When Supply is of Public Interest

Roche and Tamiflu

Assessed Case Study

Group 1 (Operations Management)
OUTLINE

 Background
 Tamiflu in 2005
 Capacity management issues
 Response and improvements
 Tamiflu in 2007
 Going forward
BACKGROUND

 Tamiflu (oseltamivir phosphate) - an oral antiviral drug for seasonal flu

 3-5 million seasonal influenza (flu) cases yearly
 Over 48 m flu patients in about 100 countries
 Patent protected until 2016 in 30 countries
 WHO recommended governments to stockpile Tamiflu
 Less than 15 countries had stockpile
MANUFACTURING PROCESS

Shikimic Acid
Step 1

Epoxide
Step 2
6 months
Azide
Step 3

Active Pharmaceutical Ingredients

Step 4

Blending, Encapsulation & Packaging

Step 5 2 months
 PROCESS MAPPING (2005)

Plan Capacity Market

30% Suppliers Demand Forecast Research
(Ongoing Process)
Customer

Step 1 Step 2 Step 3 Step 4 Step 5

Shikimic acid Epoxide Azide Active pharmaceutical Blending,
ingredients Encapsulation Based on
& Packaging Order

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Stock

5 5 5 5 30 60
= = 18.5 %
30 20 35 10 15 20 35 10 15 30 270
KEY PERFORMANCE INDICATOR (2005)

KPI 2005

Flexibility Hardly can match global demand

(3) *

Quality Patent & 90% of Market (8)

Speed 8 months process (2)

It has Technical ability + patent

Dependability (9)

Cost Affordable Price (5)

CAPACITY MANAGEMENT ISSUES

Limited capacity

Complex production process

Long production cycle time

Capacity
Management Capital expenses

Issues
Logistic

Government assurance

Unpredictable spread of pandemic

SCALE UP THE PRODUCTION CAPACITY

Options to increase production capacity up to 400 million treatment in 18 months :

 Redesign Development Process > Time constraints (approx. 2-3 Years)

 Building New Plants > Time constraints
 Sublicensing
 Focus production mainly on Tamiflu
 Expand supply network, especially on material Preferred option
 Outsourcing
 Improved technology
SCALE UP THE PRODUCTION CAPACITY

Increase production
capacity up to 400 m in
18 months

 Redesign  Sublicensing
Development Process
 Focused production
 Building New Plants
 Expand supply network
 PROCESS MAPPING (2007)
Strong Custom
Suppliers Demand Forecast er/Govt
50% (Ongoing Process) Demand
(+20%)
Step 1 Step 2 Step 3 Step 4 Step 5

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Order

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Stock

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10 5 10 5 10 40
= = 25.8 %
10 10 20 5 15 10 15 10 10 10 155
KPI - 2005 vs 2007

KPI 2005 2007

Capacity increased (x15),
Hardly can match
Flexibility global demand (3) * with no obligation to use
suppliers (7)
Patent & 90% of Patent & 90% of Market
Quality Market (8) (8)

Speed 8 months process (2) 6 months process +

faster transportation (5)

Dependability It has Technical It has Technical ability +

ability + patent (9) patent (9)
Good price for buyers +
Cost Affordable Price (5) lower margin for the
company (8)
STAKEHOLDERS’ EXPECTATIONS

Investors Media

WHO Tamiflu Suppliers

Government General Public

FUTURE PRODUCTION CAPACITY

?
SCENARIO ANALYSIS

Option Direction Pros. Cons.

Plan A Increase - Public image - Heavy stocks
- Strengthen stock level (can meet - Government approval
global needs) - Profit margin reduction

Plan B Maintain - Production capability - Necessity to keep communication

- Flexibility between external network
-High level stock

Plan C Reduce to 100 - More efficient - Risk of public criticism

million - Less stockpiling - May lose business opportunities
WHAT SHOULD BE ANNOUNCED

Forecasted demand is 30
million

Sublicensing to India
and China
Invest in R&D

No immediate/low
risk of pandemic
Plan C Technology Transfer

Several countries with

sufficient stockpile Sublicensing

Improved capability to
respond to pandemic

Reduce Capacity to 100 million

KEY MESSAGES

Efficient usage of KPI is an important element to judge on current

1 operation (Good or Bad). Also, it shows the gap between current
performance & how it wishes to perform (strategic goal)

Use media effectively, ignoring or over reacting to media could

2 lead to external & internal pressure on the company & its
performance.

Efficient use of outsourcing will affect the operation performance

3 positively
References

 Bamford, D. R. & Forrester, P. L. (2010) Essential Guide to Operations

Management. John Wiley and Sons
 Fisher, M.L, Hammond, J.H, and Obermeyer, W. (1994) Making supply meet
demand in an uncertain world. Harvard Business Review, Vol. 72, No. 3, May-June
 N. Slack, A. Chambers, Alan Betts and R. Johnston (2008) Operations and Process
Management (2nd ed.). Prentice-Hall,
 THANK YOU
Abdullah Alarfaj
Chetan Tyagi
John Ssenyondo
Main Anh
Masaaki Yamagishi
Rui Qi
Tsuneki Sugizaki
Yardin Octora