Outsourcing to cut costs? Shipping work to China? No need, says Lundbeck. The Danish drugmaker has slashed its own manufacturing costs 25% over the past 5 years, the Financial Times reports, saving about $341 million. Now, its production costs are about 20% of sales, compared with 25% across the industry, the company estimates.
There's nothing like desperation to light a fire under a company's feet. As SVP Lars Bang told the FT, Lundbeck was forced to act for the same reason that most of the pharma business has been cutting costs: Loss of patent protection on key products, including the antidepressant Celexa. "We had a burning platform," Bang said. "We were under more pressure than we had ever been before."
The cost-shaving process was very much that—a process, with one improvement after another after another. The company used video cameras to analyze work flow, for instance. It introduced larger packing containers. It solicited and acted on employee suggestions, and put production managers under intensive training, the FT points out. Now, it turns out 700,000 packs of meds per employee annually, compared with 380,000 in 2006.
Now, the company does all packing in-house, when it used to outsource two-thirds of that. As for API manufacturing, which it handles at two plants in Europe, the company is "producing in competition with companies in China," Bang told the FT.
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