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Pharma and other process industries "throwing away money"

13-Oct-2003

The process manufacturing industries in Europe are suffering from a costly productivity gap caused by a 'disconnect' between commercial demands and production capacity. Moreover, while this disconnect is understood, few companies seem to have the will to tackle it.

These are the surprising conclusions of a new report on the process industries commissioned by BASF IT Services, spun out of its parent, the world's largest chemicals group, two and a half years ago.

The company still makes almost all of its €440 million annual turnover from BASF, but plans to grow this to 15-20 per cent within the next two to three years. To achieve this goal, it needs to convince other companies in the process industries (pharmaceuticals, chemicals, oil and gas etc) that it can deliver a solution to the disconnect problem.

Uwe Krakau, managing director of BASF IT Services' sales and marketing division, told In-PharmaTechnologist.com that the pharmaceutical industry is a prime candidate for IT interventions that can improve productivity and reduce costs.

Companies involved in the production of pharmaceutical chemicals are facing increasing pressures, both from competition (often from Asian companies) and the R&D problems affecting pharmaceutical manufacturers that have reduced the number of new products coming to market, he said.

Krakau noted that there are a number of ways in which an integrated IT function can enhance the productivity of pharmaceutical companies, both those involved in bulk chemicals and finished medicines. For example, by reducing approval times the drug industry can extend the patent-protected life of a new product, which for the biggest drugs can translate to millions of euros in revenues each day.

Another key role for IT - particularly for industries as highly-regulated as pharmaceuticals - is the ability to adapt the documentation and monitoring process easily in order to comply with local laws, he said. Making these processes more efficient can yield significant cost-savings, he noted.

BASF's commissioned research found that 76 per cent of respondents (all at senior executive/board level) were aware that a lack of integration within plants was creating inefficiencies in their businesses, but just 36 per cent had evolved a strategy to remedy the situation and only 26 per cent considered it a high priority issue.

The scale of the problem is dramatic, however. 13 per cent of respondents said plant shutdowns occurred weekly or more frequently, with 23 per cent seeing halts every couple of weeks. With 18 per cent seeing seven to 12 shutdowns a year, it is remarkable that more than half of those companies surveyed clearly have a significant problem, yet are being slow to seek out a solution.

£6m cost per plant

BASF estimates that, in the UK, plant shutdowns are costing companies £6 million per plant per year because of poor use of maintenance resources, under-skilled workforces, problems with maintaining stocks of spare parts and inadequate planning. For example, the survey found that 20 per cent of engineers' time was devoted to finding the data they needed to do their jobs. All these areas can be addressed by improving the sharing of information across systems.

Unfortunately, said Krakau, even those companies that have identified the problems - and have the will to resolve them - are going about it in a piecemeal fashion. The remedy often involved manual workarounds which can cost the company an additional 20 per cent of their employees work time through additional management requirements.

The four most common barriers to preventing greater integration were inadequate funding, incompatibilities between systems, a lack of appreciation of the problem and a lack of internal expertise. However, 41 per cent of respondents said they simply did not know where to start.

So what does BASF IT Solutions feel it has to offer? The company recently completed a major overhaul of the systems in place at BASF, including its enormous site at Ludwigshafen at which 40,000 people, or 42 per cent of the group's total workforce, are employed.

Dieter Thomaschewski, president of BASF Europe, noted that as a result of the project, any BASF employee, no matter where in the world, has access to his electronic office space.

This mammoth task involved the replacement and re-installation of 31,000 computers, upgrading of network facilities and a restructuring and standardisation of maintenance services. The result was a reduction in the number of programs and applications in use from 5,000 to 1,200. "It is precisely this aspect which will lead to lower costs," said Thomaschewski.

Over the last two years, BASF IT Services has also completely restructured the group's IT system, creating a single data-processing centre for the entire BASF group in Europe, and is in the process of transferring all the group's old applications to a new standardised SAP R/3 system. This program should be completed in 2005 and once complete should save "tens of millions (of euros) a year."

Aker Kvaerner alliance

Meanwhile, BASF IT Services announced last week that it had joined forces with engineering heavyweight Aker Kvaerner to add some punch to its assault on the process industry.

The alliance, with Aker Kvaerner's AK Engineering Services division is valued at €2.7 million and will extend until the end of 2004, whereupon it can be extended in one-year blocks.

The thinking behind the deal is simple; BASF will supply the know-how related to data integration with Aker Kvaerner supplying the engineering expertise. At the heart of the collaboration is a maintenance planning package, called SAP-PAS, which is designed to provide a company-wide view of all planning activities for maintenance tasks, shutdowns and projects.

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