Sun Pharma, Ranbaxy and the Deming Management Method

By Louis Garguilo, Chief Editor, Outsourced Pharma

Where the Japanese have failed, the Indians will succeed? Sun Pharmaceutical Industries Ltd has not only agreed to step in and purchase Ranbaxy Laboratories Ltd, symbolically they have stepped up to the plate for the entire Indian manufacturing industry. It is in some regards an audacious move: The Japanese, known for high quality manufacturing standards, could not bring Ranbaxy through its challenges. It may not have been a strike out for Daiichi Sankyo, but they have taken a walk. Now an Indian manufacturer is in the batter’s box for team India.

Sun Pharma is not downplaying the objective here. “ We are not looking at synergies of manufacturing; the focus is to achieve compliance" at Ranbaxy, said Dilip Shanghvi, managing director of Sun Pharma. Competitors or otherwise, shouldn’t all India wish them well? The rest of the world – and the FDA – is surely watching carefully.

Humble Advice to Sun Pharma: The Deming Management Method

I had been thinking again about some of the quality challenges for the pharma industry as news of this deal came in. Specifically, I was reminiscing about my first contemplations on the true meaning of quality, while living in Japan in the 80’s…and was daydreaming about W. Edwards Deming, the management and quality guru who passed away in 1993. I’m sure we’ve just confirmed once and for all how boring this columnist is. But what would Dr. Deming have thought of the global pharma manufacturing industry nowadays?

For those not familiar with Dr. Deming, he is credited with having the biggest effect of any individual on the economic rise of Japan after World War II, particularly in the area of the production of quality services and products. And while throughout the post-War period right up into the ‘80s he was pretty much ignored in his home country of the U.S., he was revered in Japan as a guru of Statistical Quality Control and an icon for his creation of the Deming Management Method. It was not until the Japanese juggernaut (Japan, Inc.) took the West by storm, coupled with a stagnant period of U.S. manufacturing prowess, did Dr. Deming become recognized and get the chance to help industry in his own country.

It’s ironic that Sun Pharma takes over for Japan-based Daiichi Sankyo to improve quality at a manufacturing entity, with Sun Pharma and Ranbaxy both native Indian sons. It would be even more ironic if Sun Pharma is helped by the methods of that very icon for Japanese quality, W. Edwards Deming. It appears that Dr. Deming’s teachings are directly applicable to some of today’s challenges in India…and well beyond. I say “well beyond” so as to be both clear and fair: We’ve experienced a variety of alarms on the quality front, from packaging of medicines and healthcare products, to fill and finish facility shutdowns, to API manufacturing in our industry…and also to other areas of our consumer and professional lives, such as safety issues throughout the automotive industry.

So it might be worthwhile to list here Dr. Deming’s famous 14 points (as described by the American Society for Quality, of which Deming was a charter member):

1. Create constancy of purpose for improving products and services.
2. Adopt the new philosophy.
3. Cease dependence on inspection to achieve quality.
4. End the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier.
5. Improve constantly and forever every process for planning, production and service.
6. Institute training on the job.
7. Adopt and institute leadership.
8. Drive out fear.
9. Break down barriers between staff areas.
10. Eliminate slogans, exhortations and targets for the workforce.
11. Eliminate numerical quotas for the workforce and numerical goals for management.
12. Remove barriers that rob people of pride of workmanship, and eliminate the annual rating or merit system.
13. Institute a vigorous program of education and self-improvement for everyone.
14. Put everybody in the company to work accomplishing the transformation.

Unfortunately, I cannot go through this list point by point here. Perhaps most important to our specific subject of Sun Pharma and Ranbaxy is that Deming believed over 90% of quality issues causing unacceptable products and services was a direct result of the systems in place and not careless workers or inadequate equipment. While on the one hand Deming was a numbers cruncher of the highest degree and very data/data analysis driven to continuously improve quality, he was clear in his demonstration that data not be unfairly or unwisely applied to the employees performing the work. This seemed to be almost an inherent inconsistency in his philosophy. In almost all cases it is the managers and their systems that need improving, he taught. He decried the substitution of measurement for better management, even though he loved to measure. As reported by Mary Walton in an interview she did in the mid-1980s, Dr. Deming commented, “Piecework is man’s lowest degradation.”

Dr. Deming knew that if management is the issue in quality manufacturing and process controls, it is also the solution. And again in what at first blush seems hard to reconcile, throughout his writings he insisted the key is not to manage focused on the final product per se, but the continuing improvement of quality systems to produce the product. Only then will the final product be at its (continual) best for consumers and customers. And speaking of the consumer and customer, he was one of the earliest to understanding the importance of bringing their ideas and needs resolutely into the designing of quality processes.

Getting back to our deal, with this acquisition of the troubled Ranbaxy, Sun Pharma creates the largest pharmaceutical company in India and also the fifth largest specialty generics company in the world, according to their press release. The focus is on India, but the challenge is even greater – the global manufacture of products and services for worldwide distribution. The combined company will have operations in 65 countries and 47 manufacturing facilities across 5 continents. Here’s hoping this humble suggestion of a study of The Deming Management Method helps bring success. Maybe others around the industry should have a look as well.