Harvard Case - Eli Lilly and Co.: The Flexible Facility Decision--1993
"Eli Lilly and Co.: The Flexible Facility Decision--1993" Harvard business case study is written by Gary P. Pisano, Sharon Rossi. It deals with the challenges in the field of Operations Management. The case study is 19 page(s) long and it was first published on : Mar 22, 1994
At Fern Fort University, we recommend that Eli Lilly and Co. adopt a flexible manufacturing strategy for their new facility, prioritizing modular design and automation to achieve operational flexibility and cost-efficiency while remaining adaptable to future market demands and technological advancements. This strategy will leverage operations technology management and digital transformation in operations to enhance production processes and supply chain management.
2. Background
This case study examines Eli Lilly and Co.'s decision-making process for building a new manufacturing facility in 1993. The company is faced with a choice between a traditional, dedicated facility and a more flexible, multi-purpose facility. The decision hinges on the company's ability to anticipate future market demands and technological advancements, while also balancing the cost of flexibility with the potential for increased efficiency and responsiveness.
The main protagonists in this case are:
- Eli Lilly and Co. management: Responsible for evaluating the strategic implications of each facility option and making the final decision.
- Operations team: Responsible for analyzing the operational requirements of each facility option and assessing the potential impact on production processes, supply chain management, and overall efficiency.
- Finance team: Responsible for evaluating the financial implications of each facility option, including capital expenditure, operating costs, and potential return on investment.
3. Analysis of the Case Study
This case study can be analyzed through the lens of operations strategy, focusing on the following key aspects:
- Operations Strategy: Eli Lilly needs to determine the best operations strategy to align with its overall business strategy. This involves considering the company's competitive advantage, core competencies, and market position.
- Capacity Planning: The choice between a dedicated and flexible facility significantly impacts capacity planning. A dedicated facility offers predictable capacity, while a flexible facility offers greater adaptability to changing demand.
- Production Processes: The chosen facility will impact the company's production processes, including process design, process analysis, and process improvement. A flexible facility allows for greater process flexibility and continuous improvement.
- Supply Chain Management: The facility choice also influences supply chain management, including inventory management, logistics, and product distribution. A flexible facility can potentially optimize supply chain efficiency and reduce inventory costs.
- Technology and Analytics: The case study highlights the importance of technology and analytics in operations management. Utilizing information systems, data analytics, and operations technology management can significantly enhance decision-making and operational efficiency.
Porter's Five Forces framework can also be applied to analyze the competitive landscape and the impact of the facility decision on Eli Lilly's competitive position.
4. Recommendations
Eli Lilly and Co. should adopt a flexible manufacturing strategy for their new facility, incorporating the following elements:
- Modular Design: The facility should be designed with modular components that can be easily reconfigured to accommodate changes in production requirements. This allows for greater flexibility in adapting to new products, technologies, and market demands.
- Automation: Implementing automation in critical processes will enhance efficiency, reduce manual labor costs, and improve consistency in production. This allows for greater scalability and responsiveness to changing demand.
- Information Systems and Analytics: Investing in advanced information systems and data analytics capabilities will enable real-time monitoring of production processes, inventory levels, and supply chain performance. This data can be used to optimize operations, improve decision-making, and identify potential bottlenecks.
- Lean Manufacturing Principles: Adopting Lean manufacturing principles, such as Just-in-Time (JIT) production and Kaizen, will minimize waste, improve efficiency, and reduce lead times. This approach aligns with the flexible manufacturing strategy and emphasizes continuous improvement.
- Outsourcing: Eli Lilly should consider outsourcing non-core functions, such as logistics and warehousing, to specialized providers. This allows the company to focus on its core competencies and leverage external expertise for greater efficiency.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The flexible manufacturing strategy aligns with Eli Lilly's core competencies in innovation and product development. It also supports the company's mission of delivering high-quality pharmaceuticals to patients worldwide.
- External Customers and Internal Clients: The strategy focuses on meeting the evolving needs of external customers by providing a wider range of products and services, while also enhancing internal client satisfaction through improved efficiency and responsiveness.
- Competitors: The flexible manufacturing strategy allows Eli Lilly to stay ahead of competitors by adapting quickly to market changes and technological advancements. This strategy also enables the company to achieve cost-efficiency and improve its competitive position.
- Attractiveness: The flexible manufacturing strategy offers a higher return on investment (ROI) in the long term compared to a dedicated facility. It also reduces risks associated with technological obsolescence and changing market demands.
6. Conclusion
By adopting a flexible manufacturing strategy, Eli Lilly and Co. can position itself for long-term success in the dynamic pharmaceutical industry. This strategy allows the company to adapt to changing market demands, leverage technological advancements, and optimize operational efficiency.
7. Discussion
Alternative options include:
- Dedicated Facility: This option offers lower initial investment costs but lacks flexibility and adaptability.
- Hybrid Approach: This option combines elements of both dedicated and flexible facilities, but it can be complex to manage and may not fully address the challenges of a dynamic market.
The key risks associated with the flexible manufacturing strategy include:
- Higher Initial Investment: Implementing a flexible facility requires a higher initial investment compared to a dedicated facility.
- Technological Obsolescence: Rapid technological advancements may require ongoing investment in new equipment and software.
- Complexity of Management: Managing a flexible facility requires specialized expertise and a strong focus on continuous improvement.
8. Next Steps
To implement the flexible manufacturing strategy, Eli Lilly should:
- Develop a detailed implementation plan: This plan should outline the specific steps, timelines, and resources required for each phase of the project.
- Invest in training and development: Employees need to be trained on the new technologies, processes, and Lean manufacturing principles.
- Establish performance indicators: Key performance indicators (KPIs) should be defined to track the effectiveness of the flexible manufacturing strategy and identify areas for improvement.
- Monitor and evaluate progress: Regular monitoring and evaluation are essential to ensure that the strategy is achieving its objectives and to make necessary adjustments.
By taking these steps, Eli Lilly can successfully implement a flexible manufacturing strategy that will enhance its operational efficiency, competitiveness, and long-term success.
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Case Description
In 1993, Eli Lilly is preparing to build manufacturing capacity for three new pharmaceutical products that it expects to launch in 1996. Management wrestles with a decision of whether to add specialized manufacturing capacity or flexible capacity. This question touches off a broad debate within the company about which strategy to follow for future facilities decisions. This case presents two alternatives (flexible and specialized plants) and describes the benefits and costs associated with each.
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