Eli Lilly Company Case Study

Eli Lilly and Company Case Study

GSB 723 Operations management

Spring 2015 Group 5

Scott Lozier, Timothy Little, Anas Hidar, Xiaocao Yu

Situation

Eli Lilly and Company is a big pharmaceutical company which ranks amongst the top 6 in the U.S. The pharmaceutical industry changed a lot since 1993. There are huge competitions and pressure on pricing, innovation, and manufacturing. Eli Lilly and Company decided to reduce the time and cost for new product to remain their profit margin. There are three new products have gone through the tests, will be produced and launched in the future, Alfatine, Betazine, and Clorazine. The company needs to make a choice between whether to build a cost-efficient specialized facility system for manufacturing each drug, or to build a flexible facility system, which can suit all kinds of drugs and minimize production times. After evaluating the company’s options, we believe that Eli Lilly should use a hybrid facility system, combining aspects of each facility in order to maximize the advantages of both and to grow its profits and remain competitive.

Analysis

There are advantages and limitations to each type of facility Eli Lilly is considering for its next batch of products. Specialized facilities have already been utilized by the company in the past. These facilities had equipment that was specifically designed to produce one drug type, and were then retrofitted to produce a new product at the end of the initial product’s market life. The high specificity of both the equipment and employees made utilization rates of these facilities very high, and were therefore able to operate at a lower cost. However, because the construction of these facilities had to occur years before the actual product was ready for production, any changes in the product’s design, or delays caused by failed clinical trials or increased government regulations could drastically alter the launch time of drugs, as the facility would either have to...