Supply Chain & Manufacturing

Improving the bottom line with a city planning architecture for scrap optimization

By Suresh Ramanan, Sanjiv Chinnappan, Daniel Yang, Varun Chadha, and Adam Erlichman

July 21, 2023 | Article | 8-minute read

Improving the bottom line with a city planning architecture for scrap optimization

As pharmaceutical companies aim to cut costs and develop and deliver therapies efficiently, many are increasing their focus on scrap reduction and scrap optimization. Companies have varying definitions for scrap, but it generally refers to the discarded, unusable material from a manufacturing job. Scrap represents inefficiencies and waste across the supply chain and has the potential to cost large pharma companies hundreds of millions of dollars each year.


Rising costs; an increased focus on efficiency; and environmental, social and governance (ESG) considerations are just some of the reasons pharma should prioritize scrap optimization. Others include:

  • Modalities that are increasingly complex and carry intricate reagents that are expensive and difficult to capture and store. It’s harder to recover, purify and reuse a lentiviral vector than a simple organic solvent, for example.
  • Pharma scrap can often carry various hazards that make disposal expensive and run counter to a company’s ESG goals.
  • Scrap handling and disposal are labor intensive due to regulatory requirements.
  • Pharma’s high variety, mix-in products and SKUs make it more likely to produce scrap than other industries.
  • A historical lack of focus on scrap leads many to believe scrap rates are higher in pharma than in other industries.
  • With disrupted supply chains often forcing pharma companies to procure raw materials in bulk well in advance of production, subsequent schedule and production changes can lead to large scrap costs if leaders are not aware of already produced inventory.
  • Safety stock and carrying inventory are often bloated or overestimated due to understandable risk aversion.

“If a large pharma company invests in scrap optimization and mitigates these challenges, we estimate it could save between $149 million and $172 million over five years.”

Why scrap optimization is so challenging

Despite scrap being increasingly recognized as a significant challenge for the pharmaceutical industry, it’s not an easy problem to solve for four big reasons.


Multiple definitions, stakeholders and plants: Different organizations and stakeholders look at scrap in different dimensions. An executive will generally only review aggregated scrap figures—across a biologics portfolio, for example. A more tactical persona, such as a procurement specialist, may focus on raw material defects for a given class of cell therapies. Process-oriented team members, such as continuous improvement engineers, would use scrap figures to quantify losses from a machine malfunction.


Siloed capabilities: Companies may build applications and capabilities in an attempt to optimize scrap, but often these are developed for retroactive analytics across raw materials, work-in-process products and product expiries. Connecting retroactive scrap analytics to upstream decisions is difficult, as materials often expire within two to five years, which decreases visibility into the real root causes of scrap. Further segregation is found in applications that may forecast scrap or determine its root causes.


Legacy applications: Long-used applications for scrap management tend to focus on retroactive analytics but fail to provide predictive or prescriptive insights on scrap. This prevents companies from actively mitigating scrap before it’s produced.


Unstandardized data and data sources: As a result of these siloed capabilities, companies lack a single data thread that connects all their capabilities, which leads to a lack of trust and data integrity concerns.

Optimizing scrap with a city planning architecture

Thankfully, an enterprise architecture framework such as a city plan—which is comprised of multiple business and IT activities to deliver a unified architectural design—can help optimize scrap while reducing complexities and security risks. It can also ensure broader teams are aligned. We believe a city plan can help pharma companies maintain a competitive edge and adapt to a constantly evolving technology landscape. Using the five steps below, you can build a city plan that provides scrap visibility to all stakeholders.


1.  Develop a business capability map


A business capability map represents all business areas that are required for meeting or exceeding business goals. It can also represent technology capabilities in the functional context, helping teams reimagine the capability landscape in a digitally native viewpoint. Workforce, logistics, regulatory and more can be reimagined from a digital and AI context. Typically, the corporate or manufacturing area will manage the business capability map. Two relevant capabilities for scrap management are logistics planning and product quality management, as they can provide value by standardizing the communication of organizational capabilities for different stakeholders.


2.  Execute process mapping


Business process mapping, also called reengineering, helps to identify appropriate stakeholders, process steps and decision points. It can ensure relevant pain points are addressed with digital capabilities such as data analytics, AI and more, leading to cohesive design development for implementing capabilities. This end-to-end view of the process allows for effective communication to various stakeholders, resulting in faster and predictable execution of complex processes. Thankfully, process maps are adaptable enough to capture processes accurately and are also standardized enough to enable disparate stakeholders to easily understand them.


Process mapping can produce derivative benefits because it:

  • Aligns an enterprisewide understanding of the end-to-end scrap process, building confidence and trust in scrap analytics from the shop floor to executive leadership
  • Gathers individual persona needs and requirements for scrap to ensure they’re met by analytics
  • Outlines key data sources and seeks to understand the logic behind how scrap is calculated, while incorporating feedback from manufacturing, finance and supply chain experts

3.  Create a technical capability map


After identifying capabilities, processes and stakeholder needs, the next step to build a city planning architecture is to design a technical capability map. This map identifies the essential technical components required to support and enhance business capabilities, and it encompasses key elements, such as applications, data, infrastructure, management and security, to support the chosen business capabilities effectively.


Some technical capabilities relevant to scrap optimization include process controllers and workforce management. Increased insights into these capabilities can lead to broader adoption and ensure proper usage, which aids in scrap management.


4.  Develop a component architecture


A component architecture establishes the structure and maps the relationships among all existing technical components, as defined by the technical capability map. Its value lies in its ability to map and visualize the relationships between various system components.


5.  Build a reference architecture


The last step is to develop detailed architectural views like solution, data, integration, infrastructure planning and security architectures. These can accelerate implementation and reduce its costs.


By following these five steps to develop a city plan architecture, we believe organizations can successfully identify and integrate the most suitable technologies and architectures to support their business needs. This enables a more streamlined IT ecosystem, fewer complexities and optimized processes.

Advancing your city plan: Practical next steps

These six tangible actions can help your organization begin optimizing scrap.


1.  Review and assess infrastructure: Evaluate your existing infrastructure and identify areas where improvements can be made to support the goals of your city plan. You should assess the scalability, reliability and performance of your technology stack, ensuring it aligns with the requirements of scrap optimization. Consider leveraging cloud-based solutions and modernizing legacy systems to enhance efficiency and flexibility.


2.  Conduct an end-to-end value stream map: Perform a comprehensive analysis of your scrap management processes from end to end. Map out the flow of information, materials and activities involved in scrap optimization and then identify potential bottlenecks, inefficiencies and areas for improvement. It’s important to engage key stakeholders from various departments, including manufacturing, finance, supply chain and quality, to ensure a holistic understanding of the value stream.


3.  Identify and prioritize key initiatives: Based on the findings from the value stream mapping exercise, identify key initiatives that will have the most significant impact on scrap reduction and optimization. Prioritize these initiatives based on their potential benefits, feasibility and alignment with business goals. Finally, develop a roadmap that outlines the implementation timeline, resource allocation and expected outcomes for each initiative.


4.  Foster cross-functional collaboration: Promote collaboration and knowledge sharing among different teams and stakeholders involved in scrap management. Establish regular forums, such as cross-functional meetings or workshops, to facilitate communication, exchange best practices and address challenges collectively. Feedback and input from frontline operators, data analysts, IT professionals and business leaders should be encouraged to ensure a well-rounded perspective and effective execution of the city plan.


5.  Continuously monitor and measure progress: Establish robust monitoring mechanisms to track the progress of your scrap optimization initiatives. Define key performance indicators and implement a reporting framework that provides visibility into the effectiveness of your city plan. It’s critical to review and analyze the data regularly to identify trends, patterns and areas for further improvement so that you can make data-driven decisions and iterate on strategies.


6.  Embrace a culture of continuous improvement: Instill a culture of continuous improvement within your organization by encouraging employees to actively participate in identifying opportunities for scrap reduction and optimization. Experimentation, innovation and risk-taking should be embraced. Make sure to celebrate successes, recognize contributions and provide ongoing training and development opportunities to empower your teams with the skills and knowledge needed to drive the city plan forward.


Executing these six steps can help your organization optimize scrap, save resources and meet your ESG goals.

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