Editor’s Note:

Cost reduction and efficiency improvement is an important requirement advocated by the Group in recent years, which has received positive responses from all companies and departments, and a number of excellent team stories have emerged. This month, we have invited some representative teams to share their stories.

 

Join Hands to Create a Green Project

Shijiazhuang Plant Construction Team of Luye Pharma
 

Q：Please give us a brief introduction about the Shijiazhuang project and relative measures you have taken on reducing cost and improving efficiency.
 

Dai Zhaoxin, Senior Manager of EHS and Engineering Department, Luye Pharma

Dai: CNS is a key strategic business of Luye Pharma. In April 2023, the Group officially launched the construction of the production base in Shijiazhuang International Biomedical Park. Phase 1 of the project covers an area of approximately 80 acres, with a total of 10 buildings, including microsphere production workshops, solid preparation production workshops, API production workshops, etc., with a total floor area of approximately 68,000 square meters. After the completion of the project, it will mainly produce CNS-related microcrystalline formulations, solid formulations and raw materials, and is expected to start the trial operation in July this year.
 

Aerial view of Shijiazhuang plant

Regarding cost reduction and efficiency improvement, first of all, I think the design stage plays a vital role during the whole process. We organized manufacturing department, quality department and the design company to conduct detailed discussion on our demands, developed a rational process layout and equipment selection and consolidated resources resulted in a total savings of $2.2 million in procurement costs.

Second, In the procurement process, on the one hand, we grasped the market dynamics in a timely manner, and took advantage of the favorable conditions of the buyer's market to reduce the procurement price through reasonable negotiation skills. On the other hand, we optimized the procurement plan according to the production demand, for example, we suspended the procurement of refrigeration storage and constructed the wastewater treatment station in phases, which saved about $11 million of capital expenditure.

Third, From the perspective of saving investment and operation and maintenance costs, a number of practicable green design solutions have been adopted, including the water mixing system , waste heat recovery system, water reuse system for sewage station, ground source heat pump system for the comprehensive office building and canteen, and photovoltaic energy storage covering the whole plant, a total of five innovative energy saving solutions, which effectively responds to the national strategy of developing "new quality productivity". We also introduced a win-win investment and operation model with a third party to reach a hosting operation agreement on the construction of the boiler room and the later operation and maintenance, which is more economical and safer than self-operation, the above measures can help us save 6.38 million capital investment. Most importantly the project will also save nearly $2.4 million per year in O&M costs upon completion. In addition, during the implementation of the project, the construction process is rationally arranged through quality and progress control at the construction site, avoiding changes and rework and minimizing construction costs.

 

Q: Can you talk about the significance of cost reduction and efficiency improvement from the Group perspective? How will you improve and optimize this work in the future?

Dai: First, we will gradually implement the innovative energy-saving programs we have identified to meet or even exceed the intended goals. Second, we will continue to introduce safe and reliable new technologies and new ideas. In addition, we will also consider the sharing of idle resources, operation and maintenance resources, and optimization of operation and maintenance methods to achieve cost reduction and efficiency.

I believe that cost reduction and efficiency should be closely centered on the corporate culture: initiative and innovation, mutual cooperation, group effort, and integrate it into the work of each employee. It needs to be shared openly and transparently, not behind closed doors. Take the Engineering Department as an example, we have set up project construction, equipment management, operation and maintenance management groups, through mutual learning, we can share good methods that we found in the process of plant construction and operation to all the employees, so as to really achieve the purpose of cost reduction and efficiency, and also to stimulate the enthusiasm of the staff, better integrated into the corporate culture.

Challenge Higher Performance, We Are on Our Way
 

Manufacturing Cost Reduction Project Team of Shandong Luye

 
 

Q: Please give us brief introduction about the background of this project. What measures you have taken? What are the benefits of these initiatives?

 
Fan Yanli, Senior Director of No.1 Manufacturing Department of Shandong Luye

Fan: Shandong Luye holds three certificates of pharmaceutical production license A/B/C, the production involves raw materials and preparations with multiple products and dosage forms, complicated process, specific management and control regulations, and multiple countries to supply. These complex situations have pushed us over the years to pursue excellence and challenge for higher goals on the road to cost reduction and efficiency improvement.

We took measures from multiple perspectives: 1, train employees to develop competencies to handle multiple positions. We took a variety of training methods, combined with the characteristics of the staff and job requirements, theory and practice in parallel, to improve the efficiency and the comprehensive ability of employees, to achieve the stage of scheduling arrangements as well as cross-workshop cross-factory personnel transfer. 2. In terms of product, maintain effective and timely information exchange with the dynamic changes in sales demand to ensure reasonable inventory of materials and products and improve the turnover utilization rate. Combined with the product characteristics and seasonal changes in centralized production scheduling of varieties and specifications, to reduce the time taken up by frequent replacement. Centralized maintenance during the season of high energy consumption to improve production efficiency. Continuously explore and statistically analyze the batch yield of each product and the reasons for scrap, control from the details, explore the room for improvement, and further improve the yield. In addition, all relevant departments are well coordinated and work as a team to adopt more convenient operations, consolidate time in compliance with GMP standards and controlled risks. Through these measures, the unit cost of the products continues to be reduced, and the production process, positions and operations have been fully optimized and enhanced.

The success of the Shandong Luye's cost reduction project is inseparable from the joint efforts and cooperation of every colleague: immediate and rapid communication and collaboration between departments, managers are brave to take the lead in the implementation of measures to ensure that the measures fall into place according to the plan, and efficiently promote the effective implementation of the project, creating a cultural atmosphere of employee ownership.

 

Q: Can you talk about the significance of cost reduction and efficiency improvement from the Group perspective? How will you improve and optimize this work in the future?

Fan: For the future, it is necessary to give full play to the initiative of the new generation of employees, and actively guide, drive and motivate them to break the routine, develop innovative thinking, and constantly collide with new inspirations. We should keep abreast of the times, strengthen the study and research of all kinds of laws and regulations and professional knowledge, further explore the space for cost reduction and efficiency enhancement, adopt a more suitable and flexible way of continuous adjustment and optimization, and seek new ideas and initiatives for cost reduction and efficiency enhancement. The road ahead is still long, the team will continue to be united and contribute our efforts to the development of Luye.

 

Tackling Technical Barriers to Achieve Self-Sufficiency

Pharmaceutical Excipients Laboratory Team, Chemistry Research Department of Luye Pharma Research Center

 

Q: Why do we want to promote the self-production of PLGA excipients? What is the significance of realizing self-production for the Group's future R&D work?

 
Sun Jiasen, Manager of Pharmaceutical Excipients Lab

Sun: PLGA excipients are non-toxic polymers that are degradable in human body, and are now widely used in microsphere formulations. PLGA is used in more than a dozen products on the market now, and different types of PLGA have different extended-release effects in various microsphere formulations.

Microsphere formulation is one of Luye Pharma's strong areas, and PLGA excipient research plays an important role in it. There are two bottlenecks in the research of microsphere formulations: one is the complexity of the preparation process, and the other is the high quality standards required for PLGA. At present, PLGA is mostly imported from Evonik, which is expensive and has a wide range of fluctuations in the key quality attributes of the product, which has a greater impact on the microsphere process. In order to ensure the stability of marketed microsphere products in the future, it is imperative to promote the self-production of PLGA excipients.

Our department started this challenging research in 2012 because of the high technological barrier of microsphere formulations, where the release of PLGA has a key role in the formulation. We need to strictly control key quality attributes in the process: the product's characteristic viscosity, molecular weight and residual monomer specifications to meet microsphere release requirements. In the case of the LY01005 project, we initially used Evonik products, but the viscosity range fluctuated greatly from batch to batch, resulting in unstable microsphere release. The self-produced PLGA has been able to control the viscosity of the product within a narrower range and the parameters are more stable from batch to batch, so we decided to change to self-produced excipients.

Self-produced PLGA creates a great price advantage, and its cost is only 30% of the imported price. During the period of 2022-2023, we have provided a total of 20 batches of self-produced PLGA for the company's various microsphere projects, totaling about 100kg, which has saved the company about 9.6 million RMB based on the price of self-produced PLGA and imported PLGA.

 

Q: Can you talk about the significance of cost reduction and efficiency improvement from the Group perspective? How will you improve and optimize this work in the future?

Sun:In the future, we will further optimize in several aspects: first, control the material procurement according to the project requirements; second, manage the preparation of samples in place to avoid unnecessary waste; third, accurately identify the key indicators of the testing project; fourth, coordinate with the production department to integrate the scheduling of production, to reduce the cost of workshop operation and labor. In addition, we also need to enhance the individual capabilities of our team members and encourage them to explore and innovate in their projects to realize the improvement of work efficiency.

I believe that cost reduction and efficiency improvement can ultimately realize the company's revenue enhancement, so that every employee can participate in it, and it can also improve everyone's sense of ownership and contribute their efforts to the Group.

Open Source and Reduce Expenditure, We Are on the Move

Wuhu Luye Pre-extraction processing Workshop Team 

Q: Faced with the task of reducing cost and increasing efficiency, how do you assess the current situation and determine specific measures? What benefits have these measures brought to workshop production?
 

Cheng Ming, Workshop Supervisor of Wuhu Luye

Cheng: We went through the status quo of the workshop and summarized the on-site problems and listed areas that can be optimized. We took two measures at the early stage: 1, HR management, which provides training for staff, develops the ability to work in multiple positions, conducts practical exercises under guidance, and implements a job mobility system; 2, optimization of business, which focuses on improving the effectiveness and smoothness of workflow. Backing up wearing parts in advance based on single maintenance, reduces equipment interruptions due to wearing parts, thus enhancing production continuity.
After the implementation of measures, we have seen preliminary results in personnel management:  the pre-extraction processing workshop has a total of 8 front-line operators, originally only one person can take multiple positions, through the training and job mobility system, more employees have developed skills to take on multiple tasks, which enhanced efficiency of the workshop.

 

Q: Can you talk about the significance of cost reduction and efficiency improvement from the Group perspective? How will you improve and optimize this work in the future?

Cheng: The current measures are just the beginning, the next step is to find solutions to reduce cost, which requires more detailed analysis.

Speaking of the significance of cost reduction and efficiency improvement from the Group perspective, first of all, it can enhance the company's market competitiveness and strengthen the product's price resilience, thereby stabilizing and expanding its market share. Second, it will help the company to maintain stable business growth and drive the company to continuously innovate and optimize its operational processes. It can ensure that the company delivers high-quality products while achieving more efficient use of resources and a more robust financial position. Last but not least, this is also the key path for the company to realize its vision of "Customer Orientation, Efficient Operation, and Employee Achievement". The company can offer customers more competitive prices. At the same time, efficient operation can ensure that the company can respond quickly to market changes and continue to provide excellent services and products. Ultimately, it promotes the growth of employees and realizes the common prosperity of the company and employees.

Introducing Competition Mechanisms, Promoting Sustainable Development

Nanjing Luye Lipusu Procurement Team

Q:Aside from looking for solutions internally, we can also look for external pathways. Could you please tell us what measures you have taken at Nanjing Luye? 
 

Liu Haiying Procurement Manager of Nanjing Luye

Liu: Cost reduction and efficiency improvement has always been an important target of Nanjing Luye. Since there is no advantage in exclusive supply bargaining, we have initiated a program to reduce the number of exclusive suppliers since 2020. In the case of paclitaxel procurement, we have promoted competition by increasing the number of suppliers, which has resulted in a greater advantage for price negotiations. Paclitaxel raw material procurement cost was reduced by more than 60% year-on-year, payment cycle was lengthened by 25% year-on-year, and delivery period was shortened by 67% year-on-year, which effectively lowered the procurement cost and saved the capital occupation. In 2023, a total saving of paclitaxel raw material procurement cost was RMB 25.04 million. Since the project was launched, the cumulative savings in the procurement cost of paclitaxel raw materials amounted to RMB 37.62 million.

 

Q: Can you talk about the significance of cost reduction and efficiency improvement from the Group perspective? How will you improve and optimize this work in the future?

Liu: First, in the future, we will continue to pay attention to the supply and demand of the paclitaxel market and the price changes of various suppliers, and start a new round of negotiation when there is room for reduction. Second, we will further sort out materials, discover materials and suppliers with room for cost reduction, and communicate the prices; we will analyze the purchasing demand, consolidate the resources, and adjust the purchasing quantities or brands under the prerequisite of meeting the usage demand; and we will continue to carry out the development of suppliers, and bring in the competition, in order to reduce purchasing cost.

I believe that cost reduction and efficiency improvement is the driving force behind every company's sustainable development. Reducing costs and increasing efficiency saves resources, optimizes processes, and improves productivity, unleashing the innovative potential of companies and employees as we achieve efficient operations.

 

Time for a Brainstorm

Through these case sharing we can feel that the successful implementation of cost reduction and efficiency improvement cannot be separated from the collective efforts of all departments of the team. Other important members from these project teams have also shared their insights, which hopefully can inspire us in our future work:

 

“Cost reduction and efficiency enhancement can not only improve the economic benefits of enterprises, but also enhance their market competitiveness and sustainable development ability. The continuous implementation of these measures can improve the Group's risk-resistant ability, which is of great significance to the overall development of the Group.

Under the leadership of General Manager Li Shixu, Shandong Luye Procurement Department and relative departments work closely together over the years, focusing on the reduction of procurement costs, broadening of procurement channels, promoting the substitution of home equipment and others. In 2023, we have saved more than 3 million yuan in procurement. In addition, the development of the second supplier, the localization of imported materials and other initiatives, have reduced the company's excessive dependence on the external supply chain, and significantly improved the anti-risk capacity of supply, protected the continuity of production and the supply of drugs to the market.”
 

-- Guo Jun, Director of QA and Purchasing Department of Shandong Luye

 

“Reducing costs and increasing efficiency is critical for a fast-growing company. In order to achieve our corporate mission, we need to keep exploring new treatments, developing new products, improving existing products, and improving product quality. We need to have efficient management and operation ability, strong profitability, so as to develop and grow, like an athlete, with more strength, speed and athleticism. Reducing costs and increasing efficiency can make us stronger and more efficient while developing.。

As Luye people we have been working hard to practice, take the Shijiazhuang project for example, by using of domestic instruments as a substitute, implementing quality control operations and maintenance and other initiatives, we have achieved the targets of cost reduction and efficiency improvement. In the meantime, we utilized the strengths and resources of each plant within the Group to achieve resource sharing. For example, with the support of Shandong Luye, we have constructed a management system for the Shijiazhuang project that is highly compliant, efficient and cost-effective, and we hope that we can extend these practical experiences to more areas in the future as well.
”
 

-- Jiang Lei, Senior Manager of PV Department of Shandong Luye

 

“Lean management and cost control are becoming increasingly critical as regulation continues to press, costs of all types continue to rise, and competition in the marketplace intensifies. I believe that cost reduction and efficiency enhancement has three significances for the Group: firstly, it enhances competitiveness and occupies a favorable position in the market competition; secondly, it improves profitability and reduces operating costs to provide sufficient financial security for the sustainable development of the Group; and thirdly, it optimizes the allocation of resources and ensures that resources are utilized to the fullest extent.

Under the guidance of the General Manager's concept of "management sinking", Shandong Luye has started to cultivate the soil of cost reduction and efficiency enhancement from a very early stage. The effective implementation cannot be separated from efficient system, scientific management and professional talents. Since 2021, Shandong Luye has initiated the project for energy saving and consumption reduction, with efficient collaboration among various departments, realizing an annual reduction of energy consumption of more than 3 million yuan in that year. In terms of scientific management, the engineering team has been implementing lean management and continuous improvement activities since 2021, encouraging employees to identify and eliminate cost waste. The plant water reuse project and condensate recycling project can save more than 1 million RMB in energy consumption every year, and have been successfully promoted to the construction of new workshop projects. The team attaches importance to talent training, employees have developed skills to work on operation and maintenance of equipment, as well as localization of spare parts, which saved a large amount of cost. In 2020, oversea engineer was not able to install the imported sterilized filling equipment PERRY in Shandong due to the pandemic. Our project team completed all the work after in-depth research, created great value to Shandong Luye.

-- Zhang Tao, Deputy Director of No. 2 Engineering Department of Shandong Luye