Embrace operational excellence
Novartis teams continue to find new ways to improve the effectiveness and efficiency of our operations. These efforts help underpin our significant investment in research and development, our investments in the launches of innovative new treatments, and our financial performance. Our efforts cut across the company, with special emphasis on manufacturing, business services and new product launches.
Our manufacturing operations are evolving as we shift from primarily making pills toward producing more complex medicines, including personalized cell therapies like Kymriah, our groundbreaking treatment for certain types of leukemia.
As part of this evolution, we are investing in new manufacturing technologies that support the development and production of innovative new treatments. For instance, we are beginning to use continuous manufacturing techniques. At a plant in China where we make heart failure treatment Entresto, part of the manufacturing process uses that approach, helping to lower the cost to produce the drug by 25% compared to the prior approach.
We are using continuous manufacturing techniques at a plant in China where we make Entresto. This has lowered production costs for the drug by 25%
We are also pursuing a digital transformation of our manufacturing operations with the aim of improved quality control and greater efficiency. For instance, we are starting to use predictive analytics to flag when production equipment is likely to break down, allowing us to plan preventive maintenance and reduce unplanned outages. This approach should help reduce stockpiles of spare parts at individual facilities.
For more detail on how we are employing digital technology and data analytics in manufacturing and across the company, see the section “Go big on data and digital.”
We continue work on plans initiated in 2015 to optimize our network of more than 60 manufacturing sites worldwide, adjusting our production capacity to match our changing product mix. In 2018, we announced plans to transform 16 plants, including eight that we aim to sell or close. We are working with employees affected by the changes to help them manage through the transition.
In the area of quality, we continued our solid track record in 2018. Of 202 health authority inspections of our facilities around the world completed in 2018, all but three were deemed good or acceptable (98.5%). We are working with regulators to address open issues related to how we collect and manage reports of adverse events in patients taking our medicines in the EU; registration requirements for the Russian market; and procedures to ensure treating physicians and patients in one clinical trial don’t know who receives a placebo and who receives an experimental treatment.
Consolidated business services
Novartis Business Services (NBS) continues to consolidate business support functions across the company. In 2018, NBS launched a transformation program aimed at further simplifying and standardizing processes, improving productivity and better leveraging our global scale.
We are taking further steps to reshape NBS’s footprint and concentrate activities in our five global service centers, transforming them from tactical execution locations to operational management centers. As part of this change, we are reducing the number of roles based in other countries. For instance, in 2018 we announced plans to reduce the number of NBS employees in Switzerland over four years. We are evaluating similar steps in other countries.
NBS is standardizing business processes to simplify the way we work and improve productivity. One example is how we handle employee expenses across the company. In the past we had about 100 expense policies, with different reimbursement rules based on location or business unit. Starting in 2019, we plan to move to a single global policy, simplifying and speeding the work of teams that process employees’ monthly expense reports.
To support our simplification efforts, we’re finding smart ways to apply digital technology. For instance, we are moving to a single system to field employee requests for a full range of business services, from requests for online training courses to questions about payroll or procurement. We plan to use artificial intelligence and robots to answer simple questions, or direct complex queries to specialists. We plan to launch the new system worldwide in 2019, initially in the areas of finance, procurement and human resources.
We’re also reinforcing efforts to lower procurement costs. We are working to further consolidate our supplier base and increase competition. We are also changing some internal processes to make more efficient use of the products and services we purchase. We’re focusing these efforts on 10 countries that account for about 80% of our spending.
An example is procurement of marketing materials such as product brochures, videos and advertising, for which we spend a substantial amount annually. Until recently this was managed in a decentralized way by teams in local markets or individual product franchises working with about 300 different advertising agencies around the world. By changing and simplifying our approach, we aim to reduce overall spending on marketing materials by about 8–16% over the next three years.
To reduce duplicated effort and promote reuse of existing marketing materials, we are creating a central repository designed to enable marketing teams worldwide to access materials already created by colleagues. We plan to begin with key products such as heart failure medicine Entresto, and in important markets such as the US, with implementation in 2019.
Effective product launches
In our commercial operations, we are taking steps to improve the planning and execution of launches of new medicines. To ensure the launches of important new treatments receive sufficient resources and attention, during 2018 we looked across our portfolio and prioritized 18 products that were recently introduced or that we expect to launch through 2021.
We’re also beginning our launch preparations further in advance, beginning three years or more before the anticipated launch date, rather than the two years or less typical in the past. Some of those preparations involve more carefully anticipating the needs and wishes of patients and doctors.