Reorganization of an unmanaged medium sized pharmaceutical company

The Problem

The company operates in the pharmaceutical industry and is part of a market-leading French multinational group operating in several countries around the world. The medium-sized company never achieved positive financial results, despite being recognized as a benchmark of excellence for quality and development. It operates in a fast-changing sector, mainly driven by the strategic choices of large pharmaceutical groups to outsource production activities.
The crisis related to the recent pandemic (COVID 19) led to an abrupt slowdown in the orders from customers to which management failed to respond with appropriate measures to contain costs. When the market recovered, the company was unable to face the sudden increase in orders, resulting in a serious situation of delays in delivery. The sudden increase in demand highlighted a serious organizational deficiency in the supply chain and a strong technical/organizational limit in production. The absence of management control led to the inability to set production priorities to guarantee the right margins and support management choices in customer management.
In this context, the relationship of trust between the company’s General Management and the top management of the parent company broke down, leading to a situation of uncertainty.

The solution

The Contract Manager called a General Manager and tasked him with the goal of reducing the production backlog and bringing the company’s income statement back into balance.
The interim manager initially worked with the team he had available, setting priorities and assessing the potential. Soon, it became clear that some resources were not suited for their assigned roles. This led to the employment of new resources in the areas of production, maintenance, supply chain and quality control.
The project was developed at different levels:

1) Organization

  • Meetings were held at different levels of the organization to ensure a proper flow of information and to start a process to make the managers in charge of the various functions more responsible.
  • New managers were appointed for production, planning, maintenance, supply chain.
  • A set of KPI’s was shared among the management team and the parent company’s control functions to monitor key activities (productivity, correspondence between plans and actual production, product margins).

2) Management control

  • A junior controller was hired and given the task of analyzing the cost structure to define the real profitability of various products.

3) Production/maintenance

  • With the new maintenance manager, an efficiency recovery plan was defined to improve plant reliability and production lead time with the aim of increasing volumes produced at the same cost, thus improving both customer service and margins.

4) Prices

  • To manage the increase recorded in raw material and energy prices, price adjustments were defined and negotiated with customers to preserve product margins.

The year ended with a decidedly better economic result than the assessments made in the summer. This confirms that the company had potential that had never been fully expressed until then. The company’s environment has greatly improved thanks to the new resources and the efficiency of the various interventions. The client appreciated the commitment and professionalism showed by the interim manager in dealing with this very delicate situation, one in which the continuity of the business was at stake. Professional and personal experience, together with the ability to adapt and relational skills, allowed a positive integration of methods and cultures. The team’s international experience also allowed it to maintain good and strong relationships with the corresponding managers of the European headquarters, who showed appreciation and support for the Contract Manager throughout the entire assignment.
To sum up, the difficult transition towards better organizational stability was overcome with great customer satisfaction at all levels: both locally and within the corporate group.