Savvy Shrinking Margins

Over the past couple of years I have heard with increasing frequency from customers in the pharmaceutical industry who use Palisade’s Monte Carlo software in the development of new drugs, especially in testing.  In clinical trials, risk analysis can help developers extrapolate results from a limited group of patients to predict outcomes for a much larger population.  Results from these predictive models have turning up in medical publications and online summaries every day.
Now a recent commentary on the manufacturing sector of the industry has identified Lean Six Sigma teamed with Monte Carlo simulation as a "new industry paradigm."  The business of manufacturing pharmaceuticals has historically made big profits and emerged unscathed from economic downturns.  Decision makers in this sector haven’t had to worry about Six-Sigma style operations management.  But all of that is changing.

As a whole the pharmaceutical industry faces a number of threats to its profitability: the aging of patents on wildly popular big-name drugs, fewer of these drugs in the development pipeline, and price pressure from generic drugs.  The industry’s response to these new forces is instinctive and savvy. Optimize, optimize, optimize. Lean Six Sigma has taken hold in many industries, but not many of them have so instantly understood the synergy between lean manufacturing and risk simulation. 

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