Elli Lilly Case

In: Business and Management

Submitted By pkokabi
Words 589
Pages 3
Parinaz Kokabi
OP 300

“Elli Lilly and the Company: The Flexible Facility Decision” case analysis

Due to the fierce competition in pharmaceutical industry, Elli Lily has to change its product development process to retain its situation in the market. Steve Mueller, manager of strategic facilities planning, must suggest the company what type of manufacturing facilities to construct. These new facilities were needed for three new products (Alfatine, Betazin, and Clorazin), which the company expected to launch in 1996. His decision will be based on decreasing the lead-time by 50% and reducing the costs by 25%. According to the case, Mueller suggest three options: one option is to build one specialized facility; the second option is to build one flexible facility, and the third options which is stated under the second option is a combination of specialized and flexible facility. The first choice, building a specialized facility, will not reduce the production lead-time. In addition, since the facility is built only for one type of product, if that product cannot be launched to the market the part of the facility might have to be retrofitted to produce another product. Further, it can cause delays in production, which can cost the company millions of dollars in loss. However, this option is very productive (almost 16,000 kilograms of output per rig at 80% of utilization) because the plant is dedicated to a set of special products and there is no changeover. Moreover, building a special facility represent a lower construction cost of $37.50 million and an annually operation cost of $6.80 million (Exhibit 3). The second choice, building a flexible facility, will reduce lead-time only for subsequent new products and not for Alfatine, Betazine, and Clorazine. In addition the construction cost ($150 million) and operation cost per year ($9.48 million) of…...

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