Eli Lilly and Company: The Flexible Facility Decision

Eli Lilly and Company. The Flexible Facility Decision.
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Eli Lilly and Company. The Flexible Facility Decision.
Question One
Eli Lilly's value proposition is to satisfy client demands while bringing goods to market more cheaply and quickly. Eli Lilly has been compelled to alter its assets, procedures, and competencies due to declining profit margins, HMOs, intense generic medication competition, and shortened patent exclusivity. The management has decided to cut development delays by 50% and production costs by 25% (Zhang, 2022). Due to the vast gross margins on its goods, Lilly strives never to run out of stock. It becomes necessary as a result to have the surplus capacity and keep inventories. To produce a new commercial product nowadays takes anything from eight to twelve years. The construction of facilities typically represents a bottleneck in introducing a new medicine. Retrofitting facilities after they have been built can also delay the launch of new products. Eli Lilly frequently has surplus capacity at the beginning and end of a drug's lifespan due to the rigidity of specialized factories.
Question Two
Almost any of Lilly's new products will be able to be processed in a flexible facility thanks to the inert tanks constructed of intricate metals or lined with glass. A flexible facility also reduces the risk of poor investments since it may switch to producing different items if a medicine does not succeed in reaching the market. The factories are often built with vacant floor space, allowing for easy equipment reconfiguration for new products without disrupting ongoing operations and minimizing downtime. Additionally, spare capacity may be utilized to produce additional medications, hence reducing surplus capacity.
Drug production methods are subject to change, particularly throughout the development process. The procedure may be perfected later with the help of a flexible facility, providing engineers additional time to develop it without delaying the product's release. Additionally, this will give the business a more extended period of product exclusivity, which converts into much larger revenues.
Question Three
The time it takes for a new medicine to reach the market is significantly influenced by the building and design of a new facility. The time to market may be substantially extended if clinical studies are complete, but the facility has not yet been built. Lilly's flexible plant allows for a quicker time to market, which can lengthen the market exclusivity period by a year—as a result, providing Lilly an additional few million in profit.
Eli Lilly also values flexibility because not all medications will receive FDA approval. A flexible facility will be easier to correct if Lilly makes a significant investment in a medicine that is ultimately canceled than a specialized plant, which requires long periods of retrofitting. Lilly compensates for this flexibility with sub...