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Exposure Control Strategy & Return On Investment (ROI) Rob Mc Cafferty May 18, 2011. Watson At-A-Glance . Watson’s Global Footprint. Acknowledgements. Watson Pharmaceuticals Ana Prieto Teva Erella Dimentstein Barr Laboratories Mark Ostapczuk Mercer ORC Networks Tom Cecich Sikorsky

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Presentation Transcript
acknowledgements
Acknowledgements
  • Watson Pharmaceuticals
    • Ana Prieto
  • Teva
    • Erella Dimentstein
  • Barr Laboratories
    • Mark Ostapczuk
  • Mercer ORC Networks
    • Tom Cecich
  • Sikorsky
    • Dave Ehrets
topics
Topics
  • Exposure Control Strategy
    • Overview
    • Challenges
    • Procedure
    • Requirements
  • ROI
    • Why is Return On Investment (ROI) Important?
    • Competing Business Objectives?
    • How ROI Helps
    • Exposure Control Benefit Highlights
    • Examples
      • Multi Product Facility Containment ROI
      • Single Product Facility Containment ROI
      • Rigid or Flexible - determining the most cost effective solution
  • Summary
  • Resources
exposure control strategy
Exposure Control Strategy
  • Goal
    • Implement an exposure reduction strategy to reduce exposure risks at the source through primary controls
  • Drivers
    • Risk Reduction
      • Employee Safety
      • Quality (Airborne & Mechanical Transfer)
    • Consistency
      • New facilities, existing facilities and acquisitions
    • Financial Benefits - ROI
  • Elements
    • Procedure
    • Determine most cost effective solution
    • Demonstrate Value – ROI
exposure control strategy challenges
Exposure Control Strategy Challenges
  • Operations may tend towards facility/infrastructure controls in isolation
    • Facility controls may not based on primary containment being in place
    • Equipment and therefore primary process containment may be out of scope
    • Considering facilities or products not processes
  • Capital Request Process
  • Inadequate allocation of resources
  • Validation/Quality road blocks
  • Knowing how to begin & what the best options are
exposure control procedure
Exposure Control Procedure
  • Purpose:
    • Drive exposure control (containment) below the OEL
    • Prescribe facility/infrastructure controls & PPE based on primary process controls
    • Ensure consistency throughout the organization for new and existing facilities and processes
  • Primary Components
    • Requirements
    • Risk Matrices
    • Tool box

Administrative Controls & PPE

Facility/Infrastructure Controls

Process

Containment

exposure control procedure matrices
Exposure Control Procedure Matrices

Risk = Hazard x Exposure

API (Band)

Unit OperationControls

Unit Operations are by band

Facility is potent/non

slide10

Exposure Control Procedure Matrices

  • Used for new facilities (design) and existing ones (gap analysis)
  • Unit operation control matrices identify a control approach demonstrated to be effective at controlling exposure below the OEL.
  • If a desired control is not in line with the matrix recommendations, a documented explanation for how equivalent control levels will be achieved is required for approval
slide11

Exposure Control Procedure “Tool Box”

  • The “Tool Box”, is a library of containment solutions meant to supplement the matrices
  • The “Tool Box” is organized by:
    • Unit operation
    • Control Technology

EZI Dock

High Shear Mixer Glove Bag

slide13

Why is ROI Important?

  • It’s a gauge ofmanagerial effectiveness
  • "Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.  The worst business to own is one that must, or will, do the opposite – that is, consistently employ ever-greater amounts of capital at very low rates of return." - Warren Buffett, 1992 Chairman's Letter
  • The average ROI for American companies is about 11%
competing business objectives
Competing Business Objectives?
  • EHS is important to everyone in the company
    • EHS provides technical expertise regarding compliance requirements and assistance with meeting EHS goals
    • Management is held accountable
  • Optimal financial performance is essential for the organization’s success
    • Management is held accountable
  • Will Objectives be balanced?
how roi helps
How ROI Helps
  • “Safety people have their hearts in the right place but seldom understand true business objectives”
  • “We seldom make a credible business case”
  • ROI can:
    • help demonstrate financial benefits
    • identify the most cost effective compliance solution
  • Demonstrating the value shows management how EHS projects can be aligned with business objectives instead of competing with them
    • Above quotes from Dave Ehrets – VP Sikorsky Aircraft
exposure control benefit highlights
Exposure Control Benefit Highlights
  • Reliably controlling exposure below the OEL reduces exposure risk and adds business benefits:
    • Energy Savings
      • Reduced amount of air changes
      • Air re-circulation instead of once through air
    • Less elaborate air locks/decontamination systems
    • Reduced Medical Surveillance Requirements
    • PPE cost savings
      • PPE use reduced
      • Waste disposal of PPE
      • Operational Efficiency (Gowning/De-gowning)
    • Increased yield
roi process steps
ROI Process Steps
  • Step 1 – Understand the Opportunity or Challenge
  • Step 2 – Identify and Explore Alternative Solutions
  • Step 3 – Gather Data and Conduct Analysis
    • Costs and Benefits
  • Step 4 – Review Results and Make a Recommendation
  • (ROHSEI Process Steps)
roi examples
ROI Examples

Multi Product Facility Containment Project

Single Product Containment Project

Rigid or Flexible

project backgrounds step 1
Project Backgrounds(Step 1)
  • Multi Product Site ROI Performed:
    • For the benefit of the site to understand the current costs and potential future benefits for containment
  • Single Product ROI Performed:
    • For the same purpose as above except with a narrower focus of just the main product at the facility
  • Rigid or Flexible Compression Containment Performed:
    • To determine the most cost effective solution between a rigid and a flexible option
discussion
Discussion
  • Assessment does not consider:
    • decreased production efficiency
    • decreased cleaning time
    • increased yields
  • Costs and benefits are spread over 2 years
    • estimated to be the implementation time
  • Capital costs based on 5 potent and 3 non potent simultaneous operations (based on batch projections)
    • More simultaneous batches would have more costs but also more savings
      • ROHSEI ROI software makes it easy to change scenarios and look at them from other angles
cost benefit highlights step 4
Cost Benefit Highlights(Step 4)
  • Total Capital Costs - $2,145,000 (Over 2 years)
    • ROI also includes initial $50,000 HVAC balancing and $200,000 for validation work for implementation (CV, etc.)
  • Total Recurring Annual Costs for glove bags (Already being spent) - $ 100,000 + $50,000 additional for Non Potent products $150,000 total
  • Annual Savings - $1,880,000
  • Net Annual Savings - $1,730,000
  • ROI – 71%
  • IRR –45 %
  • DPP – 2.7 years
  • NPV - $ 2,950,954
  • ROI is much higher than Average ROI.
roi multi product site containment step 4
ROI Multi Product Site Containment (Step 4)

Assumptions

Discount Rate (Cost of Capital) – 8%

Tax Rate – 20 %

Inflation Rate – 2.5%

looking at it another way
Looking at it another way
  • It’s difficult to test the ROI until after the project is implemented so assumptions may be challenged
  • ROI Software makes it easy to
    • Change the assumptions
    • Look at it from another angle
cost benefit highlights single product
Cost Benefit HighlightsSingle Product
  • Same facility as previous evaluation
  • Single product with 2 formulations and 9 strengths
  • Cost estimate based on 3 simultaneous operations
  • Product is 30% of manufacturing done at the site
  • Total Initial Capital Costs - $688,000
  • Total Recurring Annual Costs - $ 60,000
  • Annual Savings - $607,000
  • IRR – 55%
  • ROI – 53%
  • DPP – 1.6 years
  • NPV - $773,000
  • Annual Net Savings of $547,000
  • ROI is much higher than Average
determining the most cost effective solution
Determining the Most Cost Effective Solution

Rigid

Assuming each solution is just as effective from a containment and operational perspective;

  • Which is most cost effective?
    • Rigid or Flexible?
    • Where is the tipping point?

Flexible

compression containment cost considerations
Compression Containment Cost Considerations
  • 200-250 batches per press per year
  • Soft wall tablet press isolator is $1300-1500 ea
  • Campaign averages 5 batches per campaign
    • Average consumable batch cost is $260-$300
  • The cost of consumables for the soft wall will run $52,000-$75,000 per press/yr
  • Flanges and supports for the soft wall isolator are estimated at $5,000 per press
  • A rigid tablet press isolator costs between $50,000-75,000 per press with $5,000 in consumables/yr
discussion32
Discussion
  • Rigid isolator is the most cost effective option based on the number of batches per year
  • If the number of batches decreases or the price of the rigid Isolator increases this may no longer be the case
summary
Summary
  • Challenges posed by implementing an exposure control strategy can be dealt with by:
    • Having an effective exposure control procedure
    • Using ROI to assist with obtaining management commitment and picking the most cost effective solution
  • Every company’s EHS mission should include ensuring compliance, protecting the environment and the health & safety of its employees
  • Financial cost benefit analysis should never be a pre-requisite for EHS compliance
roi resources
ROI Resources
  • ROHSEI software and associated training available through Mercer ORC Networks :
    • http://www.orc-dc.com/
  • AIHA’s Value Strategy Workbook may be purchased through AIHA
    • http://www.aiha.org/votp_new/study/index.html
  • Available Soon from AIHA’s Value Strategy
    • Software
    • Exposure Assessment Guideline
questions
Questions?
  • Rob Mc Cafferty, CIH
  • Associate Director Global H&S
  • Watson Pharmaceuticals
  • Morris Corporate Center III
  • 400 Interpace Parkway
  • Parsippany, NJ 07054
  • (862) 262-7420
  • Robert.McCafferty@Watson.com