The annual flu season provides many interesting lessons and observations for operations management. It was reported today in the WSJ (10/8/2010) that Novartis has teamed up with Synthetic Genomics to develop a process that will allow them to reduce the lead time to produce flu vaccines. The traditional process takes about 6 months from the time the WHO identifies the flu strains for the coming season to the time the flu vaccine hits the market. “If Novartis’s venture is successful, the time savings would be dramatic, analysts say”.
The idea behind the new technology is to do some pre-processing. Novartis will “develop a bank of synthetically constructed seed viruses ready to go into production as soon as the WHO identifies the flu strains”. In short, they will artificially create a bunch of potential viruses in the hope that one of them will turn out to be the useful one for production.
What will this extra time give them? The biggest advantage seems to be additional capacity. If a facility can make X doses per week, then adding 4 weeks to the schedule means 4x more doses for the season, pretty much with the same overhead as before.
It is also important to note what this doesn’t give them – they still face forecast uncertainty and this extra time doesn’t seem to help them on that dimension. Nevertheless, the extra capacity lowers the cost to produce each dose, which makes forecast uncertainty less costly (the lower the cost, holding the selling price fixed, the less costly are demand/supply mismatches on a per unit basis).