The Dark side of Drugs









In the past few years, drug companies have been neglecting their factories and operating under illegal conditions. Six of the major drug companies for injectable drugs have been warned by the Food and Drug Administration (FDA) about serious violations of manufacturing rules. Four of these six have actually been forced to close factories and significantly slow production in order to fix the problems. A few of the extreme violations include inspectors finding bugs floating in viles of drugs, morphine containing up to twice the labeled dosage, manufacturing plants with rusty tools and mold in production areas, and in one extreme case- a barrel of urine in the midst of the operating facility.

A lot of these violations have caused drug companies to produce faulty product, which in in turn results in a recall of their drugs; costing the company thousands of dollars in lawsuits and causing the factories to work over time to make up for the lack of product from the recall. So, why are these problems  not getting fixed?  It sounds like cleaning a factory or shutting it down for a bit in order to fix problems to meet healthy and safety codes can’t be too difficult, right?  Well, the drug companies keep brushing their violations under the rug and biting the bullet and paying for the fines because stopping production for them is too costly. The drug companies would rather pay the fine and keep producing rather than shut down for a couple days. In a business where profits are driven by volume, shutting down means huge losses. Many of the basic drugs are already selling for less than a dollar a vile and are made in batches of tens of thousands of viles. Many times, these viles run on lines that operate for 24 hours at a time.

This problem is then made even worse when patents on drugs expire, causing other companies to make the same drug and sell it at a lower price. This cut throat environment between companies competing for the lowest production costs is taking its tole by resulting in recalls of drugs and even outbreaks of sicknesses from various medicines produced in unclean manufacturing plants.

After learning about quality management in our last class, I think drug company standards need to change and laws should be put into place that require these companies to operate under six sigma or ISO 9000 quality standards. Recalls on drugs have the potential to be deadly, and drug companies should’t need to put profit above the importance of adhering to health and safety standards. After learning about quality management, inventory management, and operations strategy, do you have any ideas on a solution to this problem? Do you think that the FDA should enforce their laws in more standardized way? Will this become a never ending problem due to implicit conditions?



Will YOU give it a shot?

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Starbucks is currently in the midst of launching their newest product, the Verismo single-cup espresso based beverage machine. The Verismo has unique pods that contain coffee and milk, and when used together, can product a latte. This machine has a unique new sleek style, to better fit on top of a kitchen counter, and is also capable of making shots of expresso. This machine is going to be sold at high- end kitchen good stores such as Sur La Table, and Williams Sonoma, as well as in select Starbucks locations. It will be priced at $199 and and the larger version will be priced at $399.

Previous data has shown in the last year only 4% of coffee makers made a profit from selling espresso machines. This means starbucks is taking a large risk entering the espresso machine market. Chief Executive, Howard Schultz, stated in his most recent interview that Starbucks is making a bet with this new machine.

So, with last year espresso machine sales at a mere 4%, and the Chief Executive officer admitting that this is a big risk, why would Starbucks enter into this market? Well, I believe we can look at Chapter 12, regarding Operations and strategy in a global environment, for some answers. Starbucks has one of the most, if not THE most crucial advantage over competitors; Starbucks has brand recognition. Starbucks differentiates themselves from other coffee shops because they provide an “experience”, which sets them apart from the rest of the many places you can get a cup of coffee. But, their newest product launch had nothing to do with this in store “experience”, rather, it is about bringing Starbucks “experience” into your own home. The competitive advantage is about differentiation, cost leadership, and response. Starbucks new Verismo machine touches upon all three, with a strong emphasis on differentiation because there are currently are no other machines like it on the market. According to our book,Competing on differentiation means, “the uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts the customer’s perception of value- and in this case, the Starbucks customer values their own time, their coffe, and their loyalty to the brand itself.

I think this coffee maker will be successful? Will it be a positive thing for Starbucks?

What strategies and data do you think Starbucks is using to make sure sales of this machine are successful?

The operations managers job is to provide competitive advantage and increase productivity… Do you think the OM Manager is doing this in this instance?