In 1999, the company decided that in order to keep up with the growing demands of insulin it would need to become more productive. This could be accomplished with the addition of another manufacturing plant or by becoming more efficient at the biosynthetic human insulin plant in Indianapolis, IN. The latter was chosen on the basis that it would be more beneficial for the shareholders. This began with the creation of Reliability-Centered Maintenance and a reliability engineer in 1999, using 6 Sigma, root cause problem solving techniques (Arnold, 2006).
This new way of maintaining equipment allowed the company to become more productive, mostly using the equipment and employees already in place. During 2005, productivity of the entire company increased 15% (PR Newswire, 2005). I. Benchmarking Data Compared to other companies in the pharmaceutical industry, Eli Lilly and Company is very strong and competitive in every market it serves. Compared to the companies ranked ahead of it, Lilly is not far behind companies three through six in revenues.
As for the companies ranked behind Lilly, only the eighth- and ninth-ranked companies even closely approach Lilly in revenues. Lilly is nearly five times bigger than the tenth-ranked company. Lilly is definitely very competitive with the elite competition in the pharmaceutical industry. Please see ranking at the end of this paper in Table 3 retrieved from (Annual, 2007). J. Factors of Production The company’s products are both labor- and capital-intensive.
It currently operates 25 manufacturing sites with more than 12,500 employees. In these operations, employees “translate deep knowledge of science, chemistry, engineering, production, and numerous other disciplines into the reliable manufacture and supply of high-quality, safe, and effective medicines” (Corporate, 2007). The process is also capital-intensive because it is extremely expensive to operate and research new drugs for patients. Lilly produces some of its own raw materials when developing new drugs.
These are produced in some of the company’s manufacturing plants, which produce a purified form of the drug (Eli Lilly, 2008). These drugs also combine other raw materials such as starch, which allows the drug to be put into a pill format. This makes the drug less impacted to the change in pricing of materials when the company can produce the materials itself. K. Macro Economics When examining the macroeconomics and international influences on Eli Lilly, it is clear that the company is affected by what happens to the overall global economy.
The global economy also affects the company because of its many locations overseas and the numerous countries in which its product is available. The company is sensitive to the changes in demand for its products as new treatments become available for patients and the availability of these drugs. By using the price elasticity of demand, the company will be able to estimate how a change in price will affect the demand for their products.