No Company Can Rest on Previous Reputation for Quality and Responsiveness

The saga of Johnson and Johnson, (J&J) and specifically its McNeill Consumer Healthcare Division took a broader business, media and consumer perspective this week.  The overall story comes really close to a breakdown in production quality and response processes that span well over two years of differing incidents.  Within this time period, a well-run company with a previous stellar reputation for quality and responsiveness to crisis somehow lost its way. Sound familiar?

This week, the Wall Street Journal has featured multiple articles related to J&J, incorporating information coming out prior to testimony from J&J CEO William Weldon before the House Committee on Oversight and Government Reform. This government oversight committee called for testimony in light of J&J’s continual manufacturing problems, and subsequent product recalls, and especially what role government regulators had in protecting consumers.

In the WSJ article, J&J’s Quality Control Draws Scrutiny, (paid subscription may be required) a timeline of quality related incidents leading up to an initial recall of infants and children’s Tylenol was outlined. These incidents began in April 2009, when the company discovered potentially harmful bacteria in samples from a batch of raw materials that were used to make medicines.  According to the article, before discovering the contamination, the company had already made some Tylenol product utilizing the same identified suspected batch. J&J maintains that that based on inspections of finished product, no bacteria was found to be in any shipped product. Over 8 million bottles of medicine was shipped from April until June 2009 when the FDA formally cited the company for violating good manufacturing practices.

Readers however need to take a further step back and ponder the entire timeline of quality related incidents associated with J&J and its Fort Washington Pennsylvania production operations.  The timeline of incidents continued beyond the September 2009 recall related to contamination. In a previous Supply Chain Matters posting in January, we noted that an FDA report cited McNeill Healthcare for not proactively following-up with a separate incident of a foul smell in certain medicines, which was believed to have a history back to 2008. That incident was reported as being caused by certain chemicals applied to wooden pallets leaching into boxes that contained medicine containers that were being shipped from the bottle manufacturer to the product packager.

In April of this year, the FDA again inspected the Fort Washington facility, and this time found raw materials set aside for use to be contaminated with a different form of bacteria. A WSJ article in May indicated that the FDA considered the problem serious, and further reported that some of certain liquid products may have had higher concentrations of active ingredient than they should have, while others may have had inappropriate levels of inactive ingredients.  Obviously, these were signs of inconsistencies in manufacturing process and control.  At that point, in May of 2010, the decision was made to halt all production at the Fort Washington facility and the largest ever recall, involving 1500 lots and over 136 million bottles of children’s and infants Benadryl, Motrin, Tylenol and Zyrtec was initiated.

Flash forward to today, and there have been six product recalls dating back to 2009, reflecting different product related issues, and there have also been quality related recalls involving other J&J divisions. In roughly this same period, J&J had shed a reported 8900 workers.

CEO Weldon has publically apologized to consumers, and has been quoted in his testimony.  “We’ve learned a lot of lessons through this unfortunate situation.” Weldon goes on to state: “We will do everything in our power to make sure this never happens again.” One wonders if this same intent was iterated by J&J senior management back in 1982.

J&J and its McNeill unit has had a rather difficult two years, and a sweeping look at all manufacturing and perhaps supply chain processes is the right move.  An overall revamping of all manufacturing operations is underway, including a new czar of manufacturing with an associated task team with sweeping organizational powers across all of J&J’s operating groups. The FDA also indicates that J&J faces additional close scrutiny and inspection by that agency. But the damage remains in millions of lost sales to date, over $100 million to upgrade McNeill’s plants, and uncertain consumer perceptions regarding brands.

Yet another well-run company with a stellar reputation for quality could not overcome a series of multiple back-to-back incidents relating to its process design and quality control processes. A compounding slow response and untimely or ineffective response by senior management was also evident.   Toyota and its saga of events in the past few months is yet another timely example to ponder, since it also was a company that stood for quality.

When the first signs of a significant problem arise, teams need the empowerment to raise awareness to needed actions without fear for their long-term career or job aspects. Senior management needs to be tuned-in to operational problems and balance trust with instinct.

Bob Ferrari

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