International Manufacturing Conference 2012 Merck Manufacturing Division Life Cycle Engineering

1. Merck’s West Point Facility Embraces RCM
AAsset MManagement PProgram
RRisk BBased AAsset MManagement
Chris Gould, Merck – West Point
Mike Rose, Merck – West Point

2. Merck - West Point Site
2
Merck - West Point is a 397 acre site that provides a diversified portfolio of
products including vaccines and sterile pharmaceutical products

3. The Journey
• 2008/9 1st Reliability Engineer
– 2010 FMEAs Initiated For “Critical Assets”
– 2010 PDM Program Initiated
– 2010 Reliability Group Established
• 2011 RBAM Program Initiated
• 2011 Program Procedures Developed
– 2012 AMP Drafted
– 2012 RBAM Evaluations Completed For Site
– 2012 Risk Reduction Measures Identified
» 2013 AMP Implemented
» 2013 Actions Implemented To Reduce Risk
» 2013 “Success” Metrics Developed / Used
• FMEA: Failure Modes and Effects Analysis
• PDM: Predictive Maintenance
• RBAM: Risk Based Asset Management
• AMP: Asset Management Program
3

4. Physical Asset Portfolio of Merck Manufacturing Division
External
EXCEL
Optimize Cost
Structure &
Productivity
EXTEND
Complementary
Businesses
EXECUTE
World Class
Supplier & Lead
in New
Technology
EXPAND
Serve 80% of
the World
Concept/Concept/
DesignDesign
ProcureProcure
Install/Install/
CommissionCommission
QualificationQualification
ValidationValidation
Operate/Operate/
SustainSustain
DeDe ––
commissioncommission
Vision 2020
Target 2015
Asset Management Program (AMP)
Strategic Model
4
Corporate
Vision & Strategy
. .
Merck Manufacturing Division (MMD)
Vision & Strategy

5. 5555
1) To create cost-effective management of asset utilization throughout the life cycle to
ensure asset:
Reliability – Performs as designed
Availability – Runs as designed when scheduled to run
Maintainability – Configured to allow least downtime and highest quality
maintenance including safety and ergonomic consideration
Operability – Can be operated to prevent maintenance failures
Compliance – Maintenance completed on prescribed frequency, meeting job plan
expectations and following safe work practices
AMP Target Condition
5

6. 2) Trend asset utilization and performance metrics to drive continuous improvement
3) Asset risk is defined and appropriate control actions are taken to mitigate or eliminate
the risk considering maintenance programs, continuity and contingency.
4) Establish criteria for asset life cycle and end of useful life – when an asset becomes
obsolete based on cost of maintenance and validation cost.
5) Ensure organizational design supports the asset management plan considering:
Organization roles and responsibility
Talent Management
Training
Labor Strategy
Culture
Staffing Model – considering in-house/outsourcing
Change Execution Management
AMP Target Condition Continued

7. AMP Playbook Chapters
1. Introduction to asset
management
2. Compliance
3. Reliability
4. Work execution
5. Planning and scheduling
6. Asset life cycle
7. Organization design
8. System support
9. Capital program
10.SME
11.Metric Mgmt philosophy
12.Configuration Mgmt
13.Communication
14.Connection with
external groups
Develop detailed playbook or assessment

8. AMP Potential Benefits
8
Priority Business Impact
Compliance
• Structured asset management plan provides greater stability:
Reduce deviations, thereby ensuring GMP compliance
Visible performance measures drives continuous improvement
Better colleague safety from reliable equipment and stable processes
Focused loss elimination yielding greater product quality and customer
satisfaction
Supply
• Improved asset health
Better quality
More and consistent fill rates
Improved customer experience
Strategy
• Long-term benefit to be a preferred provider:
Proactive strategy
Process-driven organization
Transparent governance
Engaged employees
Knowledge sharing
Profit Plan
• Business benefits may include:
Less capital requirement
Lower energy cost
Greater utilization of installed capacity
Increased yield
Greater market share 8

9. 999
RBAM Intent & Approach
• RBAM Mission:
– To always achieve a high level of assurance that Merck’s products
and commitments will not be impacted by equipment-related failures.
• RBAM Intent:
– Address continuity and contingency for mission critical assets.
• Continuity: Ability to maintain normal asset function.
• Contingency: Action(s) taken to retain asset function when continuity is
lost.
Asset Management Program
Risk Based Asset Management
9

10. Program Overview
Prioritize
Assets
Core Maintenance
Programs
Reactive
Corrective
Maintenance
Proactive
Preventative &
Predictive
Maintenance.
Trending
Metrics & Oversight
PMsEvaluate Assets
& Issue PMs/
Job Plans
CorrectFailures Determine Cause
Trend Results of Asset
Performance
Maintenance programs including processes & training
(e.g. valves, air handlers, lubrication, torquing)
Metrics to assess program performance
Metrics reviewed by oversight team and program adjusted
Summary Reports and Communications
Predictive
Maintenance
1
2
3
4
3
10

11. Prioritize Assets
1. Prioritize Assets (Per The Criteria) & Identify Known Issues
2. Identify actions to Mitigate Risk
[Focusing on the Critical Assets]
For Each Action, Identify: Priority/Owner/Due Date
3. Develop Focus Factory Risk Profile
Implement
Actions
Finalize & Track Actions
•Portfolio
•Capital Plan
LOW (LOW (Risk ≤ 99))
HIGH ( RiskHIGH ( Risk ≥ 130)
MEDIUM (MEDIUM (100 ≤ Risk ≤ 129)
CRITICALCRITICAL
•HIGH RISK
•Compliance = 5
•Supply = 5
•Profit Plan = 5
Consider Contingency
Consider Continuity
Quarterly
Updates
4. Issue Focus Factory Quarterly Report
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12. 12
Prioritization Tool
Failure
Probability
Compliance
Supply
Strategy
Profit
Failure Probability
[% per lot / run]
Compliance
[Impact of a single failure]
Supply
[Impact of a single failure]
Strategy
Profit Plan
[Impact of a single failure]
Multiplication
Factor
N/A 4 3 2 1
1 Insignificant None None
Not listed on Capital Plan, LROP,
Transformation, Portfolio
None
2 ≤ LOW ≤LOW ≤LOW ≤LOW
3 LOW < Failure Rate ≤ MEDIUM LOW< Impact ≤MEDIUM LOW< Impact ≤MEDIUM
To be listed on Capital Plan, LROP,
Transformation, Portfolio.
LOW< Impact ≤MEDIUM
4 MEDIUM < Failure Rate ≤ HIGH MEDIUM< Impact ≤HIGH MEDIUM< Impact ≤HIGH MEDIUM< Impact ≤HIGH
5 > HIGH > HIGH > HIGH
Listed on Capital Plan, LROP,
Transformation, Portfolio
> HIGH
Min Max Symbol Description
10 99 L Low
100 129 M Medium
130 250 H High
Impact Assessment
Probability of equipment having a failure based upon historical events. [NOTE: Failure = Inability to perform designed function]
If asset fails, impact on GMP compliance, product quality, environmental compliance, personnel safety
If asset fails, impact on the ability to meet supply requirements, considering product impact, discards and/or critical path production time lost
Alignment with Capital Plan, Long Range Operating Plan, Transformation, Portfolio
If asset fails, impact to Profit Plan considering cost impact of a failure (e.g. discards or lost transfers) and savings benefits due to improvements
Impact Scores
Risk Level
Failure Probability x [Compliance x 4 + Supply x 3 + Strategy x 2 + Profit Plan x 1]
Total Score Risk Level
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13. Prioritization Results
For illustrative purposes only
Critical Assets Meet One of the Following:
Risk Level = HIGH, or
Compliance = 5, or
Supply = 5, or
Profit Plan = 5
Numbers shown for illustration purposes only
A
B
C
D
E
F
13

14. % shown for illustration purposes only
A B C D E F
14
Prioritization Results
For illustrative purposes only

15. Critical Asset Count
For illustrative purposes only
Numbers shown for illustration purposes only15

16. Average Asset Risk Level (%)
For illustrative purposes only
Numbers shown for illustration purposes only16

17. Maintenance Strategy
• What is an FMEA? (FFailure MModes and EEffects AAnalysis)
– A team-based, structured way of assessing risk and reducing the
chance of failures through development of actions to control the risk
(e.g. PMs).
• What is a SMR? (SSimplified MMaintenance RReview)
– A team-based, structured way of developing a maintenance strategy
based upon a review of vendor recommendations and failure history.
• FMEA & SMR Process
1. Gap analysis
2. Maintenance Strategy
3. PMs & Job Plans
4. Replacement spare part identification
5. Spare parts availability
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18. PDM - Vibration Program
For illustrative purposes only
Numbers shown for illustration purposes only
Focus
Factory
Total
Machines Extreme Serious Moderate Slight
Serious
Repairs
Overdue
A 121 0 0 9 45 0
B 125 0 2 14 24 1
C 181 0 4 22 41 1
D 8 0 1 2 0 2
E 256 0 6 23 66 1
F 167 0 3 18 59 0
G 94 1 1 17 25 1
952 1 17 105 260 6
3rd Qtr 2012 VIBRATION FAULTS ‐ Open Work Order Status
18

19. PDM – Thermography
For illustrative purposes only
Numbers shown for illustration purposes only
Focus
Factory
Total
Machines Extreme Serious Moderate Slight
Serious
Repairs
Overdue
A 973 0 1 2 2 1
B 1219 0 0 0 0 0
C 1479 0 0 0 1 0
D 8 0 0 0 0 0
E 678 0 0 0 0 0
F 475 0 0 0 0 0
G 405 0 1 0 2 1
5237 0 2 2 5 2
3rd Qtr 2012 THERMOGRAPHY Failed Scan Open Work Order Status
19

20. Reporting
Electrical
Continuity &
Contingency
Capital and
Project
Status
Predictive
Maintenance
Metrics RBAM Status
Quarterly Summary Report to Plant
• Roll-Up of Plant
• Summary of Each Focus Factory
Quarterly Report-Out to Each Focus Factory
(Tailored to each Focus Factory)
Both Written And Oral Quarterly Summaries Enhance Change Management
20

21. Key Takeaway
Developing an action-oriented asset-
based prioritization process sets the
foundation to:
1. Understand Asset Priorities
2. Work on the “Right Stuff”
3. Reduce Asset Risk
4. Make Problems Visible
5. Address Problems Continually

22. 22
Questions?
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Mike Rose
Associate Director - Engineering
Merck - West Point
Michael_Rose@Merck.com
www.Merck.com
Chris Gould
Executive Director
Merck - West Point
Christopher_Gould@Merck.com
www.Merck.com