AstraZeneca Annual Report and Form 20-F Information 2011

Delivering our strategySupply and ManufacturingWe ensure our medicines arewhere they need to be whenthey are neededCrucial to the delivery of areliable supply of high qualitymedicines in a cost effectiveway is a culture that drivescontinuous improvementand change”David SmithExecutive Vice-President, Global Operations& Information Services80%Sustained gross margin in excess of 80%$487m$487 million in procurement savings$388mOur strategy is to balance innovative and efficientin-house manufacturing capabilities with externalmanufacturing resources, particularly in relationto the early stages of our production process.We also see opportunities to use outsourcedproduction in our branded generics business.This balance is designed to give us productintegrity and quality assurance while affordingus cost efficiency and volume flexibility.Continuous improvementWe seek to maximise the efficiency of our supply chain through aculture of continuous improvement built on the commitment andengagement of our employees and a commitment to minimise theimpact on the environment. We focus on what adds value to ourcustomers and patients, as well as waste elimination. This programmehas delivered significant benefits in recent years, including reducedmanufacturing lead times and lower average stock levels, both ofwhich improve our ability to respond to customer needs and reduceinventory costs. All improvements are designed to ensure we maintainproduct quality, safety and customer service.We have applied Lean production business improvement tools andways of working to improve the efficiency of our manufacturing plantsfor a number of years, and have now applied them to the whole of oursupply chain. This has led to improvements in quality, lead times andoverall equipment effectiveness. In 2011, we continued to establishmore efficient processes, with experts from our global supply chainorganisation providing cross-functional support throughout thebusiness. In October, we launched an online Supply Chain Academy,providing ongoing internal training to drive further improvementsacross our end-to-end supply chain. Alongside this we ran an internalleadership programme to reinforce the cultural aspects of moreefficient supply chain processes.In October, we announced an investment of $200 million to builda manufacturing facility in China Medical City in Taizhou, Jiangsuprovince, China to meet growing local demand for our productsand expand availability of our products to people in urban and ruralcommunities. This will be our first manufacturing site to be built usingLean principles from the outset. These principles are being appliedfrom the planning stage to the whole facility, including operators,products, components and equipment. We are designing equipmentto meet varying demand, enabling fast, reliable changeover. We alsoseek to identify where processes could fail, designing systems tominimise these risks.Capital expenditure on supply and manufacturing facilitiestotalled $388 million38 Delivering our strategy Supply and ManufacturingAstraZeneca Annual Report and Form 20-F Information 2011