Demystifying Information Asymmetry: Aurobindo Pharma’s Journey Sandeep Chatterjee

3rd International Conference on Transforming Healthcare with IT 31st Aug.-1st Sep. 2012 Hyderabad, India

Demystifying Information Asymmetry: Aurobindo Pharma’s

Journey

Sandeep ChatterjeePrincipal Consultant, Oracle India


Agenda

• Aurobindo Pharma: An Overview• What is Information Asymmetry• The Business Challenges• Solution Options• Aurobindo Pharma’s Journey


Aurobindo Pharma: An Overview

• Founded in 1986 by Mr. P.V. Ramaprasad Reddy, Mr. K. Nityananda Reddy and a small group of highly committed professionals

• Commenced operations in 1988-89 with a single unit manufacturing Semi-Synthetic Penicillin (SSP) at Pondicherry

• Became a public company in 1992 and listed its shares in the Indian stock exchanges in 1995



• Market leader in Semi-Synthetic Penicillins• Presence in key therapeutic segments such

as neurosciences, cardiovascular, anti-retro virals, anti-diabetics, gastroenterology and cephalosporins

• Well integrated Pharma company and features among the top 10 companies in India in terms of consolidated revenues



• Exports to over 125 countries across the globe with more than 70% of its revenues derived out of international operations

• Nine units for APIs / intermediates and seven units for formulations


Agenda



What is Information Asymmetry?

• In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other

• Creates an imbalance of power in transactions which can sometimes cause the transactions to go awry


What is Information Asymmetry?

• Can lead to two main problems• Adverse Selection• Moral Hazard


Agenda



The Business Challenges

• Faulty Demand Forecasting• Adhoc Supply Planning• Silos across departments• No real time information flow• Huge Pile up of inventory• Poor Cost management• Bureaucratic business processes• Paper and signature intensive


Agenda



Solution Options

• Custom Solution• Pros

• Fit for your specific needs• Lower Upfront Cost• Immediate fixes, enhancements

• Cons• Scalability• Difficulty in supporting new technology

platforms


Solution Options

•Commercial, Off the Shelf• Pros

• Scalable• Incorporates best practices

• Cons• Higher Upfront Cost• Industry specific


ERP System

•Integrates all business management functions, including planning, inventory/materials management, engineering, order processing, manufacturing, purchasing, accounting and finance, human resources, and more

•Streamlines processes and workflows with a single integrated system


ERP System

•Reduces redundant data entry and processes and information is shared across departments

•Consolidated view


Agenda



Aurobindo Pharma’s Journey

•Successfully deployed Oracle E-Business Suite 11i across all its locations in 2004•Solution was deployed across all key functions right from finance, distribution to addressing manufacturing needs of the company•The solution not only provides up-to-date transaction information, but also ensures smooth information flow between the plants and locations of the company


Aurobindo Pharma’s Journey

•The implementation was carried out in a phased manner with the finance, purchasing, sales and related quality and stores activities being carried out in the first phase and process manufacturing, quality control, plant maintenance and projects in the second phase


Scope of the Implementation

•Oracle Financials (General Ledger, Accounts Payables, Accounts Receivables, Fixed Assets, Cash Management)•Oracle Purchasing•Oracle Inventory•Oracle Order Management•Oracle Process Manufacturing (Product Development, Process Planning, Process Execution, Cost Management, Quality Management, Manufacturing Execution System)•Oracle Human Resources


Business Benefits

•Reduction in Inventory•Better Cost Control•Higher Productivity•Smooth information flow across departments•Reporting needs•Consolidated view


Stage 2

•Transition from existing Oracle system (11i) to an enhanced version of Release 12 application in 2010•Consideration was a futuristic and ‘best practices’ embedded process model environment facilitated by package enabled re-engineering•Developed a robust solution for Actual Costing through deployment of OPM Costing


Stage 2

•Provided better financial and operational MIS reporting with a provision to comply to IFRS requirements•Developed a Solution footprint and Design Elements to cater to the global rollouts with establishment of a Shared Service Centre


Business Benefits

•Enhanced Cost Control•Better financial and operational MIS reporting (IFRS)•Opportunity to relook at the business processes•Easy integration with third party software (Chenab for Export Management System)•Enhanced performance•Leverage Service Oriented Architecture •‘Fusion’ ready


Today: Tough Economic Conditions

Trends Adapt your Business Model

Business trends forcing you to adapt new strategies

Higher degree of uncertaintyGet visibility to all demandManage to uncertainty by

postponing inventory

Increased global competition Focus on core competency – Increase outsourcing

Mass customization Move point of differentiation closer to customers

Focus on customer service to ensure brand loyalty

Provide reliable and accuratecommitments to customers

Less money to invest in IT Lower cost of ownership of apps


Traditional ApproachMulti-step planning processes, high latency, limited collaboration

Supply Chains Built on INVENTORY

Customers SuppliersTier 2

Tier 1

Marketing Forecast

Sales Forecast

MfgForecast

Distribution Plans

Production Plans

ManufacturingPlans

t = weeks

?Demand Planning Process Supply Planning Process

• Response 1: Maintain Excess Inventory

• Response 2: Reserve Production Capacity

• Response 3: Expedite Everything!


Move to a More Competitive ModelE-Business planning solution: zero latency, real-time collaboration

Build a responsive Supply Chain on INFORMATION not

inventory

• Enable closed loop collaborative planning processes across your value chain

• Have complete supply chain visibility

• Make better decisions

• React immediately to disruptions in supply chain

PortalInternet

Customers SuppliersTier 2

Tier 1

Portal

Consensusforecast andprod. plan

Supply Planning

Demand Hub &Multi-dimensional analysis

Automated Exceptions

S&OP Process

Singleholistic plan

Business Intelligence

Sales

Marketing

Mfg

Manufacturing


Stage 3

•Deployed Oracle Advanced Supply Chain Planning Solution•Deployed Oracle Crystal Ball which is the leading spreadsheet-based application suite for predictive modeling, forecasting, simulation, and optimization


Business Benefits

•Global Visibility of Demand and Supply Picture•More accurate forecasting•Reduced Response Time•Improved On Time Delivery•Reduction in Inventory•Optimized Network Design•Improved profitability through a better product mix•Reduction of stock out situations


Other Initiatives

•Aurobindo Pharma Limited’s fast growth was at risk because it lacked adequate backup and recovery solution •Deployed Data protection solution which bridge multiple platforms at multiple locations to provide the company with a 50 percent faster recovery time, yet enable a 75 percent annual growth in data to be accommodated without an increase in staff


Other Initiatives

•Brought back IT in house which brought down the total cost of IT helpdesk and facilities management by 15 percent


Thank You

Demystifying Information Asymmetry: Aurobindo Pharma’s Journey Sandeep Chatterjee

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