Lodestone Gaining More From Your Erp

Gaining more from your ERP

Turning technology benefits into real business

benefits

Michael Schmidt, 02-Mar-2009

Michael Schmidt // IQPC Smart Labs 2009

Lodestone at a Glance

UK

Portugal

Thailand

CanadaPoland

USA

Belgium

SwitzerlandHeadquarters

Germany

Australia

� Over 500 employed Consultants globally

� Founded in August 2005, HQ in Switzerland

� USD 145 mn Revenue in 2008

� Built and led by former "Big 5 Partners" with 15+ years

in Management Consulting

Singapore

Passion for Excellence. Commitment to Delivery.

Romania


Your Industry, Our Expertise: Life Sciences

Lodestone has vast expertise in designing and implementing business

solutions in the life science industry

• Global SAP enabled business transformation programs for numerous

Life Science multinationals

• Global quality process harmonization and LIMS implementations

• LIMS Strategies and tool evaluations

• Clinical trial management (clinical supply and accounting) solutions

supported by SAP

• Integrated Information Management and Validation using LIMS,

Electronic Batch Management and Recording

• Integrated global master data and PLM solutions across the value chain

• Global integrated reporting solutions enabling global management

dashboards, regional data transparency and full product cost analysis


� Our understanding of the situation

� Key business drivers

� A typical process and system landscape

� Laboratories and LIMS – black boxes in the supply chain

� Our solution proposal

� How to achieve full supply chain integration

� Opportunities and benefits - case studies

� Conclusions

Gaining more from your ERPContent of this presentation


Gaining more from your ERPKey business drivers – many quality topics on the CxO agenda

21st Century

Quality ManagementQuality by Design

Quality Risk

Management

Real-time

batch release

Supply Chain

Integration

Anti-counterfeiting

strategies

Lean LabProcesses

Process Analytical

TechnologiesPaperless

Laboratories

Electronic Lab

Notebooks (ELN)

ePedigree

Track & Trace

Higher

AutomationTechnologies

Regulations

� “State-of-the-art” LIMS solutions have become a commodity and almost

all major Pharmaceutical companies have implemented new systems and

collected a lot of operational experience

� Even though a modern LIMS might be in place, there are significant

challenges ahead which require quality organizations to continue to think

out of the box – in addition to their daily business


� The integration of laboratories with the supply chain has already top

priority for leading-edge companies in process industries because it

enables them to cut costs and increase productivity

� In future, the demand to embed laboratories in the internal and external

supply chain processes will fundamentally increase:

� Quality testing will move out of the laboratories, and regulatory acceptance

of PAT will require deep, seamless integration between laboratories and the

company’s supply chain

� ~10 years from now many drugs will be manufactured continuously and most

quality control will be completed on-line in a non-destructive manner,

allowing more efficient in-process quality control and real-time release

of products on PAT-validated production lines

Gaining more from your ERPOur understanding of the situation









� Conclusions




Business model

The complex view

Organizations

Processes

Systems

Suppliers Distribution Local marketManufacturing

LIMS

MESWHC

APS

S&M PIM

BI

Capacity Planning

Market Development

PromotionalManagement

CategoryManagement

Vendor Managed Inventory

Supplier DemandIdentification

Demand PlanningProcess

ProcurementPlanning

MRP

MPS

AggregateInventoryPlanning

DistributionRequirementPlanning

Forecasting

BuildProcess

ReceiveMaterials

Raw MaterialInventory Control

Shop FloorMgt.

Finished GoodsInventory Deployment

InventoryControl

Order Confirmation

Inventory Allocation

Trans. Planning

Load Building

Pick/Pack

Ship

Invoice Collect Deductions

OrderManagementProcess

Demand Creation Process

Order Transmission Demand Id.

Continuous Replenishment

Enterprise Enterprise ResourceResource

PlanningPlanning (ERP)(ERP)


Detailed

scheduling &

Local

Production ExecutionLocal Quality Control Operations

Gaining more from your ERPSimplified view: Process landscape with ERP, MES and LIMS

MESMES

LIMSLIMS

Supply Chain Collaboration, Planning & Execution

ERPERP

Procure-to-Pay Produce-to-Ship Order-to-Cash Master Data mgt

Sample

ManagementProduct

release

OOS / OOE / OOT

investigations

Environmental

monitoring


Gaining more from your ERPSimplified view: System landscape with ERP, MES and LIMS

MESMES

ERPERP

Procure-to-Pay Produce-to-Ship Order-to-Cash Master Data mgt

Chromatography

Data SystemsComplex

Analytical SystemsHPLC, IC, ICP, IR, NIR,

AAS, …

Simple

Laboratory DevicesGauges, Scales,

Titrators,…

Statistical Data

Evaluation Tools

MultivariateData Analysis

Tools

LIMSLIMSELNELNELN









� Conclusions



Gaining more from your ERPThe reality: How LIMS integrates with a company’s supply chain

…with ERP &

Supply Chain

…with MES &

Production Shop-floor

� “Traditional” LIMS territory withadvanced process integration inthe laboratory shop floor

� Seamless integration and highautomation of labs is an option, but still wishful thinking in manycompanies

� Fairly good integration with Manufacturing ExecutionSystems (MES) and production

� Opportunities to increase the level of process and systemintegration are there, but notused

…with Laboratory

Equipment & workflow

� Integration of LIMS and ERP is reduced to bi-directional, technical interfaces

� LIMS are perceived as black boxes due to inadequate alignment with key supply chain operations

Level of LIMS’ integration with the supply chain

low high low high low high

Operational integration within the supply chain requires more than “just” a

state-of-the-art ERP, MES and LIMS landscape



Laboratory

Equipment & workflow

MES &


ERP &

Supply Chain

Lack of innovation� When a new LIMS is put in place, the scope is

kept tight and focused on daily QC operations� LIMS promotes a reactive environment into

daily operations instead of a proactive one

LIMS not fully integrated with the supply chain – what is the issue ?

LIMS are left out when a new ERP system is

implemented, due to cost & risk

Very basic integration only to satisfy the immediate needs

from MES

Strong options to run specificprocesses in ERP or MES

are not discussed

Lack of knowledge� Sometimes the ERP-knowledge of LIMS

vendors is not too good – and vice versa

Missed opportunities� Potential synergies with key supply chain

functions remain undiscovered, and seamless operational integration is not achieved

Political drivers� Traditional LIMS territory is not discussed with

anyone outside of the quality department








� Opportunities and benefits – case studies

� Conclusions



Gaining more from your ERPA high-level comparison of process & system standardization in a company

ERP &

Supply Chain

MES &


� LIMS systems are in most cases not standardized acrossthe different production sites

� The basic business processesare similar, but LIMS are useddiscriminative due to local,historically grown specifics

� MES systems are only in few cases standardized, but process standardization is very high

� Pro-active management of bestmanufacturing processes andknowledge

LIMS &

Laboratories

� ERP are highly standardizedwith globally agreed, commonprocess design

� Globally defined business rulesare mandatory for all partners along the supply chain

Level of LIMS’ integration with the supply chain

low highlow highlow high

Process standardization is a key prerequisite to achieve operational

integrity within global supply chains


Gaining more from your ERPHow to achieve full supply chain integration

Template for keybusiness processes

Identification of criticalsupply chain functions

Simplification & Standardization

Global supply chain processesSupply chains of bigger Pharmaceutical

companies are characterized by pre-

defined global business rules that are

mandatory for all partners

Local manufacturing sites have site

specific operations to cover, but all

partners have common integration

points with the global supply chain

For these common integration points,

standardized business processes must

be defined to achieve operational

integration with the supply chain

Local quality operationsLocal quality departments become

standardized units with a high ability to connect to flexible and fast changing

supply chains - internal best practices

can be shared between sites


Gaining more from your ERPHow to achieve full supply chain integration

ERP MES LIMS Other

Design integrated business processes

Example:How to design integrated business processes in an existing ERP – MES –LIMS environment


Insight

• Review the „Top 20“

integration points in your ERP-MES-LIMS triangle

• Perform a fit/gap assessment and build

the case for change

Gaining more from your ERPThe approach: how to achieve supply chain integration in practice

� Our experience shows that around 20 key business processes managed in the ERP-MES-LIMS triangle provide huge potential for improved supply chain integration

� A typical project looks as follows:

ERP

LIMS MES

Design

• Conceptually design &

verify the to-be business

process model

• Perform an impact assessment on existing

organization, systems &

data

Execute

• Run a proof-of-concept

in a prototype system

• Drive business change

management, review impact on SOP’s and

training needs

Achieve

• Turn technology

benefits into real

business benefits

• Institutionalize the

change and leverage

the business benefit

• Retire the old data,

processes or systems no longer required

• Share the new design

as best practice with

other affiliates

X

XX

M-1 M-2 M-3 M-4

ERP

LIMS MES









� Conclusions



Genuine example from a multinational Pharma company

• Full analytical testing against internal

specifications for each physical delivery• Manual adoption of quality data from

sending sites in own system

Situation before

Quality control of intercompany replenished goods

• High workload due to amount of batches, physical samples and analytical tests

• Critical bottleneck in the raw materials lab caused by high delivery frequencies

• Many errors in quality data caused by manual adoption from certificates

The process was never challenged during the LIMS implementation and the system was designed to continue to support this process unchanged

• Elimination of the bottleneck and reduction of QC operations in the raw materials lab (>30%)

• >20% of LIMS master data retired as no longer needed

• No data entry errors due to automationof the process

The process was challenged and re-designed, a global SOP was defined to control test requirements for inter-company materials in the receiving sites

Situation after

• Test requirements reduced to identity testing per delivery• Automatic transfer of quality data from

the sending site to the receiving site


• Average quality control duration per

material test migrated into the new LIMS without verification or reality check• LIMS/MES/ERP planning not aligned

Situation before

Manufacturing lead times vs. quality operations lead times

• Extended production lead times with negative impact on the supply chain

• Planning of quality control operations not synchronized with manufacturing planning and execution: bottlenecks in LIMS not visible in production planning

After the implementation of an ERP-MES-LIMS planning model, the „old“ quality control lead times had a negative impact on the material availability planning

• Central manufacturing planning cockpit implemented with defined roles & responsibilities • LIMS bottlenecks visible in the production planning process• Lead time per product reduced by 3 calendar days in average

• Average QC times revised and adapted• Process to monitor planned vs. actual time needed defined and process owner nominated

Situation after

• LIMS capacity planning build upon ERP supply chain planning dates• ERP defined as the leading system for the calculation of lab due dates



• Planned costs for QC activities are in

ERP and used for product costing• Actual costs are not available as actual effort is not recorded by lab analysts

Situation before

Monitoring of internal quality control cost

As the actual time required for lab operations is not recorded over a longer period of time, the verification of planned vs. actual is not possible

• Higher accuracy and reliability of actual cost to support operational and strategic decision making (e.g. outsourcing)

• Revision of existing offers and contracts and related profits

A revised cost structure for laboratory cost is defined and used as a basis for product costing, invoice creation and the preparation of new offers and contracts

Situation after

• Actual time is recorded either on order, operation or test level• The monitoring of planned vs. actual is performed by a dedicated function

• No transparency on actual laboratory costs on product / order / test level

• Wrong figures used for product costing, invoicing of lab services for external customers



• Standard cost for 3rd party service labs

are not in ERP but only available on paper • Services are purchased by the labs, not via the operational purchasing department

Situation before

Monitoring of external quality control cost

• No transparency on actual external laboratory costs• No consolidated view on external purchased lab services• No standardized approach to decide if specific tests should be done internal or external

Forecasting of projected cost for external services in course of yearly budget discussions is not possible

• Projection of external laboratory cost possible based upon the ERP planning figures• Strategic decisions are fully supported by actual figures (outsourcing of tests, investments in people, equipment, new lab facilities)

External lab operations are visible in ERP (prospectively and retrospectively) and the purchase of services is shifted to the purchasing department

Situation after

• Cost for external test and operations maintained in ERP• „Big picture“ allows better negotiations with external service partners



• Creation and distribution of certificates

not synchronized with the supply chain• Goods arrive at the final destination, but not the certificate

Situation before

Creation and distribution of quality certificates across the supply chain

• High workload and FTE requirements to create and distribute certificates

• Delays in physical deliveries caused by missing quality certificates

• Manual distribution of certificates by mail or fax = standard procedure• Manual, customer-specific certificate creation (more than 400 templates)

• Reduction of certificate templates from > 400 to a single one

• Automated process ensure that certificates are available when goods are physically shipped to the final destination

The approach to have customer-specific certificate templates was challenged and assessed with QA and regulatory compliance experts

Situation after

• Certificate distribution fully integrated in the delivery process• Automatic distribution of certificates and retrieval from everywhere










� Conclusions



Gaining more from your ERPKey conclusions

Operational integrationOperational integration of quality control operations

with the supply chain requires more than just a staterequires more than just a state--ofof--thethe--art LIMSart LIMS

Quality departments must develop

good expertise in complex supply chain processesexpertise in complex supply chain processes

LIMS implementation projects should be positioned

as Business Excellence ProjectsBusiness Excellence Projects, not as pure IT exercises

Process standardizationProcess standardization is a key prerequisite

to achieve operational integrity within global supply chains

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Leverage learningsLeverage learnings from other industries

and compare yourselves with leading edgeleading edge companies

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Contact us

Michael Schmidt

Director

Lodestone Management Consultants AG | Obstgartenstrasse 27, Kloten | CH-8058 Zürich

Phone: +41 44 434 11 00 | Fax: +41 44 434 11 01

[email protected]

Thank you !Thank you !

Turning technology benefits into real business

benefits

Lodestone Gaining More From Your Erp

Technology

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