Finding the Cure for Order Processing Pain

in the Life Sciences Industry

EskErwww.esker.com

sales Order Processing

2

Table of Contents

Introduction ............................................................................................... 3

Challenges in Customer Care ..................................................................... 4

Overcoming the Challenges ....................................................................... 6

Choosing a Solution ................................................................................... 7

Order Processing Automation .................................................................... 8

Case Study: Medical Device Manufacturer ............................................... 11

Performance, Reliability and Scalability ................................................... 12

Flexible Deployment Options ................................................................... 13

Key Learning Points ................................................................................. 14

About Esker ............................................................................................. 15

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Introduction Operating in a hostile environmentIn the life sciences industry, Customer Service and Operations directors face the challenge of maintaining high margins to absorb soaring drug development costs while keeping customers happy and away from the competition.

What’s the matter? In biopharmaceuticals, the face of the industry is rapidly changing. Companies must develop molecules faster and more rapidly replace revenue from a growing number of blockbuster drugs’ expiring patents, not to mention the reduced duration of actual patent protection. Clinical research and development is a vital part of the business equation, yet it is becoming more complex and expensive.

More changes are yet to come. For example, personalized drugs will most likely mandate significant changes to life sciences companies’ business practices in the near future.

In the U.S., “Many medical device companies expect that healthcare legislation could have a negative impact on the industry during 2010. The largest challenge will be an increase in FDA regulations for oversight as well as compliance,” according to the PharmaLive Special Report, “New Medical Device Review and Outlook.” If growth is stated to continue, medical device companies around the world will also face rising R&D costs to sustain a combination of devices, drugs and nanotechnology in response to the industry trend towards less invasive treatment.

To become more agile and survive in a hostile environment, pharmaceutical and medical device companies need to accelerate business cycles and increase operational efficiency while providing excellent service to their customers.

Making smart use of the technologyWhat’s in the way of making business operations as efficient as possible while keeping an eye on the bottom line?§ A vast majority of hospitals, clinics, nursing homes, rehabilitation centers, physicians’ offices and medical centers are

not very sophisticated when it comes to placing orders. On average, 80 percent of pharmaceutical and medical device orders are received either by phone, fax or email.§ Historically, life sciences companies have focused on automating transactions with large business partners, using

EDI for up to 20 percent of their business. But that leaves smaller and more numerous trading partners out — and a lot of money on the table.

Doing business with fairly unsophisticated partners the old manual way is preventing life sciences companies from realizing operational efficiency that is so vital to them.

In contrast, over the past decade Internet and e-technologies have become part of everyday business in most industries. They have widely recognized that technology such as Electronic Data Capture and Workflow or integrated reporting and electronic archiving of documents can result in significant quality gains and cost reductions. In the healthcare industry, however, the pace of adoption has seemed much slower.

Technology to overcome order-taking efficiency challenges is available to life sciences companies who seek it out. Recognizing the misconception that solutions are expensive and complex to implement, managers should look at the cost of manually processing orders and the impact of that cost on their business.

Understanding the true cost of manual transactionsRecent studies from Forrester Consulting estimate the average cost of manually processing an order at $10.10 and the manual document error rate at 10 percent. Companies may not fully understand the true cost of manually processing orders and the impact on it has on customer satisfaction, profit margin, process transparency and competitiveness. Errors associated with manual processing drive costs even higher and create potentially deadly risks of incorrect treatment or disruption of time-sensitive medical procedures.

In exploring the challenges of drug and medical device manufacturers, this paper will present the many benefits of automating the order-taking process and the different technology options available to them.

4

Challenges in Customer Care

Life sciences companies are under rising pressure to improve operational efficiency and reduce costs. Conserving financial resources is absolutely crucial in order to sustain the highly demanding R&D necessary to keep up with aggressive competition and the changing face of healthcare, including new market trends such as personalized medicine and less invasive treatments.

Companies need to accelerate operational tasks. They can increase staff, but what’s the point in adding to a process that is already very much manual and not optimized? A better option is to rely on advanced technology to trend towards lean processes rather than increasing the cost per transaction.

One area that demands close attention is customer care — and more precisely, effectiveness of the order taking process — because it is vital to fuel the business. A vast majority of orders received from hospitals, clinics or practices are still fax or telephone based. EDI is merely present and email typically represents a small percentage.

Some companies have invested in customer portals in order to overcome the issue of fax, email and phone orders. But these initiatives often fail because customers are not likely to change the way they are doing business or put more burden on themselves to place orders.

Other companies that are connected to an EDI-based electronic trading exchange try using a fax and email translator add-on from the hub vendor. In practice, this approach typically falls short of making order processing completely electronic, particularly when it depends on development of templates to handle format variations of customer POs received by fax or email.

As a result, the order taking process continues to rely heavily on paper and human manual processing. And although order taking needs to meet high quality standards due to the nature of the business being human treatment, life sciences companies still use inefficient and error-prone methods. A recent study from Forrester Research estimates the manual process error rate to be as high as 10 percent.

The table below highlights key issues in manual order taking and their impacts on the business.

Issue ImPaCT

Order processing cycle time§ In shipping orders§ Waste of cash: late dispatch penalties§ Damaged relationships with customers

No automatic validation§ Order rework and returns management§ Duplicate order processing§ Data entry errors

Lack of process visibility

§ Difficulties in budgeting, planning and forecasting§ Lack of control and higher risk impacting audit standards compliance§ Inability to identify urgent orders as they come in§ Difficulties in responding to order status inquiries

Order processing costs§ Order dispute resolution§ exception handling§ escalation and approval of problem orders

Top 5 Challenges

R&D demands financial resources

Customer care must be effectively managed while reducing operational costs

Fax and phone orders have to be manually processed

Customer portal initiatives often fail

EDI-based electronic trading exchange hubs have not succeeded in making order processing fully electronic

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Order processing cycle timeAlthough customer purchase orders start as electronic documents, they end up as paper on someone’s desk. The result is that they take longer to process than they would if they remained in electronic format. These delays in processing have a negative impact on the ability to deliver the levels of service that customers expect.

No automatic validationRisk of error is inherent in any process that involves paper and manual data entry. In order processing, this demands particular attention not only because of the impact on Days Sales Outstanding (DSO) and working capital, but also because companies must provide hospitals and their patients the drugs or devices that their patients’ health requires. Any mistake in the order taking or order dispatch process can be dangerous for patients, or even fatal.

Lack of process visibilityJust as automated entry of customer orders is essential for process efficiency and quality assurance, data on order processing is crucial to daily operations. For example, customer inquiries frequently create the need for information about the processing status of a particular order. Quick access to information on whether an order has been received, processed, or shipped (as well as data on the currently responsible agent) can significantly reduce turnaround time of customer inquiries.

When orders sit on a fax machine or in an email inbox waiting to be processed, it is impossible to optimize management of special handling or rush orders. Meeting set service level agreements (SLA) or even basic expectations of customer service can become a challenge.

Order processing costsThe cost of processing customer orders is generally high. It is even more important for small orders, as the cost of resolving an issue may be higher than the value of the order itself. According to a recent study from Forrester Research, the average cost of manually processing an order is $10.10 per order versus $4.50 for electronic orders.

Industry Examples

Electronic orders can be processed 76% faster than manual orders.

Manual order processing commonly causes backlogs of 1 to 4 days.

Annual cost of labor to process fax and email orders typically exceeds $100,000.

Average cost to reprocess an order is $200.

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Overcoming the Challenges

steps toward the cure

HOW TO OverCOme OrDer PrOCessIng CHaLLenges

Addressing productivity and transaction cost issues helps companies:

§ remove manual sorting and handling of customer orders

§ speed up data entry

§ minimize the cost of physical archiving of documents

§ streamline communication to resolve exceptions and discrepancies

§ Reduce customer complaints and inquiries

§ Improve response time to answer customer inquiries

§ monitor individual Csr performance

§ Improve customer service level

To decrease risk and improve control you need to:

§ Improve visibility of order workload

§ unify order processing and exception tracking

§ reduce risk of duplicate shipment

§ Enable accurate cash flow forecasting

§ Quickly respond to auditor (internal or external) requests

Automation improves fulfillment and customer relationships by helping companies:

§ Deliver orders on time

§ Identify and resolve disputes

§ Reduce the number of order status query calls from customers

§ Answer customer questions immediately

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Choosing a solutionBusiness process automation or business process outsourcing (BPO)Life sciences companies also need to evaluate solution model options based on quantitative and qualitative criteria of the current business environment. Should you go for BPO or for a Software as a Service (SaaS) model? The table below highlights pros and cons of both models in comparison with the traditional software approach to help with the decision process.

sOFTWare vs. BPO vs. saas – PrOs & COns

sOFTWare BusIness PrOCess OuTsOurCIng sOFTWare as a servICe

Pros § existing application integration§ Control over in-house

order processing solution§ Higher customization

capabilities

§ 15 to 35% cost saving compared to in-house operations§ Cheap per-transaction

cost – relies on cheap labor

§ Cost: only pay for what you use

§ Low TCO – 50% less than the license model (gartner – The 3 year Total Cost of Ownership for Crm)§ accessible from anywhere with

an Internet connection§ OPeX versus CaPeX§ Low risk§ easy and fast deployment§ unlimited capacity

Cons § Costs: software, maintenance and hardware§ Fixed capacity§ Requirements to manage

system failure situation§ High cost of system

uptime plans

§ not all processes are easily moved – they must be well documented, stable and standardized§ 72 month roadmap § Cultural fit?§ Takes years to reach the success§ Future flexibility?§ Partner business stability§ Relies on people – turnover?§ Loss of internal knowledge and

expertise to improve processes§ High security concerns§ Change management required to

establish process governance§ Impact on the local community

§ multiple systems integration requirements§ Customization§ Data security concerns

§ relies on Internet performance

reaching a successful conclusionWorking with companies in the life sciences industry over the past decade, Esker has seen the highest levels of success result from leveraging a comprehensive platform — either on-premise or as a service — to focus on automating the order-taking process rather than outsourcing it. The following pages present an overview of why and how this approach produces high-value outcomes for pharmaceutical, medical device and biotech companies.

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Order Processing automation

Esker solutions provide intelligent features allowing companies to automate every phase of their order management process — from the reception of the original document to the resulting creation of a corresponding business document. The workflow includes automatic and human validation of the data as well as document archiving.

How it works

1. Orders are received by the Esker platform and processed according to predefined rules matched to order attributes such as customer, region, amount, product line, etc. Faxed or emailed documents are captured and can be automatically routed and prioritized.

2. The Esker solution extracts relevant customer PO information such as company name, order number, expected shipping date and line item details. Captured data can be automatically checked against customer and product databases. If there are no exceptions, straight-through processing can create the order ready for dispatch without the need for user validation. Specific product POs can undergo review and approval.

3. If an exception such as pricing condition occurs, the order is blocked pending validation and approval via an electronic workflow that can be set up to go through one or several users.

4. Order information is made available to the ERP application, and the document image is automatically indexed to the Esker server or another archive. Customers can be notified of order entry and status.

5. The original customer PO image is readily available for reference as needed.

reporting and metricsReporting tools empower Customer Service managers and personnel to monitor volume of orders processed by FTE per day, split between orders that have gone straight through and those that required user intervention, average time to process an order and other Key Performance Indicators (KPI). Whether a company uses the technology to remove some or all human intervention from customer order processing, the automated process offers distinct advantages with electronic copies of orders readily available to any authorised person within the company without having to go through physical files.

Received orders are automatically dispatched to the right CSR

1 2 3 4 5 Automatically extracted data verified by CSR when required

Orders requiring special handling enter specific workflow

Order automatically created in the system

Image of original order is archived for future reference

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key features for effective order processing automation

Order capture and routing Email or fax orders are received and automatically routed to the right customer order processor work queue depending on the customer, the region, the product line or special shipping instructions.

Benefits:

§ Keep track of all received orders

§ Save manual handling and routing time

§ Prevent lost customer orders

§ Prioritize orders for better customer service

Automatic order entry and archiving Data is automatically captured using OCR and intelligent extraction technology to completely eliminate manual data entry. The original invoice image is automatically stored for later search and retrieval.

Benefits:

§ Eliminate data entry errors

§ Access documents immediately for faster response to inquiries

§ Share documents across the enterprise

Audit trail and reporting The system keeps track of all invoices documenting every touch that occurs in the workflow process. It provides reporting capabilities such as volume per customer or per processor, order processing speed and bottlenecks.

Benefits:

§ Monitor and measure order processing efficiency

§ Identify and resolve bottlenecks

§ Manage resources more efficiently

§ Review process integrity

Automation benefits

Productivity

Processingerrors

ProcessingTime

Benefits at-a-glance:

§ Increase order processing speed by up to 65%

§ Lower order transaction cost by 40-60%

§ Retain customers by keeping up to your SLA

§ Prevent lost orders and delayed deliveries

§ Improve customer inquiry response time

§ Get real-time access to reporting and analytic information

§ Reduce disputes and improve DSO

In delivering the advantages of order processing automation, Esker solutions provide a tool for accurate and on-time customer order booking. Order fulfillment departments gain the ability to track and closely monitor each step of customer order processing. Combined with the versatile user rights management features in Esker solutions, these capabilities also help companies reduce risks of fraud.

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What sets this solution apart?Working with Esker, organizations gain a platform to automate virtually any business process that runs on documents, including vendor invoice processing as well as automated delivery of outbound purchasing documents and customer invoices in addition to sales order processing.

Esker customers benefit from:

§ A corporate solution for multiple processes, including electronic invoicing

§ SAP-certified integration and deep experience working with SAP solutions

§ A true enterprise solution with support for shared services and technologies such as clustering

§ Proven deployments worldwide

§ Archiving flexibility

§ One-step document validation and reconciliation capabilities

§ Web-based workflow — outside of the ERP system

§ A proven implementation methodology and process-focused approach

Order Processing Reporting & Audit Trail

Esker order processing modulefor the life sciences industry

Document Archiving & Indexing

Data & Document Capture (IDC & OCR)

Hospitals & clinicsPhysicians

& ambulatorysurgery centers

Nursing homes& rehab centers

Data Integration(EDI, IDoc, XML, Text, etc.)

Automatic Validation Exception Management– Electronic Workflow

EDI

Improve kPIs

Meet credit target

Reduce cycle time

Improve cash conversion rate

Decrease cost per transaction

strategic value assessment factors reported by Esker customers

§ Minimal downtime

§ Simplified exception handling

§ Fit with enterprise SOA strategies

§ Web workflow allowing users to validate and approve orders through the web interface

§ Capability to extend the solution to invoicing for end-to-end order-to-cash management

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Case study: medical Device manufacturerDemonstrating the business value of Esker solutions for life sciences companies

Industry Manufacturing – Medical devices and pharmaceutical products

Process Sales Order Process

erP JD Edwards (Version A 7.3)

Challenges§ CSRs collect fax orders and process 40% of them manually § Manual fax process is resource-intensive § Manually processing orders across multiple business units requires manual routing and

splitting, which is a source of errors § The template-based OCR technology employed takes 2 weeks to set up and costs

$500 per template§ Lack of flexibility and visibility

Manual sales order process

Automated sales order process with Esker on Demand

results

$1,800 saved monthly on order processing

results

§ $1,800 saved monthly on order processing

§ Complete visibility of orders

§ 100% throughput with no templates needed

§ 3.5 fewer CSRs to process orders

HOSPITALS,CLINICS,

ETC.

SALES ORDER� Imaging� Respiratory� Distribution

Incoming sales orders received by fax

1

CSRs walk to the fax machine, search the pile to pick up orders waiting to be processed

2 CSRs check for errors, and special handling instructions.

4

Data are manually keyed-in

5

Priority ordersare handled by a specific businessunit.

3

Priorityorder ?

YES

NO

ERPJD EDWARDS

HOSPITALS,CLINICS,

ETC.

FAXSALES ORDER� Imaging� Respiratory� Distribution

Incoming sales orders received by fax

1

OCR Engine reads image, extracts fields, and decides where to route the sales order.

2

Reading andExtracting Prioritisation

VerificationRouting

Key Worddetected

Automatic

Exceptiondetected

ERPJD EDWARDS

EDI File of PO is made available for upload into ERP, indexed and archived.

4

CSR checks exceptions and resolve them through a web interface before posting the PO.

3

The order is quickly processed by the sales team designated.

3DATABASENIGHTLY

REPLICATION

EDI

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Performance, reliability and scalability

Whether installed on premise or used on demand, Esker solutions provide both reliability and scalability without any compromise of performance. Esker has set up top-tier facilities around the world, combining physical and virtual infrastructure to offer world-class security of enterprise information within and outside the walls of the organization. Esker is committed to providing companies with a reliable and secure enterprise solution to automate processing of orders and other business documents.

Data Privacy§ Data transfer using secure protocol

(SSL) identical to those used for banking transactions

§ Various data transfer protocols available (FTP, SFTP, HTTPS and more)

§ Process auditing

§ Compliance with government regulations

Access Control§ Application security

§ Secure login

§ Identity administration and user provisioning control

§ Role management and administration

High Availability§ Clustering for continual access to business

critical services

§ Load balancing for faster processing speeds

§ 24/7 availability

§ Centrally maintained infrastructure

Disaster recovery§ Data tape backup

§ Data synchronization

§ Failover capabilities

§ Emergency team available 24/7

reliability§ 24/7 monitoring ensures operational

continuity

§ Server redundancy in separate geographical locations

§ Network redundancy (cluster and load balancing)

§ Physical infrastructure redundancy (electrical, ISPs, facilities)

§ Application security

§ Automatic system monitoring

scalability§ Multitenant architecture – SaaS

§ Multi-server installation support

Data Centers§ Hosted Data Centers

§ Key card entry

§ Digital surveillance

§ Biometric recognition

§ Active and passive fire prevention standards

§ Temperature control for humidity and pressure

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Flexible Deployment Options

Esker gives you the choice to deploy the solution in-house or leave it to Esker to manage the solution for you and benefit from an Esker on Demand solution. Esker will support your unique requirements while ensuring maximum effectiveness of your system to deliver the highest value for your company.

You can go for the traditional solution deployment and administration model — purchasing licenses upfront and installing the software using internal staff, resources and technology. Or you may prefer to have Esker experts deploy, host and manage your document management system externally in our secure and reliable data center. Esker can do it all. You decide.

TraditionalYour organization is granted with a perpetual Esker software license. The cost of the license is paid upfront, as is the professional services provided by Esker to deploy the solution and train your staff. In this scenario, your organization also manages and operates the system and associated infrastructure (servers, storage, network, database, etc.) on your premises.

HostedYou may choose a hybrid model where your organization licenses Esker software products and solutions perpetually, but we manage and operate the system and associated infrastructure in our secure data center.

subscription On-PremisesYour organization subscribes to Esker product licenses on a recurring basis (monthly or annually). With this approach, your organization manages and operates the system and associated infrastructure on your premises and benefits from an on-demand pricing model.

software as a service (saas)As an alternative to hosting the solution at your premises, you can leverage the capabilities of the Esker platform as an on-demand service. Users log in through a secure web interface, much like widely adopted web-based applications such as salesforce.com. This way your company preserves even more capital by automating customer order processing without additional IT complexity or associated expenditures.

Because there is no server or desktop computer setup and only Internet access required, Esker on Demand can be up and running quickly. Following initial sign-up and solution configuration of your system to match your internal process, Esker will set up users and permissions, upload data, and train your staff.

EskerSales OrderProcessing

Solution

Service Usage Fee

Permanent

LicenseRent

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Licen

se

Planning

On Premise

On Dem

and

Syste

m In

stallation, Setup and Testing – On Premise / Hosted

Plan

ning

and

Bus

iness

Process Analysis

Dep

loym

ent a

nd Tr

aini

ng

Deployment and Training Deployment and Tra

ining

Deployment and Training

Deployment and Training

Setup and Conn

ectio

n

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Key Learning Points

Order management challengesWhat is the matter?Key issues in order processing operations today include:

§ Time to process customer orders

§ Errors and delays affecting order processing operations

§ Visibility to see what’s happening with customer orders

§ Cost control and avoidance

§ Security and regulatory compliance

§ Keeping up with specific customer SLA

Performance improvement driversWhere to focusImmediate and significant outcomes can result from focusing on:

§ Productivity in the order processing department

§ Transaction cost reduction

§ Regulatory compliance support

§ Security and risk control

§ Fulfillment and customer care

§ Customer satisfaction and competitive advantage

Document process automation as the solutionEnterprise-wide rOIAdditional value beyond order processing is available from a comprehensive platform to:

§ Capture key information — such as order number, product part number, quantity and unit price, shipping address, and special shipping instructions

§ Present data for modification and validation in a web-based interface or use straight-through processing

§ Archive data and documents for easy access

§ Deliver outgoing documents such as order dispatch notes and customer invoices

Flexible deployment optionsAutomation on demandWhy choose a SaaS solution?

§ Rapid deployment

§ Rich functionalities

§ Low cost

§ Low risk

§ No IT investment

Quick Facts

On average, 80% of orders are received either by phone or fax.

Manually processing an order costs $10.10 on average – Forrester Research.

The average error rate of manually processed documents is 10% – Forrester Research.

Customer study show that one of the top three factors driving customer satisfaction is order turnaround time.

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about esker

Document process automation leadershipEsker is a recognized leader in helping organizations reduce the use of paper, eliminate manual processes and simplify IT landscapes. With its comprehensive platform, Esker delivers the benefits of automated document processing as on-demand services (SaaS) and on-premise solutions. Customers achieve significant operational efficiencies, cost savings and ROI in as little as three to six months while gaining visibility and control within order-to-cash and procure-to-pay business processes ranging from sales order management and accounts receivable to purchasing and accounts payable.

Founded in 1985, Esker operates globally with more than 80,000 customers and millions of licensed users worldwide. Esker has global headquarters in Lyon, France and U.S. headquarters in Madison, Wisconsin. For more information, visit www.esker.com. Follow Esker on Twitter and join the conversation at twitter.com/eskerinc.

solutions

Procure-to-Pay and Order-to-Cash and AutomationTo help organizations quit paper and automate business processes to speed cash conversion, enhance customer satisfaction, improve supply chain performance, and increase profitability, Esker solutions span the procure-to-pay and order-to-cash cycles:

§ sales Order Processing to automate entry and routing of incoming customer orders

§ accounts receivable Invoicing to automate processing and delivery of billing documents based on customer preferences

§ accounts Payable Processing to automate entry and routing of incoming vendor invoices and other payables

§ e-Purchasing to automate processing and delivery of supply chain documents based on vendor preferences

esker, Inc.1212 Deming Way, suite 350madison § WI 53717 Tel: 800.368.5283email: info@esker.comwww.esker.com

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