lodestone gaining more from your erp
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Gaining more from your ERP
Turning technology benefits into real business
benefits
Michael Schmidt, 02-Mar-2009
Page 2Michael 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
Page 3Michael Schmidt // IQPC Smart Labs 2009
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
Page 4Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 5Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 6Michael Schmidt // IQPC Smart Labs 2009
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
Page 7Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 8Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 9Michael Schmidt // IQPC Smart Labs 2009
Gaining more from your ERP
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)
Page 10Michael Schmidt // IQPC Smart Labs 2009
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
Page 11Michael Schmidt // IQPC Smart Labs 2009
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
Page 12Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 13Michael Schmidt // IQPC Smart Labs 2009
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
Page 14Michael Schmidt // IQPC Smart Labs 2009
Gaining more from your ERP
Laboratory
Equipment & workflow
MES &
Production Shop-floor
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
Page 15Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 16Michael Schmidt // IQPC Smart Labs 2009
Gaining more from your ERPA high-level comparison of process & system standardization in a company
ERP &
Supply Chain
MES &
Production Shop-floor
� 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
Page 17Michael Schmidt // IQPC Smart Labs 2009
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
Page 18Michael Schmidt // IQPC Smart Labs 2009
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
Page 19Michael Schmidt // IQPC Smart Labs 2009
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
Page 20Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 21Michael Schmidt // IQPC Smart Labs 2009
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
Page 22Michael Schmidt // IQPC Smart Labs 2009
• 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
Genuine example from a multinational Pharma company
Page 23Michael Schmidt // IQPC Smart Labs 2009
• 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
Genuine example from a multinational Pharma company
Page 24Michael Schmidt // IQPC Smart Labs 2009
• 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
Genuine example from a multinational Pharma company
Page 25Michael Schmidt // IQPC Smart Labs 2009
• 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
Genuine example from a multinational Pharma company
Page 26Michael Schmidt // IQPC Smart Labs 2009
� 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
Page 27Michael Schmidt // IQPC Smart Labs 2009
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
�
Leverage learningsLeverage learnings from other industries
and compare yourselves with leading edgeleading edge companies
�
�
�
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Page 28Michael Schmidt // IQPC Smart Labs 2009
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
michael.schmidt@lodestonemc.com
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