Geneva Pharmaceuticals (US hub of Novartis International AG) is one of the world’s largest generic drug manufacturers. Revenues of $300 million were achieved in 1998 and it holds a portfolio of over 200 products in over 500 package sizes. Its main business processes are manufacturing and distribution, with the majority of orders emerging through Electronic Data Interchange (EDI). In 1996, Geneva recognised the limitations in its existing information systems in that they were not capable of integrating across the different functions. Manufacturing, for example, could not share information with accounting or sales and this led to entries having to be manually input twice. Geneva believed an Enterprise Resource Planning (ERP) software system would provide better integration of data across different functions making it more efficient, improve data accuracy and lower maintenance costs. The new system was to be phased in three stages.
These consisted of Phase I (focused on the supply side processes), Phase II (focused on the demand side processes) and Phase III (aimed at the integration of the supply side and demand side processes).
Phase I
This phase of the operation looked at the supply side of the process which included the manufacturing and procurement planning. Originally this type of work was carried out manually and was very labour intensive. All the data had to be re-entered at all the various stages and this increased the risk of error and additional costs. Thus the introduction of SAP R/3 appeared to be the most appropriate choice.
Geneva employed a consultancy firm Whitman-Hart who had previous experience in R/3 and also appointed Verne Evans to be project manager for the implementation process. The team opted for the accelerated SAP (ASAP) methodology as it promised a short implementation period of only six months. Four months after implementation and having spent an inordinate amount of money and time there was minimal progress made. This was due to the fact that there was no real commitment or co-ordination between the consultants. The project manager was inexperienced in R/3 and the other consultants were technical specialists and had no business experience. They failed to critically evaluate the problem and did not modify the software that was needed to meet the company’s requirement.
After this initial setback Randy Weldon was appointed the new project manager to resolve this problem. He had experience in R/3 and also management experience with ERP previously. This provided the foundation for successful implementation of a new system. He encouraged commitment from all members of the team to ensure that targets would be achieved.
A year into the implementation process proved to be quite successful and have shown improvements in certain areas but still required more refinement to the other integrated areas of the process.
Phase II
The second phase dealt primarily with the demand side processes but this phase presented a much greater challenge than the first phase due to the complexity of Geneva's sales and service processes. Since Phase I was fairly disastrous, a number of major personnel changes were made. Anna Bourgeois was assigned overall responsibility of the project as she had over 3 years of R/3 experience and an extensive knowledge of EDI. Arthur Anderson replaced Whitman-Hart as they were knowledgeable in the technical and configuration aspects of implementing SAP. Finally, another consulting firm - Oliver White was brought in as they had extensive experience of dealing with process changes in manufacturing businesses. They decided that Phase II would be carried out in 3 stages: conceptual design, conference room pilot and change management.
At the conceptual design stage, key users with the most knowledge of the existing process were interviewed with help from Oliver White consultants. A core team of 20 was split into 5 groups in the conceptual design stage to examine different areas of the distribution process. The use of small teams with the most relevant expertise was used to give the best results possible. They found 13 different areas which could be improved, 4 of which were key areas and emerged repeatedly from cross-functional analysis by the 5 groups. These 4 key areas were product destruction, customer dispute resolution, pricing strategy and service level. Models were constructed to identify how they could improve these areas using policy initiatives.
Results from the conceptual design stage were used to test prototype R/3 systems for each of the 4 key improvement areas in the conference room pilot stage. The prototypes were used to test different aspects of the redesigned processes in a simulated environment. This was extremely important for preventing errors from reaching the final versions.
In the change management phase, there was a huge emphasis on staff training. Firstly they wanted to make sure that staff knew about the changes that were taking place and did this by distributing newsletters, and displaying signs to tell them that their jobs were changing. A dedicated telephone line was created allowing employees to voice any concerns they may have. There was also an intensive, full-time training period which lasted 3 weeks. This would ensure that they could deal with not only the technological changes, but also the changes in work process, culture and habits.
Phase III
The principal aim of Phase III was to integrate supply and demand and Verne Evans (who was also in charge of Phase I) was brought back in to lead Phase III. This decision was a little strange as this person was also responsible for the shortcomings of Phase I. SAP added a new advanced Purchase Optimiser (APO) module to assist with data analysis and this was exactly what Geneva needed for their sales and operation planning (SOP). In the previous manual SOP system, too much time was wasted on data re-entry and validation and one of the most important benefits of the ERP system is that it can save a lot of time, allowing staff to direct their efforts to other important tasks. The key business metric targeted for improvement in Phase III was that they wanted to fulfil a customer order by a promised time. They also wished to implement "just-in-time" production scheduling which would allow the company to continuously update its manufacturing capacity and scheduling in response to changing customer demands. They believed that top quality customer service would be a driver of success.
Conclusion
Implementing an ERP system into a business is a huge project but it is definitely evident that the benefits of having an ERP system are enormous. Geneva encountered various issues during their implementation and these should be avoided by any company hoping to use ERP. They employed the wrong personnel for the tasks required in Phase I and as a consequence, changes frequently had to be made. Another failure from Phase I was that they did not meet the time constraints they set themselves but perhaps the biggest problem was that the time frame was never set appropriately in the first place. After Phase I, there were massive improvements and in particular, they provided excellent training to ensure that staff would have no problems coping with the changes that ERP would bring.
This assignment was produced in collaboration with Rishi Chada
Bibliography
Bhattacherjee, A., (1999), SAP R/3 Implementation at Geneva Pharmaceuticals
Sandoz, (2006), Sandoz U.S. History
Retrieved: 08/12/08, from
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml
These consisted of Phase I (focused on the supply side processes), Phase II (focused on the demand side processes) and Phase III (aimed at the integration of the supply side and demand side processes).
Phase I
This phase of the operation looked at the supply side of the process which included the manufacturing and procurement planning. Originally this type of work was carried out manually and was very labour intensive. All the data had to be re-entered at all the various stages and this increased the risk of error and additional costs. Thus the introduction of SAP R/3 appeared to be the most appropriate choice.
Geneva employed a consultancy firm Whitman-Hart who had previous experience in R/3 and also appointed Verne Evans to be project manager for the implementation process. The team opted for the accelerated SAP (ASAP) methodology as it promised a short implementation period of only six months. Four months after implementation and having spent an inordinate amount of money and time there was minimal progress made. This was due to the fact that there was no real commitment or co-ordination between the consultants. The project manager was inexperienced in R/3 and the other consultants were technical specialists and had no business experience. They failed to critically evaluate the problem and did not modify the software that was needed to meet the company’s requirement.
After this initial setback Randy Weldon was appointed the new project manager to resolve this problem. He had experience in R/3 and also management experience with ERP previously. This provided the foundation for successful implementation of a new system. He encouraged commitment from all members of the team to ensure that targets would be achieved.
A year into the implementation process proved to be quite successful and have shown improvements in certain areas but still required more refinement to the other integrated areas of the process.
Phase II
The second phase dealt primarily with the demand side processes but this phase presented a much greater challenge than the first phase due to the complexity of Geneva's sales and service processes. Since Phase I was fairly disastrous, a number of major personnel changes were made. Anna Bourgeois was assigned overall responsibility of the project as she had over 3 years of R/3 experience and an extensive knowledge of EDI. Arthur Anderson replaced Whitman-Hart as they were knowledgeable in the technical and configuration aspects of implementing SAP. Finally, another consulting firm - Oliver White was brought in as they had extensive experience of dealing with process changes in manufacturing businesses. They decided that Phase II would be carried out in 3 stages: conceptual design, conference room pilot and change management.
At the conceptual design stage, key users with the most knowledge of the existing process were interviewed with help from Oliver White consultants. A core team of 20 was split into 5 groups in the conceptual design stage to examine different areas of the distribution process. The use of small teams with the most relevant expertise was used to give the best results possible. They found 13 different areas which could be improved, 4 of which were key areas and emerged repeatedly from cross-functional analysis by the 5 groups. These 4 key areas were product destruction, customer dispute resolution, pricing strategy and service level. Models were constructed to identify how they could improve these areas using policy initiatives.
Results from the conceptual design stage were used to test prototype R/3 systems for each of the 4 key improvement areas in the conference room pilot stage. The prototypes were used to test different aspects of the redesigned processes in a simulated environment. This was extremely important for preventing errors from reaching the final versions.
In the change management phase, there was a huge emphasis on staff training. Firstly they wanted to make sure that staff knew about the changes that were taking place and did this by distributing newsletters, and displaying signs to tell them that their jobs were changing. A dedicated telephone line was created allowing employees to voice any concerns they may have. There was also an intensive, full-time training period which lasted 3 weeks. This would ensure that they could deal with not only the technological changes, but also the changes in work process, culture and habits.
Phase III
The principal aim of Phase III was to integrate supply and demand and Verne Evans (who was also in charge of Phase I) was brought back in to lead Phase III. This decision was a little strange as this person was also responsible for the shortcomings of Phase I. SAP added a new advanced Purchase Optimiser (APO) module to assist with data analysis and this was exactly what Geneva needed for their sales and operation planning (SOP). In the previous manual SOP system, too much time was wasted on data re-entry and validation and one of the most important benefits of the ERP system is that it can save a lot of time, allowing staff to direct their efforts to other important tasks. The key business metric targeted for improvement in Phase III was that they wanted to fulfil a customer order by a promised time. They also wished to implement "just-in-time" production scheduling which would allow the company to continuously update its manufacturing capacity and scheduling in response to changing customer demands. They believed that top quality customer service would be a driver of success.
Conclusion
Implementing an ERP system into a business is a huge project but it is definitely evident that the benefits of having an ERP system are enormous. Geneva encountered various issues during their implementation and these should be avoided by any company hoping to use ERP. They employed the wrong personnel for the tasks required in Phase I and as a consequence, changes frequently had to be made. Another failure from Phase I was that they did not meet the time constraints they set themselves but perhaps the biggest problem was that the time frame was never set appropriately in the first place. After Phase I, there were massive improvements and in particular, they provided excellent training to ensure that staff would have no problems coping with the changes that ERP would bring.
This assignment was produced in collaboration with Rishi Chada
Bibliography
Bhattacherjee, A., (1999), SAP R/3 Implementation at Geneva Pharmaceuticals
Sandoz, (2006), Sandoz U.S. History
Retrieved: 08/12/08, from
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml
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