Case 1: Geneva Pharmaceuticals ERP Implementation Summary: This case discusses Geneva Pharmaceuticals and the much needed ERP implementation within the organization. Geneva is one of the world’s largest generic drug manufacturers. Geneva needed new organization within the company to help better manage the over 200 SKUs in different size packages. Their old way of doing business caused confusion and errors resulting in setbacks and overall negatively affecting the company. Realizing this, management at Geneva searched for a new ERP system to implement to solve these issues.
After weighing the pros and cons of two different ERP systems, Geneva decided on implementing BPCS in their branded drug divisions and the generics agreed to implement R/3. That plan would be implemented in three phases which each had separate goals to fulfill to improve operations within Geneva. The case discusses some of the setbacks Geneva encounters with implementation and how an initial switch to a new ERP system can be challenging. Getting through the implementation challenges opened new doors for Geneva and allowed them to compete in the competitive industry of pharmaceutical drugs. 1.
Create a graphical representation of the Geneva Pharmaceuticals supply chain. 2. Discuss what you think is the major flaw in the business decision process for Geneva’s old way of doing business. The major flaw in Geneva’s old way of doing business is the fact that their distribution, manufacturing, and sales departments don’t coordinate their moves. This means that the company is not efficient and doesn’t have a clear strategy. On one side, we have the manufacturing process that produces a lot of SKU’s which adds the complexity of the process and makes the forecasting for each product even higher.
This wouldn’t be a bad thing if the company had highly customizable products, but taking into consideration that they don’t bother distributing to end customers, having so many variations of the product can have a negative impact. Also, the fact that they haven’t decided to go into online selling doesn’t help them. Another factor that may be their major flaw in their business process is their distribution system. They have two distributions centers in Broomfield and Knoxfield. With their current business model, having two DC’s makes their order processing structure unstable.
Since the majority of their orders come through EDI, the system has to take so many variables into consideration, such as quantity ordered and delivery expiration dates. Even after that the order may not be fulfilled so a backorder will be generated. This makes the system highly inefficient and can make the customer unhappy. There is a high difficulty in forecasting the demand for each DC as well as the order processing cost being higher. Since the demand is highly speculative and the distributors usually place large orders, a more effective distribution strategy can be implemented using Broomfield as their only DC.
In this case they would have a more accurate forecasting, less backorders, higher customer satisfaction, less safety stock and lower inventory holding cost. 3. Briefly describe the Geneva’s IT infrastructure before the SAP/R3 implementation and what problems were caused by it. Geneva’s information systems consisted of a wide array of software programs before the SAP/R3 implementation up until 1996. Some of these systems were IBM A/S 400 (primary hardware platform), and multiple operational databases that to connected to desktop computers via a LAN (local area network).
This wide array of software programs did all the procurement, manufacturing, sales, accounting, and other processes. These systems were not interoperable and it led to problems for Geneva. Data that was shared across these systems had to be double-booked and rekeyed manually which opens the door for human error; which in turn leads to higher cost errors and inconsistency. It was obvious an integrated IT system could improve data consistency and accuracy but also reduce maintenance costs. 4. Geneva’s branded drug division decided to use BPCS as their ERP system.
Research and describe what BPCS is and any changes in the system or company since this case was written. Cite your sources. BPCS stands for business planning and control system. It was developed by a company called System Software Associates, which later turned into SSA Global Technologies, only to be acquired at the end by Infor Global Solutions (datacollectionsoftwares, 2011). BPCS is designed to control the operations of manufacturing companies. It eliminates batch store and forward activities and the need for multiple platforms for data collection like Geneva was using.
Other separate stand-alone data collection systems can be interfaced into BPCS. Typically, these systems are LAN-based and use a batch interface through CIMPath or they have some other batch mechanism to update BPCS (datacollectionsoftwares, 2011). The issue with this is that you need a separate database, which means more maintenance and synchronization is required. New system updates are available for ERP BPCS customers, for example Infor ERP LX. Improved customer service, planning, help control costs, enhance overall productivity, and streamline complex manufacturing processes are all upgrades with Infor ERP LX (Infor, 2009). . Discuss the problems and solutions that came out of the first phase of SAP/R3 implementation. Phase I of Geneva’s SAP/R3 implementation was to integrate the supply side of their business processes. This included the company’s manufacturing processes and other things such as master scheduling, capacity planning, purchasing management, etc. They used a MacPac package running on an IBM AS/400 machine to control many of the operations and master schedules. Under Geneva’s old system, processes were very labor intensive and often had errors that needed to be completed manually, leaving room for rekeying errors.
The goal of the first phase was to relocate the processes controlled by MacPac to R/3, automate all other processes that were not controlled by this MacPac, and synchronize all of the supply data into one database. Geneva contracted a consulting company with previous implementation experience called Whitman-Heart to help with the implementation. They originally chose Verne Evans, the director of Supply Chain for Geneva, to head up the project. Whitman-Heart offered an accelerated SAP implementation, ASAP, which involved having the program up and running in only six months.
Geneva opted to go with this strategy but noticed four months later that the project had accomplished little and was behind schedule. The consultants from Whitman-Heart were technical specialists, but lacked the business scope for the project. Geneva decided to go with a new project leader, Randy Weldon, who had previous experience in R/3 implementation with his previous employer in order to get it going in the right direction. Although not an enthusiastic supporter, he continued with Whitman-Heart for the rest of the implementation, but chose a completely new project team.
With a new project management team and a new set of goals, phase I continued to progress better than before. Geneva saw the results they were looking for such as the standardization of different jobs and the integration of the manufacturing processes into the SAP system. 6. Discuss the changes in the SAP/R3 implementation process from Phase I to Phase II. In other words, what lessons learned and improvements made? Going through the first phase helped Geneva in the implementation of the second phase of SAP implementation. This time they looked to integrate the demand side of the business which included order fulfillment, sales, marketing, etc.
Seeing as how the project went off track in phase I, the project team promoted a new team leader, Anna Bourgeois, who was the leader of the IS side of the team Weldon put together. She decided to hire a different consulting company, due to the lack of results provided by Whitman-Heart. The new consulting firm to perform the next two phases was given to Arthur Anderson Business. Along with Arthur Anderson Business Consulting, Oliver White, a different consulting firm specializing in operational processes, was also brought along to help. Both firms having a specialty, using two firms was to Geneva’s advantage.
Arthur Anderson was very good with the technological side of the implementation, while Oliver White specialized in the business processes side of the implementation. Geneva settled on using three phases to implement the technical side of phase II. These three phases consisted of conceptual design, conference room pilot, and change management. By coming up with clear cut goals, they were able to identify employees who would be the most competent with the system and they were able to bring along other employees through their change management phase.
They used company newsletters and signs around the building to keep people aware that change was on the horizon. A precise three week training plan was implemented to assist with the changes. Using business metrics, Geneva identified customer service levels as their main focus. Geneva’s primary metric was looking to increase their service levels from in the 80’s to a service level of 99. 5% or higher by years end. Seeing that phase II is still underway by the publication of this case, Geneva’s metrics can neither be confirmed a success or failure.
Using the lessons learned from phase I, phase II was implemented with much more direction, and the progress and improvements that were undergone throughout phase II prove that. 7. Describe the primary focus of Phase III and discuss the shortcomings of SAP/R3 to satisfy the needs of this phase and how Geneva plans to overcome them. Phase III deals with Geneva’s plans of integrating supply and demand side processes by using an automated system supported real-time integration of all supply and demand data into a single database for the planning cycle.
In 1998, Verne Evans who was Director of SCM, promised that the R/3 program would help to remove the technological bottlenecks that had previously prevented successful SCM implementation. Geneva focused on targeting the mission-critical and manufacturing resource planning components within SCM, specifically Sales and Operation Planning (SOP) to implement “just in time” production scheduling. The SOP will link planning Geneva’s manufacturing and sales operations which will allow Geneva to continuously update its schedule in response to constantly changing customer demands whether they are planned or unanticipated.
Geneva’s R/3 project management team believed that the SOP module provided by SAP did not have the intelligence required to generate an optimal production plan from the constantly changing supply and demand data. Geneva found that the R/3 system was meant to be a database repository and not as an analysis tool to solve complex supply chain problems. To help overcome these shortcomings, Oliver White created a template to help the initial requirement definition stage of the SOP implementation.
This template would provide a common reference point for all individuals in the SOP process and synchronize their decision process. Geneva also looked to use the business metric “available to promise” or ATP to help improvement of the Phase III implementation. ATP was expected to provide customers with reasonably accurate dates of their orders to improve their customer service levels. Geneva expects that thin inventories, just-in-time manufacturing, and improved customer service will lead to greater success. 8.
Briefly discuss how Geneva plans to extend its technology infrastructure beyond its organizational boundaries to integrate the entire supply chain. In order to seamlessly integrate the entire supply chain, Geneva plans to strengthen their relationships with key suppliers and customers. In order to do this, Geneva plans to use vendor managed inventory (VMI) which uses real-time updated electronic information. This information about the customer’s inventories is used to replenish their own inventories on a just-in-time basis without a formal ordering process.
For the distributor, Geneva expects that VMI will reduce on-hand inventory from seven to three months. Geneva also believes that the business need for cost reduction in the generics industry will drive customers towards VMI when some customers are hesitant to share critical sales data. Conclusion: Geneva Pharmaceuticals decided to try to implement a new ERP system in order to solve their old ways of conducting business that cause confusion and errors which set back the company. Geneva decided on the ERP system BPCS and to implement the R/3 system to solve these problems.
They decided on a three phase system in the implementation process which presented many challenges. However, the completion of installing the new system would allow Geneva to compete in the highly competitive generics industry. Our team felt that even though Geneva faced many challenges in the implementation process, the company was able to improve their ways of business that would help solve the confusion and errors that the old system offered. Our team felt that Geneva could have acted differently to help solve their problems by using the big bang method to implement the new system.
This method would have been risky but it offers higher rewards than installing the system in three phases. Geneva was able to use their three phase method effectively however in order to gain a more competitive advantage in the market. Bibliography 1. BPCS Data Collection. (2011). Data Collection Software, RFID, Tools, Methods. Retrieved October 20, 2011, from http://www. datacollectionsoftwares. com 2. Infor. (2009). Infor ERP LX. Retrieved October 18, 2011, from http://www. infor. com/content/brochures/update-bpcs. pdf/