Lodestone Gaining More From Your Erp

Gaining more from your ERP
Turning technology benefits into real business
benefits
Michael Schmidt, 02-Mar-2009

Lodestone at a Glance
Passion for Excellence. Commitment to Delivery.

UK Germany
Canada
Belgium Poland
Romania
Portugal
Switzerland
USA
Headquarters

Thailand

Singapore

Over 500 employed Consultants globally
Founded in August 2005, HQ in Switzerland Australia

USD 145 mn Revenue in 2008
Built and led by former quot;Big 5 Partnersquot; with 15+ years
in Management Consulting

Michael Schmidt // IQPC Smart Labs 2009 Page 2

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


Content of this presentation

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







Conclusions


Key business drivers – many quality topics on the CxO agenda

“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

Quality Risk
Anti-counterfeiting 21st Century
Regulations Quality by Design
Management
strategies Quality Management

Real-time Supply Chain
ePedigree
Processes Lean Lab
batch release Integration
Track & Trace

Process Analytical Higher
Paperless Electronic Lab
Technologies Technologies Automation
Laboratories Notebooks (ELN)



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







Conclusions


The complex view
Manufacturing Local market
Distribution
Suppliers

Business model

Capacity Planning Demand Creation Process

Vendor Managed Inventory Market Development
Distribution
M M Aggregate
Requirement
Demand Planning R Forecasting Promotional
P
Procurement Inventory
Supplier Demand Planning
Process P Management
S
Planning Planning
Identification

Processes Category
Management
Continuous Replenishment
Order Confirmation
Raw Material Finished Goods
Receive Shop Floor Inventory
Build Inventory Allocation Order Transmission Demand Id.
Inventory Control Inventory Deployment
Materials Mgt. Control
Process
Trans. Planning Order
Management
Load Building
Process
Pick/Pack
Ship
Collect Deductions
Invoice

Organizations

BI WHC MES
Enterprise Resource
Systems
Planning (ERP)
APS LIMS
S&M PIM


Simplified view: Process landscape with ERP, MES and LIMS

ERP

Procure-to-Pay Produce-to-Ship Order-to-Cash Master Data mgt
MES
Supply Chain Collaboration, Planning & Execution

LIMS
Detailed
scheduling &
Sample Product OOS / OOE / OOT Environmental
Local
Management release investigations monitoring

Production
Local Quality Control Operations Execution


Simplified view: System landscape with ERP, MES and LIMS

ERP

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

LIMS ELN
ELN
Multivariate
Data Analysis
Tools
Chromatography Complex Simple Statistical Data
Data Systems Analytical Systems Laboratory Devices Evaluation Tools
HPLC, IC, ICP, IR, NIR, Gauges, Scales,
AAS, … Titrators,…







Conclusions


The reality: How LIMS integrates with a company’s supply chain

…with Laboratory …with MES & …with ERP &
Equipment & workflow Production Shop-floor Supply Chain

“Traditional” LIMS territory with Fairly good integration with Integration of LIMS and ERP
advanced process integration in Manufacturing Execution is reduced to bi-directional,
the laboratory shop floor Systems (MES) and production technical interfaces

Seamless integration and high Opportunities to increase the LIMS are perceived as black
automation of labs is an option, level of process and system boxes due to inadequate
but still wishful thinking in many integration are there, but not alignment with key supply
companies used chain operations

Operational integration within the supply chain requires more than “just” a
state-of-the-art ERP, MES and LIMS landscape

low high low high low high

Level of LIMS’ integration with the supply chain

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

Lack of innovation
ERP &
When a new LIMS is put in place, the scope is
Supply Chain
kept tight and focused on daily QC operations
LIMS promotes a reactive environment into
LIMS are left out when
daily operations instead of a proactive one
a new ERP system is
implemented, due to cost & risk
Lack of knowledge
Sometimes the ERP-knowledge of LIMS
MES &
vendors is not too good – and vice versa
Production Shop-floor
Very basic integration only to
Missed opportunities
satisfy the immediate needs
Potential synergies with key supply chain
from MES
functions remain undiscovered, and seamless
operational integration is not achieved
Laboratory
Equipment & workflow
Political drivers
Traditional LIMS territory is not discussed with
Strong options to run specific
anyone outside of the quality department
processes in ERP or MES
are not discussed






Opportunities and benefits – case studies

Conclusions


A high-level comparison of process & system standardization in a company

LIMS & MES & ERP &
Laboratories Production Shop-floor Supply Chain

LIMS systems are in most MES systems are only in few ERP are highly standardized
cases not standardized across cases standardized, but process with globally agreed, common
the different production sites standardization is very high process design

The basic business processes Pro-active management of best Globally defined business rules
are similar, but LIMS are used manufacturing processes and are mandatory for all partners
discriminative due to local, knowledge along the supply chain
historically grown specifics

Process standardization is a key prerequisite to achieve operational
integrity within global supply chains

low high low high low high

Level of LIMS’ integration with the supply chain


Global supply chain processes
Supply chains of bigger Pharmaceutical
companies are characterized by pre-
Identification of critical
defined global business rules that are
supply chain functions 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

Simplification & For these common integration points,
standardized business processes must
Standardization
be defined to achieve operational
integration with the supply chain

Local quality operations
Local quality departments become
standardized units with a high ability to
connect to flexible and fast changing
Template for key supply chains - internal best practices
business processes can be shared between sites



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

ERP MES LIMS Other

Design integrated business processes


The 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:

Insight Design Execute Achieve
• Conceptually design & • Turn technology
• Review the „Top 20“ • Run a proof-of-concept
verify the to-be business benefits into real
integration points in your in a prototype system
process model business benefits
ERP-MES-LIMS triangle

• Institutionalize the
change and leverage
the business benefit
X ERP
ERP

• Retire the old data,
LIMS MES
LIMS MES
X processes or systems
X no longer required

• Share the new design
• Drive business change
• Perform a fit/gap • Perform an impact
as best practice with
management, review
assessment and build assessment on existing
other affiliates
impact on SOP’s and
the case for change organization, systems &
training needs
data
M-1 M-2 M-3 M-4







Conclusions


Genuine example from a multinational Pharma company
Quality control of intercompany replenished goods

Situation after
Situation before

• Full analytical testing against internal • Test requirements reduced to identity
specifications for each physical delivery testing per delivery
• Manual adoption of quality data from • Automatic transfer of quality data from
sending sites in own system the sending site to the receiving site

The process was never challenged during The process was challenged and re-
the LIMS implementation and the system designed, a global SOP was defined to
was designed to continue to support this control test requirements for inter-
process unchanged company materials in the receiving sites

• High workload due to amount of batches, • Elimination of the bottleneck and
physical samples and analytical tests reduction of QC operations in the raw
• Critical bottleneck in the raw materials materials lab (>30%)
lab caused by high delivery frequencies • >20% of LIMS master data retired as no
• Many errors in quality data caused by longer needed
manual adoption from certificates • No data entry errors due to automation
of the process


Manufacturing lead times vs. quality operations lead times

Situation after
Situation before

• Average quality control duration per • LIMS capacity planning build upon ERP
material test migrated into the new LIMS supply chain planning dates
without verification or reality check • ERP defined as the leading system for
• LIMS/MES/ERP planning not aligned the calculation of lab due dates

After the implementation of an ERP-MES- • Average QC times revised and adapted
LIMS planning model, the „old“ quality • Process to monitor planned vs. actual
control lead times had a negative impact time needed defined and process owner
on the material availability planning nominated

• Extended production lead times with • Central manufacturing planning cockpit
negative impact on the supply chain implemented with defined roles &
responsibilities
• Planning of quality control operations • LIMS bottlenecks visible in the
not synchronized with manufacturing production planning process
planning and execution: bottlenecks in • Lead time per product reduced by 3
LIMS not visible in production planning calendar days in average


Monitoring of internal quality control cost

Situation after
Situation before

• Planned costs for QC activities are in • Actual time is recorded either on order,
ERP and used for product costing operation or test level
• Actual costs are not available as actual • The monitoring of planned vs. actual is
effort is not recorded by lab analysts performed by a dedicated function

As the actual time required for lab A revised cost structure for laboratory
operations is not recorded over a longer cost is defined and used as a basis for
period of time, the verification of planned product costing, invoice creation and the
vs. actual is not possible preparation of new offers and contracts

• No transparency on actual laboratory • Higher accuracy and reliability of actual
costs on product / order / test level cost to support operational and strategic
decision making (e.g. outsourcing)
• Wrong figures used for product costing,
invoicing of lab services for external • Revision of existing offers and contracts
customers and related profits


Monitoring of external quality control cost

Situation after
Situation before

• Standard cost for 3rd party service labs • Cost for external test and operations
are not in ERP but only available on paper maintained in ERP
• Services are purchased by the labs, not • „Big picture“ allows better negotiations
via the operational purchasing department with external service partners

Forecasting of projected cost for external External lab operations are visible in ERP
services in course of yearly budget (prospectively and retrospectively) and the
discussions is not possible purchase of services is shifted to the
purchasing department

• No transparency on actual external • Projection of external laboratory cost
laboratory costs possible based upon the ERP planning
• No consolidated view on external figures
purchased lab services • Strategic decisions are fully supported
• No standardized approach to decide if by actual figures (outsourcing of tests,
specific tests should be done internal or investments in people, equipment, new
external lab facilities)


Creation and distribution of quality certificates across the supply chain

Situation after
Situation before

• Creation and distribution of certificates • Certificate distribution fully integrated in
not synchronized with the supply chain the delivery process
• Goods arrive at the final destination, but • Automatic distribution of certificates and
not the certificate retrieval from everywhere

• Manual distribution of certificates by mail The approach to have customer-specific
or fax = standard procedure certificate templates was challenged and
• Manual, customer-specific certificate assessed with QA and regulatory
creation (more than 400 templates) compliance experts

• High workload and FTE requirements to • Reduction of certificate templates from
create and distribute certificates > 400 to a single one

• Delays in physical deliveries caused by • Automated process ensure that
missing quality certificates certificates are available when goods are
physically shipped to the final destination







Conclusions


Key conclusions

Operational integration of quality control operations
with the supply chain requires more than just a state-of-the-art LIMS

Process standardization is a key prerequisite
to achieve operational integrity within global supply chains

Quality departments must develop
good expertise in complex supply chain processes

LIMS implementation projects should be positioned
as Business Excellence Projects, not as pure IT exercises
Projects

Leverage learnings from other industries
and compare yourselves with leading edge companies


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


Thank you !
Turning technology benefits into real business
benefits

Lodestone Gaining More From Your Erp

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