Title: Enterprise Risk Services
1 Enterprise Risk Services Deloitte, India
2 Pharma- Transform/readinessMarket StudyLegal
ComplianceERP Case study
3Market Study
4Key Business Issues facing the Industry
- Recruiting and retaining talented personnel
Making new product launches successful - Intellectual property protection
- Regulatory compliance for international marketing
- Implementing IT solutions including ERP Data
warehousing - CRM
- Benchmarking and adopting best practices
5Domestic Market Scenario
- Most companies plan to focus on CVS, CNS,
Antidiabetic and Anticancer which are the
therapeutic segments that are expected to have
the highest growth rates - Brand building, faster time to market,
relationships with doctors were identified as the
factors contributing to current competitive
advantage. - Both MNCs and Indian companies expect to increase
AP spends as the market gets increasingly
competitive. 34 of MNCs mentioned AP spends in
next 5 years to be gt15. 38 IRCs plan to spend
11-15 on AP. Current AP spends range from
7-10. 14 companies plan to spend 5-10 on
Direct to consumer marketing.
6IT initiatives
IT initiatives
- Companies were asked to indicate their views on
areas where technology would be most useful to
their firm. The areas were - -Enterprise Resource Planning
- -On-line sales to distributors
- -On-line purchasing
- -CRM /m-commerce with Field Force using PDAs
- -CRM/m-commerce with Field Force using
cell-phones - -Customer Relationship Management software
- -Doctor/Patient Portals
- -Data warehousing and Data mining
- -Laboratory Information Management Systems
7IT initiatives
IT initiatives
ERP, Data warehousing / Data mining, CRM software
FFA were considered important
8IT spends
IT initiatives
- The median expenditure on IT initiatives by
companies in the past 3 years has been about
Rs. 50-100 lakhs p.a. - In the next 12 months also, the median IT spends
p.a. will be about Rs.50-100 lakhs. - Some of the larger companies have IT budgets of
Rs. 300-500 lakhs for the current year
9Barriers to implementing IT initiatives
IT initiatives
- The top 3 barriers to implementing IT
initiatives, as rated by the companies are - - Need for cost/benefit analysis
- - Implementation costs
- - Security issues
- General IT controls
- System security
- New IT application
- Software licensing
- Virus concerns
- Controls over use of PCs
1021 CFR Part 11/ HIPAA/SARBANES
11About 21 CFR Part 11
- Effective from August 20, 1997
- Objectives
- Designed to advance the use of emerging
technologies by FDA regulated companies - Increase FDAs ability to promote public health
protect customers
12About 21 CFR Part 11
- Emphasis
- Control requirements for electronic data records
- Electronic signature requirements for electronic
records submitted under FDA and Public Health
Service Act - Data Access Accountability, the capability to
determine and document audit trail for
transactions - HIPAA Compliance
- SOX Compliance
13ERP Benchmarking of 6 Major Pharmaceutical
Companies
14The pharmaceutical industry continues to evolve.
Product Innovation and Introduction
- Faster development processes
- Faster/higher revenue uptake
- Role of genomics
The Race for Scale
- Pressure to develop blockbusters to sustain sales
growth - Need for expense dollar to reinvest in RD,
marketing, and preserve the bottom line
Changing Customer Dynamics
- Effectively reaching customers, current and
emerging - Evaluating customer influence on product
lifecycle - Determining the role of e
Pressure to Shift Cost Structure
- New e-procurement technology
- New B2B business models
15Objective and Approach
16Objective and Approach
- Our interviews focused on the following
questions - What benefits were pharmaceutical companies
seeking from their back-office systems, and what
benefits have they achieved? - Are the pharmaceutical companies that have
capitalized on ERP technology the most in a
position to change the competitive dynamics of
the drug industry? - What competitive advantages does ERP give them in
their supply chain, manufacturing, procurement,
and financial operations, now and in the future? - Why have some pharmaceutical companies generated
more benefits from back-office systems than other
companies? - What are the key differences between the
companies with the biggest benefits and the ones
with the least? - What obstacles prevent pharmaceutical companies
from fully leveraging their systems? - Are companies planning to further leverage their
system investments? - What role will ERP play in the future as
e-commerce, pricing pressure, globalization,
industry consolidation, genomics and other forces
of structural change take hold? - Where will the next major IT investment be made?
17Key Findings
18Key findings
- Most senior executives have paid little attention
to back-office systems - Many senior executives are harboring major
misconceptions about ERP - Despite big spending, most companies have not
received a big payback from ERP - However, a few companies are on the cusp of
achieving blockbuster-size benefits from ERP - These companies viewed and implemented ERP far
differently from the rest
19Key Finding 1 Most senior executives have paid
little attention to back-office systems
- Senior executives of most large pharmaceutical
companies have not focused on ERP or the key
business functions it supports (supply chain,
manufacturing, procurement, finance) they are
almost exclusively focused on the
revenue-generating functions of RD and marketing
- They do not view supply chain/logistics/procuremen
t operations as strategic - This can be attributed in part to to the
industrys economics - Another possible explanation is that most
pharmaceutical executives grew up in RD or
Marketing
20Key Finding 1 Most senior executives have paid
little attention to back-office systems
-
- Most senior executives have viewed ERP systems as
technology fixes rather than as enablers of
fundamental operational changes - ERP projects were generally viewed as simply the
installation of a large-scale information system
and was thus led and funded by IT - Few large pharmaceutical companies coordinated
ERP system implementation with other kinds of
change programs like reengineering of business
processes, organizational restructuring, or
retraining people, even when those other efforts
were already underway
21Key Finding 2 Many senior executives are
harboring major misconceptions about ERP
- When systems have been purchased from a single
vendor, such as S, there is a common perception
that these systems will automatically integrate
with one another - Just because every country implemented S ERP, for
example, does not mean that those systems will
share data or support a consolidated global view
of the enterprise - In reality, ERP systems are often implemented in
ways that provide little, if any, integration of
business processes or information on a global
level - When ERP systems have been purchased from
multiple vendors and interfaces built among them,
it is believed that the result is still an ERP - Installing subsets of a vendors ERP product
(e.g., only financial modules) is typically the
worst of both worlds ERPs high cost without
the enterprise integration benefits
22Key Finding 3 Despite big spending, most
companies have not received a big payback from ERP
- Spending within the industry has collectively
been in the billions of dollars, and typically
reaches 50-100M per company when all country
initiatives are accounted for. - Typically, ERP has helped companies with
- Y2K fixes and Euro 2000 conversions
- Abandonment of aging/failing application
platforms - Some reductions in IT maintenance spending
- A reduction in the number of fragile and
cumbersome interfaces - Faster financial closing times
- Larger scale and more strategic-level benefits
have been elusive
23Key Finding 4 However, a few companies are on
the cusp of achieving blockbuster-size benefits
from ERP
- G sees benefits on the order of 550 million a
year by 2005 from an overhaul of its
manufacturing and supply chains and the use of
ERP software. - G also expects that ERP, in conjunction with
reengineering, will reduce supply chain and
manufacturing costs by more than 30 over the
next four to five years. - Another company has reported that capacity costs
(salaries and wages) have been reduced by 20 and
distribution costs were reduced by 3 million
between 1998 to 1999. - Executives report that these savings alone cover
the costs of the ERP implementation. - Company Rs ERP technology has helped it reduce
inventory by 10 per year, as well as leading to
better information on production costs, higher
service levels, faster shipments, lower IT costs,
and more accurate inventory control.
24Key Finding 5 These companies viewed and
implemented ERP far differently from the rest
- In the companies on the threshold of reaping
benefits from their ERP systems - Senior Executives understood the enormous
business potential of ERP systems and thus
supported the initiative - Senior Executives did not view ERP as merely a
technology project but rather as an integral part
of a larger initiative to improve supply chain
and other business operations - Implementations were streamlined by coordinating
process redesign and ERP projects - Operational synergies were reaped by designing
systems to standardize data definitions across
countries or, more dramatically, to create global
or regional business processes - ERP systems were configured with minimal
differences between countries or geographic
regions - Companies linked employee retraining to the ERP
initiative - In short, successful companies consistently had
visible, sustained, meaningful executive level
commitment, beyond just the CIO. The ERP
initiative was recognized as one of the top two
or three strategic initiatives for the business
in that period.
25Key Finding 6 ERP implementations can be
categorized in four general ways
- The degree of enterprise integration a
pharmaceutical company obtains from ERP
technology can be seen - Across or within geographic lines (whether the
software links operations across a companys
country operating units) - Local Within a country unit (e.g., in the U.S.
only) - Global Across country units (e.g., across
Europe or the world) - Across or within business functions (whether the
software creates cross-functional integration) - Best of Breed Within a business function (e.g.,
procurement only) - ERP Across business functions (e.g.,
integrating manufacturing, procurement and supply
chain)
26Local Best of Breed
27Global Best of Breed Approach
Financial System
Procurement System
Distribution System
Manufacturing System
Human Resource System
28Local ERP Approach
Financial Module
Procurement Module
Financial Module
Procurement Module
Manufacturing Module
Distribution Module
Master Database
Financial Module
Procurement Module
Manufacturing Module
Distribution Module
Master Database
HumanResource Module
Manufacturing Module
Distribution Module
Master Database
HumanResource Module
Financial Module
Procurement Module
HumanResource Module
Financial Module
Procurement Module
Manufacturing Module
Distribution Module
Master Database
Manufacturing Module
Distribution Module
Master Database
HumanResource Module
HumanResource Module
29Global ERP Approach
Financial Module
Procurement Module
Manufacturing Module
Distribution Module
Master Database
HumanResource Module
30Implications
31Implications
- Business process changes should drive systems
changes. - Big benefits from back-office automation come
only when business processes that span functions,
countries, and continents are dealt with first. - Without reengineering, the benefits of ERP are
limited. Without an ERP system, the benefits of
reengineering are limited. - Installing ERP software will not yield instant
global integration. - Purchasing ERP software, even from the same
vendor, does not mean systems deployed in several
countries will be able to work together if
activities are not coordinated. - Inconsistent definition of data among sites can
quickly erode the degree of enterprise
integration a company can achieve. - The more customization, the less integration.
- The more authority for modifications country
units or business functions are granted, the
harder it will be to achieve high levels of
enterprise integration. - Although ERP implementation requires some level
of configuration to tailor it to the needs of the
business, the degree and type of customization
can be centrally advised. - The essential success ingredient is possessing a
vision for the future. - Often multiple, small scale initiatives which
build toward that ultimate goal are a more
effective and digestible approach to ERP
32Recommendations
33Mapping the journey
Define the destination
Know where you are now
Map out the journey
- What do we want to do that we cant do now?
- What does the business need to support longer
term operations? - What would be the benefits of doing it? The risks
of not doing it?
- What are scenarios to reach the destination?
- Approaches
- Cost and benefit
- Can we get there?
- Energy
- Commitment
- Funding
- What is the best approach?
- Workplan
- Resources
- Metrics
- What has been achieved? Is it the right
foundation for the future? - What did we do well in the first implementation?
Not so well? - What is the current cost of ownership?
34Mapping the journey 1. Knowing whereyoure going
Define the destination
1
- Absolute clarity and consensus on the
capabilities required is a key starting point - Offering availability to promise to customers
- Leveraging global buying power
- Having integrated supply chains
- Having consistent interaction with customers
- Furnishing corporate management with
decision-support information - Smoothing operational integration in mergers and
acquisitions - Having IT economies of scale and expertise
35Mapping the journey 2. What have
youaccomplished so far?
Know where you are now
- Can your company provide the following
information in less than one hour? - Who are your top ten customers on a worldwide
basis? - What are the companys three most profitable
products? - Do you have adequate capacity for a major global
product launch? - How much did the company buy last year from its
ten largest suppliers? - Which customers and products would be affected if
your largest plant caught fire? - What is your total spend on consulting services?
- Could your system as implemented support the
creation of a shared services model whereby all
the country units in Europe consolidate, for
example, accounts payable processing at one
location?
36Mapping the journey 3. How do you move from
where you are to where you want to be?
Map out the journey
Integration Across Functional Lines
Within a Business Function Across
Business Functions
Global Best of Breed
Global ERP
Across Countries
Integration Across Geographic Lines
Local ERP
Local Best of Breed
Within a Country
37Applying best practices to harvest the benefits
Focus on capabilities and benefits, not just
going live Align the organization on the true
destination Achieve balanced people, process and
technology changes across all areas Use the
business case as a management tool
Build and leverage process expertise Extend
capabilities beyond the ERP foundation Promote
post-implementation commonality
38Applying best practices to harvest the benefits
Apply planning and program management changes
throughout the program life cycle Transition
project roles to a way of life
Teach the organization to use the new
capabilities Assign clear ownership of
benefits Define metrics and manage them
39Thank You