Magazine Article | May 1, 2009

Life Science ERP And Supply Chain Trends

Source: Life Science Leader

By Brian Albright

Biopharmaceutical and other life sciences companies face significant operational and regulatory challenges. Manufacturers in this space must document and adhere to strict standard operating procedures and carefully manage and mitigate any exceptions in order to maintain quality and ensure compliance with U.S. FDA and international regulatory requirements. Compliance isn’t optional; it is a cost of doing business. These requirements can make deploying or upgrading an enterprise resources planning (ERP) or supply chain management (SCM) system a complex undertaking.

“It makes companies less prone to adopt new business processes or to vary existing processes,” says Arvindh Balakrishnan, VP of the Life Sciences Industry Business Unit at Oracle. “Further, system validation is an added complexity that increases time and expense on any IT project.”

ERP offerings for the life sciences industry are tailored to meet the unique needs of these manufacturers. But investments in these systems are not just driven by compliance issues; globalization and the need for actionable business intelligence within the enterprise and across the supply chain have caused many companies, with an eye on improved data management, to revisit their business systems.

What companies want most out of an ERP system now is a “single source of truth” for enterprise and product data that can provide real-time business intelligence as well as the capability to introduce and execute new processes and initiatives without the fear that disparate technology systems will fall out of sync with each other. For companies with legacy ERP systems, homegrown solutions, or multiple, disconnected business systems, achieving that level of data consolidation can be a challenge.

“Most customers have legacy ERP solutions that face shortcomings in areas such as data integrity, process standardization, and the inability to standardize the corporation on a single set of reports,” Balakrishnan says. “Defining standard global business processes provides customers with a platform to implement unified business intelligence, which is a huge benefit for a company that, for instance, ran reports on reams of paper. By implementing the same processes and definitions across all systems, pharmaceutical companies can ask a single question and receive the same answer.”

Globalization is also driving innovation in supply chain management systems, where life sciences companies hope to integrate trading partners more natively into their business processes through Web portals, for example. Pharmaceutical companies, in particular, need a better understanding of upstream and downstream supply chain data to improve quality control and compliance. Growing concerns about product safety and drug counterfeiting are also driving the need for enhanced supply chain efficiency, security, and visibility.

“Understanding upstream data is important, as it enables customers to identify the origin of anomalies, which in turn prevents issues related to quality,” Balakrishnan says.

According to Balakrishnan, the key benefits of a centralized ERP system are control and visibility of quality control information. Further, these systems provide agility when changing business processes. Life sciences customers are often interested in enterprise quality management and how that is integrated into the product record. Pharmaceutical companies must have clear documentation about how they are making their products, with no deviations in those processes across the company. Every component of the pharmaceutical process associated with quality must be available for audit, and all data must be integrated in one system.

“In almost no other industry do you need functional solutions for quality assurance related to business processes like you do in the pharmaceutical industry,” Balakrishnan says. That’s why a centralized data repository is so important. “The more sources of truth you have, the less ‘truth’ you actually find,” Balakrishnan says. “Data governance is impossible in many legacy systems in which data is replicated and maintained in several disparate locations as opposed to having a single source of truth. As a result, compliance risks abound.”

Life sciences companies are increasingly off-shoring operations such as manufacturing, sales, and even research and development, which makes flexibility important when companies roll out changes in their business process across the enterprise and to outsourcing partners. “As companies move to this model, there will be constant change. It’s difficult to execute those changes if your enterprise system isn’t all in one place,” Balakrishnan says. “You propagate the changes there, and they are executed globally. If you have six different systems involved, you will have problems, and that proposed change will rarely actually happen.”

This single view of enterprise data also has other benefits. By gaining better control and visibility of their information, companies can significantly improve their performance by reducing waste, increasing efficiency, and providing better sales forecasts. For example, Balakrishnan says that one of Oracle’s diagnostics customers was able, over two years and through a basic understanding of the amount of reagents and consumables being used by customers in the diagnostic lab, to reduce supply chain costs by as much as 40%. One leading pharmaceutical company improved forecast accuracy by more than 25% by integrating downstream data in its forecasting process.

Many companies, however, are not using their existing solutions to their fullest capacity. According to Balakrishnan, modules such as demand management and sales and operations planning are often poorly implemented or not executed at all.

Product life cycle management (PLM) functions often are managed outside of ERP systems, which can create data synchronization issues. For instance, a pharmaceutical company may make changes to the specifications in the PLM system, which may not be tracked in the ERP. Specification and execution should be closely integrated to prevent any problems.

“Instead of just a handful of marquee products being responsible for 80% of a company’s growth, you may now have 40 different drugs that contribute to that growth,” Balakrishnan says. “You have conflicting priorities. It’s not an easy problem to solve.”

While the downturn in the economy and the increasingly complex regulatory environment present many challenges for life sciences companies, a reevaluation of ERP and supply chain management systems could provide new opportunities to improve operations and reduce costs through improved data visibility and management.