Getting More Out Of ERP

PharmaManufacturing.com

When It Comes To Leveraging System Connectivity and Integration, Most Pharmaceutical Manufacturers Are Still Playing Catch-Up

By Doug Bartholomew, Contributing Editor

Much has been written, good and bad, about enterprise resource planning (ERP) systems. At the end of the day, though, most pharmaceutical manufacturers that use and depend on ERP to run their businesses say they couldn't do without it. "The heart of the business is to move product around, and ERP is the heart of our manufacturing and distribution," says Eric Bloom, vice president of information technology at Endo Pharmaceuticals Inc.

Even so, one of the biggest issues facing pharmaceutical manufacturers is making ERP work with the rest of the company's systems,particularly those that directly support manufacturing--and extending ERP's capability to support other applications. "Getting your manufacturing execution system to integrate up to ERP has been a challenge for quite a while," observes Joe Cardarelli, a consultant with Taratec Development Corp., a Bridgewater, N.J. firm that assists major pharmaceutical firms with regulatory issues. "ERP vendors are looking at better ways to integrate their products with customer relationship management and sales force automation systems, to provide that link so that pharmaceutical companies can get a better handle on drug samples."

In general, the drug industry has been slow on the uptake when it comes to using ERP and integrating it with other systems in the company. "As a whole, pharmaceutical manufacturers are way behind other industries," says Vijay Pillai, North American life sciences industry director for Oracle Corp., a leading ERP vendor. "The reason is that they could afford it, because their margins were so high." However, that picture is starting to change. "Today, a lot of pressures are forcing drug companies to adopt a lot of technology to operate in a more streamlined manner," he says.

Endo Pharmaceuticals, which outsources its manufacturing to several other companies, runs its SAP ERP system at its main office in Chadds Ford, Pa. The six-year-old firm, with sales of $570 million and 500 employees, makes 140 SKUs of both branded products such as Percoset, a painkiller especially for those who have had recent surgery, and Lidoderm, another painkiller in the form of a skin patch, and generic products, such as morphine sulfate.

"ERP gives us the capability to track inventory and make sure that if a wholesaler wants to buy some product, we've got it," Bloom says. "At the same time, it enables is to make sure that we don't manufacture too much of a product."

Cardarelli agrees that this is a significant concern for pharmaceutical firms. "Managing the supply chain so that there is never a stock-out is important," he says. "If you have a product launch and an expensive marketing effort, you'd better have that product there when the customer wants it." As a result, he adds, "Optimization of the supply chain has become an important business driver for both ethical and generic drug manufacturers."

At Endo, product orders come in and are deducted from inventory and electronically sent to the distributor via electronic data interchange (EDI). In turn, once the order has been processed and filled by the distributor, Endo receives back a confirmation that the order was shipped. At the end of each day, Endo makes an electronic double-check of inventory to make sure the figures mesh. That way, the pharmaceutical firm knows it's in total synch with its manufacturing providers, and that the inventory figures in its ERP system are accurate.

ERP also helps with lot traceability. "ERP systems are excellent documentation tools for maintaining lot numbers and traceability in the event a company needs to do a product recall," says Cardarelli.

Endo also finds SAP's ERP package is helpful because it supports certain pharmaceutical-specific business functions. For example, the company must adhere to strict limits on how much active ingredient goes into certain controlled products such as some groups of painkillers. That requirement, in turn, necessitates limits on how much of the active ingredient for those products they are permitted to make and hold in inventory. "When we are up to our quota and need to make more, we need to demonstrate why we need to do that, and SAP helps us demonstrate this need," Bloom explains. The system also helps the company figure this added factor into the materials-planning mix, so that it can adjust supply chain needs in advance. "This requirement adds complexity to our forecasting and supply chain management."

On the downside, Bloom adds, the company has not attempted to connect its proprietary sales force automation system with ERP. "It's totally separate," he says. "It tells our sales people which physicians may be the best prospects for a particular product."

By contrast, most ERP systems offer a fully integrated human resources (HR) application as well as full accounting software. For pharmaceutical companies, the integration of manufacturing with HR means a smooth connection for operator verification and qualification at the plant level. "Companies need to adhere to FDA regulations by tying in the individual's training to ensure that person is qualified and validated to perform the job," Cardarelli says. Many drug manufacturers are using electronic signature capability to perform this function.

In the product development area, SAP has functions that help companies manage their supplies used in clinical drug trials. "It's like a mini-supply chain, managing the flow of drugs that are used in the trial phase," says Tilman Binder, vice president of the consumer product pharmaceuticals industry business unit in Waldorf, Germany, which serves more than 30 pharmaceutical manufacturers worldwide that use SAP R/3. For instance, the system takes into account the double-blind feature of the clinical trial process, tracking the use of both the actual drug and the placebo among the test patient population.