A Small Company Gets Big Results from Its ERP

SkinCeuticals made the commitment to an Oracle ERP in 2001, and now has big-company oversight and control of its supply chain with small-company resources.

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SkinCeuticals (Garland, Texas) manufactures and distributes “cosmeceuticals” to doctors and skin-care professionals. The company is not regulated as heavily as pharmaceuticals, but “we pretty much use the pharmaceutical model for testing and protocols” because of the active ingredients in its skin-care products, says COO Timm Elrod. This has greatly impacted the company’s IT strategy. “Any product that goes to the consumer, I need to be able to trace the genealogy of that all the way back to the supplier of the raw ingredients,” Elrod notes.

A sampling of SkinCeuticals' current product line.

With an extensive background in IT, project management and supply chain management, Elrod joined the company in 2001 to help build an operational infrastructure that would enable complete supply chain oversight and optimize warehousing and shipping processes. That summer, he oversaw the implementation of an Oracle E-Business Suite, which went live less than three months later. It was the fourth ERP implementation that Elrod had overseen in his career. SkinCeuticals also enlisted the help of ClearOrbit, a maker of software that accessorizes and augments the Oracle 11i and facilitates data capture and integration with the system.

“The role was to build an infrastructure for a fast-growing company, and help put in the planning and supply-chain management to support that all the way out to the customer,” Elrod says. “A lot of people look at the supply chain and just think about getting products in and out the door. But we try to think about it all the way out to our retail partners and customers.”

SkinCeuticals has done so well that it was purchased by L’Oreal last June, though the company continues to manage itself and run its business essentially as before, Elrod says. If anything, L’Oreal has taken some pointers from SkinCeuticals about implementing IT systems and optimizing the supply chain from a small-company point of view.

We spoke with Elrod about his company’s success, and to find out how a small company can put in a new ERP system and make it work.

PharmaManufacturing.com: What was the state of IT before the ERP?

T.E.: We had a combination of products, and most of those products had fundamental issues in that they weren’t fully integrated. The database structures were suspect. Usually they were modules but the modules were standalone with some loose ties that would make them work together. It was too slow. You couldn’t get the transaction speeds you needed. You couldn’t get any business analytics.

P.M.: Clearly, you needed a centralized system. Why did you look to Oracle?

T.E.: Oracle was selected for its one-data-source approach across all the modules. Even though it’s a full-blown ERP suite, they do have the ability to break it off and implement it as modules. The preferred approach is to do a wall-to-wall implementation of one data source, so you have consistent data no matter whether you’re in order entry, accounting, manufacturing, distribution or inventory control. You’re looking at identical data. So it simplified life for us.

P.M.: Did you consider SAP or other ERP vendors?

T.E.: To be honest, it was more of a referral type of thing. When we looked at all the different SAP implementations, people who thought they had been successful with SAP had done a very large amount of customization. It wasn’t anything negative, but it seemed a little more complex to implement and maintain. The core offering for Oracle fit our business real well from an application standpoint, and the technology deployment made more sense to us. When we looked at implementation costs and the pure economics of it, it seemed to make sense to go with Oracle.

If you think about it, in 2001, the ERP vendors were still chasing the large company sells. Oracle had approached us and made it feasible for a smaller company to implement. Oracle was a top-tier ERP that was able to make a fit for a company that at that time really wasn’t a candidate. Now small to mid-size companies are the hot market for ERPs. J.D. Edwards at the time would reach down into that level, but we had under $15 million in sales at the time. To implement a top-tier ERP system was unheard of.

But we made the investment, and Oracle partnered well, and ClearOrbit came to the table to enable other pieces. So we were able to use as few pieces as possible to fill a real grand strategy for IT, which we’re still implementing today. We had this long-term vision, and we’re maybe 60% of the way through that original planning process.

P.M.: Just how hard of a decision was it?

T.E.: It was a huge decision. It was a companywide decision. The primary shareholders, and the director of IT and CFO at the time, we all looked at it together. But they were very entrepreneurial. Once we laid it out and the vision was clear among the team, it was more of a negotiation thing. It wasn’t a “should we or should we not” decision.

This was my fourth ERP implementation, and it was by far the easiest to get the money commitment. The relevance to the company was by far the largest in terms of impact and investment to the company. And the risk was greater. But it was by far the most successful implementation I’ve seen.

P.M.: What made it work?

T.E.: One of the things we did was saddle one of the owners to be the lead project manager at the time, to put his face and stamp on the whole thing so that everyone in the company was clear about where we were headed. The company continues to be very aggressive from a management perspective, and that’s one of the reasons we’ve been successful.

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