Health and Personal Care Logistics Conference
April 12 th 2011

Agenda
 Level Set
1.
Overview of Supply Chain Technology
2.
Business Reengineering
 Pendulum - Enterprise Resource/ Business Reengineering and People
1.
Key Questions
2.
Case Study
 My Experience
1.
Project Structure
2.
Processes
3.
Lessons Learned
 Questions…..answers?
1

Stages of Supply Chain Development
Stage/Capability 1.
Multiple
Dysfunction
Internet
Integration
Mail
None; no teamwork
2. Semi-
Functional
Enterprise
Catalogs
Batch
3. Integrated
Enterprise
4. Extended
Enterprise
Intranets across all functions
Internal process integration; teams
E-commerce
SC Networks; process integration
SCP
Production
•
Integrate with
Suppliers
Customer delivery
Little
Information
Exchange
Basic MRP
Fax/phone
Research
Informal; no initiative coordination
MRP II
Formal/global; enhanced logistics
MRP-ERP
EDT;low pricing EDI with all large suppliers
Local Inventory ATP
Integrated global planning;
SC vs SC competition
Externally
Integrated ERP
VMI;CRO On line RFQ
CTP
APICS
2

Features of ERP
Some of the major features of ERP and what ERP can do for the business are:
 ERP facilitates company-wide Integrated Information System covering all functional areas like Manufacturing, Selling and distribution, Payables, Receivables, Inventory, Accounts,
Human resources, Purchases etc.
 ERP performs core corporate activities and increases customer service and thereby augmenting the Corporate
Image.
 ERP bridges the information gap across the organization.
 ERP provides for complete integration of Systems not only across the departments in a company but also across affiliated companies.
 ERP is a solution for better Project Management.
3

Features of ERP (cont’d)
Some of the major features of ERP and what ERP can do for the business are:
 ERP allows automatic and one time introduction of latest technologies like Electronic Fund Transfer (EFT), Electronic
Data Interchange (EDI), Internet, Intranet, Video conferencing, E-Commerce, etc.
 ERP eliminates the most of the business problems like
Material shortages, Productivity enhancements, Customer service, Cash Management, Inventory problems, Quality problems, Prompt delivery etc.
 ERP not only addresses the current requirements of the company but also provides the opportunity of continually improving and refining business processes.
 ERP provides business intelligence tools like Decision Support
Systems (DSS), Executive Information System (EIS),
Reporting, Data Mining and Early Warning Systems (Robots) for enabling people to make better decisions and thus improve their business process.
4

ERP Implementation Barriers
 Low Tolerance for Risk
 Lack of Time
 Funding
 No Consequence Management
 Fit to Future state or as is
 Lack of Synergy
 Poor Follow Through
 Lack of Clear Communications
 Deficient of Planning for and Management of Resistance
5

Leveraging ERP Systems; ERP Manufacturing
Modules/Interfaces
Stage 1
Multiple Dysfunction
2.
Semi-Functional Enterprise
3.
Integrated Enterprise
4.
Extended Enterprise
MRP no clear definition or goals; transactional links only
MRP II; quality (etc.) initiative in nucleus firm; little cross functional decision making
ERP; silo walls broken down;
S&OP;ERP platform to advance to stage 4
Integrated networks from firm to suppliers; first linked partnership points the way to networked enterprise
6

Role of IT in Supply Chain
 Augment data accuracy
 Gathering, storing, analysis , sharing large amounts of data
 Increasing velocity
 Supporting simulation activities
 Replace inventory with information to facilitate from push to pull system
 Nexus with suppliers/customers
 Create trust through information sharing
 Align with company strategies
7

Business Process Modeling Rationale
 Understanding the Business – increase knowledge of business activity and to facilitate communication
 Creating Suitable Information Systems – basis for engineering requirements
 Improve the Current Process Structure and Operation – identifies clear picture of the current state used to identify changes required for improvement
 Data for experiments – can be used to experiment with new business concepts and to study implications
 Acts as baseline for outsourcing opportunities – core parts can be examined and those deemed less important can be delegated to external suppliers
Erriksson & Penker,
2000
8

Business Process Reengineering
Business Process Re-engineering is the:
 fundamental rethinking and radical redesign of business processes to
 achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service & speed.
A popular misperception about BPR is that:
 it is a means of streamlining the business processes. There exists a fundamental difference between streamlining a business process and re-inventing it.
 streamlining is an exercise, which result in making incremental changes to the current process to increase performance parameters like quality, etc. In the case of reinventing a process, the existing one is scrapped and a new one is created from scratch with a fresh look. Concepts & ideas from within and outside the industry should be welcomed. Projects are often identified at points along the change continuum - Streamlining to Re-inventing
Vivek Gaurav
9

The Supply Chain Value Creation Framework
Goal The Objectives The Actions
Profitable Growth
Capture new markets/customers
Outperform competitors
The Value Drivers
SC strategy and excellence
Product availability
Service innovation
Increased
Value for
Shareholders and Investors
Margin Improvement
Reduces costs of goods sold
Improve speed and productivity
Minimal operation expenses
Optimal product flows
Technology and productivity
Capital Efficiency
Reduce working capital
Reduce fixed assets
Demand-Supply management
Free cash flow
Inventory optimization
Thompkins Associates
10

ERP - Business Process Reengineering Questions
 Should the processes be reengineered first and then improved processes be automated?
 Reengineer processes after implementing ERP?
 Totally avoid reengineering and go about implementing ERP?
 Does ERP act as a tool for achieving BPR?
 Does ERP support BPR?

……………………
11

Integrating Business and Other Key Area’s
Leavitt’s Diamond
12

Culture
 Recognize Industry Position
 Amenable to Initiatives
 Adhere to Corporate Direction
 Paced to Change
 Ready for Standardization
 Maintain Business Continuity
13

Processes
 Analyzed to Determine ?
1.
Well Defined
2.
Adequate
3.
Scaleable
4.
Ready for Implementation of new IT
5.
Transferable
14

Technology
 State of the Need not State of the Art
 Technology Sophistication Level
 Affordability
 People Compatibility
 Flexibility
 History of Success
15

People
 Human Resources Strategy

Hiring Practices




Training
In house/Outsource
Hybrid
Role of Consultants
 Change Management
◊ Acceptance
◊ Resistance
 Business Continuity
16

Structures
 Corporate AND Mid Level Commitment
 Establish Core Team
 Identity Business Process Experts/ Super Users
 Delivery Reliability
 Communication
 Training
 Methodology (Lean/6 Sigma)
 Business Continuity
17

Case Study – Crotia Pharmaceutical Company
 Business Dimensions
◊ 7,500 people in 33 countries/5 business divisions/44 legal entities
◊ classic information systems – disparate/ much manual activity
 Project Plan
◊ Initiate ERP solution in financial area – cost accounting and forecasting
◊ Utilize consulting services for reengineering/ reorganization of businesses
◊ Although two independent projects they were harmonized at the steering committee level
◊ Phased approach over six year basis
◊ Initial launch system training – 700 employees average training period of 7 days lasting 4 months in two months
18

Case Study – Crotia Pharmaceutical Company (cont’d)
 Project Outcomes – successful…but……
◊ Resistance to change {particularly warehouse personnel}
◊ Weak experience and quality of consultants
◊ Lack of time
◊ Specificity of pharmaceutical industry
◊ Alignment of validation team
 Lessons Learned
◊ Focus more on change in human behaviour
◊ Focus more on change in organizational regulations
◊ Adapt solutions to the intensive flow of information among various functions and businesses
Vensa Bosilj-Vuksic and Mario Spremic
19

Where I’ve Been…..COMET - Merck’s ERP Initiative
 “institutionalize the processes you have created”
 Benchmark {with friends?}
 System training
 Implementation methodology procedures and tools
 Recruitment of subject matter experts
 Integration with other work streams
 Process development
20

Where I’ve Been…..COMET - Merck’s ERP Initiative
(cont’d)
 What is COMET? For starters, it’s an acronym for Collaborating as
One Merck to Enable Transformation. It’s also a vital element in
Merck’s Plan to Win strategy and one of the biggest, most farreaching initiatives in company history. Once implemented will allow us streamline many types of business processes, linking the
Companys different divisions and groups into 'One Merck'.
 COMET is a global effort to standardize and link our core business processes and systems using SAP software. That means everything from the manufacture and shipment of products, to expense reporting, purchasing, and updating our personal information. The goal is to have Merck operating with greater speed, efficiency and flexibility.
 COMET is a key enabler of integration for the new Merck.
 COMET's mission is to drive MSD to improved performance levels with increased operational speed, flexibility and efficiency and help
Merck achieve common, global and leading-edge end-to-end processes powered by common information and systems. COMET is essential for running the Company of the future
 COMET will not only change how Merck operates, it will also transform the work culture. COMET is a new way for a new era at
Merck.
21

COMET – Merck’s ERP Initiative (cont’d)
 COMET will support "real time" collaboration (i.e., as events unfold) and speed decision-making across the Company. It will help MSD be more lean and flexible and provide greater value to customers.
 COMET will streamline work processes, helping to reduce inventory and days sales outstanding (DSO). COMET will also help reduce manufacturing lead times as well as cycle times in month-end closing and order processing, driving efficiencies and reducing costs.
 COMET will also provide a simplified environment for meeting compliance and regulatory requirements. And, COMET will enable
MSD to present "one face" to customers and trade partners, making it easier to conduct business with us.
 COMET will not only change how Merck operates, it will also transform the work culture. COMET is a new way for a new era at
Merck.
22

Change Management Blueprint
Decide Define
Stakeholder Profiles
Value Stream Context
Case for Change
Desired State
Outcomes
Realization Indicators
Implement Sustain
Voice of Customer
Customer Value Stream
Stream Design
Foundation Elements
Solution Blueprint
Solution Component
Transition Design
Installed Component
Installed Solution
Solution
Enhancement
Desired State
Internalized Change
Risk/Mitigation Plan
Sponsor alignment and
Commitment
Enrollment Package
Advocacy Package
Change
Change Components
Change Portfolio
Transformation Plan
Business Justification
Advocacy
Enrollment
Execution Risk
Assessment
& Mitigation Plan
Sponsorship Spine
Workstreams
Gap Inventory
Projects
Implementation Plan
ROC Business Case
Communications
Sponsor/ Constituency
& Transition
Risk Mitigation
Ongoing Execution
Risk Mitigation
Communications
Operational
Transition Risk
Mitigation
Celebration
Transition Plan
Plan for Full realization
Minimum Acceptable
Realization Achieved
Planning Lessons
Learned
Continuous
Improvement Plan
Conner Partners 2006 All Rights Reserved.
23

COMET Organizational Structure
 Project team together/ “off the campus”
 Business and IT Management Leads
 Work steams comprise business and delivery leads
 Infrastructure part of core group
◊ Security – role mapping and violations
◊ Documentation Compliance
◊ Development {also off shore}
 Business process leads/Subject matter experts
 Super Users
 Process stewards
24

Business Process Overview:
Sales and Distribution Cycle
7 Billing
Invoice
6 Post Goods Issue
B.O.L.
Pack Slip or
Delivery
Note
8 Payment
Sales and
Distributio n Cycle
5 Picking/Packing
Transfer
Order or
Pick Ticket
4 Delivery
1
Quote
Inquiry
Customer
Sales
Order
2 Quotation
Quote
3 Sales Order
25

Business Process Overview:
SAP ECC Modules
Sales &
Distribution
Materials
Management
Production
Planning
WM
MM
SD
PP
Customer
Service
Quality
Management
CS
QM
PM
SAP
ECC
HR
IS
FI
CO
WF
Financial
Accounting
AA
PS
Controlling
Asset
Accounting
TR
Treasury /
Investment
Management
Project
Systems
Workflow Plant
Maintenance
Human Resources Industry Solutions
GTS
26

Work Stream Intersections
 Supply Chain Management - data - materials/ warehouse operations/ interfaces/ documents - labels/shipping papers/ radio frequency/ roles
 Source to Settle - purchasing - freight bill payment/ INCO terms
 Financial Business Management - invoicing mechanics/ triangular trade , flash sales, LEI
 Quality Management - packaging, temperature conditions/ batch determination rules
 Global Logistics - model/ supply network/ reporting/ compliance - DG, trade zones, licensing, sanction party
 Corporate - adherence to SOX, documentation
27

What are business readiness/change impacts?
 Understanding Change Impacts provides us with insight into:







Local business changes needed to get ready (i.e. basic computer skills)
Training requirements and SOPs on new processes and ways of working
Approaches to stakeholder management
Design of change plans
Communication on future ways of working
Business case benefits by identifying operational efficiencies
Possible changes to organizational or team structures and the re-alignment or re-design of jobs
28

Change Impact Categories - How ill the COMET
Business Processes impact…
Roles & Responsibilities
Organisation Structure
 Are changes to the organizational structure required to support the new integrated processes?
 Is a shared services structure anticipated?
 What roles and responsibilities need to change?
 What new accountabilities will exist?
Culture
Roles &
Responsibilities
 How will our culture change in the new environment?
 How do we need to behave in the new environment?
Technology
 What changes to current local systems will be required?
 What interfaces will need to be established to ensure business continuity?
Skills &
Knowledge
Skills & Knowledge
 What new skills are needed to perform successfully in the new environment?
 What training is required to perform successfully?
Performance
Metrics
Process
 What changes to current process / ways of working are required?
 How will policy / procedure /
SOPs be updated?
Performance Metrics
 What new measures are needed to measure the process or individual/group performance?
29

Global Blueprint Process
Project Prep
Workshop
Prep
1. Select SMEs
2. Prepare SMEs
3. Fact Finding
4. Session Prep
5. Sponsorship &
Communications
Loc aliza tion
Wor ksh op
Exe cuti on
1. Conduct
Overview/General
Sessions
2. Conduct
Workshops
3. Communicate
Results
4. Execute Action
Items/Follow-Ups
5. Sponsorship &
Communications
Rea liza
Fin al
Pre tion p
Co
Crea ndu te ct
Deli
Rea vera dou bles
1. Create Process
Assets (PDD/PFL)
2. Create
Requirements
Documents
(URS/FRS)
3. Create Gaps
4. Create Release
Notes
5. Create Change
Impacts
6. Sponsorship &
Communications
1. Prepare and t
Distribute Pre-
Read
2. Conduct
Sessions
3. Sponsorship &
Communications ort
2. Refresh Release
Plan
3. Prepare and
Distribute Final
Report
4. Sign-Off
5. Sponsorship &
Communications
Go-
Liv e and
Hy
Prep per are car
& e
Sign off
Fina l
30

Global Design Elements
 Standardization
◊ Shipment Processing
◊ Process Flows
◊ Roles
◊ Documents
◊ Messaging Formats
◊ Reporting
◊ Governance
◊ Metrics
◊ Process Definitions
◊ Foreign Trade Rules
31

Localization Workshop
PREWORK
Determine if Localization
Workshop is required
NO
Yes
WORKSHOP
Review Future State
Business Process
Review COMET
Solution
NEXT STEPS
Review Potential
Comet Requirements
COMET and SBS determine if workshop is needed
Complete COMET
Questionnaire
Gather market feedback on COMET solution from Business Subject
Matter Experts
Align SBS and COMET
Process Maps
COMET- Transfer knowledge of EMEA
Change Impacts
Harmonize the SBS
Master Service
Benchmark processes with COMET PFL/PDD’s
Provide insight into previously identified
Change Impacts
Discuss Global future state business process design
Identify COMET
Requirements
NO
Yes
Perform gap analysis to identify where COMET process and solution do not meet regulatory or compliance requirements
Discuss the results of last year’s Blueprinting efforts
Validate and
Identify EMEA
Change Impacts
What
Change
Change
Who us us
When
Now
Now
Now
Validate Change
Impacts and identify additional Change
Impacts
Review,
Approve/Reject
Potential Comet
Requirements
Conduct Local Change
Impact Business
Readiness Workshops
NO
Yes
Address Change
Impacts and execute business readiness plan
(training and SOP development, etc.
32

Sample List of Items Addressed in Localization
 Languages to be used on Official Documents
 Maintenance of Documents
 Distribution Models
 Use of Local Currency
 Messaging
 Legal Entity Integration
 Importation/ exportation processes
 Legislative requirements relating to form and content of invoices, credit notes, debit notes and statements
 Specific Reporting Requirements
 Carrier Partners
 Tax Impacts {VAT}
 Staffing Model
33

Sample List of Items Addressed in Localization
(cont’d)
 Synchronize temperature conditions
 Newness of GTS Functionality
 Country Specific Sanction party lists
 Export Trade Reporting
 Fundamentals for Controlled Substance
 Harmonized Code Integrity
 DG Processing
 Trade Zone’s
 Export/ Import licensing
 Returns Processing
 Master Data Configurations
 Batch Determination Strategy
34

What makes a Good requirement ?
 Requirements should all start with the same phrase:

“The business shall………..”

“The system shall…………….”
 Requirements should be categorized as:

High – Mission Critical (i.e., Legal and Regulatory and significant impact on targeted savings; critical to the daily operations of the business, not to the person performing the requirement)


Medium – Important (i.e., important to the business but could be managed through a manual work around or other means)
Low – Nice to have (i.e., not important but could make life easier)
 “Good” requirements clearly communicate what you want the system to do, and are easily understood by business staff, IT staff, and project team members

Example: The system shall provide the ability to print Purchase
Order with standard text on purchase order in local languages which include French, Spanish and Chinese.

 It is specific and simple
 It refers to only one function
Do not overlook the obvious!
35

Post Requirement Disposition
 Bundle
◊ In/out scope
◊ Reconfirm
◊ Assessment [high/medium/low]
 Need vs Want
 Identify SAP fit
◊ Standard/Configuration/Custom
 Communicate Disposition
 Ascertain Direction
36

Custom Requirements Assessment Criteria
 Business Driver and Critically
 Development Magnitude
 Resource Requirements
 Alternatives Considered
 Business/Organization Impact
 Benefit Analysis
 System Performance Impact Assessment
 Special System Infrastructure Requirements
 Integration Points
37

Challenges and Barriers
 Lack of mapped processes
 Make improvements before automating
 Silo Continuum {in scenario development}
 Aggressive project timeline
 Project implementation teams worked away from the business
 Nice to have vs Have to Have
 IT Lead
 Seamless transition
 Standard COMET solution misaligned with current practices
 Master data/ master data/master data
38

Metrics ….to Stay on Track…Post go live
 Tracked by “burn” rate re hours to implement on a daily basis
 Comprehensive project plan - march to go live via key dates for: process review/gap reconciliation /FS authoring/ development/ testing (unit/integration/UAT); consistent updates (weekly 90 day look - ahead's), daily “deep dive” meetings, SAP SolMan to track requirements/gaps / functional specs etc and HP Quality Center tool to track testing phases/ TIR’s
 Post testing - dress rehearsal/ cutover/ regression/master data reconciliation
 Business readiness activities - course development/ role mapping & segregation/ training
 Post go live - reporting/ role tweaking/ change requests/ missed requirements
39

Key Learning's
 Incorporate 6 Sigma Team earlier
 Restructure Testing Methodology
 Streamline Process
 Business Sponsorship
 Advance Scouts in Region
 Knowledge of Scenarios
 Additional Communication Outside Project
 Extended Business Team to do Testing
40

Key’s to Success
 Ensure Business Processes Documented
 Quantifiable Results {drive KPI}
 Flexible Staffing
 Commitment
 Robust Testing of Scenarios/ Functionality
 Communication inside Project
 Extended Business team to do testing
41

Conclusion …….
 Thanks and questions
42

Add slides
 Process flow
 Close?
43

OtC D&L Canada Localization Workshop
Export Shipping Process Flow
44

Business Process Overview:
Key Changes
 Automatic notification of “rush,” premium shipping, and other order-specific requirements
 Integration between both the order management systems and the shipping systems automatic generation of shipping documents such as a Bill of Lading (BOL/CMR)
 Exposure to regulation violations around the shipping of hazardous materials, sanctioned parties,
 Single source for shipping data
 Interface with Freight Forwarding Agents
 Interface with Third Party Logistics Providers
 Licensing Blocks
 Automate control when Hold for Release (HFR) material status can be shipped or restricted from shipment
 Interface with Government Agencies
45