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SAP R/3 implementation methodologies

Hi,

Can any one send me SAP R/3 implementation methodologies Documents and links.

Thanks & Regards,

Ram

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  • Best Answer
    Posted on Nov 16, 2007 at 02:42 PM

    Hi,

    SAP has provided the following methodologies, ASAP & Solution Manager for implementation.

    Pl. refer,

    http://www.sapfans.com/sapfans/asap/be_01_e.htm

    also,

    http://www-rcf.usc.edu/~anthonyb/itp320/ASAP.ppt

    Regards,

    Senthilkumar

    Message was edited by:

    Senthilkumar SD

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  • author's profile photo Former Member
    Former Member
    Posted on Nov 18, 2007 at 04:11 AM

    Hi All,

    Introduction

    Enterprise application software has to cover a broad spectrum of functionality, yet be configured flexibly enough to meet specific requirements, which can vary enormously. SAP’s answers to this challenge are AcceleratedSAP and the R/3 Business Engineer, providing a comprehensive solution for implementing R/3 quickly, easily, and according to your own needs even during productive operation.

    Born out of the need to cost effectively configure R/3 to order, AcceleratedSAP and the Business R/3 Engineer support custom configuration of R/3. You can tailor the R/3 components, functions and organizational structures to your needs, hiding and/or deactivating those functions that are not required.

    Fig. 1: The R/3 Business Engineer Complements ASAP

    AcceleratedSAP (ASAP) is SAP's standard implementation methodology. It contains the Roadmap, a step-by-step guide that incorporates experience from many years of implementing R/3. Along with that, AcceleratedSAP contains a multitude of tools, accelerators and useful information to assist all team members in implementing R/3. Quality checks are incorporated at the end of each phase to easily monitor deliverables and critical success factors. ASAP is delivered as a PC-based package, so that - if required - an implementation project can begin prior to having an R/3 System installed.

    The R/3 Business Engineer contains a set of configuration and implementation tools which enable you or your consultants to define and configure R/3 and also to adapt an existing configuration to new needs or changed circumstances. The Business Engineer is resident to R/3.

    So that its customers can implement R/3 as quickly as possible, SAP has standardized the implementation procedure, simplified the way functions are presented and reduced the technical complexity of implementation.

    AcceleratedSAP and the Business Engineer help you configure R/3 according to your own needs using proven, industry-specific business scenarios and processes. Whether implementing new processes in your enterprise or restructuring old ones, R/3 can release the full potential of change for you. AcceleratedSAP and the Business Engineer help you determine which of R/3’s proven processes are most suited to your business, and then help you configure to meet your specific needs. The benefit is obvious: Restructuring enterprise processes in the R/3 System leads to a rapid and efficient production startup, meaning a faster return on investment.

    By simplifying configuration, ASAP and the Business Engineer make the power of R/3 more accessible, helping companies to lower their dependence on expensive specialists or outside consultants. The user-friendliness of ASAP and the Business Engineer make them particularly suitable for the following groups:

    Business professionals who need to discuss, prototype and design their business blueprint (enterprise model)

    IS departments of large enterprises who need to customize R/3 applications more efficiently and more rapidly

    Small and medium-sized companies previously wary of implementing R/3 because of the perceived scale of such projects

    Consultants and SAP partners looking for an efficient way of offering their customers configure-to-order or wishing to develop R/3-based solutions for niche markets

    Together, AcceleratedSAP and the Business Engineer empower you to manage cost, time and quality without compromising on implementation requirements. Some of the features offered are:

     Reduced implementation times and faster return on investment through structured planning and preconfiguration

    Intuitive understanding of the wide range of functions offered by R/3

    Process optimization using proven scenarios, processes and value chains, illustrating clearly the software’s capabilities and offering practical help when you configure the R/3 System.

     High quality installations through comprehensive procedural guidelines

     Optimizing business processes using SAP Business Workflow, via process monitoring and automation of procedures

    Continuous, dynamic adjustment and optimization of R/3 applications

    The capability to copy configured areas, for example, by transferring existing settings to new organizational units.

    AcceleratedSAP and the Business Engineer are designed for openness and new platforms, using HTML-based documentation. Compatibility with many third-party modeling tools and software packages, for example, Microsoft Excel, is ensured.

    Available Tools

    Embarking on an implementation project requires a lot of careful thought beforehand. You need to think about what you want to accomplish, the optimum sequence, and the business cases that are best suited to your needs. But SAP has already done a lot of the thinking for you and packaged its findings in the following tools. They are then described in more detail in the following chapters organized according to the corresponding AcceleratedSAP phases.

    AcceleratedSAP (ASAP): A comprehensive solution for the introduction of the R/3 System in your enterprise. ASAP and most of its tools can be used independently of an R/3 installation.

    The tools available for AcceleratedSAP are:

    The Project Estimator, an internal SAP tool which enables SAP consultants to accurately gauge the required resources, the costs and the time frame of implementation. The Project Estimator takes into account the project scope and several project and risk factors.

    The Concept Check Tool, a tool enabling you to carry out quality checks on the project preparation, technical infrastructure and R/3 configuration settings. This is done mainly during the first two implementation phases of the R/3 project. In this way you are alerted to potential data volume and configuration conflicts that could lead to performance issues if not addressed.

    The Implementation Assistant: The ASAP navigation tool that accompanies you through the five phases of implementation down to the task level. It includes a description and a detailed "how-to" for each task in the Roadmap. Along with that, many tools, templates and documents are hyperlinked to the task. The Implementation Assistant contains the following elements:

    ASAP Implementation Roadmap and Project Plan. The Roadmap contains the five phases, from which you can drill down into work packages, activities and tasks. The Project Plan contains three components, a budget plan, a resource plan and a work plan. These are explained in more detail in the next chapter.

    The ASAP Roadmap is the successor of the R/3-based Procedure Model, which was used until Rel. 3.1 in R/3 implementation projects.

    Knowledge Corner, containing tips and tricks for configuration from consultants, detailed documentation on SAP’s implementation services, information on technical tools, as well as simplification guidebooks and R/3 Customizing wizards.

    Question and Answer Database (Q&Adb). Using the R/3 Reference Model structure, the Q&Adb is used to assist in gathering requirements for business processes, conversions, reports, interfaces, enhancements and authorizations. The database provides useful questionnaires to help you define the process needs and also serves as a repository for all this information. Since it is a database, it allows for flexible reporting. The business requirements generated from the Q&Adb are collectively known as the Business Blueprint.

    Business Process Master List, to manage configuration, testing and the creation of end user documentation. The Business Process Master List is linked to pre-written Business Process Procedures (BPPs), detailled end-user documentation for R/3 transactions.

    Issues Database: supporting project management, this database supports the entering, monitoring and managing of issues that come up during the project.

    R/3 Business Engineer: The implementation tools for the high-quality configuration of the R/3 System are:

    R/3 Reference Model: Comprehensive graphical process flows describing the R/3 functionality from different points of view. It contains scenarios, processes and functions, as well as components. The R/3 Reference Model can be viewed using SAP's Business Navigator and the Business Navigator Web, or using third-party modeling tools available from modeling partners.

    Implementation Guide (IMG): Used to configure all system parameters for the business processes in R/3. It contains project management functionality and a menu-driven view of all R/3 Customizing activities. Every activity can be documented in detail, and responsibilities and statuses can be assigned.

    Preconfigured systems:

    Preconfigured US and Canadian clients: Provides a head start on baseline configuration. It includes a preconfigured US/Canadian chart of accounts, print forms, account determination, units of measure, etc. The predefined test sequences that are included can be a starting point for integration testing.

    Preconfigured industry systems: A number of complete preconfigured clients consisting of an industry-specific model and preconfigured business processes for the needs of a particular industry in R/3 are available. For more information on preconfigured systems, see the description of Phase 2, Business Blueprint or the information on the IDES System in this chapter.

    Continuous Business Engineering

    In today’s fast-moving, ever-changing business climate, companies are in a constant state of flux and their mission-critical applications must adapt and evolve at the same speed. If software cannot grow with the needs of a company, the company will quickly find itself in a straightjacket.

    Furthermore, an ERP application needs to let you move forward fast, knowing that you can roll back changes without downtime.

    An enterprise's organizational structure and the corresponding R/3 implementation created using the Business Engineer are not "set in concrete", they can be modified at any time. Examples of possible changes, which can be made rapidly include the following:

    Addition or removal of entities within the organization structure (for example, business units, production plants, warehouses, etc.)

    Introduction of new staff, promotion, reallocation of work tasks, and maintenance of authorization profiles

    Changes to the reporting or cost/profit center structure

    New and concurrent currencies

    Accommodation of changed legal requirements (for example, new tax rates, new employment legislation)

    Activation or deactivation of R/3 functions

    Optimization of business processes

    Support for new and multiple versions of R/3

    In addition, SAP offers a range of services if you want support for some of these changes, for example, conversion services to support mergers and acquisitions. Standard Euro services are a further example of the available services.

    AcceleratedSAP and R/3 Business Engineer take the hassle out of implementation procedures and change management. Modifications can be made at any time, and the compatibility of changes can be verified with other configuration decisions, thus supporting their smooth, trouble-free introduction into the productive system.

    Reward if useful..

    Regards,

    Pherasath

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  • author's profile photo Former Member
    Former Member
    Posted on Nov 20, 2007 at 02:43 PM

    Hi,

    the implementation steps are,

    file:///D:/balaram/impliment%20steps/AcceleratedSAP.htm

    ffile:///D:/balaram/impliment%20steps/Introduction.htm

    filfile:///D:/balaram/impliment%20steps/Phase%202%20Business%20Blueprint.htm

    e:///D:/balaram/impliment%20steps/Phase%201%20Project%20Preparation.htm

    filfile:///D:/balaram/impliment%20steps/Phase%204%20Final%20Preparation.htm

    e:///D:/balaram/impliment%20steps/Phase%203%20Realization.htm

    file:///D:/balaram/impliment%20steps/Phase%205%20Go%20Live%20and%20Support.htm

    i hope this is healpfull to you,

    regards,

    reddy

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  • author's profile photo Former Member
    Former Member
    Posted on Nov 20, 2007 at 02:51 PM

    hi guru,

    these are the main implementation methodologies they are:

    There are many steps on the road to a successful implementation. First of all, I would want to ensure that the project has solid support from the senior executive of the company. With this in place, a project management team can be secured to lay the foundation for a great project. This project management team needs to assess the current need and develop an initial scope of work, resource requirements, plan and budget. With this initial project information, funding needs to provided to move the project to the next step. This would involve recruiting additional project resources to develop detailed business requirements and a finite scope. Once the scope is clearly defined and agreed you can continue with your project methodology of configuration and development, testing, data conversion, training, cutover and golive!

    i hope this is helpfull to you,

    regards,

    reddy

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    • Former Member

      Hi there ,

      Apart from ASAP methodology......... please enlighten me about any other roadmaps which are used in common to implement SAP in the organization ......

      Thanks & Regards

      Kaushik Choudhury

  • author's profile photo Former Member
    Former Member
    Posted on Nov 23, 2007 at 02:58 PM

    Hi people.

    i am new to this forum and this is my first question... i just want to know what a consultant will do with implementation tools like ASAP or soulution manager . as i am supposed to know this for my upcomming interview, i wish if any one can give me in a nutshell how we interact with these methodologies especially solution manager. to be more specific what a consultnat will have in solution manger to do with. i dunno if i am putting my question right.

    when i read about some answeres in this thread i understood few things but not quite clear how it helps. i would like to know about the interaction point of view of solution manager.

    thank you.

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  • author's profile photo Former Member
    Former Member
    Posted on Nov 25, 2007 at 03:39 AM

    hi,

    1

    SAP R/3 Implementation

    at Geneva Pharmaceuticals1

    Company Background

    Geneva Pharmaceuticals, Inc., one of the world’s largest generic drug manufacturers, is the North

    American hub for the Generics division of Swiss pharmaceutical and life sciences company Novartis

    International AG. Originally founded by Detroit pharmacist Stanley Tutag in 1946, Geneva moved

    its headquarters to Broomfield, Colorado in 1974. The company was subsequently acquired by Ciba

    Corporation in 1979, which in 1996, merged with Sandoz Ltd. in the largest ever healthcare merger to

    form Novartis. Alex Krauer, Chairman of Novartis and former Chairman and CEO of Ciba,

    commented on the strengths of the merger:

    “Strategically, the new company moves into a worldwide leadership position in life

    sciences. Novartis holds the number two position in pharmaceuticals,

    number one in crop protection, and has tremendous development potential in

    nutrition.”

    The name “Novartis” comes from the Latin term novae artes or new arts, which eloquently captures

    the company’s corporate vision: “to develop new skills in the science of life.” Novartis inherited,

    from its parent companies, a 200-year heritage of serving consumers in three core business segments:

    healthcare, agribusiness, and nutrition. Business units organized under these divisions are listed in

    Exhibit 1. Today, the Basel (Switzerland) based life sciences company employs 82,500 employees

    worldwide, runs 275 affiliate operations in 142 countries, and generates annual revenues of 32 billion

    Swiss Francs. Novartis’ key financial data for the last five years (1994-98) are presented in Exhibit 2.

    The company’s American Depository Receipts trade on the New York Stock Exchange under the

    ticker symbol NVTSY.

    Novartis’ global leadership in branded pharmaceuticals is complemented by its generic drugs

    division, Novartis Generics. This division is headquartered in Kundl (Austria), and its U.S.

    operations are managed by Geneva Pharmaceuticals. In 1998, Geneva had revenues of $300 million,

    employed nearly 1000 employees, and manufactured over 4.6 billion dosage units of generic drugs.

    1 This “freeware” case was written by Dr. Anol Bhattacherjee to serve as a basis for class discussion rather than

    to demonstrate the effective or ineffective handling of an administrative or business situation. The author is

    grateful to Randy Weldon, CIO of Geneva Pharmaceuticals, and his coworkers for their unfailing help

    throughout the course of this project. This case can be downloaded and distributed free of charge for non-profit

    or academic use, provided the contents are unchanged and this copyright notice is clearly displayed. No part of

    this case can be used by for-profit organizations without the express written consent of the author. This case

    also cannot be archived on any web site that requires payment for access. Copyright © 1999 by Anol

    Bhattacherjee. All rights reserved.

    ERP Implementation at Geneva Pharmaceuticals 2

    Geneva portfolio currently includes over 200 products in over 500 package sizes, covering a wide

    range of therapeutic categories, such as nervous system disorders, cardio-vascular therapies, and

    nonsteroidal anti-inflammatory drugs. Its major products include ranitidine, atenolol, diclofenac

    sodium, ercaf, metoprolol tartrate, triamterene with hydrochlorothiazide, and trifluoperazine.

    Geneva’s business and product information can be obtained from the company web site at

    www.genevaRx.com.

    Generic drugs are pharmaceutically and therapeutically equivalent versions of brand name drugs with

    established safety and efficacy. For instance, acetaminophen is the equivalent of the registered brand

    name drug Tylenolâ, aspirin is equivalent of Ecotrinâ, and ranitidine HCl is equivalent of Zantacâ.

    This equivalence is tested and certified within the U.S. by the Food and Drug Administration (FDA),

    following successful completion of a “bioequivalence study,” in which the blood plasma levels of the

    active generic drug in healthy people are compared with that of the corresponding branded drug.

    Geneva’s business strategy has emphasized growth in two ways: (1) focused growth over a select

    range of product types, and (2) growth via acquisitions. Internal growth was 14 percent in 1998,

    primarily due to vigorous growth in the penicillin and cephalosporin businesses. In pursuit of further

    growth, Geneva spend $52 million in 1997 to upgrade its annual manufacturing capacity to its current

    capacity of 6 billion units, and another $23 million in 1998 in clinical trials and new product

    development.

    Industry and Competitive Position

    The generic drug manufacturing industry is fragmented and highly competitive. In 1998, Geneva was

    the fifth largest player in this industry, up from its eighth rank in 1997 but still below its second rank

    in 1996. The company’s prime competitors fall into three broad categories: (1) generic drugs

    divisions of major branded drug companies (e.g., Warrick – a division of Schering-Plough and

    Apothecon – a division of Bristol Myers Squibb), (2) independent generic drug manufacturers (e.g.,

    Mylan, Teva Pharmaceuticals, Barr Laboratories, and Watson Pharmaceuticals), and (3) drug

    distributors vertically integrating into generics manufacturing (e.g., AndRx). The industry also has

    about 200 smaller players specializing in the manufacture of niche generic products. While Geneva

    benefited from the financial strength of Novartis, independent companies typically used public stock

    markets for funding their growth strategies.

    In 1998, about 45 percent of prescriptions for medications in the U.S. were filled with generics. The

    trend toward generics can be attributed to the growth of managed care providers such as health

    maintenance organizations (HMO), who generally prefer lower cost generic drugs to more expensive

    brand name alternatives (generic drugs typically cost 30-50 less than equivalent brands). However,

    no single generics manufacturer has benefited from this trend, because distributors and pharmacies

    view generic products from different manufacturers as identical substitutes and tend to

    “autosubstitute” or freely replace generics from one company with those from another based on

    product availability and pricing at that time. Once substituted, it is very difficult to regain that

    customer account because pharmacies are disinclined to change product brand, color, and packaging,

    to avoid confusion among consumers. In addition, consumer trust toward generics has remained

    lower, following a generic drug scandal in the early 1990’s (of which Geneva was not a part).

    ERP Implementation at Geneva Pharmaceuticals 3

    Margins in the generics sector has therefore remained extremely low, and there is a continuous

    pressure on Geneva and its competitors to reduce costs of operations.

    Opportunities for international growth are limited because of two reasons. First, consumers in some

    countries such as Mexico are generally skeptical about the lack of branding because of their cultural

    background. Second, U.S. generics manufacturers are often undercut by competitors from India and

    China, where abundance of low-cost labor and less restrictive regulatory requirements (e.g., FDA

    approval) makes drug manufacturing even less expensive.

    Continuous price pressures has resulted in a number of recent industry mergers and acquisitions in the

    generic drugs sector in recent years, as the acquirers seek economies of scale as a means of reducing

    costs. The search for higher margins has also led some generics companies to venture into the

    branded drugs sector, providing clinical trials, research and development, and additional

    manufacturing capacity for branded drugs on an outsourced basis.

    Major Business Processes

    Geneva’s primary business processes are manufacturing and distribution. The company’s

    manufacturing operations are performed at a 600,000 square foot facility in Broomfield (Colorado),

    while its two large distribution centers are located in Broomfield and Knoxville (Tennessee).

    Geneva’s manufacturing process is scientific, controlled, and highly precise. A long and rigorous

    FDA approval process is required prior to commercial production of any drug, whereby the exact

    formulation of the drug or its “recipe” is documented. Raw materials are sourced from suppliers

    (sometimes from foreign countries such as China), tested for quality (per FDA requirements),

    weighed (based on dosage requirements), granulated (i.e., mixed, wetted, dried, milled to specific

    particle sizes, and blended to assure content uniformity), and compressed into a tablet or poured into a

    gelatinous capsule. Some products require additional coatings to help in digestion, stabilizing,

    regulating the release of active ingredients in the human body, or simply to improve taste. Tablets or

    capsules are then imprinted with the Geneva logo and a product identification number. Following a

    final inspection, the medications are packaged in childproof bottles with a distinctive Geneva label, or

    inserted into unit-dose blister packs for shipment.

    Manufacturing is done in batches, however, the same batch can be split into multiple product types

    such as tablets and capsules, or tablets of different dosages (e.g., 50 mg and 100 mg). Likewise,

    finished goods from a batch can be packaged in different types of bottles, based on customer needs.

    These variations add several layers of complexity to the standard manufacturing process and requires

    tracking of three types of inventory: raw materials, bulk materials, and finished goods, where bulk

    materials represent the intermediate stage prior to packaging. In some cases, additional intermediates

    such as coating solution is also tracked. Master production scheduling is focused on the manufacture

    of bulk materials, based on forecasted demand and replenishment of “safety stocks” at the two

    distribution centers. Finished goods production depends on the schedule-to-performance, plus

    availability of packaging materials (bottles and blister packs), which are sourced from outside

    vendors.

    ERP Implementation at Geneva Pharmaceuticals 4

    Bulk materials and finished goods are warehoused in Broomfield and Knoxville distribution centers

    (DC) prior to shipping. Since all manufacturing is done was done at Broomfield, inventory

    replenishment of manufactured products is done first at Broomfield and then at Knoxville. To meet

    additional customer demand, Geneva also purchases finished goods from smaller manufacturers, who

    manufacture and package generic drugs under Geneva’s level. Since most of these outsourcers are

    located along the east coast, and hence, they are distributed first to the Knoxville and then to

    Broomfield. Purchasing is simpler than manufacturing because it requires no bill of materials, no

    bulk materials management, and no master scheduling; Geneva simply converts planned orders to

    purchase requisitions, and then to purchase orders, that are invoiced upon delivery. However, the

    dual role of manufacturing and purchasing is a difficult balancing task, as explained by Joe Camargo,

    Director of Purchasing and Procurement:

    “Often times, we are dealing with more than a few decision variables. We have to

    look at our forecasts, safety stocks, inventory on hand, and generate a replenishment

    plan. Now we don’t want to stock too much of a finished good inventory because that

    will drive up our inventory holding costs. We tend to be a little more generous on the

    raw materials side, since they are less costly than finished goods and have longer

    shop lives. We also have to factor in packaging considerations, since we have a

    pretty short lead time on packaging materials, and capacity planning, to make sure

    that we are making efficient use of our available capacity. The entire process is

    partly automated and partly manual, and often times we are using our own

    experience and intuition as much as hard data to make a good business decision.”

    Geneva supplies to a total of about 250 customers, including distributors (e.g., McKesson, Cardinal,

    Bergen), drugstore chains (e.g., Walgreen, Rite-Aid), grocery chains with in-store pharmacies (e.g.,

    Safeway, Kroger), mail order pharmacies (e.g., Medco, Walgreen), HMOs (e.g., Pacificare, Cigna),

    hospitals (e.g., Columbia, St. Luke’s), independent retail pharmacies, and governmental agencies

    (e.g., U.S. Army, Veterans Administration, Federal prisons). About 70 percent of Geneva’s sales

    goes to distributors, another 20 percent goes to drugstore chains, while HMOs, government, retail

    pharmacies, and others account for the remaining 10 percent. Distributors purchase generic drugs

    wholesale from Geneva, and then resell them to retail and mail order pharmacies, who are sometimes

    direct customers of Geneva. The volume and dollar amount of transaction vary greatly from one

    customer to another, and while distributors are sometimes allow Geneva some lead time to fulfill in a

    large order, retail pharmacies typically are unwilling to make that concession.

    One emerging potential customer segment is Internet-based drug retailers such as Drugstore.com and

    PlanetRx.com. These online drugstores do not maintain any inventory of their own, but instead

    accept customer orders and pass on those orders to any wholesaler or manufacturer that can fill those

    orders in short notice. These small, customized, and unpredictable orders do not fit well with

    Geneva’s wholesale, high-volume production strategy, and hence, the company has decided against

    direct retailing to consumers via mail order or the Internet, at least for the near future.

    As is standard in the generics industry, Geneva uses a complex incentive system consisting of

    “rebates” and “chargebacks” to entice distributors and pharmacies to buy its products. Each drug is

    assigned a “published industry price” by industry associations, but Geneva rebates that price to

    distributors on their sales contracts. For instance, if the published price is $10, and the rebates

    assigned to a distributor is $3, then the contract price on that drug is $7. Rebate amounts are

    ERP Implementation at Geneva Pharmaceuticals 5

    determined by the sales management based on negotiations with customers. Often times, customers

    get proposals to buy the product cheaper from a different manufacturer and ask Geneva for a

    corresponding discount. Depending on how badly Geneva wants that particular customer or push that

    product, it may offer a rebate or increase an existing rebate. Rebates can vary from one product to

    another (for the same customer) and/or from one order volume to another (for the same product).

    Likewise, pharmacies ordering Geneva’s products are paid back a fraction of the sales proceeds as

    chargebacks.

    The majority of Geneva’s orders come through EDI. These orders are passed though multiple filters

    in an automated order processing system to check if the customer has an active customer number and

    sufficient credit, if the item ordered is correct and available in inventory. Customers are then

    assigned to either the Broomfield or Knoxville DC based on quantity ordered, delivery expiration

    dates, and whether the customer would accept split lots. If the quantity ordered is not available at the

    primary DC (say, Knoxville), a second allocation is made to the secondary DC (Broomfield, in this

    case). If the order cannot be filled immediately, a backorder will be generated and the Broomfield

    manufacturing unit informed of the same. Once filled, the distribution unit will print the order and

    ship it to the customer, and send order information to accounts receivable for invoicing. The overall

    effectiveness of the fulfillment process is measured by two customer service metrics: (1) the ratio

    between the number of lines on the order that can be filled immediately (partial fills allowed) to the

    total number of lines ordered by the customer (called “firstfill”), and (2) the percentage of items send

    from the primary DC. Fill patterns are important because customers typically prefer to get all items

    ordered in one shipment.

    Matching customer demand to production schedules is often difficult because of speculative buying

    on the part of customers. Prices of drugs are typically reassessed at the start of every fiscal year, and

    a distributor may place a very large order at the end of the previous year to escape a potential price

    increase at the start of the next year (these products would then be stockpiled for reselling at higher

    prices next year). Likewise, a distributor may place a large order at the end of its financial year to

    transfer cash-on-hand to cost-of-goods-sold, for tax purposes or to ward off a potential acquisition

    threat. Unfortunately, most generics companies do not have the built-in capacity to deliver such

    orders within short time frames, yet inability to fulfill orders may lead to the loss of an important

    customer. Safety stocks help meet some of these unforeseen demands, however maintaining such

    inventory consumes operating resources and reduce margins further.

    SAP R/3 Implementation

    Up until 1996, Geneva’s information systems (IS) consisted of a wide array of software programs for

    running procurement, manufacturing, accounting, sales, and other mission-critical processes. The

    primary hardware platform was IBM AS/400, running multiple operational databases (mostly DB/2)

    and connected to desktop microcomputers via a token-ring local area network (LAN). Each business

    unit had deployed applications in an ad hoc manner to meet its immediate needs, which were

    incompatible across business units. For instance, the manufacturing unit (e.g., materials requirements

    planning) utilized a manufacturing application called MacPac, financial accounting used

    Software/2000, and planning/budgeting used FYI-Planner. These systems were not interoperable,

    and data that were shared across systems (e.g., accounts receivable data was used by order

    ERP Implementation at Geneva Pharmaceuticals 6

    management and financial accounting packages, customer demand was used in both sales and

    manufacturing systems) had to be double-booked and rekeyed manually. This led to higher incidence

    of data entry errors, higher costs of error processing, and greater data inconsistency. Further, data

    was locked within “functional silos” and were unable to support processes that cut across multiple

    business units (e.g., end-to-end supply chain management). It was apparent that a common,

    integrated company-wide solution would not only improve data consistency and accuracy, but also

    reduce system maintenance costs (e.g., data reentry and error correction) and enable implementation

    of new value-added processes across business units.

    In view of these limitations, in 1996, corporate management at Geneva initiated a search for

    technology solutions that could streamline its internal processes, lower costs of operations, and

    strategically position the company to take advantage of new value-added processes. More

    specifically, it wanted an enterprise resource planning (ERP) software that could: (1) implement best

    practices in business processes, (2) provide operational efficiency by integrating data across business

    units, (3) reduce errors due to incorrect keying or rekeying of data, (4) reduce system maintenance

    costs by standardizing business data, (5) be flexible enough to integrate with new systems (as more

    companies are acquired), (6) support growth in product and customer categories, and (7) is Y2K (year

    2000) compliant. The worldwide divisions of Novartis were considering two ERP packages at that

    time: BPCS from Software Systems Associates and R/3 system from SAP. Eventually, branded drug

    divisions decided to standardize their data processing environment using BPCS, and generics agreed

    on deploying R/3.2 A brief description of the R/3 software is provided in the appendix.

    R/3 implementation at Geneva was planned in three phases (see Exhibit 3). Phase I focused on the

    supply side processes (e.g., manufacturing requirements planning, procurement planning), Phase II

    was concerned with demand side processes (e.g., order management, customer service), and the final

    phase was aimed at integrating supply side and demand side processes (e.g., supply chain

    management). Randy Weldon, Geneva’s Chief Information Officer, outlined the goals of each phase

    as:

    “In Phase I, we were trying to get better performance-to-master production schedule

    and maybe reduce our cost of operations. Our Phase II goals are to improve sales

    and operations planning, and as a result, reduce back orders and improve customer

    service. In Phase III, we hope to provide end-to-end supply chain integration, so that

    we can dynamically alter our production schedules to fluctuating demands from our

    customers.”

    For each phase, specific R/3 modules were identified for implementation. These modules along with

    implementation timelines are listed in Exhibit 3. The three phases are described in detail next.

    2 However, each generics subsidiary had its own SAP R/3 implementation, and therefore data sharing across

    these divisions remained problematic.

    ERP Implementation at Geneva Pharmaceuticals 7

    Phase I: Supply Side Processes

    The first phase of R/3 implementation started on November 1, 1997 with the goal of migrating all

    supply-side processes, such as purchasing management, capacity planning, master scheduling,

    inventory management, quality control, and accounts payable from diverse hardware/software

    platforms to a unified R/3 environment. These supply processes were previously very manual and

    labor intensive. A Macpac package running on an IBM AS/400 machine was used to control shop

    floor operations, prepare master schedules, and perform maintenance management. However, the

    system did not have simulation capability to run alternate production plans against the master

    schedule, and was therefore not used for estimation. The system also did not support a formal process

    for distribution resource planning (DRP), instead generated a simple replenishment schedule based on

    predefined economic order quantities. Materials requirements planning (MRP) was only partially

    supported in that the system generated production requirements and master schedule but did not

    support planned orders (e.g., generating planned orders, checking items in planned orders against the

    inventory or production plan, converting planned orders to purchase orders or manufacturing orders).

    Consequently, entering planned orders, checking for errors, and performing order conversion were all

    entered manually, item by item, by different sales personnel (which left room for rekeying error).

    Macpac did have a capacity resource planning (CRP) functionality, but this feature was not used since

    it required heavy custom programming and major enhancements to master data. The system had

    already been so heavily customized over the years, that even a routine system upgrade was considered

    too unwieldy and expensive. Most importantly, the existing system did not position Geneva well for

    the future, since it failed to accommodate consigned inventory, vendor-managed inventory, paperless

    purchasing, and other innovations in purchasing and procurement that Geneva wanted to implement.

    The objectives of Phase I were therefore to migrate existing processes from Macpac to R/3, automate

    supply side process not supported by MacPac, and integrate all supply-side data in a single, real-time

    database so that the synergies could be exploited across manufacturing and purchasing processes.

    System integration was also expected to reduce inventory and production costs, improve

    performance-to-master scheduling, and help managers make more optimal manufacturing and

    purchase decisions. Since R/3 would force all data to be entered only once (at source by the

    appropriate shop floor personnel), the need of data reentry would be eliminated, and hence costs of

    data reconciliation would be reduced. The processes to be migrated from MacPac (e.g., MRP,

    procurement) were fairly standardized and efficient, and were hence not targeted for redesign or

    enhancement. Three SAP modules were scheduled for deployment: materials management (MM),

    production planning (PP), and accounts payable component of financial accounting (FI). Exhibit A-1

    in Appendix provides brief descriptions of these and other commonly referenced R/3 modules.

    Phase I of R/3 implementation employed about ten IS personnel, ten full-time users, and ten part-time

    users from business units within Geneva. Whitman-Hart, a consulting company with prior experience

    in R/3 implementation, was contracted to assist with the migration effort. These external consultants

    consisted of one R/3 basis person (for implementing the technical core of the R/3 engine), three R/3

    configurators (for mapping R/3 configuration tables in MM, PP, and FI modules to Geneva’s needs),

    and two ABAP programmers (for custom coding unique requirements not supported by SAP). These

    consultants brought in valuable implementation experience, which was absolutely vital, given that

    Geneva had no in-house expertise in R/3 at that time. Verne Evans, Director of Supply Chain

    Management and a “super user” of MacPac, was assigned the project manager for this phase. SAP’s

    ERP Implementation at Geneva Pharmaceuticals 8

    rapid implementation methodology called Accelerated SAP (ASAP) was selected for deployment,

    because it promised a short implementation cycle of only six months.3

    Four months later, Geneva found that little progress had been made in the implementation process

    despite substantial investments on hardware, software, and consultants. System requirements were

    not defined correctly or in adequate detail, there was little communication or coordination of activities

    among consultants, IS personnel, and user groups, and the project manager was unable to identify or

    resolve problems because he had no prior R/3 experience. In the words of a senior manager, “The

    implementation was clearly spinning out of control.” Consultants employed by Whitman-Hart were

    technical specialists, and had little knowledge of the business domain. The ASAP methodology

    seemed to be failing, because although it allowed a quick canned implementation, it was not flexible

    enough to meet Geneva’s extensive customization needs, did not support process improvements, and

    alienated functional user groups from system implementation. To get the project back into track and

    give it leadership and direction, in February 1998, Geneva hired Randy Weldon as its new CIO.

    Weldon brought in valuable project management experience in R/3 from his previous employer,

    StorageTek.4

    From his prior R/3 experience, Weldon knew that ERP was fundamentally about people and process

    change, rather than about installing and configuring systems, and that successful implementation

    would require the commitment and collaboration of all three stakeholder groups: functional users, IS

    staff, and consultants. He instituted a new project management team, consisting of one IS manager,

    one functional manager, and one senior R/3 consultant. Because Geneva’s internal IS department had

    no R/3 implementation experience, a new team of R/3 professionals (including R/3 basis personnel

    and Oracle database administrators) was recruited. Anna Bourgeois, with over three years of R/3

    experience at Compaq Computers, was brought in to lead Geneva’s internal IS team. Weldon was not

    particularly in favor of Whitman-Hart or the ASAP methodology. However, for project expediency,

    he decided to continue with Whitman-Hart and ASAP for Phase 1, and explore other options for

    subsequent phases.

    By February 1999, the raw materials and manufacturing component of R/3’s MM module was “up

    and running.” But this module was not yet integrated with distribution (Phase II) and therefore did

    not have the capability to readjust production runs based on current sales data. However, several

    business metrics such as yield losses and key performance indicators showed performance

    improvement following R/3 implementation. For instance, the number of planning activities

    performed by a single individual was doubled. Job roles were streamlined, standardized, and

    consolidated, so that the same person could perform more “value-added” activities. Since R/3

    eliminated the need for data rekeying and validating, the portion of the inventory control unit that

    dealt with data entry and error checking was disbanded and these employees were taught new skills

    for reassignment to other purchasing and procurement processes. But R/3 also had its share of

    disappointments, as explained by Camargo:

    3 ASAP is SAP’s rapid implementation methodology that provides implementers a detailed roadmap of the

    implementation life cycle, grouped into five phases: project preparation, business blueprint, realization, final

    preparation, and go live. ASAP provides a detailed listing of activities to be performed in each phase,

    checklists, predefined templates (e.g., business processes, cutover plans), project management tools,

    questionnaires (e.g., to define business process requirements), and a Question & Answer Database

    4 StorageTek is a leading manufacturer of magnetic tape and disk components also based in Colorado.

    ERP Implementation at Geneva Pharmaceuticals 9

    “Ironically, one of the problems we have with SAP, that we did not have with

    Macpac, is for the job to carry the original due date and the current due date, and

    measure production completion against the original due date. SAP only allows us to

    capture one due date, and if we change the date to reflect our current due date, that

    throws our entire planning process into disarray. To measure how we are filling

    orders, we have to do that manually, offline, on a spreadsheet. And we can’t record

    that data either in SAP to measure performance improvements over time.”

    Bourgeois summed up the implementation process as:

    “Phase I, in my opinion, was not done in the most effective way. It was done as

    quickly as possible, but we did not modify the software, did not change the process,

    or did not write any custom report. Looking back, we should have done things

    differently. But we had some problems with the consultants, and by the time I came

    in, it was a little too late to really make a change. But we learned from these

    mistakes, and we hope to do a better job with Phases II and III.”

    Phase II: Demand Side Processes

    Beginning around October 1998, the goals of the second phase were to redesign demand-side

    processes such as marketing, order fulfillment, customer sales and service, and accounts receivable,

    and then implement the reengineered processes using R/3. Geneva was undergoing major business

    transformations especially in the areas of customer sales and service, and previous systems (Macpac,

    FYI Planner, etc.) were unable to accommodate these changes. For instance, in 1998, Geneva started

    a customer-based forecasting process for key customer accounts. It was expected that a better

    prediction of order patterns from major customers would help the company improve its master

    scheduling, while reducing safety stock and missed orders. The prior forecasting software, FYI

    Planner, did not allow forecasting on a customer-by-customer basis. Besides, demand-side processes

    suffered from similar lack of data integration and real-time access as supply side processes, and R/3

    implementation, by virtue of its real-time integration of all operational data would help manage crossfunctional

    processes better. Mark Mecca, Director of Customer Partnering, observed:

    “Before SAP, much of our customer sales and service were managed in batch mode

    using MacPac. EDI orders came in once a night, chargebacks came in once a day,

    invoicing is done overnight, shipments got posted once a day; so you don’t know

    what you shipped for the day until that data was entered the following day. SAP will

    allow us to have access to real-time data across the enterprise. There will be

    complete integration with accounting, so we will get accurate accounts receivable

    data at the time a customer initiates a sales transaction. Sometime in the future,

    hopefully, we will have enough integration with our manufacturing processes so that

    we can look at our manufacturing schedule and promise a customer exactly when we

    can fill his order.”

    However, the second phase was much more challenging than the first phase, given the non-standard

    and inherently complex nature of Geneva’s sales and service processes. For instance, customer rebate

    ERP Implementation at Geneva Pharmaceuticals 10

    percentages varied across customers, customer-product combinations, and customer-product-order

    volume combinations. Additionally, the same customer sometimes had multiple accounts with

    Geneva and had a different rebate percentage negotiated for each account.

    Bourgeois was assigned overall responsibility of the project, by virtue of her extensive knowledge of

    EDI, R/3 interface conversion, and sales and distribution processes, and ability to serve as a technical

    liaison between application and basis personnel. Whitman-Hart was replaced with a new consulting

    firm, Arthur Andersen Business Consulting, to assist Geneva with the second and third phases of R/3

    implementation. Oliver White, a consulting firm specializing in operational processes for

    manufacturing firms, was also hired to help redesign existing sales and distribution processes using

    “best practices,” prior to R/3 implementation. Weldon explained the reason for hiring two consulting

    groups:

    “Arthur Anderson was very knowledgeable in the technical and configurational

    aspects of SAP implementation, but Oliver White was the process guru. Unlike

    Phase I, we were clearly targeting process redesign and enhancement in Phases II

    and III, and Oliver White brought in ‘best practices’ by virtue of their extensive

    experience with process changes in manufacturing organizations. Since Phase I was

    somewhat of a disaster, we wanted to make sure that we did everything right in

    Phases II and III and not skimp on resources.”

    Technical implementation in Phase II proceeded in three stages: conceptual design, conference room

    pilot, and change management. In the conceptual design stage, key users most knowledgeable with

    the existing process were identified, assembled in a room, and interviewed, with assistance from

    Oliver White consultants. Process diagrams were constructed on “post-it” notes and stuck to the

    walls of a conference room for others to view, critique, and suggest modifications. The scope and

    boundaries of existing processes, inputs and deliverables of each process, system interfaces, extent of

    process customization, and required level of system flexibility were analyzed. An iterative process

    was employed to identify and eliminate activities that did not add value, and generate alternative

    process flows. The goal was to map the baseline or existing (“AS-IS”) processes, identify bottlenecks

    and problem areas, and thereby, to create reengineered (“TO-BE”) processes. This information

    became the basis for subsequent configuration of the R/3 system in the conference room pilot stage.

    A core team of 20 IS personnel, users, and consultants worked full-time on conceptual design for 2.5

    months (this team later expanded to 35 members in the conference room pilot stage). Another 30

    users were involved part-time in this effort; these individuals were brought in for focused periods of

    time (between 4 and 14 hours) to discuss, clarify, and agree on complex distribution-related issues.

    The core team was divided into five groups to examine different aspects of the distribution process:

    (1) product and business planning, (2) preorder (pricing, chargebacks, rebates, contracts, etc.), (3)

    order processing, (4) fulfillment (shipping, delivery confirmation, etc.), and (5) post-order (accounts

    receivable, credit management, customer service, etc.). Thirteen different improvement areas were

    identified, of which four key areas emerged repeatedly from cross-functional analysis by the five

    groups and were targeted for improvement: product destruction, customer dispute resolution, pricing

    strategy, and service level. Elaborate models were constructed (via fish bone approach) for each of

    these four areas to identify what factors drove these areas, what was the source of problems in these

    areas, and how could they be improved using policy initiatives.

    ERP Implementation at Geneva Pharmaceuticals 11

    The conceptual design results were used to configure and test prototype R/3 systems for each of the

    four key improvement areas in the conference room pilot stage. The purpose of the prototypes was to

    test and refine different aspects of the redesigned processes such as forecast planning, contract

    pricing, chargeback strategy determination, receivables creation, pre-transaction credit checking,

    basic reporting, and so forth in a simulated environment. The prototypes were modified several times

    based on user feedback, and the final versions were targeted for rollout using the ASAP methodology.

    In the change management stage, five training rooms were equipped with computers running the

    client version of the R/3 software to train users on the redesigned processes and the new R/3

    environment. An advisory committee was formed to oversee and coordinate the change management

    process. Reporting directly to the senior vice president level, this committee was given the mandate

    and resources to plan and implement any change strategies that they would consider beneficial. A

    change management professional and several trainers were brought in to assist with this effort.

    Multiple “brown bag luncheons” were organized to plan out the course of change and discuss what

    change strategies would be least disruptive. Super users and functional managers, who had the

    organizational position to influence the behaviors of colleagues or subordinates in their respective

    units, were identified and targeted as potential change agents. The idea was to seed individual

    business units with change agents they could trust and relate to, in an effort to drive a grassroots

    program for change.

    To stimulate employee awareness, prior to actual training, signs were put up throughout the company

    that said, “Do you know that your job is changing?” Company newsletters were used to enhance

    project visibility and to address employee questions or concerns about the impending change. A

    separate telephone line was created for employees to call anytime and inquire about the project and

    how their jobs would be affected. The human resources unit conducted an employee survey to

    understand how employees viewed the R/3 implementation and gauge their receptivity to changes in

    job roles as a result of this implementation.

    Training proceeded full-time for three weeks. Each user received an average of 3-5 days of training

    on process and system aspects. Training was hands-on, team-oriented, and continuously mentored,

    and was oriented around employees’ job roles such as how to process customer orders, how to move

    inventory around, and how to make general ledger entries, rather than how to use the R/3 system.

    Weldon described the rationale for this unique, non-traditional mode of training:

    “Traditional system training does not work very well for SAP implementation

    because this is not only a technology change but also a change in work process,

    culture, and habits, and these are very difficult things to change. You are talking

    about changing attitudes and job roles that have been ingrained in employees’ minds

    for years and in some cases, decades. System training will overwhelm less

    sophisticated users and they will think, ‘O my God, I have no clue what this computer

    thing is all about, I don’t know what to do if the screen freezes, I don’t know how to

    handle exceptions, I’m sure to fail.’ Training should not focus on how they should

    use the system, but on how they should do their own job using the system. In our

    case, it was a regular on-the-job training rather than a system training, and

    employees approached it as something that would help them do their job better.”

    ERP Implementation at Geneva Pharmaceuticals 12

    Several startling revelations were uncovered during the training process. First, there was a

    considerable degree of confusion among employees on what their exact job responsibilities were,

    even in the pre-R/3 era. Some training resources had to be expended in reconciling these differences,

    and to eliminate ambiguity about their post-implementation roles. Second, Geneva’s departments

    were very much functionally oriented and wanted the highest level of efficiency from their

    department, sometimes to the detriment of other departments or the overall process. This has been a

    sticky cultural problem, and at the time of the case, the advisory committee was working with senior

    management to see if any structural changes could be initiated within the company to affect a mindset

    change. Third, Geneva realized that change must also be initiated on the customer side, so that

    customers are aware of the system’s benefits and are able to use it appropriately. In the interest of

    project completion, customer education programs were postponed until the completion of Phase III of

    R/3 implementation.

    The primary business metric tracked for Phase II implementation was customer service level, while

    other metrics included days of inventory on hand, dollar amount in disputes, dollar amount destroyed,

    and so forth. Customer service was assessed by Geneva’s customers as: (1) whether the item ordered

    was in stock, (2) whether Geneva was able to fill the entire order in one shipment, and (3) if

    backordered, whether the backorder delivered on time. With a customer service levels in the 80’s,

    Geneva has lagged its industry competitors (mostly in the mid 90’s), but has set an aggressive goal to

    exceed 99.5 percent service level by year-end 1999. Camargo observed that there was some decrease

    in customer service, but this decrease was not due to R/3 implementation but because Geneva faced

    an impending capacity shortfall and the planners did not foresee the shortfall quickly enough to

    implement contingency plans. Camargo expected that such problems would be alleviated as

    performance-to-schedule and demand forecasting improved as a result of R/3 implementation. Given

    that Phase II implementation is still underway at the time of the case (“go live” date is February 1,

    2000), it is still too early to assess whether these targets are reached.

    Phase 3: Integrating Supply and Demand

    Geneva’s quest for integrating supply and demand side processes began in 1994 with its supply chain

    management (SCM) initiative. But the program was shelved for several years due to the nonintegrated

    nature of systems, immaturity of the discipline, and financial limitations. The initiative

    resurfaced on the planning boards in 1998 under the leadership of Verne Evans, Director of SCM, as

    R/3 promised to remove the technological bottlenecks that prevented successful SCM

    implementation. Though SCM theoretically extends beyond the company’s boundaries to include its

    suppliers and customers, Geneva targeted the mission-critical the manufacturing resource planning

    (MRP-II) component within SCM, and more specifically, the Sales and Operations Planning (SOP)

    process as the means of implementing “just-in-time” production scheduling. SOP dynamically linked

    planning activities in Geneva’s upstream (manufacturing) and downstream (sales) operations,

    allowing the company to continuously update its manufacturing capacity and scheduling in response

    to continuously changing customer demands (both planned and unanticipated). Geneva’s MRP-II and

    SOP processes are illustrated in Exhibits 5 and 6 respectively.

    Until the mid-1990’s, Geneva had no formal SOP process, either manual or automated.

    Manufacturing planning was isolated from demand data, and was primarily based on historical

    ERP Implementation at Geneva Pharmaceuticals 13

    demand patterns. If a customer (distributor) placed an unexpected order or requested a change in an

    existing order, the manufacturing unit was unable to adjust their production plan accordingly. This

    lack of flexibility led to unfilled orders or excess inventory and dissatisfied (and sometimes lost)

    customers. Prior sales and manufacturing systems were incompatible with each other, and did not

    allow the integration of supply and demand data, as required by SOP. In case production plans

    required modification to accommodate a request from a major customer, such decisions were made on

    an ad-hoc basis, based on intuition rather than business rationale, which sometimes had adverse

    repercussions on manufacturing operations.

    To remedy these problems, Geneva started a manual SOP process in 1997 (see Exhibit 6). In this

    approach, after the financial close of each month, sales planning and forecast data were aggregated

    from order entry and forecasting systems, validated, and manually keyed into master scheduling and

    production planning systems. Likewise, prior period production and inventory data were entered into

    order management systems. The supply planning team and demand analysis team arrived at their

    own independent analysis of what target production and target sales should be. These estimates

    (likely to be different) were subsequently reviewed in a joint meeting of demand analysts and master

    schedulers and reconciliated. Once an agreement was reached, senior executives (President of

    Geneva and Senior Vice Presidents), convened a business planning meeting, where the final

    production plan and demand schedule were analyzed based on business assumptions, key customers,

    key performance indicators, financial goals and projections (market share, revenues, profits), and

    other strategic initiatives (e.g., introduction of a new product). The purpose of this final meeting was

    not only to fine-tune the master schedule, but also to reexamine the corporate assumptions, growth

    estimates, and the like in light of the master schedule, and to develop a better understanding of the

    corporate business. The entire planning process took 20 business days (one month), of which the first

    10 days were spent in data reentry and validation across corporate systems, followed by five days of

    demand planning, two days of supply planning, and three days of reconciliation. The final business

    planning meeting was scheduled on the last Friday of the month to approve production plans for the

    following month. Interestingly, when the planning process was completed one month later, the

    planning team had a good idea of the production schedule one month prior. If Geneva decided to

    override the targeted production plans to accommodate a customer request, such changes undermined

    the utility of the SOP process.

    While the redesigned SOP process was a major improvement over the pre-SOP era, the manual

    process was itself limited by the time-lag and errors in data reentry and validation across sales,

    production, and financial systems. Further, the process took one month, and was not sensitive to

    changes in customer orders placed less than a month from their requested delivery dates. Since much

    of the planning time was consumed in reentering and validating data from one system to another,

    Evans estimated that if an automated system supported real-time integration of all supply and demand

    data in a single unified database, the planning cycle could be reduced to ten business days.

    Though SAP provided a SOP module with their R/3 package, Geneva’s R/3 project management team

    believed that this module lacked the “intelligence” required to generate an “optimal” production plan

    from continuously changing supply and demand data, even when all data were available in a common

    database. The R/3 system was originally designed as a data repository, not an analysis tool to solve

    ERP Implementation at Geneva Pharmaceuticals 14

    complex supply chain problems or provide simulation capabilities5. Subsequently, in 1999, when

    SAP added a new Advanced Purchase Optimizer (APO) module to help with data analysis, Geneva

    realized that the combination of R/3’s SOP and APO modules would be the answer to their unique

    SOP needs.

    At the time of the case, Geneva was in the initial requirements definition stage of SOP

    implementation. To aid in this effort, Oliver White had created a template that could aggregate all

    relevant data required for SOP from distribution, operations, purchasing, quality control, and other

    functional databases, and tie these data to their source processes. It was expected that the template

    would provide a common reference point for all individuals participating in the SOP process and

    synchronize their decision processes.

    The primary business metric targeted for improvement in Phase III implementation is “available to

    promise” (ATP), i.e., whether Geneva is able to fulfill a customer order by the promised time. ATP is

    an integration of customer service level and business performance, the erstwhile key business metrics

    in the pre-SOP era. Customers often placed orders too large to be fulfilled immediately, and ATP

    was expected to provide customers with reasonably accurate dates on when they should expect which

    part of their order to be filled. Generating and meeting these dates would enable Geneva improve its

    customer service levels that not providing any fulfillment dates at all. With declining profit margins,

    as the generics industry is forced to explore new means of cost reduction, Geneva expects that thin

    inventories, just-in-time manufacturing, and top quality customer service will eventually be the

    drivers of success, hence the importance of this metric. Evans explains the importance of ATP as a

    business metric as:

    “Most of our customers understand the dynamics of our business, and how difficult it

    is for us to fulfill a large order instantaneously with limited production capacity. But

    most of them are willing to bear with backorders if we can promise them a

    reasonable delivery date for their backorder and actually deliver on that date. That

    way, we take less of a customer service level hit than defaulting on the order or being

    unable to accommodate it. In commodity business such as ours, customer service is

    the king. Our customers may be willing to pay a little premium over the market for

    assured and reliable service, so that they can meet their obligations to their

    customers. Customer service may be a strategic way to build long-term relationships

    with our customers, but of course, we are far from proving or disproving that

    hypothesis.”

    Future Plans

    Despite some initial setbacks in Phase I, Geneva is now back on the road to a successful R/3

    implementation. The senior management, functional units, and IS personnel are all enthusiastic about

    the project and looking forward to its deployment in all operational areas of business and beyond.

    R/3 implementation has opened up new possibilities to Geneva and more means of competing in the

    5 Typically, manufacturing companies requiring SCM analysis used additional analysis tools from I2

    Technologies or Manugistics on top of ERP databases from SAP or Oracle for SCM purposes.

    ERP Implementation at Geneva Pharmaceuticals 15

    intensely competitive generic drugs industry. Weldon provided an overall assessment of the benefits

    achieved via R/3 implementation:

    “In my opinion, we are doing most of the same things, but we are doing them better,

    faster, and with fewer resources. We are able to better integrate our operational

    data, and are able to access that data in a timely manner for making critical business

    decisions. At the same time, SAP implementation has placed us in a position to

    leverage future technological improvements and process innovations, and we expect

    to grow with the system over time.”

    Currently, the primary focus of Geneva’s R/3 implementation is timely completion of Phase II and III

    by February 2000 and December 2000 respectively. Once completed, the implementation team can

    then turn to some of R/3’s additional capabilities that are not being utilized at Geneva. In particular,

    the quality control and human resource modules are earmarked for implementation after Phase III.

    Additionally, Geneva plans to strengthen relationships with key suppliers and customers by

    seamlessly integrating the entire supply chain. The first step in this direction is vendor managed

    inventory (VMI), that was initiated by Geneva in April 1998 for a grocery store chain and a major

    distributor. In this arrangement, Geneva obtains real-time, updated, electronic information about

    customers’ inventories, and replenish their inventories on a just-in-time basis without a formal

    ordering process, based on their demand patterns, sales forecast, and actual sales (effectively

    operating as customers’ purchasing unit).6 Geneva’s current VMI system, Score, was purchased from

    Supply Chain Solutions (SCS) in 1998. Though Mecca is satisfied with this system, he believes that

    Geneva can benefit more from R/3’s ATP module via a combination of VMI functionality and

    seamless company-wide data integration. Currently, some of Geneva’s customers are hesitant to

    adopt VMI because sharing of critical sales data may cause them to lose bargaining power vis-à-vis

    their suppliers or prevent them from speculative buying. But over the long-term, the inherent

    business need for cost reduction in the generics industry is expected to drive these and other

    customers toward VMI. Geneva wants to ensure that the company is ready if and when such

    opportunity arises.

    6 Real-time customer forecast and sales data is run through a VMI software (a mini-MRP system), which

    determines optimum safety stock levels and reorder points for customers, and a corresponding, more optimum

    production schedule for Geneva. Initial performance statistics at the grocery store chain indicated that customer

    service levels increased from 96 percent to 99.5 percent and on-hand inventory decreased from 8 weeks to six

    weeks as a result of VMI implementation. For the distributor, Geneva expects that VMI will reduce on-hand

    inventory from seven months to three months.

    ERP Implementation at Geneva Pharmaceuticals 16

    Exhibit 1. Novartis’ divisions

    Divisions Business Units

    Healthcare Pharmaceuticals

    Consumer Health

    Generics

    CIBA Vision

    Agribusiness Crop Protection

    Seeds

    Animal Health

    Nutrition Infant and Baby Nutrition

    Medical Nutrition

    Health Nutrition

    Exhibit 2. Novartis’ five-year financial summary

    1998 1997 1996 1995 1994

    Annual sales 31,702 31,180 36,233 35,943 37,919

    Sales from healthcare 17,535 16,987 14,048 12,906 14,408

    Sales from agribusiness 8,379 8,327 7,624 7,047 7,135

    Sales from consumer health 5,788 5,866 5,927 5,777 4,258

    Sales from industry - - 8,634 10,213 12,118

    Operating income 7,356 6,783 5,781 5,714 5,093

    Net income 6,064 5,211 2,304 4,216 3,647

    Cash flow from operations 5,886 4,679 4,741 5,729 5,048

    R&D expenditure 3,725 3,693 3,656 3,527 3,786

    Total assets 55,375 53,390 58,027 50,888 51,409

    Net operating assets 20,913 19,619 21,820 22,278 22,952

    Number of employees at year-end 82,449 87,239 116,178 133,959 144,284

    Sales per employee (Swiss Francs) 369,337 350,905 289,705 258,357 266,740

    Debt/equity ratio 0.28 0.41 0.46 0.46 0.57

    Current ratio 2.0 1.7 1.9 2.2 1.6

    Return on sales (%) 19.1 16.7 13.9 - -

    Return on equity (%) 21.0 20.7 16.7 - -

    Note: All figures in millions of Swiss Francs, except otherwise indicated.

    Pre-1996 data is on pro forma basis, based on pooled data from Ciba and Sandoz.

    ERP Implementation at Geneva Pharmaceuticals 17

    Exhibit 3. Phases in R/3 implementation at Geneva

    Phases1 Business processes R/3 modules Implementation timeline

    (inception to go-live)

    Phase I: Supply side

    management

    MRP, purchasing, inventory

    management

    MM2, PP,

    FI/CO3

    Nov 1997 – Feb 1999

    Phase II: Demand side

    management

    Order management, sales,

    customer service

    SD, MM4,

    FI/CO5

    Oct 1998 – Feb 2000

    Phase III: Supply/demand

    integration, business

    intelligence

    Sales & operations planning,

    supply chain management,

    data warehousing

    APO, MES,

    BIW

    Early 2000 – End 2000

    Note: 1Vendor selection took place in mid-1997

    2MM: Raw materials inventory

    4MM: Finished goods inventory

    3FI/CO: Accounts payable

    5FI/CO: Accounts receivable

    Vendor

    System

    Sales orders ATP

    Sales & Distribution

    Customer

    Inquiry Quotation

    Order

    Generation

    Goods

    Issue

    Billing

    Delivery Document

    Update

    Financials

    Inventory

    Management

    Update

    Demand

    Management

    Run

    MPS/MRP

    Production Planning Materials

    Management

    Finance &

    Controlling

    Exhibit 4. Geneva’s order management process

    ERP Implementation at Geneva Pharmaceuticals 18

    Business Planning

    Sales & Operations

    Planning

    DRP Master

    Scheduling

    Detailed Materials/

    Capacity Planning

    Plant & Supplier

    Scheduling

    Execution

    Demand

    Management

    Rough-Cut

    Capacity Planning

    Exhibit 5. Geneva’s manufacturing resource planning process

    Exhibit 6. Geneva’s sales & operations planning process

    Demand

    Planning

    Supply

    Planning

    Integration/

    Reconciliation

    Business Planning

    (S&OP)

    Key Activities:

    • Product planning

    • Forecasting

    • Sales planning

    • Performance

    management

    (prior period)

    • Master production

    scheduling

    • Capacity planning

    • Materials requirements

    planning

    • Consolidation of

    demand, supply,

    inventory, and

    financial plans

    • Feedback to

    demand and

    supply planning

    • Performance review

    • Key assumptions review

    • Product family review

    • Key customers review

    • Financial review

    • Approval/action items

    Current Planning Cycle (Monthly):

    Financial

    close

    (prior month)

    0 5 10 15 17 20 (Business

    days)

    Demand

    planning

    Supply

    planning

    Integration

    Business

    planning

    Goal:

    To reduce the planning cycle time from one month to 10 business days.

    ERP Implementation at Geneva Pharmaceuticals 19

    Appendix

    SAP (Systems, Applications, and Products in Data Processing) is the world’s fourth largest software

    company, and the largest enterprise resource planning (ERP) vendor. As of February 1999, the

    company employed 19,300 employees and had annual revenues of $5 billion, annual growth of 44

    percent, over 10,000 customers in 107 countries, and 36 percent of the ERP market. SAP AG was

    founded in 1972 by Dr. H.C. Hasso Plattner and Dr. Henning Kagermann in Walldorf, Germany with

    the goal of producing an integrated application software, that would run all mission-critical operations

    in corporations, from purchasing to manufacturing to order fulfillment and accounting. This

    integration would help companies optimize their supply chains, manage customer relationships, and

    make better management decisions. SAP brings in 26 years of leadership in process innovations and

    ERP, and invests 20 percent of its revenues back into research and development.

    SAP’s first breakthrough product was the R/2 system, which ran on mainframe computers. R/2 and

    its competitors were called ERP systems, to reflect the fact that they extended the functions of earlier

    materials requirements planning (MRP) systems in manufacturing firms to include other functions

    and business processes such as sales and accounting. In 1992, SAP released its R/3 system, the

    client/server variant of the earlier R/2 system, which was installed in 20,000 locations worldwide, and

    R/2 is installed in over 1,300 locations by mid-1999. Initially targeted at the world’s largest

    corporations such as AT&T, BBC, Deutsche Bank, IBM, KPMG, Merck, Microsoft, Nestle, Nike,

    and Siemens, R/3 has since been deployed by companies of all sizes, geographical locations, and

    industries. SAP solutions are available for 18 comprehensive industry solutions (“verticals”) for

    specific industry sectors such as banking, oil & gas, electronics, health care, and public sector.

    The R/3 system is designed as an “open” solution, i.e., it can run on a variety of hardware/software

    environments such as UNIX, Windows NT, or OS/400 on Sun, IBM, or HP servers, Intel-based

    servers, and IBM AS/400 machines. R/3 uses a thin client-based, 3-tier architecture, consisting of a

    database tier, an application server, and a presentation tier (see Exhibit A-2). The database server

    provides a common, central repository of all organizational data in relational form, which can be

    accessed via application servers. Back-end databases supported include Oracle, Microsoft SQL

    Server, DB2, Informix, and ADABAS. The application server provides job scheduling, print

    spooling, user validation, and application programming interfaces (API) requested by the presentation

    server. The presentation server provides the desktop graphical user interfaces (GUI) running on thin

    clients, which can retrieve data from or store data to the database server via the application server.

    Front-end GUIs supported by SAP include Windows 3.1/95/NT, OS/2, Macintosh, and OSF/Motif.

    SAP requires a TCP/IP networking environment, but supports a wide variety of middleware such as

    RFC, DDE, OLE, and ALE for client-server interaction.

    R/3 is organized in form of over 8,000 configuration tables that define how the system should

    function, how users should interact with it, and how transaction screens should look like. Though it

    can be implemented as a “standard” application, generally some configuration is required to meet

    customer-specific business needs. Configuration is done by changing settings in R/3 configuration

    tables. Implementers first model how a business process should function, then map these models into

    “scripts,” and finally translate scripts into configuration table settings. Typically, external consultants

    (e.g., Anderson Consulting, Price-Waterhouse-Coopers) are hired to assist with the configuration

    ERP Implementation at Geneva Pharmaceuticals 20

    process. Implementing R/3’s basic modules may take 18-24 months, however the new Accelerated

    SAP (ASAP) methodology can reduce the implementation time to under six months.

    R/3 is packaged as a set of application modules (see Exhibit A-1 for a listing of common R/3

    modules, their functions, and key elements); plus the core system called the Basis System. The basis

    system provides the operating system, database, communications middleware, and technical

    infrastructure required by all application modules, and also manages the data dictionary, security,

    ABAP/4 programming workbench, operations, transactions, change requests, and administration. A

    customer may implement the core plus any combination of application modules, depending on its

    specific needs. These modules interact with business data that are defined as objects, with predefined

    attributes and behaviors. R/3 configuration involves setting up “values” for these attributes, building

    custom forms to map business processes, building interfaces to transfer data across applications, and

    populating data from prior databases after appropriate data mapping, cleansing, conversion, and

    extraction (using SAP-supplied tools such as BDC or IDOC).

    Although R/3 typically supports 80-95 percent of a large company’s needs, some companies may

    require additional functionality for unique business processes. This remaining functionality can be

    obtained in four ways: (1) interfacing R/3 to existing legacy systems via SAP-supported middleware,

    (2) interfacing R/3 to third-party (SAP partners) solutions (which can be coded in C or C++), (3)

    writing custom software in ABAP/4 (a proprietary fourth generation language) that extends R/3’s

    functionality, and (4) modifying R/3 source code directly (this approach is strongly discouraged by

    SAP and may lead to loss of after-sales support). The scope and complexity of R/3 implementation

    requires the hiring of consulting agencies (e.g., Anderson Consulting, Price Waterhouse Coopers,

    KPMG), who not only configure the system based on business specifications and custom-code

    additional requirements using ABAP/4, but also plan and manage company-wide rollout, training, and

    change management.

    ERP Implementation at Geneva Pharmaceuticals 21

    Exhibit A-1. R/3’s application modules

    Module

    name

    Description Key elements

    FI Financial

    accounting

    Designed for automated management and

    reporting of GL, A/R, A/P, and other subledger

    accounts with a user-defined chart of

    accounts.

    General ledger, Accounts payable, Accounts

    receivable, Treasury, Special-purpose ledger,

    Legal consolidation, Accounting information

    system.

    CO Controlling Represents the company’s flow of cost and

    revenue, and is a management instrument for

    organizational decision.

    Cost/profit center accounting, Job order

    accounting, Project accounting, Product

    costing analysis, Activity based costing,

    Profitability analysis.

    AM Asset

    management

    Designed to manage and supervise individual

    aspects of fixed assets.

    Plant maintenance (repair, schedule),

    Inventory control, Traditional asset

    accounting (depreciation, etc.), Investment

    management.

    PS Project

    system

    Supports the planning, control, and

    monitoring of long-term, highly complex

    products with defined goals, accelerates work

    and data flows.

    Funds and resource management, Quality

    control, Time management, Project

    management.

    WF Workflow Links SAP R/3 modules with crossapplication

    technologies, tools, and services

    to automate business processes.

    IS Industry

    solutions

    Combines SAP R/3 modules with additional

    industry specific functionality.

    Segments: Consumer packaged goods,

    Utilities/telecommunications, Healthcare,

    Process industries, Oil & gas, High

    tech/electronics, Automotive.

    HR Human

    resources

    Supports the planning and control of

    personnel activities

    Payroll accounting, Travel expense

    accounting, Benefits, Recruitment,

    Workforce planning, Training

    administration, HR information system.

    PM Plant

    maintenance

    Supports the planning, processing, and

    completion of plant maintenance tasks, track

    maintenance costs, and make maintenance

    decisions

    Processing of unplanned tasks, Service

    management, Maintenance planning,

    Maintenance bill of materials, Plant

    management information system.

    QM Quality

    management

    Supports quality planning and control for

    manufacturing and procurement.

    Quality inspection, Quality planning, Quality

    management system.

    PP Production

    planning

    Supports planning and control of

    manufacturing activities.

    Bill of materials, Work centers, Sales and

    operations planning, Master production

    scheduling, Material requirements planning,

    Shop floor control, Product costing, Kanban.

    MM Materials

    management

    Supports the procurement and inventory

    functions in daily operations.

    Purchasing, Inventory management, Reorder

    point processing, Invoice verification,

    Material valuation, External services

    management.

    SD Sales &

    distribution

    Helps optimize all tasks and activities carried

    out in sales, delivery, and billing.

    Pre-sales support, Inquiry processing,

    Quotations, Sales order processing, Delivery

    processing, Billing.

    Note: This is not a complete list of SAP R/3 modules. New modules are being added at the time of the case, such as BIW

    (Business information warehouse) and APO (Advance purchase optimization).

    ERP Implementation at Geneva Pharmaceuticals 22

    Exhibit A-2. R/3’s three-tier client/server architecture

    Database

    Server

    Application

    Server

    Presentation

    Server

    1

    6

    2

    3

    4

    5

    User request processing:

    1 User requests data or transaction from presentation server via the GUI

    2 Presentation server relays user requests to appropriate application servers via set of middleware

    3 Application server creates appropriate SQL queries and transmits them to the database server

    4 Database server processes the query and returns results to application server

    5 Application server returns the data to the requesting presentation server

    6 Presentation server formats data and presents it to the user.

    Exhibit A-3. System platforms supported by R/3

    UNIX platform NT platform AS/400 platform

    Hardware Bull, DEC, HP, IBM,

    SNI, Sun

    AT&T, Compaq, DEC,

    Dell, Data General, IBM

    IBM AS/400

    Operating

    system

    AIX, Digital UNIX, HPUX,

    Linux, Sinix, Solaris

    Windows NT OS/400

    Database Adabas D, DB2 for

    UNIX, Informix-Online,

    Oracle 7.1

    Adabas D, MS SQL

    Server 6.0, Oracle 7.1

    DB2/400

    GUI Windows 3.1, Windows 95, Windows NT,

    OSF/Motif, Presentation Manager, Macintosh

    OS/2, Windows 95

    Programming

    languages

    ABAP/4, C, C++

    Communication

    protocols

    TCP/IP

    Middleware ALE, DDE, EDI, OLE, Mail, RFC, Q-API, CPI-C

    path is:http://www.isworld.org/onlineteachingcases/cases/Geneva.pdf

    i hope this will be help full to you.

    regards,

    reddy

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