ERP II - A Competitive Edge for Pharma SMEs’

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Ajaypal Singh

Ajaypal Singh

At present, pharmaceutical companies are at a crossroads.

Price discounts, shrinking margins, reductions in market exclusivity, product commoditization − as well as Part 11 validation compliance11 − represent new challenges for pharmaceutical companies of all sizes. Equally daunting are pressures on the manufacturing, supply chain Process Analytical Technology (PAT)5.

ERP systems are used to integrate and optimize an organization’s internal manufacturing, financial, distribution and human resource functions6. In contrast, ERP II addresses the integration of business processes that extend across an enterprise and its trading partners. ERP II forms the basis of Internet-enabled e-business and collaborative commerce. It provides benefits such as improved information visibility, personnel and inventory reduction, productivity improvement and new improved processes. However, since ERP II software has been a new evolution, and many firms have realized benefits such as those listed, it is argued that ERP II software is an unlikely source of competitive advantage either through opportunities for strategic positioning or through gains in operational effectiveness21.

Introduction

The IT companies had recently introduced an ERP II product for handling the complex requirements of the pharmaceutical industry encompassing both bulk drugs and formulation18 business.

Solution providers had kept in mind the nuances of the business as well as the unique information requirements of a sensitive business segments such as pharma19.  As by adopting such IT-enabled business practices, not only they have modified the infrastructure but also the SMEs will benefit Aspects such as batch traceability, expiry date control, environment requirements for storage and other such considerations need to be fully supported. Quality assurance processes, extensive documentation capabilities would all be considered as basic requirements for acceptance.

ERP II over ERP

Enterprise Resource Planning (ERP) is mainly based on resource planning as well as visibility beyond the plant and throughout the manufacturing enterprise, including man, machine and money resources24.

The quintessence of ERP II to improve enterprise competitiveness, by setting strategies and deploying applications that enable the enterprise to share information and thereby collaborate in communities of interest to participate in collaborative commerce (c-commerce)33. In this sense ERP II is an expansion beyond enterprise-centric optimization and transaction processing and thereby breaks down the barriers of traditional ERP, forcing solutions to offer functionality that extends beyond the four walls of an organization34.

In comparison to the web-aware, closed and monolithic architecture of ERP, ERP II is a web-based, open, and most importantly, components based architecture. ERP II enables an organization to extend itself to communicate directly to its vendors and customers to create an external enterprise2. Transactions generated from outside the traditional enterprise can be received and processed by the enterprise and similarly transactions received can be directly sent out to impact the customer’s systems after due authentication. ERP II thus extends transaction processing beyond the traditional boundaries of the conventional ERP.

ERP II uses a broad-based approach that integrates business processes across suppliers, partners, employees and customers to create a more effective organization.

Characteristics of ERP II

ERP II product that is an integrated enterprise solution system that meets the enterprise solution requirements of diverse market segments such as manufacturing, distribution, contracting and retail. The salient features14 of ERP II are:

  • It supports multi-company, multi division/ profit centres, and multi-department/ cost centre kind of organization structures.
  • Its flexible design and extensive parameterization permits it to evolve to cater to changing business dynamics.
  • It is designed to accommodate diverse and dynamic business needs.
  • It offers virtualized solutions that require very little customization thereby ensuring a shorter implementation time.

For pharmaceutical industry, it offers specific solutions like batch tracking including expiry date tracking17, quality control tracking, recipe management, credit control, logistics control, sales promotions and discounts, purchase-sales-inventory analysis and consignment sales tracking38.

While in retail, it offers making informed merchandising, stocking and logistics, decisions that are based on analysis of data across the retail store locations42. Integrates and centralizes customer, sales and merchandising information across multiple channels and locations.

Scope of ERP II for Small Manufacturing Enterprises (SMEs)

For SMEs involved in similar pharma businesses, there are a lot of commonalities in business practices. However, practically, each SME reinvents the wheel since little attention is initially given to business processes and made sure they are followed51. ERP provides a repeatable, scalable framework where best business practices are made available to the business to work with. Far from having to modify the infrastructure, the SMEs will benefit greatly by adopting such business practices.

Initially there would also be some learning and unlearning in terms of how to do what they do but the basic essence of what they do does not change. ERP II delivers as a pre-mapped solution for specific verticals, such as pharma, chemical, auto ancillary and retail provides the SMEs21, benefits of rich industry expertise without the related costs and time of high end consulting. It also provides information, infrastructure and process definition required to adapt to changing business requirements, and scales rapidly or desegregates the part of the business say by outsourcing some part of the business and yet retains overall control effectively on the business. The affordability is brought in with pre-mapped solution and rapid implementation that makes the solution faster to go live and lighter on the purse.

The model for deployment for SMEs enables the organization leave IT to the experts and focus on fine tuning its business processes and take maximum advantage of ERP implementation in the shortest possible time. This utility model of computing where user organization can install the PC/client, connect it to the data centre that is remotely located and get benefits of the full ERP is truly a plug and play solution that provides best business practice to SMEs without the pain of hardware selection, infrastructure creation and other related issues of setting up IT infrastructure46.

The financial modules not only permits the transaction based on a fixed fee single cheque payment on a monthly basis which goes to the expense line and does not burden the organization with the kind of one time investment that traditional ERP modules require in hardware and infrastructure as well as the repetitive in house cost of qualified professionals who are difficult to retain52.

ERP II functionalities for fragmented information in companies

ERP II transaction processing is designed based on the source document being generated by the system and the data flowing from the original document that captures the data to all related transaction. Data from the quotation to the customer could go all the way to the customer order, the packing list, delivery note, invoice that flows through transaction processing47. Fragmented data is a thing of the past once an end-to-end solution is implemented in the organization.

ERP II is designed to meet the requirements of pharma organization across the value-chain both within and outside of the enterprise encompassing its suppliers and clients36. The ERP II collaboration corporate will also support data flow between distribution chain and the organization and provide infrastructure required for end to end transaction processing across the ‘buy’, ‘sell’, ‘insides’ of the business40. Thereby it is a single contract cover applications in all the activities of the organization, namely, production, QA/QC39, supply chain, stores, retailing, distribution etc.

Security level

For the in house implementation, operating system, database and user level security ensures that authorized users have access to specified information, so there is no question of information being given to anyone outside of the company.

In the hosted model, since security of the data stored at the data centre is a basic factor for success, it have invested in highly sophisticated security tools (which would normally be done by large organizations) and provide this benefit to the SMEs. With constant monitoring of the environment by administrators and the usage of other tools such as those for intrusion detection, the data centre provides the SMEs the benefit of a high security data environment18, normally available to large organizations at very high investments.

Conclusion

The existence of ERP II in pharma SMEs was the need to look at a way to give customers and partners access to scheduling, delivery, inventory, manufacturing, invoicing, and planning information28. ERP II needs an open architecture and a vertical-specific functionality. Its main emphasis is to integrate departments and functions throughout a company into a single system that can serve every department's needs. ERP II forms an integral part of most manufacturing organizations13. It is an application/system that both small and large pharma manufacturing companies are using today in order to streamline and integrate operation processes. And now with the growth of the pharma SME segment, a lot of ERP implementations are also happening27. Though ERP II systems are supposed to facilitate transactions between external entities, organizations should implement it with caution. One should not migrate to ERP II systems without first addressing current systems issues that may run the risk of adding to existing problems. ERP II developers incorporate a single package of condensed granular versions to suit the SME market along with their regular ERP solution portfolio6. Industry specific solutions/vertical solutions with rapid implementation methodologies are being offered now. Most of the bigger ERP vendors have recognized the need of the pharma SME segment and are now offering condensed granular versions to suit the SME market49.  As the implementation of the software for SMEs are more complicated it raises the implementation costs.

To summarize by adopting ERP II pharma SMEs can be globally competent enough to fulfill organization needs to open and reach out to its collaborative partners enabling businesses to compete by providing information online and adding real value to businesses of all types and sizes26.

Acknowledgement

Authors are very thankful to librarian of British library and JNU library, New Delhi and KIET School of Management for their kind support during literature survey.

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About Authors:

 Binkey Srivastava

KIET School of Management, Meerut Road, Ghaziabad UP (India)

Ruchi Srivastava

KIET School of Management, Meerut Road, Ghaziabad UP (India)

Ajaypal Singh

Ajaypal Singh

*Corresponding Author

Lecturer, KIET School of Pharmacy,www.ajaypalsingh.faithweb.com