Case Study 1 - SAP R/3 Implementation at Sandoz (formerly Geneva Pharmaceuticals)

Geneva Pharmaceuticals (now rebranded as Sandoz), a subsidiary of Novartis, is one of the world’s foremost manufacturers of generic drugs and operates within the North American market. The company has a large portfolio of generic drugs and outputs in excess of seven billion units annually (as of 2007). However, prior to 1996 the company’s computer systems were outdated, unreliable and no longer met the future ambitions of the company.

The company relied on various computer systems for different functions and due to this there was a lack of integration. This resulted in data having to be entered manually more than once and often led to the risk of dirty data. As a result the company decided to invest in a new system that would be better integrated, more efficient, reduce error rates, reduce maintenance costs and generally be flexible enough to meet any future requirements. Eventually the company decided to adopt the SAP R/3 system.

2 – Phase I

Sandoz looked to implement the chosen ERP system R/3 in three phases. Phase I concentrated on the supply side processes which included purchase management, supply capacity etc. Before R/3 these processes were handled manually which was labour intensive, this resulted in the risk of input error and large costs. The implementation of R/3 looked to automate the supply side process and integrate all supply-side data into a single real time database.

To implement R/3 Geneva set up a team of 20 full and part time employees from within Sandoz (all of whom had no R/3 experience) and a team of 5 consultants from Whitman-Hart who had previous R/3 experience. Verne Evans, Director of Supply Chain Management, was assigned project leader. The team decided to use SAP’s implementation methodology Accelerated SAP (ASAP) for its promised quick results.

The consultants Whitman-Hart were technology specialists and had an understanding of R/3 but they had little business experience. They therefore did not know how to customise the system properly in order to meet the required needs of Sandoz. There was a lack of communication between the different groups that lead to problems defining the system as the requirements were not clear or shared between parties. The ASAP methodology was also a mistake, as it did not allow time for the system to be modified which was essential due to Geneva’s extremely complex manufacturing process.


To resolve the situation Geneva appointed a new project leader Randy Weldon, Weldon had implemented an R/3 system in his previous job. Weldon knew that successful implementation relied on the different groups collaborating together. His new team consisted of one IS manager, one functional manager and a senior R/3 consultant. The smaller team allowed for better communication, which resulted in faster progress. He also recruited a team of employees that all had R/3 experience. This team of R/3 professionals were able to customise the system to get it ready for implementation. The new team did not agree with the ASAP methodology but were brought in too late to enforce a change.

Within a year Weldon’s new look team had the MM (Materials Management) module of R/3 up and running. The successful implementation resulted in an improved performance in Sandoz's manufacturing sector. In addition, as data did not need to be retyped or checked the inventory control unit was shut down and the unit’s employees were taught new skills to help in other areas.

3 – Phase II

The purpose of the second phase was to implement new demand-side processes like accounts receivable and order fulfilment. This phase had to take into account the many variables (such as customer production combinations and customer rebates) that would have to be included in the system.

If this phase was to be successful it was clear project management would have to face a fundamental shake up from phase I. As such Anna Bourgeois was assigned overall responsibility for this stage of the project. Whitman-Hart were replaced by Arthur Andersen Business Consulting to assist. Given the complexities involved with designing the system to meet Sandoz’s manufacturing needs Oliver White (another consulting firm) were brought in due to their experience in the field.

A team of twenty full-time IS employees were initially committed to this phase along with thirty users on a part time basis. The full-time team were split into groups of five to look at the various functions. This process identified thirteen areas (with four in particular) as needing improvement. A conference room was used to display the system plan on a wall (using “post-it” notes). This allowed others to view it and make comments.

This phase also involved the training of staff. Advertisements were posted around the company to make employees aware of the new system. Each employee received between three and five days of training although the process itself revealed that a large majority of users were not fully aware of what their actual job description was and as such the process had to take account of this. The company also sought to educate its customers upon its new system.

4 – Phase III

The final phase of the project involved integrating supply and demand side processes. In 1999 SAP released a new Advanced Purchase Optimiser module that met the company’s requirement for a SOP (sales and operations planning process) module that would integrate with the company’s R/3 implementation. Successful implementation of this module finally allowed the company to provide accurate real-time information to its customers on stock levels and better predict when backorders should be filled. The company saw improving the reliability of stock and backorder information as ones of the key ways of improving customer satisfaction levels.

5 – Conclusion


The implementation of the R/3 system has been a huge success for Sandoz. The company has become far more efficient enabling it to reduce costs and improve customer service. However, the implementation process could have been better thought out. A more suitable methodology and original IS team structure are areas that could have been improved. These changes would have allowed the system to be implemented quicker and perhaps with even more success.

References

This is the company's (which has changed its name to Sandoz) "about us" page on their website:
http://www.us.sandoz.com/site/en/company/profile/about_us/content.shtml

This is a brief history of the company:
http://www.us.sandoz.com/site/en/company/profile/history/content.shtml

SAP R/3 Implementation at Geneva Pharmaceuticals (2005) Alan Wilson

This project was a collaboration between Rory Linwood and Stuart Nibloe