Geneva Pharmaceuticals and ERP Implementation

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Case 1: Geneva Pharmaceuticals ERP Implementation

This case discusses Geneva Pharmaceuticals and the much needed ERP implementation within the organization. Geneva is one of the world’s largest generic drug manufacturers. Geneva needed new organization within the company to help better manage the over 200 SKUs in different size packages. Their old way of doing business caused confusion and errors resulting in setbacks and overall negatively affecting the company. Realizing this, management at Geneva searched for a new ERP system to implement to solve these issues. After weighing the pros and cons of two different ERP systems, Geneva decided on implementing BPCS in their branded drug divisions and the generics agreed to implement R/3. That plan would be implemented in three phases which each had separate goals to fulfill to improve operations within Geneva. The case discusses some of the setbacks Geneva encounters with implementation and how an initial switch to a new ERP system can be challenging. Getting through the implementation challenges opened new doors for Geneva and allowed them to compete in the competitive industry of pharmaceutical drugs.

1.         Create a graphical representation of the Geneva Pharmaceuticals supply chain.

2. Discuss what you think is the major flaw in the business decision process for Geneva’s old way of doing business.

The major flaw in Geneva’s old way of doing business is the fact that their distribution, manufacturing, and sales departments don’t coordinate their moves. This means that the company is not efficient and doesn’t have a clear strategy. On one side, we have the manufacturing process that produces a lot of SKU’s which adds the complexity of the process and makes the forecasting for each product even higher. This wouldn’t be a bad thing if the company had highly customizable products, but taking into consideration that they don’t bother distributing to end customers, having so many variations of the product can have a negative impact. Also, the fact that they haven’t decided to go into online selling doesn’t help them. Another factor that may be their major flaw in their business process is their distribution system. They have two distributions centers in Broomfield and Knoxfield. With their current business model, having two DC’s makes their order processing structure unstable. Since the majority of their orders come through EDI, the system has to take so many variables into consideration, such as quantity ordered and delivery expiration dates. Even after that the order may not be fulfilled so a backorder will be generated. This makes the system highly inefficient and can make the customer unhappy. There is a high difficulty in forecasting the demand for each DC as well as the order processing cost being higher. Since the demand is highly speculative and the distributors usually place large orders, a more effective distribution strategy can be implemented using Broomfield as their only DC. In this case they would have a more accurate forecasting, less backorders, higher customer satisfaction, less safety stock and lower inventory holding cost.

3. Briefly describe the Geneva’s IT infrastructure before the SAP/R3 implementation and what problems were caused by it. Geneva’s information systems consisted of a wide array of software programs before the SAP/R3 implementation up until 1996. Some of these systems were IBM A/S 400 (primary hardware platform), and multiple operational databases that to connected to desktop computers via a LAN (local area network). This wide array of software programs did all the procurement, manufacturing, sales, accounting, and other processes. These systems were not interoperable and it led to problems for Geneva. Data that was shared across these systems had to be double-booked and rekeyed manually which opens the door for human error; which in turn leads to higher cost errors and inconsistency. It was obvious an...
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