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Solutions for all round growth
IT-enabled solutions have paid huge dividends for pharmaceutical
companies, says Raghu Ram N C
Shaolin Chemicals and Pharmaceuticals is a Rs 45-crore company
that manufactures penicillin and fluoroquinlone and active pharmaceutical ingredients.
Yadunandan Shah inherited the company from his father Krishnandan Shah. Even
though Shaolin faces stiff competition, its business has been doing well and
the company has been growing at a steady rate. Yadunandan is a proud man, but,
now, he is worried.
Nittoor Pharmaceuticals was founded by Abhijith Nittoor, an alumnus of a top
management institute. He had worked for more than two decades in leading multinational
pharmaceutical companies before setting up this company. Nittoor Pharma manufactures
and markets a wide range of formulation products.
The company has seen phenomenal growth during the last eight years to reach
a turnover of Rs 200 crore in 2004. But, Abhijith is worried too.
Meenakshi Pharmaceuticals is a reputed loan licensee manufacturer
of pharmaceutical formulations.
Over the years, Meenakshi has built a reputation for on-time delivery and reliable
quality. Its customers have permitted Meenakshi Pharma to certify the quality
of their products before shipping them to their warehouses. Despite business
being good, Arjun Dharapur, Meenakshi’s founder is alsoworried.
Even though Shaolin, Nittoor and Meenakshi are all in the pharmaceuticals business,
a sector that is booming and like information technology, will be the next big
opportunity for Indian companies, the reasons for the worries of their chief
executives are different.
The business challenges
Yadunandan is worried because many of the countries he sells his products have
now introduced product patent laws. His company can now sell its products only
in the less regulated market and that too in countries where these products
are not manufactured. While he is gearing up to take advantage of the generic
opportunities in advanced markets, he has to install systems and processes that
win the confidence of regulatory authorities — systems that are tamperproof
and facilitate storage of data in real time.
The challenges for Abhijith are different. Come June 2005, the patent statutes
are likely to change again. Under the new patent laws, his company has to source
actives only from manufacturers with patented products. Nittoor Pharma has to
undertake fresh bio-availability and bio-equivalence studies for raw materials
from new suppliers. This will put pressure on his margins. But Nittoor cannot
increase its product prices because of stiff competition in the domestic market.
Abhijith realises that to stay ahead of competition, he has to closely monitor
all his activities. He has to keep a close watch on costs and be able to monitor
operations. He has to quickly identify solutions that can improve efficiency
and provide him accurate information, so that he can take quick decisions and
communicate it to his people.
In the case of Meenakshi Pharma, the reputation it has built over the last decade
as a reliable manufacturer has resulted in enquiries from global pharmaceutical
companies. Auditors from the global companies, while acknowledging the quality
of the processes, have reported that since all of Meenakshi’s processes
are manual, tracking production orders and monitoring processes would be difficult.
Arjun realises that if he does not quickly identify appropriate solutions, his
company will lose this opportunity for sustained business and growth.
The solution
The consultants, hired by the companies, have advised that
the solution to their problems lies in changing over from manual based business
processes to information technology (IT) based solutions that help in improving
efficiency, enable to capture business data on-line and facilitate compliance
with GMP.
The IT-enabled solutions that Shaolin, Nittoor and Meenakshi have to implement
are pharmaceutical industry-specific applications like Enterprise Resource Planning
(ERP). Let us first understand what is an ERP.
An ERP helps integrate all functions of an enterprise like production, quality,
maintenance, cost accounting, financial accounting, human resource management
and sales. In simple terms, this means that data entered once by the relevant
function is used by other functions. ERP solutions, in addition to facilitating
overall improvement efficiency, also provide significant benefits in all operational
areas.
An ERP developed for the pharmaceutical business also enables companies to comply
with GMP and regulatory requirements like 21 CFR part 11 of US FDA.
The benefits:
We shall take two examples and a case study to understand how an ERP benefits
a pharmaceutical company:
Example-1: Faster inventory turnover
Gencord Pharmaceuticals has implemented an industry-specific ERP. Rajesh Mehta,
working in the production department of the tablets plant, has raised an indent
for 100 kgs of cephalexin in the ERP. The indent has reached Ramesh Bapat in
the purchase department. Ramesh checks in the ERP and finds that 50 kgs of free
stock of cephalexin as per specification required by Rajesh is available in
the liquids plant of Gencord. He calls up Rajesh’s counterpart Mahesh and
arranges for transferring the cephalexin stock to Rajesh’s plant.
The ERP has helped Gencord in several areas: The alert regarding
availability of cephalexin, has resulted in reducing the quantity to be procured
by half — hence, reducing working capital requirement.
By providing appropriate information on time, it has facilitated faster conversion
of raw material to finished goods, resulting in faster inventory turnover, thereby
further reducing working capital requirements.
The ERP has also contributed to efficiency improvement, as all the activities
have been completed faster than what it would have taken if the systems were
to be manual.
Example-2: Compliance to GMP
Harmony Pharmaceutical’s sterile manufacturing facility in Baddi is approved
by US FDA for ceftriaxone sodium. When an FDA inspector Thomas Knoll, was provided
with the documents pertaining to qualification and validation of the ERP, he
was impressed and decided to audit the system. Thomas took the Bill of Materials
(BOM) of ceftriaxone sodium and checked its audit trail to determine whether
the GMP regulations on control of BOM were followed properly. He asked for the
protocol defining BOM creation and modification.
The protocol document explained the methodology of preparing a new BOM and prescribed
conditions under which the BOM can be modified. Thomas asked for the audit trail
records of the BOM transactions of ceftrixone from Harmony’s IT department
and checked with the validation documents. In less than an hour, he was able
to determine that Harmony had meticulously followed GMP. There was only one
instance in the last twelve months, where there was a deviation from GMP, for
which the system had raised an alert. The detail of the alert and the Corrective
Action Preventive Action (CAPA) report were also available in the ERP system.
The FDA inspection was one of the fastest. Harmony’s management was happy
it had invested in a pharmaceutical industry-specific ERP solution. Their investment
had paid rich dividends because of faster FDA inspection and reposed confidence
with the inspectors about adherence to regulations.
If a solution like ERP facilitates efficiency improvement and enables compliance
with regulatory requirements, how does it help company directors and managers,
like Abhijith Nittoor? Functional and Management Information (MIS) reports generated
from data captured in solutions like ERP can be accessed and reviewed by decision-makers
like Abhijith from wherever they are — in any location of their company
or from locations outside the company or from any country in the world. By providing
information anywhere, anytime,
IT-enabled solutions help companies take quick and informed decisions.
Solutions like ERP, sales force automation and others have been around for more
than one and a half decade. Almost all the leading global enterprises have invested
in these solutions. Many of them have derived considerable benefits from these
investments. Case studies of many of these implementations have been documented.
A case study from a pharmaceutical company where ERP was implemented is illustrated
for understanding the benefits that this company achieved by investing in ERP.
Case study of a real life ERP implementation
The company is one of the largest in India in the pharmaceutical sector. It
had consistently achieved impressive growth and has been recognised as one of
the fastest growing enterprises in India. During the late nineties and early
2000s, it had hit a flat rate of growth. In the process of achieving rapid growth,
the company had also increased its manufacturing plants from one to four. The
company was finding it difficult to obtain data, analyse it and take timely
decisions. Hence, most of the decisions were taken based on the experience of
the decision makers and their intuition.
The company had charted out aggressive plans to come out of the flat growth
rate. It had identified opportunities in the advanced markets. The company recognised
that it had to invest in IT-enabled solutions like ERP to ensure that the business
transactions of the company would be centralised and hence enable their managers
to access information for taking quick decisions. It invested in an ERP solution
developed specifically for the pharmaceutical sector.
The ERP in addition to supporting traditional functions like financial accounting,
HR, etc, also supports processes that enabled compliance to cGMP and regulatory
requirements. A full-time implementation team with representatives drawn from
all functions was formed to implement the ERP. The ERP implementation was completed
in record time and the functional users from all the locations started using
it from day one.
The company had identified benefits to be achieved after the implementation.
The measurements of the benefits were carried out periodically and the management
reviewed the activities leading to the benefits periodically. Two years after
using the ERP, some of the benefits that the company obtained are:
- Value of inventory held in stores reduced 27 per
cent
- Number of days of finished goods stock reduced by
264 per cent
- Overdue receivables reduced by 75 per cent
- Idle time from material shortages reduced by three
per cent
- Machine utilisation improved by eight per cent
The above achievements have resulted in a very healthy bottom line for the company.
The company has now tied up with global generic majors for marketing their API
and FDF oral and sterile products. These tie-ups were facilitated by the easy
audit of data from the IT solutions.
During the past two years, the company has obtained US FDA approvals for several
of their API and FDF products, making them one of the few integrated pharmaceutical
companies in India having approved DMFs and ANDAs. By deciding to invest in
IT-enabled solutions like ERP and other solutions like Sales Force Automation
and Lab Notebook, the company has not only achieved significant benefits and
savings, it has also been able to successfully face simultaneous audits from
agencies like US FDA, TGA and MHRA.
Conclusion
From the above examples and the case study, it is evident that investments in
information technology solutions will help pharmaceutical companies become more
efficient and profitable. Such solutions, which enable compliance with GMP regulations,
will also help companies instill confidence in advanced customers and regulatory
agencies, hence helping Indian pharmaceutical companies capitalise on opportunities
in advanced markets, contract research and contract manufacturing. For Indian
pharmaceutical companies, this is the right time to invest in IT solutions.
The writer is director & CEO, SpectraSoft Technologies
Limited
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