Yield Loss in Subcontracting
Dear Gurus...
We make the subcontracting PO as follows..
Requesting Mat-1 45 KG
I issue 50 KG of Mat-2
Fact is that, we have to issue 50 KG of Mat-2 and the output material (Mat-1) is only 45 KG
There is a process yied loss of 5 KG in the process.
Problem is, while we make the PO, we have to specify 45 KG for Mat-1 and Process Charge as Rs. 12...but the Vendor charges on 50 KG Qty Issued Material means payable is Rs 50x12 = 600 But system calculates Rs. 45x12 = 540 and only 540 is debitted to the Receiving material price/unit...where as we want 600 to be debitted to the receiving material price/unit...
Can anyone help solve this??
Thanks in advance
Suraj
Dear Eduardo...
Thanks for the reply...in MB04 I think its adjustment of components. But in my case we have already supplied 50 KG and we are actually receiving 45 KG of finished product....in MB04 its only for the components...my query is where do we manage the loss of 5 KG ....
Vendor charges us on SUPPLIED QUANTITY of 50 KG and we should distribute this cost on Actually Received Qty 45 KG as I explained in the beginning...where as system is calculating on 45 KG only...
Pls let me know how to manage this...
Thanks in Advance
Suraj
Similar Messages
-
Production Order Yield loss control
Dear All,
Suppose i made one production order of say "A product" of 100 units. And to produce this 100 units of "A Product" i required 100 units of "B material" as a raw material.
So while issuing the raw material system should not allow to issue raw material more than 2% loss.
Kindly confirm how can i control this yield losses through system ?
Kindly confirm how can i define yield losses in BOM.
Regards,
Phalgun patelHi Phalgun,
U can achieve the above requirement by using the functionality of "Component Scrap".
In your example, you define the "Component Scrap" (expressed in terms of %). It takes into account all faults that occur before the component is put into assembly.
In your case, the component scrap has to be defiend for material "B" in the BOM of material "A"- item detail screen. If material B is used in other BOMs as well and same amount of scrap occurs, then the component scrap can be defined in material master of B directly in the MRP-4 tab. Keep the value as 2 %
u can refer the following link.
_http://wiki.sdn.sap.com/wiki/display/ERPLO/Scrap+Calculation
Hope this gives u a satisfactory solution to your querry.
Regards,
Chetan.. -
Process Loss in Subcontracting Scenario
Dear all,
In this scenario I am sending 10 kg of mat A 10 kg of Material B to Subcontracting vendor to get a final product of C but in actual process the vendor loss 1 kg of Mat A and 2 kg of material B and final product is of 17 kg .My question is how we can map in SAP ?
Thanking you;
Regards;
Joydeep MukherjeeHi
If this is your standard business process for subcontracting means
create a BOM for the material C -17kg
The components are materail A -10 kg,
material B- 10 kg
This means that for making the material C ,the subcontractor needs MterialA -10KG and MterialB-10kg.
Do your subcontracting process normally.
If this is not your standard business process for subcontracting means (rarely or some times)
Then after completing your goods receipt, go for subsequnt adjustment in the MIGO screen. then enter your wastage and post the document.
Thanks -
dear sap experts,
I am working on jewellry manufacturing sap implementation project..we have subcontracting scenarios here.
in this scenario, client issue gold and diamonds for job work to the subcontractor and receives the material back from the subcontractor.
The problem i am facing is that for example suppose if i give 1 kg gold to subcontractor and in return i get 9.8 kg gold from him. now i have to capture the loss of 200 gms. as client need to keep the track of this loss.How to map this proces in subcontracting SAP?
THANX IN ADVANCE..Dear Ravi,
What you have to do is,
There are 2 ways to handle this:
1)
Transfer the gold 1 KG to your subcontractor in MB01 through MVT 541.....
At the time of receive , return the complete 1 KG stock with MVT 542...Then later on issue 200 GM to SCRAP.
2)
Create 2 materials M1 is GOLD which you are sending and another material M2 which comes from subcontractor after job work..
Craete Subcontracting PO with M2 and enter M1 as a BOM...
Transfer M1 stock to subcontractor with 541 with Qty 1KG.
Now at the time of Goods receive , receive the entire qty as 1KG.
Now do the issue for M1 qty 200 GM to SCRAP with MVT 201.
Regards
Utsav -
Dear Experts,
In my Scenario Sales Deptt. Update sales Scheduling Agreement in SAP By VA31 and then MRP is running & creating Planned orders .
Now We wants to change our Process ,
NOW Before MRP Run we wants to transfer Sales schedule to Demand management MD61 , Where we can manually change Production plan which is not equal to Sales delivery schedule .
To copy sales schedule , I am doing Edit > Copy Requirement > Sales Plan > Total sales
Here system do not copy plan and shows below given error
u201C No production plan exists for product group XYZ u201C
Please let me know that how to copy sales schedules in Demand management (MD61) .
Regards,
ashutoshAshutosh,
???? VA01 and VA31 are not plans, they are sales documents (execution). If your question is 'does SAP support a direct copy from sales documents (such as sales scheduling agreements) to planned independent requirements, the answer is no. It would make no sense. Sales documents usually consume planned independent requirements, depending upon your planning strategy.
If you want your production plan to be increased, for the reason of planned scrap/yield loss, you normally enter that yield loss quantity in one of the scrap or yield fields in either the Material Master, or in the Bill of Materials (depending upon your planning methods). In this way, every time MRP suggests a supply order (planned order), it will suggest quantities large enough to cover planned yield loss. It is normally considered a waste of time to have a planner manipulate these types of numbers manually for each iteration of the production plan.
http://help.sap.com/erp2005_ehp_06/helpdata/EN/f4/7d28d544af11d182b40000e829fbfe/frameset.htm
http://help.sap.com/erp2005_ehp_06/helpdata/EN/be/43bdd865f411d3b4e60004ac160649/frameset.htm
If your yield is totally unpredictable (according to your statements, this is not the case), then you would also consider using one of the standard planning tools (like Safety stock) to create some buffer stock.
Demand plans are usually not created for the sole purpose of accommodating yield issues. The most common reason to create a demand plan is to provide an orderly way to plan the entire supply chain in the most efficient manner. This is especially important when your customers demand a lead time that is longer than the total time to procure all raw materials and build all subassemblies for your finished goods.
Best regards,
DB49 -
Extension of the tryout version indesign DC
good day
My name ispaulo caldeira'm graphic designer in the city hall of the amateur. At this time working with adobe creative CS3 with licenses purchased by my company. I started a few days the process of upgrading all software. I'm also in a transition from quarkxpress to indesign process and it installed the tryout version of indesign CC. The idea is that there is no yield loss in this transition. As you know the process of buying the upgrade is a bit long. For these reasons I come to ask whether it is possible to prolong the tryout which is currently installed on my computerHi, Cliff -
Have you tried Googling those products? I did that just no and got many hits, including downloads for trial versions as well as updates. -
SAP R/3 implementation methodologies
Hi,
Can any one send me SAP R/3 implementation methodologies Documents and links.
Thanks & Regards,
Ramhi,
1
SAP R/3 Implementation
at Geneva Pharmaceuticals1
Company Background
Geneva Pharmaceuticals, Inc., one of the worlds 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 companys 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 companys 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.
Genevas 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.
Genevas 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 companys 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 1990s (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
Genevas primary business processes are manufacturing and distribution. The companys
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).
Genevas 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 Genevas 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 dont 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. Lukes), independent retail pharmacies, and governmental agencies
(e.g., U.S. Army, Veterans Administration, Federal prisons). About 70 percent of Genevas 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
Genevas 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 Genevas products are paid back a fraction of the sales proceeds as
chargebacks.
The majority of Genevas 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, Genevas 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, Genevas 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 Genevas 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. SAPs
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 Genevas 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 Genevas 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 Genevas 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/3s 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 SAPs 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 cant 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 dont 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 Genevas 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 dont know what to do if the screen freezes, I dont know how to
handle exceptions, Im 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, Genevas 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 systems 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 Genevas 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 80s,
Geneva has lagged its industry competitors (mostly in the mid 90s), 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
Genevas 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 companys 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 Genevas 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). Genevas MRP-II and
SOP processes are illustrated in Exhibits 5 and 6 respectively.
Until the mid-1990s, 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, Genevas 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/3s 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 Genevas 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/3s 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 Genevas 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/3s ATP module via a combination of VMI functionality and
seamless company-wide data integration. Currently, some of Genevas 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. Genevas 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. Genevas manufacturing resource planning process
Exhibit 6. Genevas 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 worlds 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.
SAPs 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 worlds 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. -
Scrapping material in WIP and impact on MRP / Demand Messages
Hi Everyone,
We have a situation where we have a high yeild loss (planned scrap) on a typical discrete job. When material is scrapped, MRP creates demand and notifies the planner that additional material is needed for the job. We also discovered that on jobs with 100% yield loss, Oracle will automatically complete the job.
My question is is there a way to stop MRP from creating demand messages? I'm told there might be a way to change scrap to non-netable.
Thank you
JAditya,
You can see any changes made manually in the PIRs themselves in MD61 Open your PIR, select the item, then Goto > Item History.
SAP will automatically reduce PIRs under certain circumstances, such as a Delivery Post goods issue in strategy 40.
The value displayed in MD04 is the requirement generated by the PIR. This can be automatically changed by the system during the process of consumption. This function is also controlled by the planning strategy and requirements type.
Read about Consumption in the Glossary
http://help.sap.com/saphelp_erp60_sp/helpdata/en/35/26c4d7afab52b9e10000009b38f974/content.htm
Planning strategies in general, as well as the concepts of Consumption and Reduction, are discussed in detail in Std Online help here
http://help.sap.com/erp2005_ehp_04/helpdata/EN/cb/7f947543b711d189410000e829fbbd/frameset.htm
Best Regards,
DB49 -
Record Loss While posting GRN for subcontracting
Hello folks!
I am implementing subcontracting procedure for business. The issue arises at the time of GRN. If the quantity of received material is less than that in SC Purchase order, how to do its GRN and how is this loss will be recorded in SAP.
For example i have made SC purchase order of a material A with quantity "5 pcs" , the quantity received is "2pcs". At the time GRN how is this scenario handled and how to view this loss in reporting.
- Regards
Sahar Khalid>
Sahar Khalid wrote:
> What if the GI is done before GRN and we transer 5 components to produce 5finished goods. But at the time GRN we receive lesser quantity lets say "2" but the components have already been issued as "5". System allows you to GRN receive stock as 2 and consume component as 5.
what you call here a goods issue is not an goods isssue.
getting the components to the subcontractor is just a transfer posting from your storage location into subcontractor stock. Goods issue is done then from subcontractor stock when you post the goods receipt.
it is still not clear to me whether the subcontractor can usually produce 5 finished out of 5 components and just had a quality issue with 3 out of 5, hence you get only 2.
Or if you always get only 2 finished out of 5 components, which you can easily setup with the right definition of the Bom -
Have an iMac. Problem is I hear the fan noise, yet no power on the screen yielding no power. I have checked the power cord and it seems to be fine. Not sure if computer is a total loss. What would be the next step?
<Email Edited by Host>What does the EMC# say on the base?
-
Loss of quality of exported DVD movie on TV when compared to Digital original
Hi
Can anyone please suggest a way to limit the loss in quality when burning a completed movie to a DVD for TV playback?
When I playback on my Mac monitor (in either MPEG or H.264 saved versions) the image quality is 'mint' and seems as clear/rich as it was filmed.
However, once I have exported (using various 'best options' availible to me in via Prem Pro export menus) the SD (and Blu-ray) DVD playback on a TV seems a long way away from the quality level of the digital original still playing on my Mac.
I am prepared for a drop in quality in both SD and even HD formats due to the compression processes, but I'm still disapointed with how amazing my digital copy looks compared to my best DVD efforts.
Why is it that commercial 'hollywood' SD are still miles apart from my 'home made' version?
Can anyone please suggest their tried/test 'digital alchemy' formular for getting fantastic results onto a DVD/TV playback, please?
Here are my current details/settings:
Canon 5d and XF300 to capture 1080p 25 fps footage (timeline created to match footage)
CS5.5 platform = Premiere Pro/After Effects/Media Encoder/Encore (and burn saved ISO image using Roxio Toast version 10)
Length of edits = 40 to 50 minutes (approximately) creating HD but mainly SD event movies.
Create HD but mainly SD versions
Export out of Prem Pro = MPEG or MPED-DVD/Blu-ray H.264
Video Quality = 5
Field order = None/Progressive (matching my original source footage)
VBR 2 = Min 7/Target 8/Max 8.5 or CBR 8
Use Maximum Render Quality
Could the issue be with what happens after the export from PremPro into Encore?
What else could/should I be doing?
All constructive comments are very weclome and appreciated ...
Thanks,
BWhy is it that commercial 'hollywood' SD are still miles apart from my 'home made' version?
Because they use super-expensive hardware compression.
Still, I make DVDs that look almost exactly like the output from Pr using my Kona card.
I wonder if you're ending up with double-compression on your DVD. And maybe I'm confused here, but it sounds like you're using Toast and Encore, and I see no reason for that, if so.
There are a few ways to get to DVD from Pr. The simplest may be just to send your Pr project to Encore, using Dynamic Link. That will ensure you're only compressing once.
Another is to export from Pr or AME using a DVD preset, and when you take the resulting MPEG2 to Encore, be sure your clips are set to "Don't transcode." And use the comparable strategy for BR.
CBR at 8 should yield you stunning looking DVDs. -
Help- WDS with Extreme-N & 2x Airport Express with ~ 40% packet loss
So this problem is driving me crazy. I recently moved into a house that has enough metal in the walls (don't ask) to prevent me from using a single base station so I expanded my network as a WDS utilizing an Airport Extreme (mixed NGB mode) and two Airport Express (one as a relay and one as remote). The configuration appears to work normally some times but other times (especially evenings) I get a very high rate of dropped packets between the client notes (which are connected through the WDS-enabled Expresses) and the base station (using a simple ping 10.0.1.1 to check connectivity to the APBS-N). The problem manifests itself from a users' perspective as very long DNS lookups which causes slow page loads in a browser but it's very reproducible via ping.
So far I've tried changing the channels on the network but I haven't seen a huge payoff there. iStumbler reports no additional networks on channel 2 which I'm using, there are some on channel 1, 5, and 13. I've also tried channels 7 and 11. We have no microwave in the house and our cordless phone (5.8ghz) never interrupted with our simpler Express-based network at our old house, n/m the fact that the phone is never in use when we have this problem.
I don't seem to see the problem when I'm local to (in the same room as) the AEBS; it really seems to happen only when I'm on the WDS-enabled remote and/or relay.
Other data points that may help are that the AEBS-N drops out of the Airport utility at the same time. Sometimes isn't gone for 30 seconds, other times for > 30 minutes. The other base stations continue to report "Green" in that they are not having any WDS problems. If I disconnect the remote node the relay will correctly reflect a status of yellow, so I know it somewhat works.
It's an open network (no encryption, open SSID) so it's unlikely that there's an issue there.
Clients include an Apple TV, iBook G4, MacBook, Tivo Series 3, Intel Mini and Dell Latitude D810. Because of the diversity of clients I don't think it's a driver or NIC adapter issue on any of the clients.
Does anyone have any experience working in a similar environment? Suggestions on troubleshooting packet loss (or other performance issues) in a WDS network?
Thanks,
MikeHello errorsupply. Welcome to the Apple Discussions!
I suggest downloading a copy of iStumbler. Use iStumbler's Inspector feature (select Edit > Inspector from iStumbler's menu) to determine the Signal-to-Noise Ratio (SNR) at different points around your house, by performing a simple RF site survey. Within the Inspector, note the values for "signal" & "noise" at these locations. Start with your MacBook near the main base station, note the readings, and then, choose the locations where you have the relay and remote base stations.
SNR is the signal level (in dBm) minus the noise level (in dBm). For example, a signal level of -53dBm measured near an access point and typical noise level of -90dBm yields a SNR of 37dB, a healthy value for wireless LANs.
The SNR, as measured from the MacBook, decreases as the range to the base station increases because of applicable free space loss. Also an increase in RF interference from microwave ovens and cordless phones, which increases the noise level, also decreases SNR.
SNR Guideline
o 40dB+ SNR = Excellent signal
o 25dB to 40dB SNR = Very good signal
o 15dB to 25dB SNR = Low signal
o 10dB to 15dB SNR = Very low signal
o 5dB to 10dB SNR = No signal
If the SNR is 20dB+ at each of these locations, then you should be getting reasonable performance from your AirPorts. If less, either try to locate/eliminate the source of the Wi-Fi interference or try relocating the relay and/or remote base station until they are within a 20dB SNR range of the main (and for the remote, of the relay). -
Hi experts,
My Input material (raw material) for a product is 40g and the out put (Finished product) weight is 20g. where we will show the material loss in discrete mfg. MTO Or MTS manufacturing scenario.Hi,
There are two parts in scrap posting:
1) Inventory
2) Costing
If there is no physical scrap generation or no inventory recording of scrap is required as well as there is no cost credit of scrap material is involved then you can simply maintain BOM data as 4 kg of SFG for 2 kg of FG. So, if backflush is activated then during confirmation of 2 kg FG as yield system will issue 4 kg of SFG.
If inventory of scrap material needs to be recorded or cost credit of scrap material to FG production is required then you need to:
Step 1) Apart from SFG maintain material master data for scrap material (not sure backflush require or not)
Step 2) Along with SFG component maintain scrap material as component for FG BOM but with -ve quantity (i.e. - 2 kg of scrap material for 2 kg of FG)
As scrap material is maintained as component in FG BOM, system will add one row for scrap material receipt in Goods Movement list during confirmation. And system will also credit cost of scrap material to production/process order (debit SFG component cost).
Try this and if require get back with your query.
Bye for now,
Devang -
Subcontracting cross company code
Hello,
I didn´t find a standard way to handle the following scenario:
Plant A creates an intercompany purchasing document item category L for subcontracting with header material S and supplier 1 which is intercompany for Plant B (another company code).
Plant A provides material P to Plant B with transaction ME2O and delivery.
The goods issue with reference to delivery creates special stock material provided to supplier on plant level for plant level (quantity and value).
Works all fine so far -->standard subcontracting procedure
My Question:
How should Plant B post goods receipt:
Background:
The goods receipt would lead to doubling material quantity (stock available in Plant A and in Plant B) and double valuation.
Plant B needs to create production order to produce S and P as component.
Any Ideas ?
Your help is very apreciated
Cheers
ThomasHi,
But if the two plants are in different company codes then the STO can use Billing and profits etc. so that the revenue can be managed as you need it.
By using STOs with billing, the system treats the supplying plant as a vendor and the reciving plant as a customer anyway. But the whole process is much easier because you treat them as stock transafers and yet get the benefit of the profit / loss and billing functions.
You rellay do need to read up on the use of STOs cross-company (too much detail for this thread). There may even be some help on the first thread on this forum.
I think that you will be pleasantly surprised at the benefits to the whole process if you explore this option fully. The STOs are "easy" to maintain, the movements and consumptions etc. also follow basic real-world logic and the accounting is DEFINITELY as the auditors would want to see it.
If your plants were set up incorrectly and were within the same company code, then these options would not be available to you (because the SAP system does not allow you to break financial rules and cause audit problems, you cannot have a profit from a transfer within the same legal entity). But is your case you have got the structure correct (many people don't) and so I would recommend that you exploit this standard SAP functionality to your benefit.
Short or long-term, you will realise the benefits, go down the suncontracting route for this solution and your users will have messy functions and will not have the kind of reporting and exnquiries that they will definitely need.
It is up to you, subcontracting is not "wrong" as such and you could get it to work, but it will certainly not be the best solution (by far)
Steve B -
Set loss quantity to a fixed percentage in Process Order Confirmation - C0R6N
Hi Experts,
How it is fixed the loss qty percentage at the time of process order confirmation.
I want to set the loss quantity to a certain percentage when compared to the Total Process order quantity.
For Example:
If the Total processed quantity = 100
Yield Quantity = 20.
Loss = 80.
This kind of scenario should not happen, since Loss quantity is very much higher that the yield quantity. I want to set the loss quantity to a particular percentage ( say 20-30 %) of the total processed quantity so that the yield quantity will be higher than the loss quantity by a substantial amount. Are there any possibilities of doing this through configuration. If not what are the other options?
NB: Scrap quantity is not maintained at the time of process order confirmation.
Regards,
Umapathy.Hi Umapathy,
Yield and Scrap are user entry fields where you can have restriction on entered qty by changing under delivery and over delivery to error through OPK4 config as shown below. Agree that any qty can be entered in any field (Yield or Scrap)
OR
You can define the operation scrap. Read the below doc for more details.
http://scn.sap.com/docs/DOC-52834
OR
Another option is to use exit and write your logic based on input yield and loss.
Thanks & Regards,
Ramagiri
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