Wednesday 21 November 2007

Geneva Case Study

Introduction

Geneva Pharmaceuticals are one of the world's largest generic drug manufacturers with revenues in excess of $300 million in 1998. Until 1996 Geneva's information systems were incompatible across business areas; for example, the accounts department could not be made available to manufacturing without re-keying the data manually. This was a major problem for Geneva because it meant that time was being wasted reproducing data and there was a high incidence of 'dirty data' - factors which lead to inefficiency and inevitably the loss of profits. Management at Geneva realised that such problems existed in their company which led to their belief that they needed a "common, integrated company-wide solution to improve data and reduce costs". Their solution? Deploy SAP's R/3 system.

Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organisation into a unified system (www.wikipedia.org). Due to the desire within Geneva for applications to be compatible across business units it is possible to see the attraction of SAP R/3.


Phase One

The main aim of this phase was to reduce the cost of operations. The SAP R/3 system would require data to be entered only once - thus saving time and money, with efficiency greatly increased.

However, despite such suitable objectives many key problems occurred. There was little communication or co-ordination amongst the team implementing the system which is clearly a recipe for disaster and it was actually necessary to bring in a new CIO in order to provide the project with better leadership. As witnessed in the London Stock Exchange it is very difficult to implement changes if you fail to consider organisational feasibility and fail to communicate effectively (Taurus v Crest) and it is likely that this contributed to these problems.

Another major decision and, ultimately, a problem at this stage is the fact that Accelerated SAP (ASAP) was chosen due to its promise of a short implementation cycle of only 6 months. This appears to be a valid decision because any company would want their systems to be running as quickly as possible in order to reap the maximum benefits however, 4 months down the line very little progress had been made; Geneva was therefore well behind schedule and this could have knock-on effects for future stages. The following quote appears to embody the thought process at Geneva: "some people want to do everything in one or two months and underestimate the time it takes for proper development and employee comprehension"(McCabe, R., 2007). By considering such an attitude it is easy to see why problems occurred because by trying to do things too quickly one can fail to notice areas which are actually struggling.

Finally, at this stage it emerged that the new system provided Geneva with problems that had not existed within the original system. This was a major blow because the system was designed to be better and more efficient than its predecessor, not worse and after so much time and money had been spent on the system it is reasonable to expect it to carry out its function properly.


Phase Two

A key point to note at this phase is the fact that it was far more challenging than the previous phase due to the complex nature that Geneva used in dealing with customer orders, rebates and chargebacks. Due to this, a decision was made to change those managing the project as the first phase had suffered from so many set backs. Whitman-Hart was replaced by Arthur Andersen and Oliver White, consulting firms, due to Arthur Andersen’s knowledge in the technical configuration aspects of SAP implementation and Oliver Whites’ reputation.
On top of this, Anna Bourgeois was assigned the overall responsibility for this phase due to her extensive knowledge in this field.

Another point that was raised at this stage was the conceptual design of the system in which thirteen areas for improvement were highlighted with four emerging repeatedly. This stage was carried out by the key users who were most knowledgeable with the existing processes with help from Oliver White. The use of expertise here was important to ensure that the best design possible was established. To further this point, prototypes were used to test these emerging areas of conceptual design against any emerging problems.

Also, in this phase a lot of attention was paid to the management of change in relation to the staff and training. This process was taken extremely seriously with posters, surveys and even a telephone line implemented for staff to call in relation to their worries. Further, three full weeks were devoted to training. This point of the project was undertaken meticulously possibly, with a little too much emphasis.


Phase Three

A key decision of this phase was the fact that they reinstated the project manager from phase one. This could be seen as a problem as in phase one there were problems relating to communication, co-ordination and time scale.

A key benefit of ERP systems highlighted in this phase is they can save a lot of time. It was estimated that using the R/3 model for sales and operational planning (SOP) would cut this process from 20 to 10 days - an important selling point of these systems. Further, at the time of this case SAP brought out a new module - Advanced Purchase Optimiser which combined with SOP would answer the unique business needs of the company. This will then go on to help meet Geneva's targeted business improvement of having their orders 'ready to promise' which will help improve its customer service levels.


Conclusion

In conclusion, there are a number of things we can learn from this ERP implementation. Firstly, it is necessary to have the correct people on board from the start as Geneva had to implement personnel changes during the project and ERP is as much about people as it is about systems. It is also necessary to have a realistic view of the time frame required as phase 1 ran over schedule which had knock-on effects for the other stages and staff are likely to be demotivated if they are continually told different finishing dates. However, we can also learn from Geneva's successes such as spending a large amount of time and effort making staff receptive to change and training staff to ensure that they are confident in using the system, as one of the main reasons for failure is that staff often feel scared of the technology and fail to make the best use of it in their day-to-day work.


REFERENCES


McCabe, R., How to recover from a failed ERP implementation, http://www.microsoft.com/canada/midsizebusiness/businessvalue/local/failederp.mspx, accessed 14 November 2007

SAP R/3 implementation at Geneva Pharmaceuticals, Case Study

Taurus v Crest, Case Study

This post was created in collaberation with Lynsey Smith

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