ERP Consolidation Assessment in Pharma Companies:Cross-Divisional or Divisional
Pharma and Healthcare companies may have multiple ERP system lines in their Organization. This could be because of multiple reasons, for example how organization was structured in the past e.g. separate business divisions exist for patent drug production, Generics, Consumer Health or it would have acquired or got merged with other Pharma companies for better strategic fitment. Reasons apart, there is sufficient scope to optimize the total cost of ownership of ERP Systems by consolidation into a Global ERP System. Apart from the benefits arising from IT Infrastructure consolidation, the business case for consolidation of ERP systems will originate from the top management need of having a global view of business, to foster the standardization of the business processes across divisions, to improve visibility across supply chain, to bring efficiency in handling inter-divisional transactions and most importantly to emerge as a customer and market responsive organization.
The ERP system consolidation is a highly visible project not only as top management is involved but the fact that project budget may be so high that it may require sanction from Chairman`s or CEO Office. It translates into a highly critical project and therefore project roadmap and planning have to be very detailed for successful consolidation. It is important to decide the approach whether to go for cross-divisional consolidation in one go or first perform divisional consolidation and than go for cross divisional consolidation. The answer lies in performing assessment across divisions based on combination of factors e.g. Current standardization and complexity of various business processes, number of ERP system lines in each division, Tools and Processes used across divisions, extent of harmonization within each divisions.
In case of ERP systems consolidation across business divisions, if the underlying ERP Systems are same for example it is SAP ERP in all the divisions than the consolidation will be easier as technical infrastructure and resource skill sets required will be same. However if some divisions are on SAP ERP and some are on Oracle ERP the task is compounded and Organization have to decide on the consolidated ERP System whether it will be SAP ERP or Oracle ERP in such a scenario.
Another complexity which can arise is that some of the business divisions may have multiple landscapes of ERP Systems. For example, the different geographies have their own ERP system landscape e.g. North America, Europe, APAC operations of the divisions have their own ERP system landscape. The ERP system may be same e.g. SAP ERP system but operations are supported by individual regional ERP system landscape for each geography. The business processes may not be harmonized across region within a business division. This will mean more time will be required to standardize the processes. In such a scenario, Organization should aim to harmonize the business processes and integrate the reporting within different regions in a given division. Since the nature of business operations are likely to be same (except localizations) across regions for a given division for example say Generics Division or Consumer Health Division, it is less complex to consolidate all regions at divisional level. Business Process harmonization can be achieved to a high degree. The Project budget and timeline will be more predictable and easier to control. Also, since within division, the chance that top management is likely to be same will help in bring better alignment across regions and will result in less political hurdles. This will mean faster business decisions for the divisional consolidation project.
For Global ERP Consolidation across various divisions, to prevent the project failure and to minimize the risks it may be prudent to perform and compare assessment for each business divisions. If the divisional complexity is high then consolidate first at individual divisional level and than perform the further consolidation at global level in the Organization.