Pharmaceutical

procurement in pharmaceutical industry

Reshaping Procurement within Pharmaceutical Supply Chain

Reshaping Procurement within Pharmaceutical Supply Chain 1920 1080 Xcelpros Team

Procurement in the Pharmaceutical Industry

The procurement of raw materials in any Pharma manufacturing company is the source of inventory. An established method to improve visibility, track and trace product quality is a must, regardless of a manual, electronic, or a hybrid purchase to pay process. With the continued impact of COVID-19, approval criteria for Procurement in the pharmaceutical industry is scrutinized further. Businesses have become more cautious of raw material/services spend. Many companies are evaluating different suppliers who can fulfill their requirements at a lower cost, with attention to overall spend and quality requirements.

A robust supply chain management system is needed to

  • to manage on-hand inventory
  • build a more reliable end-to-end pharmaceutical supply chain 

What are some considerations while revisiting purchasing functions?

This question throws light on companies’ need to organize their buying process, include more visibility for senior management, and increased traceability of purchasing transactions for streamlining pharma procurement. A comprehensive supply chain management solution with low-code and customizable workflows to modernize the pharmaceutical procurement process will be a value add to improve procurement processes.

Figure 1Checklists to Turn Your Supply Chain More Efficient

Businesses can benefit through a supply chain management system with advanced procurement processes to help accomplish the below objectives:

01Ensure Compliance:

Failure in quality compliance can result in hefty penalties and jeopardize customer trust. Especially when activities such as buying from approved vendors or segregation of duties between the buyer and invoicer are compromised. Your procurement management system should provide the ability to perform required audits with controls and enable only authorized users to perform their appropriate functions. Ultimately a pharmaceutical supply chain management system needs to remain 21 CFR part 11 compliant and cutting corners can be extremely risky for a pharma company.

02Support Strategic Vision:

Successful Life-Sciences companies focus on strategic planning and development to boost their bottom line. Any modern supply chain management system should help an organization achieve its strategic goals. Functions like a well-streamlined buying process are possible with spend analytics, derived from multiple dimensions of purchase transactions. Factors such as success rate of higher quality materials from approved suppliers, competitive pricing details, and gauging on-time in-full from preferred suppliers are a few key analytics that can help improve decision-making within the purchasing department and organization to meet their goals.

03Effective Supplier Relationship Management:

Long-lasting supplier relationships are crucial to procuring higher quality products at the lowest prices. A stronger relationship with a familiar supplier is far more effective than continually switching vendors to lower costs. Changing suppliers places an additional burden on the entire ecosystem as suppliers put a lot of effort into understanding your business needs over time, including feedback on the quality of raw materials purchased and the speed of shipments delivered, allowing them to make any necessary corrections to their processes. A supply chain management system that supports collaboration, in such cases, helps integrate suppliers as partners to add value to the overall supply chain process.

Figure 2Agile ERP Solutions in Various Phases of Chemical Manufacturing

04Reduce Operational Costs:

Buyers or purchasing managers should be able to quickly analyze products offered by various suppliers spread across multiple geographical locations to secure the best pricing and reduce expenses.

The right kind of solution should eliminate wasteful spend – a critical factor in calculating the performance of any organization

A detailed view of supplier insights can help make decisions while identifying the best supplier for various materials. Identifying solutions to balance the cost and quality of purchased materials can help significantly reduce operational overhead without compromising on any KPIs of pharma procurement. Result-oriented companies in the Life sciences industry should have a well thought out method in place to manage procurement functions allowing them to maintain highly competitive prices without compromising the quality of a lot.

Figure 3Agile ERP Solutions in Various Phases of Chemical Manufacturing

Improving Organizational Efficiency is Your Key Metric:

Streamlining procurement in the supply chain, as well as identifying all possible failure points in your workflows, can significantly improve your organizational efficiency and increase the overall performance of the business. Every organization requires the ability to identify areas of their business that need improvement. Enhancing procurement in the supply chain directly affects the utilization of materials and labor appropriately, without compromising quality or cost. Optimizing resource time and inventory management together increases efficiency. A well-planned purchasing procedure will make it easy to show incremental results on crucial analytics, such as vendor performance/ spend analysis.

The Ideal System

  • Helps organizations streamline their pharma procurement process and get deep visibility into product inventory.
  • Easily and quickly Identify product/service needs and procure products, post receipts, invoices, and payments through included procurement and sourcing management modules.
  • Define purchasing policies and workflows to configure procurement processes that meet your business needs.
  • Manage product catalogs and procurement channels based on demand and vendor pricing and capabilities.
  • Define spending limits to constrain requisition spending and the purchasing workflow.
  • Protects the privacy of business and customers.

Procurement management 2.0 – Revamping technology

Any advancement in market dynamics has a direct impact on the buyer’s journey. Because of this, the need for procurement department heads to play more strategic and tech-enabled roles increases significantly. Early life-sciences procurement departments had only two primary objectives, cost reduction, and risk mitigation. Now, digital technologies have revolutionized procurement in the supply chain in companies to expand focus into different areas like efficiency, accessibility, sustainability, and metrics for generating better purchasing decisions.

In the five years immediately following the
2008 global financial crisis (GFC), total return to shareholders (TRS) for companies with top-quartile procurement capabilities was 42 percent higher than for companies whose procurement operations were in the bottom quartile.
Source: Mckinsey

To stay on top, companies must move out of the traditional buyer mindset and deliver value to businesses by keeping their procurement teams collaborative with their suppliers, both internally, driving productivity and increasing savings, and externally to maintain better supplier relationships and reduce unnecessary supply chain risks.

As technology continues to advance, the new-age applications have added strengths within the pharmaceutical supply chain that can promote business functioning.

01Cloud-Based Platforms:

Moving Procurement to the cloud enables life-science organizations to operate with more agility, with benefits including enhanced collaboration, security, and data privacy. A growing number of traditional enterprises are already embracing the cloud capabilities to accelerate their businesses. Buyers can be a lot more agile at moving materials through the supply chain if they’re managing procurement functions on the cloud. Embracing portals and well-defined workflows allows better engagement with suppliers, allowing the acceleration of tasks and to-dos like Requests for Quote (RFQs).

Gartner reports that the procurement industry has an anticipated growth of up to 3.2 billion dollars by the end of 2020, fueling the cloud-procurement sector.

02Data Analytics:

Adopting an analytically-driven approach might not be revolutionary, but it’s certainly an evolution for pharma procurement management that we know today. The significant challenges that organizations face today are majorly related to a lack of visibility.

A survey by Deloitte Global CPO showed that analytics would play a significant part in shaping the procurement in the supply chain over the next two years. As per the study, the respondents use analytics in different ways.

50%for Cost optimization

45% for Management reporting

48%for process improvement

As procurement departments’ spend-vs-quality goal is often to exceed expectations for their business, turning to integrated analytics can offer innovative solutions to enable efficient resolution of on-going buyer challenges. For best results, these teams need analytics as a core function in their decision-making process instead of treating it like a checklist submission to management. With the right reporting and analytics, Life-Sciences companies should have an easy preview of the quality of raw materials per supplier. Categorizing suppliers into the proper buckets based on supplier evaluation criteria or consuming specific lots based on customer potency/quality requirements helps make better purchasing decisions.

03Enhancing Collaboration:

The previous decade has seen a relatively large shift in procurement-based technology, with solutions moving from on-premise to completely collaborative cloud-platforms. The initial extension of legacy ERP software systems, which included purchasing modules in the 1990s, has now evolved to easily accessible systems with enhanced collaboration and procure-to-pay solutions.

As businesspeople started exploring the pharmaceutical Procurement process further, the focus is moving to niche functions like strategic sourcing, asset acquisition, and others. These standalone technological products did nothing to solve a significant challenge – collaboration. Integrated tools such as Microsoft Flow integrated with Microsoft Teams are providing seamless collaboration between buyers and suppliers.

04 Mobility

The demand for mobile devices continues a steady rise, with the increasing population of millennials entering the workforce. Deloitte predicts that nearly 42% of companies invest in mobile phone technologies to support their procurement strategies, meaning mobile devices should now be considered an integral part of every procurement strategy going forward. With the help of the cloud and mobile-enabled services, companies can better manage their operations and analyze real-time functions and processes, leading to more proactive decision making.

The Role of Microsoft Dynamics 365 Supply Chain

Microsoft Dynamics 365 Supply Chain helps organizations streamline their procurement process and get deep visibility into product inventory –

  • Easily and quickly Identify product/service needs and procure products, post receipts, invoices, and payments through included procurement and sourcing management modules.
  • Define purchasing policies and workflows to configure procurement processes that meet your business needs.
  • Manage product catalogs and procurement channels based on demand and vendor pricing and capabilities.
  • Define spending limits to constrain requisition spending and the purchasing workflow.

Figure 4Agile ERP Solutions in Various Phases of Chemical Manufacturing

Key Takeaways

  • Modern Pharma & Life sciences companies have digitized their operations, and processes within the Procurement department, to help streamline the buying process.
  • Advanced digital approaches such as using Microsoft Dynamics 365 Supply Chain or Automating the pharmaceutical Procurement process can help accomplish the goal of well-stabilized procure-to-pay cycles.
  • A revamp in the Microsoft ecosystem’s overall procurement process enables life-sciences companies to identify and eliminate inefficient, time-intensive aspects.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

Current biotechnology issues

Top Concerns of Biotechnology Industry Current Issues

Top Concerns of Biotechnology Industry Current Issues 1920 1080 shahid.anis

At a Glance

  • The world has turned its hopes towards biotech companies to reduce the spread and impact of the Covid-19 pandemic.
  • The biotech industry is working continuously towards fortifying healthcare systems, enabling serosurveillance to gauge the spread of disease in a community and to aid in the development of a vaccine.
  • With governments across the globe funding research and production costs to enable biotech companies to win this battle against time, there are various operational, technological, and workforce concerns that these companies face that need to be addressed with strategic maneuvering from the apex.

Introduction

The Biotech and Life Sciences industry is one of the most sought after sectors this year in conjunction with the pharmaceutical industry as a solution to the current Covid-19 pandemic. Health experts across the globe have agreed that highly effective treatments, including the development of a vaccine, would be needed to reduce and eventually stop the spread of novel coronavirus, allowing cultures around the world to get back to normal activity. While some countries have fared better than others in handling the Covid-19 health crisis, there are still looming fears of new waves. Current Biotechnology issues are expected to normalize with an effective antidote or vaccine.

While the biotech industry sprung into action to begin developing a solution almost immediately, there’s still a long way to go. Challenges faced by biotechnology have been as real as the crisis itself. While the biotech and life sciences industry has a primary role in addressing pandemics like that of COVID-19, it’s not immune to economic downturns, supply chain disruptions, workforce shortage, or any other challenges.

Below are some of the pain points that the Biotech and Life Sciences industry are facing:

01.Roadblocks and Hurdles

All over the world, various biopharma companies, both privately and through government-funded efforts, are performing clinical trials for different potential vaccines and drugs. In 63 days after the genome sequence of the novel coronavirus was shared with the world, USA’s Moderna Biotech Inc. had developed its mRNA candidate to battle the pandemic. Being able to move at a pace never seen before requires immense talent, robust AI-enabled software setup to perform bioinformatics processes, and exceptional R&D infrastructure.

The journey from vaccine development to approval and administration on a global scale is wrought with numerous additional steps and hurdles, requiring mobilization of assets and task forces, recruitment of volunteers, conducting clinical trials, collation, and analysis of humongous amounts of data, smoothly operating supply chains, enormous monetary investments, and a well-equipped production and distribution infrastructure.

02.Collateral Delays

The spread of the coronavirus pandemic brought most of the world to a screeching halt, with many businesses having been forced to close. A result of this is disruptions to major clinical trials and research work on drugs and vaccines for other life-threatening diseases like cancer, HIV, autoimmune diseases, etc. These are collateral delays, and the biotech industry is now challenged with not ignoring existing health issues while still focusing on developing a solution for the ongoing pandemic.

03.Global Distribution

Health experts and top executives at significant biotech companies agree that even if we succeed in making an effective vaccine for Covid-19, there would be a need for immense strategic and operational changes in the current global and local supply chains to ensure that it’s produced and distributed to everyone around the world. With disruptions to most supply chains, only adding to challenges faced by the Biotechnology industry, it will be interesting to see how these organizations address these issues.

Figure 1Covid-19 Vaccine Development in Phases: The Role of Biotech and Pharma

04.ROI

A global health crisis of this scale requires a humanitarian approach to ensuring treatment is available to all. This is why most pharmaceutical and biotech companies have agreed that the first or even second batches of any drugs or vaccines they produce(should they prove to be valid) will be distributed at non-profitable rates. We shouldn’t, however, neglect the current biotechnology issues who are investing millions of dollars in rising to the occasion. These organizations will need a blueprint for steady business growth and monetary returns in the post-COVID era.

05.Remote Solutions

Now more than ever, biotech companies need highly skilled and experienced scientists, health experts, and paramedical personnel who can make this journey towards vaccine development smooth. With most businesses still not fully operational to support new workplace requirements, more remote access solutions will have to be developed and embraced to keep operations moving forward.

Role of Microsoft Dynamics 365 Supply Chain Tools in Biotech Companies

We have spoken about some ongoing challenges faced by the biotechnology industry in the war against Covid-19. It is important to note that current biotechnology issues are handled with strategic realignment and robust Enterprise Resource Planning tools. An ERP tool such as Microsoft Dynamics 365 Supply Chain enables biotech companies of all sizes to optimize their supply chains, mitigate costs on manual labor, avoid redundant efforts, automate billing cycles, and other enterprise-level processes.

Key Takeaways

These are challenging times for organizations in the Biotech and Life Sciences industry. They now, more than any other sector, continue to work at unprecedented speeds to help the world end this global crisis. Billions of lives are at stake, waiting anxiously for a solution to the ongoing pandemic. There are many challenges that the biotech sector needs to address from disrupted supply chains to the need for multi-layered coordination for clinical trials. With strategic intervention by strong leadership and the use of modern robust tools, these challenges and more, can all be overcome.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

Predictive Analytics in Pharmaceutical Industry

Predictive analytics in the pharmaceutical industry: Key Use Cases

Predictive analytics in the pharmaceutical industry: Key Use Cases 1920 1080 shahid.anis

At a Glance

  • The digital era has given companies various tools and techniques to help pharmaceutical manufacturers optimize and streamline their operations, and predictive analysis is one such highly advanced method.
  • There are different ways with which predictive analytics can integrate with existing software setup and forecast plausible technical glitches and predict future trends, thus helping in enhancing operational efficiency.
  • Predictive analysis can help planning to execution, aftermarket services level to develop better products/ services, improve their response time, and stay ahead of the curve for delivering better customer experience.

The Role of Robust Infrastructure

Database management has become one of the topmost priorities for companies across the globe. This database is used to fabricate trends and patterns for a particular time-frame or a process or a product. Data historians have been around for quite some time now, but manufacturers have recently started to look at them as more than software that stores and retrieves data. Application of predictive analytics is turning out to be a game-changer in terms of predicting the future with maximum accuracy and helping manufacturers make the right calls across various functions- purchase, operations, consumer demands, marketing, and more.

Any business operates with the ultimate motive – to enhance productivity and profits. Optimizing operations thus becomes a must for manufacturers. Companies are riding the digital wave with cutting-edge technologies and tools such as Cloud, Internet of Things (IoT), Machine Learning, and Digital Analytics. By making the most of this digital disruption and using predictive analysis to their advantage, companies can achieve better operational efficiency and higher productivity.

Increased and better predictability for both structured and unstructured data helps companies in planning their operations accordingly for enhanced productivity and a faster pace of work.

Predictive Analytics in Pharmaceutical Operations

Predictive analytics is creating a buzz in the Pharma industry for quite some time now. Different pharmaceutical manufacturing companies are looking to model their business processes by gauging the future requirements. The predictive analysis makes use of data historians to accurately make predictions about future trends, possible glitches, and diversions along the road. While technology has come a long way when it comes to predictive analysis, at an enterprise level, there are many things you can do to make the most of this technique.

93%

of healthcare executives stated that predictive analytics is important to their business’ future.

Source: CIO.com

As major companies are competing to stay ahead, product sales and consumer acceptance of a specific drug are a few contributing factors that help decide on advancing to Predictive analytics.

Here are a few ways that predictive analytics helps Pharmaceutical operations become more streamlined and agile:

01. Predictive analytics assets help in understanding patient needs ahead of time

For years Pharma companies have invested heavily in market research and insight experts to understand various geographies and patient domains. This included research to understand and forecast patient needs and drug usage compliance to help both R&D and manufacturing teams prepare them ahead, thus catering to the requirements of the patient base. Predictive analysis plays a vital role in this domain by taking historian data and mining it to populate trends and patterns that can be used by Pharma companies to decide upon the demand for their product. Advanced digital analytics is also capable of generating models based on consumption density for a particular geography, demographic, and health index of the patient base. A pharmaceutical company, thus, would automatically be empowered by knowing its end customer base better and learn the composition of drugs and approximate quantities to produce. You can, therefore, produce the drugs as per the forecast and restructure your supply chain as per the demand. All this will optimize your operations by streamlining both the production department and your supply chain. This will result in enhanced productivity and reduced risks of stock-outs or inventory influxes.

02. Digital analytics plays an imperative role in predicting plausible manufacturing equipment glitches

Anyone working on a production line can vouch for the fact that faulty equipment can cost fortunes by becoming the reason for slowed down or altogether stopped production for days. What predictive analysis does is that it uses the stored equipment data and runs the algorithms to understand the working patterns of any equipment. This, in turn, helps in generating reports for plausible scenarios of equipment malfunction. The production team can get forewarned and can work on the said equipment beforehand to prevent any glitches. Apart from helping in enhancing the operational efficacy, this can also help in preventing loss due to stalled production.

One can take the predictive analysis a step further and use the trends generated to get into a proactive maintenance mode, rather than a more cumbersome and costlier reactive maintenance option.

9%

uptime improvement can be achieved by ensuring predictive maintenance in factories.

Source: A Report by PWC

03. Predictive analytics enhances operational efficiency by enabling risk assessment

Predicting the actions and production outcome of a batch record has become integral to measuring the performance of a Pharma product line. Predictive analytics helps in this assessment with maximum accuracy. It also helps in proactively foretelling issues risks related to product line performance, which allows Production Managers to mitigate these risks to raise product quality standards, and hence become a key driver in increasing product performance in the market. This could apply to both software and hardware in a production line. The cumulative phenomenon results in better risk assessment. This helps the operations team to proactively plan the course of their actions for a better outcome. The advanced predictive analytics tools integrate with different software used by the manufacturers to recognize patterns, share information with other machines and apply the principles of machine learning to automatically gauge risks and alert the users on a timely basis. For optimized operations, risk aversion plays an important role.

Figure 1Use Cases of Predictive Analytics in Pharma

01

Deriving 360 degree patient journey insights

02

Influencing patient adherence

03

Capturing genomics data to accelerate discovery of precision medicine

04

Speeding up drug discovery and development

05

Improving the efficiency in clinical trials

06

Identifying gaps in compliance to streamline regulations

07

Reducing cost and speeding up time-to-market

08

Improving safety and risk management

09

Managing operations and employee training

10

Taking effective sales and marketing initiatives

04. Advanced analytics is essential in accelerating operations

The ways mentioned above with which advanced predictive analysis helps in operational efficiency have all resulted in more agility in the overall operations. Rapidly delivering drugs to the end customer, is becoming a primary responsibility for Pharma companies within the Pharma Value Chain. Companies see a rapid generation of patterns, demands met with more ease, lower risks in manufacturing processes – advancing production lines, and related functions to be more agile.

Business Scenario

Meridian Medical Technologies, a Pfizer company, continues to experience manufacturing challenges in the production of EpiPen® (epinephrine injection, USP) 0.3 mg and EpiPen Jr® (epinephrine injection, USP) 0.15 mg Auto-Injectors, and the authorized generic versions of these strengths. These challenges are expected to result in tighter supplies and greater variability in pharmacy-level access at this time.

Added to the shortage of EpiPens due to tighter supplies, the U.S. Food and Drug Administration provided additional information on lots that are about to expire creating further risk in Epipen availability for the patient base.

A good model of predictive analytics in the Pharma supply chain that provides a gauge of stock requirements based on patient demand, in-store inventory, and expiration dates would have mitigated this risk of Epipen outage before it is too late. Time to market is an essential factor in deciding the success of a product. Accelerating pharma manufacturing processes will thus help companies stay ahead in the competition.

Key Takeaways

  • Predictive analytics is highly effective in risk assessment, equipment analysis, trend forecasting, and data mining.
  • Every industry has their specific criterion to make use of predictive analysis to boost sales and with better use of such tools, enterprises will be better prepared to serve their customer base.
  • Manufacturers can benefit highly from this advanced digital technology by optimizing their operations and enhancing the speed of production.
  • Speeding up the drug to the market process by predicting demand based on patient demographic enables Pharma companies to be prepared for the increase in end-customer demand and manage stock outages without compromising patient needs.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

CRO Strategic Partnerships

How life sciences cros are changing to strategic partners?: the covid-19 effect

How life sciences cros are changing to strategic partners?: the covid-19 effect 1920 1080 Xcelpros Team

At a Glance

  • The biotechnology and life sciences industry is at a cusp of major changes due to COVID-19. There is a lot of fluidity built up due to the pandemic and a huge dependency on government rules, FDA regulations, intricate drug production, and overall research and development at this time.
  • These firms are looking for CROs who can take the role of strategic partners that can manage their life sciences research & development. The preference of CROs has already shifted from traditional to technologically adaption that can handle the rapid pace needed due to the existing COVID-19 emergency.
  • The call for innovation and increased collaboration amongst the CROs have led to the onset of a new, evolved era of project management that is more comprehensive improving customer engagement and experience.

The Role of a Contract Research Organization

Project management is considered to be the backbone of any Contract Research Organization be it for biopharmaceutical development, commercialization, preclinical research, clinical research, clinical trial management, or pharmacovigilance. Pharmaceutical/ life sciences companies outsource R&D works to CROs for better time management, test data maintenance, and focus on concrete results and help address the current pandemic.

While the role of CROs was not very well defined in the early 2000s, there has been a gradual evolution of CROs moving from being mere project management vendors to strategic partners for life science organizations. Contract work in various steps of the life cycle from R&D to commercialization and sponsored clinical trials have become a necessity for the research and development wings of any biotechnology or pharmaceutical company.

Active engagement with CROs has proven to help in accelerating the process while managing the details efficiently and now these Contract Research Organizations need to be prepared to streamline their project work without a process breakdown.

CROs have evolved from a target-based model to become more a strategic partner to life sciences and biotechnology companies.

For any pharmaceutical company, conducting sponsored trials to drive their products safely and quickly to the market is an important aspect of overall project success. Earlier, these projects were outsourced to CROs with a limited scope of time and budget management. However, now the CROs are expected to manage risks, apply newer tools and techniques to maintain transparency throughout the clinical trials and related processes. The Rapidly expanding industry is posing a demand on CROs to keep up with market conditions.

The global market for clinical trial services to biopharmaceutical, biotechnology, and medical device companies is forecast to grow at 12%
year on year up to 2021. Contract Research Organizations Global Market Report

This stat is quickly becoming obsolete due to the current state of affairs and the need for contract research and development services have already grown tremendously to aid the life sciences companies in their quest to find a vaccine for the pandemic.

FIGURE 1 Steps for Right Partner Selection

The growth and general technological disruptions in project management have led to a progressive change in the roles that CROs play while managing the sponsored clinical trials.

What are some of the major areas reflecting this rapid and definite evolution?

  • End-to-End Strategic Partnership: CROs are no longer just outsourced vendors for life sciences companies to carry out Pharma research, or conduct clinical trials in a stipulated amount of time. As the intricacies of the current world have already changed every aspect of project management, CROs are now expected to take complete ownership in the strategic moves of a Pharma company and transform into a strategic partner to make their clients successful. End-to-end coordination with pharmaceutical companies gives Contract Research Organizations enough time and stability to focus on core research. This aids towards capturing the right kind of clinical data to help move the drug forward to commercial markets.
  • Bringing Innovation to the Table: CRO project management is not just about completing given tasks while sticking to some fictitious timelines. The needed collaboration between CROs and their life sciences customers has increased, giving rise to a need for better project management methodologies. These Organizations now handle the ‘cradle to grave’ process of the contract research work. Pharmaceutical companies expect innovative, out-of-the-box solutions to manage risks, cut down costs, and push the boundaries of paramedical science while complying with the government’s rules and regulations. CRO project management has changed from being reactive (problem-solving) to becoming proactive (anticipating the problems and providing feasible solutions for them well in advance).

FIGURE 2 Key Parameters CROs are Assessed on

  • Being Technologically Ahead: Companies can start with 3 main technology initiatives – transitioning to cloud, strong workflows to moving processes/procedures forward, and to use online collaboration tools embedded with the overall infrastructure.

All of these above points are leading to a cumulative phenomenon of faster results, lesser errors, better team management, and overall improved communication between the client and the CRO for the entire project life cycle.

Customer Experience and Engagement

A crucial part of Project Management is to actively engage clients on various projects that require constant collaboration. Customer experience and engagement were given less importance in the past and can no longer be ignored. In order to make the strategic partnership a tactical success for both parties engaged in the contract, proper customer experience and engagement has become a crucial step in the life cycle of the project. If we were to take a 2 pronged approach on how customer experience can be handled, one is through the processes and procedures laid out in the engagement, and the other is through the slew of technologies and tools that can be used to make it a seamless experience.

Connect your processes, customer data, and tools with Dynamics 365 and the Microsoft Cloud

Customer Experience (CX) and Customer Engagement (CE) can be made better for a CRO

01.Process and Procedures

Making some minor tweaks in existing processes and procedures is needed to enhance the customer experience and engagement during a project lifecycle. Below are some of the areas to consider for better CX and CE:

  • Improving team management
  • Quick onboard of experts for clinical trials
  • Effective cost management due to tightened budgets
  • Proactive management of risks in the clinical trial process
  • Mitigation strategies of probable risks
  • Project monitoring and reporting with detailed analytics to better understand research data
  • Effective resource planning to optimize resources for multiple projects.
  • Simplify milestone-based billing
  • Improve deviation-tracking methods to remove unknowns that are notified earlier rather than later in the project lifecycle.

There is a need for a next-generation CX/ CE platform in life sciences organizations: a disruptive platform capable of replacing old generation CRM systems to accelerate development and drive demand. Microsoft Dynamics 365 is one such system that offers all tools and capabilities within one comprehensive ecosystem.

The seamless integration between Dynamics 365, robust cloud and AI offerings, and familiar tools such as Office 365 enables companies to rapidly develop a powerful, intelligent platform. It is a class-leading life science customer engagement platform that functions across mobile devices – which is a large market need.

02.Digital Advancement

This point was covered briefly in section 2 and taking it further, companies would absolutely require the below to enhance their customer experience and engagement:

  • Move from legacy systems to the cloud
  • Use advanced analytics for risk prediction and mitigation
  • Systematically manage their R&D database with digital applications
  • Improve collaboration with clients through collaboration tools
  • Reducing human intervention and semi-automate project management workflows
  • Customer self-service and supplier self-service portals to better manage the engagement from both the customer and a subcontractor’s end
  • In-line reporting through key project milestones to customer to build trust and visibility

03.The Inevitable Evolution

The evolution in the role of CRO to manage R&D through project management is leading to greater expectations by their life sciences clients. Pharmaceutical companies are looking for CROs that are not afraid to push boundaries and are adept at the latest tools and techniques. Since pharmaceutical firms are aiming for greater customer satisfaction, use of latest technologies, and overall better project management, they are engaging with CRO’s at an integral level.

This in turn is causing CROs to be more innovative and agile in their approach when it comes to project management. This interdependent relationship will not only be beneficial for clinical trials, but it will also improve the overall research and development process of a pharmaceutical company. A well-managed and organized workflow-based environment will be of great benefit to both the CRO and their life sciences customers who engage in a contract with them. Microsoft Dynamics 365 Finance and Supply Chain would make a good comprehensive system to aid a CRO to become better strategic partners to Pharma and Biotech companies.

Figure 3How to Create Successful Sourcing Partnerships?

Modernize Finance & Operations: Increase your speed of business with unified processes and predictive analytics

The speed of doing business is increasing. As companies seek to stay competitive, they must rely on technology to provide agility and the capabilities needed to excel. However, many organizations are still running on ERP systems that are complex, inflexible, and impede their ability to innovate and grow.

Microsoft Dynamics 365 F&O helps you to

  • Elevate your company’s financial performance and streamline its supply chain management
  • Innovate with connected operations in an extensible platform
  • Drive HR operational excellence through organizational agility and centralized data
  • Unify the processes listed above with predictive analytics and intelligence
  • Track and trace inventory management
  • End-to-end customer project management

Key Takeaways

  • Throughout the world, CROs are transforming from a time-bound project management role towards a more performance and results-oriented role in order to keep up with the current state of the market conditions.
  • As technology is evolving, so are the tools of project management. CROs are equipping themselves with these tools for better time management, budget management, and risk mitigation.
  • Technology that allows smoother onboarding of customers and suppliers to handle clinical trials will be a need of the hour. Pharmaceutical companies are looking for CROs who can be their end-to-end project execution partners while providing innovative solutions for seamless research and development or testing processes.
  • While time management and cost management will always be top priorities for CROs when it comes to any project, they will also need to develop adjacent digital competencies to offer more ROI for funds spent by pharmaceutical companies.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

Enhance Supply Chain Planning within Pharmaceutical operations

Enhance Supply Chain Planning within Pharmaceutical operations 1600 1000 Xcelpros Team

Introduction

The COVID-19 pandemic has created significant changes in market dynamics, forever changing the face of the global economy. Along with the pandemic’s impact on our daily lives, there has been a ripple effect in the day-to-day operations of Pharmaceutical manufacturing. As industries around the world continue to adjust to changes, Pharmaceutical manufacturers in specific, are noticing technology, process, and infrastructure gaps that are impeding growth and sustainability. Additionally, businesses that were forced to slowdown production during the initial stages of COVID-19 and are now getting back to full momentum, are finding it difficult to manage end-to-end operations.

Pharmaceutical companies cater to a customer base that is dependent on their products to manage patient health. This requires additional efficiency in everything they do, especially for planning supply-demand. The primary objective is to not halt manufacturing, as the dependencies can impact the entire Pharma value chain. Since pharma companies are quality controlled, there is an additional time factor that comes into the picture while determining the right deadlines to produce finished product and deliver to end customers. The entire process from drug discovery to packaging for delivery is a series of collaborations within the supply chain before the final product reaches the end customer.

Roughly 66% of the surveyed were concerned that COVID-19 could result in a possible supply chain disruption for pharmaceutical products. The statistic illustrates concern levels on possible drug supply chain disruptions due to the COVID-19 pandemic as of April 7, 2020. Matej Mikulic | Statista

The Planner’s Panorama

Due to the rapid changes in the global supply chains, production planners at pharmaceutical manufacturing are now tasked with surveying inventory and operations with a new set of eyes. Organizations need to be more watchful of new safety standards related to inventory storage, retrieval, usage of material, and equipment maintenance. Tools like Visual Gantt Charts are becoming invaluable for planning and managing inventory. The ability to depict a weekly schedule of operations for different production jobs and a clear picture of resource capacity is a core requirement for any good production planner. The production planner’s prime focus is to ensure there are enough raw materials and resources (equipment or human resources) to ensure a near-to-perfect supply-demand ratio. An additional element that supports a planner is to have inventory visibility within their current warehouse and plan transfers of inventory from overflow warehouses.

Simple visual planning methods are no longer adequate to correctly manage all inventory-supply-demand processes and ensure proper movement of transactions across the company’s supply chain.

What planners need is a robust system that can track supply – demand by including a complex set of parameters such as lead times, working calendars, the capacity of equipment and capability of vendors to ship materials on a timely manner. Planners also need the ability to alert different departments of the next steps based on plans made for upcoming weeks or months. Any modern system should be able to offer required insights including the current state of batches manufactured and available equipment for future work orders.

A production planner often prefers handling the supply chain proactively rather than reactively by responding to the demands. The planner needs visibility of when the finished product will be ready, tested, and released for shipment. This type of planning helps overcome downtime and shortages in raw materials, which is a common issue in most companies. Responding quickly to changing inventory is one way for planners to be more proactive.

Even today, many small and medium-sized pharmaceutical companies continue to use a combination of excel sheets, inventory reports, and some old school methods when managing their supply chain. As industries continue to face changes related to the COVID-19 pandemic, only companies that have thought ahead and have invested in an automated AI-based planning system that can assess and predict future demand as well projected resource plans will be best equipped to handle their product delivery on time and in full. Companies now need a quicker and more streamlined process to take their products to market.

The Role of a Master Planning and Scheduling System

01. MPS Driven by Demand

The goal of a Master Planning and Scheduling (MPS) system is to provide suggestions to meet material requirements. If set up correctly, MPS systems respond to demand and plan supply accordingly. Demand usually comes from sales orders recorded in the Order Management system. Master planning ties Planned orders for Production or Procurement to corresponding sales orders. The supply requirements are then calculated based on settings for each item that is included in the Finished Goods Bill Of Material(BOM). The coverage settings of an item show precisely how and when to send feedback with a view of current stock levels or foreseen changes in stock levels from existing planned orders in place.

02. Planned Supply

MPS systems use algorithms for tracking the demand from sales orders, customer forecasts, safety stock levels, and calculating net-requirements for purchase and manufacturing. MPS also pulls together independent or groups of demands that trace back to the production of intermediate and raw materials to be consumed in different Manufacturing and Packout processes.

Determining the quantities required would depend on the inventory quantity setup of any single item. The requirement could be specific for a static batch size or dynamic quantities based on the demand needs. MPS systems provide planners the capability to either consolidate supplies across multiple demand orders, offering a comprehensive supply and demand management experience, or consider only the net change from the start of a full production run.

03. Lead Times

The ability to define lead times is critical to a master scheduling system. For instance, if a user enters a purchase lead time the system should account for the time it takes to receive raw materials after placing a purchase order.

I. Purchase Lead Times

Purchase lead times for a supplier can be set up based on different factors including

  • Pricing agreements
  • Time in days that a supplier can accommodate
  • Transportation time, and
  • Any other unforeseen coverage settings

Within Dynamics 365 Finance and Supply Chain, a purchase lead time found for a specific supplier and item combinations takes precedence over general settings of an item. This applies when (1) no vendor is assigned to the item, and (2) the Find trade agreements checkbox is selected via Master planning parameters form > Planned orders tab.

II. Production Lead Times

Production lead times are the details that can be configured in coverage settings; however, these values are disregarded when items are produced via routes. Routes, defined in the modern Production control modules, consider available resources (people or equipment) and their working schedule. In this situation, production lead times needed to create finished goods do not have to be specified by a user, as they are calculated automatically.

Planning for the Unknown

There are still unknowns within pharmaceutical production and operations. Without the right system, planners will struggle to retrieve the data needed to better streamline the manufacturing process. To help with this, Production Planners can benefit from valuable information like –

  • Batch production history and patterns of user behavior that show actual production lead times
  • Quality standards of work-in-process production run based on raw materials that are procured from specific suppliers
  • Quantity yields of past batches, actual scrap percentages based on changes in production routes and resources
  • Accurate actual batch costings in comparison with estimates

These additional details provide supplementary insights to help improve production, downtime planning, maintenance, and most importantly, promise dates to customers. Production planners need to be equipped with a system that presents elaborate sets of insights and actionable suggestions on how to plan/schedule production operations. A well reliable tool empowers a company to drive efficiency and growth.

An AI-ML & Analytics Centric Approach

Eventually, and soon, a standard planning system will no longer be capable for the Pharmaceutical supply chain to operate efficiently. Systems that reduce human effort, learn from history, and improve daily operations will become necessary to overcome inefficiencies. At the same time reporting possible issues and roadblocks that impact orders as well as deliveries, improves the overall plan vs actual picture. Production planners are proving to be more efficient when they have real-time and historical analytics available during the planning process to make better decisions while managing inventory and orders. A guided method of operating and reporting through actionable data can make your company a powerhouse within the industry. An intelligent and optimized planning system can help eliminate guesswork for the production planners in build a competitive edge in the market.

Final Thoughts

The supply chain within a pharmaceutical company is only as efficient as the ability of a planner to proactively coordinate supply, demand, and inventory. A robust planning system with an emphasis on analytics and guided user behavior can play a key role in building efficiency and moving shipments out the door, along with meeting the required quality standards.

Xcelpros has designed Microsoft’s offerings to enhance planning for Pharmaceutical, Chemical, or Biotech industries. For more information on Production planning and Scheduling tools within Microsoft – Contact us!

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

PHARMACEUTICAL QUALITY CONTROL

Pharmaceutical Quality Control – Improving Methods & Systems

Pharmaceutical Quality Control – Improving Methods & Systems 1920 1080 Xcelpros Team

At a Glance

  • The definition of quality has evolved with changing business dynamics, particularly in regulated industries such as pharmaceutical, chemical, and food & beverage.
  • The Pharmaceutical & Drug industry witnessed a 168% increase in drug approval by the FDA in 2018 compared to 2016, testifying the growing quality adherence among manufacturers.
  • Compliance to quality guidelines is only getting more stringent with time. Pharmaceutical & Drug industry also saw high rejection (73) through 2018 including Recalls, Market Withdrawals, & Safety Alerts, highlighting the importance of quality standards set by the industry watchdog.
  • While quality is increasingly becoming an integral part of modern-manufacturing practices, our research revealed that some organizations continue to devalue the importance of quality to a mere afterthought.

Introduction

Quality plays a pivotal role in the success of a business and is no longer considered an impediment to a successful business. It’s often that the release of a product for shipment is delayed due to standards not being met, causing stress on the customer service reps working closely with Customers.

Saying yes to sub-standard ‘products to the market’, however, could be catastrophic, with damages that could at times be irreparable. Today, modern-day Quality Management is supporting technology initiatives to ensure the right systems are in place to allow the product to pass all quality checks proactively.

This article highlights just a small section of Quality Management related to processes and systems. The intent is to help businesses understand how technology has evolved with the changing business landscape and how manufacturers (in any highly regulated industry) can leverage technology such as the One-Microsoft ecosystem to stay relevant, and ahead of the competition. In this part of the series we will discuss Quality Management holistically, and follow it up with the finer aspects of Quality Management in the subsequent posts.

FIGURE 1 Supply chain within manufacturing with the ability to pivot operations

The Evolution of Quality Management

Quality management has evolved from being an afterthought to becoming a rigorous self-discipline that most modern-day manufacturing companies have taken onto themselves. What used to be quality control in the 1960s has evolved to become “total quality control” in its present form. The US FDA is tightening its norms to ensure higher quality standards, and companies are responding to such challenges by increasing their quality standards. The below timeline depicts how the definition of quality has evolved over time since the 70s.

FIGURE 2 Supply chain within manufacturing with the ability to pivot operations

Process Improvements in Quality Control

Improvements always start by first understanding the issues that reside in a department. Typical activities in the Quality control department of a Pharmaceutical company would be to

  • Manage Quality control tests
  • Manage Quality control specialists and their workload
  • Allocate and calibrate test instruments
  • Establish appropriate test methods
  • Document test specifications
  • Perform tests in the order of priority and
  • Accurately record test results.

Trending and analysis, as well as stability studies, would be a follow up of quality data that is captured for understanding the reliability of the batches being produced. This is just a quick and simplified view; in reality, all of the activities listed above have many details involved. Making sure that all processes and procedures are handled with precision ultimately reflects on how well you are able to maintain the quality standards in a Pharmaceutical company.

Processes in the Quality Department

A typical day in the life of a Quality control department could start with lab analysis and paper requests to perform quality tests on a sample size of a batch. At times it could be multiple batches for different products that are either produced in-house or received from 3rd party manufacturers. The department prepares the test instruments for each test and accurately records the test results along with any digitally signs-off on the work. If we were to take a quick view of what could be involved in ‘getting it right’, the understanding towards all essential requirements of an optimal quality process could change.

Use cases with digitization and automation have demonstrated a more than 65% reduction in deviations and over 90% faster closure times.” The Future of Quality Control, PharmaManufacturing

It involves having all the SOPs opened up in front of you to perform a test with precision and not allowing any deviation in method unless the ‘method to deviate’ is clearly spelled out. It could often be challenging to hold the people in your department compliant to the process unless there is a stringent system in place. If the system is paper-based, you are adding laborious tasks with corrections and piled up paperwork. Every time an audit occurs, it would require digging through so many stacks of paper to bring out the right answers.

FIGURE 3 Supply chain within manufacturing with the ability to pivot operations

Quality Control Systems

Pharmaceutical companies that are implementing an electronic system need to decide how tightly the system has to be built. The process could add discomfort to users due to various systemic restrictions, or an uneasiness around user errors.

People could start feeling anxious about making mistakes, as every change would have a digital stamp tied back to the person modifying the data. It could also get a bit cumbersome to fix errors after the fact in a controlled system that is validated and is 21 CFR part 11 compliant.

The idea is not to add discomfort but to build the right kind of habits in users. Ideally business users need to be given enough information about how the overall system works. A well-planned training can help the users move from discomfort to being champions promoting the process in the organization.

Anyone with a basic understanding of compliance would prefer an electronic system instead of a paper-based process, for the strength and ability to capture data as is. It then requires a change in the mindset of ‘ continuously fix errors’ to ‘proactively do it right in the first place’. At the end of the day you want to foster this efficiency in your whole organization. This can be achieved by evaluating a reliable process that could be leveraged by the Quality Control department.

Elimination of up to 80% of manual documentation work will improve productivity. The Future of Quality Control, PharmaManufacturing

Quality Management Challenges – What Does a Plant Manager Look for?

A Plant Manager would have a specific view of the business as their purview is not restricted to one department but to the overall operations of the plant. Some key concerns that typically need to be addressed by a Plant Manager or a General Manager of Plant are:

  • Quality Management
  • Compliance with evolving regulatory standards
    • Take control of your Documentation such as COA
  • Safety
    • Corrective and Preventative Actions management (CAPA)
    • Location directives
    • Raise flags when two reactive chemicals are placed in proximity
  • User Adaptability and training to conform to the new Quality standards

These concerns are typically addressed by:

  • Efficient Document Management – allows you to centralize documents into a secure repository that is seamlessly accessible. This ensures quicker decision making and effective change management. It also helps in ensuring visibility of your documents, enhances traceability by tracking amendments, and document safety with revision control features.
  • Addressing Non conformance – can be done through a unified platform to log non conformance, quality of incoming raw materials, complaints, delay, etc. This helps in addressing compliance at an early stage, paving the way for course correction and registering the same in the system.
  • Corrective & Preventive Action – a method with advanced analytical features built in to help you learn and unlearn from records of the past. As discussed, registering a non-conformance incident into the system initiates a workflow for corrective measures. This system learns from past incidents and recommends preventive action to control similar incidents from recurrence.
  • Implementing the right kind of tools and technology can help with Process automation and reduce data entry errors along with tracking process efficiency.

Identifying the right system to help make the most impact will be the first essential step to move in the right direction. Once that hurdle is crossed, it is important to build a ‘to be’ mindset instead of worrying why the system doesn’t do what your workforce is used to. Evaluate how stringent you want your process to be, based on your company’s needs and accommodate a well-defined method that is native to the application.

Key Takeaways

  • Quality management is no longer an afterthought and has evolved to become a discipline in most prosperous manufacturing organizations. Quality management which was once considered as a business function that hindered speed to market and product launch, is now embracing modern technologies to fuel innovation, bring in efficiency, eliminate the scope of incidents within a plant, and offer better predictions for the future.
  • Pharmaceutical companies that have evolved to modern, automated quality control systems are able to empower their workforce to rapidly adopt process improvements and optimize all the functions in the department.
  • The adoption of better tools in one department typically sets the standard for the entire ecosystem, including functions such as regulatory compliance, procurement, demand management, research & development, inventory and warehouse management, etc.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

Chemical Industry Software Solutions

Active Ingredient Management & Potency-Based Pricing in Microsoft Dynamics 365 The Caustic Soda Example

Active Ingredient Management & Potency-Based Pricing in Microsoft Dynamics 365 The Caustic Soda Example 1400 820 Xcelpros Team

At a Glance

  • Active Ingredient Management and Potency-Based Pricing are highly relevant to process manufacturing, distribution, and other manufacturing industries.
  • The products in these industries consist of Active Ingredients, Compensating & Filler Ingredients (sometimes referred to as buffers, fillers and excipients).
  • Active Ingredients and Potency have a significant impact on price variations in-turn affecting downstream functions such as customer billing and value.
  • In order to calculate potency, it would be required to maintain min, max and target values of batch attributes such as potency, concentration and purity on items, inventory or batches.
  • The calculation of a potency-based price that is dependent on the percentage of active ingredient purity or potency can be achieved by maintaining an attribute-based price with algebraic equations.
  • The industry requires that the purity and potency of active ingredients be captured at the time of incoming inspection / receipt of the product or at the time of quality testing of goods received.
  • Batch attributes, such as potency and purity, captured at various stages of the operation have an impact on the value of physical and financial inventory.
  • Unit of measure conversion from weight or volume would be a key element in determining the appropriate price for a certain customer-specific batch and potency requirement.
  • Manufacturing an item with a specific active ingredient, requires an ability to maintain a specific weight or volume-based formula and be able to balance a batch using compensating and filler ingredients with a compensating factor.

Active Ingredient Management & Potency-Based Pricing: Which industries is this relevant to?

  • Chemicals (Specialty, Bulk and Distribution)
  • Pharmaceutical (Manufacturers & Distributors)
  • Food & Beverage
  • Cannabis
  • Distribution
  • Textile and
  • Paper

Active Ingredient Tracking

Highly regulated and process industries such as Chemical, Pharmaceutical or Food & Beverage have an inherent operational need to manage and account for active ingredients.

Batch attributes such as potency and purity are maintained in the system along with pricing based on target values. Behind the scenes, an algebraic equation combines the unit price, quantity, batch attribute – target & actual values and determines an automatically adjusted price within the target transaction such as purchase order or sales order invoice. A key element for active ingredient management is to be able to capture potency, purity or other batch attributes during quality testing of a batch. This allows you to view inventory by recorded batch attributes and reserve these batches for the appropriate transactions. As stated above, leveraging the pricing formula allows you to implement price adjustments to the downstream transactions based on actual values.

Microsoft Dynamics 365 for Finance & Operations has extensive out-of-the-box functionality to help manage active ingredients for both make and buy items.

Item Batch Attributes

Batch Attributes are properties of raw materials, intermediates or finished products that capture the key distinguishing factors for an inventory batch. These attributes vary by industry, use and other factors such as environmental.

As discussed above, in Microsoft Dynamics 365, you have the ability to manage item batch attributes such as potency and purity. The first step would be to create an item that is tracked at a batch level and define batch attributes that can handle a range of potency values. Dynamics 365 allows for managing multiple attributes for the same item, including one primary and multiple secondary batch attributes.

A few examples of batch attributes in different industries:

Industry Example of Batch Attributes
Chemical & Pharmaceutical Potency, Purity, Concentration etc.
Food & Beverage Fat Content, Percentage Weight, Moisture, Age
Steel / Metals / Mining % of Magnesium content
% of silver content
% of zinc content
Cannabis % of CBD
% of THC
Purity
Contamination etc.

The screens below provide a quick view of what batch attributes look like in Dynamics 365 for Finance and Operations.

Figure 1 Released products – Caustic Soda

Figure 2 Released Product Details – Product Tab Expanded

Figure 3 Released Products – Manage Inventory Tab Expanded

The screens below show product-specific batch attributes that can be set for either purity or potency with an acceptable range and a target value.

Figure 4 Released Products Attributes – Purity

Figure 5 Released Products Attributes – Potency

Purchasing and Receiving Items with Active Ingredients: Attribute-Based Pricing

There are times you may purchase one or more items from an approved supplier with a specific active ingredient and it may be required to track active ingredients’ potency at a specific value.

To learn more about the receiving process in Microsoft Dynamics 365, refer to “An Overview of Chemical Distribution in Microsoft Dynamics 365”

When an item has batch attributes, you receive the item batch and enter the batch attribute value along with the vendor batch details. The attribute-based pricing that is derived during invoicing alters the unit price and net amounts based on the potency value of the batch.

Purchase prices for active ingredient purity or potency can be maintained in the attribute-based pricing details section shown in the screen below.

Figure 6 Attribute-based pricing details

Figure 7 Attribute-based pricing for Caustic Soda based on Pricing Formulas

Figure 8 Purchase Orders – Purchase Order Lines

The screens below show the different batches in inventory with specific batch attributes.

Figure 9 Batch Tracking (These are the batches in inventory with specific batch attributes. You can add / remove columns you want to see in any view)

Figure 10 Released Products – Inventory Batch Attributes

Manufacturing with Active Ingredients

Caustic Soda is just one example to demonstrate active ingredient management in process industries. The same concepts can be applied to different types of chemicals or products that contain a variety of batch attribute requirements.

A formula is defined by taking active ingredients, compensating & filler ingredients and applying a conversion factor to calculate the totals on batch production. Microsoft Dynamics 365 is able to meet this requirement with the included batch balancing functionality.

Manufacturing to meet a certain potency by using active ingredients can be tricky if you do not have a way to calculate amounts based on the potency of the active ingredient batch picked during production. When a formula is setup to meet a specific potency requirement, the weight / volume of the active ingredient, compensating ingredient and filler ingredients need to be defined.

Figure 11 Released Products – Inventory Batch Attributes

Figure 12 Released Products – Formulas Details

Formulas can be setup by maintaining the quantities of Active, Compensating and Filler ingredients along with a compensating factor designed to automatically adjust batches.

With a compensating factor, the system will recalculate and adjust batches as needed to produce desired potency values. The compensating factor always refers back to the base value, in order to correctly calculate batch quantities.

Figure 13 Formula Lines – Compensating Principle

Figure 14 Compensation Principle Example

Batch orders created for the item in Fig. 14 (shown above) will have standard values proposed at the time of estimation. When the batch order is started and the appropriate active ingredient batch is picked with a specific potency, the batch balancing function in Microsoft Dynamics 365 provides the ability to balance the ingredients based on the compensating principle setup in the Formula.

Figure 15 Production Orders – Batch Order

Figure 16 Production Orders – Batch Balancing – By confirming the formula, the balanced quantity is automatically selected to continue through the process

Active Ingredient Attribute-Based Pricing for Customer Billing

Similar to purchasing, potency-based pricing can also be active during the sales process and within customer billing.

Using the same Caustic Soda example as above, if you sell a Caustic Soda tote, the calculation will auto-adjust billing based on the potency or purity selected. I will illustrate the Caustic Soda billing based on the purity of the batch consumed through the example below.

The Caustic Soda tote is created as a product in Microsoft Dynamics 365 with a specific purity of Na2O as the base attribute. This includes an acceptable range of Na2O purity and any other customer-specific requirement for the batch. The illustration of this example starts with assigning a batch attribute and a target value of the attribute. For Caustic Soda, we use batch attribute ‘purity’ of Na2O. Microsoft Dynamics provides the ability to capture multiple attributes for an item, in this case the purity of Na2O which is the active ingredient and the purity of Caustic Soda itself becomes relevant for pricing purposes.

Figure 17 Batch Balancing

Figure 18 Released Product Details – Label Print Options

Microsoft Dynamics provides the ability to maintain product-specific as well as customer-specific batch attributes. For example, if your customer has additional potency requirements on the batch, over and above purity, the system provides the ability to maintain acceptable potency values for the batches that would be sold.

Figure 19 Released Product Details – Manage Inventory Tab Expanded

Product information management in the system has the ability to maintain attribute-based pricing from trade agreements, which is a journal to maintain sales and purchase prices.

Figure 20 Compensation Principle Example

In the example shown in the screen below (Fig. 21), the sales price is maintained in pounds for an effectivity date that is tied to an attribute-based price calculation. This can include an algebraic equation that adjusts the price based on the purity or potency of the batch being sold.

Figure 21 Attribute-based Pricing – Trade Agreement for Sales Price

The figure below shows the calculation that includes the purity of Na2O and Caustic Soda if the price is dependant on both attributes.

Figure 22 Attribute-based Pricing Details – Trade Agreements

In this example, we demonstrate the use of a simple calculation based on actual purity and target values. The system would read the below calculation and, based on the actual value of the batch, automatically adjust the price on the customer’s bill.

Figure 23 Attribute-based Pricing

Figure 24 Attribute-based Pricing

The invoiced sales order below shows the adjusted price for the batch based on the purity of Caustic Soda.

Figure 25 Sales Order with an Invoiced Line

Key Takeaways

  • Active Ingredient Management functionality in Microsoft Dynamics 365 distinguishes the “Active” content of the material from the other compensating or filler ingredients.
  • This function ensures that a company gets paid for the active ingredient content it delivers to its customers and pays its vendors only for the active or potent content of the product.
  • Microsoft Dynamics has the ability to proportionately adjust price on downstream transactions based on the quality test results captured on the Batch Attribute which determines the percentage of the Active Ingredient in the product.
  • The system has the ability to track and maintain inventory based on the percentage of the Active Ingredient.
  • Microsoft Dynamics 365 for Finance & Operations delivers powerful and comprehensive out-of-the-box functionality to support Active Ingredient and Potency Management that is critical to the process and other highly regulated industries.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

the power of integrated material requirements planning

The Power of Integrated Material Requirements Planning (MRP)

The Power of Integrated Material Requirements Planning (MRP) 1100 644 Xcelpros Team

At a Glance

  • The need for integrated Material Requirements Planning (MRP) in growing companies
  • Gain perspective on MRP and Supply Chain Planning as essential drivers for growth
  • Managing customer expectations & reality behind the scenes
  • Real-life pain points
  • A planner’s day-in-the-life and what matters while planning production campaigns
  • Workforce resistance and solutions in adapting to newer efficient ways of planning
  • What can an integrated materials requirement planning and forecasting system do for you?
  • Key Takeaways

Are good supply chain planning methods only for larger corporations?

Whether you are a bakery or a pharmaceutical manufacturing company, planning is happening everyday to balance your supply and demand. If a bakery does not order enough flour, yeast, or eggs – they cannot fulfill their customer demand. Order too much, and they could easily face hundreds of dollars of wastage.

In chemical companies, wastage is not like throwing away a loaf of bread. There are far more repercussions to unplanned operations in highly regulated industries. Bad batches of extremely hazardous or volatile chemicals and constantly yielding unplanned co-products or by-products add additional need to store or dispose based on quality testing done to the batches.

In a pharmaceutical company, the production of batches with lower-than-planned batch attributes, potency for example, can result in an over extended campaign, over consumption of raw materials, and a lower production yield. If a batch is planned for a certain potency, the production process is not complete until quality passes the tests per specification. After reworking the batch a few times the batch may be reclassified to a lower potency not yielding the desired results.

While the concept of Material Requirements Planning (MRP) was originally only intended for manufacturing companies, it now extends itself into all industries, including Service. The role of MRP becomes even more critical in small-to-medium manufacturing companies. In fact, if you are a smaller company, materials and resources need to be planned with precision. Your planners and buyers need clear and precise signals that allow them to make informed decisions on when to buy, and when to produce. The availability of materials and capacity of resources is everything in optimizing and streamlining the supply chain within your plant.

MRP software was siloed and standalone during the initial years of its inception. In the later years, Material Requirements Planning has been included in Enterprise Resource Planning (ERP) software as an integrated module. This integration turned a new leaf in planning allowing companies to serve their customers better with lower cost of inventory.

Let’s explore real-life..

Your ‘A’ customer calls you requesting a quote for a specific product with an aggressive shipping date. You know that your customer has already reached out to secondary vendors for quotes.

To be successful in meeting your customer demand, especially when there is stiff competition, you need to be able to evaluate what your current inventory situation is and how fast you can meet the demand.

Without a proper system in place for MRP you will be forced to build complex spreadsheets with sales orders, supply and demand forecasts and production schedules and manually superimpose inventory availability and resource capacities into the same excel sheet. Sounds complicated? It sure is..

Quite a few of our customers maintain many such spreadsheets on a daily basis and sometimes take 2-3 days to just give a promise date to a customer. This is not sustainable as it puts tremendous pressure on planners, alienates customers and impairs organization growth. Meanwhile, your competition is able to quickly and easily provide a realistic promise date and close the sale, leaving you high and dry.

In order to meet customer demand by their request date, you need a minimum of three inputs –

  • Planned supply
  • On-hand availability (after all allocations / reservations) &
  • Resource capacity

If you are unable to quickly provide an available-to-promise (ATP) date, your customer will work with suppliers who are able to provide a reliable promise date and deliver on time.

What happens on the ground?

Preparing a production schedule can be challenging if there is no view into inventory levels or the availability of labor and machine resources needed to meet customer demand. Even with a forecast in place, it could be quite hard to schedule production if you are constantly facing capacity issues – be it machine or labor. If you have read my blog –“Standard Costing in Pharmaceutical Manufacturing – Industry Challenges & Solutions”, I have described an example of batch manufacturing process and the kinds of data inaccuracies that can occur while consuming inventory during a lot production process. Now add to it the lack of proper resource capacity during a week. Production planning and scheduling becomes a critical function in any manufacturing or distribution company to streamline operations.

“Not only do customers often expect 99+ percent service levels within 24 to 48 hours, but supply reliability is also becoming more tenuous as once local supply chains now extend around the world. Source – McKinsey & Company

You will need to up your game if you want to stay ahead of the curve especially with growing competition where customer loyalty is related to the value that you as a company can provide.

How would your planner be able to handle the signals to produce and purchase without a system that can do that very same thing by virtue of an algorithm in minutes? They need to pull together information such as:

  • Overall Customer demand
  • Worker availability
  • Machine capacity
  • Raw material availability
  • Stocked supplies
  • Quality requirements
  • Batch potency requirements

Dumping data into excel sheets from different sources and in turn creating a plan for your supply chain by creating a manual schedule is at the very least a basic requirement. I have often heard companies say we don’t need a plan or schedule end up in a very reactive production management that results in waste of material and chaotic operations.

Even with basic planning, a company operating in a reactive mode would face loss of inventory and suffocated resource availability resulting in a wastage of company’s time and money.

Lack of capacity – waiting for a machine operation to complete one job before the next job starts. This capacity information is crucial in providing a reliable promise date.

Do you have high customer demand and need to plan your fast moving items?

You are operating in a competitive market, if you are not able to fulfill on-time-in-full and in some situations prior to promise date you lose edge over your peers in the market. Companies that lack proper supply chain planning and that carry extreme resistance to change stunt their own growth as they constantly talk themselves out of proactively planning through an appropriate planning and scheduling tool. This is an issue within any manufacturing company be it discrete or process industry.

Real-life that you can connect to

Your planner is proactively planning out the work orders in most cases weekly and creates a schedule for the upcoming week. Lack of a proper visual capacity planning tool that provides the material availability and resource availability based on requirements is forcing the planner to create a calendar schedule and is manually tracking the production plan.

The plan involves production of a batch and a packout operation to meet the customer’s demand. There was an assumption that there is enough inventory available in stock as per your system but the containers are actually empty due to a misrepresentation of inventory. Now, the planner needs to look for alternatives or push out scheduled start on operations. The ripple effect is that customer service now has to go back to the customer with a new promise date. An additional situation occurred when couple of operators who were supposed to work on a certain job had to be repurposed because a certain high priority lot failed quality testing pushing out the jobs that they were scheduled to work on. A certain equipment broke down due to a lack of proper scheduled maintenance in place adding a new variable that is altering production schedules.

In this situation, a well-integrated mobile supply chain and planning system would feed data into each area along with frequent cycle counts on those fast moving products and a good capacity schedule that can predict labor and machine capacities with a secondary backup in place would help your planner proactively plan. A set of resources with the same capability to produce or understanding and planning for an alternative route of operations will alleviate some of the issues that were mentioned in this example.

How will an integrated materials requirement planning and forecasting system help you?It ploughs through the system based on the coverage settings such as lead times and time fences on the product that requires planning and creates production signals based on material availability and resource capacity/ capability. The algorithm looks at the full set of products that require planning and share the same raw materials/ resources and shows the planner schedules for all material requirements to meet supply and demand based on the calendar with working time. The planner sees the same visual schedule similar to the excel sheet and makes informed decisions on how the reprioritization needs to happen and which lot production runs need to be scheduled first. Holidays and weekends automatically can be excluded from the MRP run along with any sales orders/ quotes that are blocked from requirements to be planned.

The algorithm empowers the user to proactively plan and keep a tab on raw material and resource allocations. A stringent production floor standard operating procedure with stop gaps will control any uncontrolled activities that can alter inventory projections.

Role of People

Workforce that has been with you for a long time is your biggest strength as they were able to stick with you through your difficult times and pull your company through when you needed help. They may not be willing to adopt new planning mechanisms to streamline your supply chain.

But how do you bring about a change in attitude especially when your experienced workforce is change averse, risk averse and want life to continue the way it is?

A few proven ways would be –

  • Educating your workforce on the pros of adapting to newer methods and tools to increase supply chain optimization
  • Providing assurance to them that the new age tools are actually simpler to use and often follow standard methods of execution
  • Helping them gently cross the hurdle through a proper change management process
  • Having them involved in the overall transformation from no planning or manual planning to a systematised planning and scheduling tool
  • Teaming your workforce with newer team members who may have seen other tools and can be change agents during the process

Key takeaways to proactively plan your supply chain

  • Look at your current cycle count procedures and re-categorize the ABC items for better visibility.
  • Engage in proper clock-in/ clock-out and time management procedures through production floor and job management systems to allocate operators optimally for the right jobs.
  • Provide proper handoffs from one step in the operation to the other to relieve operators and resources appropriately.
  • Schedule jobs proactively and set good methods in place to operate efficiently.

Finally, do you think your company is able to handle competition well in these markets? How accurately and quickly are you able to provide a promise date that can out run your competition?

This article was written by Bindu Chunduru, Head of Delivery & Solutions Architect at XcelPros. She has extensive hands-on experience in Finance, Costing and Manufacturing functions in conjunction with industry leading ERP systems like SAP, Microsoft Dynamics and building industry specific products. She has been an advocate of transformation through technology and a change agent helping companies grow by improving business processes & practices. If you have any questions or need help in anyway, you can reach out to the author at bindu@xcelpros.com.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com

standard costing in pharmaceutical manufacturing

Standard Costing in Pharmaceutical Manufacturing Industry Challenges & Solutions

Standard Costing in Pharmaceutical Manufacturing Industry Challenges & Solutions 1024 600 Xcelpros Team

At a Glance

  • Business objectives typically involve current state of cost accounting and profitability in current day mid-market pharmaceutical manufacturing.
  • The C-level cares about impact of people and incorrect processes on costs/bottom-line and are continuously looking for ways to improve overall productivity.
  • Improper habits of recording data can be a major culprit in building hidden sunk costs. 30% of costs go undetected due to poor business practices and the inability to accurately report them.

Where Is the Pharmaceutical Industry Heading?

Mid-market pharmaceutical companies based in the United States will only see a rise in opportunity in the coming years. The projected increase in the industry calls for more streamlined processes within Pharmaceutical Manufacturing and Contract Development and Manufacturing Organizations (CMOs & CDMOs).

Rising R&D costs have been accompanied by more stringent testing requirements. The number of new chemical or biological entities (NCEs and NBEs) launched on the world market increased to 226 in the 2011-2015 period compared with 146 a decade earlier. (IFPMA facts).

R&D costs are on the rise due to stringent regulatory requirements. Tariffs and changing political climate has a huge impact on the dynamics of the pharmaceutical manufacturing industry.

If the pharmaceutical manufacturing companies need to adopt to these changing market dynamics, it is imperative to build sophistication in their methods of costing, profitability analysis and production variance calculation & reporting. Most companies are constantly watching their bottom line to measure profitability and production variance analysis.

This article lays the foundation for standard costing, best practices and its optimization within a Pharmaceutical Batch Manufacturing company. In the subsequent blogs, we will cover best practices within other aspects of costing – weighted average, ABC costing etc.

The Never-Ending Challenges of C-Level Reporting

So, what is my overall profitability for a Product?

This is a major concern for a C-Level executive when there are fast moving raw materials, labor, overheads and other indirect costs involved in identifying the actual cost of a batch in the pharmaceutical manufacturing industry.

As a pharmaceutical company, one of your prime objectives is to comply with the processes set forth in your Standard Operating Procedures (SOPs) to ensure compliance reporting with FDA. In many cases, the focus has been to stay compliant while losing sight of key indicators that drive profitability and organizational goals.

In continuous production and batch manufacturing processes, the multitude of activities involved brings about a need for costing that ties to each activity. There are always many moving parts in identifying the right cost breakdown structure. When there is a need to provide key analytics for stakeholder reporting, it is imperative to measure true costs.

What matters to the CFO?

A CFO, however, is not just looking at this unilaterally. Instead, a broader view is what matters which includes the details in determining the actual cost and how the variance came about. In reality, the manufacturing process is heavily intertwined with product costing and therefore the need to highlight many different elements that aid in standard cost determination and variance reporting. Production variance reporting is however just a subset of the overall cost breakdown structure in bottom-line reporting.

Depending on the reporting structure, there may be a preference of backflush costing methods to delay costing until an item is manufactured. It could be a reporting nightmare if a proper method is not leveraged in deriving analytics and production performance metrics. Many times, people resort to traditional means to analyze these costs and variances using excel spreadsheets. Analyzing costs can be extremely challenging if your system does not keep a track of perpetual costs until the completion of a production job.

Does an extremely complicated cost excel sheet with COMPLEX macros and v-lookups ring a bell?

Data Capture Discipline & Lost Visibility

Certain processes in longer production campaigns, specifically in continuous processing, can span across days, weeks or sometimes even months. Recording actual numbers based on material and resource consumption to report standards vs actuals can get very tedious. Enforcing process discipline can alleviate some of these pains.

In real life, this can take hours of data crunching to gain clarity. Now, add to it a statistic of rework batches or lots which adds significant complexity to the overall calculation. What is not easily visible is the additional cost of starting material, line clearance, labor and machine hours that get compounded to the original batch cost.

This statistic makes you wonder where your company ranks in performance. Human capital, machine or work center hours need to be planned across multiple production jobs to better understand how to source and schedule labor as well as allocate machines to each production run. As material is being processed, it becomes essential to understand the cost of each operation in process that would further feed numbers into each production job.

People & Processes in Pharmaceutical Production – Impact on Costs & Bottom-Line

A large amount of time and resources are spent in an attempt to recover from inefficiencies caused due to improper procedures followed in day-to-day operations. This could be due to lack of proper KPIs, processes or even methods to track efficiencies.

  • The Production planner cares less about cost and more about possible capacity roadblocks with additional material and resource requirements that could in-turn lead to unplanned variances.
  • Warehouse operators need to record consumption based on feedback from Quality Control (QC) on when to proceed with the job, how much to consume on the batch and how many hours were already recorded. But do the operators have systems and processes in place to capture critical data real-time?
  • For the sake of convenience, operators tend not to record data during operations and instead wait till the end of the production run. It would be ideal to capture this data in real-time, directly in the ERP system. If not, recording on paper would do.
  • Based on a proper set of batch instructions and results of WIP testing performed by Quality Control (QC) personnel, the production manager is always looking for ways to substitute materials to meet timelines, quality standards, batch potency and capture relevant batch information accurately.
  • Understanding how expensive the total batch record is going to be helps proactively plan for all the operational costs involved in producing a batch mainly for your ‘A’ items.

Improper habits of recording data is a major culprit in the accumulation of hidden sunk costs

Batch Manufacturing – An Example from Real Life

In long running batch manufacturing processes, there may sometimes be a need to test the PH value of the mixture / API every hour. Depending on the PH values and WIP tests, operators add additional compounds to achieve the desired PH. These additions are often not captured in the system nor on paper. These compounds / chemicals are consumed from Inventory without even tracking their use. Considering that Inventory is now out of sync and inaccurate, the controller may have to categorize these as overheads thereby losing sight of costs when they occur. Most of us have experienced such processes in real-life.

Now, what are a few practical solutions to minimize such practices?

  • Having an industrial grade tablet or mobile device on the shopfloor to aid in data capture real-time is one possibility,
  • IoT is very relevant for today’s markets to track start, stop and inputs within each operation
  • Mobile supply chain gun or a handheld scanner is another input method that can aid in capturing data on the shopfloor
  • Putting systems in place that are easy to follow and not over complicated is another one
  • An ERP system that will flag the deviation when it occurs and not after the fact
  • Checks & balances involving electronic signatures that can help stop incorrect practices and the list goes on

High-Level Production Process

Standard Cost Calculation

In a sophisticated mixed mode manufacturing ERP system, where both process manufacturing and discrete processes occur within the same operation facility, the standard cost is derived from standards set on the Formula or BOM depending on a combination of the following:

  • Batch being manufactured
  • What is packaged into containers
  • Hours spent on each operation
  • Standard resource costs per unit price

Calculated cost on a Formula or a BOM is derived from ‘individual raw material / intermediate costs’ just as the cost of operations are derived from ‘resources and machines’ assigned to the Route.

It is important to set the standards correctly based on past history to proactively manage production runs and keep a close tab on production costing.

For any C-level who is tracking profitability or for a Plant Manager whose bonus depends on higher margins, a better gauge of where they are headed from a numbers standpoint helps them proactively fix redundant spend resulting from operational and resource inefficiencies.

Estimation of Production – What Should Happen?

  • First step is to plan the size of the batch that needs to be produced. Your ERP system should automatically scale from the standard batch size and identify standard cost.
  • This information already provides an insight on subsequent decisions to be made about the batch such as ‘identifying the right margin’ and ‘set an appropriate selling price’ on customer quotes / sales orders.
  • As production jobs are released to the production floor, operators allocate all appropriate raw materials for consumption marking those specific raw material lots as unavailable for other batches.
  • Allocating raw material lots / resources correctly and recording data in a modern Pharmaceutical ERP software can control unnecessary mistakes and coverups providing a true picture of product costs.

The standard cost rollup for a manufactured product comprises of Direct Material, Direct Labor, Overheads and Indirect costs.

Following actual raw material consumption, there is a tendency of not wanting to record point-in-time information due to a fear of making mistakes or to better state it – wanting a flexibility of making mistakes and not keeping a track of what was altered from standards, making variances a bit of an enigma.

Consumption Process

  • During raw material consumption, physical inventory is relieved by directly booking material costs to Work-In-Process (WIP). If we were to assume that the only changes on a production run is to the overall labor and machine time on operations, then all standards relieved from WIP would book production and quantity variances based on standard cost when the lot is closed out.

Multi-Tier Formula / BOM

  • A much complicated scenario occurs when there is a multi-tier formula where intermediates are produced and consumed into the next tier with additional flavor of substituting raw materials and continuing until the final finished product is produced. There may be times where yields are properly known before they move on to the next step and in some cases the shop floor goes by standards and records adjustments to material and operation after the final finished lot is yielded and finally closing out all tiers in the multi-tiered BOM/ Formula.
  • It could easily become a complicated cost calculation with all tiers involved – their costs, variances and the costs being fed into the final finished product along with the final set of variances.

Key Takeaways – Move Forward Plan

  • With proper methods and good industry standards it is possible to streamline operations to control these variances from being unpredictable.
  • The first step would be to stop and understand what your current manufacturing practices are and what the downstream impact is on costing.
  • It is imperative to identify what competitors with an outlook of outperforming the market are doing to create operational efficiencies.
  • Once that is established, it would be important to properly identify the correct methodology to implement changes in business practices which bring about a noticeable change in productivity and worker efficiency.
  • Sophisticated ERP systems made for the process industry offer deep functionality that provides different types of production cost buckets including quantity, substitution and lot variances.
  • You will benefit from a sophisticated analytics and business intelligence tool embedded within your Finance, Operations and Sales productivity systems with necessary insights to grow and stay ahead of the market.

This article was written by Bindu Chunduru, Head of Delivery & Solutions Architect at XcelPros. She has extensive hands-on experience in Finance, Costing and Manufacturing functions in conjunction with industry leading ERP systems like SAP, Microsoft Dynamics and building industry specific products. She has been an advocate of transformation through technology and a change agent helping companies grow by improving business processes & practices. If you have any questions or need help in anyway, you can reach out to the author at bindu@xcelpros.com.

About XcelPros

XcelPros is a Chicago-based company and delivers transformation through technology. We offer business and technology solutions with deep industry experience in Chemical, Pharma, Life Sciences (including Medical Devices, Bio-Medical & Biotech), Insurance, Discrete Manufacturing, Process Manufacturing, Distribution and Food & Beverage.

XcelPros is a Microsoft Gold Partner, Direct Cloud Solutions Provider (CSP) and a Systems Integrator (SI) offering software licensing, implementation and consulting services for Microsoft Dynamics 365, CRM, Microsoft Dynamics AX, Business Intelligence & Analytics (Power BI), SharePoint, Office 365 and Azure (Cloud, IOT, Microsoft Flow amongst many others).

Our mission is to provide integrated technology solutions that amplify impact and empower our customer’s businesses. We believe technology is the key enabler of exponential growth for us and our customers.

Contact XcelPros today to transform your business.

Call us toll-free – 1.855.411.0585 (or) visit www.xcelpros.com