Prescription for growth

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The healthcare industry has grown steadily over the past few decades and is now one of the largest industrial sectors worldwide. Today, it accounts for about seven to 15 per cent of the GNPs of most nations and some spend well beyond that. So, it goes without saying that pharmaceutical distributors must have exceptionally powerful software to be able to handle the large transaction volumes they see every day. Oriola Oy, a major Finnish wholesaler and distributor of pharmaceuticals and healthcare products, knows this all too well.

Oriola is a marketer and wholesaler of healthcare and research products and equipment, as well as a leading pharmaceutical distributor. The company’s main markets are in Finland, the Baltic countries, Sweden, Denmark and Russia. Its operations comprise pharmaceutical distribution, pharmacy and retail sales and dental care as well as healthcare and research – its product offering includes close to 66,000 skus.

The fact is that efficiency, operative reliability, punctuality and high quality client service, backed up by a modern IT system decide the profitability of any distributor. In Finland and the Baltic countries, Oriola has a distribution operation that covers its extensive product portfolio. This system comprises all logistics from import to client deliveries. The Finnish network, comprised of four regional distribution outlets, is able to deliver the
firm’s goods anywhere in the country within 24 hours of the order being placed. And the company’s nine units – each specialising in its own sector – provide distribution, marketing and expert services to promote the businesses of their clients.

Oriola’s services are used by over 60 international pharmaceutical manufacturers including such big names as AstraZeneca, Sanofi-Aventis, Janssen-Cilag, MSD, Novo Nordisk, Organon, Amgen and Orion Pharma. It has two main sectors of operation – pharmaceutical distribution /wholesale and healthcare equipment and supplies. The largest of these is the pharmaceutical distribution and wholesale area which accounts for 87 per cent of sales. Overall, the company’s market share accounts for over 40 per cent of Finnish pharmaceutical distribution.

The firm was established in 1948 as part of the Orion Group which also includes KD, a company that operates independently in the Swedish market. Both the Finnish and the Swedish pharmaceuticals wholesale and distribution operations are characterised by a single channel distribution operation. Most other countries have a multi-channel system, with the same product being available from several wholesalers. In countries with long travel distances involved, such as Finland, the single channel system makes sense.

Extreme diligence
Wholesalers bear a great responsibility in the pharmaceuticals supply chain. The goods must be handled, stored and transported appropriately. This calls not only for extreme diligence throughout the supply chain but also for advanced information technology.

Oriola’s customers, including pharmacies, dentists and labs, hospital clinics, health centres and retail shops are taken care of at every level, especially when it comes to deliveries. Since November, 2004, they have been backed up by an IT solution with business-specific applications. It was then that Oriola introduced a new order and delivery process steering system. The solution came from International Business Systems (IBS), a software supplier for wholesale distribution and supply chain execution based in Sweden.

Looking back, Oriola had a gigantic task on its hands. With 80,000 order lines per day, it needed to replace a functional but technologically obsolete system with a standard ERP system without losing 15,000 customers in the process. The company needed software that could handle challenging transaction volumes. It also needed a pharmaceuticals-specific solution that would enhance functionality, and one that was
scalable. The company chose IBS’ pharmaceutical distribution software solution, IBS Pharma, knowing that it was able to handle two million order lines per hour with a response time of just 0.04 seconds. Oriola went live with the system in November, 2004 and hasn’t looked back since.

Oriola’s main selection criteria for an ERP partner included high performance, a single customer interface, one system across business functions, stability and reliability. In fact, Oriola was the first company to implement IBS Pharma since its introduction in the same year. Hele Lonka, project manager at Oriola, says the company chose the IBS software not only because of promised cooperation in product development but also because of its performance and functionality.

‘One important thing we were looking for was the introduction of batch control,’ says Lonka. ‘This could not have been managed before we implemented the new software. The solution also brought us other benefits when it came to the management of sell-by dates and expiring goods. We introduced warehouse management by location which increased the accuracy of our warehouse management procedures.’

Lonka says the company had excellent customer satisfaction before it chose the solution so its goal was not to drastically change anything – rather, the challenge for the golive date was to ensure continuity and to make sure everything was working as it should.

‘We had one distribution centre and three subsidiaries while our total number of users was over 500. So the day we went live was a huge challenge. During implementation, it was crucial that we didn’t have to struggle with system performance. And since our goal was not to improve
operations at the time but to retain functionality, we really depended on the system to do the job. We were pleased with the results.’

Oriola receives 80 per cent of its order lines electronically, while more than half of order lines are picked automatically. Order fulfilment throughput time is between 30 to 60 minutes. Its employees located in Finland, the Baltic region, Sweden and Denmark, now operate out of nine sites including a central warehouse in Espoo and four distribution centers in Finland.

Modular approach
The Pharma software fits the company’s requirements well. It has modules for sales order management that automatically streamline order entries and integrate them with warehousing, logistics and invoicing. It also includes invoicing and financial modules that provide on-demand integrated invoicing and accounting based on real-time information, warehouse management, picking and delivery, purchasing, returns and
alert management, business analysis, e-business and CRM. But best of all, according to Oriola, it speeds up sales and purchase processing, optimises stock, minimises errors and enhances logistics planning.

The software works well for Oriola’s wholesale business requirements too. With its e1bn yearly invoicing and 20 million orders per year, quick order cycles and high order processing volumes, it needed a professional integrated supply chain management system.

‘Our largest customer base are pharmacies in terms of order lines,’ says Lonka. ‘We compete by trying to get the distribution contract for pharmaceutical companies. But, of course, there are other benefits with an integrated system. It’s simpler, you’re not so dependent on one or two key people, the organisation works together better and it’s more convenient in that you don’t have to involve all departments. It also makes it possible to introduce fresh ways of doing things across functions.’

Risto Kanerva, MD of Oriola in Finland says he is satisfied with the software the company chose. He explains what happened during implementation: ‘After going live, customers were positively surprised since some of them had complained they had had bad experiences with a competitor’s implementation before and were worried when we started ours. But that November, for us, everything went well – even better than expected.’

It wasn’t until a month later that the company realised it was in trouble.

‘When our customers contacted our telesales operators we faced many ordering problems. It took longer to solve invoice problems and answer questions, mainly because operators weren’t used to the system’

But three months later, in March 2005, the application startup phase was over and so were the problems. Customers are now ‘very satisfied’, says Kanerva.

Kanerva adds the main reason the company chose IBS was that the origin of the application was in logistics and distribution. ‘This is different from IBS’ competitors who have solutions geared more toward manufacturing and production businesses. But this IBS solution has some great distribution applications. In fact, the pharma portion of the software was an added benefit.’

One system for all
He goes on to point out that logistics is only part of the solution and says he is impressed with the business solution module. ‘This functionality allows us to use one system for all our business areas. So, this application takes care of all the needs of the healthcare business.’

Kanerva says that processes have also improved, noting that everything is now faster and more efficient, and the firm is able to run with fewer resources. ‘But what we are really excited about is the fact that we now have a platform upon which we can build value-added services and fresh
applications,’ he adds.

Kanerva’s colleague, vp of logistics Seppo Hakanpää attests to this fact. ‘Our old IT environment had too many software systems and no upgrading was possible. We had too many interfaces among the many variants of existing software. But that’s all in the past. We now have single packet solutions as well as real-time visibility and synchronisation of business documents and supply chain data such as vendor and
customer information, pricing, inventory, orders, returns and contracts.

‘And I like the fact that now we have a single user interface. It’s easier to teach new operators how to use the system with a single software and graphic user interface.’

Oriola looks to IBS Pharma to develop according to the needs of the pharmaceutical industry, side by side with best practice in the distribution industry. It is in the midst of putting together a fresh IT strategy. Once this is in place the firm hopes to integrate the software with its suppliers and customers. And Oriola wants to extend the solution to its Baltic operations soon.

Critically, IBS is also supplying management services. ‘The system works well and it’s nice to know we have a proactive supervising function for orders as well as picking interfaces – and we like the fact that IBS is supervising the system 24 hours a day and actively 12 hours a day,’ says Lonka.

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