SAP R/3 Implementation, Hosting & Managed Services - Pharmaceutical Industry
Enabling The Customer to Reduce Costs and Focus on Core Business Issues
The Customer:
SANKYO CO., LTD.: Manufacturing and marketing of pharmaceuticals, medical devices and diagnostics, veterinary drugs
- Headquarters: Tokyo, Japan
- Established: 1913
- Capital: 68.7 billion yen ($625 million as of March 31, 2003)
- Revenue: 400 billion yen ($3.7 billion for FY2002)
- Number of employees: 6,033 (as of March 31, 2003)
- Branch offices: 11
- Sales/Satellite offices: 67
- R&D facilities: 5
- Factories: 4
- Affiliates & Subsidiaries: 48
The Backgound:
In the competitive pharmaceutical industry environment, Sankyo needed to develop a new profit structure in which the company could enhance its profit margin without having to rely heavily on new product development. The new profit structure included cutting costs of more than $200 billion yen ($1.82 million U.S. dollars) a year by streamlining business processes and increasing operation efficiencies. To achieve this goal, Sankyo decided to implement the SAP R/3 enterprise resource planning (ERP) system.
Sankyo also made a decision to outsource the operations, support and maintenance of the SAP system. With outsourcing services, Sankyo hoped to allow its IT group to focus on information strategy planning and development instead of daily operations, while reducing costs at the same time.
“The pharmaceutical industry in Japan is in a very difficult situation due to fierce global competition, domestic deregulation and drastically increasing costs for new product development. In addition, one of Sankyo’s major product patents is about to expire. Given these situations, we have a critical business issue: we need to develop a new profit structure with minimum impact to new product development – in other words, we need to reduce costs. To tackle this issue, we set our goal to cut costs of more than $200 billion yen ($1.82 million U.S. dollars) a year by streamlining business processes and strengthening internal IT functions. We believe we can achieve these goals by implementing the SAP R/3 ERP system.
We also decided to outsource the application management, support and maintenance to further cut costs. We believe outsourcing will allow our IT group members to focus on core IT strategy development and systems design.”
- Board member
Vendor Selection:
Sankyo started the vendor selection process in Fall 2001. After an 18-month complex vendor selection process, Sankyo chose NEC for the following reasons:
- Extensive systems integration experience in the pharmaceutical
industry;
- Deep knowledge in SAP implementation and consulting services;
- Project management skills;
- Outsourcing expertise; and
- World-class data centers.
“An ERP system is essential for businesses to optimize operations and to reduce costs. Therefore, it is critical to choose a partner who can provide the best possible services for our specific needs. During the vendor selection process, we Smooth SAP R/3 Implementation
visited each candidate’s data centers and interviewed their clients to learn and compare their services, expertise and execution skills. After 18 months of research, we chose NEC as our outsourcing partner.”
- Head of IT group
“We had two major concerns for this outsourcing project. One was to clearly define services requirements and create a comprehensive Service Level Agreement (SLA). The other was to smoothly transfer the responsibilities from our IT department to NEC; who would actually implement and maintain our SAP system.
NEC helped us define and document a comprehensive SLA. This process was indispensable for us to thoroughly learn the history of service performance, to conduct joint evaluation and to improve total service quality and operation/management efficiency.”
– Head of business restructuring
“NEC helped us conduct employee training from November 2002 to January 2003. At the same time, we also defined help desk rules and completed transferring our system operations to NEC. With NEC’s help and expertise, the process went smoothly within the timeline we had originally planned.
It was difficult for us to define service requirements before the project actually started. However, NEC assigned experienced consultants with comprehensive skills and knowledge to our project and my initial outsourcing concerns alleviated as the project progressed.”
– Head of IT group
Results: Improved Operation Efficiencies. Reduced Costs. Maximized Bottom-Line.
“Working with NEC’s experienced consultants, our entire SAP ERP system is up and running without any problems. The SAP ERP system has enabled us to make our business processes more efficient so we can be more competitive. We can also better collaborate within the organization using the SAP system. Being able to better share information within the organization has allowed our employees to be aware of our business goals and contribute to the bottom-line. The core benefit of outsourcing is to allow us to focus our internal resources on critical business functions. I believe that the decision to outsource has also enabled us to react to business environment changes more rapidly. We will further analyze our business processes and continue to outsource less-critical business functions. This ERP system implementation and deployment was initially thought to be a huge project for us, but it turned out to be a good experience thanks to the great staff at NEC.”
– Board member
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