Successful Enterprise Resource Planning

Diagnostic Hybrids Inc. manufactures discrete units of mammalian cell cultures and diagnostic reagents—such as antibodies—that are used to grow, isolate and type viruses. The company faced complex information-management challenges because of its many different product offerings, complex bills of material and high volume of units produced. These challenges were complicated by the high volume of production lots and the lot-tracking requirements imposed by the U.S. Food and Drug Administration. The company often had to produce finished cell culture products with expiration dates less than a week away. To maintain its average annual sales growth of more than 70 percent, the company decided to examine its shortcomings.

A hybrid of batch and discrete processes
Diagnostic Hybrids’ manufacturing processes can best be described as growing and cultivating living cells in a batch and dispensing the recipe material into specialized discrete units—tubes, vials and multiwell plates—suitable for use in a laboratory. The end products are used in medical laboratories to diagnose viral infections.

Diagnostic Hybrids’ operations begin with incubating genetically engineered cells in a growth medium. This batch, called a subassembly, is then dispensed into test tubes, vials and multiwell plates and further incubated in a discrete process. The entire operation is conducted under good manufacturing practice (GMP) clean-room conditions. The company dispenses products according to a variety of specialized and custom requirements.

Diagnostic Hybrids differs from conventional manufacturers because its products can die and the company is subject to FDA regulations. As a result, it must have complete traceability of its products down to the lot level to determine expiration dates and notify customers in case of a recall.

Facing the challenges
In the past, Diagnostic Hybrids had had no production accounting system and managed all information requirements on multiple spreadsheets. The company had limited visibility into detailed product costing and real-time raw material, subassembly and finished goods inventory balances. What’s more, it had difficulty sharing information across departments and simple information exchanges became time-consuming projects.

For example, when the company’s customer service team took orders from customers and entered the information into a spreadsheet containing the part numbers and volumes needed to meet customer demand for the day, the operations would quickly become crippled by continual adjustments. As customers called in to change orders and requirements, customer service team members had to update the spreadsheet and send a new version to the company’s manufacturing managers. At any point in time, there were easily a half dozen versions of the spreadsheet floating around the company.

Diagnostic Hybrids also had trouble capturing the amount of material used, leaving managers without a method for tracking production costs. Inventory control was another major challenge, because management was unable to assess inventory until it counted the goods at the end of the month. If a supplier issued a recall, it took hours to locate the appropriate spreadsheets and determine which customers needed to be notified.

Choosing an enterprise resource planning (ERP) system
Unprecedented growth, inefficient methods and poor data spurred the management team at Diagnostic Hybrids to search for an ERP system. The evaluation team comprised management and a number of other individuals across key areas of the business. They called in 10 vendors to deliver on-site demonstrations. Based on that process, the evaluation team narrowed the field to two vendors, each of which was then asked to present a two-day demonstration. Everyone who viewed the demonstration was asked to evaluate the relative merits of the two software packages. The evaluators chose the Made2Manage® Enterprise Business System.

Information drives cost savings
The Made2Manage® software greatly improved the company’s business processes, starting with ordering. Each sales order started to generate a work order. With the company’s customer and product information in one comprehensive system, customer service representatives could process orders more efficiently, make changes to standing orders and maintain customer-history information. One valuable software customization allowed standing-order releases to be automatically scheduled by defining the shipping schedule in a drop-down box.

According to Geoff Morgan, Diagnostic Hybrids vice president and CFO, “We have reduced the time needed to schedule out a large order from a customer from four hours to 30 minutes. . . . since implementing the system, Diagnostic Hybrids has effectively doubled in size, without adding additional full-time customer service staff.”

Return on Investment at a Glance

Diagnostic Hybrids saw the following improvements after implementing its ERP system:

Effectively doubled in size without any additional full-time equivalents in customer service.

Experienced $8 million in revenue growth.

Better complied with FDA regulations by becoming more accurate and responsive to product recalls.

Reduced the time needed to schedule out a large order from four hours to 30 minutes.

Improved product costing.

Created competitive product pricing.

Helped production become more closely aligned with true product demand.

Closed month-ends more quickly.

Provided enterprisewide data to all employees for better decision making.

The company makes certain products on different days of the week, so manufacturing managers need to see the demand for the products that are scheduled each day. The production floor travelers are then used to automatically generate bar code labels for the products . Raw material is back-flushed from inventory based on production volume, and adjustments are made at the end of the day to account for any discrepancies in the amount that was produced vs. the plan.

Each unit of finished goods is assigned a lot number that is recorded in the software. If a supplier recalls a product, the company can easily generate a list of lot numbers and customers affected by the recall. It also knows exactly what’s in inventory at any given moment, which makes it possible to reduce the volume of inventory that it carries without worrying about running short. Diagnostic Hybrids is moving toward a totally paperless process, in which production scheduling would flow directly from customer orders.

The company has also developed a costed bill of materials for each of the 300-plus items in its catalog. As a result, managers know exactly how much it costs to build each product and can price products more accurately. “Our financial information is more accurate because our system captures information that was not available in the past, such as when research and development takes products from manufacturing,” Morgan said.

Another example of cost saving is the company’s improved ability to monitor and manage the scrap of finished goods safety stock. Because these data can now be trended, manufacturing management can fine-tune the size of production lots to meet product demands more closely.

Diagnostic Hybrids also closes its books more quickly now that information flows automatically from sales orders, work orders and inventory into the accounting system. Each area of the company can use data already entered by others, saving nearly everyone data-entry time as well as helping to prevent errors.

“From the point of our ‘go-live’ date, we have experienced $8 million in revenue growth,” said Matt Holbrook, manager of information systems. “We had to add only two additional full-time equivalents to our administrative staff to support this growth.”

Happy to create new jobs based on unsurpassed revenue growth, Holbrook looks to future ways he and his team can partner with the ERP provider to drive additional cost savings.

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