Anatomy of a Business Transformation

Feature Article | May 21, 2008 by Christine Macfarlane

Reflecting on the start of the company, Thomas Swetnam, vice president of IT at Graceway, says, “We purchased products and a sales force and we went from seven people to two hundred fifty in 6 weeks.” It was mid-November 2006, just before the year-end holidays. Graceway Pharmaceuticals, headquartered in Bristol, Tennessee, was just founded that year. The specialty pharmaceutical company had no legacy system in place, and Swetnam says his instinct told him that because they were in pharma they should go with an SAP solution. So a rapid implementation of SAP Business One essentially launched the company and helped define business processes. In January, 2007, with go-live of SAP Business One, Graceway shipped US$7M worth of products.

“Fortunately, we had the support of B4 Consulting,” says Swetnam. “They helped us to stay on track during this transition.” SAP Business One delivered the functionality Graceway needed and enabled the company to engage quickly with the market.

The company acquired 3M Pharmaceuticals North and South American business, and merged with Chester Valley Pharmaceuticals which positioned the company as a leader in the marketing of specialty pharmaceutical products. Graceway’s best known national brands Aldara® (imiquimod) Cream, 5%, a prescription only dermatology treatment, and Maxair Autohaler (pirbuterol acetate inhalation aerosol), a prescription only rescue inhaler.

Then in July of 2007, the management team started discussing additional needs to support the company’s unprecedented growth. Acquisition, in-licensing, and product development are Graceway’s primary business strategies. The company is on the lookout for new possibilities to bring innovative therapies, unique drug delivery methods, existing compounds for branded therapies, and more, to market. They acquired a distribution facility, and could foresee additional mergers and acquisitions on the horizon. Swetnam notes that they knew they needed logistics support, warehouse management functionality, enhanced reporting, regulatory compliance, and greater support for critical business processes.

Choosing ingredients for success

Again working with B4 Consulting to map out an IT strategy aligned with Graceway’s business strategy, Swetnam and his team decided to bite the bullet and make the leap to EzPharma, a qualified SAP Business All-in-One solution developed by Answerthink for the pharmaceutical industry. EzPharma is based on best practices from SAP and is customized for growing small businesses and midsize companies in the pharmaceutical industry. It’s appealing because it is preconfigured with hundreds of pharma-specific business processes, reports and business forms. It also contains pre-defined user roles and end-user training and validation templates.

Swetnam realized that implementing the entire solution, including the warehouse functions, was an ambitious goal, especially because the team also decided to move to a UNIX environment for stability and security. And they were going through an audit at the same time, which meant that the finance department would only be able to give snippets of their time. “But from our experience in implementing SAP Business One with B4 Consulting, we put complete faith in their ability to design and execute on a roadmap that would have us running the EzPharma solution on January 2, 2008,” he says.

As part of the deployment, Arbour Group, a strategic partner of Answerthink, would manage the US Food and Drug Administration (FDA) validation testing, and be the onsite coordinator of the Six Sigma process.

Just what the doctor ordered

While Graceway may be a young company, it is set to scale dramatically. Swetnam says that they had been very satisfied with the SAP Business One application, and their Canadian and Latin American offices continue to run on it. “It’s just that we knew we could profit with additional functionality specific to the pharmaceutical industry, and rather than adding functions individually, we decided that the best course for us was to move to the EzPharma SAP Business All-in-One solution.

The new solution, deployed in Graceway’s US sites, is delivering lean warehouse management and distribution, as well as integrated shipping with dynamic updates from FedEx/UPS common carriers. Employees now have total inventory visibility from the moment of receipt through electronic quality assurance release, and inventory tracking. They have the ability to do product-segregated reporting, and they can see and track actual shipments.

“Significantly, we have a validated FDA compliant system, which is a requirement due to the addition of the distribution center,” notes Swetnam. EzPharma provides extensive inquiry and reporting capabilities for lot trace and to meet regulatory requirements from the FDA and PDMA. Sophisticated audit trail and electronic signature functions enable compliance with the FDA’s 21 CFR Part 11 rule, which defines the criteria under which electronic records and electronic signatures are considered to be trustworthy, reliable, and equivalent to paper records. It also supports compliance with Sarbanes-Oxley regulations.

“And the finance department loves this new solution. Typically in the past it took at least ten business days for month-end close. Now they can do it in just three to four days. Fifty percent of the work was with manual spreadsheets. They got rid of forty percent and cut time to close in half,” remarks Swetnam. They also can do automatic accrual accounting now, which is important for handling charge backs, returns and Medicare rebates.

Planning for strength and longevity

Most of Graceway’s sales are from inventory, and Swetnam envisions working with B4 to better manage purchasing of non-inventory products as future needs arrive. Another element for future deployment is the SAP Business Information Warehouse function for heightened business intelligence. “We also plan to implement the employee portal, which will make travel authorization and expense reporting far easier,” he says.

Additionally, with support for Sarbanes Oxley compliance the company has the ability go public at some point in the future.

Swetnam states that the executive team knows that they have a platform that will easily sustain at least five to 10 years of growth without having to re-engineer and retrain. “It was an aggressive move, and I was afraid it would feel like bamboo shoots under the fingernails, but it didn’t, and it was worth it,” he says. “We saved millions of dollars and at least two years worth of work by implementing the EzPharma solution now.”

“And if our CEO were to say ‘next quarter we’re buying a manufacturing company,’ I know we’re prepared to handle it,” he says.

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