“The natural question is why we changed ERP systems,” says Dan Lubin, Director at IT at Abiomed. “The simple answer? We’re scaling our operations in anticipation of growth. Our ERP strategy is to leverage the fewest number of tools for the most areas of the business that we can – the opposite of a best-of-breed strategy.”
That approach is consistent with Abiomed’s product strategy as the company has more products in various stages of regulatory review than it has had in its 25 year history. In 2005 it acquired a German company called Impella and is working to expand its global reach through regulatory progress and increased distribution.
“We’re a medical device company. The product that makes up a good portion of our revenues is the AB5000, an artificial ventricle that has exclusive labeling on heart recovery for every type of sudden heart failure,” says Lubin. “We are also well known for the AbioCor, the world’s only totally implantable artificial heart, which was approved by the FDA in September 2006.”
Searching for broader access to the market
But Abiomed is searching for much broader access in the United States and the worldwide market. With the acquisition of a German-based company, Impella, Abiomed now has a variety of minimally invasive products used in the catheterization lab in its portfolio. “Those products are already approved in the European Union, but they are in trials by the FDA. We are a publicly traded company in the United States, so we have to comply with Sarbanes-Oxley, with the Code of Federal Regulations, and with requirements from an audit regulatory authorizations reporting standpoint,” says Lubin. “Therefore, there’s a need not only to scale our manufacturing or product portfolio, but also the technology and automation layer that supports all of the business processes.“
Abiomed began to search for a new ERP solution in 2005. “We were converting from a very old legacy ERP system called Minx, which is UNIX-based, and about 100 internally developed applications and databases,” Lubin recalls. “Our final round was Oracle, Microsoft, and SAP.”
Microsoft offered Abiomed some extra products it was very excited about. “But by the time we added in all the components we thought we’d need, it wound up being an expensive solution for us. Also there were a number of third parties involved, and who knows where they will be five years from now”, Lubin says. “Our perception of Oracle was that while it would meet our needs, it didn’t offer the flexibility we felt was necessary to support our international operations.
When Abiomed looked at all the things it wanted – whether it was an international control environment from a regulatory compliance standpoint, product life-cycle management, document management, quality management, and an option to embed foreign subsidiaries – the company found that “the nice thing about SAP is that it can do pretty much anything”, Lubin says. “We thought that SAP could provide better local functionality.”
Abiomed is at an early stage of growth, and it remains flexible about that growth. That’s why Abiomed needed all the options it could get from standard software. “SAP’s ability to service any kind of company anywhere in the world and yet still consolidate with an entity in the United States was compelling,” Lubin says.
Focus on implementation, not reengineering
Abiomed selected SAP in December 2005 and began its implementation of SAP Business Suite in January 2006. “We implemented financials, controlling, materials management, production planning, quality management, sales and distribution, and human capital management as core ERP functionality,” says Lubin. “We also implemented SAP NetWeaver Enterprise Portal, replacing the old ERP system and about 35 of our internally developed applications when we went live on Independence Day weekend in 2006.” Abiomed has since extended the landscape to its service organization and has begun to use SAP NetWeaver Business Intelligence.
Abiomed was careful not to make the implementation project a process reengineering effort. The company found it challenging enough to go ahead in 26 weeks with a business blueprint of 250 pages and over 500 business processes, each one with some minor or major change required. “It could be as simple as having manual processes that worked well, but which didn’t translate well into automation,” Lubin says. ”And when we really challenged it, we realized it probably didn’t need to exist the way it did at all. And so we changed it.” Lubin says that questions about who can perform what operations – especially in a regulated industry – are a large part of the ongoing conversation. And so the company has had challenges in those areas as well.
Right now, Abiomed’s use of SAP software is very internally focused, and the benefits have been felt primarily by the internal team and internal processes. “You can take it for granted, that coming home from a SAPPHIRE conference, I put all my expenses into the SAP Travel Management application via the enterprise portal within human capital management,” Lubin says. “The workflow gives it to my manager to approve, and the ongoing process takes it to payroll, and it eventually shows up in my paycheck.” In the old days, this was a paper-based process – with the result that no one ever knew about the status of the reimbursement. “Using the new application is especially good for our team of traveling clinicians and salespeople,” Lubin says.
Rolling out the processes across the supply chain
“This year we’re looking to continue to leverage SAP by implementing it in our operations in Europe and adding additional business intelligence functionality,” says Lubin. Currently, Europe still has its own ERP system – KHK – but plans are to integrate them onto the US SAP system. “We had discussions about buying the SAP Business One application for the subsidiaries, but because we all have the same complexities – shipping products, FDA validation, and so on – we are going to have one global instance of SAP software,” Lubin says. “That was another reason for us as a small company of about 300 employees to buy the entire SAP Business Suite family of applications.”
Future opportunities will arise because Abiomed is in a highly regulated business. The need to preserve traceability will become more and more of an issue, and the only way to solve it is through the extension of a single system across the supply chain. “Maybe two years from now we’ll switch focus to external processes starting to look at things like potentially allowing our customers or hospitals to see the service history of their devices,” Lubin says. “We could allow them to place online orders for the disposable components of our products.” Abiomed management is thinking of allowing its customers to see more transaction history from its SAP solution, so that they can see the business they’ve already done and the business they will do in the future with the company. What’s more, there’s an option to integrate contract manufacturers into the processes and ERP as well. “We’ll be implementing SAP software bit by bit. For us, it is a journey,” Lubin says.