ERP for Life Sciences Businesses

ERP for Life Sciences Businesses

When you’re getting ready for that commercialization, when you’re looking at that inventory control, get ahead of that. Because the last thing you're going to want to be worried about is your ERP implementation as you're trying to build a business.

Explore SAP ERP for Life Sciences

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[Transcript]

[Russell DeLapp]: When you’re getting ready for that commercialization, when you’re looking at that inventory control, get ahead of that. Because the last thing you're going to want to be worried about is your ERP implementation as you're trying to build a business.

[Peter Kowalke]: Hi, this is Peter Kowalke. Today I’m here with… Thanks for joining me, you two.

[Ralph Hess]: Hey, Peter. How are you?

[Russell DeLapp]: My pleasure.

[Peter Kowalke]: Today I’d like to talk about ERP for life sciences and for regulated industries. Let's start at the basics. Why do life sciences and regulated industries need ERP?

[Ralph Hess]: Well, I think that every life science company goes through an evolution that where they start out really focused on what their treatment or their product is going to be, and that's where a lot of the investment and thought process goes into in starting a company
like that. Before long, as they look to either</font>

[Ralph Hess]: achieve what we refer to as commercialization, or actually bringing a product to market, going through all the different regulatory rigor that they need to, to bring a product to market, they come to realize that they need to put some systems and processes in place in order to be able to run their business, but also to pass some of the regulatory rigor and inspections that they're going to have to navigate over the course of time. And so an ERP really becomes the foundation for all the business process that a life science company needs to adhere to. So whether that's the running their financials, tracing and tracking their inventory, being able to produce products in a repetitive and regulated way, whether it's how we're ordering product and bringing it into the warehouse, whether it's how we sell it, how we deliver it, the ERP solution is providing the business process foundation that can be regularly audited and able to be verified in a regulated industry.

[Peter Kowalke]: So the way you're telling it, Ralph, it sounds like life sciences and regulated industries need ERP from day one.

[Ralph Hess]: We certainly think so, Peter! Well, when do you normally see them adopting ERP then? It’s usually Yeah, it's a great question. So,
as we're dealing with startups, we usually see it when a true CFO comes on board. And the true chief financial officer is generally a person that will
bring into the business the desire for more controls and process within the organization. Up to that point, that has usually been driven by the quality department.
because the quality department will be very interested in making sure that there's consistent processes that are being conducted throughout the organization
as part of their quality plan. But it's really usually the CFO that is the driving force in saying: Okay, we are now at a point where the business is mature to
have brought this person on board. And so now is the time to start to implement an ERP solution.

[Peter Kowalke]: So I'm hearing that it doesn't often happen during the developing the core product. It doesn't happen right after the university, the startup phase, it happens when it's maturing?

[Ralph Hess]: Yes, and at various stages of its maturation. So depending upon the level of investment that the company has, depending on whether they're bootstrapping their product versus somebody has invested $100 million and what those investors are looking for in terms of the utilization of that capital, the deployment of that capital, all of those will become variables of when a system is implemented.

[Peter Kowalke]: You hit on something I wanted to ask you about, which is: You know, as a life science business, a startup, you know, that is looking for outside investment, What does having an ERP system in place do for a startup in terms of investment and how it looks?

[Ralph Hess]: It's a great question. So, I think with your first investment, probably your first round, not necessarily seed rounds, but in your series A, series B, oftentimes that it won't be as big of a factor as your latter-term investments, where you're starting to near that exit strategy. One of the things that we've been told, and I believe industry has shown, is that by having an SAP ERP solution in place, it does increase the value of a life science organization. So, as the investors are looking towards a liquidity event, whether that being going public and the SOX compliance, and the FDA regulatory compliance that has to be in place for that, or whether it's attracting your next round of growth investment, having that ERP solution in place is going to really provide some comfort to those investors that you have a business that's well founded, well established and is running well.

[Russell DeLapp]: It’s always nice to get a best practice system deployed early, and that way you're just growing, you're just leveraging more and more of the system as you grow and scale because you're always going to need punch outs to Fisher Technology, right? That's stuff that we have out-of-the-box. Having just
that three-way match for your financial control is going to be great. As you're building your facility, if you're that early on, you're gonna wanna leverage some of the assets under construction. Just stuff that's there for you when you're ready to consume it is a huge value add to the organization. But when you're looking at investment to show that you have a SOX-compliant system, that you have a system that can be audited, and most importantly, that you have your processes validated by a third party, is gonna be huge in any kind of series that you're looking at.

[Peter Kowalke]: It generally looks good for a startup who has an ERP in place. As an investor, you say: Oh, their finances are clearly in order because they're using the system that handles it well. Their processes are going to be in place. They've already got the back end ready for this growth.

[Russell DeLapp]: Exactly.

[Peter Kowalke]: What are some of the other advantages of ERP for life sciences and regulated industries? Can we get specific on how an ERP system supports a life sciences business?

[Russell DeLapp]: I think, just one of the challenges across most ERP systems in life sciences is CFR 21 Part 11 compliance, which requires a digital signatures. Making sure that those people are authorized to make those changes to those transactions in a secure way that is going to be, it's going to make the FDA happy. That you can say, I am in a validated system and we're doing everything in compliance with the FDA rules and regulations. And so ingraining that, out-of-the-box with our life science package, is a truly effective way to…again, take you pre-revenue, before operation, all the way through using the same system, using the same processes all the way into commercialization of your treatment or product.

[Russell DeLapp]: So you don't have that disruption when you're taking a product to market. The core process is already there. The second thing is, we do a lot of work in life sciences. So we have templated approaches that, again, make it very affordable for early-stage life sciences to adapt and adopt different phases of their organization. So if you're pre-commercial, if you're pre-production, you're only taking certain segments of the template and deploying them. And then you're only worried about that 20% that might be different than the standard template. And so, that's ingrained into our methodology and it's gonna accelerate your validation, test scripts, and ultimately lower the cost for a lot of that, as well as make it a quicker time to value.

[Peter Kowalke]: So, what you're referring to is Navigator's prepackaged industry solutions

[Russell DeLapp]: Exactly.

[Peter Kowalke]: for life sciences?

[Ralph Hess]: Correct.

[Peter Kowalke]: So instead of taking an ERP off the shelf, building it for the particular needs of a medical device manufacturer, there's a pre-built, almost turnkey version of ERP for medical device manufacturers that then you just need to tweak a little bit for your specific business?

[Russell DeLapp]: Exactly. So you don't have to describe to me your challenges with digital signatures. I'm going to go back to that. We already know them. We already have a solution. We already know what you're going to need to do in the ERP to accommodate those regulations. So it takes a lot of pressure off of your quality team to see what's out there rather than trying to explain the challenges and have somebody build something for you.

[Ralph Hess]: Yeah, and Russell, I think it goes even beyond that. And something we take great pride in is our team. On top of having the package, we have the consulting team that, again, knows the industry and isn't going to be asking you questions that they don't understand, or you're not going to be asking them questions they don't understand. So, the package for us is really a combination of three things. It's some standard operating procedures that we have prepackaged. It's IP, or intellectual property, that we bring to the table for digital signature and quality. But the third part, and equally important, is our human capital that we have as part of our services team.

[Peter Kowalke]: I know, Russell, you hit upon the FDA validation part. And I wanna get to that in just a second. But before we talk about that one, can you give me a few other reasons why ERP really is essential for a life sciences business today?

[Russell DeLapp]: Yeah, really, it comes down to inventory control. When you're dealing with controlled substances, understanding that level of inventory control is going to be extremely important… Or live viruses. So you have to measure how long certain things have been at a cryostorage, for example. Is it still good in that process? So, it It really comes down to the inventory control for a lot of our customers, and making sure that your processes and your procedures are meeting the
hundreds of checks that you need to accommodate. 

[Russell DeLapp]: So there's that side of it, but there's also the SEC reporting. Having that structure and being able to report into those different entities is going to save you a lot, a lot of pain and disruption down the road. Again, plugging that in early on, or even midstream if you're experiencing that pain right now, certainly we have that solution for you as well, adopting those best practices both from Navigator and from SAP.

[Peter Kowalke]: So what I’m hearing then is, when we’re talking about a regulated industry such as life sciences, there's a lot of strict process control that needs to go on, and that's at the heart of an ERP solution. Without that, it's pretty hard to make sure products are identical, that they're sourced from the verified vendors and tracked and traced when if... you know, God forbid something goes wrong, they can be tracked as well. And that's kind of the center of an ERP,
what an ERP does.

[Ralph Hess]: Certainly within the life sciences realm, absolutely Peter. And I think that all goes down to, you know, kind of the predictability of the process, the standard process that then really supports the quality system that life sciences companies put in place. Those are all kind of the key components of why an ERP is important in the life sciences. Or, let's just, you know, kind of go out to a regulated industry.

[Peter Kowalke]: Let’s talk about validation. FDA validation. This is something that, know, gets talked about, but I don't know if it gets talked about enough. The FDA requires certain requirements from life science businesses in terms of their systems. So what is FDA validation? Tell me more about that. FDA validation is a number of components through the process. One of those that we tend to focus on more is really the ERP-based validation requirements.

[Russell DeLapp]: So I'll talk to that today. Really, to put it simply, the system does what your processes say it will do. Certain regulations like
basic security protocols. We mentioned digital signatures to make sure that person has the authorization to sign off on this process being executed, right? So my technician is qualified to record the results in this specific element, and then my quality manager is approved to make a usage decision on this lot of products to make sure that all the signatures and documentation and results are in accordance with the regulations or statements for the product. And so the validation basically goes through all of your business processes. Make sure the outcome of all of those processes are intact. And there's no loopholes to it, right? You can't bypass that process by doing something differently than you should.

[Peter Kowalke]: So the FDA has guidelines on what and how you're supposed to do it. And validation is the verifying that, yes, you're actually, those processes are good. This is really what happens. How does that actually look in practice with an ERP? How do you validate an ERP for the FDA?

[Russell DeLapp]: Yeah, it's an interesting question because there's so much change in the organization like we mentioned before. So we're going through this change management procedure. We're going through a software implementation. And so we've basically inserted the validation effort in parallel with our verifications, which is what we call it, or realization of the system. So at the point the users have signed off on this is my process, this is what it's going to look like. At that point in time, we insert the validation team to start that validation process early.

[Russell DeLapp]: So on day one, you have a validated system. And so it's, you know, we bring the validation team in early in the process as well, so they understand the timeline. We work with their project manager. And so when we say we have a template, that includes validation, right? So we insert this other team, this other project, essentially that layers on top of our project to ensure that seamless, both implementation timeline, and validation timeline.

[Russell DeLapp]: To put it another way, it's a lot of documentation, it's a lot of testing, and it's a lot of user feedback that is in a controlled way So you have these
huge booklets of your validated processes.

[Peter Kowalke]: And that has to be done by a third party, if I'm not mistaken, that actual validating the system?

[Russell DeLapp]: We highly recommend that. But technically it is not.

[Ralph Hess]: We, We, Peter, we do have some customers who will, you know, be validated by a third party and then build up their own validation team as part of their quality team. That will then self-validate after the initial validation. So… But it is not, as Russell said, not for the faint of heart, not for people who haven't done it before, which is why, typically customers will rely on a third party.

[Peter Kowalke]: Okay, so it can be done without a third party, but it's recommended you do a third party. And I hear that using something like a prepackaged solution speeds along that process, too, because you're not inventing something, you're using something off the shelf basically.

[Russell DeLapp]: Yeah, and Navigator has a validation team that's inserted in the projects as well. So, our customers have the choice to leverage Navigator as a validation team, or we also partner with other organizations that come in as a third party. They tend to be slightly more expensive because they have to validate that our package makes sense first, instead of our team that already has worked with that package, right? So, that's the difference, but they do have different approaches, and there's pros and cons to both.

[Peter Kowalke]: Let's talk about growth. How does ERP support the growth of a life science business?

[Ralph Hess]: As you’ve implemented an ERP, at whichever stage of growth you want, certainly it's going to be able to allow you to process more transactions in a predictable, validated way so that it's taking, again, removing any manual intervention and applying automation to things like accounts payable invoice scanning, where you can leverage artificial intelligence and robotics to be able to streamline and automate that process. But also just in terms of being able to expand into handling order to cash, and being able to handle EDI transactions, and the types of things that come with growth and volume that a customer needs to be able to address and support as they're growing.

[Peter Kowalke]: My understanding is Navigator works with a lot of life sciences businesses. What have you seen from customers and potential customers that the life science business most needs to understand about ERP, that often it doesn't when it starts the conversation with you?

[Ralph Hess]: That's a… That's a really good question, because oftentimes the initiative towards systemization is initiated by quality, because quality is trying to put process and documentation in place. And then, as I had mentioned earlier, it is the CFO or finance who will then come in on the other end. And so, really, as we take a look at working with our prospective customers and our existing customers, having that team come together and understand each other's constituency’s requirements, and having a good project team that addresses both of them to the best extent, really I think is one of the things that customers need to understand as they're looking forward into an ERP.

[Russell DeLapp]: When, when you’re getting ready for that commercialization, when you’re looking at that inventory control, get ahead of that. Because the last thing you're going to want to be worried about is your ERP implementation as you're trying to build a business. And so having that foundation in place, and having those best practices and working with our consultants that have worked with dozens of other customers that did what you do right now, and are still supporting them with where you want to be, is just gonna be instrumental in your growth as an organization.

[Peter Kowalke]: Well, thank you very much for talking with me, Ralph and Russell. I really appreciate it.

[Ralph Hess]: We've enjoyed it. Thanks Peter.

[Russell DeLapp]: Thank you.