Company
Background
AmerisourceBergen
Corporation is
one of the
world's
largest
pharmaceutical
services
companies
serving the
United States,
Canada and
selected
global markets
with a focus
on the
pharmaceutical
supply chain.
Servicing both
pharmaceutical
manufacturers
and healthcare
providers, the
Company
provides drug
distribution
and related
services
designed to
reduce costs
and improve
patient
outcomes.
Business
Scenario
As a major
distributor in
the
pharmaceutical
industry and
comprehensive
pharmaceutical
services
provider,
AmerisourceBergen
Corporation
has several
relationships
with
manufacturers,
pharmacies,
and hospitals.
In addition,
the company
manages
distribution
of both
brand-name and
generic drugs.
AmerisourceBergen
is challenged
not only with
complexities
of contract
and
relationship
management
with its many
manufacturers
and customers,
but also by challenges
associated
with the
physical
distribution
and inventory
management.
While
managing the
contract and
pricing
details
associated
with each of
its many
relationships
is
people-intensive
and
time-consuming,
it is critical
to the
company's
bottom-line
profitability.
To address
these
challenges,
AmerisourceBergen
has
implemented
BPM
enterprise-wide
to enable
processes such
as contracts
management and
chargeback, AP
vendor
reconciliation,
pro-generics
competitive
pricing and
the quote to
contract
lifecycle.
This year, as
part of the
company's
broader
business
transformation
initiative,
AmerisourceBergen
replaced its
legacy system
with SAP, and
used BPM to
create six new
processes,
including PO
reconciliation
and variance
resolution.
Variance
resolution,
which is
unique to the
pharmaceutical
industry and
critical for
ensuring
AmerisourceBergen's
compliance
with strict
regulatory
mandates,
including FDA
and DEA, is
not provided
by SAP. These
processes will
integrate with
SAP and
provide users
with a
seamless,
one-stop shop
experience.
These and
other
implementations
have enabled
AmerisourceBergen
to:
-
Establish more
efficient and
accurate
tracking
capabilities
-
Significantly
reduce
chargeback
disputes
-
Improve
transaction
transparency
and improved
supplier
collaboration
-
Realize
millions of
dollars in
recurring cost
savings
-
Empower
more
process-centric
thinking
across
multiple
departments
-
Enable
variance
resolution to
expedite
credits and
returns across
partners,
customers and
suppliers
-
Establish
Process Center
of Excellence
To remain
successful in
this highly
competitive
market,
AmerisourceBergen
needs to be
constantly
improving,
changing and
innovating. To
this end,
AmerisourceBergen
invests
significantly
and
continuously
in technology
to extract
strategic,
financial,
competitive,
and
productivity
dividends. BPM
is an integral
tool in the
company's
arsenal.
One area in
which the
company has
benefitted
from BPM
innovations is
contracts and
chargebacks.
This process
drives the
establishment
of pricing and
terms with
each of the
company's
manufacturers
and then
controls
compliance
with pricing
terms and
payment of
rebates from
the
manufacturer
if the company
is forced to
sell at a
lower price to
compete. The
process
represents a
cash flow of
approximately
$10 billion a
year - and any
disputes or
inaccurate
pricing data
result in
costly delays
in getting the
refunds the
company is
owed.
Due to
frequently
shifting
business
conditions,
contract
prices
fluctuate.
When they do,
both the
distributor
and
manufacturer
need to
analyze these
changes and
validate them
against
business
rules.
Traditionally
in the
industry,
communications
and record
tracking
required
between
manufacturers
and
distributors
has been
largely manual
- with a heavy
reliance on
email,
telephone, fax
and postal
mail -
resulting in
costly
inefficiencies
and inaccurate
information.
ROI
AmerisourceBergen
built a
business case
to justify
implementing
BPM - focusing
on the hard
dollar
benefits the
company would
realize in the
form of lower
headcount,
fewer
disputes, and
more accurate
pricing
information as
well as soft
benefits such
as faster
processing of
price changes
and better
supplier and
customer
relationships.
The company
recognized
that in
addition to
the initial
pilot
projects, many
critical
business
processes
would likely
become BPM
projects in
the future.
This made the
business case
for investing
in BPM
technology
even stronger,
as it would be
a technology
that could be
extended and
leveraged
across other
areas of the
business.
The
success
of
AmerisourceBergen's
project and
ROI generated
by using BPM
helped
establish a
strong
business case
for expanding
the use of BPM
to other areas
of the
business. The
company held
workshops to
educate other
departments
about the
value of BPM
and helped
them identify
potential
"process"
candidates for
use of the
technology.
Out of this
effort, many
additional
processes were
identified as
candidates for
BPM,
underscoring
the need for
and value of
an
enterprise-wide
deployment.
The use of
BPM has
resulted in
significant,
recurring cost
savings and
long-term
competitive
advantage for
AmerisourceBergen.
Company
officials
believe that
the effective
implementation
of BPM
software is
essential to
achieving real
time
communications
of contract,
pricing and
membership
updates
between its
trading
partners and
most
importantly,
it directly
impacts
AmerisourceBergen's
bottom line.
AmerisourceBergen
has
successfully
adapted a
strategy where
new BPM
implementations
occur in less
than 12 weeks.
Moreover,
removing
repetitive and
tedious
paper-based
processes that
suffered from
high error and
rework rates
was seen as a
positive
improvement by
staff.
Project
Capsule
Timeline: In
July 2005,
AmerisourceBergen
commenced a
pilot BPM
project.
Following the
success of
that project
the company
recognized
that BPM could
be leveraged
across other
areas of the
business to
solve similar
business
challenges.
This led
AmerisourceBergen
to expand to
an
enterprise-wide
BPM deployment
in January
2006. In 2010,
the company
again extended
its BPM
deployment to
interface with
SAP.
2010
Initiative: In
2010,
AmerisourceBergen
began
migrating its
legacy systems
to SAP and is
using BPM to
create six new
processes that
extend and
augment SAP's
capabilities
around
managing and
automating
critical
processes
within SAP.
For example,
SAP does not
offer a
variance
resolution
process, so
AmerisourceBergen
is using BPM
to bring out
all variances
in its SAP
system (i.e.
variance
between PO and
invoice).
Variances are
identified in
SAP and then
passed to BPM,
which resolves
the variance,
matches the
credit and
sends it back
to SAP (more
than 1.2
million
credits,
including
manual, 812
(EDI) and
paper, come
into BPM for
matching
purposes each
month). This
cyclic process
is seamless to
users.
Additional
processes
created in BPM
that will
interface with
SAP include
drop ship
invoices, PO
reconciliation,
all returns
(including
factoring) and
associated
credits,
indirect
expenses and
invoices, and
AP indexing
and
processing.
Enterprise
BPM Adoption:
To date,
AmerisourceBergen
has
implemented BPM
enterprise-wide
and has over
3,000 users
(including
subsidiaries)
and over 200
processes
automated.
Return on
Investment (ROI)
in terms of
hard dollars
is achieved in
as little as
three months
after each
process going
live.
Executive
Sponsorship is
integral to
BPM at
AmerisourceBergen
and is
department-driven.
Business-IT
Collaboration:
AmerisourceBergen's BPM projects
are
collaborative
efforts with
business and
IT. Both
business and
technical
participants
comprised the
project team,
and primarily
included the
Accounts
Payable
department -
from the VP of
Accounts
Payable to
Data Entry
operators. The
implementation
team was
comprised of
four members.
BPM has
quickly become
a priority at
AmerisourceBergen
to improve
internal
productivity.
The company
saw the
advantage of
creating a
Process Center
of Excellence,
comprised of
key business
and IT people
who assess
processes,
help with
business case
development,
and oversee
BPM projects
to ensure they
are
successful.
Methodology
The Process
Center of
Excellence
(COE) team at
AmerisourceBergen
ensures that
BPM is
entrenched
into the
fabric of
AmerisourceBergen.
Over 200
processes have
now been
deployed
enterprise-wide.
The
implementation
team uses a
modified
version of the
Software
Development
Life-Cycle as
its
methodology as
well as Agile
and Iterative
development
life cycle.
This enables
them to
categorize and
prioritize
projects,
conduct
iterative and
rapid
development,
build reusable
components,
effectively
involve the
business and
provide a
30-day
warranty as a
"cushion"
for their
implementations.
Key
Performance
Indicators (KPIs)
are built
around
processes to
measure
productivity
and are
defined on a
departmental
basis. These
KPI enable the
company to
continually
refine and
optimize its
processes. The
business and
process owners
determine the
appropriate
KPIs to
monitor and
measure for
their
respective
department,
with IT
providing
input and
ultimately
executing on
the directive.
One of the
largest
contributors
to
AmerisourceBergen's
ability to
achieve
success in its
BPM efforts
has been its
focus and
emphasis -
from the
outset - on
scoping
3-month
deliverables
and milestones
for every BPM
project and
defined
metrics way to
ensure they
were
consistently
delivering ROI
and adding
value to the
business.
Now,
AmerisourceBergen
has a mature
Process Center
of Excellence
in place to
govern BPM
projects
corporate-wide
and maintain a
constant focus
on KPIs. It is
this focus on
KPIs and its
emphasis on
applying BPM
to
mission-critical,
core business
processes that
has enabled
AmerisourceBergen
to track
millions of
dollars in
recurring
savings across
several of its
BPM projects.
Lessons
When looking
at expanding
or embarking
on new BPM
projects
within the
organization,
the company
refers to and
applies these
best
practices,
which include:
-
Establish a
COE team with
adaptive
individuals.
-
Work in
very agile and
iterative
mode.
-
Build
reusable
components.
-
Involve the
business to
ensure
alignment.
-
Take
advantage of BPM
technology.
-
Categorize
projects and
look for quick
wins.
-
Use BPM
workflows for
managing
processes, not
for
transactional
systems.
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Winner, Van Ameyde
