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Case Study


AmerisourceBergen Accelerates Its Order Fulfillment and Delivery

by Lauren Bonneau, Senior Editor, SAPinsider | insiderPROFILES

January 2, 2012

For any company, delayed deliveries can result in lost profits. But for a company like AmerisourceBergen, which processes 80,000 orders for pharmaceuticals per day, delayed deliveries can have deadly consequences. To continue to ensure that pharmacies and hospitals receive the inventory patients need, AmerisourceBergen embarked on a business transformation initiative to replace its legacy system with a scalable ERP platform.

As a key player in the pharmaceutical supply chain, AmerisourceBergen knows the value of speed and the risk of inefficiency. The company handles 80,000 orders every day, delivering $300 million of inventory to pharmacies, hospitals, and managed care centers from 25 distribution centers. Any delay could cost the business real money — not to mention the consequence to the patients who rely on the medicines being delivered.

It’s “fill or kill,” says Michael Wondrasch, Vice President of Technology Services for AmerisourceBergen. Wondrasch is responsible for application development and support, as well as the company’s technology and data center architecture and infrastructure. “In our industry, fulfillment cycles are extremely short. There’s no such thing as two or three days or weeks,” he says. “We take orders from our customers up until nine o’clock at night, local time, and we guarantee they will receive the product by the next morning. If we can’t deliver the service our customers are looking for, they will go to our competitors.”

To handle increasing demand, AmerisourceBergen launched a CEO-sponsored business transformation initiative to replace its aging technology infrastructure and move to a robust, scalable, integrated ERP platform. “We knew that to continue being a leading provider of distribution services to our customers, our organization needed to change its delivery infrastructure,” Wondrasch says.

Three years later, AmerisourceBergen has not only upgraded its back-end systems of record, but has also re-engineered its entire customer user experience to offer lightning-fast ordering and seamless fulfillment. The key to the project’s success, according to Wondrasch, was fostering and managing relationships with a retinue of partners. “It’s impossible to complete a project this large alone,” he says. “The only way it can be successful is with tremendous program management and partnerships where all partners have an equal say at the table. We treated that seriously. When any of our partners suggested a way to go forward, no point was ever dismissed.”

“I think we’ve done an outstanding job making sure our wide range of customers can continue to place orders and be serviced successfully.”
Michael Wondrasch, Vice President of Technology Services, AmerisourceBergen

Moving to an Integrated SAP Platform

The business previously operated from a homegrown, mainframe-based ERP system, which had been in use for 25 years. “Everything was custom coded from the ground up, which meant making changes became more of a challenge every day,” Wondrasch says. “And many of those customizations were for non-core, non-value-add areas, so we had to challenge if there was a business need to be different from a standard or a leading practice.”

The first step in the initiative was to determine whether to adopt best-of-breed applications to replace decentralized functions or move toward an integrated set of business processes and data. A team of senior business leaders determined that an integrated approach would allow the company to deliver its services most efficiently. “There was a very limited set of technology solutions that could meet those criteria,” Wondrasch says. “And SAP was the clear leader for the wholesale distribution space from a technology support standpoint.”

The business purchased SAP ERP, SAP NetWeaver BW, and SAP Customer Relationship Management (SAP CRM) in late 2008. The implementation team consisted of a mix of internal associates blended with resources from SAP and various SAP partners.

AmerisourceBergen engaged one large enterprise systems integrator (SI) for project blueprinting and another for the implementation itself. The company also engaged with SAP in various capacities, including SAP MaxAttention, SAP Custom Development, SAP Consulting, and SAP Linux Labs.

For instance, SAP MaxAttention — through SAP Active Global Support, which the business engaged with for recommendations from very early on — played an important role in helping the team work through different architectural approaches and develop a deployment strategy. The team selected a big-bang approach to implement back-office functionality, including finance, procurement, and receivables.

Choosing this approach required a tremendous amount of testing and an organizational focus on change management. “We did not miss any business operations because we did a great job preparing,” Wondrasch says. “We closed our first quarter on time to Wall Street, and as a public company, that’s incredibly important and widely seen as an organizational success.”

Also contributing to the success of the project was an intensely involved executive team. “The fact that this was not an IT initiative but a complete organizational initiative was what made the project successful,” Wondrasch says.

Taking the Distribution Centers Live

Once the back end of the system was up and running, the next step was to expand it to customer-facing applications at the distribution centers by providing customers a new ordering platform connected to the SAP system. “We wanted to use this opportunity to provide a new e-commerce platform for our customers that would allow us to have a strategic advantage in the marketplace, and we knew we could build off the e-commerce framework that SAP had in place and expand it out for some of the other functions we were looking to provide,” says Wondrasch. “By engaging with the SAP Custom Development organization as well as SAP Consulting to help build our e-commerce platform, we were able to provide a great solution for our customers — and the stability has been fantastic.”

While the big-bang approach was appropriate for back-office functionality, the company took a different approach to the e-commerce solution. The project team rolled out shipping and ordering functionality to each center and ensured that 100% of the data from the legacy ERP system was captured in the new SAP system.

The first two distribution centers went live in June 2011 and September 2011, respectively. The remaining 23 distribution centers will follow in the next year or so. “We allowed three months between the first set of distribution centers with two months between the next set, and then we’re going to start accelerating the pace substantially to be done by the end of fiscal year 2012,” says Wondrasch.

Training External Users

Because the e-commerce solution (called ABC Passport) is being rolled out to AmerisourceBergen’s customers, the company has to consider the training needs of nearly 40,000 users. To minimize the impact, AmerisourceBergen account teams prepared customers ahead of time through face-to-face visits. AmerisourceBergen’s customers range from highly sophisticated hospital networks to mom-and-pop pharmacies, so each requires a different level of instruction.

“I think we’ve done an outstanding job making sure our wide range of customers can continue to place orders and be serviced successfully by AmerisourceBergen,” says Wondrasch. “Our training approach was to start talking to all our customers upfront about why we are going through this initiative, how it’s going to affect them, how we will operate differently with them, and why it’s better for them. We designed an entire curriculum for our customers, with their account team in the field — people who they deal with day in and day out — providing online training materials to educate them.”

Designing the E-Commerce System

The starting point for designing the e-commerce system was determining the requirements. “We took customer feedback into account as we set out a roadmap for the system functionality, and the number-one requirement was system performance,” says Wondrasch. “Early on, we discussed with the SAP teams how to architect the system and ensure we can continue to provide the same system performance we do today.”

To ensure customer satisfaction, AmerisourceBergen hired a company that specializes in usability design for web-based applications to observe how customers actually do their jobs — through on-site visits and even videos — and develop prototype web applications. The project’s design team incorporated these prototypes into the final design.

Providing a fast way to locate customer-specific product information, including availability, pricing, contracts, and frequently ordered items, was a key focus of the e-commerce application development. “Our customers order every single night and have a very short amount of time that they’re looking to provide that order, send it to us, get confirmation we’ve received it, and then receive it the next morning with accurate pricing and fast system performance,” Wondrasch says.

Ensuring the solution could deliver this information in sub-second time required some behind-the-scenes technical creativity. The key output for this level of performance was a custom-built catalog that SAP Custom Development  — selected for its business-process and design expertise — created in collaboration with SAP Consulting and SAP Active Global Support.

“With some tremendous creativity and technological expertise and innovation in process teams, we met or even exceeded what our targets were, and the custom catalog was a key piece of that,” says Wondrasch. “Customers love the usability and how quickly the system provides their historical orders and their draft orders with the real-time inventory.”

Excitement Abounds

With two successful rollouts already completed, Wondrasch is confident the rest of the project will follow suit. “I think the largest challenge will be peppering our customers’ enthusiasm for how much more they want us to continue providing the systems and how we can continue to provide the stability that they expect while rolling out the new functionality and capabilities,” he says. “Our external customer community is tremendously excited that we made this kind of investment 100% for them. And our internal associates are excited because they see ways we can leverage this platform for a strategic advantage going forward.”

Wondrasch sees the project as a step forward for AmerisourceBergen — one that positions the company incredibly well for the future. “We’re a newbie by SAP standards,” he says. “We have just gotten started on this journey so the excitement level is very high.”

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