Matching ERP Complexity with Business Requirements
Small Division Saves Time and Money by Using Tier-Two Instead of Corporate ERP
The BioMeasurement Division of Hutchinson Technology Incorporated (HTI) was established in 1996. Drawing on the company’s rich technology base and expertise in precision measurement, the division developed the InSpectra® StO2 Tissue Oxygenation Monitor. Launched in 2006, this device helps clinicians reduce risks and costs by enabling faster and more precise assessment of oxygen delivery to vital organs and tissue.
Managers of the BioMeasurement Division, which has grown to more than 100 employees, decided early on that they wanted to avoid the cost, time and complexity involved in implementing the corporation’s enterprise resource planning (ERP) system. Instead, they elected to search for a more cost-effective system that would be suitable for a research and development effort, yet be able to accommodate growth once the division introduced its products to the marketplace. They selected Expandable from Expandable Software, Inc.
Expandable’s ERP solution was able to meet all of the BioMeasurement Division’s ERP needs even though it required a much lower investment of time and money. In particular, the Expandable ERP system offers very strong serial number tracking capabilities, which is critical to manufacturers of regulated medical devices.
Hutchinson Technology has long been recognized as the leading worldwide supplier of suspension assemblies for disk drives. Suspension assemblies are precise electro-mechanical components that hold a disk drive’s recording head at microscopic distances above the drive’s disks.
The company established the BioMeasurement Division with the objective of leveraging its culture of quality, engineering capabilities and leading-edge measurement technology in the medical market. The result was the design and development of the InSpectra StO2 Tissue Oxygenation Monitor.
The device uses near infrared spectroscopy and a noninvasive, single-use sensor placed on the thenar eminence (thumb muscle) to provide clinicians with a fast, objective means to assess a patient’s perfusion status. When a patient is at risk for inadequate or threatened oxygen delivery to vital organs, the compensating physiological response is to reduce blood flow in peripheral muscle. Thus, by measuring tissue oxygen saturation (StO2) in peripheral thenar muscle, the InSpectra StO2 System uses the body’s own response mechanism to provide valuable information on the adequacy of oxygen delivery to vital organs. Like no other option available today, the InSpectra StO2 System can help clinicians detect and respond appropriately to changes in perfusion status instantly.
Starting up the manufacturing operation
After several years of research and development, the BioMeasurement Division began producing a research device in 2002. This led directly to a requirement for an ERP software system to manage the division’s new manufacturing operations. “We were concerned that the ERP software used by the corporation was more complicated than what we needed to run our business,” said David Rupp, Business Systems Analyst for the BioMeasurement Division. “We were concerned that implementing this software would be time-consuming and expensive. Being in the start-up mode, we wanted to keep our operations lean. Besides that, the corporation’s ERP software did not support the serialization and lot control that is required by the Food and Drug Administration.”
BioMeasurement Division managers decided to look instead at Tier-Two ERP software systems which are used by many smaller companies and startups. “Even though we are a division of a large company, we essentially operate as a startup,” Rupp said. “We talked to some other startup companies in the medical device field, and found that the Expandable ERP system came up several times as a package that has been used successfully by them. We evaluated the software and decided to select it because of its lot tracking and serialization capabilities, ease of use, and scalability. Yet it is much less expensive and much faster to implement than a Tier-One system.”
ERP software implemented in a few months
“We were able to implement the software in a few months, without having to incur the costs of an army of consultants,” Rupp continued. “Expandable staff members provided assistance by spending a short time at our facility training our staff members and helping us plan the implementation. Two members of our information technology staff drove the project and in the process learned enough about Expandable to act as our in-house experts. The implementation process was simplified by our approach, which was to adapt our business processes to the way the software works rather than the other way around.”
The BioMeasurement Division utilizes a build-to-forecast manufacturing process that primarily involves assembly of components that are either built to its specification by subcontractors or purchased as standard products. The division’s manufacturing cycle begins when the forecasting and manufacturing planning staff determines how many units to build over the next several months. Their forecast includes both units that are sold to customers and those that are provided to potential customers for evaluation purposes. These units are then entered as work orders into the Expandable ERP system. The ERP system’s Manufacturing Resources Planning (MRP) module then explodes the forecast into the components that will be required to build them. The MRP module also automatically generates the work orders required to build the end units.
Streamlining the purchasing process
The list of required components appears on the material requirements planning screen used by the purchasing staff. The buyers download the material requirements into a spreadsheet file, and then make adjustments to it such as increasing the order quantities when quantity discounts are available. They then upload the adjusted file back into the ERP system and use it to automatically generate the purchase orders needed to meet the projected demand. The purchasing staff then exports the purchase orders as PDF files and emails them to the suppliers. When the materials are received, they are immediately entered into the ERP system. A large number of components are tracked either by serial number or lot number. Some key components, such as the optical sensors, are already serialized when they are received. Other components are placed under lot control by generating a lot number for each vendor’s shipment.
Manufacturing begins when components are issued to work orders on the shop floor. Should a monitor require repair, a special repair work order is generated and Expandable’s labor tracking module is used to record technician hours. The Expandable Consignment Inventory module is used to keep track of those units that are in the evaluation pool as they move from hospital to hospital. The Order Entry module of the system is used to enter sales orders and to generate shipping documentation.
The real-time integration between the different ERP system modules allows manufacturing information to be available for financial reporting as soon as it is entered. This integration also eliminates the need to transfer information from one system to another, and removes the risk that multiple databases may conflict with each other.
The corporate HRIS system is used to produce the payroll for the BioMeasurement Division. Once produced, the payroll information is exported from the corporate system and is then imported into the Expandable ERP system via an easy-to-use general ledger import module. Financial data generated within Expandable is similarly uploaded into the corporate ERP system. The BioMeasurement Division uses Microsoft’s FRx product to produce their financial reports.
Potential for future expansion
BioMeasurement will activate the shop routing later in 2008 and may start using the bar coding module shortly thereafter. The shop routing module will make it possible for BioMeasurement to define work centers, and then track labor costs and work-in-process inventory through them. It will also allow them to integrate with a recently-implemented manufacturing execution system (MES).
The division’s sales force uses the SalesLogix electronic customer relationship management (e-CRM) system. They are using Expandable’s standard integration between Expandable and SalesLogix to exchange the basic information required by the sales reps scattered across the United States and European Union, including sales history and receivables. This integration has considerable potential for growth into such areas as sales forecasting and customer service.
“Expandable has met all of our requirements at a fraction of the cost and disruption that would have been involved in implementing a more complex ERP system,” Rupp concluded. “It’s possible that our growth may create the need to implement a Tier-One ERP system at some point in the future. But we see no reason to invest the time and money that would be required until such a step is appropriate. In the meantime, Expandable ERP is meeting all of our needs, including helping us comply with the stringent serialization requirements for regulated medical device manufacturers. Expandable also offers considerable potential for future growth both by taking advantage of capabilities that we have not yet used and in its flexibility to work with other complementary systems.”