BAYER’S UNIQUE PLANNING WIZARD SYSTEM CURES BUDGETING HEADACHES
In the most simple terms, the need arose for a system that could accommodate the extraordinary growth - and the corresponding growth in the volume of data - of the Pharmaceutical Division of Bayer Corporation, one of the primary business groups in the Health Care segment, which is one of four major business segments that make up the Bayer conglomerate. Since the facility’s opening in 1979, pharmaceutical sales have increased from $100 million to well over $2 billion today, substantially increasing revenue but increasing operational complexity as well. In 1996, Bayer completed a $50-million campus expansion, which reaches from West Haven to neighboring Orange, Conn. The site, which also houses Bayer Corporation, Pharmaceutical Division Sales, Marketing, Distribution, and Administration operations as well as one of Bayer's three worldwide research centers, employs more than 1,800 people. But numbers alone do not tell the story of the division’s success. Besides conducting research into treatments for osteoporosis, cancer, diabetes, and obesity at this facility, Bayer manufactures a number of the world's leading prescription drugs. Given the need of the company to maintain its industry position, as well as a need to help the Pharmaceutical organization fulfill its overall objective of achieving a $60-million savings in prime expenses within the cost centers, it was agreed that the Planning Process must be redesigned.
Kicking off the project in first quarter 1996, the role of the BReW Crew was to develop and implement a redesign concept, gain approval by the Pharmaceutical Management Committee, and convert those concepts and processes into practical application in the 1997 Planning Process. Subsequently, the BPR Core Team, comprised of nine people - most at the vice president level - not only provided validation and enhancements but also helped to expand ownership of the planning process redesign beyond the Finance organization. The concept of establishing a planning baseline, as well as reviewing activity changes and new projects, was validated and embellished by the BPR Core Team. Lastly, the BPR Design and Implementation Team was charged with converting the concepts, processes and flows into a system in under four months. The details were developed concurrently with the process of defining a system platform, desktop requirements, and rollout methods to over 500 users across four sites. The "guts" of the system consists of an IBM RS 6000 server, located in the West Haven facility, running Oracle® 7.4 and containing several million records. Having information in the Oracle database, according to Greenbaum, “lets us ‘slice and dice’ the information as many ways as we want.” The system also incorporates a firewall-protected intranet server, which subsequently feeds information to the Oracle server/data warehouse and then on to a Hyperion system for further reporting. Additional systems will be incorporated on the back end for reporting purposes, including an SAP Business Information Warehouse (BW). Users access their planning information via Bayer’s corporate intranet from any of the company’s North American locations or its German headquarters. The web-based aspect was chosen due to the ease of distribution of applications over the Internet. The application-design criteria required a user-friendly approach in aiding non-financial cost center managers to prepare, analyze and change their own budgets and to reinforce the concept of "ownership" and “empowerment” in the Planning Process. A high level of security has also been built into the system, with access to sensitive areas such as payroll properly restricted.
The delivery mechanism, arguably the heart of the system, is arcplan’s front-end solution, inSight. Long recognized as a powerful environment for creating innovative database applications, inSight is a flexible analysis tool that functions in a way that mirrors the decision-making process. In general terms, inSight is used to develop a wide range of analytical solutions but the Planning Wizard represents a specific (and perfect) example of what the users can realistically expect from arcplan products. “Thus, an otherwise loathsome task has been transformed into the basis by which all budgetary considerations are made within the group, all in a timeframe that would paralyze most projectstaffs.” “inSight’s ease of implementation enabled us to get the entire system up and running in the nine-week timeframe that we had; no other system would have allowed us to do that.” “inSight works very well with the back-end,” said Williams. “We chose inSight in part because of its flexibility. We knew that no matter what type of server we employed, inSight would interface with it to give us the highest level of functionality possible.” inSight also excels because of its multitude of performance features such as corporate-wide applications, short development times, and Internet /intranet capability - all important considerations in the development of the Planning Wizard. After going through the first budgeting cycle, Bayer examined ways to refine it, a relatively easy task given inSight’s dynamic character and flexibility. "We made major functionality improvements," said Greenbaum. "For instance, in the first year the budget system would only make automatic compensation adjustments for salaried personnel. In the second year this was expanded to included automatic compensation adjustments for wage earners as well.” The benefits of the system have been substantial. Besides the overall improvement of the planning process, the company has realized an estimated savings of $2 million per year. In addition, Greenbaum says, managers can now "seasonalize" budgets - inputting information on a monthly basis - for greater accuracy and more precise decision making. Further, the amount of time managers actually spend on the computer, as well as the time handling paper, is greatly reduced, not to mention the cost of the paper itself. Plus, the system is updated every night, so the accuracy and timeliness of the information is assured. According to Greenbaum, the Planning Wizard gives Bayer a significant advantage in the highly competitive pharmaceutical industry. "By making us watch costs - and helping us make a more rational allocation of resources - we believe we have an advantage over our competition," she said. "And it will grow more significant with each budgeting cycle."
Then, there’s the matter of Bayer’s core business objectives. Everything Bayer does must satisfy one or more of these objectives. The Planning Wizard helps satisfy five: increasing fiscal responsibility of management; assuring rational allocation of resources; ensuring consistency with strategic objectives; continuous improvement process; and improving Bayer AG’s profit margin. "The key goal of the Planning Wizard was to provide a user-friendly system which would ensure that budget planning was carried out by all levels of cost center managers, thus increasing financial responsibility across the whole division." Greenbaum summed up the system’s benefit succinctly:“Under the old system, the budgeting and planning rules were not being enforced,” she said. “The new system has brought a new level of discipline to the planning and budgeting process, as well as a new level of confidence that can be credited to the way that the system has been accepted by ourusers.” Not quite magic out of a hat, but pretty impressive by any standard.
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Vanessa Bonenberger, Marketing Specialist, arcplan, Inc., gave permission to use this case study at DSSResources.COM on Monday, April 30, 2001. For more information check http://arcplan.com. Posted April 30, 2001.