After the clinical trials phase, we move into the last phase of the life cycle—life sciences commercialization phase. Some of the app strategy decisions that organizations face at this point are the following:
- What are your legal regulatory and internal reporting requirements?
- What does the organizational roadmap look like? Is your intention to stay with R&D or move into more of a product manufacturing environment?
- Is there an exit strategy or possible acquisition on the horizon?
- Does the nature of your product introduce FDA regulation and compliance factors?
- What is your product ownership?
- What does your supply chain visibility strategy look like? When do you plan on taking ownership of your inventory? How much visibility to you need into the supply chain movements of your products? If you’re not planning on maintaining the inventory within your own ERP, do you still require visibility of that supply chain?
- Where are you trending with the decision to use contract manufacturing or outsource contracts sales organizations?
One thing to note quickly here is that established ERP systems like NetSuite do support many different inventory management manufacturing and order management capabilities. This is where you define where you are maintaining those types of functions within our ERP environment. If not, it’s time to define when you start looking at third-party providers for maintenance.
Regardless if your organization is going to manufacture in-house or use a third-party, you will still require some systemic manufacturing capabilities within your ERP environment. For example, if you’re in a contract manufacturing scenario, you may still need to report WIP (work-in-progress) on the balance sheet.
You will also need to take into account different manufacturing processes. How is the product made? How much labor is involved? What’s the time scale of your manufacturing process? Is it project- or patient-specific? How many locations are manufacturing your product? It will also be really important to define the makeup of your product. Does it contain a bill of materials (BOM)? What level do the components break down? Are the bill of materials made up of quantities or recipes?
Commercialization Inventory Management
Inventory management does introduce a very significant strategies shift for these life science organizations, meaning that the organization is going to start to think about things like tracking inventory items versus non-inventory items or expense items. These challenges come from using outside purchasing systems. It’s very common to use a third-party purchasing provider, and so strategies shift when we have to track things like inventory quantities and assets on a balance sheet.
What this means is that those leading procurement systems are going to require a tighter integration into your ERP environment. This may be a simple shift of going from something like just integrating accounts payable to now having the requirement of integrating all of your purchasing, receiving, supply planning, and things like product catalogs.
When it comes to moving inventory, this can come in a lot of different forms. You must configure your ERP system to support moving inventory from one physical or virtual location to another, identifying things like bins or sub-locations within a warehouse or lab, and dealing with lost, damaged, or non-usable inventory.
Another big one is relieving inventory. Relieving that inventory can mean we’re committing it to a project or that we’re using it on a patient. So we have to identify what the actual, physical relief looks like as well as how we best account for that in the ERP environment.
Last but not least, we must provide proper accounting for that inventory ownership. Be sure ask when in the process does that occur, when we actually own product or when do we not own product?
Tracking and Traceability
An important element at this phase is whether you have traceability requirements. Does your new product require lot numbers or serialization? Do you need to have visibility into the lot or serial item in every step of your supply chain? In addition, you need to be able to provide insight into where the product was shipped or when it was procured.
You must ask all of these questions and understand if that ERP has the ability to support each of these elements.
In terms of order management, it will be very important to define the beginning of your sales cycle for your organization. Some organizations may decide to fully contract out their sales processes while other are going to sell in-house. If you’re selling in-house, you’re definitely going to need a customer relationship management solution or CRM. Systems like NetSuite have CRM capabilities, and many organizations are aware of Salesforce as a CRM tool.
But once an order is placed in your ERP system, you’re going to need system capabilities that include things such as shipping, invoicing your customers, revenue recognition, sales tax, commissions for orders placed, and return processes for when the products come back to the company. ERP systems like NetSuite are highly versed in these areas and provide a lot of flexibility to meet your needs as those processes continue to evolve.
With this series, we wanted to show the typical life cycle of a life sciences organization. Our intention is to get your organization thinking about where you are in your process and what the next step should be. If Sikich can help support your organization in any way, please contact us at any time! We are here to support your organization at any phase, not just the life sciences commercialization phase.
Other posts in this life sciences life cycle series: