A Supply Chain With No Weak Links

For many of Dade Behring's customers, next-day delivery is not good enough. The $1.3 billion laboratory instrument manufacturer often has to ensure same-day delivery. Integrating technologies with its new SAP system helps Dade Behring deliver the goods on time.

You wake up in the middle of the night with shortness of breath and pains in your chest. As the paramedics load you into an ambulance, you're thinking that you are either having a heart attack, or you shouldn't have eaten that fifth Chalupa from Taco Bell. You're wheeled into the emergency room, and physicians start hooking you up to machines. A doctor quickly draws blood from one of your veins. He informs you that, by testing your blood, he can determine if you are having a heart attack or just a savage case of indigestion.

Ah, a quick test and then you will know the seriousness of your condition. "This test would normally take less than 15 minutes," states the doctor. "However, the instrument is malfunctioning, and the replacement part is on back order. So, we're going to send your blood to an outside lab, and if we're lucky, we'll have your results in four to five hours."

"The part is on back order? Four to five hours if I'm lucky? Is this any way for a vendor to manage its supply chain? This is crazy. I could be dying," you think to yourself. Well, you're probably having all of those thoughts, save the one regarding supply chain management.

For Dade Behring Inc., however, helping to sort out life-or-death scenarios is part of the company's business. The company is headquartered in Deerfield, IL, with locations throughout the United States and 40 other countries. Dade Behring develops, manufactures, and markets technologies, products, instruments, systems, and services for clinical diagnostics laboratories. The $1.3 billion company has 8,000 employees worldwide, and slightly more than half (51%) of its sales are in the United States.

In addition to manufacturing and distributing laboratory instruments, Dade Behring also creates and distributes reagents for clinical use. For example, a urine or blood sample is mixed with a reagent before a lab analyzes it. Selling new instruments and reagents is a large part of Dade Behring's business, but processing requests for replacement parts is time-sensitive and mission-critical. Dade Behring's world parts center (WPC) is headquartered in Atlanta. "If an instrument part fails, we have to get a replacement to the field engineer as quickly as possible," relays Pat Conner, director of materials and logistics at the WPC. "That can be the next day, or in some cases, it might be the same day." To accomplish this daunting mission, Dade Behring is in the process of implementing SAP R/3 and integrating a host of technologies - ranging from a warehouse management system (WMS) to fault-tolerant data storage. The company is also exploring document management and imaging and Web solutions for the Year 2000.

A Cautious Approach To ERP
There is no question that implementing an enterprise resource planning (ERP) system like SAP R/3 can be a strain in terms of labor and financial commitment. Even companies that have had smooth implementations can attest to this. To make the implementation as manageable as possible, Dade Behring capitalized on the modular nature of the SAP R/3 architecture. The WPC started its implementation less than 18 months ago, and it currently has financials, order management, and flexible planning up and running. "We are doing a very methodical SAP implementation. We didn't want to do a ‘big-bang' implementation where we unplug everything and start running SAP," explains Conner. "We're putting in one piece of SAP at a time. We make sure that it is configured properly and works great, then we move on to the next piece."

Despite the success of the SAP R/3 system at the WPC, Dade Behring decided to evaluate the business needs of each site around the world before extending the SAP system. For example, it was not financially practical to implement SAP at some of the smaller Dade Behring country sites. In short, the return on investment (ROI) just wasn't there. Smaller country sites, for instance, may currently be operating their facilities on Dade Behring's other ERP solution (Sun Systems). In these cases, the information technology (IT) personnel at Dade Behring are linking Sun Systems with the SAP system implemented at larger sites. "SAP is not a be-all, end-all solution, where every site must be running on that platform by a certain date per corporate edict," comments Conner. "We will only implement SAP at sites where it makes financial sense. You have to do what is responsible, not what is trendy."

Creating A Paperless Warehouse — Almost
In terms of responsibility, Dade Behring certainly feels a great deal of it toward its customers. In addition to warehousing products, the WPC handles instrument repair and refurbishment. But, it is in the area of replacement parts and new instrument orders that the company flexes its logistics muscle. A mid-sized warehouse handles requests for new instruments, and a slightly smaller facility houses replacement parts. Both warehouses are running PC/AIM, a WMS developed by Ann Arbor Computer (Ann Arbor, MI). Radio frequency (RF) technology, supplied by Intermec Technologies (Everett, WA), is integrated with PC/AIM to help automate the picking, receiving, and put away of inventory. Employees in the warehouse use Intermec's bar code readers to identify inventory and to automatically deduct or add a product to the inventory count. To create a near-paperless warehouse environment, EVCOR's (Dallas) Clippership is integrated with Ann Arbor Computer's PC/AIM. Clippership automates the shipping process. The software weighs, rates, and routes shipments while complying with carrier documentation requirements.

Walking through the WPC warehouses, you would never guess that the people scurrying about are not Dade Behring employees. Instead, the company has contracted GATX (Chicago) to manage warehouse operations at the WPC. "Our relationship with GATX is a partnership. In addition to labor, GATX provides us with resources, such as engineering and transportation services, that we can tap into at any time," says Conner. "In terms of the cost, I don't honestly think we would experience any significant savings if we ran the warehouse with in-house personnel." While the WPC uses GATX to manage warehouse operations, Dade Behring's distribution facility in Delaware has contracted FDX Supply Chain Services (formerly Caliber Logistics) for warehouse management. The warehouse in Delaware may be significantly larger than the WPC; however, that facility only handles the creation and fulfillment of reagents for customers. Requests to the WPC are more varied and time-sensitive.

A Logistics System To Handle Same-Day Delivery
A patient on a hospital gurney never wants to hear that a diagnostic instrument is down, and that the replacement part will arrive in a few days. To avoid such instances, Dade Behring categorizes many of the replacement parts requests as next flight out (NFO). "Sometimes a lab has a serious power spike, and some of its equipment is damaged. Or, a lab employee might accidentally spill a reagent onto an electronic component," says Conner. "In either case, the lab or hospital needs a replacement part right away. There's really not an option. They need a part, and they need it now."

Dade Behring's WPC handles a few hundred NFO orders each month. If the company's field engineer and phone support representative agree on immediate shipping, the order is appropriately identified and entered into the SAP system. The request is then handled by a representative of Sky Courier, who is on-site at all times in the WPC warehouse. The Sky Courier employee arranges to pick the product, deliver it to Hartsfield Atlanta International Airport, select the proper flight, and arrange for a destination courier to pick up and deliver the product. It's no coincidence that Dade Behring's WPC is based in Atlanta. According to a 1998 Airports Council International study, Hartsfield Atlanta International Airport is the largest passenger airport in the world. It is ranked ninth in the country in terms of cargo shipments. When it comes to NFO shipments, Atlanta's airport is efficient and offers plenty of flight options with very few weather-related delays.

Handling Customers Through ERP And EDI
Dade Behring's WPC receives most of its orders from field engineers. Customer service representatives at the WPC handle these types of orders. "I hesitate to call these employees ‘customer service reps,'" adds Conner. "They do much more than take orders like an employee for a catalog company." In addition to taking orders, the representatives also check order status, expedite shipping, sort through warranty issues, and help the field engineer determine the type of shipping required for a particular order.

The customer service representatives work in SAP's order management module when processing orders from field engineers. A handoff is then made to PC/AIM — the WPC's WMS. "We see the demand coming through and the transactions going back. After the order is fulfilled, it gets posted back into SAP, and then an invoice is printed," explains Conner.

For some of Dade Behring's larger customers, orders are handled through electronic data interchange (EDI) transactions. For example, one of Dade Behring's largest distributors — a provider of healthcare products and services to hospitals and laboratories — regularly orders instruments and parts from Dade Behring's WPC. Dade Behring also has a direct EDI link to its European distribution center (EDC). Orders from the EDC flow directly to the warehouse where they are fulfilled and shipped like every other order. "We have arrangements with our carriers that allow us to have orders delivered to the EDC in two days," states Conner. "We pride ourselves on the fact that we don't allocate. We don't fulfill domestic orders first and then European orders. We treat the EDC like one of our customers. We give the EDC whatever it needs, and we jump through hoops to get it done."

Managing Data And Documents
All of the data generated through order entry, fulfillment, and billing is stored on Compaq and DEC Alpha servers configured with RAID (redundant array of independent disks) arrays at different Dade Behring sites. The nature of RAID offers a great deal of fault tolerance. The data is stored redundantly on the array's magnetic hard drives. If a hard drive fails, it can be replaced without taking the server offline. RAID systems also have fault-tolerant features, such as backup power supplies and fans. All of the data is backed up on a nightly basis using magnetic tape drives from Hewlett-Packard. "We use a grandfather process to rotate tapes and keep our backup current," explains Gregg Davis, manager of IT at Dade Behring's WPC. "We also have a monthly master tape that we store off-site. If there is a disaster on-site, we can get the master tape and restore the data."

Of course, complicated instruments are most certainly accompanied by extensive technical manuals — this is no different at Dade Behring. There are also manuals that detail the refurbishment of parts, and company policies and procedures to maintain FDA (food and drug administration) compliance. Currently, the manuals are stored on bookshelves throughout the different facilities. However, Dade Behring is exploring the option of scanning the manuals to create digital images that can be stored on the company's network. "Ideally, we would like employees to be able to access documents from a PC or online. This would allow us to update the manuals dynamically and would ensure that the documents being accessed are the most accurate and up-to-date," adds Davis.

Technological advances have allowed industries to compress time and offer near instant responses to customers. While you might not care if the hospital's lab can't process your drug test result immediately, you have a much deeper sense of urgency in an emergency situation. Dade Behring's WPC can deliver a part when — to quote a FedEx slogan — "It absolutely, positively has to be there overnight." Sometimes, however, overnight is not good enough. It's in these cases where technology and superior supply chain management are paramount.