Plexxus to team up with a partner to implement supply-chain module

Not-for-profit organization Plexxus forms the back-end of a dozen Ontario hospitals, a situation made perilous by the many legacy systems and competing bureaucracies at work. A 2006 RFP is finally materializing into a new, integrated ERP system for the hospitals courtesy of SAP Canada (NYSE: SAP). But it’s been a long journey, and it ain’t over yet.

Plexxus was formed to act as a sort of “back office” for 12 hospitals, including Bloorview Kids Rehab, Lakeridge Health Network, North York General Hospital, and St. Joseph’s Health Centre Toronto, among others. The goal of was to streamline the supply chain management, payroll, HR, and finances of the stakeholder hospitals and healthcare organizations. “But this shared service model needed a common technology platform,” said David Yundt, president and CEO of Plexxus.

The group put out an RFP for an ERP system in late 2006, and spent the next year putting the respondents through their paces, until the three finalists remained (Yundt declined to name the other two contenders). “We were looking not so much to solve a day-to-day problem, but more to get a scalable, integratable platform that would ensure a long-term transformation,” he said, pointing out that lowering costs and increasing efficiency as important drivers. Experience in the healthcare sector was crucial. Touting integration is a popular move in the ERP space, said IDC Canada research manager Vinay Nair. “A key to SAP’s strategy is talking up that plug-and-play functionality for multiple environments. In the ERP market, a way to win over new customers is to sell into their existing accounts, by saying that this will work with their Microsoft or Oracle systems, let’s say,” he said.

SAP Canada had a network of 45 hospitals and healthcare organizations in Quebec to boot, said Yundt. The brand recognition also appeased senior management, as, he said, the health-care space is a risk-averse environment. The applications chosen include the SAP Business Suite and the SAP for Healthcare solution portfolio.

Getting into the hospital space can be seen as an important one for SAP, said Nair, as the company’s strongest ERP showing is more in the manufacturing, distribution, and wholesale areas. “Public sector is definitely not their strongest area, so this is a win for them.”

In addition to the public sector win, branching into hospitals especially can be tough, said Nair. “There’s complexity in the way they are funded, whether it’s provincially or locally, so trying to sell into it is a challenge,” he said. By teaming up with Plexxus and scoring a dozen hospitals at once, the company saved itself plenty of selling energy and hassle and busted into a tough area for ERP implementations.

Take, for instance, Plexxus’ six-month, post-RFP process, which involved drafting up the implementation plans and getting all the approvals. Around 100 people were involved. “We kind of put SAP on hold,” laughed Yundt. The discussions included everyone from department-level managers discussing the nitty-gritty of the business functions all the way up to the C-level suites, where the executives discussed the wide-angle business strategies.

Now, Plexxus will be teaming up with a partner and setting out on the actual implementation of the first module-supply chain management. One project that will form a large part of the supply chain management push is a new “procure-to-pay” system that will pull in current product pricing, as well as track usage, current contents, and expiry dates to make procurement cheaper and more effective. This project should take between 18 months and two years, said Yundt.

“This will allow them to save money in their business processes,” said new SAP Canada president Mark Aboud. “Plus, SAP’s integrated suite has full functionality. IT managers can avoid dealing with a variety of different software vendors and platforms.”

As the aforementioned approvals and planning process gets streamlined, they will be run more and more concurrently with the implementations, ensuring that each module can flow from the rest, without stretching on too long. The final time tally? Four to five years.

To help manage this, the organization has been peeking at a few more IT-enabled change management options, including training tool software and collaboration software like Microsoft SharePoint, and will be calling on its system integrator for tips on how to manage the change of the long-term transformation to reap the best benefits from the new shared services model. Said Yundt: “Eventually, these changes could help us move toward more standardization (between hospitals) and better common practices.”

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