A Business Case for an Enterprise Quality Management System

A Business Case for an
Sparta Systems, an industry pioneer and leading provider of enterprise quality management software
(EQMS) solutions, enables businesses to safely and efficiently deliver their products to market. Its
TrackWise® EQMS, a trusted standard among highly regulated industries, is used by quality, manufacturing
and regulatory affairs professionals to manage compliance, reduce risk and improve safety across the
global enterprise. Headquartered in New Jersey and with locations across Europe and Asia, Sparta Systems
maintains an extensive install base in the pharmaceutical and biotechnology, medical device, electronics
manufacturing and consumer products markets.
Enterprise Quality
Management System
WHITE PAPER
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Today’s manufacturers face enormous challenges managing their enterprise quality and compliance initiatives. Market trends point
to even greater scrutiny of these efforts as pressure mounts from both consumers and regulatory agencies for manufacturers across a
broad range of industries to deliver better, safer products and services. To meet these important regulatory challenges, it is imperative
that manufacturers have a quality management system to manage processes and provide timely access to relevant data, effectively and
efficiently. This paper will act as a step-by-step guide to help readers:
Get started with the system selection process
Lay out requirements and identify the right internal stakeholders
Set up the business case and quantify the benefits of an Enterprise Quality Management Software (EQMS) for internal buy-in
Introduction
EQMS solutions are focused on managing, tracking and reporting
a company’s quality management processes, including incident
management, corrective and preventive actions (CAPAs), audit
management, complaint handling and change control. Most
systems are industry focused with many having originated
in the heavily regulated industries like medical device and
pharmaceuticals. Through the years, the needs of smaller
organizations have driven some EQMS vendors to include an
electronic document management system (EDMS) or training
management (LMS).
EDMS’ focus on managing documents electronically. They are
typically “file-folder” based and have limited workflows to support
revision history and change processes around ”unstructured
content.” EDMS’ alone cannot support the more complex
relationships of quality management processes.
If you’re on the team responsible for product quality and
regulatory compliance, you may have already determined
that your organization needs to invest in an EQMS to drive
greater control, consistency, efficiency and transparency. Now
what? How do you convince your peers, supervisors, senior
management, directors and other colleagues that EQMS is a
worthwhile investment that will provide significant business value
and long-term competitive advantage?
First Things First
Before you attempt to build a business case for an EQMS, what
do you want the system to be? This is one of the most important
aspects that will have lasting consequences, benefits and value.
Typically, a large organization’s compliance needs and regulatory
oversight should look for the following vendor qualities when looking
for the most appropriate solution.
Industry Knowledge and Experience: Vast Regulatory and
compliance experience will help you leverage the vendor’s
both diverse and industry-specific experiences in providing and
successfully implementing a suitable solution.
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References: Gain immeasurable insight from peers who have
already implemented EQMS solutions to help you figure out your
unique needs and identify best practices and pitfalls to watch out
for.
Comprehensive Solution: While today you may be only
interested in a smaller set of EQMS process, you may need a
broader set in the future. Make sure the solution you choose is
comprehensive, future proof and provides end-to-end coverage
of all EQMS based business process.
Configurability: Stay away from solutions that are hard-coded
and shrink-wrapped under the guise of best practices. Even
with a best practices baseline, you want to be able to conform a
solution around your existing processes through configuration,
and be able to create new processes as your needs expand
without going back to the vendor. Systems lacking this level of
flexibility introduce risk and additional cost for implementation
and validation.
Integrated: The multiple processes and best-practice based
quality components should be integrated for optimum usability
and value. This will allow you to gain value as you generate
reports and increase visibility. Another consideration involves
process and data interchanges with your existing enterprise
applications like ERP, CRM and EDMS which can utilize batch
processes or modern, real-time web services.
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Start of the Business Case
Those with little experience making business cases for investments in software or other enterprise systems may not know where to
begin. This document outlines the critical steps for building support for EQMS investments. Sparta Systems’ “Building a Business Case”
toolkit provides additional templates and worksheets that are invaluable for quality professionals at every level of experience.
What follows is a suggested guide for how to build your case for EQMS investment. Your exact process will be tailored to the specific
needs of your organization – what its approval process looks like and where you are in the budget cycle. These unique circumstances
will dictate which steps require the most emphasis. You may find that you can move quickly through certain steps and that you need
to drill down more deeply into others. Building a business case is not always a linear process. You may gather all of the data you think
you need and then realize as you are preparing your pitch that you have to gather different information all together. This is a normal
part of building a business case. It is also almost certain that external factors will evolve as you move through the process, and you
should be prepared to accommodate those changes and shifts in a fluid fashion.
People, Process, Data – Which is Most Important?
Oftentimes, the numbers are what first come to mind for people building a business case. Many think that their first step should be to
calculate the frequently requested business metrics – return on investment (ROI), total cost of ownership (TCO), payback period (PP)
and net present value (NPV) – that are sure to sway management (see “Key Financial Metrics” sidebar).
While it’s true that metrics are important, they will have little credibility if you haven’t derived your calculations in collaboration with key
stakeholders. Financial metrics are most effective after you’ve gone through a careful process of building organizational alignment for
a project.
If your organization has not already decided to implement EQMS (see “Where Are You Today?” sidebar), or if you haven’t spent the
time to build organizational alignment, you may find that your proposal, while well received, ends up on the back burner of company
priorities. Or you may find that the project gets approved but without the proper stakeholder and financial backing to make it a true
success.
The takeaway here is that you need to build a strong level of support for your proposal. At the same time, understanding your
company’s approval process and getting the right people involved in your project will be critically important for getting your project
green-lighted. The ultimate success of your project — when you move from approval to implementation and launch — will also
depend on the work you did up front to ensure organizational alignment.
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CRM
Customer master data
Automated complaint
initiation
LIMS
Automated initiation
of lab investigations
ERP
Product/material/
vendor information
Batch release
Return/repair processing
EDMS
Integrated change
management workflow
Access to controlled
documentation
Enterprise Bus
Quality Management
System
MES
Automated initiation of
deviations/
nonconformances
PLM
Engineering Change Order
Document Access
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Nine Steps toward Building a Business Case for EQMS
Step 1: Understand the Approval Process
Understanding the process your company uses to evaluate potential capital investments is the critical first step in your project. Meet
with your immediate supervisor, someone in the finance department or a person who has shepherded a similar project through
the approval process to find out how your company handles it. Discuss the specific steps that will need to be taken (which may
differ somewhat from this list) and identify key stakeholders whose support will be needed. Make sure you walk away with a clear
understanding of how the process works, who is involved and what their roles are.
During your due diligence, you may find that there is no budget available for new IT projects this year. If that’s the situation, don’t be
discouraged. You can still put together your business case, and you’ll have the information to understand which year’s budget you’ll be
aiming for and what your project’s time frame will be.
Step 2: Identify Your Champion
Every organization has a hierarchy of decision makers with different degrees of influence in the approval process. To make the case for
EQMS, it’s important to find a partner with both the organizational leverage and the willingness to move the proposal up the hierarchy.
In some cases, the right person may be somebody high up in the quality department. In other cases, he or she may be a senior
manager in IT or someone in finance. It all depends on who at your company is involved in financial decision-making about major new
projects.
Identify a champion who has the power to help you progress the project through the approval process. That person may not
necessarily be at the top of the political pyramid, but he or she should be at a level high enough to have gained the trust of those at the
top.
Step 3: Uncover Your Champion’s Priorities
Once you know who your EQMS champion will be, invest some time to identify specific priorities. For example, if your champion is in IT,
you may find that his or her top concerns are all about reducing support costs by consolidating infrastructure and reducing the number
of systems the IT department needs to manage. If your champion is in quality, you may find that training, documentation, auditing or a
new regulation is a principal challenge. Do a little digging and find out if there has been a recent issue that dominates decision-making
in your champion’s department or if there is a relevant industry challenge that has been highlighted in their area.
“When embarking on a quality management initiative, leading companies do a good job charting out
the problem statement. Obviously these initiatives can vary in scope, and best practice is for companies
to take a hard look at that scope first… Companies that get very detailed, very clear and very granular
as to that scope will have a clearer set of functional requirements that help in the selection of their
quality management solution. It also pays dividends in terms of organizational alignment… It allows
these companies to bring all their stakeholders along through the process to have clarity on the purpose,
the business benefits and goals of the quality management initiative. And that is a key determinant for
ultimate success.”
Roy C. Wildeman, Senior Analyst
Forrester Research
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Initially, the concerns your champion raises may not appear to have much to do with your proposal. You need to gather the information
and then go back and see if EQMS can be used to address your champion’s needs. You may end up building a case around the use
of EQMS for a particular, immediate business need, followed by expanding use of the system to address your champion’s broader
priorities.
If your EQMS proposal doesn’t seem to align with your champion’s stated priorities, yet you think his or her department would benefit
directly from the investment – either immediately or in the longer run – you’ll have to do some educating about the benefits of EQMS.
This is good practice for the other stakeholders you’ll need to win over along the way. The goal is to have a champion who is truly
willing to go to bat for this investment - to be the most effective possible advocate for the system.
Step 4: Get Resources Allocated for Further Investigation
Most enterprise software projects require its champion to build a business case to justify the capital spend. Your next step will be to
convince your champion and/or your direct supervisor to approve the allocation of resources for further fact finding. In building a
business case, the champion needs to capture all tangible benefits that the company would obtain from implementing the software
and then place a defensible monetary value on these benefits in terms of annual savings to the organization. The goal of the business
case is to ensure that the project delivers value greater than the corporate hurdle rate for capital investments. The following steps are
required to develop the financial business case to ensure the resources are allocated for this endeavor:
Identify quantifiable business benefits
Capture current state scenario and collect baseline metrics
Develop a future state scenario
Model future state metrics
Populate ROI data and quantify the benefits
Communicate value
(See Step 6)
Step 5: Win Support of Your Stakeholders
It’s vital to get key internal stakeholders involved and invested in the project and to avoid conveying the impression that you are out to
change the way their world works. Even if the change is an improvement, stakeholders might be resentful if it is forced upon them.
This is the time to have thoughtful conversations with stakeholders across the various business processes that will be impacted by
EQMS. Ask them what they think needs to be improved and what they would like to see changed. Your willingness to listen, discuss,
adjust and make them part of the change process will help to build their support and provide momentum for your ideas at the middle
and lower levels of your company. It will also help you gauge the extent of your organization’s openness to change.
Step 6: Gather Supporting Data
At this point you will need to get the information needed for a cost benefit analysis outlining gains, risks and resources required to
implement a solution, with a focus on the key concerns of your stakeholders. To get the right information you must engage with
the people who are on the front lines of each process and who have the direct experience to help you understand the scope and
components of each process. Make sure these people understand your goals and engage with them to develop detailed process maps
of both the current and the future states you envision for each process. Be sure to include every process step no matter how trivial.
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Step 6.1: Identify Quantifiable Business Benefits
The first task is to identify the top three to five quantifiable business levers that will be impacted by the EQMS. The key criteria are to be
exhaustive but not overlap (to prevent double counting of benefits) and the impact of the EQMS should be quantifiable. A set of sublevers
helps identify detailed quantifiable cost reductions or revenue increases from the selected levers. An example is shown below.
“We mapped out at an extremely granular-level the deviation, the CAPA and the GMP investigation
process. And then we identified what the value-added and the non-value-added activities were in that
process. When we mapped out the process we actually included things like take the file and put it in the
drawer. These were 14-page process maps. And we took work distribution surveys, and we distributed
them to our QA groups and our customer groups. And we actually had them do them between one and two
weeks, based on the workflow process, to figure out how much time they were spending on each step. We
then extrapolated that to the number of transactions per year and rolled it up into a pretty robust business
justification.”
Roland Smith
Manager, Quality Technical Systems
Shire HGT
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Step 6.2: Capture Current State Scenario and Baseline Metrics
Now’s the time to work with your stakeholders and their teams to analyze their current processes and cost elements, identify
baseline metrics and capture the value of these metrics related to the primary business levers. For example, if a sub-lever is
“reduce recall costs,” then document the current process headcount requirements and determine the following:
What was the dollar amount of recall costs last year?
What is this percentage compared to the total output?
What was this recall amount internally attributed?
Hours spent on the following:
- Inspection
- Sorting
- MRB
- Disposition
Calculate hours spent on each activity and the standard cost of each unit of activity. An example of how these variables can be considered
and quantified is provided below. *
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- Recall administrative costs
- QA department handling
- Handling cost to replace or refund
- Shipping costs
EQMS
- Communications with suppliers and customers
- New design costs
- Replacement costs
* Figures in the chart above are example estimates.
** Most companies use a concept called “fully loaded FTE” cost, based on job title. Work with your finance partner to get the hourly values for your organization.
?
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Step 6.3: Develop Future State Scenario
This step enables you to visualize the future process flows with the new EQMS solution. It lays the foundation for how the new system
will streamline the various processes that drive the primary levers and sub-levers identified in step 6.1 and how the new system will
address the various issues that caused the current state problems. This is the most critical part of the business case development
process. The user determines how the future state scenario will improve the key baseline metrics identified in step 6.1 for each of the
sub-levers and creates assumptions for the new value of the metrics. Since this is the most subjective part of the overall process, it is
recommended that the user create two scenarios for identifying improvements to the metrics:
Conservative: User assumes that change management related inertia will slow the improvements to each of the processes.
Most Likely: User assumes that with strong sponsorship of the management team, the user will be able to achieve the most likely
process improvements, factoring in some change management-related pushback.
An example of how the future state scenario provides value and benefits is shown below.
Step 6.4: Generate ROI Data and Quantify the Benefits
Once you have identified and tabulated the business levers, future state scenarios and quantified the outcome, now it is time to tabulate
the quantified benefits to show the value of the EQMS. This is customarily calculated based on the five year life of the investment,
taking cost of capital, all other expense bases and considerations into the calculations to provide an annual cash flow status, leading to
an investment decision (net present value). This is typically the step required to get the approval from the finance department for the
investment approval. The following example illustrates the cost elements considered and how the NPV is calculated.*
* Please note that the numbers used are examples only.
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EQMS
*Numbers used are examples only
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Step 6.5: Communicate Value
At this step, it is imperative that you bring all the internal
requirements, current and future states, value generators (both
tangible and intangible) and create a quantifiable benefits
paper. This should consider internal stakeholders along with
management so all parties understand the value and benefits.
This is important for financial and operational success of the
EQMS implementation project. The previous charts provide some
examples on the kind of value communication that resonates well
with management. These include annual net cash flow, NPV, ROI,
payback period, etc.
Step 7: Re-engage with Vendors
If you haven’t already done so, this is the time to engage
software solution vendors so you can understand the order
of magnitude of your implementation costs. If you’ve already
spoken to vendors, this is the time to re-engage with them. If
you’re proposing a centralized QMS for the first time, the exact
scope and details of the project can come later, but you want
a solid ballpark figure that takes into account both installation
and ongoing maintenance costs. If there is already support
for enterprise quality management in the organization, now is
the time to get more detailed numbers. Remember that you
may want to consider not only the costs involved with your
initial adoption of enterprise quality management, but also any
expansion plans if they will be implemented in the near-term
future.
Step 8: Create Your Business Case Presentation
Next you’ll want to use the information you’ve gathered from
stakeholders and their teams as well as outside vendors to build
your business case presentation. It should include the following
quantifiable elements:
Current state
Current state metrics
Future state
Future state metrics
Benefits/value of future state
Cost of an EQMS
Justification - ROI/TCO
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Step 9: Work with Your Champion to Take the
Proposal through the Approval Process
By this time your champion and key stakeholders should be in
support of your proposal. Present your findings and metrics to
your champion and arm him or her with the information needed
to present the investment. Then allow your champion, with your
help, to use his or her political leverage to take the EQMS proposal
through the approval process.
Presenting a compelling business case can sometimes feel
daunting, particularly if you have had no experience doing
one in the past. If you follow these steps and keep in mind the
importance of people, process and numbers in accomplishing
your goals, you’ll find that your proposal will be much more
effective. And regardless of the timing of your approval, you will
have acquired an understanding of your company’s structure and
processes and you will have gained allies across the company
both of which will enable you to build a stronger case in any
future projects or initiatives.
Recap: Nine Steps
Step 1: Understand Approval Process
Step 2: Identify Your Champion
Step 3: Uncover Your Champion’s Priorities
Step 4: Get Resources Allocated for Further Investigation
Step 5: Win the Hearts and Minds of Your Stakeholders
Step 6: Gather Supporting Data
Step 7: Re-engage with Vendors
Step 8: Create Your Business Case Presentation
Step 9: Work with Champion to take Proposal through Approval
Process
Key Financial Metrics
Payback Period (PP) takes into account how many months
it takes for the savings from a new technology to equal, and
thus pay back, the initial investment and ongoing costs of its
implementation.
Return on Investment (ROI) provides a figure for the ratio of
savings to the cost of the investment.
Total Cost of Ownership (TCO) refers to the total cost of a process
or software implementation over its lifetime, taking into account
both upfront costs and ongoing recurring operating costs.
Net Present Value (NPV) refers to the present value of the project,
including initial hardware, software and implementation costs,
as well as ongoing recurring operating costs net of quantified
benefits, adjusted for the cost of capital. If the NPV is positive, it
indicates the project will yield a good investment above the cost
of the capital.
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Where Are You Today?
There are two typical scenarios in which you might have to present your business case.
Scenario One: You’re presenting EQMS as an entirely new project that you want included in the next budget cycle. In this scenario, the
first five steps, which are all about building organizational alignment, will be the most critical. You’ll be taking a more macro view of
the project for the purposes of business planning and will most likely end up with a ballpark budget figure of X million dollars, plus or
minus X percent.
Scenario Two: Your organization has already included EQMS in the budget or there has been an event such as an audit or regulatory
issue that has compelled your company to prioritize an EQMS investment. In this scenario, organizational alignment is already fairly
established so it’s a matter of cultivating that support rather than building it from scratch. Steps six to nine will be your focus as you
build out a detailed answer to the question, “How much will this cost?”
Conclusion
Quality management solutions are often viewed as an additional cost that must be incurred in order to help ensure compliance.
However, if the implementation process of an automated quality system is approached methodically and properly, organizations
benefit not only from greater compliance, but also realize a significant ROI.
To learn more about this topic and how Sparta Systems can help, visit www.spartasystems.com
Sparta Systems, an industry pioneer and leading provider of enterprise quality management software
(EQMS) solutions, enables businesses to safely and efficiently deliver their products to market. Its
TrackWise® EQMS, a trusted standard among highly regulated industries, is used by quality, manufacturing
and regulatory affairs professionals to manage compliance, reduce risk and improve safety across the
global enterprise. Headquartered in New Jersey and with locations across Europe and Asia, Sparta Systems
maintains an extensive install base in the pharmaceutical and biotechnology, medical device, electronics
manufacturing and consumer products markets.
www.spartasystems.com | http://blog.spartasystems.com
Global Headquarters
2000 Waterview Drive
Hamilton, NJ 08691
(609) 807-5100
(888) 261-5948
info@spartasystems.com
European Offices
Berlin | London | Tel Aviv | Vienna
europe-info@spartasystems.com
Asia Pacific Offices
Singapore
apac-info@spartasystems.com