Secrets for Successful SAP Implementations

Andrew Purton, President of business education consultants Oliver Wight Europe, argues that to be successful with a SAP implementation companies must firstly understand their business by embarking on a Class "A" journey.

Most SAP implementations struggle to meet time and budget constraints, let alone business benefits. A vital pre-requisite for a successful SAP implementation is that companies undertake a thorough understanding of their business needs, policy definition and high level process design in advance of transactional process design and 'blue printing'. This is gained at the start of a Class 'A' journey which will additionally install Integrated Business Management - enhanced Sales and Operations Planning (S&OP) - as the monthly management process.

Oliver Wight developed the Class 'A' concept in the 1970s. It has been adopted by companies world-wide as an improvement driver and strategic goal. To achieve Class 'A', companies are assessed against a checklist of best practice and key performance indicators. This ensures companies consistently achieve 95-100% in data integrity, supply chain schedule attainment and customer service.

Here, we look at three major organisations that have taken this route, and not only delivered their SAP implementation ontime and in budget, but also generated step change business benefits.

Luxfer Gas Cylinders

Achieved Class "A" status in Planning and Control through a remarkable culture change and business transition. The company is the largest manufacturer of aluminium gas cylinders in the world, and has six manufacturing plants world-wide. At Nottingham, UK, the business makes around one million cylinders a year for use in fire extinguishers, scuba diving, breathing apparatus and speciality gases.

Luxfer US was badly let down in the mid-90s by an ERP supplier who failed to deliver. So it then chose SAP, which Operations Manager Duncan Banks says was eventually implemented on-time and on-budget due to these reasons: Foremost, the design teams developed the key business processes and used Oliver Wight education and methodology to establish high level process redesign before implementing SAP. S&OP had also been functioning for two years at the time of implementation, so there was a clear understanding of the supply management, sales and financial forecasting processes. Additionally, before going live with SAP all master data was at, or approaching, Class 'A' levels.

The benefits for Luxfer US are impressive, including a totally integrated business system and a significant improvement in business process execution. For example, the 50 steps to undertake procurement have been cut to 10, and manufacturing lead times have been slashed from 30 days to eight. Other benefits include:

Secured its Class 'A' in just under a year, and was a major driver in the turnaround of the division, more than doubling its return on capital employed from 8% to 20%.

When its Manchester facility was sold to FMC, a US company with interests in products such as flame retardants, plastics and cutting oils, the original synergies were not as strong as first thought and it faced difficult market conditions. "We went through several cuts and reorganisations to turn the business round but these had little affect," says Vice President David Cartmell. "What were really needed were dramatic improvements in performance through step change and radical re-engineering. The division knew it had just 18 months to achieve Class 'A' performance levels. If it didn't achieve results by then, the division would probably be sold. There was a clear 'burning platform'!"

They were also buoyed by the discovery of a 'hidden factory'. Early analysis by process development teams revealed that a simple business process, such as raising a sales order, often had 30 to 40 linear steps instead of just four or five. The root cause was that staff did not trust the data from the $100 million FMC-wide SAP business system installed two years earlier. To ensure customers got their orders they double and triple checked everything and used their own sub-systems of e-mails and spreadsheets.

Cartmell adds: "Nobody believed the SAP data on the terminals so they developed their own sets of numbers. This hidden factory focused us towards getting the processes right and people using them correctly."

A plan was developed to deliver the results within the year. A key target was to get everyone supporting the change programme. So the first phase was to educate directors, key individuals and taskforces in the Oliver Wight integrated model. They then developed the business processes and the training of 550 people.

Within three months of going live inventory record accuracy had shot up from 40% to 95% through diligent recording and reporting and process development. With intense daily monitoring results improved quickly. People's jobs became easier and they began to trust the numbers. "This became a catalyst for improvements in other areas,? says Cartmell. "Morale and teamwork improved. We also saw tangible business results. Lead times for orders reduced from four to three days and reliability improved considerably. Customer complaints dropped, inventory reduced by 25% and customer delivery performance increased from 85% to 95%."

International Flavours & Fragrances

With facilities in over 40 countries and a $1.8 billion turnover, IFF is the world's largest producer of flavours and fragrances. Steve Wilson, General Manager of the Aroma Chemicals division at Haverhill, Suffolk, recalls: "The company started rolling out SAP at sites in the US four or five years ago. The implementations were less than successful and two years ago it was decided to suspend the rollouts until the problems were sorted out. These were typical of other failed SAP implementations - people who had been doing jobs for years a certain way were told to do it differently without much explanation or education. They were trained in 'How', not 'What' or 'Why'. I feel the Oliver Wight approach is invaluable to businesses as their methodology starts with What and Why and leaves the business to sort out the technical implementation or How.

"In addition, the approach concentrates on integrating the business processes and people aspects, helping us to manage the 'white space' around all those little organisational chart boxes labelled finance, manufacturing etc. Managing this white space is important, not how you process customer orders or make something.?

The Haverhill site was the first in the company to go live in November 2001 with SAP since the US implementation problems. Within seven days it was business as usual, but the company had put in a lot of effort having initiated a Class 'A' objective in early 2000. This drove an understanding of business process needs, deployment of effective business management though Integrated Business Management (S&OP) and an attack on data integrity.

"The shopfloor staff asked why they couldn't have done this before, because it makes their lives so much easier," adds Wilson. "The business is now moving forward. Customer service and other key indicators are in the high 90s and SAP will be rolled out globally by the end of 2003."

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NOTE FOR EDITORS:

Oliver Wight

Oliver Wight was an innovator in industry. He recognised the challenges that industry faced whilst always seeking to do things better. His ideas were matched only by his ability to communicate them in ways that generated acceptance, commitment and enthusiasm. When computers first emerged in manufacturing he saw the role of people being overshadowed by technology. He made it his personal mission to put people first, and to give them the knowledge they needed to use their new tools. His tenet - Computers aren't the key to success, people are - remains a core philosophy of the Oliver Wight Companies.

Today the Oliver Wight approach is to provide long-term coaching and support for clients striving to attain business excellence through sustainable behaviour change. Founded upon a best practice business framework Oliver Wight provides:

With a track record tracing three decades and a distinguished past in working with both international 'blue chip' organisations and medium sized businesses Oliver Wight?s current client list includes ICI, GlaxoSmithKline, The Wrigley Company, Caterpillar, Unilever, British Aerospace, Rolls Royce, 3M, Merck Sharpe & Dohme.

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