Glass manufacturer Pilkington expects to achieve ROI of £21m in just three years from its SAP systems

Integration is the holy grail for many companies, but achieving it is not easy and always comes at a price.

However, for those not put off by the short-term costs and the amount of time and effort involved the rewards can be enormous, as glass products manufacturer Pilkington found when it implemented an integrated IT system for planning and scheduling float glass production across its plants in Europe.Following a series of acquisitions and the building of new facilities the company was left with a mixed IT infrastructure and, as the project manager Phil Roberts explains, each country, or in some cases each plant, had its own data, ways of working and peculiar IT systems.As a result, comparing manufacturing or distribution costs was extremely difficult. "We ended up with all sorts of mainframe-type systems down to manual-based systems," he says. "This was one of the rationales behind it all - there was no easy way to get visibility."

Pilkington started to look into integrating its disparate systems and conducting feasibility studies in early 1997. The company knew it wanted to operate on more of a European perspective but was not sure whether to take a country-by-country or a more centralised approach. So, Roberts says, the company looked at every business process, to identify those that needed to be changed. "Effectively what we came up with was a huge change-management scheme," he says.

Although Pilkington decided that centralising functions like manufacturing, purchasing and finance was impractical, it decided to centralise its IT function. The result was a new server centre in Gelsenkirchen, Germany, which is networked to all of Pilkington's other European sites. The location was chosen because Germany is one of the company's biggest markets, it has the highest number of Pilkington plants and the team there already had skills in SAP software, which had been chosen as the base for the whole project.

Roberts says the decision to use SAP R/3 enterprise software was taken early on. "At that time there was only really SAP that could fulfil our requirements in one solution," he says. "We needed to be on one integrated system to help us to be more efficient and use what we had more effectively. We did not want multiple pieces of software that we had to bolt together."

The company decided to roll out the software across 11 of its European manufacturing plants, covering finance, fixed assets, purchasing, inventory management, warehouse management, production planning, sales, distribution and plant maintenance.

Following the initial feasibility study, the next steps were winning board approval and assembling a project team. Roberts says the company made a point of using staff from both the business and the IT side and the project team included representatives from most of the company's European plants. It also included staff from consultancy Diagonal.

The team's first tasks were to work out a timescale and redefine the new business processes which would form the basis of the system. Roberts says the multinational team was involved at each stage and had a say in all of the major changes, which it tested with "system walk-throughs". The team also formulated the change management programme, which ensured that all affected personnel were trained in the new ways of working in advance of the system going live, Roberts says.

Getting user and senior management buy-in was a key early goal. "We got sign off at every stage," says Roberts, and the team worked closely with the heads of department to show them the potential savings in their areas in order to get them interested in completing the project. Directors signed off the proposals individually and a steering group reported every month during the board meeting. "It is a continual process of involving them and communicating with them," Roberts says. A project charter compiled at the outset was also instrumental in achieving user buy-in, while helping to manage the scope of the project.

The system was rolled out on a country-by-country basis, with the UK first to adopt it. The implementation was split into two phases: finance, costing and asset management went live in September 1999; and production, planning, warehouse management, sales and distribution, and shopfloor data collection systems went live in May 2000.

Just before the launch the team split into two groups with one going to Germany to assist in the roll out there. This process of dividing the team at each stage continued as the company rolled out the system in the remainder of its European operations. According to Roberts, this model helped the company to address regional differences like tax and legal implications, different accounting requirements and the fact that the plants make different products. All these factors had to be taken into account in the system build, he says, and any changes that the company made in one country would have to be tested in the countries implemented previously as well. This meant that the more countries the system was rolled out in the more time consuming it became.

Roberts says each country was different and had its own complications. The major problems Pilkington experienced were related to the management of the project itself. "Once we went beyond Germany we were running several projects at the same time," says Roberts. This led to problems co-ordinating the disparate groups of people and keeping it all in sync.

"It is a job to manage the people and make sure that the right people are in the right place at the right time," he says. Other key considerations involved managing cash flow and getting all of the various parts of the business in shape for the roll-out. "Managing cultural change is massive, as is making sure that everyone is on board and realise what they have to do," says Roberts. "It is all down to individuals and their ability to change." Difficulties arose because in some areas the change management programme removed people's responsibilities.

Despite these barriers, Roberts says the project "went horribly well", considering the scale of what Pilkington took on. "There were very few problems," he says, claiming that it was completed within the required timescale and the cost (£21m) was within budget. The project was even extended beyond the original scope, with the addition of areas like shopfloor data collection, the software for which was written in-house to complete the cycle in the production area. The company's European building products division also uses SAP's advanced planning and optimisation module to ascertain demand, capacity and availability of products across all the production plants in the division.

The ultimate goal of the implementation was to introduce standard processes, ways of working and consistent data. Now the screens and interfaces in the European plants are interchangeable and staff do things in the same way. "We can utilise the workforce more effectively," says Roberts. "And it allows you to rationalise your business entirely."

This also includes the workforce. The increased visibility means the company does not need the same number of people performing the same function. Pilkington has reduced its staff levels by setting up virtual departments, spread over multiple sites. Roberts says this model was especially beneficial as the company was reluctant to centralise departments because it was afraid of losing staff. "You end up with a multinational, multi-skilled workforce and you don't want to lose them by centralising," he says.

Although the project cost about £21m, the company expects to match that figure in return on investment by mid-2003. This will be a result of savings through bulk purchasing of raw materials and energy from suppliers rather than each plant buying its own as previously; better use of resources through more accurate planning; reduced stock levels through more accurate inventory management; and reduced transportation costs from better distribution planning. The company's suppliers are also beginning to be set up to monitor stock levels at the plants via Pilkington's Internet site, receiving information direct from the control cells. They can then schedule deliveries accordingly.

"Being able to co-ordinate your purchasing across Europe gives huge benefits and you can commit to longer range contracts with suppliers," says Roberts. He hopes the SAP system will "provide a stable base on which the company could expand in a far more controlled manner; an integrated foundation on which to build the business".

600450 Glass manufacturer Pilkington expects to achieve ROI of £21m in just three years from its SAP systems
Date: 6 March 2002
Source: CW360

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