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How one of the UK’s largest SAP implementations saved money and improved performance

Lee Harris, Programme Manager

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Outline of Presentation

Background

Programme Overview

Functionality Implemented

Benefits Achieved

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Royal Mail

Facts & Figures

Turnover £8,408m, 224k employees

Delivers letters and parcels to 27m UK addresses, Operates

17,500 retail outlets

1 Shareholder – UK Government

Regulated Industry (PostComm) but still required to provide

Universal Service Obligation.

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Why are we doing this?

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The Issues

De-centralised Businesses lack of

corporate focus

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The Issues

Multiple Systems and processes 10 significant legacy financial systems (inc. JBA, Walker

Financials, Oracle and SAP).

Numerous variations on common processes mainly paper

driven or local PC solutions with no integration to financials.

Aspiration to become an e-business difficult to support with

current landscape.

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The Issues

Financial Backdrop

Underlying profitability was deteriorating.

Availability and consistency of financial performance information.

Planning was an annual event with 1 year horizon, which took 6

months.

On-set of regulation would furnish additional information

demands.

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The Solution

Single SAP ERP for Royal Mail

1 common Chart of accounts across all business operations

Common finance processes, e-enabled where ever possible

Cycle time improvements for results production from one-set

of numbers.

“Getting a grip of the numbers”

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Programme Overview

Enterprise System Programme (ESP)

Programme initiated in early 2000, with SAP as strategic

technology choice.

ITT led to selection of implementation partner – Deloitte

Consulting.

Programme created with a mix of Internal process experts,

Royal Mail IT staff and supplemented with External Consultants

as required.

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Programme Overview

Programme Scope

18 Individual Business Units

Over 7000 users (inc 4,000 EBP users).

8,500 Profit/Cost Centres.

40,000 vendors & 250,000 business customers

1.5m invoices per annum.

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Programme Overview

Early Major Decisions

Single CO area.

Roll-out strategy (Functionality, Business Unit or by legacy system).

Business Unit ownership – Implementation Managers.

Technology Choices (Workplace, EBP).

Establish a specific governance group to chase benefit achievement.

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Programme OverviewIMPLEMENTATION TIMELINE

Phase 1

04/00 - 11/00 11/00 – 07/01

Phase 2

12/01 – 03/02

Phase 3

08/01 –11/01

• EBP Pilot

R/3

• 5 BU’s

• FI/CO, EBP, AM, PM & MM

R/3

• 8 BU’s

• RE - Prototype

R/3

•6 BU’s

• RE, PS

Blueprint

R/3

• Blueprint

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Functionality Overview

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R/3 SCOPE : Version 4.6c

Procurement

InventoryManagement

PlantMaintenance

CashManagement

AssetManagement

Projects

RevenueManagement

EBP

MM

IM

PM

SD

FI-CA

AM

PS

TreasuryFinancial

Accounting

Inter-Business

ManagementReporting

FI

CO

Real EstateRE

Functionality Overview

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Functionality Overview

Key Functionality:

EBP – new functionality, incomplete content, piloted the

technology first (100 days) – before productionising.

RE – Real Estate no previous UK versions, prototyped before

developed (prototyping didn’t expose all the integration

issues encountered later).

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Functionality Overview

Gaps in Solution

Demands from Regulator starting to materialise, which pose

challenges for R/3 to handle.

• Costing

• Planning

Performance Management loop not closed by ERP alone.

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Functionality Review

Programme Response

Initiated additional project to deliver:

• Business Warehouse Reporting Flexibility (BW2.1c)

• Strategic Enterprise Management (SEM 3.0)

Also replaced AB Costing solution with Oros (SAS), including

unique “bridge” to BW for distributed reporting.

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R/3 Data Sources

SEM-BPSBusiness

Planning andSimulation

SEM-BPSBusiness

Planning andSimulation

OROSRevenue and Cost Model

OROSRevenue and Cost Model

Bridge

SEM-BCSBusiness

Consolidation

SEM-BCSBusiness

Consolidation

SDPRISDPRI

HUB

BW/SEM Scope

SAP BWReportingReporting

PayrollLedger

PayrollLedger

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Programme OverviewIMPLEMENTATION TIMELINE

Phase 1

04/00 - 11/00 11/00 – 07/01

Phase 2

12/01 – 03/02

Phase 3

08/01 –11/01

• EBP Pilot

R/3

• 5 BU’s

• FI/CO, EBP, AM, PM & MM

R/3

• 8 Bu’s

• RE - Prototype

R/3 & BW

• 6 BU’s

• RE, PS & BW Functionality

03/02 – 10/02

Blueprint

R/3

• Blueprint

Phase 3 (a)

R/3, BW & SEM

•BCS / BPS Functionality

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Somebody has to pay for all of this don’t they?

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Programme Benefits

Targeted Benefits - Financial

Replacement of legacy applications.

Process Efficiencies – Reduction in Headcount.

Improved Control – Controlling demand (e.g.utilities / cleaning etc)

Supplier price reductions (conformance and supplier efficiencies)

Inventory reduction (JIT & automatic re-order levels)

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Programme Benefits

Targeted Benefits – Non Financial Performance reporting, Product/Customer profitability,

regulatory and statutory accounts are all produced from a

common source.

Flash results available within 2 days of period close.

Actual product profitability reported on day 15 each month

(previously quarterly).

Business Plans consolidated in a day (previously 2 weeks).

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Investment Costs & Benefits

0

20

40

60

80

100

120

140

99-01 01-02 02-03 03-04 04-05 05-06

Financial Year

£m

Cumulative Benefit

Cumulative Cost

Sunk £86mTotal £103m

Rec. Benefit

£37m

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Programme Benefits

Measures of Success

Financial Benefit achievement

Stakeholder Perception of Programme

End user Perception

Non Financial Results.

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Programme Benefits

Enablers of Success

Keep it lean and mean – provides pace!

Business Ownership – Solutions Team, Implementation

Managers, ASAP methodology.

Focused Board securing benefits (inc. Implementation

partners “skin in the game”).

LEADERSHIP – within the Programme and the Business..

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Programme Benefits

Still to Finish!

Revenue management (SD/FI-CA).

Sustaining the gains!

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Thank You