After an El Niño, this cement company rebuilt itself by rebuilding Peru

SAP S/4HANA helps Cementos Pacasmayo pivot to construction solutions and community building

By | 5 minute read | July 16, 2020

For Cementos Pacasmayo, 2017 will always be a momentous year.

Just as the largest cement manufacturer in the north of Peru was turning 60 years old and looking to diversify its offerings, rampaging rains and damaging floods hit the country.

The climatic phenomenon El Niño Costero would become Peru’s worst disaster in two decades. During the first half of 2017, more than 1.7 million Peruvians were affected, according to the National Institute for Civil Defense, leading to 138 deaths and USD 3.1 billion in damages.

Following this natural disaster, Cementos Pacasmayo CEO Humberto Nadal took both the opportunity and responsibility to rebuild the company’s community. Rising to the occasion would mean not only reimagining building materials but also Cementos Pacasmayo itself. Only months before the disaster struck, the company had established a new vision of providing construction solutions alongside its construction supplies.

To excel at both—at a moment of national crisis, no less—Cementos Pacasmayo would have to radically overhaul its technical capabilities, all without interrupting its business.

“We’d been doing cement for 60 years and had been pretty good at it,” Luis Miguel Soto, CIO at Cementos Pacasmayo, said in an interview. The company had been happy with its position in the market, being one of Peru’s largest cement companies and the first listed on the New York Stock Exchange.

Yet as Peru’s real estate market boomed last decade, Nadal and his team began in 2016 to reconsider the company’s benchmarks. “Our transformation began as a realization that the world was changing and that it was time for us to reinvent ourselves,” said Dante Cardenas, director of innovation and digital transformation at Cementos Pacasmayo.

This shift would transcend the product, offering construction solutions and materials as a complete package. Building relationships would prove just as important as building roads or high-rises. “In order to deliver valuable construction solutions, we needed to focus on understanding and placing our customers in the center,” Cardenas said.

Operations management meets disaster management

Warm coastal waters caused torrential rains and flooding throughout Peru, especially in the north. Image by The Weather Company

After the coastal El Niño event, the company’s commitment to its new model crystalized. “This tragedy pushed us to demonstrate that our new vision could be put to the service of our people and our communities,” Cardenas said. “The tragedy forced us to walk the talk.”

El Niño Costero not only inundated many communities but left them stranded. A large lagoon formed, dubbed La Niña, severing the main road connecting many northern populations. Cementos Pacasmayo took up the challenge to rebuild the highway in the shortest time possible so traffic could resume.

As it dealt with the chaos in the countryside, Cementos Pacasmayo was tackling challenges closer to headquarters, as well. The company needed new technological capabilities to enable its expanded business model without interfering with ongoing operations. Yet the success of its solutions business was double-edged as a chainsaw—rather than selling to a settled group of distributors as before, Cementos Pacasmayo now had to transact with thousands of clients.

Though the company had the drive to provide innovative construction solutions, leadership realized they lacked the digital core to efficiently manage thousands of new transactions. Becoming more agile was key, Cardenas said.

In particular, the existing SAP ERP resource planning system couldn’t handle all the moving pieces of the new puzzle. Delays started to cripple the business. Inventory management was lacking. Managers couldn’t keep up with supplies they needed, so they erred on the side of caution by ordering a surplus, causing unnecessary expenses.

“We wanted to provide quality service to our clients as well as boost our efficiency and cut costs,” Soto explained. “But with the technical resources we had at the time, we were doing the opposite.”

Cementing core business applications

Cementos Pacasmayo helped rebuild one of the main highways in northern Peru after it washed away in the 2017 El Niño Costero. Photos via Cementos Pacasmayo

The resulting bottlenecks and miscues highlighted how even a commonplace program like resource management software can hamper operations.

Cementos Pacasmayo did not want to potentially harm relationships with clients, so it needed to implement technologies that could turbocharge digital management without disrupting operations. It turned to IBM Services for help.

“They wanted to completely change some of the most critical processes in the company, said Carlos Yepez Villa, IBM’s sales leader for SAP services. “We had to be organized enough make sure we caused the least amount of interruptions while also leveraging new services.”

To better handle all the new workloads, the team chose SAP S/4HANA on IBM Cloud, a cost-effective infrastructure that was also scalable. Migrating to SAP S/4HANA enabled Cementos Pacasmayo to accelerate processes, increase manufacturing performance and obtain business information in real-time.

“Before SAP S/4HANA, it was a little bit chaotic to deliver information to our customers,” Soto said. “Back then, we had to have a lot of people in customer service answering the phone all day. Now we can deliver that information right to our customers throughout the B2B portal.”

A foundation for transformation

Cementos Pacasmayo’s Piura plant at dusk. Photo via Cementos Pacasmayo.

Soto points out that SAP S/4HANA was just the first step towards Cementos Pacasmayo’s digital transformation. His team continues to work with IBM as they integrate more technologies, such SAP Analytics Cloud and Watson AI, to better serve the company and the community.

Having forged these new bonds, Cementos Pacasmayo continues to look to the community for opportunities and inspiration. In 2018, it launched Tu Idea Pacasmayo, a digital platform for sourcing creative and high-impact ideas from its growing roster of partners. The goal is an ecosystem of open-mindedness that decentralizes innovation.

“What we are looking for,” Cardenas said, “is to give the organization, as well as our collaborators, tools so that they can have a voice to optimize construction solutions.”