In the wake of the global economic slowdown, falling prices were cutting into this rubber producer’s margins. How could the company identify operational cost savings to protect profitability?
The company worked with IBM Services to enable fine-grained insights into the true cost of its day-to-day activities, based on data captured from integrated SAP solutions.
100%accuracy for operational cost reporting
60%reduction in time required for month-end closing
66%faster expenses processing boosts business-user satisfaction
Business Challenge Story
Recent years have seen a dramatic slowdown many parts of the global economy—especially major markets in India, China and the United States. Downturns in these regions present a particular challenge for businesses that produce physical commodities such as rubber.
A company spokesperson explains: “Within the last few years, the price of rubber has fallen by around 46 percent, and the global market remains volatile. We expect that it will take a number of years before demand in our key markets in India and China return to their original levels. More than ever, ensuring our profitability depends on operating as cost-efficiently as possible.
“We are a vertically integrated enterprise, and manage everything from planting, cultivating, tapping and processing natural rubber to the marketing and sale of the final product. Because our business includes so many complex, interdependent processes, accurately determining our operational costs presented a number of challenges.”
“Each of our worldwide plantation and refinery operations were in effect operating independently, using their own paper-based systems and processes,” continues the spokesperson.
“Different methods for calculating key metrics meant that it was extremely difficult to consolidate the reports to gain an accurate view of our performance. In addition, the heavily reliance on manual processes increased the risk of important information going missing.
“When each business reported monthly cost of activities such as cultivation, maintenance, staffing and logistics, we estimated that the figures were often only 80 percent accurate. To identify and implement cost-efficiencies, we wanted to track our spending down to the cent with complete precision.”
Planning worldwide integration
To solve the challenge, the company performed a complete review of its worldwide operations, and mapped out new, fully integrated business processes.
“To support the new way of working, we looked for a single software platform that would enable us to manage every business process from end to end,” recalls the spokesperson. “After a thorough evaluation of a number of potential solutions, we selected SAP® ERP software. As well as being impressed by the maturity of the platform, we felt that the SAP solutions excelled in their ability to manage and monitor the production planning, plant management and logistics processes that support our day-to-day activities.”
As a next step, the company looked for an expert partner to accelerate and reduce the risk of its business process transformation project, and selected IBM Services.
“I have worked on many implementation projects for ERP solutions in many other enterprises, and experience has taught me what makes a strong consulting team,” says the spokesperson. “IBM provided us with exactly what we asked for—a highly experienced team with comprehensive knowledge of the SAP solutions and their associated disciplines, especially finance and consolidation reporting.”
Using best-practice methodologies for the SAP ERP software implementation, the IBM Services team guided the company through every stage of the process: running workshops, designing the solution blueprint, and training end-users after the go-live.
The spokesperson comments: “At the start of the SAP solution implementation, we asked our business users to request the reporting capabilities that would help them most from the new solution. We received a massive response, particularly from our senior management community, which led to more than 200 items being added to the project scope.
“The IBM Services team handled the additional requirements beautifully, and helped us to design a range of dashboards customized to meet each unit’s specific reporting requirements.”
The company, working together with Services, implemented SAP ERP with applications for finance, controlling, consolidation, materials management, production planning, warehouse management, plant maintenance, and project system. The SAP solutions now support practically all of the company’s worldwide businesses. The SAP ERP applications are hosted in the parent group’s data center, connected to high-performance IBM Db2® databases.
Bouncing back to efficiency
With SAP solutions driving its newly integrated business processes, the company has gained the reporting accuracy it needs to identify and drive cost-efficiencies.
“Previously, if one of our employees needed a quantity of a raw material such as fertilizer or a component to carry out repairs on some equipment, they would need to sign a slip of paper at their nearest warehouse,” says the spokesperson. “If the slip then got lost before it could be keyed into the back-end warehouse management system, there was a risk that our reported and actual stock levels would be mismatched, and our financial reporting data inaccurate.
“Today, everything—from raw materials and equipment to the person-hours that our employees are working—is managed centrally in our SAP solution. Utilizing a fully integrated electronic system gives us near-real time visibility of the true cost of our day-to-day operations, and enables us to identify new ways to improve our efficiency.”
The company’s SAP solutions are helping it to boost the accuracy and efficiency of its reporting cycles, facilitating regulatory compliance.
The spokesperson continues: “In the past, our manually prepared month-end group consolidation reports were approximately 80 percent accurate; thanks to integration and automation from our SAP solutions, our reports are 100 percent accurate.
“As a result, we can deliver reports to our parent company, our government regulators and to our shareholders with complete confidence in the validity of the results. Better still, our SAP platform enables us to accelerate our monthly close by 60 percent—freeing time for value-added analytics to help the business to make better-informed strategic decisions.”
New capabilities from the SAP solutions are enabling the company to offer enhanced, more responsive services to its community of business users worldwide.
“If one of our senior executives requested a comparative report that involved a number of different business units, it typically took our finance team five working days to collate and corroborate the underlying data,” explains the spokesperson. “Today, we offer all the information that our executives need via SAP dashboards at the touch of a button.
“By freeing our finance team from the time-consuming work of building reports, they can now invest time on other value-added activities. A good example is our employee expenses processing, which could previously take as long as six weeks. Now, the combination of a streamlined expenses workflow in our SAP software and freeing our finance team from repetitive report generation tasks means that we can run two expenses payment runs every month—speeding up payments by 66 percent.”
The spokesperson concludes: “The SAP ERP software delivers full visibility of the true costs of running our worldwide businesses, and we are already planning to further enhance its accuracy with extra financial planning and consolidation capacities. We are confident that the SAP solutions delivered by IBM Services will help us achieve the cost-efficiencies needed to keep our margins healthy in a tough economy.”
About Leading rubber producer
This leading natural rubber producer employs thousands of people, managing plantations and processing plants around the world.
- Db2 (zMLC)
- GBS AD&I - EA - SAP
- IBM Global Business Services
- IBM-SAP Alliance