Aceros Arequipa looked to strengthen its leading position in the highly-competitive Latin American steel market by ensuring maximum operational efficiency throughout the business.
To streamline core business processes and improve data visibility, Aceros Arequipa engaged IBM Services to convert its SAP ERP to SAP S/4HANA on IBM Power and IBM Storage.
93%reduction in time required to produce monthly closing reports
20%increase in product deliveries direct to customer, slashing logistics costs
$15cut from cost of sales per ton of steel
Business challenge story
Building for the future
Based in Peru, Aceros Arequipa is the country’s leading steel company and an important player in the Latin American steel industry, primarily serving the region’s booming construction sector – and international customers – with steel rebar and customized components.
In this market, Aceros Arequipa competes against both local producers and against importers. Faced with significant volatility and uncertainty, it is essential for the company to fully understand its own production costs, which will help it react rapidly to price fluctuations and make the right commercial decisions.
However, the scale of the business and the sheer amount of data that Aceros Arequipa was generating meant that key business processes often ran slowly. Employees were unable to gain the operational insight required to make the most effective decisions.
Rafael Caceres, CIO, Aceros Arequipa, outlines the challenges: “Month-end closing processes took around five hours to complete, and it would often take a significant amount of time to generate vital sales reports. Without timely access to this information, we couldn’t ensure maximum efficiency at every point in our supply chain.
“The limited performance and flexibility of our existing application infrastructure, running SAP ERP, impacted customers, too. For instance, we aim to ship all products from our plants directly to our customers’ doorstep; however, this was only possible for around 50 percent of our deliveries. So, we set out to enhance our reporting, accounting and supply chain management capabilities by converting SAP ERP to SAP S/4HANA. If we could achieve greater visibility across our operations, we knew that we could empower employees to increase efficiency and make even better decisions.”
Trusted relationship delivers again
Aceros Arequipa engaged IBM Services to review its strategy, and completed the IBM HANA Impact Assessment – essential preparation for a program that affects every part of the business. Alecxy Diaz, SAP S/4HANA Program Manager, Aceros Arequipa, comments: “Using the IBM HANA Impact Assessment, we identified and implemented best-practices that ultimately helped reduce the database size by 30 percent, resulting in improved go-live processing time. Additionally, the IBM HANA Impact Assessment results helped us to establish the functionality required, and helped clarify the business roadmap and strategy for S/4HANA.”
To enhance productivity and unlock powerful strategic insight into all aspects of its business, Aceros Arequipa chose to implement SAP S/4HANA, alongside SAP Process Orchestration, SAP Business Warehouse, SAP BusinessObjects™ , SAP Integrated Business Planning for response and supply and SAP Cloud for Customer, all running on SAP HANA, with remote access to core systems provided through the SAP Fiori® interface. The complete suite includes Finance (FI), Controlling (CO), Funds Management (FM), Business Planning & Consolidation (BPC), Materials Management (MM), Plant Maintenance (PM), Production Planning (PP), Sales & Distribution (SD), Warehouse Management (WM), Quality Management (QM), Human Capital Management (HCM) and ABAP Custom Code Remediation.
Rafael Caceres continues, “One of the key requirements we had for our new ERP system was that it should be as easy to use as possible, so our employees can maximize the time they spend on value-add tasks. We selected SAP S/4HANA because of its reputation for excellent performance and simplicity. We had been running our previous SAP ERP solution on SAP HANA for a year, so we were familiar with the rapid in-memory data processing that the SAP database delivers. Implementing SAP S/4HANA was the next step in our strategic plan for improving operational efficiency.”
Benefits of IBM Services
Aceros Arequipa selected IBM Services on the basis of its long-term relationship and strong rapport with the company’s IT team, and based on IBM’s experience of working with SAP solutions.
Rafael Caceres comments, “We expected a strong performance from IBM Services, and the team certainly did not disappoint. Working closely with the Aceros Arequipa IT team, IBM Services completed the implementation on time, in around eight months, and around 20 percent under budget. We were very happy with the quality, speed and responsiveness of the team during the implementation. IBM Services showed a deep understanding of SAP S/4HANA that enabled them to optimize the solution for our company.”
The IBM Services team was able to leverage the assets and expertise of the IBM Global S/4HANA Center of Excellence, bringing SAP S/4HANA Conversion Best Practices, SAP S/4HANA Conversion Process Flows, HANAtization Console (ABAP Custom Code Remediation), and CVI Lessons Learned to help manage the project.
Some 800 users access the SAP solutions, with around 2 TB of data stored in SAP HANA. IBM completed a total of five conversion cycles to migrate the data to SAP HANA, for sandbox, development, quality assurance, pre-production and production instances
“The IBM Services team has been instrumental in making the jump to SAP S/4HANA and we would certainly work with them again,” says Rafael Caceres. “This project has proved to us that working with IBM Services on SAP implementations is an unbeatable choice.”
Performance, reliability and flexibility
To optimize the performance, reliability and flexibility of its SAP S/4HANA environment, Aceros Arequipa implemented two IBM Power Systems E880 servers running SUSE Linux Enterprise Server for SAP Applications.
Rafael Caceres explains: “To get the most out of our SAP S/4HANA solution, we knew that we needed robust infrastructure, and SAP S/4HANA on IBM Power Systems could provide us with the excellent performance, availability and reliability that we required to streamline our core business processes.
“Another key requirement was flexibility. With data volumes set to grow in the coming years, it’s critical that we ensure we can upsize systems as we expand. IBM Power Systems deliver excellent scalability—we have been using the servers for over 15 years, using logical partitions (LPARs) to generate additional capacity when required. When we were deploying the new servers, we used IBM® PowerVC™ to create new LPARs—as a result we were able to triple the size of our hardware with minimal investment or maintenance effort. Thanks to the flexibility of IBM Power Systems, we were able to implement 26 POWER8® cores - if we had chosen another vendor we would have incurred much higher total cost of ownership.
“Additionally, had we implemented servers from another technology vendor, we calculated that the implementation process would have been at least 50 percent slower. Because every hour that we aren’t selling has an impact on our bottom line, the fact that IBM Power Systems could facilitate a rapid implementation was a huge plus for us.”
For storage, Aceros Arequipa deployed IBM SAN Volume Controller and an IBM FlashSystem® 900 all-flash array, providing excellent performance, flexibility and reliability. Rafael Caceres comments: “The IBM FlashSystem is one of the fastest and most flexible flash storage arrays on the market. We especially like the real-time data replication built into the solution, and we use this capability to back-up our SAP HANA environment, with no impact on performance.”
Creating future opportunities with SAP and IBM
Aceros Arequipa believes that implementing SAP S/4HANA on IBM Power Systems and IBM Storage with IBM Services will dramatically improve efficiency, by simplifying and streamlining business processes and delivering greater strategic insight into operations across the company.
Rafael Caceres outlines key benefits: “For example, whereas previously, closing monthly accounts would take around five hours, with SAP S/4HANA on IBM Power Systems and IBM Storage, the process can be completed in less than 20 minutes—a time saving of around 93%.
“Similarly, producing sales performance reports used to be extremely time-consuming. Now, with SAP S/4HANA deployed by IBM Services on IBM Power Systems, we can deliver management reports in just minutes, providing senior decision makers with instant strategic insight into sales performance.”
Customers will also benefit from the increased logistical flexibility that SAP S/4HANA will provide for Aceros Arequipa. Currently, customers order stock based on the closest location – which may not have the item requested. With the new solutions from IBM and SAP, Aceros Arequipa will be able to provide customers with access to stock stored across all of its warehouses, offering customers greater choice and making it easier for them to find the goods they want.
Rafael Caceres continues, “We are also looking at building algorithms to optimize the routes of our delivery trucks—that way our drivers can avoid traffic jams in urban areas and ensure we deliver all products to our customers on time. Whereas prior to implementing SAP S/4HANA, Aceros Arequipa was able to deliver half of sales directly to customers, with the new solution, we aim to increase this figure to around 70%, cutting the cost of sales by around $15 per ton.”
By implementing mobile applications powered by SAP Fiori, Aceros Arequipa gives employees even more flexibility. This is especially important for salespeople, who are often in the field, as they can now access core SAP applications via their mobile device. As a result, they no longer need to travel to the office to complete routine administrative tasks—improving their productivity.
Creating future opportunities with SAP and IBM
Committed to unlocking efficiencies across its business, Aceros Arequipa is already looking to the future. Rafael Caceres explains: “Currently, our employees manually inspect and select scrap metal sent to us for reprocessing. We want to develop an imaging system to improve our selection standards and increase our capacity, and have embarked on an artificial intelligence project potentially based on the IBM Watson® platform to conduct visual analysis and selection, and enhance our scrap metal performance.”
Rafael Caceres concludes: “We’re very pleased with the impact that SAP S/4HANA delivered by IBM Services and running on IBM Power Systems and IBM Storage has had on our business. Our new SAP and IBM solutions have truly streamlined processes and enhanced data visibility throughout our operations, enabling us to work more efficiently and provide even better services for our customers.”
About Aceros Arequipa
Corporacion Aceros Arequipa S.A. manufactures and sells steel products in Peru and internationally. The company produces wire rods, construction bars, nails and wires, rock support bolts, pipes, irons and coils and commercializes steel calamine and other steel products products. The company provides its products for house construction, rock support applications metallic carpentry, the mechanical metal industry and construction companies. Corporacion Aceros Arequipa S.A. was founded in 1964 and is based in Lima, Peru.
Take the Next Step
To learn more about SAP S/4HANA, please talk to one of our IBM SAP experts or visit: ibm.biz/gbssap4hanana-scheduler or ibm.com/services/sap/s4hana
To learn more about IBM Power Systems, please contact your IBM representative or IBM Business Partner, or visit the following website: ibm.com/it-infrastructure/power
To learn more about IBM Flash Storage, please contact your IBM representative or IBM Business Partner, or visit the following website ibm.com/it-infrastructure/storage/flash