Petrochemicals giant Sipchem wanted to find ways to cut costs and increase central services efficiency. How could it align people, processes and technology to drive margins and raise profitability?
Sipchem partnered with IBM to deploy standardized, end-to-end business processes based on integrated SAP applications, enabling huge cost savings, new insights and greater corporate agility.
35%increase in process efficiency drives higher margins
25%reduction in internal services delivery costs contributes to profitability
Unlocksthe agility needed to compete successfully
Business challenge story
Making the most of opportunities
As globalization introduces new competitors and places downward pressure on margins, petrochemical companies must find new efficiencies to ensure continued success. Sipchem, a well-established manufacturer of petrochemicals, found that the speed of its expansion had out-paced the development of its administrative processes and systems. To remain competitive, the company sought to make a change before other players in the marketplace moved in on its market share.
Abdullah Al Belaihed, General Manager of Shared Services at Sipchem, explains: “Sipchem grew so fast that our expansion outstripped the development of our processes. When we first attempted putting a shared services model in place, we had difficulties merging the many different approaches that existed.”
Sipchem was running SAP applications on a small scale, to support some parts of the business. Without enterprise-wide integration, it was hard to extract meaningful insights into overall business performance. If Sipchem could integrate its data, management and workflow processes, it could save time and cut costs by automating critical processes, and reduce the company’s reliance on costly external consultants.
Sipchem called on IBM® Services to help it embark on a comprehensive business transformation program, underpinned by a company-wide rollout of an integrated SAP solution. In a ten-year agreement, IBM will manage the company’s applications and infrastructure.
First, Sipchem and IBM launched a detailed discovery and planning phase. IBM helped Sipchem restructure the organization into three business units: growth-driven, manufacturing, and corporate shared services. The team assessed the business maturity of processes in each department by mapping the previous situation and running analyses from both a top-down and bottom-up perspective. Finally, IBM created detailed proposals for improvement, the desired end state for each process, along with a rigorous business case and implementation plan.
The GM of Shared Services adds: “Working with IBM, we looked into each part of the organization to identify ways in which we could drive more value and deliver greater efficiency. For the finance, procurement, human resources, sales, distribution and maintenance departments, we agreed on new standardized approaches that would unlock agility.”
With the new processes agreed, it was time to select appropriate supporting technology. Working with IBM, Sipchem chose to capitalize on its existing knowledge of SAP and deployed a comprehensive suite of integrated SAP® ERP applications, including financials and controlling, materials management, sales and distribution, production planning, human capital management, plant maintenance, quality management, and environment, health and safety.
Sipchem also embraced SAP BusinessObjects™ Planning and Consolidation to enhance its planning, budgeting, forecasting, and financial consolidation capabilities.
“Today, every single employee in Sipchem relies on our central SAP solution,” comments the GM of Shared Services. “Drawing on IBM’s specialist knowledge of getting the most out of large-scale SAP deployments, we have been able to transform critical processes across the company in parallel.
“One example is production planning, which used to be heavily reliant on manual work. With our SAP solutions, we can automate many essential processes such as product costing and stock replenishment, reducing the time, cost and complexity required to perform key tasks.”
Next, IBM helped Sipchem roll out performance management and reporting tools for each level of the enterprise, based on SAP Manufacturing Integration and Intelligence (SAP MII) solutions.
Today, the company offers users three levels of insight into the business, equipping them with the information they need to make better decisions.
“With SAP MII, we can provide operational dashboards that offer a real-time view of success against a range of key performance indicators [KPIs],” says the GM of Shared Services. “With IBM’s assistance, we divided the company into our executive leaders, business leaders and finally managers and employees. For each level, we deliver tailored insights into the business. For example, our CEO and President receive the highest-level view of shareholder returns, cash from operations and sustainable development. Similarly, our manufacturing managers get production reports on daily, monthly and year-to-date production and consumption levels.”
Sipchem has also introduced SAP Fiori® mobile technology, which provides an optimized, consistent user experience across desktop, laptop, mobile and tablet devices, enabling effective working both inside and outside the office.
The company’s managers can now access critical systems to provide immediate approvals, monitor their target versus actual performance on operational expenditure, and view other critical reports while on the go. As a result, they have relevant information and the ability to take action at their fingertips at all times.
Cost-effective, agile operations
With consistent, standardized ways of working embedded in the centralized SAP solutions, Sipchem has succeeded in dramatically improving efficiency, cutting costs and boosting productivity.
“Transforming our business with IBM and SAP has unlocked unprecedented efficiency,” says the GM of Shared Services.
“Overall, we estimate that our shared services transformation has enabled us to increase process efficiency by approximately 35 percent. As part of this, we have driven down the cost of internal services delivery by around 25 percent, a huge saving that contributes to our profitability. What’s more, we were able to achieve a full return on our investment in just one year.
“One great example of a specific saving is to our end-of service benefit liabilities process. Before the project, we used to have two external consultants working to validate final salaries and termination packages, and check that employees were paid on time. With the new SAP solution, wages are now paid automatically directly to the employee’s bank, with accurate, rapid calculation of end-of-service benefit liabilities that are legally required by Saudi law.
“Additionally, with help from IBM and SAP solutions, our performance reporting capabilities have been completely transformed.
“Every quarter, the Sipchem CEO, president and general managers meet for a corporate review where they discuss the balanced scorecard for the company. Before, the scorecard was compiled using a combination of spreadsheets and slide decks. Now, we are able to access this report with one click using our new SAP tools. With much greater granularity in the business data, our decision-makers have the information they need to build more effective strategies, to guide the company to success.”
With significantly enhanced visibility of closely aligned processes, technology and people, Sipchem is better-positioned to meet the challenges of the present, and take advantage of opportunities in the future.
The GM of Shared Services concludes: “Working with IBM and supported by SAP solutions, we now have much more control over the business—meaning that we can adapt faster to change than ever before. In the highly competitive petrochemicals industry this is a key competitive advantage, and essential to achieving our sustainable growth aims.”
Established in 1999, Sipchem is a globally recognized manufacturer, producing and marketing more than 2.4 million metric tons of petrochemicals each year. Following its success over the past decade, Sipchem continues to deliver impressive growth while maintaining its commitment to excellence and innovation. The company currently employs more than 1,100 people from all around the world.
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