British American Tobacco (BAT) looked for major cost savings to free up cash for investment in growth.
Partnering with IBM, BAT has designed and implemented a new global SAP template in more than 180 markets worldwide in record-breaking time and delivered significant business value.
30% greatergreater treasury gains versus business case across BAT
50% higherhigher P&L improvement versus business case in Asia-Pacific
30% strongerstronger balance-sheet versus business case in Asia-Pacific
Business challenge story
Unprecedented transformation challenge
To build a truly global business, executives at British American Tobacco (BAT) looked for cost-efficiency gains and greatly enhanced business agility. To this end BAT developed a new target operating model that was to be enabled by the digital transformation of the business through the implementation of a new global SAP template.
This strategy prompted a fundamental review of BAT’s existing SAP software landscape, and created a program that became known simply as ‘TaO.’
Setting the scene, Nicandro Durante, Chief Executive Officer of BAT, explains: “Our transformation program is of immense scale and intensity, unlike anything ever seen in BAT before. It is about designing and implementing the lean, nimble and effective company we have all wanted for so long. The TaO program is a key part of our global strategy and will make a major contribution to funding BAT’s future sustainability and growth.”
BAT engaged IBM to enable global delivery of the TaO program, from initial project plan to final go-live.
Ben Stevens, Finance Director, confirms, “The TaO program set out to create an integrated global enterprise. We simply have to be the most efficient and the most effective player in the market if we are going to release resources to invest behind next generation products, new markets or indeed new brand launches.
“What we have now is the opportunity to look at the company on a holistic basis. The reason we can do this is because we are doing things the same way everywhere. TaO means the ability to compete and win in an ever-changing market place.”
Harmonizing global operations
BAT began by designing a simplified set of integrated business processes – the Target Operating Model (TOM) – that would enable its international operations to share more resources. To match the new globally integrated way of working, BAT needed to update its business management solutions, which were largely based on SAP software.
The aim was to transform BAT’s landscape from operational units working independently to a global enterprise working in a unified way, underpinned by one SAP instance for the entire business.Time was of the essence: BAT aimed to roll out the program, known universally as TaO (TOM and One SAP), to more than 180 markets in less than four years.
The program was not as simple as rolling out a standardized deployment to each country. Each new deployment introduced additional global functionality required by that market, for example: interfaces to front-end trade marketing systems, demand forecasting, invoice scanning, and EDI with suppliers.
Shon Kumar, Global Programme Director, comments, “The TaO program is about creating an integrated global enterprise – taking a collection of individual and really well-run markets and stitching them together into something that is greater than the sum of the parts.”
A program of this scale carries immense business risk. For example, one specific regional deployment supported 15,000 users in 85 markets. BAT relies on SAP software to support every part of the global enterprise, and unexpected downtime or lack of critical functionality could halt operations and damage profitability.
Due to the required speed and scale of the transformation, BAT joined forces with IBM® Global Business Services® to help complete the delivery successfully.
Shon Kumar continues, “We were looking for a system integrator who could offer excellent global business and technical support, provide absolute commitment to this business-critical program, and generate superb ideas for innovation to help us meet our deadlines. IBM Global Business Services ticked all the boxes, and demonstrated a proven track record of successful large, complex SAP implementations, worldwide.”
The IBM consultants helped BAT to design, build, test, release and roll out the new SAP template. A joint BAT and IBM team managed the TaO program and provided subject matter experts to advise both the SAP deployments and the design of business processes. Additionally, IBM provided the following services: A mixed on-shore, near-shore, off-shore model delivered services to regionally based teams utilizing IBM InfoSphere Information Server and Backoffice Associates Data Stewardship Platform for Data Quality. Enterprise Analytics (BI, BW Design and Implementation). Global Template Governance (Design Authority). Systems Administration & Security (Basis/GRC)
Toby Granwal, Head of Business Readiness at BAT, explains: “The global SAP roll-out is complete and we are delighted with the service we have received from IBM.
“Even though the IBM team has had to accommodate tens of thousands of change requests, and a larger scope than originally planned, each stage of the deployment has been completed on time, within budget and with very minimal disruption to our operations.
Jeff Keller, IBM Engagement Partner for TaO at BAT, comments, “The joint BAT and IBM team’s success in rolling out the new SAP template globally to more than 180 markets in two years and three months is an amazing accomplishment that no other SAP implementation has achieved before.”
SAP awarded its 2015 Business Transformation Award of Distinction to BAT for executing with excellence in their vision to transform its global product portfolio (including e-cigarettes) to support BAT’s long-term strategy and withstand industry disruption.
The SAP jury gave the award to BAT’s TaO program for the global scale of transformation including product portfolio and supply network, aligning global and local needs, and impressive value measurement.
Crystal-clear view of the business
Rapid access to reliable data is already proving hugely advantageous to BAT. Procurement staff have greater visibility of current and future materials requirements which helps to prevent over- or under-stocking.
BAT now has full visibility of its global end‑to-end supply chain, which is managed by the SAP Supply Chain Management application. This enables greater optimization of stock levels and smarter inventory management. By reducing total inventory, the company will be able to cut logistics and storage costs, which in turn will release capital.
Toby Granwal remarks, “We manage materials and recipes centrally, so we can ensure consistent products globally and leverage our scale to get the lowest possible cost. Global standards make it easier to ensure consistently high quality, and that our products adhere to regulatory requirements. In addition, we have millions invested in spare parts inventory most of which doesn’t move for two years. Standardized data, naming conventions and a global view will allow us to drive down spend on spares.”
Historically, a lack of integration between systems and processes used by different divisions of BAT made it cumbersome in some areas to produce data for business decision making. Data now flows automatically through a single integrated system giving instant access to up‑to‑date figures.
A program methodology was developed for TaO, with significant input from IBM, that enabled a process of industrialization, learning from early implementations and then building rapidly. This culminated in the ability to go live with eight factories and multiple markets on a single day.
The importance of the single operational standard and benefits of strategic digital transformation became clearer with each deployment. With standardised data and insight into the entire business, managers can make smarter strategic and operational decisions than ever before.
Furthermore, the company can better focus its resources on growing the market share of key brands and on identifying opportunities to launch new products to meet demand. The implementation of TaO enabled BAT to operate as a globally integrated enterprise, focussing its resources in a targeted way to maximize sales and profitability. Improved trend data helps identify new opportunities and substantially accelerate time-to-market.
Mark Burns, Head of Delivery for TaO, comments, “Partnership was key in terms of how we worked together to make sure we all had the same goals – it was sometimes difficult to determine who was BAT and who was IBM.
“The core of the solution we provided comes from SAP. We knew from the previous legacy instances the calibre of SAP and its capabilities. IBM working in partnership with SAP brought it to life; the partnership with BAT ensured that we successfully delivered the final product to our markets and factories and achieved our goals.
“IBM provided capabilities around system integration, supplementing a core set of skills that already existed within BAT, especially in the IT department, and made sure that we were able to deal with volume, scale, geography and complexity. To drive a global program such as TaO required strong leadership throughout the organization – strong leadership that was matched in our IBM and SAP partners.”
In the finance and back-office functions BAT integrated and automated many processes. With better data, BAT has a granular view of how money is spent at all levels of the organization.
Similarly, the standardization offered by TaO has enabled BAT to introduce the concept of shared services. Where previously each end-market supported its own back office, BAT can shift activities such as finance, treasury, technical support and others to shared centers of excellence, providing greater resources to the group at lower total costs.
“With the implementation of TaO, we now better understand how we invest money with customers across all our different business units. We currently invest significantly in trade margins. A global view will allow us to optimize and drive improved return from this investment.
“Having better-quality data at our fingertips means that we can also plan and forecast much more accurately than before – ultimately helping us make smarter decisions for our business. For example, we can pinpoint the markets with the greatest potential for profit growth, and allocate our resources accordingly.”
Where country business units need capital, improved central cash management may remove the need for external funding to help reduce borrowing costs. Currently Treasury benefits are 30 percent ahead of business case as well as improving risk management and controls across the company.
In summary, streamlining and standardizing on a single set of processes enables BAT to operate far more cost-effectively than before with improving operating margins and further enhancements predicted. BAT expects that TaO will contribute significantly to growing operating margin on average by 50-100 basis points per annum.
Shon Kumar elaborates, “The money we save will be invested in new growth initiatives, helping to cement the future prosperity of our business and sharpen our ability to compete in a tough market. We can now view the company in a holistic manner, and can therefore make better resource and investment decisions.
“IBM has provided essential project, technical and SAP deployment support at every moment of this journey. Bringing this global program to a conclusion on time and on budget is a remarkable achievement.
“The strength and depth of the resources delivered by IBM Global Business Services have been truly critical to the shared success of the TaO program at BAT.”
Mark Burns concludes, “What we’re looking to do is to take ownership of the solution, and work again in partnership with IBM, with SAP and with BAT, making sure we continue to evolve the solution, to continue to drive benefit and take us into the next generation.”
About British American Tobacco
Selling around 663 billion cigarettes every year, British American Tobacco is one of the world’s leading tobacco companies. With more than 50,000 people employed across the globe and annual revenues of approximately GBP13 billion, the company serves more than 200 markets.
- GBS AD&I - Application Development & Management
- GBS AD&I - EA - SAP
- IBM Global Business Services
- IBM-SAP Alliance