This is Part Two of our article series on Sapphire 2011 Highlights. In Part One we discussed SAP’s newly launched Supplier InfoNet that lets participating companies anonymously share actual supplier performance information to gain insights into supplier risk.
SRM 7.0 at B. Braun
Rainer Schimpf, B. Braun’s CIO for Asia-Pacific, gave a presentation on their implementation of SRM 7.0. B. Braun is a Germany-based provider of healthcare founded in 1839, now with $6.3B in revenue and 42K employees, operating in 56 countries.Their product offerings cover integrated therapy concepts of products and services for anesthesia, intensive and acute care, infusion therapy, urology, systems in the surgical area, comprehensive patient care for the segment of physicians in private practice as well as out-patient and stationary care, and activities in the field of extracorporeal blood treatment and dialysis, and provider of dialysis centers.
Challenges in Malaysia
Braun has a production plant in Malaysia where they were experiencing a lot of pain in the procurement process. In Malaysia, they were spending MYR700M on materials out of MYR1.1B in revenue. Headquarters in Germany negotiated direct materials contracts, Malaysia negotiated indirect materials, but it was a time-consuming manual process, lacking in transparency and adequate quality controls.
The existing procurement system did not support Asian languages. That was not a major issue in Malaysia where English is widely spoken, but since B. Braun planned to roll out SRM to other Asian countries like China, Thailand, Korea and Japan where the administrative staff doesn’t speak English, the available system was not suitable.
They wanted to implement streamlined global processes provided via a centralized purchasing system that would provide visibility to all procurement, and manage the quality of suppliers and provide local procurement and local language support.
Centralizing Contract Management
To solve some of these issues, B. Braun decided to implement SRM 7.0 from SAP which is able to provide a single master repository of operational contracts — a central place to locate and manage contracts and track changes to terms or pricing — while at the same time allowing those contracts to be executed in one or more backend transactional systems (ERP and/or procurement system) independently. This was important for B. Braun because they run the company on three separate instances of SAP’s ERP Central Component (ECC 6.0). SRM enables centralization of sourcing and contracts with distributed execution of procurement.
Working Under Tight Time and Budget Constraints
The first challenge for Rainer’s group was negotiating with headquarters in Germany to convince them the project should be done by the Asian IT group. Headquarters finally agreed to start small with a phased approach, first in the Malaysian subsidiary, and if that worked, to then expand to the other subsidiaries. For the first phase, headquarters provided a very limited budget and an aggressive time frame. There was a lot of pressure to prove it could be done within budget and timeline.
The initial plan had a start date in the last week of February 2010, and a go-live date by the end of July with order management and self-service procurement functionality, followed by other modules in September 2010. Due to the Icelandic volcano preventing travel, as well as other challenges, the project did not actually start until June. In spite of this, they went live on August 1st, 2010. According to Rainer, B. Braun headquarters could hardly believe how quickly they did it. This was a real eye opener, and headquarters decided the model worked and they should expand the scope from regional to a global implementation. With the success of Phase 1, in Phase 2 they implemented supplier registration, contract management, order management, supplier evaluation, and are just finishing up invoice management. In the next phase, they are implementing Strategic Sourcing with RFx (Bidding), SRM Strategic Sourcing with Live Auction, SRM Service Procurement, and SPM Spend Performance Mgt.
Asians Prove to be Fast and Flexible
Rainer made an interesting observation that people in Asia are much more open to changes and trying something new compared to their counterparts in Europe. He said the change management process was much simpler and they could execute the phases must faster in Asia than in Europe. In Europe, standard processes are very firm and difficult to change; whereas in Asia, if the internal customer had justifiable concerns, then the IT organization would consider whether some adjustment was possible and appropriate. This approach increased satisfaction and acceptance by users when they started using the system.
Rainer added that in Asia, people seem to be much more willing and interested in learning new things, and he believes these differences hold true across the region, not just within B. Braun. One participant in the session concurred that in their experience Malaysia was particularly progressive in this regard. It occurred to me that developing countries often end up implementing new technologies, like the latest cell phone networks, sooner and faster than developed countries that are saddled with the baggage of a large installed infrastructure.
Rainer stressed the importance of training, not just at launch, but as a permanent program. This is true not only because you are hiring new employees, but because existing employees need refreshers and updates to their knowledge to create a continuously improving organization. B. Braun’s IT and business experts work together to create and deliver training processes and systems. It is critical to keep that knowledge refreshed within the organization.
He also brought up the point that applications like SAP are delivered in vertical modules. Due to this, the installation and testing is often verticalized by module and function. People are tempted to think that when their part of the system is working, the job is done. In reality, processes and data flow across functional and module boundaries. So, it is important to build cross-functional mindsets and implementation methods.
Rainer also warned implementers of SRM functionality not to just “dump the new system on your suppliers.” Instead, it is important to get suppliers involved early and provide them training and support as well. B. Braun asked for volunteer suppliers who were willing to pilot the solution. They started with just six suppliers who agreed to participate. These suppliers were invited to all the relevant meetings, and were closely supported throughout the process. In this way, B. Braun worked out the kinks and learned the lessons with some friendly and willing suppliers, making it smoother to roll out to the rest.
Getting Results Fast
B. Braun showed that implementations need not be long drawn out affairs, and that even in complex environments, things can get done with the right combination of people and approaches.
To view other articles from this issue of the brief, click here.