BAT Taiwan

Case III-6 BAT TaiwanImplementing SAP for a Strategic TransitionIS 628 Group 3Artounian, BenDebba, Fogel, Msuya, Vaisman

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Tobacco IndustryGlobal Economic Industry4,930,000 tons produced each year5.5 trillion cigarettes smoked each yearUntil 1960s, U.S. was world leader in GrowingManufacturingExporting

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Company BackgroundBritish American Tobacco99 years old; one of the top threeglobal players (12% market share)Global HQ in London, U.K.Asia Pacific is one of six global regionsBAT Taiwan is part of the Asia Pacific North management unit (one of five in AP region)

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BAT IT InfrastructureMatrix organization including ITGlobal CIO in LondonGlobal IT services via three data centersAsia Pacific Shared Services (APSS) is the regional IT service based Malaysia, supporting shared business system solutionsData CenterCompetency Center (for SAP)Each management unit IT supports end market usageIdentifying IT solutions, building business cases,managing support servicesAPN management unit IT based in Hong KongBAT Taiwan only one desktop/LAN support tech

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APSS

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Timeline

1980 1987 Tobacco marketliberalized in Taiwan 1992 Brown & Williamson brandssold through BAT worldwide19902000 1999 mergerBAT-Rothmans 2000 distributor mergeConcord Tobacco Co2001 direct sales*operations planned* Direct sales planned as result of new market dynamicsFive largest convenience chains 4,000 outletsDistributor 66,000 retail outletsNew taxlaws passed

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Situation on the groundBusiness environment changesEnding of Tobacco MonopolyNew Tax Law

New business model requires new IT infrastructure Most personnel have no ERP experienceNew A/P and A/R (previously done in U.K.)Support direct sales and inventory management

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ERP System ChoicesSAP R/3More complexVery expensiveStandard solution for larger markets

Sage Tetra CS/3Less complexSmall operationsLower costLimited functionalityTwo standardized ERP platforms approved globally at BAT

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ERP System Pros and ConsSage Tetra CS/3Lower complexity and lower cost (+)Works well in smaller markets (+)Limited functionality; will need to upgrade soon (-)SAP R/3Successful SAP implementations based on Symphony template in Australia, Malaysia, and Singapore (+)Addresses all business needs short and long term (+)Higher upfront investment (-)

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SAP R/3 selectedSAP R/3 selected by head of APN IT over CS/3 as the only platform moving forwardMarginally higher up-front investmentAPSS model proved almost same TCOCommon configuration - using same solution as other Asia Pacific management unitsAdvance directly to endgame solution

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BAT Taiwan SAP R/3 ImplementationSAP R/3 modules implemented supportfour primary business processesSD - Sales and Distribution (A/R)MM Materials Mgmt (A/P, purchasing & inventory)CO Controlling (incl. profitability analysis)Using Symphony template with few changesReduces difficulty/expense when upgradingPhased implementation1 ($100K) Support importing and distribution2 ($50K) Support direct sales to key accountsSix months after completion of 1

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SAP R/3 ImplementationAPSS data center hosting & support servicesAPSS was selected to implement systemExperience w/3 prior implementationsLower labor costs for operations & maintenanceThan EDC and Accenture (external partner)Same time zone (vs. EDC - European support)APSS owns SAP licenses savings to BAT TaiwanAsset tracking, procurement/excess, policy & termsLocal language benefits (reports/invoices in Chinese)ASAP methodology live system in one quarter

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Implementation OverviewPhased approachDetailed project timeline Support from top management and department headsKickoff meeting with key personnelScope change dealing w/increased technical complexities communication was keyAcceptance testing and change management

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SAP R/3 in OperationERP went live on-time (1/2/01) and on-budgetExceptionsChinese GUI integration two weeks lateLeased line late one month costly dial-up usedMinor order processing issues during 1st monthDown time2 hours during the first three monthsRequest for system changes reviewed and authorized by BAT project co-leadNew functionality, reports, configurations

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IssuesIssue: 4 full-time members of the APSS development team are planned to be in Taiwan to discuss issues faced during the project. Government regulations permitted non-resident to work in Taiwan only 2 weeks at a time. Further, they could obtain visa for only 2 months

Issue: Phase 1 could be done easily in 8 weeks, and phase 2 can also be done by January 2001. Changing the schedule increased the risks. GUI and Chinese language module increased the technical complexity, as well as the need the training for additional business processes.

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IssuesIssue: Phase 1 could be done easily in 8 weeks, and phase 2 can also be done by January 2001. Changing the schedule increased the risks. GUI and Chinese language module increased the technical complexity, as well as the need the training for additional business processes.

Issue: at the end of November, it was learned that SAP could not deliver the GUI system before January 1st.

Issue: SAP Malaysia offered to help for the Chinese language module, but would not have the resources before mid-March.

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IssuesIssue: Implementing the new system required changes in Taiwans business model. Issue: During the User Acceptance Testing, there were some problems, due to the lack of understanding of the system, and the process adjustments that need to be made.

Issue: Phase 1 and 1A went live on January 2nd, with one major exception: The Chinese language module was included, but the GUI interface was not integrated with SAP until mid-January.

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IssuesIssue: there was a delay in the installation of a new telecommunication line leased from the government owned telecommunication company in Taiwan.

Issue: The Go-live date was close to the Chinese New Year, which meant heavy numbers of orders had to be processed at the same time as the new business processes were being implemented. Some orders were delivered late, others contained wrong prices.

Issue: Contacts with APSS consultant are sometimes feasible, but not guaranteed.

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Issues

Issue: - The production server running the Taiwan system had been down only once for 2 hours. - Procedural errors led to a few processing errors. For example, incorrect data were collected when the user specified an incorrect company code.

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Q&AWhat has the company done since the time of the case? Has it been successful at it?Implementations were stored in Lotus NotesBAT Taiwan has grown from 20 t0 100 personnel

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Q&A (cond)What should the company do in the future?Continue to follow solid business practices in implementing technology solutionsAnticipate market requirements and plan ITneeds accordinglyTry to stay as close as possible to standard templates to lower customization costs, ease upgrade processes, and increase re-use of common templates across organization

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Lessons Learned (take-aways)Top management needs to continue to be engaged in projectsProjects need to take advantage of both expert and non-technical users Make use of third-party expertise where appropriateTrack and anticipate market, environment, and technology changesUse existing templates, making changes only when absolutely necessaryMaintain consistencyEasier upgradeability

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Lessons Learned (take-aways)The complete PMI process was usedInitiatingPlanningExecutingMonitoring & ControlClosingTake-away: the process works and inBATs case ensured success

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EndClass Questions and Comments.

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