How one of the UK’s largest SAP implementations saved money and improved performance

1. How one of the UK’s largest SAP implementations saved money and improved performance Lee Harris, Programme Manager

2. Outline of Presentation • Background • Programme Overview • Functionality Implemented • Benefits Achieved

3. Royal Mail • Facts & Figures • Turnover £8,408m, 224k employees • Delivers letters and parcels to 27m UK addresses, Operates 17,500 retail outlets • 1 Shareholder – UK Government • Regulated Industry (PostComm) but still required to provide Universal Service Obligation.

4. Why are we doing this?

5. The Issues • De-centralised Businesses lack of corporate focus

6. The Issues • Multiple Systems and processes • 10 significant legacy financial systems (inc. JBA, Walker Financials, Oracle and SAP). • Numerous variations on common processes mainly paper driven or local PC solutions with no integration to financials. • Aspiration to become an e-business difficult to support with current landscape.

7. The Issues • Financial Backdrop • Underlying profitability was deteriorating. • Availability and consistency of financial performance information. • Planning was an annual event with 1 year horizon, which took 6 months. • On-set of regulation would furnish additional information demands.

8. The Solution • Single SAP ERP for Royal Mail • 1 common Chart of accounts across all business operations • Common finance processes, e-enabled where ever possible • Cycle time improvements for results production from one-set of numbers. • “Getting a grip of the numbers”

9. Programme Overview • Enterprise System Programme (ESP) • Programme initiated in early 2000, with SAP as strategic technology choice. • ITT led to selection of implementation partner – Deloitte Consulting. • Programme created with a mix of Internal process experts, Royal Mail IT staff and supplemented with External Consultants as required.

10. Programme Overview • Programme Scope • 18 Individual Business Units • Over 7000 users (inc 4,000 EBP users). • 8,500 Profit/Cost Centres. • 40,000 vendors & 250,000 business customers • 1.5m invoices per annum.

11. Programme Overview • Early Major Decisions • Single CO area. • Roll-out strategy (Functionality, Business Unit or by legacy system). • Business Unit ownership – Implementation Managers. • Technology Choices (Workplace, EBP). • Establish a specific governance group to chase benefit achievement.

12. Programme Overview IMPLEMENTATION TIMELINE 11/00 – 07/01 08/01 –11/01 12/01 – 03/02 04/00 - 11/00 Blueprint Phase 1 Phase 2 Phase 3 • EBP Pilot • R/3 • 5 BU’s • FI/CO, EBP, AM, PM & MM • R/3 • 8 BU’s • RE - Prototype • R/3 • 6 BU’s • RE, PS • R/3 • Blueprint

13. Functionality Overview

14. Inter-Business FI Financial Accounting Management Reporting CO Functionality Overview R/3 SCOPE : Version 4.6c SD FI-CA Revenue Management EBP MM Procurement Cash Management Inventory Management Treasury IM Asset Management AM Plant Maintenance PM Projects PS Real Estate RE

15. Functionality Overview • Key Functionality: • EBP – new functionality, incomplete content, piloted the technology first (100 days) – before productionising. • RE – Real Estate no previous UK versions, prototyped before developed (prototyping didn’t expose all the integration issues encountered later).

16. Functionality Overview • Gaps in Solution • Demands from Regulator starting to materialise, which pose challenges for R/3 to handle. • Costing • Planning • Performance Management loop not closed by ERP alone.

17. Functionality Review • Programme Response • Initiated additional project to deliver: • Business Warehouse Reporting Flexibility (BW2.1c) • Strategic Enterprise Management (SEM 3.0) • Also replaced AB Costing solution with Oros (SAS), including unique “bridge” to BW for distributed reporting.

18. OROS Revenue and Cost Model Bridge SEM-BPS Business Planning and Simulation SDPRI Reporting SAP BW HUB Payroll Ledger SEM-BCS Business Consolidation BW/SEM Scope R/3 DataSources

19. Programme Overview IMPLEMENTATION TIMELINE 04/00 - 11/00 11/00 – 07/01 08/01 –11/01 12/01 – 03/02 03/02 – 10/02 Blueprint Phase 3 (a) Phase 1 Phase 2 Phase 3 • R/3 • 5 BU’s • FI/CO, EBP, AM, PM & MM R/3, BW & SEM • R/3 • Blueprint • R/3 • 8 Bu’s • RE - Prototype • R/3 & BW • 6 BU’s • RE, PS & BW Functionality • BCS / BPS Functionality • EBP Pilot

20. Somebody has to pay for all of this don’t they?

21. Programme Benefits • Targeted Benefits - Financial • Replacement of legacy applications. • Process Efficiencies – Reduction in Headcount. • Improved Control – Controlling demand (e.g.utilities / cleaning etc) • Supplier price reductions (conformance and supplier efficiencies) • Inventory reduction (JIT & automatic re-order levels)

22. Programme Benefits • Targeted Benefits – Non Financial • Performance reporting, Product/Customer profitability, regulatory and statutory accounts are all produced from a common source. • Flash results available within 2 days of period close. • Actual product profitability reported on day 15 each month (previously quarterly). • Business Plans consolidated in a day (previously 2 weeks).

23. Investment Costs & Benefits Total £103m Sunk £86m Rec. Benefit £37m

24. Programme Benefits • Measures of Success • Financial Benefit achievement • Stakeholder Perception of Programme • End user Perception • Non Financial Results.

25. Programme Benefits • Enablers of Success • Keep it lean and mean – provides pace! • Business Ownership – Solutions Team, Implementation Managers, ASAP methodology. • Focused Board securing benefits (inc. Implementation partners “skin in the game”). • LEADERSHIP – within the Programme and the Business..

26. Programme Benefits • Still to Finish! • Revenue management (SD/FI-CA). • Sustaining the gains!

27. Thank You