Australian health and beauty company Australian Pharmaceutical Industries (API) has merged its retail and wholesale businesses onto a single SAP ERP platform as part of a comprehensive IT and business transformation program.
With a national wholesale network supplying more than 5400 independent pharmacies and 420 Priceline and Priceline Pharmacy stores (around 70 per cent of which are franchisees), API turns over $3 billion each year.
But as a result of several merger and acquisitions, as well as rapid growth, the business faced numerous challenges – it had two business models for the retail pharmacy environment, multiple systems for merchandise, inventory and the finance unit, multiple version of SKU, customer and vendor information, and varied reporting periods, inventory valuation methods, and customer and supplier terms of trade, according to Cary Farmer, who served as program manager for API’s OneERP project.
Tata Consultancy Services (TCS) was engaged by API as a strategic partner to update and replace key IT systems with a seamlessly integrated SAP ERP platform, to provide enhanced customer service capabilities, improved logistics and finance processes, and operational efficiencies.
The OneERP project was driven by three key principles – simplification, clarification, and unification.
“The big key for us was to standardise and simplify the processes so we could enable our company to run as one,” Farmer told an audience at SAPPHIRE NOW earlier this year.
The business model was based on a standard retail structure of Plan, Buy, Move and Sell, underpinned by Finance and Inventory. TCS designed a platform that included SAP ERP, SAP Business Warehouse, SAP Point of Sale Data Management SAP Business Planning and Consolidation, SAP Supply Chain Management, and Global ATP, as well as Manhattan Associates’ Warehouse Management System.
With such a large amount of change required to business processes, one of the key appointments on the project, alongside solution architects, process leads and process teams, was a business process owner.
“[They] literally oversaw the entire process design solution from end to end, knew both the retail and wholesale [businesses] and basically helped us to collate, align and review what people had come up with in terms of requirement, design and testing,” said Farmer.
To eliminate duplication across the two businesses, all product SKUs had to be renumbered prior to the new system being rolled out to stores. With stores making multiple order types and with multiple POS systems in place, interfacing all systems into SAP and a single sales order process was an important part of the process.
The roll-out of the system was first piloted in stores and distribution centres in Queensland, and a month later, went live across the rest of Australia.
Farmer said some of the main challenges in the project were trying to get the two divisions to think as one – and this wasn’t always easy.
“Even in the way analytics were done, the way people recorded a sale in the retail system versus wholesale, or a margin – the definition of a margin was completely different [in the two businesses], so we had to almost come up with the terms and agree those terms upfront as we worked through the solution,” he said.
Other challenges included having two project locations, which slowed down the process, and underestimated the internal development effort required, even while working alongside TCS as the key vendor.
Contributors to project success
As well as having a clearly defined business case and expected benefits, and senior executive buy-in throughout the project, another positive aspect of the project was having a business readiness team in place. This team provided support in change management, both in terms of what was coming with the new systems and processes, as well as interim processes running during the go-live process.
Remaining as aligned as possible with standard business processes was important, as well as good data governance.
“SAP doesn’t tolerate bad data, so it was very important for us that we measured that. We had 60 data conversion objects, so we got the business involved to own that and measure data accuracy,” said Farmer.
API also had a strong vendor partnership with TCS, and said SAP’s Active Embedded Support was an invaluable process.
“We knew that to truly transform as a business and increase our competitiveness we could realise greater value by leveraging our considerable scale across both retail and wholesale operations,” said Stephen Roche, MD and CEO, API. “The integrated IT solution delivered by TCS delivers that platform, and with the system now ‘live’ we are able to achieve our key objectives of better outcomes for customers while still maximising efficiencies.”
“API and its customers will now be able to benefit from this state-of-the-art technology infrastructure, including an enhanced user experience and the elimination of duplication across divisions, saving the company time and money,” said Deborah Hadwen, CEO, TCS – Australia and New Zealand.