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Case Study

 

Sappi Limited Gains Real-Time Visibility into Production Costs with SAP MII

by Natalie Miller, Contributing Writer | insiderPROFILES, Volume 7, Issue 1

January 6, 2016

Sappi Limited case study

Sappi Limited has grown to become a leading global producer and supplier of dissolving wood pulp, paper pulp, and paper products — with an expanded system landscape to match. Its Southern Africa division recognized an opportunity to improve efficiency by consolidating the data spread across its multiple manufacturing systems. Learn how Sappi Southern Africa used SAP Manufacturing Integration and Intelligence to gain increased visibility into its production costs by integrating its manufacturing data.

While going digital is all the rage these days, the paper and pulp industry remains one of the largest industrial sectors in the world. Despite the shift toward paperless communication, demand is on the rise in other areas, such as the demand for packaging materials driven by the continued surge in online shopping.1 And the industry is more competitive than ever due to rising input costs, challenges in obtaining raw materials, and competition from global players.

Headquartered in Johannesburg, South Africa, Sappi Limited is a leading global producer and supplier of dissolving wood pulp, paper pulp, and paper products. Sappi has been in business for nearly 80 years, and has grown to produce roughly 5.7 million tons of paper, 2.4 million tons of paper pulp, and 1.3 million tons of dissolving wood pulp each year at manufacturing sites across three continents.

As the company has grown, so has the system landscape supporting its manufacturing operations. Recognizing an opportunity to improve efficiency and gain increased visibility into its production costs, in 2006, the company’s Southern Africa division sought to systematically bring together the data residing in its numerous manufacturing systems to enable more meaningful reporting.

A Need for Integration

At the time that Sappi Southern Africa began looking for a solution to help integrate its systems and improve reporting, it had eight paper, pulp, and paper packaging mills (Enstra, Ngodwana, Cape Kraft, Tugela, Saiccor, Stanger, Adamas, and Usutu, excluding the Lomati sawmill) in production and running on systems that ranged from legacy and in-house developed applications to best-of-breed systems, with new systems undergoing development.

“We had quite a patchwork quilt of systems and data silos, with each system providing its own set of reports and controls,” says Sappi Southern Africa’s Business Process Engineer Joanne Boyd, who led the integration project team. “What we were lacking was the consolidation of all that data into meaningful information.”

The data silos caused mill employees to waste a lot of time and productivity while gathering and formatting all the data from the different systems into spreadsheets. “While we had basic operational reporting in place, the manual consolidation of the data meant that there wasn’t a whole lot of time left for the business users to analyze the information,” Boyd explains. “Also, we had multiple interpretations of the same data because everybody was doing their own spreadsheets. We had conflicting key performance indicator (KPI) values floating around the organization.”

From a technical aspect, the data silos produced complex webs of interfacing and integration between the systems, and simplification was necessary to keep operations running smoothly and provide meaningful information to the business. It was at this time that Sappi Southern Africa purchased the SAP Manufacturing Integration and Intelligence (SAP MII) application — a solution that integrates plant and enterprise systems to enable unified visibility into manufacturing processes and data — and embarked on a two-step integration project.

 

Joanne Boyd, Business Process Engineer, Sappi Southern Africa


 

 

We had quite a patchwork quilt of systems and data silos, with each system providing its own set of reports and controls. What we were lacking was the consolidation of all that data into meaningful information.

Step 1: Integrate the Manufacturing Systems and Consolidate Data

The first step was using SAP MII to integrate and consolidate information from the various Sappi Southern Africa manufacturing execution system (MES) data. This horizontal integration consisted of the consolidation of all the manufacturing data from the various systems in the MES arena — beginning with historical information, which included data from previous shifts, previous days, month-to-date figures, and so on, and then moving on to real-time visibility in the second step of the project — into a single, unified view within SAP MII.

Sappi Southern Africa saw immediate results. “We instantly made information a lot more accessible and digestible,” says Boyd. “Finally, we got to the point where we were able to develop some very basic predictive reporting,” she adds. Still in its infancy at the time, the SAP MII–based reporting capability allowed operators to see how much they were producing during a shift, at what cost, and determine whether they were on track to meet daily targets.

After implementing the horizontal integration at the first mill, Sappi Southern Africa followed the same recipe while rolling out SAP MII at each remaining mill. And since the project team developed a generic reporting toolset — rather than developing reports specific to a particular mill — the team could drop these toolsets into any mill with minimal configuration, enabling rapid deployment. Operators could then quickly and easily gain insight into information that included downtime, production, and quality for the day.

“The user-adoption rate was great,” Boyd says. “All of a sudden, users had information available at their fingertips. While we started by implementing basic production dashboarding and reporting, this soon gained momentum and more requests started to come through from our users.”

Once the users realized what the system could do for them, their requests started to get a little more sophisticated. To take reporting to the next level for users, Boyd and her team worked with the business to learn its biggest pain points and then, a few years later, embarked on the project’s second step: connecting plant floor systems with financial data from the ERP system. This vertical system integration project started with the development of a real-time solution that enabled visibility into the measurement and control of consumptions and costs. 

Step 2: Develop a Real-Time Costing Solution

The Sappi real-time costing solution enabled the integration of the actual consumptions of the various bills of material (BOMs) with the budgeted consumptions. In addition, it also provided a cost comparison to budget and actuals. This project has enabled operators and management alike to understand the impact of production problems and decisions — not only from a budget/recipe perspective, but particularly from a financial perspective, and has assisted with variable cost control within the organization. 

Operators are able to identify in real time the minute a particular BOM is over consumed, and more importantly understand the financial impact of that consumption. This information is then gathered over time, enabling Sappi Southern Africa to determine the cost of each roll of paper produced. In addition, it provides the opportunity to analyze profitability of various products, performance to budget, recipe management, and even which crews or shifts perform more effectively.

To enable access to this consumption information across systems, Boyd and her team developed a solution in SAP MII that was easily deployed at any mill with very little customization. “The solution is able to integrate ERP information and plant floor information, regardless of what plant floor systems are in place,” she says. “The mill queries are the only part of the solution requiring customization. By pulling the production information, the consumption information, and the costs together, we can provide feedback to users on the physical BOM quantities consumed against budget, and more importantly, we provide detailed cost comparisons against budget right down to each roll of paper produced. This financial perspective enables us to pinpoint opportunities to save money.”

With this integration and consolidation of information, Sappi Southern Africa is able to monitor production costs more effectively. “This visibility has promoted better cost control,” Boyd adds. “Generally, production managers know what they are doing and rely on experience to understand what affects the profitability of the various grades. Now, we are backing this up with real, tangible data and making it more visible to every level of the business.”

On the implementation side, it was smooth sailing for Boyd’s team. “We didn’t have any technical implementation challenges,” she says. “From a technical perspective, we had a strong development team that was proficient in SAP MII. A lot of the intellectual property from the various systems was within our domain, which was a big differentiator.”

The third and final step of the integration project will be to implement enterprise-level reporting. Sappi Southern Africa is ready this year to begin that stage — it is currently drawing up a proof of concept to upgrade from SAP MII 12.2 to SAP MII 15.0. “We are currently reviewing our enterprise reporting strategy,” says Boyd. “And while our SAP MII 15.0 upgrade is imminent, we are presently ironing out the details.”

 
Sappi Limited

Headquarters: Johannesburg, South Africa

Industry: Paper and pulp

Employees: 13,000 worldwide

Revenue: $6 billion

Company details:

•              Founded in 1936 in South Africa

•              Produces and sells graphic paper, printing and writing paper, packaging, speciality and release paper products, paper pulp, specialized cellulose, and forest   and timber products

•              Manufacturing operations in Europe, North America, and South Africa

•              Has customers in 100+ countries

•              Produces 1.3 million tons of dissolving wood pulp each year

SAP solutions:

•              SAP MII

•              SAP ERP 6.0, SAP ERP HCM 6.0,
                SAP SCM 7.0, and SAP BW 7.4
                (all powered by SAP HANA)

•              SAP SRM 7.0, SAP PI 7.4, SAP Global Trade Services 11.0, and SAP Enterprise Portal 7.4 (all running on SAP Sybase)

•              SAP Cloud for Sales

•              Ariba solutions

Reaping the Rewards of Improved Cost Visibility

While four of Sappi Southern Africa’s eight mills (Adamas, Usutu, Enstra, and Cape Kraft) have been sold off or closed due to restructuring since the initial SAP MII implementation, the four remaining mills (Saiccor, Stanger, Tugela, and Ngodwana) continue to run both SAP MII and the real-time costing solution. Sappi Southern Africa is looking at expanding this solution into other areas, such as the pulp plants and bleach plants, as significant savings have already been demonstrated.

The increased visibility into data has allowed mill employees and managers to spend more time analyzing data rather than gathering it. Cost and consumption data — both historical and real-time data — can be easily sliced and diced in different ways to look at various areas of the production process, from which grades to which crews and shifts are more cost effective.

The operational and the financial sides of the business are also more connected with SAP MII and the real-time costing solution. The operational side now has a concrete understanding of the cost and consequences of actions, and everyone across the company has access to the information. Boyd says that Sappi Southern Africa is now looking at ways to close the loop between production and finance. “We make the SAP MII reports available throughout our organization,” she says. “By providing our operators with the financial impact of over/under consumptions, we are empowering them to be the first line of defense in profitability improvement. Often, the financial impact of a production decision will provoke a faster reaction from the operator than describing the impact in kilograms or liters.”

1 See http://media.ibisworld.com/2015/01/14/wood-pulp-and-paper-prices-on-the-rise/. [back]

 

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