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Case Study

 

Planning Tips Scales in Stepan Company’s Favor

A Detailed Business Plan Pays Off for Chemical Manufacturer in Successful SAP Rollout

by Ken Murphy, Senior Features Editor | insiderPROFILES, Volume 8, Issue 3

August 10, 2017

Stepan

As a manufacturer of chemicals that must be created according to precise plans, Stepan Company understands the importance of robust planning. So when the organization underwent a financial transformation, it took a close look at how it could update its financial planning and analysis processes. Beforehand, financial planning was performed manually, with time-consuming processes and several disparate sources of data slowing the organization down. Learn how Stepan Company streamlined financial planning, cut down on manual processes, and made its planning personnel strategic business partners with SAP Business Planning and Consolidation.

As a chemical manufacturer of surfactants, polymers, and specialty products for use in common household and commercial products such as shampoos, detergents, disinfectants, coatings, and insulation, Stepan Company knows full well the value of precision and planning. When even a small miscalculation in a formula could mean the difference in a chemical’s viability, there is only an upside to meticulous and careful planning.

Stepan held true to this philosophy when it came time to introduce a best-in-class enterprise performance management (EPM) solution for management reporting, planning, and consolidations. For many years, the company’s corporate financial planning and analysis (FP&A) team managed budgeting and forecasting processes for a global finance organization through spreadsheets and databases that are not integrated into the overall consolidation. Manually intensive reporting and analysis resulted in a disproportionate amount of effort focused on report creation rather than repeatable, sustainable, and insightful analysis. Stepan outgrew its legacy reporting and planning processes due to the company’s tremendous growth over the past seven years.

Rectifying this situation became the goal of Stepan’s financial transformation, a change that was timely due to a company-wide business transformation initiative called “DRIVE,” which began in 2014. A main objective of this initiative was to make the organization more efficient by improving business processes globally. Also, because the business ran a single instance of SAP ERP Financials, it made even more sense to implement a powerful consolidation and forecasting solution.

Well before Stepan identified specific technologies and solutions to modernize budgeting and forecasting processes, the company kicked off its transformation project by examining its current state of affairs. While the ultimate goal was to have FP&A become more strategic to the business, Stepan wanted to first pinpoint the reasons its current state prevented this from happening.

“We were spending a significant amount of time maintaining spreadsheets and collecting, aggregating, and extracting data out of our system. It took hundreds of hours to produce monthly financial statements, and that left little remaining time for strategic initiatives to partner with the business and manage margins,” says Andrew Chapman, Corporate FP&A Senior Manager at Stepan Company. “Examining our pain points helped to set the starting point for where we wanted to go — which was to reduce the amount of time and effort that’s required to aggregate that data and pull it together in a digestible format that people can make good decisions from.”

It became clear to Stepan, as it neared completion of a global SAP ERP instance, that an automated planning solution that could integrate with its ERP system would help deliver actionable insight, which was a prerequisite to improve its ability to conduct sustainable ad-hoc analysis and develop access to automatically updated dashboards of key metrics.

Developing a Formula for Success

After a careful study of existing processes, Stepan embarked on a fact-finding mission to narrow the search for a best-in-class EPM solution. A partial list of activities performed during evaluation included discovery sessions, meetings with improvement and implementation consultants, training courses on applied strategic thinking, site visits to several peer companies, and attendance at FP&A conferences.

A survey was sent out that asked employees three simple questions regarding how much time they spend on management reporting, on planning processes related to data manipulation, and on planning processes not related to data manipulation. “We found there was a significant amount of time and effort spent on these processes, so the key takeaway was that it was worth investing and improving these processes throughout the organization,” Chapman says. “There are a lot of people involved in the commercial marketing, sales, and supply chain functions in the planning processes, and if we can make the processes more efficient for them and save them time, they can shift their energy to focus on opportunities and activities that will drive more bottom-line growth for the company.”

Stepan also interviewed several dozen employees inside and outside of the finance organization from all different geographies, functions, and layers of management — most of whom confirmed the frustration with manual labor duplications and expressed a concern over data integrity due to information coming from so many sources. “We set aside a lot of time to meet with different experts, and we learned something from everyone we spoke with,” says Chapman, who was the project sponsor for the EPM initiative. “We were grateful that SAP offered up a key resource from its analytics group who came on site for a week to help facilitate these valuable interviews. They helped confirm that people were experiencing very similar pain points as far as extracting information out of our system and summarizing it in a digestible format. They also helped to solidify our path forward and to align and excite people about change so we could make improvements and become more efficient.”

Armed with all of these insights, Chapman’s team set out to build a business case that supported the need for a planning tool. The team presented data to executive leadership that showed Stepan’s finance department benchmark position was below that of similar-sized chemical companies in terms of its cost as a percentage of net sales. The costs were lower because there were certain strategic activities that the finance department was not doing. The team then made the case that the planning tool would enable FP&A to evolve into a strategic partner and to help facilitate, develop, and execute a more flexible short- and long-term strategy for the business.

Also, Stepan compared its budget cycle time with other similar-sized companies and discovered that the median number of elapsed working days spent on budget cycles was roughly half the amount of time that Stepan was spending. Chapman says, “We realized that we have a significantly longer budget cycle time than most companies, and a key goal was to reduce that cycle time so we can refocus our energy and our resources on more value-added activities.”

Stepan calculated that the cost for performing internal management reporting and budgeting and forecasting processes was a significant amount annually when translated to full-time equivalent (FTE) wages. “Now, that’s not to say all that cost goes away once you put in a system or that we were looking at a headcount reduction,” he explains. “But any reduction of the time spent is a soft savings that can be reinvested elsewhere in the organization.”

Andrew Chapman

Andrew Chapman
Corporate FP&A Senior Manager
Stepan Company

There are a lot of people involved in the planning processes, and if we can make the processes more efficient for them and save them time, they can shift their energy to focus on opportunities and activities that will drive more bottom-line growth for the company.

— Andrew Chapman, Corporate FP&A Senior Manager, Stepan Company

A Successful Chain Reaction

In April 2016, Stepan concluded its search for an EPM solution by selecting SAP BPC 10.1. The fact that the company was implementing a single instance of SAP ERP was a significant factor in the decision to select an SAP product, according to Chapman, despite having looked closely at multiple vendors and products. Ultimately, integration of the SAP solution with Stepan’s main SAP ERP platform was the key differentiating factor of why it chose SAP over other options. The company wanted a global solution that would support its future growth.

Stepan followed a phased implementation approach, tackling management reporting and supply chain forecasting in Phase I. It went live with the functionality for management reporting in January 2017, after a six-month project. Functionality for supply chain forecasting and reporting went live shortly thereafter.

Phase II — bringing the budgeting, forecasting, and profit projection capabilities live — is planned for the fourth quarter of 2017, with the functionality for full consolidations and external reporting slated for Phase III in 2018. “Because FP&A is leading the implementation charge, the intent to go live with management reporting first was to save roughly 100 hours for our five-person team, freeing us up to help implement the future phases,” Chapman says.

Blueprinting and data validation by a key subject matter expert from the FP&A team was critical to ensure the integrity of data being pulled into SAP Business Warehouse (SAP BW) and SAP BPC was robust. “We relied heavily on the FP&A subject matter expert and on our external consultants’ technical expertise in getting the data over because it’s an important first step in setting the framework for a successful implementation,” Chapman says. “A solid understanding of our current state internally combined with an outstanding consulting firm was the secret to our success. Overall, contributions from the lead subject matter expert, Adam Robledo, and our consulting partner, Jon Essig at SimpleFi Solutions, were invaluable.”

Receiving a Seal of Approval

Because of the two-year timeframe, the FP&A organization was careful to clearly define the project scope and keep the entire company abreast of any developments and changes. In fact, Chapman calls scope the top priority. To avoid runaway expectations, Chapman’s team developed and distributed a list of everything in scope and out of scope for each phase. The reference guides included a granular listing of functionality users could expect for every rollout, detailing what SAP BPC delivers. “Managing expectations with people in the organization is critical,” he says. “One of the points of addressing scope the way we did was to highlight each pain point the application attacks and educate people throughout the company who might not know a lot about finance. However, clearly explaining what is not in scope is actually more important than defining what is in scope.”

Along the same lines, Stepan took a phased go-live approach, rolling out functionality to select groups of users before going live for the global finance teams. Taking this approach allowed Stepan to better allocate training resources for smaller user groups, even though by doing so the company recognized that it would take longer for benefits to materialize.

Even though Stepan hasn’t fully unplugged all of its legacy reporting yet, it is already realizing the benefits from the first phase of the project. “We have an improved ability to slice and dice our information, better visibility, and out-of-the-box functionality for performing analytics on our manufacturing costs on a constant currency basis. With this functionality, it doesn’t require a lot of effort to analyze our costs, and we can see precisely what’s driving cost and profitability.” says Chapman. “We have freed up a significant amount of time by automating a lot of our manually intensive processes, and we’re currently starting to ramp up being more involved with supporting the CFO and investor relations functions and those kinds of initiatives. It’s early yet, but that aligns with the goal of becoming a more strategic organization.”

The primary benefit from Phase I is that a strong foundation was built for the implementation of Phase II, budgeting, forecasting and long-range planning, which will generate the most significant savings across the organization. The company is supplementing its use of SAP BPC 10.1 in Phase II by rolling out SAP Business Planning Cloud to the Stepan sales personnel.

Stepan Company

Headquarters: Northfield, Illinois

Industry: Chemicals

Employees: 2,000+

Revenue: $1.76 billion (2016)

Company details:

  • Founded by Alfred C. Stepan Jr. in 1932
  • 17 manufacturing plants in 12 countries in North and South America, Europe, and Asia
  • Manufactures surfactants, polymers, and specialty products

SAP solutions:

  • SAP Business Warehouse
  • SAP Business Planning and Consolidation
  • SAP ERP
  • SAP Ariba
  • Concur solutions

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