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Case Study

 

Saving Paper & Streamlining Operations

by Lauren Bonneau, Senior Editor, SAPinsider | insiderPROFILES

October 1, 2010

Would it surprise you to learn that Lexmark International, a printer manufacturer, is squarely focused on reducing the amount of paper its employees and customers use? Well, prepare to be surprised. Learn how Lexmark has gone from good to better by eliminating its paper-based processes and replacing its nearly 15-year-old legacy ERP system with SAP ERP 6.0.
 

One out of every six pages sent to a printer is never used. It’s unfortunate, but not that surprising when you think about it. How many times do you hit “Print” on your computer and then forget to pick up your print job? Or how often do you print an entire document or email, when all you really need is one page?

On average, each employee at your company prints 13,000 pages, which translates to roughly 26 reams of paper per year. This is a tremendous amount of output. Wasted paper is a costly, industry-agnostic, enterprise-wide epidemic — and companies would be well served to think about how they can reduce this output by printing less, printing smarter, and streamlining paper-based processes.

It might seem ironic that Lexmark International, a printing solution company, would concern itself with trying to reduce the amount of pages its employees and customers print. But as Keith Moody, Lexmark’s CIO, explains, limiting paper output not only reduces costs but also helps identify areas of inefficiency in an organization. “It’s important for companies that are dependent on paper to streamline their processes, because many times those processes are slowing down their business,” Moody says.

Lexmark recognized that its own business could benefit from streamlining, or even eliminating, its paper-based processes. The desire to move to a more electronic workflow was the starting point for a larger initiative to standardize the company’s processes globally; this initiative was a major driver in the decision to replace its nearly 15-year-old, highly customized legacy ERP system with SAP ERP 6.0.

Previously, the company operated three separate, regionally-focused ERP instances — one for the Americas, one for Europe, and one for Asia. “While the software was all from the same provider, the fact that people were following different processes for each instance was significantly hampering our ability to move forward,” says Moody. “Our primary focus was to transform our business by addressing some key workflows and improving our business processes. We wanted to streamline our operations, get globally consistent processes, leverage a shared service center, and, most importantly, improve the service we were providing to our customers.”

Keith Moody

Keith Moody, CIO, Lexmark International

Implementing ERP to Improve Business Operations

Clearly, there was a great need within Lexmark to standardize its global processes and streamline operations, and the ERP implementation was the catalyst to drive those changes. “For me, the ERP implementation was not just about implementing a new system,” Moody says. “It was about changing our business processes.”

Lexmark saw a business opportunity — specifically in the finance and supply chain areas — to improve efficiency and create more effective demand forecasting and inventory management by moving away from highly customized, geography-specific ERP instances. It wanted to discontinue its use of cumbersome static reporting across inconsistent silos of data and overhaul any manual, inconsistent business processes.

The company’s key goals in the transformation were to:

  • Improve visibility into, clarity of, and control over its data with a flexible technology platform
  • Create standard and consistent global processes with end-to-end integration
  • Make more informed decisions through more efficient data analysis
  • Lower material spend, inventory levels, and transportation costs
  • Improve productivity, compliance, and customer service

“Without clean data, you won’t get the value out of the SAP ERP implementation you really want.”

Keith Moody, CIO, Lexmark International

Also, because Lexmark was setting up a shared service center, maintaining different processes for each of its three ERP systems would hinder the company’s ability to get the maximum value out of that common center.

“You’ve got to change the business — because if you just put in a system to do the same old process, you’re not going to get the improvement and benefits that you really hope to gain,” Moody says.

According to Moody, because SAP has designed many processes based on industry-standard best practices that are working for many companies today, Lexmark decided to take the “standard SAP” approach. “Leveraging standard SAP functionality will position us so that as SAP continues to invest and work with other companies and refine those processes, we can more quickly leverage them,” he says.

Moving Away from Static Reports and Data Silos

Prior to the SAP ERP implementation, Lexmark’s finance and supply chain data resided in different silos, and business users were spending a lot of time and energy processing static reports. These reports would pull information from each of the ERP systems, and then users would have to leverage spreadsheets to consolidate the information. It wasn’t easy to answer the “what-if” questions or determine why a certain number was the way it was. “There was a lot of manual effort involved with questions like that. The process wasn’t as real-time as it needed to be, and it made it difficult to get consistent answers,” says Moody. 

“Previously, we made data available to a set of users and gave them static reports,” says Dick Cross, Director of IT Architecture and Strategy at Lexmark. “If those users were asked a question, they had to go back to the data and manipulate it to get the answer, which was obviously time-consuming and resource-consuming. As we’re moving forward with SAP software, business people can ask a question and get it answered from a report right from their own desk, rather than asking somebody else to do a set of analyses for them.”

Lexmark’s data challenges also affected the company’s ability to deliver for its customers. Many times, business users didn’t have the information they needed and weren’t able to deliver on their commitments or properly forecast product demand. “It was very difficult for us to get visibility into our business information,” says Moody. “We spent a lot of effort consolidating data from these various systems to put together the information in a form that the business team could use to make the right decision.”

Each of the three geographic ERP instances had its own set of reports to consolidate information, and the data elements were inconsistent across the systems. “Sometimes when people pulled data and put it all together, they would interpret the segmentation of our products or customers slightly differently, so it made it very difficult to consolidate and get a consistent global view of our business,” says Moody.

Cleaning Up the Data

According to Moody, the key to solving these data challenges and getting better visibility into business operations and customer interactions is to cleanse the business data.

“Without clean data, you won’t get the value out of the SAP ERP implementation you really want,” he says. “Getting the data clean was a fundamental part of making our ERP project a success.”

Lionel Susini, Director of Lexmark’s Global ERP Program, adds, “You can always implement technology without clean data, but any reporting from that new technology will be meaningless. A simple key metric like ‘revenue by product family’ is only useful if ‘product family’ has been well defined ahead of time. Then, that same definition needs to apply to all the data in all the systems,” says Susini. “Had we failed to achieve this consistency, we could have questioned the benefit of the whole project.”

To clean up its data, Lexmark opted to put in place a master data management (MDM) initiative a year before it executed the SAP ERP project. This initiative involved a separate implementation of SAP NetWeaver Master Data Management (SAP NetWeaver MDM). “After we picked the SAP toolset, the first step was to define the data hierarchies and elements in the hierarchies. Then, by the time this was completed, the SAP ERP implementation was actively engaged in the global design, and we started cleansing data,” says Moody.

The data-cleansing team focused on putting standard definitions and hierarchies in place for customer, product, material, person, and vendor data. “For example, we could look at a specific customer as a local entity, or we could consolidate across all the entities in the country or the globe, and we’d be sure to get all the customer data in a way that could be consistently rolled up,” says Moody. “From a product perspective, we could look at a specific printer model and consistently pull that information from the system. Or, if we wanted to look at monochrome lasers as a category, we could consistently aggregate the appropriate models into that category or division.”

The MDM initiative was very involved; not only does the company have data in its ERP system that needed cleansing, but business data also resides in other software — such as PeopleSoft, Siebel, and ENOVIA back-end systems — that feeds data into SAP ERP. The cleansing process had to start all the way back in those systems.

“You have to achieve a critical mass in master data cleansing before starting an ERP project,” says Susini. “The processes you define in ERP will then dictate additional cleansing rules or data requirements, so it is important to keep a data cleansing thread going throughout the implementation.”

“Don’t even consider starting your ERP implementation until you begin your MDM work and cleanse your master data.”

Keith Moody, CIO, Lexmark International

Achieving Visibility, Among Other Benefits

Lexmark went live with its SAP ERP rollout in Europe last October (2009) and in North America and Latin America this past August (2010). To complete the global implementation, the company is scheduled to go live with the system in Asia by the close of 2010. (To read more about why the company chose to deploy in Europe first, read the sidebar “Starting with the Most Complex Region” to the right.)

Here are some of the many benefits that Lexmark has already realized or anticipates as a result of its SAP NetWeaver MDM and SAP ERP implementations:

  • Data visibility: “Benefiting from the work done on the master data level to define data hierarchies, we can go deeper into the data, see more information, and understand more — making it much easier for us to look at rolled-up data at various levels, such as by country or geography,” says Moody. “As a result, in the supply chain, we’re already seeing improvements in our availability-to-promise commitment and capability.”
  • Traceability: “Better visibility into every transaction has resulted in better controls around pricing, better pricing policies, and better traceability,” says Susini. “Now we can trace every transaction back from the time the order was created, and we can track the entire document flow from there, including billing and accounting documents.”
  • Improved customer service: “Particularly in the supply chain, by better understanding what supply we’re going to have, what the demand is, and where our shipments are, we can better serve our customers, anticipate their needs, and meet the dates for delivering products when they need them,” says Moody.
  • Easier communication: Executives in different regions can now speak the same language, discuss the same processes, and contribute to improving those processes. “Our different operational teams now use the same definitions, information, and reports, and they can better relate to each other’s problems,” says Susini. “We can now have a team in Europe more easily contributing to process improvements in Asia.”
  • Quicker reactions: By having a common global system with standard processes, global changes can happen much faster. “In the past, we had to plan the change and then make the system changes one region at a time,” says Moody. “So it slowed down the regions’ ability to adjust their business operations as they needed to react.”
  • More focus on value-added tasks: “We’re going to spend less time on consolidating data into reports and instead create more meaningful, accurate reports that allow people to spend more time analyzing that information and determining what to do differently,” says Moody. “As a result, we can move those people from lesser-value roles of consolidating data to more value-added roles.”
  • Better process organization: Now, with its global shared service center, Lexmark can assign one team to focus on one individual process. Susini says, “Instead of multiple teams focusing on the same process for given countries or regions — for example, having a separate accounts payable team for each region — we can consolidate to one global accounts payable team, and each team member can use the same processes.”
  • Faster partner onboarding: The time it takes to onboard partners, such as logistics partners, has reduced considerably. “It used to take us six months, sometimes more, to integrate with a partner’s systems,” says Susini. “We can do it now in a matter of weeks.”

According to Moody, the benefits the SAP implementations have brought — and will continue to bring — to the company are obvious. “We saw this project as key for our long-term strategic success. Everyone working on it knows their efforts will help us as a business going forward and will help us better serve our customers,” he says. “We can now achieve the efficiencies and the improvements that we need to become a more world-class organization.”

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