Conlog, a leading South African electronics manufacturer, has gone live with a multi-million Rand SAP R/3 enterprise resource planning (ERP) system that has not only solved its Y2K problems, but has enabled it to re-engineer aspects of its business to achieve a host of benefits from improving costing and product delivery to rationalising its product range.
Conlog, an ISO9001-compliant company and the first electronics manufacturer in South Africa to comply with the demanding QS 9000 motor industry quality rating, is part of the Lok-Tek Holdings group, which is listed on the Johannesburg Stock Exchange.
At its headquarters in Durban, which houses the bulk of Conlog`s 700 employees and the largest surface-mount plant in the Southern Hemisphere, the company manufactures a variety of innovative, high-performance products for automotive, electricity and water metering, and solar energy markets. Its major customers in South Africa include six leading automotive manufacturers, Eskom and many municipalities, and it is also highly successful in the export market.
The main reason for initiating the project was to achieve Y2K compliance as the company had previously been running on a non-compliant package. Because of the long lead times required to meet some orders, Conlog set the deadline for completion of the implementation in April 1999.
"Although we looked at several possible solutions to the problem, SAP R/3 appeared to be the best option as we had already implemented its Financials and Sales & Distribution modules," says Conlog`s IT manager, Andrew Austin.
Accordingly, the company put out a tender for an implementation partner. This attracted some half dozen proposals, including one from the eventual winner, Ernst & Young CSI, a joint venture owned equally by the Big Five accounting company and CSIPER Consulting, a SAP Southern Africa Logo Partner with a global presence in the SAP implementation and integration market.
"We valued E&Y CSI`s input above the others for a number of reasons," says Austin. "First, they gave us direction and advised us on where we could realise specific advantages through SAP implementation. Both their approach and their methodology suited us and we could see a conclusive solution. We also saw an advantage in that they had been involved with us in the earlier implementation of SAP modules.
"Another key issue was E&Y CSI`s approach to our staffing capability. We needed a number of our senior staff to work on the implementation while, at the same time, continuing to handle their regular duties. E&Y CSI`s approach made this easier to achieve.
"Finally, we were committed to developing a long-term relationship with a strong SAP partner in Durban. It is very expensive to transport expertise from Johannesburg. CSIPER is one of the few SAP companies with a strong presence in Durban and we saw this as a significant advantage."
CSIPER Consulting director Colin Jackson, who fulfilled the role of the consultants` project manager, notes however that this proved to be a two-way street.
"It is not that often that we get the company`s best staff on the project team as happened here," he says. "Most companies say they cannot afford to take their best sales manager, for instance, out of the front line so we typically end up working with less experienced staff. This has, on occasion, resulted in problems. In this case, most of the consultants who worked on this project would agree that the quality of the users we worked with contributed markedly to a smooth and successful implementation."
Consultants and users held a series of meetings at which they established clear base lines for the project. These was documented in what came to be called "the Blue Book", which was effectively the blueprint for the project. The scoping phase was then reviewed by a project forum consisting of about 20 senior Conlog people. Their ideas were listed in an addendum to the Blue Book. It was then decided to tackle the project in two phases. By then, both the company and consultants felt that they had got such a good handle on the issues they were able to negotiate a fixed price cap on project, thus removing a source of friction in many implementations -- money issues.
In any project of this size, skills and knowledge transfer form a key issue. Unusually, but logically in this case, Conlog decided against having its staff equipped with broad system configuration skills.
"We evaluated the IT environment in the country and decided to use E&Y CSI to handle all the configuration changes to the system, and to have certain staff trained to super-user status so that they would be able to keep the systems up and running by themselves," says Austin.
"This is consistent with our belief in the need to focus on our core business, but there was also a secondary issue -- that of avoiding making our staff the target of poachers. Many companies have invested heavily in developing in-house SAP expertise only to have their trained staff lured away. We prefer to reward staff who stay with us and used an incentive package to reward the implementation team."
E&Y CSI provided Conlog with templates and training materials, but Conlog itself modelled and delivered the actual staff training.
Work began on the pilot phase of the project in September 1998. "Having scoped and planned the project extremely well in the beginning and having been very strong on detail, there was very little argument over what had to be done," says Austin, "so we just got on with the job."
Among the key objectives were to achieve a fully integrated solution and enhanced functionality in order to significantly improve operations in such areas as supply-chain management, product costing, product quality, product delivery, capacity management, product rationalisation and overall customer satisfaction.
Only eight months later, Conlog went live with a near wall-to-wall implementation including Accounts Payable, Accounts Receivable, General Ledger, Material Management, Costing, Internal Audit, Cashbook, Asset Management, Quality Management, Sales and Distribution, Profitability Analysis and Production Planning.
As well as implementing SAP R/3, the project involved migrating from a Unix environment to Microsoft NT and extending the company`s network to ensure a one-stop solution for all users.
The project team could, in fact, have gone live a month earlier, but delayed the switchover to 1 May 1999, using April to check Conlog`s data. "In agreement with E&Y CSI we commissioned an external quality assurance audit during this period by a SAP consulting company, CSIMS, to ensure that we had covered all required business processes correctly," says Austin.
This was seen as an essential step in risk minimisation. "With an SAP implementation you can derail the whole process if the data is not correct," explains CSIPER`s Jackson. "Conlog were not comfortable that their data was 100 percent perfect and a lot of complex stuff had to be checked."
Even with this delay, the project still went in extremely fast for an implementation of this size. "We employed a combination of E&Y`s Fusion methodology and Accelerated SAP, using those elements that best served the purposes of keeping firm control while developing solutions rapidly," says Jackson.
The migration itself was achieved over a single weekend. "The old system was shut down on Friday," says Austin. "We were back up and running on Monday, and by Tuesday we were on-line again. It was a very smooth transition with only one or two minor problems which could, in fact, have been avoided. The whole thing went easier than would have been expected with a project of this size."
An acid test of any project is how well users respond. "We have about 130 users -- significantly more than with the old system -- and the feedback from them has been one of relief," he says. "The company in general was happy with the implementation and the fact that it went in so smoothly.
"In retrospect, we have realised that one cannot ever underestimate the amount of awareness of training needed by everyone in the company. I think the main weakness in the project resulted from the loss of our organisational change manager in January. We applied organisational change management techniques right from the beginning and had scheduled more awareness training, but failed to keep up to date with the awareness programme. This resulted in us having to revisit the awareness programme and schedule additional training. Our next objective will be to cross train users to ensure continuity of service in the business."
Nonetheless, Conlog is already realising the advantages of the new system. "One of the most important benefits we have seen is that R/3 is showing up weaknesses in our business processes," says Austin. "As a result we are now investigating ways to improve these processes."
This ties in with a broader initiative to redefine Conlog`s business and streamline its operations in order to focus not merely on manufacture of its own products, but on providing cost-effective manufacturing services to other businesses. Work on this has gone on in parallel with the SAP R/3 implementation.
"Having looked closely into the whole area of contract manufacture, we realised that we were very competitive in worldwide terms," says Austin. "Accordingly, we are now looking to take up manufacturing contracts from overseas as well as local companies."
What is also already clear is that the SAP R/3 infrastructure facilitates increased factory throughput. "We are now able to support clients -- international as well as local -- much better that in the past," he says. "We are satisfied that we have chosen the right platform to extend our capabilities, to identify new business opportunities and be able to get the company moving quickly in the right direction, to be able to meet changing market demands and to respond quickly to changes in business practice, such as the move to electronic commerce and the need to provide additional services to our clients via the Internet."
Austin attributes the success of the project primarily to the commitment demonstrated by both users and consultants. "For Conlog`s part, our staff really put their hearts, backs and brains into the project, while E&Y CSI demonstrated a very mature management approach and supplied an excellent management team. Having been involved with a number of major military and engineering projects, I can say this one has gone very well and I am confident that we will continue to reap significant benefits from it."
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