BAT Taiwan:

Implementing SAP for a Strategic Transition

DWITYA & LEE

Todays Discussion

BAT Taiwan Company Background

BAT Taiwan and IT Optimizing

Lesson Learn from the Case

BAT Taiwan
Company Background
BAT Taiwan was established in 1989. BAT Group - the world's second largest stock market quoted tobacco business. 3rd largest international tobacco company in Taiwan in terms of sales volume: Average market share was approximately 8% in 2008.

160 employees in head office in Taipei and three area offices in Tucheng, Taichung and Kaohsiung.
Business includes the importation, distribution, marketing and sale of tobacco products.

BAT Taiwan directly importing and won products and selling directly to key accounts (7-11; Family Mart; Circle K; Hi Life, and Niko Mart) :
70,000 retails outlets

BAT Taiwan
Company Background
Major Challenges:

Preparation for entry into World Trade Organization (WTO)

TWO new laws relating to the new administration and taxation of tobacco products

BAT Taiwan
Company Background

New Business Model

Selling directly to key accounts Directly importing its (big 5 own products convenience and chains) and its distributor

Focus on direct store delivery

Piloted first in Taipei

BAT Taiwan
The IT Function at BAT
The global CIO (Globe House) : IT infrastructure, IT service delivery, e-business and business system initiatives, and IT people and processes. Purpose: Increase emphasis on global strategies to help reduce the costs of implementing integrated IT solutions and ongoing IT service delivery.

3 data centers geographically: Europe (Hamburg, Germany); North America (Macon, Georgia); Asia Pacific (Kuala Lumpur, Malaysia) operate under a shared service model (regional level)

BAT Taiwan
The IT Function at BAT
Responsible in:
identifying business requirements, identifying IT solutions, building business cases for IT projects, and managing support services (including local, shared, and outsourced service.)

BAT Taiwan only has one IT technical support resource onsite for desktop and LAN support, who has dotted-line report to the IT organization for APN.

BAT Taiwan
New Computer System for Taiwan: The ERP Choice
2 ERP platform standards had been prescribed for all BAT solutions by 1998: SAP R/3 and Sage Tetra CS/3.
SAP R/3 Standard solution for larger Sage Tetra CS/3 Less complex

More complex BAT market

Very expensive system to implement and maintain Recommend for: sales and distribution (SD), material management (MM Purchasing and inventory management), financial (FI including fixed assets), and controlling (CO including profitable analysis) Phase II Support direct importing and distribution to one customer (formal distribution)Phase I

Smaller operations that did not need the functionality of SAP

Required a low- cost ERP solution Did not scale well, no longer viewed as the best solution for BAT organizations in rapidly growing markets.

Not viewed as a sufficiently robust system for HK market

BAT Taiwan
Selecting an IT Partner
European or Asia Pacific? Current BAT Taiwan: new and small; consider project cost; no request a bid from an external consulting firm.
European (EDC or EcoE) Implementing R/3 Taiwan had experienced the data centers high-quality operational support More extensive SAP implementation experience Asia Pacific (APSS) Implementing R/3 Template (code named Symphony )similar business model in Singapore. Ongoing operations and maintenance roles: Lower personal cost, same time zone

Ongoing operations and maintenance roles: Higher personal cost

Late 7 hours away in Europe

Able to communicate more easily

Same natural synergies - Mandarin speaking

BAT Taiwan
Taiwans R/3 Project
Four primary business processes: Account receivables Account payable Inventory management Plan-and manage-enterprise
Phase 1 Budget (Fixed-Cost) Man-days Other expenses USD $100,000 250 (USD $ 77,700) Phase 2 USD $50,000 USD $30,000

Technology upgrades and direct expenses (travel and living expenses for the APSS consultants)

BAT Taiwan
Taiwans R/3 Project

Phase 1

BAT Taiwan
Taiwans R/3 Project

Phase 2/A1
Consulted with the APSS Applications Manager, the Head of IT at APN, and the other project team members,
A revised proposal was prepared by APSS, and the phase was renamed 1A to signal that the Phase 1 resources would continue on the project team, rather than have a totally different implementation.

BAT Taiwan
Taiwans R/3 Project

BAT Taiwan
User Acceptance Testing and Change Management

1) BAT Taiwan hire additional temporary staff prior to the User Acceptance Testing 2) Delay in GUI integration with SAP lead the team to execute a contingency plan for the first 2 weeks in January, creating an additional burden on the team. 3) Compromise in Support after Implementation 4) 2 APSS consultants onsite for 6 weeks 5) MM consultant onsite for 2 weeks 6) FI/SD consultants onsite for 2 weeks after the MM

BAT Taiwan
Quality Review
In the first 3 months of service, the production server running the Taiwan system and need to assistance to take over problems. In the weeks immediately following Go Live, procedural errors led to a few processing errors. A multi-tier support plan is in place.

Some problems have surfaced over time and certain changes have been requested as users have learned more about how the system works.
For instance, a differential pricing policy was not initially specified, but has been added to the configuration.

BAT Taiwan
Post-Implementation in Taiwan

Within APN, Hong Kong would probably be the next end market to implement SAP.

A formal post-implementation review, sponsored by Globe House, was to be conducted toward the end of March 2001. Other BAT managers are expected to be interested in learning how the implementation was accomplished so quickly, at such a low cost, and whether the business users were happy with the quality of the system.

BAT Taiwan
Case Lesson to Learn
Learning from the past experiences of similar businesses should be utilized in making current project decisions, such as the unsatisfactory implementation of SAGE Tetra CS3 in Hong Kong Ensure any project revisions remain within a reasonable scope Include vendors in consultations for timeline revisions

IT and Business Managers work together to share the common goals and build mutual trust of the project, and IT investment risk
SAP is a very powerful application for a small market. Initially you go through a stage where you learn the basics but you dont yet know all the functionality. When you become proficient with the system, you begin to look at other needs. APSS needs to be ready to show the business how to use the system better what the more complex processes are that they couldnt absorb before. Mr. Ponce, Asia Pacific Regional IT Manager

Thank you !