Colgate-Palmolive will consolidate five regional instances of SAP into a single global platform that it expects to act as the “digital core” of the business for the next 20 years.
The fast-moving consumer goods (FMCG) giant, which has presence in 223 countries, wants to simplify its IT landscape and move to standardised processes and master data management across its worldwide operations.
Global IT director Francisco Galindo told last month’s SAP Sapphire conference that the company currently runs five SAP ECC (ERP central component) instances in each of its regions for its order-to-cash processes.
“If you look at those systems really they’re running on a 15-20 year old basis,” Galindo said.
“We’re really proud of what they’ve done but opportunities to standardise started surfacing as we started comparing across the different instances and different practices that we’ve got.
“We’re really firm believers on the importance of global processes, and as much as we tried to implement them we’re starting to find out that differences in master data and configuration - natively the differences in our instances - are truly slowing us down from achieving what can be our digital potential.”
Part of that digital potential is simply being able to move faster; FMCG by definition is fast.
"We operate in a very dynamic market and we have to be able to accommodate changes in the environments in which we operate,” Galindo said.
Getting faster means becoming “standard in everything we do, and this is all across the board - master data, business processes and configuration".
“This is going to give us the agility to drive those operating decisions as fast as we can, and the ability to adopt new technology bundles around the world faster,” he said.
“Today if we want to implement something new we have to do it five times. Now the opportunity is there to do it once and do it fast.”
The company plans to consolidate on a single global instance of the newer SAP S/4 HANA platform. However, it will not be a ‘greenfield’ instance of the software.
“We settled on what we’re calling a brownfield approach,” Galindo said.
“We’re going to take one of the five ECC instances and upgrade it to the latest S/4 release.
“Once we have this instance up and running, we’re going to start migrating all the other four divisions into this one [upgraded instance].
“So we only go through the upgrade process once, but we do four different migrations to incorporate the global instance.”
The company has selected its Latin America ECC instance as the global target. Colgate-Palmolive has partnered with SAP for the project and earlier this year created a proof-of-concept modelling the initial upgrade to S/4.
“We were able to fully upgrade a sandbox copy of our production environment for Latin America to the latest 1610 release [of S/4 HANA in January 2017],” Galindo said.
“Now, the goal is to start the process of our true production project towards the back half of this year. We’re going to upgrade this initial ECC instance into S/4 HANA into next year.
“This becomes the global instance which for the next few years we’re going to be migrating one by one, although on quite an aggressive timeline, all the different divisions and ECCs and ultimately we get to our goal of a single instance by 2020.”
Galindo said planning was still in train on how to perform the upgrade and consolidation into what is already a production system.
“We cannot afford to disrupt the business,” he said.
“We are going to be upgrading a live system so we’ve got to manage downtime to a target. We’re not quite there but we want to get to what our goal is for this downtime conversion.”
Galindo said there were three key business factors that had driven Colgate-Palmolive to act and embark on the major simplification project.
The first of these was to improve financial consolidation, and this predated the availability of S/4 HANA.
“The speed of business around the world is driving the need for global and corporate results to be consolidated seamlessly and fast, and we don’t have that option today,” Galindo said.
“There are still batch jobs that run every night, and different processes that take the information back up to our satellite systems like BI [business intelligence] and enable us to do the consolidation there.”
The company also wanted to eliminate duplicate processes that drove “secondary sets of data and unnecessary reconciliations”.
Colgate-Palmolive had a financial consolidation project already in train, which is now being superseded by the consolidation onto S/4.
“We started a journey to have a central finance instance as our end-state before S/4 came to be a product,” Galindo said.
“This, in reality, became an interim state because while we were implementing this central finance instance, S/4 came into play.
“So what we [now] want to get out of this is we’re going to move from the five ECC system setup that we’ve got today and a couple of other legacy reporting systems that are floating around, and move this into our [new] end-state – that is the single SAP S4 HANA instance, and we’re going to have a native transactional universal journal living within that S/4 instance.”
The central finance instance project will be wound down.
“It doesn’t make sense to continue investing in that project while our end-state is taking us to a full-blown S/4 consolidation,” Galindo said.
“However, there are significant learnings and values that we were capitalising with this project, and there were a couple of other business benefits that was driving the need to continue with this, so we’re limiting [the single finance instance project] now to a single division – one of the ECC systems – and using it as a ‘test and learn’, if you will, while we continue to build this global instance.”
Simplifying shared services
Over the past four years, Colgate-Palmolive has “been on a very aggressive journey to start embedding business shared services units around the world”, Galindo said.
“These centres are running end-to-end processes for a number of areas: finance, customer service and logistics,” he said.
“The complexity is quite big because they’re operating in this five-instance ERP setup and the user experience we have today is not necessarily conducive to doing efficient business in those five instances.”
That means the single shared services user base had to memorise how to navigate five differently configured systems to find the same information or same result.
Once the single global instance of S/4 is in place, Colgate-Palmolive will use an SAP Fiori front-end to make the lives of its shared services staff easier.
“We’re going to put in placer role-based ‘launchpads’ that are going to deliver for each individual employee the transactions that they need to do on a day-to-day basis at their fingertips,” Galindo said.
“Again, we’re looking for simplicity. We want to simplify the way they work because that simplicity translates to efficiency.”
A third business driver for simplification – though not as sizable as the first two – is to make it easier to reassign business units internally.
Galindo said Colgate-Palmolive wanted to move “tiny” North American subsidiaries to its Latin America division. It had previously done similar reallocations in its South Pacific and Central European operations.
“What we realised is managing those changes [from North America to Latin America] turned out to be a nine-month exercise because it meant lifting one company code or operation from one instance, migrating all the processes and master data and embedding it in this new instance,” he said.
“It’s not worth the effort. There’s no value proposition there. But by having this central S/4 instance this becomes a moot point.”
Ry Crozier travelled to SAP's Sapphire Now conference in Orlando as a guest of SAP.