Going for growth on a fast SAP-plus implementation

Bookham Technology, the Abingdon-based global opto-electronic components manufacturer that successfully completed a £2 million SAP corporate ERP implementation in August last year, says it’s already seeing serious business efficiency and production gains. Overhead cost reductions and streamlining alone will deliver around £1 million savings, but the firm also expects more from partner, supply chain and customer performance improvements, leading to return on investment well within three years. Its new GEMS (Global Enterprise Management System), which now involves 800 users world-wide, was implemented by SAP VAR Ascent Technology and went live after just seven months – an extraordinary achievement given the scale and complexity of the business. SAP replaced no fewer than seven legacy systems and was also seamlessly integrated with the firm’s specialist Promis waferfab production management system in that time. But that wasn’t all: goal posts always move, and in this case, developers had to accommodate Bookham’s acquisition of Marconi’s optical components business at Caswell early on. They’re now wrestling with the integration of Nortel’s much larger optical components business at several sites, the largest of which is Paignton, Devon. And with the drive, enthusiasm and market focus of these people, it will happen fast. Bookham’s is one of those legendary stories. Started in 1988 in a garage by current chairman Dr Andrew Rickman, it not only volume manufactured the world’s first single chip integrated optical and electronic processing components but, before the crash in 2000, had gone global, public and achieved a market cap of $7 billion. At one point, the firm was growing at 50% per quarter. Currently, following the high tech downturn, it’s in contraction mode, with revenues in 2001 around £22 million and, although sitting on £137 million, is loss making, burning cash at £11 million a quarter on R&D and eagerly anticipating an upturn in 2004. Punishing time scales It has little choice. It’s designing and building leading edge, high performance short and long haul broadband components and subsystems for the world’s telecommunications giants, like Fujitsu, Lucent, Nortel Networks, Alcatel and Siemens using patented silicon ASOC technologies. And that requires punishingly high rates of innovation to merit survival and ultimately growth. New product development cycles are 12—18 months, but sales lifecycles are just six, and then it’s the next. Yet quality, traceability and robustness have to be second to none in an industry where, once installed, components need to survive for up to 50 years. As for manufacture, it’s complex, specialised, relatively low volume production in very expensive clean room environments, with semiconductor type machines sitting alongside automated assembly and test equipment costing literally millions of pounds. This is not for the faint hearted. And what Bookham president and CEO Dr Giorgio Anania says he needs is systems at the heart of the business that not only provide current information fast for tight management, but are also able to change fast as the market dictates. And hence, he says, SAP. “We needed a system that would let us see inside logistics, production, stock levels and so on immediately… We had to have flexibility and speed… When you’re burning significant money every day, you can’t afford to wait three extra weeks to get the numbers…” Now he says: “SAP is certainly beginning to make a big difference; we’re able to look forward not just back.” And the proof of that comes from the month end close, for example, which was 25 days and is now five, with a goal of three globally. That alone, he says, will release huge savings and improve decision making. John Barton, vice president of information systems and the driving force behind this implementation, takes up the story. “Two years ago we’d reached the point where our systems and processes were no longer capable of supporting our growth. They’d been built up piecemeal so information was inconsistent, there were hidden loops and work-arounds, different systems, different databases and lots of manual admin.” In fact, there were separate systems for financials and logistics, no structured forecasts, lots of batch processes between systems, no MRP, BoMs (bills of materials) on different spreadsheets and “unbelievable” raw materials, WIP (work in progress) and subassemblies inventories due essentially to poor visibility. Best of the best “Processes and IT needed to change,” says Barton, “but we didn’t have time for full business process re-engineering. We needed to import best practices and that meant a pre-packaged solution. But it had to be big and flexible.” In the event, Bookham looked at SAP, Oracle, PeopleSoft and JD Edwards and underwent three months of due diligence before selecting SAP. Barton involved senior management from across the business in the decision, providing data from finance, logistics, sales, manufacturing and so on for proof points. Although initially wary of using a VAR instead of SAP itself, he says Ascent turned out to be instrumental both in planning and rolling out the implementation quickly. “We wanted to get into bed with an organisation with the same sort of mindset as ourselves. We’ve all been burned by some of the large consultants and inexperienced people. They had been through a number of similar projects and really understood our business and manufacturing. It worked.” Getting it in fast In fact Ascent used its own SAP-certified mySAP ‘All-in-One’ templated solution which delivers sector-specific pre-packaged processes, functionality, documentation and training material built from the firm’s experience. It’s aimed at mid market manufacturers below £150 million turnover, and speeds implementation by moving the game from a ‘blank piece of paper’ to a virtually ‘out of the box’ system. Bookham found itself effectively switching off attributes deemed inappropriate and switching on others – mapping the business to a prescribed platform with good solid processes. “It meant we could do it quickly and in bite size chunks,” comments Barton. Ascent also eased additional requirements via what it terms its ‘Value Packs’ that bolt onto All-in-One for custom ‘coding’ using standard software tools. Barton says that’s absolutely worked, citing forecasting and its feed into sales and operations planning, and also workflow managing purchase order requisitions and sign-offs. And he adds that the system hierarchy is now virtually flat, with clear process and information flows to ensure flexibility in the future. Central to the implementation was tight integration with the Promis silicon MES (manufacturing execution system), which was achieved using Ascent’s Java interfaces. In terms of functionality and roles, Promis now holds the manufacturing BoMs, change control, lot tracking, SPC (statistical process control) history, costing models, yield data management and so on – everything for detailed production. SAP covers the business side, holding mirrored BoMs for online materials purchasing and mangement, and covering sales, financials, production planning and scheduling, inventory management, supplier management, etc. There are plenty of statistics demonstrating improvement. What passed for MRP before as an overnight batch run now executes in 117 seconds in memory. Purchase requisitions that might have taken days to get sign off are now as instantaneous as workflow can make them. Visibility that before was non-existent, now matches work centres to orders, with job and yield tracking and the rest using barcode data input on Promis with instant data transfer up to SAP. What was 60,000 lines of Excel spreadsheet from shop floor data collection is now integrated to show WIP, variances, scrap, planned and actual costs and so on, all online. Likewise, operator, machine and process performances can all be assessed on line with full material traceability. With inherent visibility, SAP is ready to plan deliveries and sales people are aware of job status and production capacity. And it can give profitability analysis by product group, manufacturing cell, plant, whatever, while documentation and quality management are aligned. The list goes on and clearly management of the business is in a different league. Seamless operational IT At the operational level, so good is the inter-system interface that it’s hard to see where Promis ends and SAP begins. It appears as a single, seamless management system across the different functions (finance, sales, production and so on), providing real time information and clearly eradicating the old issues around inconsistency and latency. Says Barton: “There are even more efficiencies to be gained as the company matures with SAP, and as the software is flexible it will provide a platform for growth.” The first test of that was the Caswell acquisition, which meant closing down an existing Oracle system and running up to SAP; the next is already underway, with similar requirements at the Nortel Paignton opto-electronics factory. Following that will be a SAP business intelligence (BIW) implementation to provide for better top level decision making with real time data warehouse-driven business ‘dashboards’ providing relevant metrics. Continuous improvement But there is one last aspect that provides key advice for all of us. Of the £2million budget for this implementation, £300,000 was set aside specifically for big picture and functional education and training, which Barton says has been fundamental to getting more than just ‘buy in’. This, and his approach of migrating senior business leaders from across the sites and functions not only onto the project to facilitate change management, but right into the IS team and now mandated to drive for continuous improvement, he says is the way to guarantee ongoing success. Barton is adamant that it delivers critical flexibility through real and up-to-date knowledge of the issues and processes throughout the business and manufacturing. He believes any other way is paying lip services to the IT and, by extrapolation to the business health. For him, this is what’s making the IT not only the business backbone, but also the enabler for change. “If you’ve set your sights on growth you absolutely have to do this. The last thing you consider is outsourcing your IT or business processes.”