This is a continuation in the series of interviews with strategic partners to describe the value they create. If you want to refer to the original KPMG article please see here. Today I’m interviewing José Neves, Senior Manager at KPMG/Safira, in order to discuss their SAP capabilities built on top of IBM BPM and ODM.

You have made significant investments in creating these assets, can you describe what it is and what it does?

The SAP capabilities we have developed at KPMG, are an approach and a methodology that we have developed from working for many years with customers all over the world. At the highest level, we have built a layer of User Interfaces (UIs) that facilitate the implementation of these complex projects. These UIs, inside IBM BPM and ODM, are much more intuitive and easier to use than the alternative in SAP. Additionally, we have made huge investments in integration capabilities, which manage the integration with SAP. With these capabilities, we are able to deliver completed projects much faster with IBM BPM and ODM, than if we try to do this from scratch with SAP.

The real value of working with IBM BPM and ODM on top of SAP, is that an ERP system - by its very nature - only addresses approximately 20% of routine work. Therefore, IBM BPM and ODM extends the functionality of the ERP system. As a result, they create significantly more value from the investment in SAP, for their users. Additionally, IBM BPM and ODM is significantly more flexible in addressing non-routine work. ERP systems are not designed to be flexible to help people address all the types of work that they do.

I would like to explore with you a little bit deeper the UIs that you have created. Can you describe for me the value that clients get from these UIs?
Normally, when end-users need to work with an ERP system, they usually find that these ERP systems have very complex screens that are not intuitive. This leads to organizations having to spend effort, time and money training people to use the ERP system. They also have to spend significant time doing all the customizations they need for the ERP system, to have all the specific requirements for that particular business. Additionally, they spend a lot of time defining documentation that describes what the process is, that is impacted by the ERP system, and that they want the people to follow.

The UI capability that KPMG built on top of IBM BPM, was built to ensure that the end users that are now interfacing through IBM BPM with the ERP system, will have only the information that they need to do any particular task, as opposed to everything. For example, a particular worker needs only three fields to perform a task. In IBM BPM they will only be presented with those three fields. If they were working in SAP they are presented with multiple fields, and they would have to go chasing through different tabs and screens with a lot of information, which is not intuitive.

The way we constructed the UI, we built very simple controls. Additionally, we have built searches, lookups for data, and also very descriptive rules that tell the user, that in a particular field for example, they need to fill information in a very specific way. By building a lot of tips in the UI, that guide the user on all the tasks that they need to perform, this significantly cuts down on the training required of end-users to adopt the ERP technology. In effect, the UI is actively teaching the end-user how to use it.

You made a very insightful statement that I would like to probe a little bit deeper, and it pertains to exploring what you mean by an ERP system handling about 20% of the work. Can you explain what you mean by this?

Normally, ERP systems are designed to perform transactional work, and they are superb in terms of handling that type of work. That said, in terms of managing people work, they were not designed to do this. By this I mean for example, handling exceptions, ad hoc work, and service level agreements. Additionally, when it comes to orchestrating work, there is no better technology than BPM which is the technology that tells someone, when they need to do something, as part of a major sequence that makes up an end-to-end corporate process. When companies do not use a technology like BPM to manage this flow of work, they resort to technologies such as email, paper… to drive the work to the people that have to do it, which further complicates the smooth working of an organization, because everything is manual. And this is where BPM (and ODM) perform the remaining 80% of the routine work, which is performed by humans and which is not transactional in nature.

Additionally, when you support an ERP system with technologies like IBM BPM and ODM, you can significantly reduce the development cycle time of implementing ERP based capabilities in an organization. For example, when you want to make changes in the system, you will find that the ERP system is quite inflexible, because everything is hard coded in an ERP system in programming language that businesspeople simply do not understand. This results in months spent identifying the change you want to make in the ERP system, in order to enable some type of workflow capability. Additionally, as you hard code more and more changes in customizations in your ERP system, this results in a degradation in the performance and flexibility of the ERP system, with time.

Conversely, when you make all the customizations in a BPM or ODM system, your processes are simple BPMN drawings that any businessperson can immediately understand, and if they need to make a change, they can do it without the need for experienced software programmers. The ERP system benefits, because it is kept simple and streamlined to the mission it was bought to accomplish in the first place, which is performing transactional work.

Let me ask you a tough question. The primary audience for this type of article are senior executive leaders on the business side, and not necessarily just an IT audience. For a business leader, can you explain to me, why everything that we have spoken about so far, cannot be done effectively in an ERP system, and why you need a complementary technology in the form of IBM BPM and ODM?

At the most basic level, a lot of the tasks that you need to perform to support an end-to-end process are simply not built into an ERP system. Therefore, if you try to capture everything without a Business Process or Operational Decision technology you will be missing part of the process. Conversely, when you use a technology like IBM BPM or ODM, you can capture the process end-to-end, with every aspect of that process, and routing through every area of the business, without limitations. Additionally, because a technology like BPM or ODM are integrating technologies, they can seamlessly interact with all your IT systems, irrespective of the type of system of record, or personal productivity tools like Microsoft Excel or Word, that you use on a daily basis to perform all your business activities.

That said, many companies try to capture everything in the ERP system, and as a result they invest millions of dollars and potentially multiple years, writing custom code in order to make the ERP system do something that is not natural for such an application. Because the business environment is changing so quickly, all organizations need to be agile, in order to respond to changing market conditions. When you try to do everything inside the ERP system with custom code, you end up with an IT infrastructure that is inflexible, and very slow to respond, because it takes so long to make changes. Moreover, with the passage of time, as you do more and more customizations, you actually get into a situation where your IT systems become more and more “fossilized”. What KPMG observes, is that one of the byproducts of your IT systems becoming inflexible, is that your employees and managers, in order to get their daily work done, start to create an extensive amount of manual processes and ad hoc procedures outside of the corporate system. When this happens, you now run into a problem of transparency and control, because it becomes very hard to understand how the work is progressing inside the organization.

But that is not the end of the problem. All the changes and customizations that you have made to the current ERP version that you’re running, will become a huge cost and liability when it comes time to upgrade that application to the latest version. This is because when you migrate to a new version, all those customizations are not part of the application. Conversely, when you use an application like IBM BPM or ODM, which were designed from the ground up to make it very easy for business people to make changes to processes and business rules, they act as a layer in between the business users and your ERP systems, and they handle all the complexity of integrating between the user and the ERP systems. As a result, all that customization is eliminated.

What you have just said is extremely powerful and insightful. If I was a senior executive running a company, where massive customization is happening, this would really open up my eyes in terms of all the liability from a financial, risk-management, and operational perspectives that I’m incurring by engaging in these practices.

Agreed. The most striking savings are that of time. When you are making all these customizations in an ERP system, these projects can literally take years to accomplish. Whereas if you’re using IBM BPM or ODM, you can make changes in days or weeks. I think that says it all. For example, externalizing business rules: If you’re creating business rules right inside the ERP system, you need to write ABAP code in SAP. You are writing potentially thousands of “If, Then and Else rules” inside the ABAP code. This can only be done by very specialized and skilled software developers, who are able to develop all this code effectively. On the other hand, if you externalize all these rules in a dedicated system like IBM ODM, you will use the IT professionals to identify the interfaces to your systems of record (the applications that run your business), and they will also define the data model to be used by the ODM system. But everything else that pertains to creating the business rules, maintaining them and changing them, is done by the businesspeople, because this technology supports natural language that any human being can understand, without programming experience. And this is how you go from multiple years to develop rules through custom code, down to days to make a change.

Can we make everything that we have discussed so far real, by sharing customer examples of how they are benefiting from these capabilities that you have developed around SAP and ERP systems with IBM BPM and ODM?

First example:

One of our clients in the pharmaceutical industry, as they manufacture drugs, they produce final products, but at the same time they are producing components of drugs that will become part of a final product. After they finish a product, they need to run extensive tests in order to ensure they meet regulatory requirements, before they can place the product in the market for final consumption. Additionally, because their products are biological in nature, these tests take more time than normal in the pharmaceutical industry. The one thing these folks can absolutely not afford, is to have batches waiting in the warehouse until they finish all the tests and all the trials. By streamlining all this work on IBM BPM and ODM technology, and thus reducing the cycle time massively, they can afford to manufacture the final product and then ship it faster while meeting all the regulatory compliance requirements. Very short cycle times without sacrificing quality are critical, because these products, being biological, have an expiration date.

The problem that the client was having, was that if as a result of the trial and tests, they determined that a batch was faulty, it took massive amounts of time to input all the data into an ERP system, which caused unacceptable delays in the production process. The reason for this is that putting all the information into SAP, and then managing all this work with all the different SAP instances, in the different subsidiaries could take up to three months in cycle time. The solution we built for this customer was to put all this testing and trial process in IBM BPM as well as ODM. We then created a suite of SLAs and very tight integration into all the SAP systems, in order to eliminate all the manual work and sending emails to all the different employees involved. This was the way of working, prior to implementing BPM and ODM.

As a result of this project, they were able to reduce the identification of nonconformity from an average of three months down to seven days. Also, 50% of all the nonconformities are resolved in three days. This allows the client to stop the production of new products, or to stop the shipment of products virtually instantly. This implementation also massively reduced the operational risk of this company, by eliminating regulatory compliance lapses that can cost millions in fines. Within the production process, these capabilities have radically improved their performance, by very quickly identifying when a sub component of a final product is bad, so they can stop it immediately. Additionally, they can ensure that they are continuously improving their production process. The ability to respond very quickly has also translated in very large cost savings to the organization.

Second example:

This particular example is with the same client as above, but it describes the use of ODM in order to improve their sales compensation processes. They use a variable incentive compensation model for their sales people, around the world. The commissions and bonuses that the salespeople are paid, are subject to different rules depending on the country, where the sales person works. Additionally, rather than selling the same thing around the world, they prefer to emphasize different products for different countries, and they do this by incentivizing salespeople differently from one country to another. Another dimension that they manage, as part of the sales process, is how aggressive they want their salespeople to be relative to a given product and a country. That is, how quickly they want to gain market share in a given geography. Given that they are in more than 20 countries around the world, and the fact that they manage their sales compensation centrally from headquarters, this created a huge challenge in terms of managing this level of detail, in compensating salespeople around the world, because the country managers around the world, have the flexibility to define what will be the key performance indicators for their particular salespeople.

Additionally, the directors and senior managers at headquarters, also want to superimpose products that they want sold around the world into the local sales mix, which has further repercussions into the incentives for the salespeople. The way this process worked, was that at the beginning of the year they did a lot of work and took a lot of time from HR and IT resources, in order to define the compensation plan for the year, and all the controls that had to be programmed into their ERP systems. This resulted in the sales compensation model for that year. Additionally, they also had to spend a great deal of time working with the different stakeholders that impacted the process in order to define how people will be paid for that year, and calculate the appropriate bonuses, in order to ensure there will be adequate funding throughout that year.

From a seller perspective, there was a great deal of dissatisfaction with this process because they were not able to understand if their bonuses were correctly calculated. This led to continual complaints, because the salespeople always felt that they were missing something (whether right or wrong in actual fact). The most common complaints pertain to the fact that they were not paid for something that they sold and they didn’t understand why. KPMG implemented a rules system based on IBM ODM, by working with the HR department. The ODM technology allowed them to define different models, which could be easily applied to different rules in the organization. For any given model, managers can now easily define what the KPIs are for that model, as well as what are the different objectives, financial and sales ratios, the business objectives behind the goal that the different sales profiles need to fulfill.

Once the model is defined in the ODM system, that same system goes into SAP and automatically fetches all the performance information for each individual seller that it needs to populate the model. These models then automatically calculate all the compensation that a sales rep is entitled to each month, and then the ODM system generates two files:

  • One of them goes to payroll to process the payment to the sales rep,
  • The other file goes to the HR department which reviews the information, and then sends an email to the sales rep explaining how they were paid and why.

With this implementation, KPMG was able to collapse the cycle time to calculate all these bonuses and sales plans from a couple of months down to two days. Additionally, because the information is so well outlined and so transparent, the satisfaction of the sales force has improved massively, because now they know exactly what is their performance for any given month. Additionally, the salespeople also get an itemized view of everything they have sold and how they were paid against that product, including the appropriate bonuses for that product. Something actually quite interesting happened as a result of this project: The salespeople are extremely happy because they’re getting paid the right amount that was stipulated in their sales plan for the year, but the company is paying less bonuses because the system is so much more efficient in calculating what should be paid.

Third example:

The third example is a client in the manufacturing sector specializing in power tools and outdoor equipment. They have two major customer sets: One is consumer products and the other one is products for professionals. Additionally, they had different processes for the creation of different end products. They are a user of SAP, and this KPMG project was undertaken to transform the Materials Management Module in SAP.

Because the products are seasonal, they divide the year into quarters. For each quarter they need to create a product roadmap. The roadmap then creates a full catalogue of the products, they want to manufacture for that quarter. All of this needs to be done well in advance of the quarter. Before implementing IBM BPM and ODM, they needed to start 12 months ahead of the quarter. The problem that they were experiencing was that they had a fragmented process for the materials creation in SAP, because they had two separate processes: One for the consumer and a separate one for the professional line of equipment. Additionally, it was extremely difficult to get visibility into the status of the process of each product that they wanted to manufacture in the plant. As a result, they were compensating for this lack of visibility, by creating a significant amount of manual work in order to be able to understand, where in the process these products were. Whenever they needed to understand the status of the process, these employees went into SAP, looked at numerous screens, in order to get information and data to understand, whether they needed to do something or not, to impact the process. Additionally, they had challenges managing absences of key employees, which became very important in a primarily manual way of working. Finally, as a result of all these limitations they were struggling with the product release process, in a timely fashion for their customers. From a management perspective, this created a lot of frustration across the enterprise, which included the sales function of the company.

KPMG implemented a solution with this client by externalizing all the interactions of every employee with the SAP system, by creating an external layer using IBM BPM. Additionally, using IBM BPM, they created a uniform process for both the consumer and the professional lines of equipment, collapsing all unnecessary additional work that didn’t need to be done. With the introduction of very user-friendly interfaces, this allowed users to very easily fill in the information required, which is made up of up to 80 fields. Because this team was already building everything in an Excel spreadsheet, KPMG built an accelerator on top of the IBM BPM technology, which allows them to automatically drop all the content in that Excel spreadsheet into the BPM system, just by dragging and dropping the excel file and without having to manually enter data. Additionally, the business is able to create service level agreements, and notifications and escalations when those thresholds are surpassed, and all of this is managed by the BPM technology.

  • Clarification on the role of the Excel file: On the consumer side of product development, employees were using an Excel file that tracked all the information. Originally the use of the Excel file was in order to simplify the process prior to the implementation of IBM BPM, because entering data into an Excel file is significantly easier, than entering all this data directly into the SAP ERP system. When KPMG implements a project, they are very careful not to introduce disruptions or changes to the way people work, unless absolutely necessary. They very quickly identified that this Excel spreadsheet was the natural way in which people were doing their work, so it made sense to leave that alone and build capabilities around that. This file tracks all the critical information about that product in order to be able to produce it.

The BPM technology additionally enforces that the workflow is followed as prescribed, without any deviations, and this was impossible to enforce with the SAP system, because of the great deal of manual intervention that was necessary with that technology (as described above). As a result of all these improvements, the business realized a 60% reduction in their Induction Process – to be specific, they reduced it from 16 weeks down to six weeks, and in some cases when the organization flags a particular product to be urgent, the Induction Process can be reduced down to two days. The end-users no longer interact directly with SAP. They are working with IBM BPM and it is the BPM software that creates all the integrations, and fills in all the data, that the SAP ERP system needs. Moreover, the BPM technology has given this company full visibility and transparency into the end-to-end process so, they can truly understand, where they are in the lifecycle of producing any particular product.

  • Clarification on the Induction Process: This is defined as the initial creation of the product.

Fourth example:

A client can change the labeling of its products, which is required to sell in different countries with different regulatory rules, very quickly using IBM ODM. The reason why this works so seamlessly is that when things change, the users go into ODM and quickly change the rule and that drives the whole process, which leads to the label being properly written. This is done in days. Additionally, the reason why this works so seamlessly is that all the rules that pertain to that label, where externalized outside the ERP system so that they can be easily managed.

If all these rules where embedded in the ERP system, it would simply be impossible to make that change in a couple of days. For example, let’s say that the company deals in more than 20 countries, but only in the United States you need a special statement put right on the label. In the example where the rule is embedded in code in the ERP system, a very specialized ABAP programmer would have to program that statement, just for the United States. This requires opening up an IT project just to put in that statement. Conversely when you’re using ODM, the manager in charge of labeling with responsibility for the United States for example, without asking IT, can go into ODM and add that sentence in a matter of hours. And the ODM system, because it is completely integrated into the ERP system, will automatically write that new business rule into SAP, without an employee having to do it.

 

 

*************************************************************************
About Jose: Jose Neves is a Senior Manager at KPMG/SAFIRA, an IBM Premier Business Partner widely known for its maturity and experience in BPM and ODM. With over 16 year of experience in consulting, runs a unit dedicated to full lifecycle delivery of BPM, ODM and Mobile projects and also BPM and ODM Support and Operations services. Started his BPM journey in 2005, and from 2007 built one of the most successful IBM BPM references world-wide. Currently is responsible for helping grow KPMG’s BPM and ODM capabilities in the North America markets and his team of experts are also delivering cutting-edge BPM, ODM and Mobile projects at several international organizations in Europe, Africa and Latin America. Here is Jose’s LinkedIn Profile.