Home Enterprise Solutions SAP Ariba farms cost savings that go on and on

The procurement platform from global enterprise software vendor, SAP Ariba, has aided ASX listed crop protection and specialist seeds company, Nufarm, in its cost reduction goals.

Were he with us today, animated mouse Speedy Gonzales would surely say “Arriba, arriba!” about how swiftly Nufarm was able to execute a move from disparate on-premises products to SAP’s cloud-based solution and obtain the cost savings that followed.

David Bury, Global Strategic Procurement Manager for Nufarm, explains the company is over 100 years old globally, entering Australia in the 1950s from New Zealand, and built itself on acquisition around the world. While the story of growth is positive, it also meant the company did not enjoy a standard computer system.

It did not aid things that the company would, at times, compete with itself. Many of the pesticides sourced by the business originate in China and without a global view of the company’s procurement, the business would be periodically competing for the same product in different markets, driving the supplier’s price up.

Bury joined the company in 2015 during a time of leadership change. Nufarm was turning over $2.7 billion and expressed its goals to reach $4.5 billion by 2020.

Yet, the leadership recognised this goal could not be reached without new ways of operating. Firstly, a One Nufarm project commenced to break down the country and regional silos and bring about a single strategy for the company.

Bury was originally set a target of reducing spending by $8 million. During his first six months, he set up a procurement and resourcing hub in China, which co-ordinated buying and reduced travel needs, and generated benefits of around $32 million within the first year. The chief executive was so pleased he announced in the Financial Review that Bury’s target would be doubled the next year.

Bury recognised the company spent about $400 million on indirect costs. The bulk of these was locked into contracts or was part of non-negotiable regulatory costs, but around $150 million to $160 million were valid targets for reduction. The company set a goal of reducing indirect costs by $20 million over 12 to 18 months.

Bury and his team hit the goal, but recognised it was not sustainable without better systems. His past experience told him you can do all this work and save money, but as soon you take your focus off to return to the larger overall spend, the costs creep back up over three years.

Bury spoke to the chief financial officer and said Nufarm needed a better system in place, a tool to monitor and manage spend.

As part of its One Nufarm strategy the company had already identified the need to consolidate ERP platforms, but Bury recognised this was a multi-year project for a global company. Bury needed something now, and the $20 million reduction goal became the business case for taking up SAP Ariba.

SAP Ariba is the German software giant’s cloud-based procurement, spend management and purchase-to-pay platform, providing visibility of all pricing and contract arrangements, and the full transaction pipeline from requisition, order placement, goods receivable, invoicing and payment.

Being cloud-based, Ariba offered the chance to roll it out swiftly ahead of the ERP change. “It takes 12 to 18 months to change an ERP in a region,” Bury says, “but we rolled out Ariba in six months.”

Nufarm found it enjoyed $2 million savings just by having a robust system in place. Previously, if someone could stamp an invoice the accounts payable team would pay it. Along with the Ariba implementation Bury and his team implemented controls, telling the business they needed to follow proper approval processes. “No purchase order, no pay,” Bury said. “If you don’t put in a requisition via your boss and get it approved then we won’t pay it.”

The Australian rollout became the foundation for deploying the product in Europe and North America.

When it came to Ariba, Bury says it is one of the leading solutions in sourced contract procure-to-pay. He explains Nufarm spent three months evaluating options but found the competition lacking.

He adds, “Ariba is not just software but a network of suppliers that helps us transact electronically. It saves phone calls, it gives access to our business people where other solutions couldn’t do that and still required a procurement officer.”

Nufarm worked with Ernst and Young to scope out procedures, and with Accenture to implement Ariba with this developed set of procedures and processes. SAP’s consultants also performed a critical role in structuring and designing the final process. Nufarm established a Centre of Excellence, employing a Process Systems and Compliance Manager and within each region an Ariba Administrator. Accenture continues to work with Nufarm to support IT in the back office beyond the implementation.

With an eye to Ariba’s future, the company customised forms heavily to suit the business needs, but left all else as out-of-the-box as they could. Bury states, “I made the conscious decision to do a vanilla implementation with zero customisation so when SAP do an upgrade we can take it forward. As we were rolling out across multiple regions, region by region, previous learnings say you end up with very complicated regional customisation and your teams are disconnected. One of the things I wanted to make sure was we had a very straightforward simple process for our users.”

While achieving sustainable cost reductions was the chief goal, Bury states the project improved analytics, with Tableau-powered dashboards using data directly out of Ariba showing factors around spend — who they spent with, when, from who in the business — as well as dashboards on the process itself – how long it takes to raise a purchase order, to get approval, and other aspects.

For Bury, the greatest outcome was getting the team to work together as one across Nufarm. “Change is never easy,” he says, but “our team on the ground, with SAP, all stood the system up quickly. Other companies took two years but we took six months.”

Offering his tips to other companies on driving successful change, Bury suggests there are three keys

  1. Get leadership engagement up front
  2. Drive visibility of the process
  3. Really explain why you need the change

“A lot of people really needed to understand why the company needed to change. We were at a point we were not growing anymore. We couldn’t be siloed anymore if we were to beat the next target. Driving the understanding of the challenge was the biggest thing.”

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David M Williams

David has been computing since 1984 where he instantly gravitated to the family Commodore 64. He completed a Bachelor of Computer Science degree from 1990 to 1992, commencing full-time employment as a systems analyst at the end of that year. David subsequently worked as a UNIX Systems Manager, Asia-Pacific technical specialist for an international software company, Business Analyst, IT Manager, and other roles. David has been the Chief Information Officer for national public companies since 2007, delivering IT knowledge and business acumen, seeking to transform the industries within which he works. David is also involved in the user group community, the Australian Computer Society technical advisory boards, and education.

 

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