Information Age (IA): You say IT is a key differentiator at Rexam. To what extent is that view accepted throughout the business?
Paul Martin (PM): When I arrived five years ago, Rexam did not invest in IT. I was fortunate that, when I appealed to the board that IT could bring real competitive advantage, they listened.
We are spending $35 million on the new SAP platform, which includes purchasing the software, development and implementation. We spend $3 million per annum on the wide area network infrastructure, and $3 million to $4 million annually on the SAP supply chain infrastructure. We've standardised on SAP.
I convinced the board through presenting a very solid business case. And we have good people that know how to plan and test well. We did detailed acceptance testing, with business process owners that had to buy into the new system. They were the ones responsible for saying whether it was working or not.
IA: What do you expect to be the benefits of this project?
PM: A key value from the e-business perspective was electronically connecting our supply chain. From a customer perspective, that means using SAP tools and products to help our customers with planning and execution of their value chain processes with Rexam.
We also give suppliers tools and services that allow them to ensure their product is delivered at the right time to the right place, reducing stock risk and ensuring they can meet our requirements.
We tie that all together with a supply chain management programme. SAP provides a platform for seamless integration with our partners, from system to system. It also gives us the toolset to promote electronic collaboration through an Internet based portal.
This gives us the ability to trace and track orders online, and put our logistics requirements and accounts receivable function all online. We also provide our customers with 12 months of shipping history, which they use to help with their own auditing and internal forecasting.
In the US, we make 23 billion cans a year, of which 19.5 billion are ordered through this portal – that's 85% of our business. Over 80% of our accounts receivable paperwork is returned electronically, with major productivity improvements in our order handling process as a result. An area that our CFO really enjoys talking about is that we ended 2003 with our accounts receivable 99.7% current.
Four or five of our major aluminium suppliers are also using this portal. We have seen a 25% reduction in aluminium inventory on the factory floor – we only order supplies when we need them.
IA: That kind of business-to-business collaboration with suppliers and customers promises great efficiencies but almost inevitably involves an element of risk for many companies. What has Rexam's experience been?
PM: When I joined the company five years ago and said there was a way we can leverage the Internet as a way to make it easy to do business with us, I remember this great senior person who had been in the can business for a long time saying: "Our customers will never use the Internet to place orders." My comment was, if you can show them the value, they'll change.
So I personally went to visit every large customer, 15 to 20 of them, and took them through our strategy and made sure it was in line with theirs. I took them through the value the portal could bring to their operations, making them more efficient, and they loved it. So we started training our customers at their plants.
In all of our implementations, we have done things that were difficult. But have we had anything that has truly disrupted the business? No. It's all about planning and ensuring you get the buy-in.
If you are leveraging technology that impacts business processes and telling customers they must use a portal, there is a risk to that. It involves a lot of planning and scripting. We definitely take a lot more risks than a lot of our competitors.
One big risk was going to our largest customer and having to convince them to be the first to use our e-business portal. We were the first can maker to introduce this solution to our customers, so we truly got the ‘first mover advantage'.
About a year later, one of our competitors launched their web-based portal to our shared customer, who looked at that portal and said: "We don't want to use it, we like the Rexam portal and we don't want to introduce another solution into our environment. We'll operate with you manually and continue to use the Rexam portal for the other part of our business."
To show our appreciation, we modified our portal so that they could enter the other supplier's orders and then print out and fax the details over to that supplier. We could link our system to the other supplier electronically, but we don't want to make it that easy for our competitors to do business with our customers.
IA: In the last few months, several ERP disaster stories have been in the news, most recently at MFI and Avis. To what do you attribute the relatively smooth roll-out of SAP within Rexam?
PM: The one thing I would tell everybody is that it's never an issue with the software. SAP has proven products and a solid platform. Where companies fail is in two key areas. One is not addressing the magnitude of the business process change that an ERP system can bring to an organisation. You really have to focus on behavioural change. You're asking people to do things differently. If you don't have that buy-in from the top down, that's going to be very difficult. The second area really focuses around training. In all of our implementations, even at initial planning stages, we talked about training. We did some very detailed workshops so that everyone using the ERP system is fully aware of how to walk up to their system and do their job.
IA: What other projects do you have in the pipeline?
PM: We've just rolled out 400 BlackBerrys across the entire group — talk about what I consider an easy rollout! Doing that added tremendous value and that's
been great. They are now available to our key associates who travel a lot. We are also looking into using RFID [radio frequency identity] technology to signal goods issued and received, and to create automatic triggers for advance shipment notices. The key area is pallet tracking. One issue we have is getting the pallets back from the customer. [With cans costing less than a penny each, pallets are often worth more than the load they carry.] The customer does not view the pallets as a valuable item; they throw them into a corner or return them to one of our competitors. If we could stamp them with an RFID tag, we would know not only who has the cans but also who has the pallets, so we can work on getting them back. We also see potential for pallet tracking inside the warehouse, to eliminate the use of manual scanning guns.
But we haven't had any customer requirements for using RFID. Coca-Cola don't see the need to put RFID on the can right now – it's not really feasible as the technology does not work with aluminium. But in other areas of Rexam's business, the beauty business and plastic packaging business for example, we are already having conversations about taking RFID down to item-level tagging.