Making a big bang with ERP
Manufacturing conglomerate RAK Ceramics has completed a complex roll out of SAP ERP in just eight months, bringing new levels of transparency to operations and helping the company to position for sustainable business growth in the future
RAK Ceramics is one of the manufacturing success stories of the UAE. The $1bn conglomerate is the largest manufacturer of ceramic tiles in the world, supplying over 117 million square meters of tile per year to 160 countries. Established in 1991, RAK Ceramics has expanded to multiple plants and showrooms in the UAE, with 12,000 employees worldwide and manufacturing operations in six countries. However, Despite having grown to become a billion-dollar-plus business, the RAK Ceramics group had very little in the way of information technology systems to manage its businesses. The group had a small deployment of some Oracle applications, dating back to 1996, but in the main it was reliant on Excel sheets and paper, with business processes de-centralised across units.
With the growth and scale of the company, the need for a proper ERP deployment had started to be felt around five years ago, explained Dinesh Mohan, CIO of RAK Ceramics. Mohan joined the company in 2012, as general manager for SAP Projects, as part of the drive toward putting those systems in place.
“It was about five to six years back that the company started feeling the pinch, and the need for a full-blown ERP,” he said. “The need was felt primarily because of a few things — the operations had become sprawling, internationally spread, so we needed to start with a system which could be quickly rolled out to all our locations, and could provide a consolidated view to the management. That was the key need.”
There were various discussions going on among different stakeholders, Mohan said, and once the company began studying a potential deployment it became apparent that there were many areas where an ERP could bring benefits in terms of improving transparency, efficiency and productivity and supporting growth.
The decision was made to go ahead with a major ERP roll out in late 2011, and in February 2012, SAP was signed as the vendor of choice. Rather than a gradual deployment of one or two modules at a time, RAK Ceramics elected to go with a big bang approach, with the roll out of SAP to cover 13 UAE manufacturing plants, 15 warehouses, 6 showrooms and various administrative offices in the Emirates. The comprehensive ERP suite would serve a user base of some 650 people across the company. Along with the broad scope of the project, RAK Ceramics also set an aggressive time scale of just eight months, making it one of the most complex and large scale SAP projects in the region to date.
Mohan explained the reason for taking the big bang approach: “My own experience is that ERPs are mainly an exercise in change management, and normally they are the first step in change management — after you’ve done this, then you do HR, and other parts, and the shorter the pain, the better it is. I am very clear, projects must be done on a big bang approach because of this.
“The second reason is the devil always lies in the place where processes flow across functions, where there are touch points across departments. Unless you do a big bang approach, you always run into a lot of rework, which is costly and time consuming.”
With such ambitious targets, RAK Ceramics decided to implement a three-tier management structure to deliver the project. Khaled Abdulla Yousef, executive director and board member of RAK Ceramics, headed up the top level steering committee, which also included all the other C-level executives. The core team under that pulled together the second in commands from each department, and was managed by Mohan and the Deputy CFO to manage the business side of the project.
The third tier consisted of support teams, to tackle areas such as training, master data management, and change management in specific areas.
The management buy-in was also extended to areas of the project that were identified as major challenges. Mohan explained: “We foresaw major risks and need for change in three areas. Number one was costing. Costing was not on the computers before, it was done using Excel sheets, the processes were not in place and there was no one model of costing that was followed everywhere. The CFO was put as the change manager for this.
“The second area where we thought a lot of change would come was the finished goods inventory management and dispatch. The finished goods inventory owner in our hierarchy is the chief marketing officer, he was the change manager for that.
“Similarly, the third area was production. The production areas were seeing computers for the first time. No-one had used computers in the production area, neither executives nor workers, so that was a big change. The COO was put in charge of that.”
From the IT side, Mohan faced an issue in the fact that the IT team had no SAP skills. With no time to train the team from scratch, it was decided to outsource to SAP’s services, and for RAK Ceramics team to build up their skills as the project progressed.