Terumo, a $6 billion medical device company headquartered in Tokyo, announced that its subsidiary, Terumo Americas Holding (TAH), underwent a digital transformation by implementing SAP S/4HANA and several other SAP solutions. Forced to temporarily pull the plug due to COVID-19, the Americas business had a successful go-live in July of 2020.
Although the digital transformation program is a global project, ASUG sat down with the three individuals responsible for the TAH program, which employs more than 8,000 people throughout locations in the U.S., Latin America, and Canada. The goal, in addition to simplifying processes and modernizing the infrastructure, was to ultimately have a single instance of an ERP that can help gain insights and drive business in the age of disruption.
In part one of this two-part series, Kalyan Balsubramanian, CIO for all the Americas, Sung Yang, VP and digital transformation project executive, and Rick Larrieu, VP of global IT and infrastructure, discussed the scope of the project, building the business case, navigating the implementation process, and going live. In part two, we’ll go into more detail about the benefits of moving to SAP S/4HANA, executing on a well-thought-out change management strategy, and doing so during a pandemic.
ASUG: Can you talk about Terumo’s digital transformation project from a high level and explain the scope of the project?
Balsubramanian: This digital transformation is the core need to support our growth for the future in terms of infrastructure, application, security, data standardization, and in bringing us up to par with what the industry has been doing. From an overall scope perspective, this program is comprehensive and includes transforming various processes as well as the enablement of various technologies, including SAP S/4HANA, SAP Master Data Governance, SAP Ariba, SAP Integrated Business Planning for Supply Chain, SAP Extended Warehouse Management, SAP SuccessFactors, and SAP Concur. Everything runs on SAP HANA Enterprise Cloud.
ASUG: What was the TAH landscape before moving to SAP S/4HANA? What were you looking to achieve with an upgrade to SAP S/4HANA?
Balsubramanian: Terumo America has been a business-unit-led organization, which means that most of our business units have been free to go with their own landscape of obligation. We’ve predominantly had our legacy ERP systems on two versions of J.D. Edwards. There are some common applications across the board, but by and large, it is a disparate set of technology platforms and applications.
We had a unification and standardization goal to bring all of Terumo Americas under one single instance of SAP with a common set of enterprise applications enabled by the SAP suite of solutions.
ASUG: Is the goal to use TAH digital transformation program as the test case for all other programs globally?
Yang: Yes and no. Each region is responsible for their own implementation. However, there is a goal for an entire global consolidation to SAP maybe three or fours years down the road.
ASUG: What were the most compelling factors within your SAP S/4HANA business case that helped you gain buy-in to the executive project?
Yang: As we've mentioned, our goal was to standardize all the processes that we have, as well as put all the business units that are on a disparate ERP system into one single instance of SAP. So, we led with that.
Larrieu: Another part that led to buy-in was the fact that our application portfolio was aging and deficient, and we needed to bring it up to speed in order to actually meet the needs of the company from a growth perspective. We're a company that has been growing double digits year after year for the past 20 years, and as such, the infrastructure that we had in place from a system perspective was bursting at the seams. We needed to revamp all that, and it was a prime opportunity to do two things. One was to harmonize the processes to facilitate a future share service of activities. The second was the opportunity to break out the best practices of each of the business units and go after best industry practices. We also needed to get ourselves into a better position in terms of compliance. We're a regulated industry, and we need to maintain compliance with all kinds of regulatory requirements related to our life science industry. Our legacy system was not equipped to do that.
Balsubramanian: To be clear, this was an infrastructure project. We really looked at the qualitative aspects and benefits of what we are trying to do. We knew the quantitative aspect would come along on its own. One of the bigger things that we also wanted to establish was to enable that visibility that we can provide to our organization and businesses across the various continents.
ASUG: Why did you decide on running the software on SAP HANA Enterprise Cloud?
Larrieu: There were several reasons.
First, SAP is the most used and best-of-breed software package in the life sciences industry. Second, at the end of the day, given the size of the organization and the size of the enterprise, we were faced with only two choices: either the Oracle route, which has a solution that is aging and is not as nimble as SAP, or SAP. In addition to that, we were very intrigued with the SAP S/4HANA platform. It was brand new and introduced a lot of functionality that applied to us. Lastly, we needed a true private cloud to maintain compliance, and SAP HANA Enterprise Cloud provided us that.
Balsubramanian: Our IT strategy is a cloud-first strategy. And SAP HANA Enterprise Cloud fits in very well with our overall strategy to move our infrastructure to the cloud. As Rick pointed out from a compliance perspective, the best way for us to embark on that journey, especially with an SAP landscape, was to go to the SAP HANA Enterprise Cloud environment.
Yang: It’s important to note also that our sister entities—Terumo Asia Pacific and Terumo Europe—were on older SAP systems and the organization as a whole felt that SAP HANA Enterprise Cloud was the best choice.
ASUG: What types of roadblocks or setbacks did you face during your company’s SAP S/4HANA migration? How did you address them?
Larrieu: One of the biggest challenges we faced was to go to the cloud in a validated environment. We could not go to the public cloud like any other company. We had to maintain a private cloud in order to maintain compliance, as well as our validation requirements.
Balsubramanian: We have seven different quality systems that we need to be compliant within the Terumo ecosystem, and that was challenging to sort out. We had to work diligently to make sure the compliance needs of the seven different quality systems were consistent with the way SAP HANA Enterprise Cloud quality system monitors the protocols. We needed to bring that in alignment from a timeline perspective, from a documentation perspective, and from an electronic signature perspective. We had to get all those practical aspects aligned and ensure that this has been accepted within our organizations.
Larrieu: Quite frankly, at the time, SAP HANA Enterprise Cloud was one of the few to offer the ability to do so because it can leverage the compliant data centers of Microsoft Azure.
ASUG: How long did the project take from start to go-live?
Yang: We started in April of 2018. We originally had a vision of going live on April 1, 2020, but because of COVID-19 and the mandatory lockdown in New Jersey, we switched our go-live date to July 2020. The entire project took a little more than two years.
Balsubramanian: Keep in mind, this is a five-year program. The first leg of this program was creating a global design and solution and deploying it to the biggest entity that we have, which is Terumo Americas. The rest of the journey is to take the solution and the design and deploy it to other entities. So, I think this is the five-year journey and we are well on our way into the next big part. The next entity to go live will be our neurovascular division, which has five locations—three in Europe, one in California, and a major manufacturing facility in Costa Rica.
Yang: Our secret sauce was that we did not cheapen the project. We hired early on because we had 20 years of working and consulting experience to form the CoE team from the start. We hired close to 20 individuals who are experts in the field so they can help co-develop. I know a lot of companies come in at the back end of the project to build a CoE team, but we had ours ready to go from the very start. We also—myself, Kalyan, and Rick—have shielded the team from a lot of the politics that goes around in the organization so that they can concentrate on working on the program.
Larrieu: We had to shift the paradigm. We had to take it from being an IT SAP project to a business transformation initiative. We had to promote the project along those lines. At the end of the day, it was about promoting best practices, new processes, new compliance and conformance regulations, and doing it through a robust change management program.
Keep an eye out for part two of this series in next week’s First Five newsletter. ASUG members can watch six episodes of ASUG Express: Achieving Success with SAP S/4HANA Virtual Boot Camp on demand.