There are many reasons companies make the transition to SAP S/4HANA. One of the most common reasons is that users want to upgrade their ERP system, while minimizing the changes associated with that process that could affect day-to-day business.
ASUG recently sat down with Otto Baskin, director of information technology at Wellborn Cabinet, a family-owned residential cabinet company based in Ashland, Alabama. He recently oversaw the company’s transition from its old SAP R/3 ERP system to SAP S/4HANA. We talked about the reasons Wellborn Cabinet upgraded, why a new system was vital for the company, and how the company’s IT team overcame some of the roadblocks of their brownfield implementation.
Jim: You have been on SAP S/4HANA for less than six months. How has that experience been so far?
Otto: Overall it has been really good. However, it is better in some areas than in others. We use Variant Configuration (VC), as we sell configurable cabinets. It's one of the more complicated VC models around, very code-intensive. So while SAP S/4HANA is much faster in some areas than what was in our old ERP system, some areas, like VC, are not. VC is actually about the same speed as it used to be.
Jim: Out of curiosity, what was your past ERP platform that you used before SAP S/4HANA?
Otto: We were in a unique situation. We've been using SAP products since 2005. We were on SAP R/3, version 4.6C. It had been out of support for quite some time. We stayed on that platform for so long because it ran, it was working, and we had other places to invest our resources. So this move was quite a jump for us. It was a re-implementation to move from SAP R/3 to SAP S/4HANA.
Jim: What prompted you to make that jump then?
Otto: Several reasons. First, we were long overdue. We were on-premise with SAP R/3. The hardware was aging and out of support. The drives were failing, and we were having trouble sourcing them. We knew we had to move to the cloud, and we wanted to get out of the business of maintaining our own hardware.
The operating system that our old SAP R/3 system ran on wasn’t available in the cloud, due to the lack of support. We were running on an older database that was no longer available. We had to reevaluate our situation and pick a supported platform for our business. SAP S/4HANA was the obvious choice.
Jim: I’d love to hear about what you are using SAP S/4HANA to accomplish at Wellborn Cabinet. How are you leveraging the platform in your day-to-day operations?
Otto: We use all the basic modules that most people are familiar with: sales and distribution, procurement, inventory, production, costing, and finance. We also use HR and payroll, and that one’s a bit less common.
The system tells us what have we sold, what we need to make, how much money are we making, and how much money we are spending. It gives us all the information that’s required for our operations to run. So you can see why it’s important that we keep the system supported and running reliably.
Jim: What makes SAP S/4HANA such a great platform for the work that Wellborn Cabinet specifically does?
Otto: We crunch through a tremendous amount of data. We have something like 300,000 production orders every month. It’s all the pieces and parts that go into a cabinet assembly. We've got a Kanban process where we’ll make a lot of the components ahead of time, put them into inventory in the warehouse, and then pull out those components as needed to make a cabinet.
It’s a tremendous volume of data, so the SAP S/4HANA in-memory database platform is really helpful. When we moved from SAP R/3 to SAP S/4HANA, one of the biggest improvements that we saw in performance was around production order settlement. It used to take us a week to settle the orders for that month. Sometimes the order settlement was failing, and we would have to reprocess in the old system because it ran out of memory. Now with SAP S/4HANA, order settlement is completed in a matter of hours. It’s done on a Sunday, and by Monday morning, the business is ready to close the books. It’s great for processing volumes of data.
Jim: I noticed that you decided on a brownfield implementation. Why was that approach the best fit for your technology environment?
Otto: We needed to get back into support and have a reliable platform. We needed to have a modern operating system and a database, but at the same time, most of the business was quite comfortable with how the old system ran. There were few complaints, other than the performance issues I mentioned. People were generally happy with how the old system ran from a process perspective.
One of our project objectives was to minimize change where possible, which also happened to reduce the cost of the implementation. We weren’t going to go through the exercise of reengineering our whole business. We needed to update the hardware, the database, and the application to a supported platform without disrupting operations. We also were interested in performance improvement, but that was secondary. In many cases, we did achieve that performance objective, but we weren’t looking to change much.
Jim: What sort of roadblocks did you encounter during your implementation, and what did you do to overcome them?
Otto: First of all, we have a fairly complicated rebate program we used to handle in our old SAP R/3 system. That rebate agreement functionality was part of the simplification list and was repackaged. We were told we needed to start using SAP S/4HANA Condition Contract Management, which was new to us and our implementation partner. It was very different. When we got into that, midway through the project, we realized it wasn’t meeting our requirements. We weren’t able to settle those rebate agreements like we used to do. Working with our implementation partner, we decided to go a different route.
In the middle of the project, we ended up changing directions and went with a fully custom solution. Now, we are up and running with that new process. It's working seamlessly. It's different than what it used to be, but it meets all the business requirements and checks all the boxes. It gets the business users the information that they need.
We also had to navigate through some change. Some of the old transactions that our users are familiar with are gone. There's a new SAP Business Partner function that is, as far as customization and adding extension fields, entirely new. That was a big learning curve. Now, we are using Business Partners as originally intended and it's working fine. That change required a great deal of training and patience from the business users.
Jim: Did you have a timeline that you laid out to complete your implementation? And if so, did you complete it within that timeline?
Otto: Yes, and we did go live on time. It was through blood, sweat, and tears, but we made it on time.
Jim: What factors do you think led to completing it on that scheduled timeline?
Otto: Because we use payroll, it was very important to the business that we do the cutover at the end of a fiscal year so that tax reporting would be seamless. We would do all our 2019 tax reporting out of the old system, and 2020 would be out of the new system. It was a nice clean cut. We also used a third party for system maintenance because our old system was no longer supported by SAP. The contract was up at the end of the year, and we didn't want to renew it for another year. There also were downtime considerations, and the holidays were our best opportunity. There was a lot of pressure to go live on schedule.
Jim: What release are you currently on?
Otto: That's a good question. We’re on SAP S/4HANA 1809, but we are behind on support packs. At Wellborn Cabinet, IT exists to serve the business. We have to keep the lights on, of course; we have to keep the system running. We’ve applied support packs as required for the tax software legal updates. But it is difficult for a business our size to apply support packs and stay up to date just for the sake of staying up to date.
Jim: How did the business respond after go-live?
Otto: We had quite a few incidents in the beginning, but we did not miss a single shipment. We did not miss any customer commitments. Production did not stop. We continued to manufacture just as we had before, and we continued to pay our employees just as we had before. Now, there were plenty of things that we had to work on where a report wasn't right, or things weren't working quite as expected in some places. We did have to address those. We spent the first four months after go-live just addressing bugs that we didn’t catch during the upgrade.
Jim: One last question for you. What is the greatest impact that you have seen as a result of the implementation?
Otto: There are a couple of things. First, being on a modern platform, SAP S/4HANA gives us a great opportunity to go in a new direction with a lot of functionality. For example, we were able to implement SAP Cloud for Customer. We were able to get that going, and we couldn't do that before because our old system was so outdated. Now our sales team can record their leads and prospects, and manage their customers using a modern platform. That’s a big win.
We also have many custom web applications and web pages for both internal and external use. Some of those were written using Adobe Flash, which Adobe is ending support for in December 2020. Being on SAP S/4HANA, now we're able to look at SAP Fiori as a possible replacement for many of those web applications.
The greatest impact is that we are now on a truly modern platform from which we may now build and grow to meet the ever-changing needs of the business. We didn’t have that before.
Read about Baillie Lumber's SAP S/4HANA implementation journey.