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What it's like to implement SAP Leonardo

Pregis implemented Leonardo's IoT technology to improve its customer service and ensure that its machines run effectively, but it ran into some challenges along the way.

To keep its machines running around the clock at customer sites, Pregis Corp., a packaging manufacturer in Deerfield, Ill., turned to SAP Leonardo's IoT technology to provide the 24/7 digital support needed to monitor and analyze its machines. Leonardo offers fine monitoring and control via its IoT capabilities, and it worked out for Pregis, but not before the company faced the challenges of selecting the right hardware, implementing the platform on older systems, and changing the billing and sales process for customers.

SAP Leonardo's IoT tech helps Pregis -- which supplies the on-site machines that package customers' orders, in addition to making packaging products -- avoid machine downtime, leading to higher customer satisfaction, according to Jeff Mueller, vice president and CIO of Pregis.

"We make money when the machines are up, so we obviously want them to be working 24/7 -- not down waiting for a field service technician," he said.

To reach its goal, Pregis had to ensure that it was collecting the right data from the machines in a timely manner so it could make the best decisions for the business.

"Today, we're reactive, [but] we're moving toward preventive," Mueller said. "The next step will be looking for trends in the data to be proactive. We had mounds of data, but we didn't do anything with it and we didn't collect the right type of data. The collection was not timely, so we were data rich and decision poor."

Pregis also implemented SAP Connected Goods, a cloud-based IoT product, with the support of the SAP Analytics Cloud and SAP Leonardo Edge Services, a product that expands the capabilities of SAP Leonardo IoT Edge to help manage the sensor-equipped machines the company maintains in customers' distribution centers.

Now, equipped with tablets and special sensors, these machines can collect and transmit data that Pregis can use to keep the tools running nonstop, as well as to automate field service and ensure that a company's inventory is replenished in a timely manner.

These technologies also keep customers supplied with the raw materials they need to create packaging and enables technicians to address mechanical issues before they become problems, according to a case study.

Pregis did a proof of concept on Microsoft Azure cloud technology in November and December 2017, and in January and February 2018, it ran a pilot in Leonardo.

"We did a rapid, six-week setup, and that kind of was our shift onto the Leonardo platform," Mueller said.

The first wave of customers signed on in November.

"Right now, the number of customers is still low -- about 20," Mueller said. "But over Q1 2019, we'll ramp up to 100. And in Q2, we'll ramp up to 500-ish. At the end of the year, we want to have close to 2,000 systems on."

Facing challenges when implementing SAP Leonardo

During the implementation of SAP Leonardo, Pregis encountered some challenges on three fronts: technology, processes and -- most importantly -- people, Mueller said.

From a technological perspective, the pilot and the setup were fairly straightforward.

"We're more of an SAP-centric shop," Mueller said. "We moved to Leonardo and SAP for integration and to be more tightly coupled with our SAP back-office environment and our CRM environment. But we had some challenges because we were early adopters."

Initially, it was challenging selecting the right hardware and connecting with the hardware for Edge Services, Mueller said.

"We have Edge hardware in some distributors and we have Edge Services ... and we have Wi-Fi connection for that, as well," Mueller said. "So we had to work through the technical aspects of four different types of connections, as opposed to just turning it on and it works. But now, it's working."

One of the other technical challenges involved Pregis' legacy systems.

"A lot of our older model [machines] have lower-end tablets attached to them, and it really was [older] technology on our machines," he said. "So we had to go through and upgrade the tablets and the different hardware on those systems to be able to leverage Leonardo and the platform."

From a process perspective, Pregis went into its project with the goal of changing its revenue model to charge customers monthly fees for its services.

"We planned to work with our customers through that on the front end," Mueller said. "What happened was that we didn't get our commercial team ahead of the technical change."

Communication is key

The lesson Pregis learned was that it should have worked more closely with its customers to position the pricing change as beneficial.

"Then we would have changed our billing and our sales process to be able to use it as a selling [tool] on the front end, which we are doing now," Mueller said. "But now it's six months into the process that we're getting our arms around the commercial side of things."

In many cases, implementing SAP Leonardo is challenging because it's more of a change for organizations to go through.
Eric KimberlingCEO, Third Stage Consulting Group

The biggest lesson the company learned was that the business side of the company should have been involved in the project from the very beginning. The transformation started out as an IT and technically driven project, Mueller said. However, the company wasn't successful until the business team participated in a session with SAP to understand the goals of the project.

"We had the technology figured out," he said. "But from a people perspective, we really needed to get our business team to own it and to want it, as opposed to us saying, 'Hey, this is cool technology' from an IT perspective."

In many cases, implementing SAP Leonardo is challenging because it's more of a change for organizations to go through, said Eric Kimberling, CEO and founder of Third Stage Consulting Group in Denver.

"For example, looking at how [AI] or machine learning can help improve business processes is a pretty drastic change for a company that has been predicting and forecasting demand on the same spreadsheet for the last 20 years," he said.

However, this is not so much the case on the technical side because even though the technology is evolving, it is more stable than the people and process sides.

"For example, if we talk about machine learning and [AI] in the demand forecasting example, the technology typically works," Kimberling said.

The difficulty for organizations is figuring out how to get the business processes and the people aligned with the new technology.

"Change is always hard on organizations, especially when you're talking about some of the technologies with Leonardo because it's just so much change," he said.

Other companies facing different challenges

An international telecommunications company based in Brussels, Proximus Group was struggling with a lack of visibility into the copper and fiber reels it used to build and modernize its extensive network infrastructure.

After the reels had been shipped to contractors and subcontractors at more than 7,000 sites, the logistics department didn't have accurate information about where the reels were located or how much cable had been used, according to Hans Schurmans, director of logistics operations and transformation at Proximus. In addition, contractors often returned reels late, resulting in higher inventory costs, late fines and potential project delays.

To solve these problems, Proximus worked with SAP and an implementation partner, Ordina. Together, they developed a sensor-based smart application using the Proximus IoT network to efficiently track these cable reels from the warehouse to the installation sites.

SAP Leonardo IoT technology is a central part of this application, which is integrated with Proximus' back-end systems, giving the company visibility into its decentralized stock, Schurmans said. The project, which began in early 2018, went live in the second half of that year.

The implementation process started with discovery workshops held by Ordina that were attended by various stakeholders, including representatives from the business side and the network department, as they were the ones who consumed the cables in the network, said Bart Karel Degroote, IT service and application manager at Proximus.

"It's not a manager somewhere at a desk who invented the idea -- the basic idea came from the field," Schurmans said. "So you have the buy-in from the user from the start. So then it's easier for your change management."

Although user adoption wasn't an issue because the idea for the application came from the field, there were challenges with the technology.

"There were challenges because this is quite a new technology," Degroote said. "Leonardo is a kind of suite that has different technologies, different modules and different possibilities to implement. And we had to make the right decisions about which solutions to implement. So we tried out all kinds of things and we selected SAP HANA database for the back-end data."

Regarding integration, Degroote said some of the plugins were already available, but that the company had to fine-tune others with the help of SAP's product development team to make them work.

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