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Royal Mail's SAP project delivers ROI

The UK Government agency Royal Mail successfully implemented SAP across a massive and decentralized organization. Now they have a success story, and are achieving ROI.

LONDON -- When the UK's Royal Mail Group first implemented SAP, it was, in the words of one Brit who was there,...

a bit of a disaster.

"We tried to do it our way," explained Lee Harris, Royal Mail ERP program manager. "We didn't listen to anyone, and we thought we knew how to get what we needed.''

But that was back in 1996 -- and this is now, when the Royal Mail's ERP project, one of the largest in UK history, is being hailed as a near perfect example of how to centralize business processes, achieve high availability, and reduce inventories along with costs to suppliers.

The first time around, the press had a field day with the Royal Mail; now Harris is hosting IT press conferences to tell a success story.

This month Harris presented a case study to 200 of his peers at the Conference Europe, held at the Commonwealth Institute.

For all those who has ever suffered a go-live headache, just hearing the Royal Mail's facts and figures should be enough to make them reach for a bottle of aspirin.

The UK Government agency delivers letters and parcels to 27 million UK addresses, and operates 17,500 retail offices. They had 7,000 users; 8,500 accounting offices; 40,000 vendors; 250,000 business customers; and, finally, 1.5 million annual invoices.

The size of their problems, having to do with de-centralized business processes, were staggering: 10 significant legacy systems, including Oracle, SAP, and Walker Financials, and dozens of paper processes at multiple locations with no integration to financials. Profits were slipping. Financial performance figures couldn't be accessed without months of waiting.

This time, Royal Mail knew what it needed.

"Our goal was a single SAP ERP system, providing one common chart of accounts across all business operations, and common finance processes -- and these would be e-enabled wherever possible," Harris said.

In short, Harris said, "We wanted to get a grip on the numbers."

Key factors in Royal Mail's success included making "early, major decisions," Harris said. Those included the selection of an implementation partner, Deloitte Consulting, and the creation of a "benefits board," a group that governed the project, and chased specific benefit goals, and were rewarded -- or not -- as a result.

Running SAP R/3, version 4.6c, Royal Mail needed a Real Estate (RE) module to address the costs of running their satellite retail outlets, and there were no other UK versions of the module 18 months ago, when Royal Mail built a prototype.

Royal Mail also implemented Inventory Management (IM); Plant Maintenance (PM); Asset Management (AM); Financial Accounting (FI).

Was the entire trip a smooth ride? No, Harris said. "We found gaps in the initial solution. Our performance management loop was not closed by ERP alone. And the RE prototyping didn't expose all the integration problems we encountered later."

In response, Royal Mail initiated an additional project to deliver business warehouse reporting flexibility (BW2.1c) and strategic enterprise management (SEM 3.0)

The entire project, from blueprint to the SEM implementation, was delivered on time -- within two-and-a-half years.

What they got, Harris said, exceeded expectations. Royal Mail cut supplier prices, inventory, and jobs. Actual product profitability numbers were reported on the 15th of each month, a process that previously occurred only four times annually. All of Royal Mail's regulatory and statutory accounts were produced from a single source.

In short, Royal Mail has begun achieving ROI at a rate they had hoped, and the benefits are growing.

Despite all that good news, Harris said that end user adoption remains a problem. "We never did get them to feel as if they owned this project," he said. "We found that very difficult."

Looking back, Harris said the creations of the "benefits board" and the right implementation partner defined the project's success.

"It's not over," Harris said. "We have to sustain the gains."


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To provide your feedback on this article, contact Ellen O'Brien.

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