Mölnlycke Health Care and Axfood demonstrate divergent ERP strategies

Two Swedish firms, Mölnlycke Health Care and Axfood, demonstrate divergent ERP strategies - one standardised, one customised

Once so rigid, enterprise resource planning (ERP) systems are slowly changing form. But the implementation of something of the order of an SAP system is still a very big project, even though it can be handled in different ways.

ERP systems often arouse feelings of both love and hate - most big organisations rely on them, at the same time as many people dislike them due to their inflexibility, cost and often flawed user interfaces. ERP systems will probably stay with us in some form for a long time, but change is coming. The systems are already much more flexible and configurable than they used to be, and we have seen a growth in industry specific ERP systems and the availability of niche functionality.

ERP will probably continue to "deconstruct" to become a dispersed environment of loosely coupled applications that run mostly in the cloud, are ubiquitously mobile, and have built-in analytics for making better decisions, according to Computer Weekly publisher TechTarget's recent overview of ERP trends and technologies.

SAP user Roderik Mooren, CIO of Swedish medical devices company Mölnlycke Health Care, thinks there is a lot of truth in this prediction - except for one thing.

“I don’t personally believe that ERP systems for large companies will move into the cloud. It’s too close to the core of what you do, and so connected to business processes, so the ERP system is probably one of the last things I would move into the cloud,” says Mooren.

But he thinks it’s likely  there will be cloud services connected to the ERP system, such as web shops, web portals, custom reporting and government reporting.

In  2000, Mölnlycke Health Care acquired a new SAP ERP system, and since that time they have been rolling it out around the globe to different subsidiaries and new acquisitions.

“I think we never will be finished, since the company continues to expand and go into new countries. But we have a stable platform that we operate now,” says Mooren.

Today Mölnlycke Health Care has 7,400 employees in 90 countries. But only around 100 people work in the IT department, of whom half are located in the headquarters in Sweden and half are spread around the globe.

“We have outsourced quite heavily. The programming, configuration, maintenance, hosting and support of the SAP system is outsourced to Capgemini, and they operate it from two datacentres in the Netherlands. But it’s staffed mostly by people from India,” says Mooren.

Mölnlycke Health Care also has a 35-people in-house team of SAP specialists who work with the interface to the business organisation and demand management, and who keep the SAP solution together.

“Since we are growing very much and have to support new business initiatives with IT systems, we have decided to standardise all the back-office processes on the ERP system and to very actively roll out the ERP system when we do acquisitions, as a part of controlling the business,” says Mooren.

He believe this strategy gives the company the most cost-efficient set-up, the best control over the business and the least risk.

“We use SAP extremely widely, the whole suite, all integrated on the same platform, because that gives us a lot of benefits. Of course we have other applications as well, for business intelligence, social media, web and so on, but SAP is one of the big backbones that we standardise on.”

The ERP system is probably one of the last things I would move into the cloud

Roderik Mooren, CIO, Mölnlycke Health Care

Mölnlycke Health Care has tried to limit the customisation of SAP, since that makes it easier to maintain and upgrade the system, and to train and support users.

“From a business perspective limited customisation also makes it a lot easier to control the business processes and to be effective,” says Mooren.

The biggest challenge during Mölnlycke Health Care’s long ERP implementation has been to successfully offshore a lot of the work, reducing the costs by 50%, according to Mooren.

“We were one of the first companies in Scandinavia to do this, so we had to learn it the hard way. We first looked at the offshore staff as the back-office staff, with the front-office staff in Europe, but that proved not to be the right way. Now we have a one team approach; everyone works together, and then we gradually shift work over to India,” says Mooren.

Axfood customizes SAP

Grocery retail chain Axfood, with nearly 8,300 employees, is another Swedish company that has thrown out old systems and implemented SAP throughout the whole company, a journey that took five years and required an investment of £66m. 

But Axfood has chosen to customise the new ERP system much more heavily than Mölnlycke Health Care, and has built a number of new solutions in SAP. One of them is a portal for service providers, which lets Axfood make invoices match contracts.

It's not without problems to incorporate this much code into SAP. But most of the time it works just fine

Glenny Särnström, manager of indirect services, Axfood.

“At the moment four service providers of waste management are using the portal, and we are working on connecting more, since the problem with invoices not matching contracts is the same in a number of areas,” says Glenny Särnström, manager of indirect services at Axfood.

So far, the new portal has meant that Axfood’s costs for waste management have been cut by 30%–40%, at the same time sparing the environment since the number of transports has gone down 50%, according to Särnström.

“There are standard portals like ours for products, but not for services. Everybody has the same problem as we had, but to my knowledge we are the first to create this kind of solution. And that was the biggest challenge during the project - we had no role model to look at,” says Särnström.

Axfood hired consulting firm Claremont to build the portal in SAP, a project that took six months and required an investment of £330,000. The further development and maintenance of the portal is handled solely by Axfood.

“It's not without problems to incorporate this much code into SAP. Sometimes we get interesting surprises, like web browser problems. But most of the time it works just fine,” says Särnström.

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