Is your ERP ready for the new normal?
Enterprise resource planning (ERP) systems are the central nervous systems of most businesses, helping companies with financial management, supply chain management, asset tracking, HR and more. One of the biggest ERP providers is SAP, and Illumiti, a consulting company and system integrator that mostly focuses on SAP software, has helped many majors and mid-tiers implement the platform.
Lorraine Howell, Illumiti’s vice-president of Innovation and Continuous Improvement spoke with CMJ in April about how miners can use their ERPs to cope with some of the challenges that have come with the COVID-19 pandemic, and over the longer-term, to facilitate their digital transformation plans. Howell also speaks about some of the advantages of S/4HANA, SAP’s new platform introduced in 2015.
Canadian Mining Journal: What are some of the issues that Illumiti has seen affecting mining customers so far during the pandemic?
Lorraine Howell: Different countries and regions have handled the pandemic differently – some are trying to keep the lights on and to keep people at work; others are taking more drastic measures and have shut down mining activities.
Most of our customers are trying to keep the lights on, but they have certain constraints around travel – for example, we have fly-in mine sites in remote places like Canada’s North. With travel now restricted, they’ve had to lengthen the time that people stay on site so as to minimize their interaction with other people, then have them offsite for a longer period of time so they can self-isolate. So, travel to and from mines has been restricted, even in places where it’s not remote. In those cases, they’ve had to reduce their crew sizes, so productivity has declined as well.
At corporate offices, people are finding working from home to be quite disruptive, so that has been an adjustment.
On a broader level, there’s a lot of supply chain insecurity – not knowing whether they’re going to get all the spare parts they need in order to operate their mines because some of their suppliers may not be seen as essential services.
CMJ: How are miners addressing some of these issues using their ERP platforms?
LH: Companies are having specific people, process and technology issues because of the pandemic. The people issues are people that aren’t coping well with managing home and business in the same environment, or people that are actually getting sick. So, we’re trying to help our clients by just providing them bodies, or helping them with automation to address the fact that they may not have the same people capacity they had before.
Before the pandemic, we found that a lot of organizations don’t really use all of the capabilities in their ERP systems. Now, it’s even more important for them to start leveraging those capabilities to cope with all the issues that are coming up around people and processes.
For example, a lot of our clients are still issuing physical cheques to their vendors. That’s a problem because you’ve got to touch the paper and put them into envelopes and mail them out, and the recipient might have virus concerns. Because of this, we’re offering companies a quick and easy way to move to EFT using their current ERP.
The other concern is the supply chain; people are concerned if their vendors are going to be able to continue supplying them. And what’s going to happen when suddenly everybody starts working again? Are we going to be oversupplied because we’ve let it slip for three, four, five weeks and suddenly we go back into business and we’ve got these minimum replenishment measurements on our inventory?
We’re suggesting to have a look at your materials requirement planning parameters within your ERP before we get to the next phase of this pandemic and make sure that you’ve set your reorder points to the right level so you don’t get overwhelmed by supplies once things get back into place.
Then there are short-term cost initiatives and ways of tracking expenses specifically related to COVID-19. Mines can also utilize the tools in SAP to better track the health of their employees and to record where they are in dealing with the virus.
Probably the biggest thing is visibility to metrics (business measures and key performance indicators) that are essential to maintain their business continuity. These would be metrics they’ve been tracking over time. A lot of our customers download data into Excel and calculate those metrics in Excel spreadsheets instead of leveraging their ERP. But if they are running S/4HANA, they can see all their data in real time and build new metrics that will help them check if their vendors are in good shape and if they are supplying on time, and also look at the health of their own customers.
CMJ: So there are ways companies can make better use of their ERP platforms during the pandemic. What sort of opportunities should they be looking at that will still be useful after the pandemic subsides?
LH: With our customers that have moved to S/4HANA, a lot of them didn’t really embrace the new capabilities of the platform, such as embedded analytics and KPIs, they really just wanted to continue business as usual. But I think the pandemic has disrupted the apple cart – now it’s not good enough to just keep the lights on, in fact the lights are going to go off if you don’t do something. Getting visibility to your data, deriving value from your data, being able to measure the right KPIs or business measures to make decisions and to act on those decisions immediately, are going to become more important.
Whether they’re on SAP ECC (an older, on-premise version of SAP) or SAP S/4HANA, one of the biggest opportunities to my mind would be automation.
There are really cool robotic process automation tools out there that work with SAP and some of them are even provided through the SAP platform, that enable users to record activities and then have the system generate a script that can be repeated. Then, if you integrate the intelligent machine learning capabilities into that robotic process automation, you get what we call intelligent RPA, which can actually learn from the way you do something and suggest ways of doing it better. You don’t necessarily have to upgrade to S/4HANA to leverage these tools.
Everybody’s afraid that machines and robots are going to take over our work, but that’s not the objective. The objective would be to automate manual and repetitive tasks that people are now doing, and to get people – specifically where they have limited capacity – to focus on more important things. So, the capacity of your business doesn’t necessarily have to deteriorate because your people capacity has. In fact, you can keep going and have your people focus on the critical parts of your business.
CMJ: Is that a tough sell for an industry where you still have companies that are sending physical cheques out?
LH: I think the pandemic is forcing people to adopt technology where they would have been reluctant to before because they couldn’t create a business case for it. When you’re in a situation like we’re in today where people are saying, ‘Don’t send us a cheque because we don’t want the risk of catching this virus,’ you are forced into an adoption process. And people are also realizing that their workforce is changing – the older generation is retiring, and the new generation (millennials and Gen Z) that are looking for work, are not going to want to do some manual, repetitive job. If your competitor is automating and you’re not, you’re going to be left behind.
I think that miners are going to start adopting technology more and the pandemic is actually going to help them from that perspective because it’s going to be a necessity as opposed to a nice-to-have.
CMJ: You mentioned there are longer-term opportunities your ERP can help unlock, including automation. Are there other, similar opportunities companies should be looking at?
LH: Yes, automation is the easiest one because it really addresses capacity issues directly. But one of the obvious ones is embedded analytics. Companies that are running ECC today still struggle with analytics. In a traditional SAP environment, you can run list reports pretty easily, but to measure your performance in a particular area, you would typically have to download to Excel and then do calculations in Excel, or get a programmer to build that calculation into a program that would then produce a metric that you could then use to measure your business and then act on.
With new technology and with the SAP S/4HANA system, all of your transactional data is immediately available. Some of the essential KPIs that you need – for example, inventory turnover, actual cash flow, supplier evaluation, etc. – are provided out of the box, and can be made readily available on a launchpad or dashboard. But you can also leverage tools within S/4 to generate those KPIs that are not provided through a drag-and-drop kind of environment. Then those KPIs can be displayed on the launchpad so that I can see that my inventory turnover has deteriorated over the last day or two or my cash flow has become critical, and can immediately from that insight act within the system to remedy the situation.
We call it “insight to action” – where as you drill into the problem, you can click on a transaction that will enable you to communicate with your inventory manager and share a screenshot of what you’re looking at. And from the inventory manager’s side, he or she could probably see the issue right away and then easily address it by resetting the order point, for example. So those embedded analytics and insight-to-action capabilities can address the pandemic KPIs you need today, and any kind of business measures that you need to keep your business efficient and competitive longer term.
CMJ: You spoke a little bit about the capabilities of ERP systems in general and of SAP and S/4HANA. What are the differences with S/4HANA– how is it better, what’s new?
LH: The most important thing I would highlight is embedded analytics and the insight to action in S/4HANA that I described above – the ability to drill down and follow some process to solve a problem directly from the data. S/4HANA sits on an in-memory database that gives you access in real time to your data instead of having to bring that data into a data warehouse and then have to report on the data on a lagged basis. This is the one fundamental difference in S/4HANA. The other thing that comes with that is the built-in KPIs. SAP has built in a whole bunch of KPIs – things like inventory turnover, days sales outstanding (DSOs), contract renewals – that in the past, you would have had to run six reports or download to Excel to get.
Mining customers also need to think about what are the KPIs that are most valuable to them. Is SAP delivering them out of the box? Probably not always. But are they easy to create yourself?
The second major benefit of S/4HANA is the user experience – having a launchpad that presents tiles that enable you to see these business measures and be able to drill down from those business measures. When you come into the office in the morning and log into SAP, you have a dashboard of all these tiles that give you exactly the information you need to know to be able to solve any problems in your business. This new user interface has these KPIs directly available and is a one-place environment where you can also link into commodity prices from a website, for example. You can integrate non-SAP systems into that user experience as well.
Beyond that, in 2019, SAP released a number of machine learning and prediction algorithms and capabilities within the ERP itself. These give people the ability to predict what goods receipts are going to come through by month’s end, which sales orders are going to be invoiced and paid by the end of month based on the historical trend, etc. There are so many things people wouldn’t have even thought of that are now available.
CMJ: SAP will end its maintenance of pre-HANA platforms in 2027 – what does that mean for miners?
LH: You need to plan your migration to SAP S/4HANA so you can get it done before then, although SAP may change the date (they already did from 2025). You don’t want to get into a position where you lose your maintenance relationship with SAP because once that happens there are penalties you’ll have to pay if you want to do the migration at a later stage.
But you need to have a real reason for going to S/4 – it shouldn’t just be because you’re afraid of non-compliance. I strongly believe that every mining company, if they sat down and analyzed their business today and where they would like to see their business in five, 10 years, digital transformation would be part of their long-term goal. Your current ERP is not going to miraculously support digital transformation; S/4 is moving you from an old platform to a new platform that can enable you to use new technologies.