The Choice: Best of Breed or Simply the Best?

Eimskip hf, Iceland’s largest transportation and logistic service provider, found itself in an unfortunate situation with its IT systems: It had been using a “best-of-breed” strategy but found itself with IT costs running well above the average for the industry, which generally has very small margins. Eimskip is a subsidiary of the Iceland Steamship Company Ltd. Eimskip Holding, which was founded in 1914. The company was the first shipping line in Iceland but through the years has evolved into a full-range transportation and logistics service provider. It is also involved in investments and seafood. Eimskip operates 22 offices and employs 1,200 people, one-third of whom work outside Iceland at offices in the UK, Germany, Scandinavia, Canada and the US.
Eimskip decided to scrap its “best-of-breed” approach and move to a system landscape based largely on a single standard package from one vendor. The company chose SAP and has concluded a contract for the mySAP Business Suite, the SAP Logistic Service Provider solution, and the SAP NetWeaver integration and application platform. Nyherji, one of Iceland’s leading IT service providers (whose name means “new warrior” in Icelandic), is performing the implementation in partnership with Danish firm R5 A/S.
According to Árni Rafn Jónsson, Vice President of IT for Eimskip, the SAP solutions were selected following an extensive assessment of business solutions from various manufacturers, including Microsoft and Oracle. “The SAP solution was the most ideal for supporting all of the company’s key activities,” he says. “Nyherji, SAP Denmark, and R5 A/S all have knowledge of the transport industry. Together with their expertise in large-scale software projects, this was a decisive factor in Eimskip’s choice.”
“New warrior” Nyherji initially offered a mySAP All-in-One human resources (HR) mid-market solution, later expanding to the current broader implementation. This represented a major strategic win for both Nyherji and SAP, since Eimskip had been the only JD Edwards customer in Iceland. JD Edwards has since been acquired by PeopleSoft, which is now the subject of a takeover bid by Oracle, leaving Edwards and PeopleSoft customers in a somewhat shaky situation.
As a clincher for the SAP deal, Jónsson mentions the in-depth functionality of the standard mySAP Business Suite, which covers almost 70 percent of the company’s current processes. He also points to the focus and commitment from SAP to the logistic service provider industry. What’s more, Eimskip was impressed by the SAP project methodology – which included the SAP Business Blueprint and the ASAP accelerated implementation approach – and the cooperation shown by all the partners.

Phased implementation for rapid results

The SAP solution will cover the entire order-to-cash (O2C) process for Eimskip’s branches worldwide. “One of our chief objectives is to achieve considerable cost-cutting from streamlining our operations, a process in which SAP will play a key role,” says Jónsson. He notes that, by combining Eimskip’s main IT needs into one solution, SAP will substantially simplify the company’s operations, which will in turn deliver extensive cost-cutting.
The SAP enterprise resource planning (ERP) and logistics package, which will serve 400 users, will replace several legacy systems and, in the long run, support almost all processes within the company. As a result, systems that become redundant will gradually be closed down. Beyond simplifying Eimskip’s range of systems, the SAP package will facilitate innovation in response to market developments or changes, Jónsson adds.
Kristján Jóhannsson, General Manager of IT solutions at Nyherji, says that the first phase of the project is expected to take five months, and that, all told, it is the largest software implementation project for an Icelandic transportation company in recent years. “The software will be installed in a number of stages and will therefore start to deliver results for the company quickly,” he explains. “We place a great deal of emphasis on using the latest technology in business solutions developed by SAP for simple user access and effective management information.”
The project began in September 2004, with implementation expected to start in Iceland and Aarhus in Denmark in February 2005. The plan is to add all the remaining Eimskip offices before the summer of 2005.

Covering the full order and payment cycle

The SAP Order-to-Cash solution encompasses the entire process from order entry to collecting revenue for the sale. It includes all paperwork, invoicing, and links to accounting and warehousing systems.
The Eimskip transportation system provides the logistics information needed during the lifetime of a shipment, tracking it from the time it is booked for transport, through being received, stored, put into a container, loaded on board a ship, unloaded, stored, trucked, and delivered. The SAP Enterprise Portal will be the main interface to the system. In addition, the Eimskip BasePort website allows customers to connect to the company database, giving them access to all information regarding their shipments and self service.

The implementation of the SAP Logistic Service Provider solution will lead to the development of new and more efficient business processes, says Jónsson, since it is tailored to the needs of transport and logistics companies. The end result will be improved services and increased profitability for shareholders.