“Would you tell me, please, which way I ought to go from here?” a lost Alice asks the Cheshire Cat in Lewis Carroll’s 1865 novel Alice’s Adventures in Wonderland. “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where,” said Alice. “Then it doesn’t matter which way you go,” was the reply.
Until recently, Pentagon Chemicals was not quite sure exactly where it was when it received its monthly reports. It was difficult to attain visibility on costs, which were generated by disparate stand-alone systems and spreadsheets at the end of each month. And in order for a company to compete, explains Nicholas Lindop, director of Pentagon Chemicals, it has to know where it is at any given time. “If it takes a lot of time and effort at the end of every month to provide that information, you don’t know where you are – and so you can’t really reach where you want to go.”
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In October 2008, Pentagon was honored with the Manufacturer Award 2008 for the Best SME in recognition of its impressive business transformation. This new award category identifies key organizations within the SME sector in the United Kingdom that have delivered remarkable performance. Held in London, the award ceremony was attended by more than 400 senior figures from across all sectors of the manufacturing industry in the United Kingdom.
However, unlike Alice, Pentagon Chemicals does know where it wants to go: to double the profitability of its business within the next two years. Although its profitability had considerably improved since June 2006, the ambitious company realized it could not go to the next level without updating its technology platform.
In October 2007, it first came into contact with SAP Business ByDesign, the on-demand SAP solution for midsize companies. “We quickly decided that the hosted application would suit our business strategy perfectly,” says Lindop. “The most attractive aspect of this product to us is that it is offered as a software-as-a-service package, so that we can have the full 24 / 7 support without having to have an extensive IT infrastructure. Most importantly, with software delivered as a service, we would be free to focus on our core activities, which are fine chemical and specialty chemical manufacturing.
Making a systems cake
The following six months were spent examining the product and giving people time to get used to it. “We didn’t want to push the decision or give the staff that was going to operate the system a baked cake to eat,” explains Lindop. “We wanted to involve them in making the cake – testing it, using it, giving us feedback.”
At the end of March 2008, the decision was made to implement SAP Business ByDesign and an implementation team was created. Its name: Project Novus, a term symbolizing new beginnings for Pentagon Chemicals. Its mission: to integrate the business systems so that the company could have much greater control and visibility of the costs within the business. Only a few months later the first of the two Pentagon Chemical businesses, fine chemicals, went live; it was joined by the second location, the specialties business, in October.
The SAP solution will enable Pentagon to:
- Gain better control and visibility of costs
- Improve purchasing by reducing the need for reactive or short-term buying of raw materials
- Identify opportunities for operational improvements
- Integrate the business processes
- Improve customer service
- Bring the IT infrastructure up to date
Knowing where you are …
“Now we have uniform systems and procedures across our two businesses,” reports Lindop. SAP Business ByDesign will enable the company to acquire increased and real-time visibility on costs and financial data, which had often been hidden within disparate systems and stand-alone software packages. “We’re looking forward to receiving accurate and timely reporting on a monthly basis, whether it be on works in progress, inventory, or finished products,” he adds. “We’re looking forward to knowing exactly where we are at the end of each reporting period.”
… So you can reach your goals
By knowing where it stands, Pentagon Chemicals can reach its goals of growth through acquisition more quickly. “Should a third business be bolted onto our two businesses, we can impose the same systems and procedures rapidly,” says Lindop. “Because the software is configurable to our legal entity structure, it enables us to move forward with an acquisition faster than some of our competitors can.”
Another benefit to this software solution, he continues, is that it will enable the company to outsource its payroll with one of SAP’s business partners and thus be able to concentrate on core, revenue-producing activities. “Although we don’t believe that this technology platform will find new customers for us,” Lindop says, “we do think it will improve our chances of growing our business with existing customers.
For example, since most of our customers have SAP systems in place, SAP Business ByDesign would allow us to align our business metrics with theirs right down to the kilogram, which is the unit of measurement in our industry.” The good thing is “that we can then supply directly into their organizations as a virtual warehouse through the SAP interface.”
Such new and anticipated changes have a direct impact on a company. In the case of Pentagon Chemicals, a new business model was created. “We have reshaped all our processes and disparate systems and brought them onto the SAP Business ByDesign platform,” Lindop summarizes, before reaching down to stroke his Cheshire cat – which he, of course, owns, living and working as he does in the county of Cheshire.
Pentagon is an independent company created by a management buyout of the Workington-based Specialties business from Dow in 2002 and an acquisition of the Halebank Fine Chemicals business from Great Lakes in late 2003. Its core capabilities are in batch manufacturing and product development supported by its wide range of technologies and process plants.
In 2008, annual sales were estimated to be around £40 million (about U.S.$58 million). Approximately 200 people are employed by the company. Pentagon’s business is split almost equally between its own products and contract manufacturing and provides intermediate products and supply chain services to a wide range of industrial markets as well as to the agrochemical and pharmaceutical sectors. A majority of Pentagon’s business serves export markets, mainly in continental Europe.