In 2004, no country in the world saw more new contracts for wireless phones than Russia. Almost every seventh new contract in the world was closed in Russia. The Russian firm Ultrastar sells mobile radio devices and has experienced as rapid a growth as the telecommunications market in its home country. Like many companies in Russia, Ultrastar follows a strategy oriented toward strong growth.
But rapid growth and the large bandwidth of the business processes to be mapped reached the limits of the firm’s IT solutions. That’s why the company wanted an ERP solution that combined retail, wholesale, and services and that enabled access to central data at any time. In addition to this technical target, the company was also focused on another important goal. With the creation of distribution and service centers throughout Russia, Ultrastar wanted to gain new business areas and to integrate these plans and the business strategy in its IT solutions.
The desire to get ahead is ubiquitous in Russia. To continue its growth strategy consistently, Ultrastar decided on SAP for Retail and hired CIBER Novasoft to handle the implementation. It’s difficult to compare IT projects in Russia with projects in western, industrialized countries. First, most companies in Russia have little experience with the far-reaching changes and time involved in a new ERP solution. “Second, speed is a decisive factor,” says Ingo Windshügel, the project leader at CIBER Novasoft, as he describes the conflicts.
Consultants who already have experience with projects in Russia know that this work involves a great deal of pressure. The working conditions often can’t be compared to western standards. That problem begins as early as office space. “Consultants often work at construction sites in Russia,” says Windshügel. The reason? Many companies are literally being built, so small, dusty rooms and half-completed buildings are not a rarity. “We were especially grateful to have good working conditions at Ultrastar,” says Windshügel.
In general, the Russian mindset also plays an important role. For example, titles like “premium consultant” are viewed with a great deal of respect in Russia. In Western Europe, however, everyone agrees that freely chosen titles say little about a consultant’s competence.
The Consulting Firm Shows the Way
Companies in Western Europe also have an exact idea of what a business process should look like after the implementation. Company personnel work with consultants to develop the optimal strategy. In Russia, however, the customer expects the consulting firm to show the way. In addition, Ultrastar did not view the SAP implementation as just an IT concern; it was also an organizational project. “The new ERP solution should design the decision-making process more efficiently and optimize it in terms of speed and quality,” explains Windshügel.
Between January and May 2004, the consultants completely redesigned Ultrastar’s business processes and uncovered additional opportunities for savings in several business areas. In material requirements planning, the new system-supported, partially automated, and integrated planning capabilities replaced the previous manually organized and paper-based requirements planning process. The new approach reduced the throughput time for planning by almost 50%.
The new, prognosis-based requirements planning process opens up all kinds of opportunities. It creates the basis for significant reductions of warehouse inventory in distribution centers and branch locations. And the replenishment process at branch locations now runs automatically. With these changes, the new IT solution helps to minimize the risk of surpluses or bottlenecks. In controlling, redesigned profitability analysis at the item level ensures that Ultrastar can operate profitably – despite the smallest of margins. It also enables the calculation of exact price floors for flexible reaction to market changes. The redesign of internal accounts allows for prompt valuation of decisions on locations and investment alternatives – all based upon valid data.
Not a Traditional Retail Project
“Even though the retail elements play a crucial role, this is not a retail project in the traditional sense,” says Windshügel. “Ultrastar is not only a retailer, but also a wholesaler. It also offers services. Each business area brings its own very individual flows and special requirements to IT.” In particular, the special needs of distribution in the various business areas must be considered and realized in the system. The retail area requires very short delivery times, but service employees primarily need an efficient information system.
After the opening of governmental structures in the old Soviet Union, the telecommunications industry still has a predominantly vertical integration of the creation of infrastructure, the operation of infrastructure, network management, and infrastructure services – usually in the hands of regional monopolies. The reality lowers efficiency, stymies innovation, and has a negative affect on prices and services. The Russian market is very dynamic, but because of its history, it’s also strongly regulated and margins are small. That’s why the accounting and logistics areas focused upon the design and implementation of appropriate controlling and reporting – to identify potential revenues and then to realize sustained profits from the revenue.
Transparent Material Flows
In May 2004, CIBER Novasoft began a complete implementation of SAP for Retail based upon SAP R/3 4.7. Ultrastar wanted to remain close to the SAP standard to limit maintenance costs. Ultrastar does not have an additional POS system or other upstream systems, so retail branches are to work directly with SAP R/3. As selected by CIBER Novasoft, this approach uses as much SAP functionality as possible and avoids additional investments in IT. The legacy system was replaced in January 2005 with a big-bang go-live.
The solution was stable in production even during the first month of the implementation. Transparency was significantly increased; it’s easier to trace inventory and material flows, and value and quantity flows are mapped in an integrated form in accounting. Since the implementation, the system handles several thousand orders from branch locations. At each location, employees can access central data, view existing contracts, and make changes on site. Such increased productivity benefits deliveries, services, and a customer-focused orientation.