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By Anita Devasahayam

March 1, 2000

Honing the Supply Chain at British American Tobacco

One world-class company that has benefited from implementing a suite of integrated business applications is British American Tobacco Malaysia (BATM).

On November 3 last year, Rothmans International B.V. Group and British American Tobacco Plc completed its worldwide merger that resulted in the second largest tobacco firm worldwide after Phillip Morris International. The impact on Malaysian shores was the union of local tobacco giants, Rothmans Pall Mall (M) Bhd and Malaysian Tobacco Company (MTC) Bhd.

High on today’s business agenda is honing the supply chain management (SCM) at the recently merged BATM. By improving the management of its supply chain, the company can look forward to an effective and efficient record of inventory flow. Key information garnered is useful for defining consumer needs and providing best service possible to its retailers.

“This will help us make as accurate a forecast as possible and it will also simplify the product procurement procedure,” said Angelo Grasso, head of IT at the new entity. “Increasing flexibility within the organisation is crucial as is the process of gathering and assessing feedback from our distribution channels and from our customers.”

Grasso intends to achieve the task by creating an “international-flavoured” IT platform from the disparate computing systems inherited as a result of the merger.

For Grasso, blending the two computing systems was a challenge even though both companies had recently implemented SAP R/3 systems prior to the merger.

Grasso is aware of the need to be very careful and makes sure that redundant processes are not duplicated and that strengths, are capitalised upon. “In the integration process, we need to harmonise our roles,” he said.

Prior to the merger, the bulk of Rothmans products was sold in the domestic market and it was reverse in the case of MTC that exported 50% of its products. The merger gives BATM a 70% market share. Internal studies had shown that group brands continue to dominate the market and remain attractive to consumers. And to support such services, significant investments has to be continually made to modernise its manufacturing and distribution facilities. IT is no less an important element here. As Grasso pointed out, BATM’s main IT objective underscores its corporate mission. He added that each and every technology put in place is aimed squarely at securing higher returns for shareholders.

Creating Efficiency

BATM began modernising its activities as early as the 1970s by using external services to conduct data entry work. It was only in the later years that the company began investing in computers.

“These were used mainly for accounting and payroll—mainly what we consider to be a back-office type of activity,” Grasso recalled.

In the early 1980s onwards, the company criteria changed. It not only looked at automating the book work but also at how they can become more efficient by adopting an easier mechanism to acquire goods and raw materials from outside.

The move towards automating procurement and to production planning processes for the manufacture of its products brought BATM right into the mainstream IT scene.

In 1983, BATM invested in ERP software called BPICs running on IBM equipment. According to Grasso, prior to the merger, both organisations followed very similar IT implementation routes. Initial concerns were how to automate the manual and paper intensive work before moving to more important areas such as how to grow as an organisation in terms of delivering their products to market.

“The issue is how do we keep our procurement and manufacturing activities on par with marketing and sales. We collected a lot of information from our customers to evaluate their needs and from retailers on how to improve the distribution network. This data helped determine quantities to purchase and produce,” he added.

Powering Business for the Future

In 1998, Rothmans and MTC made a significant technology shift when it decided to convert and refurbish its computing processes. After careful study of the software available in the market, both opted for SAP R/3 which was implemented enterprise-wide.

The SAP R/3 software implementation exercise was completed a little under 10 months at Rothmans and close to a year at MTC. Both systems went live from January 1999.

Sheer focus on the part of the IT team and solid backing from senior management sped up the implementation process, Grasso said.

“With significant effort put in to create and implement this system in the last two years, we now need to find a way to accommodate one another, fit the roles and responsibilities, and reduce duplicity due to the merger,” he said.

In migrating processes into a single entity, Grasso is mindful that a certain level of autonomy needs to be negotiated while the common activities are merged.

Grasso reiterated that in the process of integration, the company did not try to look at reducing headcount as it was growing rapidly despite the economic downturn.

Instead of downsizing, it chose to deploy its employees in over-staffed divisions to short-handed sections to increase efficiency. “Apart from retraining staff and equipping them with new skills, we also decided to outsource and opted for casual labour when necessary,” Grasso said.

He said that although the company did seek the help of professional consultants in drawing up and implementing the new system, BATM still held the reins. “We decided it was better for us in the long run to have control of the project management work as it would benefit us if we went down this path again,” he revealed.

He also pointed out that there is a cost associated with using external consultants that will need to be justified in the long run. Hence, it made sense to have their own pool of in-house experts. By doing so, he hopes it will help build necessary skills and set career paths as well as provide more opportunities for internal development.

“The ability to train and grow our own support staff not only benefits employees involved but also delivers value back to the company’s shareholders. Besides, we don’t want to pay consultants to do the job three times over. Why not provide career paths within.”

Grasso also hopes that the strategy will bring a halt to job-hopping that epitomise the local IT workforce. While he does not dispute that there always will be people leaving for better prospects or personal reasons, Grasso believes that creating rewarding career paths benefit all parties involved.

Of the total 1900 employed by BATM, the 23 full-time staff in the IT department are mainly business analysts and infrastructure design specialists. Technical staff are hired on a temporary basis when needed.

“We want to provide a conducive environment for them to work in and, if you will, we like to have them job hop within the organisation instead of moves elsewhere. Here they can diversify their skills and we know we have retained a good person,” he added.

Recruitment does occur, as and when necessary, and the company tends to pick fresh graduates who will be taught under its in-house management training courses.

Now with the merger coming on stream, Grasso revealed that in the next 18 to 24 months, the companies will concentrate its efforts on unifying the divergent business process that the companies had invested on heavily in the last decade.

As the global nature of the company dictates, Grasso reiterated that the implementation will certainly possess an international flavour. Computing platforms opted for deploying systems will be common. However, some are likely to piggyback on others or improved upon.

“What we want to do is fall back on that knowledge and improve on it. At the moment, we are still combining our information to make sure that we meet our targets that have been set for us and then we will be looking into more investments,” he added.

Overall, BATM’s technology roadmap is geared at constantly improving on supply chain management to enhance efficiency. “Flexibility is key as we strive to deliver not only for our group in Malaysia but all our offices worldwide,” he reiterated.

One of the tools under scrutiny at BATM is the Internet. The corporate standpoint of the ’Net is being evaluated from the supply chain and e-commerce perspective.

He said that the company has several missions in progress where projects related to the Internet will be undertaken with partners on how best to use the ’Net.

The core team has been set up in London to run the project with trials taking place around the world on ways the ’Net can enable the business.

“It will be a business-to-business (B2B) model and we need to be clear on how to leverage that best before proceeding any further,” he said, adding that ensuring returns to shareholders is key.

Published in Intelligent Enterprise Asia, March 2000

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