Dynea Customer Case

Towards the end of 2011 the owners of Dynea Group decided to split up Dynea Group and divest individual companies or clusters of companies to various buyers around the world.

IZARA was tasked with analyzing what could be the potential obstacles or sales liability within IT and business systems when selling the European factories either as a whole or as individual factories or group of factories.

Analysis

An interview driven analysis was carried out at 6 of 14 factories representing a fair spread of business size and complexity. The analysis revealed that the business system was large, complex and inflexible. The analysis revealed that the business system was not attuned to the requirements of the business. The main “business pains” where identified and are listed below. These “business pains” where rated as critical liabilities that would influence the disposal of factories,

  1. The previous business system implementation lacked clearly defined business objectives and key performance indicators.
  2. Though the ERP system was a marketing leading integrated solution, actual work was not been carried out in an integrated manner nor where the integration possibilities of the solution being exploited. Employees understanding of the system was limited to their specific role, unaware of the wider role that their input could impact other business processes downstream.
  3. There was no uniform costing model across the factories, meaning that similar products could not be benchmarked across the factories.
  4. The lack of business planning tools within ERP severely impacted on the efficiency of material purchasing based on requirements.
  5. Overall, employees lacked sufficient competency in using the systems due to poor training and lack of understanding of their role within the business process.
  6. Timely valuable management information was lacking due to poor integration of reporting and stale frequency of monthly reporting.

The analysis further revealed that the current hosting/outsourcing agreement was inflexible and non scalable when wanting to split up the factories. The current support model for the system was simply too costly if the factories were to be split up in single or small clusters. In short, it would be impossible to reduce IT cost to match the size of a reduced company.

Strategy

After having reviewed the conclusions in the analysis, Dynea contacted IZARA to discuss actions to limit the liability of identified issues in the sales process. These liabilities would complicate the disposal of the company and open up discussion to reduce selling price.
In June 2012 IZARA was tasked to form a strategy as well as identify the right appropriate solution for dealing with the liability for 7 of the 14 factories, as these factories would be sold as one unit to a potential buyer. It was the belief at that time that the rest of the 14 factories would be sold as single units to industrial buyers that would replace the business system with their own.

Strategy Options:

  1. Leave business system as is and optimize current IT model with the understanding that Dynea opens itself up for a substantial discount on selling price of the 7 factories.
  2. Upgrade existing business system with the aim of replacing any customizations with standard features available in system and relocation to hosting partner that would scale cost.
  3. Adopt completely new simpler, cost effective and better fit business system and adopt an IT model more suited to business needs.

Looking at the first option of doing nothing it was obvious to cut down all services related to sustaining the current business system. After all possible cost reductions the 7 factories would still be faced with an 80% higher cost per user per year than current cost.  This would mean a substantial discount would have to be given during the sale of these 7 factories. The calculated possible discount was too high. And as such strategy option 1 was discounted as a viable option.

Focusing on Strategy 2 and 3, The CIO of Dynea and IZARA embarked on a workshop based approach with the current supplier/system and a new Supplier/simpler system with the aim to demonstrate that Dynea could run on a standard system with no modifications and that all Business pains identified during analysis could be addressed. The end result for the workshops should be that each supplier would be in a position to present an implementation proposal for a 100% standard ERP solution supporting the business needs and addressing the business pains.

In parallel to the above ERP journey a similar journey was started with 3 selected infrastructure suppliers. The foundation for the new infrastructure was that Dynea should focus on doing their business while the infrastructure supplier should focus on their business. Furthermore the new solution should be as simple, flexible and scalable as possible – Taking into the consideration that Dynea will be dismantled, without knowing the composition or sizes involved. It was important the contract volumes would be easily scalable in both directions.  Preferably, all IT infrastructure, should be supplied as a service, based on a per user per month principle.

The two ERP alternatives were presented to a selection committee in Dynea consisting of functional track leads from previous implementation and Dynea Management. In a direct comparison on system usability, flexibility, simplicity, implementation cost and ability to understand and resolve the core business pains the supplier representing strategy 3 was selected as the best alternative for Dynea.

Subsequent to approval by management team, strategy 3 was presented to the Board of Directors (BoD). Some of the board members have experienced unsuccessful ERP projects, that have been very late and over budget. This was seen as a potential risk during the sale process. To minimize this risk the board tasked the project to build a representative prototype utilizing actual company data to demonstrate that all functional challenges would be addressed.

In beginning of November 2012 The project presented a solution to the BoD:

  • Confirmation that the Dynea factories could run on a standard ERP platform with no customizations.
  • A license and infrastructure agreement so flexible that remaining sites outside the 7 factories, reducing their current costs, could incorporate the project.

The project could also with confidence present a project plan that could bring all factories live on the new infrastructure and business system platform within 10 months from start in January 2013. As a consequence another 3 of the 14 factories decided to join the project bring the total number of factories to 10

Solution

Business System:
After a thorough strategic-fit analysis, which included a practical proof of concept that demonstrated business pains where addressed, Dynea selected a standard Dynamics AX solution for process manufacturing.
In addition, Dynea implemented tools and components, which improved self-sustainability and reduced IT footprint at factory locations, thus reducing overall infrastructure cost and operations.
A business analytics solution was implemented to simplify and improve the insight into business information in terms of validity, reliability and freshness of data.
In conclusion, a fully integrated business solution underpinned by standard components and a straightforward implementation, which addressed all business pains identified during the analysis phase, was realized. Furthermore, the IT footprint required to support the operation of the ERP solution was significantly reduced.
As a consequence of the new business systems it enabled Dynea to painless split according to how the factories would be disposed of in the sales process.

Infrastructure:
The strategic review of infrastructure identified a sole partner that was able to meet requirements defined and provide a platform where infrastructure was delivered as a service:

  1. Minimal transition cost from existing environment.
  2. No capital investments.
  3. Flexible monthly pay-per-use.
  4. Scalable to meet fluctuating user volumes due to sales process.
  5. Attractive enough to dissuade factories running their own siloed IT.

With an economical centralized infrastructure model, Dynea are able to operate at lower running costs that can be adjusted on a monthly basis.

Conclusion:
With the redesign of Business systems and Infrastructure into a simple and scalable solution, the redesign meant that not only was it possible to scale users but also scale the cost during the sales process. This later proved to be of great benefit as it enabled buyers to transparently see the IT Business system and Infrastructure costs of the entity that they were buying.

Execution

As a natural extension of the already delivered services for analysis, strategy build and solution sourcing, IZARA was tasked to realize the strategy defined:

  1. Assume full responsibility and act on behalf of Dynea
  2. Drive decision-making, ensuring project was on track even during times when consensus was not possible.
  3. Approve Functional designs Documents and Change requests.
  4. Manage suppliers, approve all cost and control project budget.
  5. Ensure identified business pains where addressed.
  6. Ensure full carve out from existing suppliers
  7. Take full responsibility for meeting committed target for cost/user/year
  8. Go live on time and on within budget for all 10 factories.

In short, assume full ownership of project throughout its lifecycle and ensure targeted business benefits materialized.
During December 2012 a project team was formed based on functional tracks represented by Super users from factories. The Project team decided that a core solution will be established at one of the factories. This core solution would then be replicated to the remaining 9 factories.
The project  kicked off in January with the first factory going live on April 1st 2013.  The remaining factories where implemented in groups of three every 2-3 months throughout 2013. The last factory went live on November 1st 2013, 10 months after project kick off.
Key measures of success for factories on first live day where defined as:

  • Deliver goods
  • Issue transport documents critical for their industry
  • invoice the customer

These success factors were met by all factories during the project.
The above had previously been major business pains when going-live with their previous system. Also quite common in other ERP go-live projects.
The key drivers that achieved such an aggressive timeline:

  1. Full management support to standardize and align business processes across factories.
  2. Complete functional process models from supplier that eased the common understanding in the project.
  3. Competent consultants that understood the industry as well as the solution – quote: ‘Finally consultants that spoke our language’ unquote.
  4. Flexible service minded partners that ensured project success by not adhering too rigidly to contractual agreements.
  5. Committed pragmatic project team that adjusted work patterns to the way the system worked rather sacrifice the “no customization” promise.
  6. Strong internal and external project management that stayed focused to project promise rather than let the scope creep – which is also not uncommon in large projects ERP project.

Dynea set out to replace a complex, overly costly system, with a simple, flexible and scalable solution based on standard ERP processes and a fully scalable pay per service based infrastructure whilst addressing the identified business pains and meeting running cost target. A tough, but rewarding, project that has set new standards for the customer, the supplier and the ERP Industry.

Lessons learned

  1. Large company does not necessarily mean complexity – we managed to transition from a high-end customized ERP to midrange standard “vanilla” ERP.
  2. Select your business partner with care, ensure they understand your business pains and empower them to tell you what to implement, rather than asking you what you want.
  3. Empower your organization to make tough decisions that will cause disturbance, but benefit many when standardizing and harmonizing across sites/countries/cultures.
  4. Keep focus on rapid implementation that covers 85% of requirements and be prepared to adjust processes afterwards rather than getting it 100% perfect up front and never complete.

P360.dk by Columbus (danish language)

Hurtig udrulning af Microsoft Dynamics AX på ti fabrikker. Investering tjener sig hurtigt hjem, fordi IT-omkostninger falder markant.

Ti fabrikker på ti måneder. Så hurtigt gik det, da Columbus leverede og implementerede en helt ny ERP-løsning til flere af Dynea-koncernens virksomheder i Europa.

At det skete samtidig med, at de pågældende fabrikker skulle sælges, gjorde kun udfordringen større. Alligevel kan kundens projektleder nu bagefter slå fast, at projektet er det mest succesfulde, han endnu har været med i.

“Det har været noget af en drømmerejse. På bare ti måneder har ti fabrikker fået implementeret Dynamics AX og ny infrastruktur. Konsulenter, brugere og ledelse har alle været supermotiverede for at løfte opgaven”.
Jakob Ingemann, Forretningsrådgiver og projektleder