An ABC of ERP for chemical businesses

An ERP transformation is no small undertaking, but it’s not something businesses should fear or shy away from. If your project is well-planned, thought through, and executed, there are multiple potential benefits that can be gained, namely:

• Reduced costs and increased efficiency
• Stronger financial reporting systems
• Better grip on regulatory compliance
• Better protected customer and commercial data
• Enhanced cyber security
• Analytical insights into business performance
• Greater ability to pivot and adapt to supply chain and operational challenges

So, as the topic increasingly looms in the Boardroom, what are the critical elements for chemical businesses to consider in a successful ERP transformation?

ERP program governance intends to manage and drive the overall value realization of the transformation project. The fact is that many complex transformation projects fail to deliver value in a variety of ways:

To avoid these pitfalls, it goes without saying that setting up and structuring the project effectively is fundamental to success. You need a robust program model with a PMO at the heart of the project to direct, monitor and steer; clearly defined roles and responsibilities for all the key parties involved; milestones and timelines for each project stage; and effective monitoring to validate progress and ensure the project remains on track.

An ERP transformation is no different from any other change management program your business has been through in the past — and may bring the same time-honored techniques to bear. It’s classic project management territory, whereby you need a holistic and people-focused approach to bring all stakeholders on the journey. This often referred to as the ’Make It’ methodology for change: Make it Clear (align leaders around the strategic aims); Make it Known (communicate the change vision); Make it Real (define what the changes will mean for people); Make it Happen (carry out the change and support people to work in new ways); Make it Stick (ensure there is capability in the organization to maintain the change).

However, while this classical project management approach fully applies to ERP projects, KPMG professionals believe that today’s complex changes require a new deployment model that can enable the effective delivery of complex solutions involving many supporting vendors. 

This modernized approach seeks to leverage additional expertise and perspectives across the program with the aim of maximizing success. It involves breaking the work into three key roles: systems integrator, business enablement advisor, and transformation integrity advisor.

Today’s complex transformations require a new deployment model. This modernized approach leverages additional expertise and perspectives across the program to help enhance success.

The systems integrator is at the heart of the technical work, configuring the solution environment and integrating the new technology with other technical systems. They can manage the infrastructure strategy, create and execute the data migration strategy, and conduct software quality assurance for coded objects. In short, they can perform the traditional technical roles involved in new system integration and implementation.

Next-generation ERP is no longer a single technology platform but an ecosystem of capabilities and software. The business enablement advisor is crucial in enabling the organization to unlock its business value. They help to ensure delivery aligns with customer needs, leading practices, industry trends, transparency requirements and program goals. They can validate program savings and value creation against the business case and have key inputs into security and control integrations, program governance, and training needs.

It’s a case of working across the critical layers of the TOM — process, governance, service delivery, people, technology, data & reporting — to unleash the potential benefits, with the aim of ensuring value is not lost. A good business enablement advisor should continually strive to ensure that the organization puts itself in a leading position relative to its peers.

Take processes as an example —
whereas a ’middle of the pack’ position would be to have standardized processes which are documented, with a low level of automation and integration, the kind of leading position the business enablement advisor should be aiming to help the client reach would be simplified, collaborative and automated processes, integrated across functions, and where strategic initiatives are identified, analyzed and prioritized.

One of the most significant areas of value the enablement advisor can bring is addressing the loss of customization when moving to cloud-based platforms. Many businesses have heavily customized on-premises solutions that have grown over time and fear that a cloud solution may not be able to cater to their business’s unique requirements. But this is where automation and digitization come in. Instead of customization per se, it’s about leveraging the data in the platform to achieve the same results.

For example, imagine a business had created customization in their on-premise ERP system to extract data about upstream revenues and put that into the accounting/financial system because there was a gap between the two systems that needed bridging. In the new cloud-based world, it will be possible to create a piece of AI-based automation through a digital layer that automatically pulls the data out from one and places it into the other. There won’t be any need to carry out a reconciliation, unlike in the old regime, because the two pieces of data can co-exist independently in different parts of the system. The result is a more flexible, elegant and change-proof solution.

Cloud-enabled ERP solutions force clients to consider their unique business requirements and determine a value to the present-day customization to ascertain if the value is there for the business partner or shareholder. This often significantly reduces manual processes that prevent employees from focusing on value-added activities. Moving to the cloud is also about removing unnecessary complexity from business processes and decreasing the cost of maintaining the solution.

Quality assurance is a critical aspect of any project. KPMG’s Transformation Integrity (TI) model is a structured but flexible strategic risk management methodology designed to support the implementation of complex, high-value transformations. It helps clients develop forward-looking risk profiles to better gauge their effectiveness at achieving expected outcomes and develop proactive mitigation strategies if results are at risk. TI plays a crucial role in assessing and validating progress at each critical stage gate of the project.

Transformation Integrity addresses core transformation risks through four workstreams creating proactive insights and evaluating delivery constraints across all contributing parties.

The business alignment workstream monitors the consistency and accounting of program requirements and objectives all along the journey with a strategic eye on preserving business case outcomes; change readiness seeks to create objective avenues for feedback while evaluating the effectiveness of the processes and artifacts designed to enable the organization to operate in the post-transformation state; program governance is designed to monitor the performance of all engaged vendors for complete, accurate, timely and transparent representations of scope, risk, quality, budget, schedule and communications. In contrast, the technical solution workstream monitors technical aspects, providing insights related to the processes and artifacts used to develop and deploy the technology. This could include, for example, assessing and validating the Business Enablement advisor’s work in building any automated solutions to replace old customizations — ensuring that they are secure and consistent with the rest of the technology stack.

Different clients may have other transformation-driven objectives —
which is why KPMG firms have a configurable delivery model that is designed to give clients multiple options, ranging from point-in-time evaluations to being embedded in crucial areas for the highest risk areas of the project. The first of these engagement modes — Evaluate — provides a point-in-time review of specific project activities to confirm the quality with scores or observations on what to continue, what to modify, and what to stop. The medium option — Embed — places KPMG resources into the fabric of key processes to help promote quality delivery on a real-time basis. It’s a powerful way to mitigate risks that are not reported via typical project and program protocols. Finally, there is Engage at the top end, where KPMG methodologies and resources are deployed to deliver core program workstreams where risk is highest. This approach seeks to ensure high-caliber delivery of crucial program areas likely to encounter significant risk.

As noted earlier, it’s a simple fact that many ERP transformations hit roadblocks and fail to meet expectations.

So how can you avoid the stumbling blocks? Our top five tips for success are:

1.   Understand the business and IT context

No improvement can be achieved unless you have a good understanding of the current situation, including what works well, what does not, and why. What are the critical business and technology outcomes you want to achieve? What do you want to change and improve in what you have now?

2.   Don’t underestimate stakeholder management

While it’s essential to bring stakeholders on board, at the outset and throughout the journey, it is equally important to keep engagement and communication high, consult where needed and work by consensus wherever possible. Establish and articulate a clear ’case for change’ that all stakeholders can sign up to.

3.   Agree on scope and principles

Defining a clear scope can help to make the project more manageable, structured and organized. The design principles should ensure the strategy is aligned and stays consistent. Be clear about the level of standardization you will introduce (versus customization or digital layer solutions). 

4.   Identify unnecessary complexity

In everyday practice, KPMG professionals often see much of the potential value of ERP being lost due to unnecessary complexity. This can start with too much variation in business processes and unnecessary customization in your (existing) system. The level of complexity in your current landscape is usually an indicator of where you can find improvement potential — and can also be a starting point in choosing between a greenfield or brownfield scenario.

5.   Focus on management information and analytics

Besides considering an efficient set-up and executing transactional processes, keep a constant focus on obtaining value-adding management information that can enable the business to perform at a higher level. What information and insights do you currently have from your ERP — and where do you need to get to? How can you embed data analytics to drive insights and business value? Better, faster and actionable information that can be turned directly into operational, financial and customer insights — this is really what the project is all about achieving.

For chemical companies to stay competitive, businesses must transform by leveraging technology to enable new opportunities and capabilities. Implementing the next-generation ERP Platform is a key component of digital transformation — incorporating artificial intelligence, in-memory computing, redesigned business processes, analytics, cloud technologies, and personalized user experience — to truly transform how organizations do business so that they can run at the rate needed to remain agile and achieve growth that is required to thrive in today’s market. KPMG firms’ range of implementation approaches, frameworks, and enablers are aligned to provide tailored technology solutions specifically for the chemical industry’s system implementation challenges. Our approach seeks to target enterprise-wide capabilities with a customer-centric approach to deliver transformation.

KPMG firms' leading Quality Assurance methodology — Transformation Integrity — provides a platform for consistent evaluation and reporting across QA projects. By leveraging this repository of performance indicators, observations, and leading practices, KPMG professionals can better support the accuracy, health and risk mitigation of a client’s new customer information platform program with real-world insights necessary to help reduce risk and improve quality.