1. Hosted by How one of the UK’s largest SAP implementations saved money and improved performance Lee Harris, Programme Manager

2. Hosted by Outline of Presentation Background Programme Overview Functionality Implemented Benefits Achieved

3. Hosted by Royal Mail Facts & Figures Turnover £8,408m, 224k employees Delivers letters and parcels to 27m UK addresses, Operates 17,500 retail outlets 1 Shareholder – UK Government Regulated Industry (PostComm) but still required to provide Universal Service Obligation.

4. Hosted by Why are we doing this?

5. Hosted by The Issues De-centralised Businesses lack of corporate focus

6. Hosted by The Issues Multiple Systems and processes 10 significant legacy financial systems (inc. JBA, Walker Financials, Oracle and SAP). Numerous variations on common processes mainly paper driven or local PC solutions with no integration to financials. Aspiration to become an e-business difficult to support with current landscape.

7. Hosted by The Issues Financial Backdrop Underlying profitability was deteriorating. Availability and consistency of financial performance information. Planning was an annual event with 1 year horizon, which took 6 months. On-set of regulation would furnish additional information demands.

8. Hosted by The Solution Single SAP ERP for Royal Mail 1 common Chart of accounts across all business operations Common finance processes, e-enabled where ever possible Cycle time improvements for results production from one-set of numbers. “Getting a grip of the numbers”

9. Hosted by Programme Overview Enterprise System Programme (ESP) Programme initiated in early 2000, with SAP as strategic technology choice. ITT led to selection of implementation partner – Deloitte Consulting. Programme created with a mix of Internal process experts, Royal Mail IT staff and supplemented with External Consultants as required.

10. Hosted by Programme Overview Programme Scope 18 Individual Business Units Over 7000 users (inc 4,000 EBP users). 8,500 Profit/Cost Centres. 40,000 vendors & 250,000 business customers 1.5m invoices per annum.

11. Hosted by Programme Overview Early Major Decisions Single CO area. Roll-out strategy (Functionality, Business Unit or by legacy system). Business Unit ownership – Implementation Managers. Technology Choices (Workplace, EBP). Establish a specific governance group to chase benefit achievement.

12. Hosted by Programme Overview IMPLEMENTATION TIMELINE Phase 1 04/00 - 11/00 11/00 – 07/01 Phase 2 12/01 – 03/02 Phase 3 08/01 –11/01 EBP Pilot R/3 5 BU’s FI/CO, EBP, AM, PM & MM R/3 8 BU’s RE - Prototype R/3 6 BU’s RE, PS Blueprint R/3 Blueprint

13. Hosted by Functionality Overview

14. Hosted by R/3 SCOPE : Version 4.6c Procurement  Inventory Management  Plant Maintenance  Cash Management  Asset Management  Projects  Revenue Management  EBP MM IM PM SD FI-CA AM PS Treasury Financial Accounting Inter-Business Management Reporting FI CO Real Estate  RE Functionality Overview

15. Hosted by Functionality Overview Key Functionality: EBP – new functionality, incomplete content, piloted the technology first (100 days) – before productionising. RE – Real Estate no previous UK versions, prototyped before developed (prototyping didn’t expose all the integration issues encountered later).

16. Hosted by Functionality Overview Gaps in Solution Demands from Regulator starting to materialise, which pose challenges for R/3 to handle. Costing Planning Performance Management loop not closed by ERP alone.

17. Hosted by Functionality Review Programme Response Initiated additional project to deliver: Business Warehouse Reporting Flexibility (BW2.1c) Strategic Enterprise Management (SEM 3.0) Also replaced AB Costing solution with Oros (SAS), including unique “bridge” to BW for distributed reporting.

18. Hosted by R/3 Data Sources SEM-BPS Business Planning and Simulation SEM-BPS Business Planning and Simulation OROS Revenue and Cost Model OROS Revenue and Cost Model Bridge SEM-BCS Business Consolidation SEM-BCS Business Consolidation SDPRI HUB BW/SEM Scope SAP BW Reporting Payroll Ledger Payroll Ledger

19. Hosted by Programme Overview IMPLEMENTATION TIMELINE Phase 1 04/00 - 11/00 11/00 – 07/01 Phase 2 12/01 – 03/02 Phase 3 08/01 –11/01 EBP Pilot R/3 5 BU’s FI/CO, EBP, AM, PM & MM R/3 8 Bu’s RE - Prototype R/3 & BW 6 BU’s RE, PS & BW Functionality 03/02 – 10/02 Blueprint R/3 Blueprint Phase 3 (a) R/3, BW & SEM BCS / BPS Functionality

20. Hosted by Somebody has to pay for all of this don’t they?

21. Hosted by Programme Benefits Targeted Benefits - Financial Replacement of legacy applications. Process Efficiencies – Reduction in Headcount. Improved Control – Controlling demand (e.g.utilities / cleaning etc) Supplier price reductions (conformance and supplier efficiencies) Inventory reduction (JIT & automatic re-order levels)

22. Hosted by Programme Benefits Targeted Benefits – Non Financial Performance reporting, Product/Customer profitability, regulatory and statutory accounts are all produced from a common source. Flash results available within 2 days of period close. Actual product profitability reported on day 15 each month (previously quarterly). Business Plans consolidated in a day (previously 2 weeks).

23. Hosted by Investment Costs & Benefits Sunk £86m Total £103m Rec. Benefit £37m

24. Hosted by Programme Benefits Measures of Success Financial Benefit achievement Stakeholder Perception of Programme End user Perception Non Financial Results.

25. Hosted by Programme Benefits Enablers of Success Keep it lean and mean – provides pace! Business Ownership – Solutions Team, Implementation Managers, ASAP methodology. Focused Board securing benefits (inc. Implementation partners “skin in the game”). LEADERSHIP – within the Programme and the Business..

26. Hosted by Programme Benefits Still to Finish! Revenue management (SD/FI-CA). Sustaining the gains!

27. Hosted by Thank You