Company: SAPCustomer: TilconSubmitted by: Harvard Centro”The business practices and systems of the Tilcon Group are being transformed thanks to SAP,” declared David Moore, Finance Director of the Industrial Minerals Division of Anglo American plc, the parent company of the Tilcon Group. “A combination of industry specific business requirements to handle our extensive product portfolio, geographical spread of sites and the complex management information which we require, have led to possibly one of the most comprehensive wall-to-wall installations of SAP R/3 in Europe.”The Tilcon Group, originally part of Minorco S.A. before being taken over by Anglo American plc in 1999, is one of the largest quarrying companies in the UK with a turnover of over £360 million in 1998.

Tilcon was purchased by Minorco in 1995 and divided into three operating companies, Tilcon Scotland Ltd, Tilcon North Ltd and Tilcon South Ltd. A second company owned by Minorco, Buxton Lime, was merged with Tilcon South. Quarrying is Tilcon’s core business with products ranging from sand and gravel through to all sizes of hard stone, which have been crushed and graded according to size. Other major products include ready mixed concrete, asphalt and mortar, giving Tilcon over 250 quarry and other sites across the UK.Across Tilcon over 30 different non-integrated computer systems were in operation in 1995 and none allowed for real time transactions or easy access to company-wide information.

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Following an internal review, the decision was made to replace the old systems and to start again with a single enterprise-wide integrated system.”Software from several different companies was considered,” commented David Moore, “but we opted for SAP R/3 because it offered us full integration and a path for growth. Other parts of Minorco, such as our German subsidiary and the Cleveland Potash Mine were already using SAP and their experiences proved a valuable guide for us.”To ensure continuity of the main business of Tilcon, the implementation of the new system had to be handled in parallel with maintaining the legacy systems. Before being bought by Minorco, Tilcon had run its systems from a central IT department based in Harrogate.

With the restructuring of Tilcon, the IT department was transferred to CSL Ltd.”The work of maintaining the stability of the old system was outsourced to CSL,” continued Moore, “and the experience and knowledge of the former Tilcon staff of the current systems proved invaluable as part of the implementation of the new system.”The main implementation of the SAP software was carried out in a joint project with Diagonal, the UK’s leading SAP implementation and support services consultancy.”It was important to us that all areas of Tilcon should support the new system from the start,” said Moore. “Diagonal’s and our approach was to look at the process as a business project and not an IT one, involving all parts and areas of the business.”David Beresford, now Managing Director of the Support Services Division at Diagonal, and Diagonal’s Project Director during the implementation, was involved with the project from the start.

“We helped Tilcon set up groups from all areas of the company to standardise best business requirements across the company’s different products and establish how best to map the business onto the SAP model. This is an important process at the start of the implementation, as the solution must meet the needs of all the businesses and have their full co-operation of the project to succeed. We also operate in a way that ensures there is a skills transfer from our consultants to staff in all areas of Tilcon’s business. We are not imposing a system on the business but involving the business to such an extent that they are largely self-sufficient to handle every day tasks by the time the system goes live.””The implementation approach also enabled us to handle the issue of change management,” added Beresford.

“Because SAP requires the business to change in line with the product’s best business practice, business input was required at all stages of the project. Our starting point was the premise that even change for the better is often viewed with suspicion so it had to be handled sensitively by getting the business to buy in over a long period of time. SAP as a product only represents the potential to improve and create competitive advantage. Turning the raw material into a working solution is achieved through people. You ignore them at your peril.”Discussing best practice provided a forum to enable different geographical and business areas of Tilcon to learn from each other.

This type of communication had not operated previously in Tilcon. “The personal skills of the people involved with the project have been lifted to a new level of competence,” he said. “Many had to learn negotiation, presentation and communication skills not previously required in their jobs.” The value of the project to the business extended well beyond a simple improvement in business practice.The first area of the business to start implementing SAP was Tilcon Scotland with the project getting underway in November 1996.

The headquarters of Tilcon Scotland lies in Glasgow and the system needed to link with 50 quarries, concrete and mortar sites providing a system for 160 users.Graham Greenhalgh, Managing Director of Tilcon Scotland, believes that using Tilcon Scotland as a pilot project for the company has enabled many teething problems to be ironed out before the system was extended. “Tilcon North and Tilcon South have benefited from our experience as they have implemented their systems. There were many areas of our business which were easily set up, such as purchasing, but there were others which needed constant reassessment as the project progressed.”It was recognised that SAP R/3 could not provide the specialised distribution and despatch facility at the quarries and other sites and that complementary software would be needed. Tilcon had already found part of this functionality from software it was using from Fortek, a Gosport based company specialising in software for the emergency services.

Diagonal worked with Tilcon to upgrade and improve this software, integrating it fully into SAP and providing a fully automated distribution system.Typically, a customer – perhaps a building or construction company – can phone to obtain a quote from Tilcon for a product such as gravel or concrete. The quote will vary depending on the location of the quarry or plant, whether the customer wishes to collect or have the order delivered and, if being delivered, the distance between the quarry and the final destination. SAP provides the sales quotation and, on confirmation of the order, the products can be delivered through Fortek. The order can call for a specific product to be delivered at a specific time to fit in with the building or construction project – perhaps a delivery of gravel might be needed to a housing development at a precise stage in the building programme.

If Tilcon is to deliver the order, then Fortek will arrange delivery with one of a number of hauliers with whom Tilcon works. The lorry arrives at the quarry, is weighed in at the weighbridge, collects its load, weighs out and is given a ‘ticket’ printed by Fortek containing all details of the order and haulage. Four copies of the ticket are made, one goes to the customer, one to the haulier, one electronically to Tilcon administration and one to record any extra charges that may have arisen such as loss of earnings by the haulier if he had to spend time waiting to make his delivery.Once the ‘ticket’ has been issued, Fortek automatically updates SAP which can process the sale and bill the customer. SAP can then update Tilcon’s internal stocks and automatically process payment to the hauliers. Over 2 million ‘tickets’ are issued across the whole of Tilcon every year.

For the haulier companies, Tilcon can evencarry out self-billing and payment, cutting out further administration.Other product lines, such as bricks, precast concrete and cement did not need to use Fortek and these processes are carried out using SAP exclusively.Training of staff across the company was paramount and once Diagonal had helped to train a core of Tilcon staff, an intensive internal training programme allowed all users to be given detailed training on SAP, and where necessary, on basic PC/Windows skills.The scale of the project changed during the course of the implementation. Tilcon Scotland, for example, set up a joint venture, Caledonian Quarry Products which needed to be integrated into the new system and other acquisitions in the UK and business growth increased turnover by almost 50% since the project was planned.Tilcon Scotland went live in January 1998 and although Graham Greenhalgh admits that they have probably not yet realised the full benefits of the system, he can already see significant changes to business practices which are bringing benefits across the company.

“Senior management at Tilcon Scotland can now hold meetings with a live SAP system and can carry out real time analysis of any aspect of the business,” he said. “We can drill down into the system and look at the performance of each quarry or make a sales analysis of individual product lines. Similarly individual customer information can be pulled up for analysis so that we can identify problems and opportunities in good time.””The changes at the quarry level have also been very significant,” continued Greenhalgh. “We believe we now have the greatest level of automation within the UK quarrying industry. The processes have been pushed to the front end as far as possible, removing much of the role of the back office support.

Much of the ticketing process had been done on paper, putting the responsibility to carry out the administration with the back office staff. The quarry operators now carry out much of this for themselves, leaving a reduced office staff to carry out a monitoring role.The staff at the quarry embraced the changes with enthusiasm. We had worked hard at explaining the needs for change and they fully understood these reasons and took them on board. There was a great willingness to learn how to use the new computer system and the staff are now finding that it has helped to make their jobs easier. It is fair to say that the new system has brought about a fundamental shift in the way staff carried out their day to day business.

“Alasdair Mackenzie, Diagonal’s Project Manager during the implementation said that the project was one of the most exciting and challenging he had ever been involved with, delivering tangible business benefits. “SAP R/3 has been used as a tool to drive process improvement,” he said, “being heavily promoted by senior management of the companies involved. Through project sponsorship and commitment to dedicate quality resource to the project, Tilcon management has managed to balance process improvement with on-going commercial targets.”Tilcon North, with 80 sites and 250 users, went live with SAP in May 1998 and Tilcon South, with over 100 sites and 400 users, went live in September 1998.”Many of the teething problems which cropped up during the implementation in Tilcon Scotland had been resolved by the time we started to move into Tilcon North and South,” said George Oliver, Tilcon Project Manager and IT Director. “The projects went reasonably smoothly and over the next few months we shall start to see benefits coming from these operations as well.

Across Tilcon, the business continued to operate successfully even though we had taken key people out of the business to help in the implementation project. The strain on people was often very tough, but at all times the level of commitment by Tilcon and Diagonal staff was outstanding.””We have recognised that we still need a better understanding of how to use all of the information available to us,” continued Moore. “We can now obtain detailed accounts after five days instead of ten, and we believe debtor days can be significantly reduced as we are able to be more pro-active with the information available. We have more accurate information on stock levels and a level of communication of information across Tilcon which was not possible before.

“”Following the transfer of skills from Diagonal to us,” continued Moore, “we have now successfully implemented SAP for ourselves within our subsidiary Nash Rocks Ltd. And although we still have a fall back contract from Diagonal’s Support Services Division, we are now in a position to be fairly self-sufficient and have recruited back some of our former outsourced IT staff to create a small help desk based in Buxton and Harrogate. Our greater levels of communication throughout Tilcon have opened the door to the pooling of knowledge and experience.””We continue to work closely with Diagonal, who are helping us assess the benefits already achieved and others which can be derived,” he continued. “We need a period of calm now to allow the system to settle in, but we can see that more could be done in the future in areas such as EDI, workflow and the Internet. By installing SAP we addressed the Year 2000 compliance issue, even though that was not one of our original objectives.

We have a solid foundation for our business to grow and develop in the future.””SAP R/3 will prove to be a tremendous tool for us, I believe,” concluded Moore, “and we are now recognising that we need to work hard at fully utilising the power of the system to gain the best advantage for the company. We believe we still have more to gain from the level of management information available and the cost savings we can make.”