Organic growth may be the dream of every bright company. But after 30 years in business, having achieved that goal, coal-mining firm Idemitsu Australia Resources (IAR) found itself confronted by new challenges.Organisational change and corporate governance requirements spelled the need to consolidate IT systems. With the SAP Business All-in-one for Mining solution, IAR realised not only company-wide commonality but greater speed, efficiency, and a whole new era of cross-enterprise communication.
A subsidiary of Japanese company Idemitsu Kosan Co Ltd, IAR operates two 100 per cent-owned mines and two joint ventures in Australia. Altogether, the Australian mines produce some 10 million tonnes of coal per annum. One of its 100 per cent-owned mines, Boggabri Coal, had been growing exponentially: from 1.5 million tonnes in 2010 to 3 million tonnes in 2011 and, subject to approvals, a predicted 6.5 million tonnes by 2013. And a recent reshuffle of the finance group had IAR’s main joint venture, Ensham Resources, moving in to share the IAR head office. Yet Ensham was running different enterprise resource planning (ERP) software. At this point, IAR recognised the need to both future-proof and consolidate its IT systems.
A need to streamline the business
Alongside these challenges was the innate complexity of IAR’s business itself. Just 5 per cent of its coal is sold domestically, with the rest shipped predominantly to Asia. The company juggles development and production at its sites, as well as the complex distribution chain of rail, ports, and shipping, and extensive marketing in multiple countries. Improving and streamlining internal corporate governance requirements had become essential. And since its parent company had listed on the Japanese stock exchange in 2006, IAR needed to comply with both Australian and Japanese regulations.
“We’ve been through a period of significant development in the last few years, mainly through organic growth,” increased corporate governance requirements resulting from the listing of our overseas parent. And the other major change occurring in our business was the move to shared services.”
Each of the mine sites acted autonomously, to a greater or lesser extent.
“Effectively, we all had different systems, so the push became to standardise those systems. We looked at the core systems in our business, and what we wanted was commonality,” Smith says.
The move to a common system
In searching for commonality and a shared services model, IAR took a look at its two existing ERP systems. One was the company’s standard, a platform provided by Pulse Mining Systems. This served the head office and the firm’s two fully owned mines. The other was the SAP software that Ensham Resources had put in place about a year before. It would, of course, have been possible to stay with both. And many within IAR were happy with their existing setup; for example, Muswellbrook Coal Company, another of IAR’s fully owned mines, had been using its ERP software for more than 15 years. But IAR was impressed with the benefits SAP software had brought to Ensham Resources in just a year. Whereas previously Ensham ran a number of different applications, with separate payroll and manual preparation of accounts, Ensham had achieved full integration in moving to the SAP solution. What’s more, a changeover to SAP software across IAR offered not only commonality, but a genuine foundation for growth. What SAP offered, Smith says, was an elasticity that would grow with the company. “SAP offered a product with more functionality and greater flexibility for integrating some of the other subsystems and information systems we wanted to use going forward. We felt it provided us with a better platform for where we wanted to take the business.”
The value of a team approach
Implementing the new system had its complexities. Two mine sites and corporate headquarters needed to migrate to the new software, and that involved a change in the company culture.
“We were challenging people to change processes and the way they had done things for a number of years,” Smith says. “We had some very sophisticated ERP users who had been using Pulse Mining Systems for a very long time and couldn’t see the need to move. So it was complex in that we had software in place that served individual business needs, but the consolidated enterprise required moving to a common system.”
Adding to the complexity, IAR wanted to incorporate into the new scheme various aspects of the old. “We wanted to take the good of the old system and replicate that in the SAP software along the way,” says Smith.
This included a popular web-based invoice and purchase order module and mobile applications for maintenance planning and inventory management.
“That was considered important functionality that we didn’t want to lose,” says Smith. “And using SAP workflow processes and the tools that SAP provided, we were able to achieve something that is very similar.”
After eight weeks of scoping, implementation was completed on schedule in just 16 weeks. The implementation was multidisciplinary, including functionality encompassing maintenance planning, materials management, payroll, finance, and accounts payable.
A multidisciplinary project team included key people from IAR as well as implementation partner Extend Technologies. And it was this team, and the high-calibre skills and commitment of the people involved, that ultimately made the implementation so successful, Smith believes.
IAR ensured that key internal employees from the head office and mine sites were involved in the implementation from start to finish.
“It was important to have those people there, because at the end of the day, it was their knowledge of the business, their knowledge of outcome requirements, that guided us through the blueprinting phase of the project,” Smith says. Extend Technologies brought a wealth of experience –and continuity – to the table.
“The experience on that team was invaluable in solving problems and issues as they arose,” Smith says. “In this project we managed to go through five months with the same people involved. That continuity was key, since those
in scoping and blueprinting took it all the way through to configuration. The involvement of the consultant project manager was also key. His experience in SAP implementations and knowledge of the mining business,
as well as his relationship with Extend, ensured that the project kept on track against both schedule and budget.”
Simpler system, streamlined processes, better communication
One of the major benefits to IAR has been simplification. All finances are now on the same system, with staff members able to report and source common data right across the business. Mobile applications for maintenance staff were replicated at Muswellbrook and will be implemented at other mine sites. And the time taken to produce month-end results has been reduced by 30 per cent.
“We haven’t yet met our ultimate objectives. But to realise these efficiencies in just six months since going live is certainly an achievement – given that we also had yearend reporting and audits thrown in,” Smith says.
Just as powerful, in a qualitative sense, has been the surge in company-wide communication. “One of the biggest benefits for us has been that people at our various mine sites are talking to one another,” says Smith. “We really never had a platform before to do that.”
Previously autonomous sites are now regularly communicating and sharing information. The success in this area has almost surprised IAR, particularly in the way it has connected teams from the joint ventures. Smith says, “It’s a great communication forum for people and their counterparts at other mines to forge relationships. They now know the right person to contact and just pick up the phone.”
Future plans
Now that the company is familiar with its new software, IAR is looking forward to reaping the benefits. “Going forward, I think we’ll see a lot of qualitative benefits,” says Smith. “And that means faster recording time, greater level of detail in transactions, and the ability to drill down into costs.”
But that is just the start. IAR aims to use its new system to reduce inventory levels, initiate group procurement, build common processes, and create commonality in materials management.
The company is also looking at a major reporting review, potentially extending its SAP software landscape with the use of SAP BusinessObjects business intelligence solutions.
Ultimately, with its goal of shared services now achieved, IAR is returning to its journey of organic growth, this time relying on SAP solutions for faster results, greater effectiveness, and smarter communication.
This case study was prepared by SAP.
This article was first published in Inside SAP December 2011.
