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With all the information technology (IT) systems available, it is often difficult for paper companies to prioritize those most essential to achieving business and operational goals. Now, as companies move outward from mill-based systems focused on papermaking to enterprise-wide systems exploring e-commerce opportunities, the right IT architecture becomes even more important. Having too many systems means entanglement in hard-to-maintain interfaces, while not enough can limit the ability to automate processes and execute business strategy.
CIO Lloyd Storey says Riverwood's e-commerce systems are now "stable enough to be focused on enhancing business
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For Riverwood International, IT decisions are based almost exclusively on a business strategy of creating value for the company and its customers. Rather than defining an elaborate IT architecture overloaded with functionality, Riverwood has chosen a lean, flexible one that can be enhanced for customer-specific purposes. It's centered around an enterprise resource planning (ERP) system with complementary/integrated roll handling and scheduling systems for paperboard products. Riverwood's solution, which was installed in 1999, currently processes 100% of the company's transactions across all domestic divisions.
"We are not interested in pursuing technology just for technology's sake," emphasizes Lloyd Storey, chief information officer (CIO) for Riverwood. "Our strategy is to deliver business value, and if e-commerce technologies enable us to do that, great, but we are very consciously avoiding the trap of trying to invest in all the latest wizardry just for the sake of saying we've got them."
STRATEGY DEFINES FLEXIBLE ARCHITECTURE. The challenge for Riverwood has been to create a technical architecture flexible enough to entertain a variety of collaborative business models between the company and its customers, which range from those who employ Riverwood's packaging solutions to coated paperboard and containerboard customers. Though constantly evolving, as Storey stresses, the Riverwood client/server IT architecture is currently focused around two critical components: an ERP system from SAP and Honeywell's Optivision for scheduling and roll handling.
Riverwood currently uses the core financials and logistics modules of SAP/R3's Version 3.1: financials and controlling (FI/CO), sales and distribution (S/D), materials management (MM), and production planning (PP), as well as production planning for process industries (PP/PI) in the paperboard mills. Additionally, Riverwood uses the plant maintenance (PM), project systems (PS), asset management (AM), and profitability analysis (CO-PA) modules. Because Version 3.1 was not designed specifically for the paper industry, lacking functionality for roll tracking and roll sales, Riverwood chose to interface SAP with Honeywell's Optivision at its mills.
"The version of SAP used by Riverwood is a better fit for the carton converting and the packaging machinery businesses than it was for the papermaking business units," explains Storey. "Because of this, Riverwood was able to configure necessary business processes for cartons and packaging machinery directly on SAP."
The SAP server, located at the corporate office in Atlanta, is accessible for all of Riverwood's domestic business units and operations, including paperboard, containerboard, carton converting, and packaging machinery. The Optivision product is installed at the West Monroe, La., and Macon, Ga., mills, but is also accessible through the companywide network. With virtually all of its domestic business transactions now processed through the ERP system, Storey notes that no major paper company has implemented SAP as extensively as Riverwood.
Most customer orders are managed in Atlanta, with many currently placed by phone or fax. Currently, a relatively small percentage of orders are made using electronic data interchange (EDI) or the Internet.
After paperboard orders are entered into the ERP system, it communicates with Optivision to make sure the system is aware of the order and to confirm the date the order will be fulfilled. Scheduling is also done in Atlanta using a combination of SAP and Optivision for paperboard products. However, for packaging, virtually all scheduling is done through SAP.
STARTUP AND STABILIZATION. In early 1997, Riverwood formally started its 18-month implementation of the ERP and roll handling systems. The financial modules went live in January 1999, with the balance starting up in April 1999. IBM Global Services was the dominant provider of external resources for the project, although Honeywell and SAP also were involved.
Storey says that the real-time interface between SAP and Optivision was the most daunting technical challenge for the project. Although ultimately a functional success, Storey describes such interfaces as "a formula for technical risk in the paper industry."
With virtually all transactions now processed through the ERP system, the project's initial success from a technical standpoint is apparent, although Storey notes this achievement required great effort and expense.
"As is true with most large scale, complex projects," says Storey, "there was a fairly significant stabilization effort here at Riverwood after startup. However, in terms of availability, there have not been any significant outages in the two years SAP and Optivision have been operational. And Optivision, like SAP, is another system that works like it's supposed to."
Was the project a success in terms of the 18-month implementation? To Storey, this is a matter of perspective.
"Compared to much larger companies that undertake multi-year projects, you might look at this and say it was pretty quick," he describes. "Relative to this business, which is a $1.1 billion company, some might think that it perhaps took a little too long."
Change management. Because it is a core transaction system touching employees at every level, an ERP system implementation is what Storey describes as a "target-rich environment for change management and training" in order to provide the necessary motivation and skills. Despite "the magnitude of change" stemming from the implementation, Storey reports that many people continue to like the system "more and more everyday."
"It's certainly not the kind of event where you go home on Friday night and turn out the lights as you leave, then come back Monday morning to a different set of lights with everything exactly correct immediately," describes Storey. "But, I would say at this point that the organization has largely embraced it and is learning every day how to use it better. That learning process goes on virtually forever."
Current technical challenges. Keeping SAP and Optivision communicating in real time offers the greatest technical challenge facing Riverwood on a daily basis. The difficulty stems not so much from routine transactions, but from changes and exceptions affecting the original order.
"Last minute change orders are what you're never really able to design into the systems," explains Storey. "Once you've already transferred data from one system to another, customer changes in order details or accidental damage to produced rolls are examples of real-life situations that create disruption in the systems. Trying to keep the two systems synchronized under those circumstances is what presents a challenge."
Despite such issues, Storey reports that "things are quite stable, at this point." Now, the emphasis has shifted from design decisions and technical stabilization to deriving long-term value from the investment. As Storey describes, "We're clearly stable enough to be focused on enhancing business value as opposed to making sure things keep running."
WANTED: E-COMMERCE COLLABORATORS. For Riverwood, deriving long-term value from its ERP system is linked to finding customers to collaborate with on e-commerce projects, rather than developing a full-fledged e-marketplace just for the sake of having one. Currently, Riverwood's Web site does feature an online order entry page. Developed in collaboration with a major customer, the form is posted to demonstrate that the company can technically offer such a capability.
"Instead of displaying an elaborate Web-based shopping cart where you can point and click to put rolls of paper in your shopping cart, the online order entry on our site is mostly there to attract potential interest," explains Storey. "We're collaborating with customers who want to jointly derive business value from improved business processes. Our strategy is more focused on working with the customers and developing collaborative business processes than it is on our Web page."
Riverwood is now working on pilot e-commerce initiatives with at least one carton customer and at least one paperboard customer. One of these collaborative e-commerce pilots produced the online order entry feature shown on Riverwood's Web site. In addition, Storey says the company is "beginning to learn of specific customer expectations around e-commerce capabilities," each of which must be individually considered.
"We are evaluating demands on a case-by-case basis as to how quickly and to what extent we choose to invest, because there are as many business models as there are customers," explains Storey. "It could become very inefficient for us to build all those different, unique applications. We're not driving our customers, and it's not necessarily in their best interest to drive us either. It really needs to be collaborative."
Riverwood is still assessing what it has learned from its pilot e-commerce project, trying to determine whether it is a scalable commercial solution to build upon. However, any hesitance is not associated with technical issues, but with how to define the "detailed rules of engagement between trading partners," according to Storey.
"Value is derived from the business processes, and technology only plays a supporting role," he explains. "Defining detailed business rules is key. For example, what constitutes an order? Is it a full truckload? Is it one item that fills up a truckload or multiple items on the same truck? And, if you share demand planning information with a customer, does the forecast constitute a purchase order? If we as a manufacturer react to your forecast and make the product you forecast, is it yours? Does that constitute an agreement?"
Defining such rules and developing such relationships demands trust between trading partners, and Riverwood is finding that its most progressive customers are interested in examining such a joint process. However, Storey quickly points out that both sides are still in an exploratory mode as to how to progress. "No one has all the answers, but we are working together to uncover them," he notes.
So, is this focus on partnerships rather than e-commerce for e-commerce sake unique in the paper industry? Maybe, says Storey, pointing to companies collaborating around Forest Express, an exchange type of e-commerce model.
"We continue to monitor their progress with a lot of interest, but it has yet to deliver much in the way of functionality or value," explains Storey. "It's only of interest if we're able to visualize the business value from it, and the same for our customers. So, perhaps we're more business focused around our technology investments than some in the industry."
At the InterBev 2000 trade conference in New Orleans, La., this past December, Riverwood announced some of its e-commerce capabilities for packaging customers-an announcement that was "very much a call to collaborate," according to Storey. Building on its ERP foundation, the company is offering several e-business tools for beverage customer operations, including Web-enabled order entry of cartons and machinery parts; collaborative planning allowing customers to track carton usage; tools that analyze the assembly of packaging machinery; remote monitoring of packaging machinery; and online training.
BENEFITS: FOR NOW AND FUTURE. With Riverwood's clear focus on deriving long-term business value from its IT architecture, it might be easy to overlook some of the more immediate benefits that have been achieved. Using the ERP system for virtually all of its basic business transactions, the company has experienced obvious automation benefits by eliminating individual effort, operational benefits such as cycle time reduction, and better reliability of its business processes.
Has Riverwood started seeing any strategic benefits? Storey believes that it has, but with a notable caveat. "It's important to understand that benefits are not usually derived directly from information systems, especially transaction processing systems," he explains. "While there may be some minor level of effort reduction through automation, the real value is derived through improved execution of business processes. Realizing such improvements requires balanced attention to process, people, and technology. You won't get results if any of these three ingredients are missing."
Starting at about the 18-month mark this past August, the company began experiencing some more tangible advantages from its IT investment. "Our customers now have more confidence in us," describes Storey. "We've become a more dependable part of their business and anticipate that we will begin to realize the resultant business rewards."
As an IT project, Riverwood's architecture appears a definite success, and it has begun to show even more potential in the area of increased business. But has the project suffered from some of the typical pressures experienced by IT projects in a manufacturing industry as far as return on investment?
"There is pressure to see a return as there would be with any significant investment," explains Storey. "However, this is not a new piece of equipment, added capacity, or more machine time-the more traditional investments with which our industry executives are familiar. It's much more difficult to assess all the returns, as the real benefits occur in better, faster, and cheaper business processes. People are inherently more comfortable with direct cause and effect relationships, where benefits can be tied directly to specific systems, rather than with subtle, indirect benefits. I would say that everybody here is pleased with the stability and reliability of what we have and are optimistic about having invested in the infrastructure and the opportunity it provides to bring value."
Riverwood has a number of options available to further leverage the investment already made in SAP. Upgrading to the most current release of SAP R/3 that now provides specific functionality for the papermaking businesses, advanced planning and scheduling, data warehousing, and international implementation are but a few of the potential alternatives. Riverwood's management team is currently evaluating these options to determine which should be pursued and when they'll be scheduled. Whatever choices are selected, the company plans to stay focused on delivering fundamental business value.
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