SAP S/4HANA in Private Cloud Helps Build up Organization
Reading time: 10 mins
By Brianna Shipley, Editorial Director, SAPinsider
The building products industry is experiencing a shortage of materials and labor. This situation is one side of a duality: Shortage of supply against explosion in demand. COVID-19 seems to be the main cause of contributing factors like supply chain disruption and employee concerns for workplace safety.
SAPinsider’s Chief Research Officer Riz Ahmed interviewed one player in the industry to learn how the organization, which provides business services and support like human resources and information technology to Pacific Coast Building Products, Inc. (PCBP) and its family of companies, is helping meet customer demands.
PCBP is a family-run, private, third-generation company with wholly-owned subsidiaries that operate in 12 states and two Canadian provinces with approximately 100 sites and 4,000 employees. Four major subsidiaries generate revenue for the companies and Pacific Coast Companies Inc. (PCCI) is the shared service organization supporting all of PCBP and its family of companies.
Marty Menard, CIO for PCCI, says that “the building products industry is going through an unprecedented growth since COVID-19 struck the US. This demand for building products, coupled with a lack of resources, as a result of COVID-19, has been a huge impact. Whether employees are sick or can’t work or don’t want to come into work,” Menard says, “like most companies, we’re still having trouble hiring people. About 10% of our total jobs have openings today. As I talk to my fellow CIOs around the world, the number-one problem is finding talent to join our respective companies.”
Building back the organization has been a strategic initiative for PCBP and its family of companies since 2008 when a large group of IT professionals left the company. According to Menard, in 2008, the construction industry, in general, was struggling and this carried over to PCBP and its family of companies. Starting in 2017 when Menard joined PCCI, the company has recommitted to investing in technology. PCCI is accelerating its business results by innovating across new SAP platforms — including a modern ERP — using a “no blink” deployment approach.
“The biggest investment we’ve made has been moving from our legacy ECC environment into the SAP S/4HANA environment. We realized that there had to be an investment in technology equal to that growth in the business, otherwise we wouldn’t be competitive.”
Expanding SAP Usage
Menard estimates that the PCBP subsidiaries only use about 50% of everything they license from SAP. Prior to joining PCCI, Menard spent 24 years working at Intel and six years at Hewlett Packard. He joined PCCI in 2017 and is responsible for all operations, applications, and cybersecurity within the technology environment. PCCI supports the 4,000 employees that work across PCPB and its family of companies.
About 25% of PCCI’s 250 applications are enterprise software (both SAP and non-SAP), says Menard. “We’re constantly looking for ways to consolidate back into the SAP environment. A lot of the core functionality that we use today is the same that we started with back in 2001 when we became an SAP customer. We’re trying to expand our overall usage.”
Now that the company is on SAP S/4HANA, Menard is encouraging PCCI’s sister subsidiaries to innovate across new platforms that will help the businesses accelerate. PCCI started by implementing SAP Transportation Management (SAP TM). Menard’s team is adding skills to its toolbox to learn more about the solution. Since implementing SAP TM, the logistics subsidiary of PCBP has experienced:
- Increased efficiency of load planning
- Increase in revenue from the prior year due to more efficient planning
- Decrease in time management hours spent with non-value-added effort
- Reporting/data analytics, giving the business real-time access.
SAP S/4HANA has also been deployed, running on a private cloud managed by NTT Ltd. Managed Services Division (NTT).
Menard says he chose NTT as his cloud provider because it offered the best combination of pricing, commitment, relationship, and confidence. “We focus on building great partnerships and relationships. We desire an executive relationship with our key partners; somebody we can call if we need help. I felt that NTT worked the hardest at the relationship component compared to the other companies. We’ve been extremely happy with them.” Menard says that network and application reliability were additional contributing factors to his decision to partner with NTT.
Menard attributes the successful go-live of SAP S/4HANA to his IT team, too, who underwent a significant customization reduction effort before deployment. Menard says that despite working remotely due to COVID-19, the IT team and subsidiary partners were able to work extremely efficiently and reduce the total object customization footprint by 56%.
PCCI started the conversion process by defining scope, schedule, and resources in September 2019 after selecting NIMBL as its systems integrator. Like NTT, NIMBL put forth the best plan, team, and effort on the relationship. NIMBL was first hired to work on the strategy for reporting and then rolled into the move from ECC to SAP S/4HANA. NIMBL, along with SAP, committed an executive to the governance process. “Our governance process was a huge benefit, including having PCBP’s family of companies, SAP, and NIMBL executives all committed to our project’s success,” says Menard.
The official project start was December 2019 and ran through February 2020, with face-to-face workshops including all subsidiary partners. The implementation occurred between March and October 2020. The go-live on October 19, 2020, was “like the Maytag repairman moment,” says Menard. The number of reported defects was less than expected with few high or critical items, all of which were repaired within three weeks. He adds that the bulk of the implementation happened after PCCI sent all its employees to work from home full time. “We wanted to be an early adopter and we didn’t blink once we started,” Menard says. “COVID-19 didn’t slow us down. I’m super proud of how the team, PCCI IT, subsidiary partners, NIMBL, and NTT executed; it was a true team effort. We committed and delivered!”
Ryan Lucchetti, now President and CEO of Pacific Coast Building Products, Inc., says, “The implementation worked because we had commitment across all subsidiaries, we had a good plan, we found a compromise and delivered. We are now on the other side of the transition, and looking back, it was the best choice for us. The partnership across our teams made this a successful implementation.”
A Culture of Compromise
Menard says his original optimistic goal was to eliminate 80% of customizations. To date, the company has eliminated 56%, an end result that the CIO considers a success.
“The key was making a business case for what customization to keep. Some customizations were a result of innovative and novel approaches to make the business more efficient. Employees were challenged enough by COVID-19; to take away an efficient ‘tool’ that made their business processes easy, especially during a time of high stress and a global pandemic, wasn’t going to be effective,” he says. Instead, leadership sought to understand people’s hesitation about change and challenged them to think beyond their own resistance. “We found the right balance,” says Menard.
“We tried not to use the term ‘why’ during these interactions. Asking ‘why’ usually results in a defensive response. If someone asks you: why didn’t you take out the trash? Your immediate reaction is ‘what do you mean? I always take out the trash!’ Instead, we say ‘hey, tell me more about this.’ This phrase can open the brain to a place of positive intent and send the message that the question isn’t a trap or attempt to embarrass or shame. Rather, it’s about clean listening and intent.”
Menard is building a culture of compromise and collaboration, he says.
From a skills perspective, he is investing in front-end skills and module- and business-process-specific skills as he integrates new applications and acquires more companies.
“We’re actively looking at our resources that we have in the application side, the BASIS side, as well as operations and trying to make judgment calls about where we need to grow and expand.”
Menard says the family of companies can still improve in certain areas, having increased the complexity of its landscape by deploying SAP S/4HANA.
If he had to do it again, Menard says he would take a different approach with the BW 4/HANA implementation.
“The goal at the time was to make sure that the business users had access to all the reports that they had in ECC. Now, we’re moving our data to a data lake. Our BW instance will provide historical data, and those reports are still available. But our business leaders are asking us to move to more real-time availability for analysis. This radical change in how they look at the business is being implemented via a dashboarding analytics capability. At any moment a leader, salesperson, or CFO can know precisely what is happening in their business and drill down for a deeper understanding. You can’t do that in a static environment.
An example of this occurred since we implemented a dashboard for one of the subsidiaries. The margin for one of the business lines spiked. We checked and an order was put into SAP without estimated cost. That miss was quickly corrected, bringing margin back into line. About half of the subsidiaries are actively engaged. Had I to do it over, I would have focused more on the data lake and analytics and less on legacy reporting.”
Menard says he also underestimated how challenging rebates were going to be. “We chose to take rebates out of the box and our system integrator did a great job. But they didn’t have a ton of expertise with the new rebates functionality that came from SAP S/4HANA,” Menard says.
Stable Core Expands Revenue Potential
With the right platform in place, the focus now says Menard, is on expanding the business from a revenue perspective and improving back-end efficiency. “We increased IT spending significantly since 2017 and are now more aligned with an 80/20 mix of keep the business running (KTBR) to investment. We’ve made a significant investment in cyber, which we had not done previously. We’re in a better place to support the acquisition growth.”
Menard says that PCCI’s progress in 2021 reflects the agility of the IT shop “being able to move in the direction the business needs you to. For example, customers are starting to do more business through electronic data interchange (EDI). In 2020, we had eight to 10 EDI projects. This year we have 28, so three to four times what we thought we were going to have. The business has completely turned a corner. COVID-19 has taught customers and suppliers that using digital transformation does make a difference. They don’t need paper and they do need electronic commerce,” Menard says.
The second big change for PCCI, says Menard, has been acquisitions “and moving all of our business to core infrastructure and ERP.” In 2021 alone, PCCI has completed six acquisitions and moved one business to core infrastructure, including cyber programs. “In 2022, we will move what has been a stand-alone entity with a legacy ERP to SAP S/4HANA as well.”
What Does This Mean for SAPinsiders
- Get to the other side. At former companies, says Menard, the general rule was to wait until 90 days after general availability to get on the latest technology. But this mindset is no longer enough for running a modern SAP environment, he says. “Do anything you can to convince your leadership team that getting there is better than waiting,” Menard says. “SAP is not going to stop the treadmill. If you’re going to stay on the SAP platform, I think the sooner you get into that environment the better.” His team followed a no-blink commitment to deploying SAP S/4HANA, and the business benefits include increased revenue potential.
- Include your suppliers in business reviews. At least twice a year, Menard holds a business review where he invites his top 10 suppliers to talk about their reliability, uptime, roadmaps, product offerings, and issues. “This has been a great way for us to continually improve the relationship with NTT,” Menard says. “Remaining open with this group about business strategy, what needs improvement, and what the organization is trying to accomplish has served the business well.”
- Consider what you’re up against when measuring success. Menard’s team ran into some unexpected challenges with rebates that required them to spend time on the deployment project for four additional months. The project also fell short of its original goal to eliminate 80% of customizations, hitting 56% reduction instead. But the company was up against challenging and unlikely circumstances, including remote work and employee stress brought on by COVID-19. Menard says that the lessons learned from the experience have led to positive business outcomes and better communication.
Pacific Coast Building Products, Inc. and its family of companies are manufacturers, distributors, and specialty contractors for the building products industry. Founded 68 years ago by Fred Anderson, the company today is run by Ryan Lucchetti, the grandson and third generation of the family.
Pacific Coast Companies Inc, is a shared services organization providing professional services to the revenue-generating subsidiaries, including marketing and advertising, accounting and tax management, environmental consulting, human resources, and information technology to Pacific Coast Building Products, Inc. and its family of companies.
Presence across States/Sites: 49/100
Headquarters: Rancho Cordova, CA
NIMBL helps companies throughout their business transformation journeys by providing agile solutions that combine business advisory, technological expertise, and a passion for innovation. With 2,500 highly skilled, passionate professionals, NIMBL supports large enterprises and mid-sized companies across 3 continents every day — providing best-in-class consulting services and digital solutions.
NTT Ltd., the global technology services company, offers a broad portfolio of managed and consulting services, covering hybrid cloud, IT, security, network, application, and collaboration. NTT’s managed services practice has been awarded many of the highest certifications from companies like SAP (2021 Outsourcing Partner of the Year), Microsoft (Azure Expert MSP), Google (Premier Partner), and AWS (Consulting Partner).