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Casestudy: Kao Corporation Manufacturing Integrated Solutions Case Study Manufacturing / Integrated Solutions SAP Award of Excellence 2005 Kao Corporation, The ABS Project “The Project of the Year” With SAP Installation, Standardized Operation at 22 Asian Bases Enforced KAO’s Global Expansion in Asia As a consumer products manufacturer, Kao has been a front runner since 1964 in expanding its marketing to the greater Asian region, and it is currently expanding its manufacturing and sales operations for a range of items from household use products including areas of personal care, household goods, and feminine sanitary needs to cosmet- ics and industrial chemical products. Foreseeing further advancement of business performance within the Asian countries crucial to its global expansion, Kao commenced its “KAO ABS Project” in October, 2000 to promote the standardization and optimization of its business operations. The project was one of enormous scale, extending over a period of four years and five months and involving implementation at twenty-two Asian business centers, with SAP as the ERP package of choice. Global Business Synchronization Group & International Consumer Products, who played a central role in the Project, explains as follows: “Before the ABS project was initi- ated, self-contained business op- erations were administered in each Mr. Akio Tsuruoka Mr. Takashi Matsuzaka Mr. Hiroyuki Kowase Asian country, and such things as Executive Vice President, Vice President, Vice President, business methods, processes, codes, Member of the Board, Global Information Systems Information Systems Division, Global Procurement Kao Corporation Global Business Synchronization rules and KPI (Key Performance Kao Corporation Group & International Consumer Indicators) were not synchronized. Products, Kao Corporation As an example, the definition for ‘sales’ differed from country to country, together with differences in Confusing Evaluation In- gradually installed in all twenty-two accounting standards, and these all dices Interferes with Wide Asian bases in a two-step process interfered with our global expan- Area Operations lasting until February, 2005. sion. In addition, changes occurred in the business environment as well. The goal of the “Kao ABS Project” What lay behind Kao’s establish- After the Asian currency collapse in (hereinafter ABS Project) was to ment of the ABS Project? Mr. 1996 - 97, European global retail- standardize and optimize business Hiroyuki Kowase, Vice President, ers began to enter the Asian market. operations by the installation of the of Information Systems Division, Due to this, the distribution and SAP ERP package, with the ultimate goal of a broader expansion of busi- Client Data ness throughout the countries and regions of Asia. ABS is an acronym Company name Kao Corporation Kayaba-cho 1-14-10, Nihonbashi, Chuo-ku, Tokyo, Japan for “Asian Business Synchroniza- Headquarters Established May, 1940 tion,” describing how the “syn- Company Business Description Manufacturing/sales of household products, beauty products, chronization” (standardization) of Profile industrial chemical products and business products. business operations was viewed as Capital 85.4 billion yen 936.8 billion yen. a key factor in Kao’s expansion in Consolidated Net Sales Employees 5,600 (Total including all Consolidated Subsidiaries: 19,143) the Asian area. The initiation of SAP installation began from December, Aims Synchronization and improvement of business in the Asian area. 2002. A pilot installation program Project Period October, 2002 to February, 2005 Profile Staff Approximately 80 (Kao) 120 (ABeam) (Both during peak periods) was undertaken first in Thailand and Software SAP R/3 4.6C Hong Kong, and from then, SAP was Manufacturing / Integrated Solutions ■ The ABS Project ■ ABS Project Operation Structure Shanghai / China ABeam AMO ABS = Asian Business Synchronization Helpdesk Tokyo / Japan Project Goal : Data center Toward growing wide-range business operations throughout Asia, the proj- ect aims to implement standardized business operations and optimize overall business based on a uniform China package (SAP). China Taiwan Hong Kong Hong Kong Tokyo / Japan Role of ABeam Consulting : Taiwan Network Thailand Philippines Monitoring center ■Standardizing Business Malaysia Thailand Philippines (Processes, codes, rules, KPI) ■System design and development Singapore Malaysia ■Pilot installation ■Rollout to Asian countries Indonesia Singapore ■Support following installation Pilot Indonesia ■Maintenance and operation support Wave1 Wave2 sales methods changed dramatically, accumulation of expertise at SAP covered five areas; the introduc- and Kao’s business model was re- implementation projects and long tion of a new supply planning quired to change in response.” experience at business process de- method, the synchronizing of the sign, was chosen as the consulting related companies, standardization/ These changes in the style of Asian firm for the Project. optimization of basic business distribution and sales represented operations, the installation of an a driving force behind Kao’s deci- Project members included fifteen optimum production method, and sion to introduce a new information ABeam members on-site and addi- budget management. The standard- system. At that time, Kao was using tional members arranged locally by ization of business operations took an in-house-developed software; ABeam, and in Japan, thirty ABeam place in six areas (chemical sales, the prototype was created in Japan, members, and at peak periods, thirty household product sales, material and the source code was made open Kao members. Other than human flow, manufacturing, purchasing so that it could be subcontracted resources, the package included al- and accounting), and included a for localization to local companies most all SAP modules, including FI total of approximately 1,300 indi- in each Asian region. However, to (Financial Accounting), CO (Control- vidual standardized business items, try and respond to the rapid change ling), SD (Sales & Distribution), MM ranging from processes to codes, in business environment by con- (Materiel Management), PP (Pro- rules and KPI. These projects were tinuously updating the in-house- duction Planning), APO (Advanced documented and collected in Kao’s developed program resulted in Planning & Optimizer), BW (Busi- “Business Standardization Manual.” tremendous costs in labor and time. ness Information Warehouse), SEM Kao thus decided to move towards (Strategic Enterprise Management), What contributed greatly in the the installation of the ERP package. and CRM (Customer Relationship standardization of operations and Management). Add-ons were created became the foundation for creat- for individual countries where statu- ing the “Business Standardization “Industry Framework®” tory requirements were difficult to Manual” was the “Industry Frame- Brought Into Action cover with the basic SAP. Exception- work,” an original industry-specific al localizing also took place in cases template created by ABeam. Since this was Kao’s first experi- when customers had special needs ence at installing an ERP package, for items such as ledger sheets. The “Industry Framework” is an ABeam Consulting, with its great The business optimization project industry-specific template reformu- ■ Schedule 2002 2003 2004 2005 12 4681012 246810 12 246810 12 2 Japan 2003/7 Hong Kong Pilot 2003/8 Thailand 2004/3 Singapore 2004/4 Wave 1 Taiwan 2004/4 Indonesia 2004/6 Malaysia (HH) 2004/9 Malaysia (CH) 2004/12 Shanghai (CH) Wave 2 2005/2 Shanghai (HH) 2005/2 Go-Live Preparation Project period Go-live support Philippines Manufacturing / Integrated Solutions ■ Project Coverage Account Demand Pull Shared Management Service Business Demand Manufacturing Improvement Projects Management Planning Driving Benefits Chemical Household Sales Sales Logistics Manufacturing Procurement Finance Process Process Process Process Process Process ABS Standardization Codes Codes Codes Codes Codes Codes Establishes Core Business Rules Rules Rules Rules Rules Rules and Technical Standards KPI KPI KPI KPI KPI KPI for the Future A Technology Enabler SAP R/3,BW,APO,CRM and SEM Systems Technology Projects Establishes the IT Infrastructure and Support Data Center Design, IT Support Organization Design, IT Infrastructure Upgrade Organization Implementation & Outsourcing Implementation & Outsourcing lating the methodology gleaned from with local representatives became a good use of this difficult experience past projects; its key feature is its problem. Mr. Kowase reflects, “Al- in Thailand, thus making the instal- condensation of high-quality busi- most nothing was codified, and even lation in the other Asian countries ness processes for consumer goods when it was, we encountered many go more smoothly. manufacturers. By using the same situations in which the implementa- template in each Asian country, it tion differed between departments. Securing and Effectively became possible to support business When standardizing codes, we had Assigning Human Resourc- processes unique to each country and to identify each master name, but es: Key to Project Success users of different languages, as seen the master names were all different in the high appraisal of Mr. Kowase, as well, and it was not unusual for How did such a large-scale endeav- “It was very useful in determining us to have to check with the local or as the ABS Project succeed in the the scope of business processes, and supervisors.” Asian regions, where languages
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