SAP Customer Success Story

To Alliance Contract
Manufacturing Sdn Bhd
ALLIANCE CONTRACT
(ACM), their success on MANUFACTURING SDN
the world stage hinges BHD
on IT. “As a SMB [small ACM ADOPTS SAP’S SOLUTION TO SHARPEN ITS
and medium-sized COMPETITIVE EDGE

business] with a short ACM knows that their competition is not isolated to local
operational history, it markets, but extends across the globe. Faced with the need to
is important for the compete in a global marketplace, it upgraded to a world-class
company to create a IT infrastructure for a competitive edge.
strong presence in the
“Our legacy system is unable to cope with
market place in order
the increasing business activities and
to achieve strategic
complexities in our quest to be a global
advantages,” says Tan
player.”
G.H., Executive Director,
ACM. G.H. Tan, ACM

The company’s existing IT system had placed constraints on

its ability to be a viable global competitor. “Our legacy system
is unable to cope with the increasing business activities and
complexities in our quest to be a global player,” says Tan.

The small and medium-sized firm in the opto-electromechanical

assembly and contract manufacturing space targets the info-
com/medical/photonics and industrial equipment industries.
With a forecasted revenue of RM85 million (US$22.4 million)
for fiscal year 2004, and 480 employees, its operation is based in
Penang, Malaysia.
Specifically, ACM’s legacy IT system was not fully integrated,
and lacked a real-time reporting capability. As a result, logistic
transactions entered through the GL (general ledger) prolonged
the time taken for monthly closing. Also, the estimation of the
gross margin was not available as the cost of sales and inventory
is valued and entered through a journal at the end of each fiscal
period.
In addition, timely information on financial and logistics status
was lacking when business decisions were made, and the lack of
comprehensive product costing breakdowns may have resulted
in lost business.
SEARCH FOR IT EXCELLENCE
ACM started its search for a world-class IT infrastructure by
projecting its IT needs for the next five years, and justifying
to management the investment needed.
“SAP has a full range of functionality that
meets our current and future needs,… and
it provides us maximum interoperability
with our holding company and its
subsidiaries and other SAP users.”
G.H. Tan, ACM
The company decided on SAP’s solutions because of its breadth
of functionality, and integrated nature. “SAP has a full range of
functionality that meets our current and future needs,… and
it provides us maximum interoperability with our holding
company and its subsidiaries and other SAP users,” says Tan.
In addition, ACM intends to leverage SAP’s helpdesk services,
online monitoring, remote maintenance and on-site assistance
to reduce the costs of its operations.
ACM signed the agreement with SAP Malaysia on 30 June 2002,
and started implementation with SAP partner JSPC. Using the
AcceleratedSAP (ASAP) methodology, ACM went through
five implementation phases. The time taken to implement
the solutions met up to expectations, says Tan.
The bulk of the time was spent at the Business Blueprint stage,
to ensure that the best choices are made for the firm’s ERP
requirements, says Tan.
“The scalability and performance of the
system are superb.”
G.H. Tan, ACM
ACM also leveraged SAP’s best practices to redefine some
of its business processes. In terms of the pre- and post-
implementation support, ACM will use SAP’s Online Service
System (OSS), SAPNet, Early Watch Alert, and Go Live Check.
ACM is running the SAP solution on Microsoft Windows 2000,
and on two HP servers, one for Development and the other for
Production. The application and database servers are installed on
one physical server. The database deployed is Oracle 8.1.7.4.1, and
the total number of users for this system is 20.
“The scalability and performance of the system are superb,”
says Tan. He explained that the SAP solution allows for high
scalability and high volume Internet transaction rates, and its
vertical scalability encompasses a multi-tier Internet
architecture.
TANGIBLE BUSINESS BENEFITS
With the implemented SAP solutions, ACM now has a single
real-time financial and management solution, and improved
links between customers, suppliers, and employees. It can now
get up-to-date reports on sales, materials, operations and
financial performance monitoring, and the monthly financial
report is available in three days.
To measure the effectiveness of the SAP solution, ACM had set
both tangible and strategic business benefits and measurable Key
Performance Indicators (KPI).
The KPIs are to achieve revenue and profit growth of 50% within
the SAP investment pay back period and for customers to
perceive ACM as having a fully integrated value chain that is
B2B ready.
Also, an annual productivity improvement of 20% is targeted
for the next five years; to achieve inventory information with
99.8% accuracy; and to reduce inventory holding days by
two-thirds.
ACM expects the cost of the system to be paid for in three years,
and intends to achieve its ROI through increased business, and a
reduction in operational costs.
So far, the strategic benefits ACM have experienced are a
stronger company presence in the market; an infrastructure
ready for future growth; better supplier management;
maximizing the utilization of human assets; establishing an
operational value chain to manage the end-to-end logistic
process; and improved customer satisfaction through better
response to their needs.
“This implementation has created better
team work, more discipline in data entry
and data quality, better communication,
and inventory accuracy.”
G.H. Tan, ACM
Already, Tan says ACM has seen improved efficiency, better
product costing and customer value. Profit margins have
also improved through leaner operations, shorter lead time,
reduced waste, accurate inventory control, and productivity
improvement. The value chain has also been optimized to
support collaborative planning and forecasting.
The SAP solution has enabled ACM to “work in real-time,
make faster decisions and respond more quickly to business
opportunities,” says Tan. “All data is real-time, and fully
integrated now; information is more transparent to users at
all time.”
Customers have also noted a difference. “The perceived
customer value has improved with the SAP implementation.
[There is now] better service in terms of inquiry response time,
order execution and inventory management,” noted Tan.
For the 20 employees of ACM who use the system, the system
has helped them to focus in their respective functional areas for
higher value added jobs, as internal procedures have been
reengineered and mapped onto the SAP solution.
“This implementation has created better team work, more
discipline in data entry and data quality, better communication,
and inventory accuracy,” says Tan.
ACM does not intend to just maintain status quo. It already has
plans to work towards RosettaNet-ready standards, supporting
the XML-based document standards, and getting ready for their
customers and supply chain partners’ linkages on a global basis.
Future plan includes implement mySAP Enterprise Portal to
allow their employees and business partners to access and work
with SAP information across the extended enterprise through a
centralized interface.
Finally, ACM intends to add a shop floor database system with
Web reporting capabilities, and build B2B integration ability with
an integration solution like SAP Exchange Infrastructure.
 www.sap.com /contactsap

AT A GLANCE

SAP solution components Financial Accounting and Controlling

(FI/CO) with product costing,
Materials Management (MM), Sales
& Distribution (SD), Production
Planning, Quality Management (QM),
and E-portal

Hardware platform Hewlett-Packard

Operating system Microsoft Windows 2000 Server

operating system

Database Oracle 8.1.7.4.1

Number of users 20

Number of sites One

Length of implementation 9 Months

A one-sentence To attain world-class ICT and ERP

description of the capability to enable us to stay ahead
desired change of global competition as a specialist
contract manufacturer

Implementation partner JSPC

04/02
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