Academy of Better Business

Zespół Elektrociepłowni Bydgoszcz SA: SAP system implementation

Advantages of controlling in electric power industry

As the sale volume of the company depends on state-imposed prices on electric power and heat, defined by the Energy Regulatory Authority of Poland, the company must strictly keep every kind of costs down to limits. The basic measure of the operations efficiency is thus a reduction in unit costs of energy production. So possessing a complete, reliable and up-to-date management information about costs becomes all the more important.

Why SAP?

The decision to choose SAP made by the board of ZEC Bydgoszcz SA was partly caused by a very good opinion not only about the system, but also about the consulting service and possibilities to ad-just SAP to Polish legal regulations. Of all the ERP systems considered by ZEC, SAP was the one that in the most complete way supports the manage-ment. It can be adjusted to company’s needs and modified during its use. SAP software is made in compliance with Polish legal circumstances and modified as needed to meet the Polish legal re-quirements.

SAP client receives not only a licensed product, but also an assistance in creating an analysis and a concept of company’s computerization as well as technical and implementation support.

Implementation objectives

The basic business objective of SAP implementa-tion in ZEC Bydgoszcz S.A. was achieving an im-provement in the quality and manner of manage-ment on the basis of complete and reliable infor-mation. The objective was to be achieved together with a significant improvement in the efficiency of planning and business events forecasting. The ac-tual controlling was to be completed by implement-ing planning functions and a modern cost calcula-tion. SAP was to speed up, standardize and mod-ernize information and document flow, and conse-quently, to improve the work of finance and eco-nomical departments.

The choice of an implementation partner 

ZEC Bydgoszcz chose BCC as an implementation partner. It was mainly due to its wide experience in SAP implementations in the Polish market and qualified team of consultants. The high quality of consulting service was confirmed by the certificate ISO 9001 which guarantees repetitiveness of implementation services provided by BCC, using clear and defined procedures, in order to implement SAP within the timetable, budget and the required quality accepted by the teams.

Implementation course

Implementation works started in October 1998. In the first twenty days of October the project standards were defined. They included project organization, formal procedures and specimens of documents used in the project. In order to manage the implementation a steering committee was appointed. The committee consisted of representatives of ZEC Bydgoszcz, BCC and SAP Polska. Four teams were responsible for performance of the works included in the project timetable.

Current communication between the management and team heads during the implementation was of vital importance.

The mechanism of notification of problems and questions, making settlements with a contractor and constant analysis of project risk added to quick decision taking and an efficient course of implementation works.

At the first phase, finished in August 1999, the following modules of SAP were implemented: financial accounting (FI), fixed assets accounting (FI-AA) and controlling (CO). The standard functions of the CO module were developed by a solution prepared by BCC that improved the efficiency of cost settlement according to the regulations of the energy law. Within the second phase of implementation in January 2000 the module of materials management (MM) was finished. 

SAP advantages

The implemented SAP solution enables recording income, overhead and variable costs for power and heating, considering the division into sources and carriers. The used method of cost registration helps define prices for every carrier, which complies with the new energy law.

SAP system also enables more effective, quicker and complete access to financial and accounting information and, consequently, more efficient decision processes.

Besides direct advantages of SAP implementation also the increase of the company’s book value that together with the new values planned to achieve in management should result in higher attractiveness of the company in the privatization process.

Has SAP implementation made work easier or rather more difficult? 

Contrary to earlier fears the work with such an extensive system does not cause trouble. Our system users have been thoroughly trained and work with SAP every day without problems. Naturally first results of the implementation are best seen on the level of the company’s management that gains detailed and complete reports, as they require.

In what way does SAP support controlling? What has been gained and what are the plans for the future?

SAP shortened settlement time for costs of primary and supplementary operations and purchase. It also made cost planning more detailed – down to the cost centers - and enabled control at each level through comparing actual values with the planned ones. We can now record the income and overhead and variable costs for electric power andheating with the division into the sources and carriers. The method of cost registration enables to define prices for every source and carrier, which complies with the new energy law. Thanks to SAP we obtain aggregated information included in reports, we transfer them directly to the required statements and make a cost plan in many versions depending on the value of parameters that influence the value of planned costs. In the future we intend to introduce more and more advanced controlling tools included in SAP.

And what have been the advantages for ZEC in fixed assets management? 

The most important is that SAP has turned out to be a complete solution for fixed assets management, reflecting all economic and legal functions related to life phases of fixed assets components. We have detailed data on particular components of fixed assets, we gather information on current investment, planned and performed improvements and maintenance works and other events, not planned. Using simulations we optimize the operations related to management of those components and then we obtain clues for taking decisions (e.g.  purchase, leasing or rent). We can also take the results as a basis for balance policy (using special amortization, the right to choose valuation) and the basis for cost calculation (e.g. calculation amortization, calculation interest, capital costs).

So we enter the area of accountancy. Are the employees of the accounting department glad of the cooperation with SAP? 

Very  much so. Accounting staff perform now much less tiring routine operations. And the transparency, the reports being ready on the fifth day of each month… they have never had such comfort.

What SAP-based information is used by the board of your company? 

For the management the most important feature of SAP is the current access to necessary and full information, covering the whole area of company’s operations. We know in detail our settlements with customers and suppliers, we control costs, plan and perform investments. Soon we will know stock levels in detail, forecast the value of cash resources, keep the statistics of breakdowns and many, many more.

What did the cooperation with SAP partner BCC look like?

It was perfect. As we expected, BCC met the requirements of the task; competence of the  consultants and efficient management of the project significantly influenced the success of implementation.

What are other indirect advantages of SAP implementation?

I think there are many. For example increasing the book value of the company and qualitative change in management.

Do you think that after SAP implementation ZEC Bydgoszcz has strengthened its market position? 

ZEC Bydgoszcz SA may be now seen not only as a company with a high organizational and technical potential, successful in research and development, caring for environment, but also as the one to use leading world-class solutions in IT technology in wide sense, optimize business processes and cost control.

How are SAP solutions related to development plans of the company? 

SAP system is constructed in such a way that as the company  develops, we can use more and more advanced functions. It works in single companies, holdings and even global companies. Whatever the future direction our company takes, we are certain that R/3 will meet its demands. Besides there are always new SAP products launched, like those using the internet. Maybe we will take advantage of them soon.

Would you recommend SAP to companies similar to ZEC Bydgoszcz, like those that are now preparing to privatization? 

As I mentioned before, a company using such a system experiences a qualitative change in management and information about all aspects of company’s operations is up-to-date and easily available, which really facilitates managing and reduces costs. Building information policy of a company on SAP system, which is a world-recognized standard, makes us a very reliable partner.