Rohm and Haas realizes IT cost reductions, enabled with SAP ERP and IBM Power Systems

With sales of almost $10 billion, Rohm and Haas pioneers innovative technologies and solutions for the specialty materials industry. Headquartered in Philadelphia, PA, the 15,000 company employees serve the construction, electronics, food, household, industrial, medical, packaging, paper, personal care, pharmaceuticals, transportation and water markets.

Business growth

Built largely through acquisition, Rohm and Haas is focused on growth. Today it has more than 100 manufacturing, technical, research and customer service sites in 27 countries. Acquiring and integrating multiple businesses created an enormous business challenge. A mix of best-of-breed and in-house developed applications were inherited from each acquisition, making central reporting and planning a complex and time-consuming task.

Anne Wilms, Executive Vice President and Chief Information Officer at Rohm and Haas, comments: “In this situation, how do you ever really know what’s going on? How can you manage and grow the business prospectively, rather than respectively? Information quality is always questionable, and executives spend significant time questioning the validity of the numbers.”

“Patching systems together could be done, but in the end would cost about the same as implementing a new global ERP solution, plus you would have the difficulty of making changes in a best-of-breed ‘spaghetti’ environment,” says Anne Wilms. “We did not want to have to become systems experts.”

“With a common solution for all divisions, we knew we were going to lose some localized functionality as we did not wish to tailor applications down to the departmental level. The balance was the huge increase in the quality, reliability and speed of data delivered.”

SAP ERP applications offered a very close fit for Rohm and Haas, with their long history of serving the chemicals industry and offering a complete order-to-cash process. Recently, the company decided to upgrade its original SAP ERP production system (version 4.6C) to the latest version of SAP ERP with ECC 6.0 components, and perform a Unicode conversion at the same time. IBM India was a key part of this effort and is now a well-known resource in SAP upgrade projects.

IBM partnered with Rohm and Haas in the technical upgrade, and helped ensure that all the existing custom and standard programs were fully Unicode compatible, during a six-and-a-half-month project. During execution, the IBM team worked on 2,615 objects of which 1,547 (about 60%) were affected by the Unicode conversion and required sustained focus and efforts to reach the goal.

Business transformation

Rohm and Haas began this transformation during the years 2000 – 2004 by implementing a single instance of SAP ERP modules across all global business units and functions.

Each component area of the implementation, such as financials or order to cash, was owned by a specific business representative who took responsibility for completing the implementation. The results of moving to a global ERP system were outstanding, as Anne Wilms explains: “For example, it used to take 28 days to close the books. With the SAP applications, closing the books now takes just 5 to 7 days. For the first time, we had a consolidated view of procurement activities for our raw materials, and were able to optimize spending and gain valuable discounts.”

The team also reports that one of the largest savings is in the IT support environment. “Previously we could not even define our infrastructure on a chart! By consolidating to a single SAP ERP platform, annual IT costs have been reduced significantly, during a period in which the corporation’s sales grew from $6bn to $10bn,” says Anne Wilms.

Put another way, in the period 2003-2008, IT costs reduced from approximately 3 percent of revenue to 1.3 percent. Much of the cost reduction was through the implementation of SAP and standardization of processes, combined with the IBM Power Systems using virtualization to reduce the physical server footprint.

The company’s SAP implementation coincided with the emerging trend for greater financial accountability and corporate compliance with legislation such as the Sarbanes-Oxley Act of 2002. By implementing SAP software as a single global ERP solution, Rohm and Haas was able to realize additional benefits in terms of transparency and ease of compliance with new legislation.

Price changes reflected more quickly

As the company is dependent on a wide variety of raw materials, a significant challenge for Rohm and Haas is to reduce the time between input price changes and sales price adjustments. In the past, it took one quarter to reflect variations. With shared SAP applications that can drill-down from final product right through to initial feed stocks, raw materials price changes can be reflected more quickly.

When raw materials prices are rising, Rohm and Haas is able to manage the consequences – including the impact on cash flow. When costs are falling, the company can reduce final prices while maintaining margins.

Executive dashboards

Easy access to reliable information has transformed Rohm and Haas from a diverse company with multiple data sources to an integrated operation.

“For example, we now use SAP ERP to deliver financial data using executive dashboards – a solution we call ‘the Pulse’,” says Anne Wilms. “Accurate, detailed information is available to appropriate executives, refreshed twice daily, with key performance indicators.”

“The Pulse has been exceptionally successful: there is not an executive in the business that does not like the dashboards. They say things like: ‘I don’t know what we did before this’ and ‘The dashboards have been the best investment decision we ever made’.”

Rohm and Haas is also using SAP NetWeaver Portal to provide the Pulse dashboards on Blackberry devices, offering high clarity and consistent data – in near-real time – from the SAP applications over the IBM infrastructure. With the Blackberry solution, executives on the move can have key performance indicators always available.

Building the new architecture

The original IT landscape at Rohm and Haas had been dictated by the constant acquisition of new companies. Between 1,200 to 1,400 physical servers, mainly running Microsoft Windows and some UNIX operating systems, were dispersed throughout the corporation.

Working with IBM Global Business Services, Rohm and Haas elected to implement its upgraded SAP applications on IBM Power Systems servers, predominantly p570 POWER6 systems with their optimal compromise between flexibility, performance, and cost, running IBM AIX. Using the advanced virtualization technologies of the IBM POWER architecture, multiple applications and services can run in separate virtual servers, which has allowed the corporation to cut the number of physical servers by more than half, to 600. This reduction saves at least 150kW in electrical power alone, making a sizable contribution to greener, more efficient operations. The virtualization program has also helped to deliver reductions in maintenance, management and support costs that contribute to lower IT operational costs at Rohm and Haas.

Charles Wallace, Executive Director of IT Architecture and Infrastructure, comments, “The drive is for continuous consolidation and simplicity of management, and to help us to exploit the performance offered by the Power Systems servers.

“With virtualization, we are able to move processor capacity to where we need the power. With IBM Power Systems, we typically reach 60 to 70 percent processor utilization, which means we can avoid buying new systems simply by using what we have more efficiently – with IBM we get more bang for our buck.”

The central IT team of four database administrators and four SAP BASIS administrators is able to support some 12,000 SAP users. With global operations, the SAP applications are in continuous operational use, with uptime of better than 99.98 percent. Rohm and Haas has achieved these availability levels through using the advanced clustering capabilities of the IBM Power Systems servers, ensuring that operations continue even should a specific server require downtime.

The SAP ERP applications run on IBM Power Systems servers at a main data center in Philadelphia, with a remote backup and recovery data center some 23 miles distant. IBM Tivoli Storage Manager provides automated backup, archive and restore services to an IBM System Storage 3594 tape library.

Rohm and Haas also deployed Tivoli Access Manager for Enterprise Single Sign-On for 13,000 users. This allows all users to sign in to the relevant applications, as defined by their role, with a single log-in process. This simple yet enormously powerful concept helped the company achieve $190,000 in savings in year one alone by reducing the number of helpdesk calls associated with password resets.

Tivoli Access Manager for Enterprise Single Sign-On also offers a simplified end-user experience, by eliminating the need to recall multiple user names and passwords, which in turn has helped compliance reporting by tracking and collating user access. The software offers strong authentication, session management, workflow automation and centralized administrative and audit capabilities, without requiring changes to SAP applications and the existing IT infrastructure. Employees now have fast access to all applications and network resources with a single password on both personal and shared workstations.

Scott Megill, Project Manager for the Tivoli Access Manager for Enterprise Single Sign-On implementation at Rohm and Haas, comments, “Management at Rohm identified single-sign-on as one of the top three technical changes that improved their lives and helped raise productivity. These are the things that can make a real difference across an enterprise. With Tivoli Access Manager providing enterprise single sign-on, it is faster and easier for employees to gain access to the systems they need, saving a significant number of man-hours each day across the whole organization.”

Rohm and Haas worked closely with IBM Global Services to scope out a twin migration of the SAP applications and complete a migration to Unicode in the same project. The purpose was to take advantage of the program steps that could be shared across both projects, offering a more cost-effective route towards the new system environment.

“Having started with SAP R/3 4.6C, Rohm and Haas completed its cutover to SAP ERP 6.0 and 5.5TB database – introducing Unicode during the same migration – inside a 48-hour time window,” says Charles Wallace. “We have also invested in automated systems management software such as Tivoli, which enables us to run the SAP applications globally with an exceptionally small team. All our actions are designed to drive costs down or mitigate cost increases. Simplification through server virtualization and consolidation is very important to us.”

Rohm and Haas has also implemented IBM CommonStore for SAP, which automates the archiving of SAP application-related data to disk or tape. CommonStore provides access to stored business information and reduces unnecessary data redundancy, helping businesses maximize their storage utilization by optimizing databases and improve total business efficiency.

Business intelligence and planning

Rohm and Haas has deployed SAP NetWeaver Business Intelligence to bring together its reporting, analysis and business management projects. Data is collected from transactional, production and manufacturing systems, and executives can then conduct what-if and data mining exercises on the constantly updated information warehouse.

In a related project, Rohm and Haas is working with IBM Global Business Services to introduce the SAP Advanced Planning and Optimization (SAP APO) solution, designed to optimize the “available to promise” process. This will enable Rohm and Haas to have a global demand and supply planning model positioning them well for the supply chain process transformation and optimization journey.

“Through the use of dashboards, SAP NetWeaver BI and SAP APO data automation we are giving the people at the plants the ability to do more querying and analysis of the supply chain for themselves,” says Charles Wallace. “We are on the lookout for solutions that will save significant dollars on procurement and compliance, and with IBM Power Systems we have the infrastructure capacity to do this.”

Real teamwork

Rohm and Haas has been working with IBM since 1996, and continues to explore cost-saving opportunities that can be exploited on the new SAP and IBM infrastructure.

Anne Wilms says, “What we really like is the IBM model, including the IBM offshore model combined with people on the ground. We like the honesty and openness – IBM has skin in the game and a willingness to take responsibility.

“From a cultural perspective, IBM fits very well with Rohm and Haas. When we are faced with market pressures IBM Global Business Services responds with a flexible attitude to meet our needs. IBM is willing to find solutions even if it is a short-term need and not necessarily a long-term opportunity.”

The popularity of the SAP NetWeaver BI solution has led to increased usage, and consequent growth in server workload. Rohm and Haas is considering the introduction of the IBM Systems solution for SAP NetWeaver BI Accelerator, based on IBM BladeCenter technologies, which would greatly accelerate the delivery of query results. IBM Global Business Services regularly presents such possible solutions and advises about the costs and benefits, so that the Rohm and Haas executive team can consider the business case before commissioning implementation.

“Ultimately we want to assure we are giving our executives and managers the best possible information to make accurate and timely decisions,” concludes Anne Wilms. “Rohm and Haas is well-positioned to accomplish this with IBM and SAP infrastructure, combined with advice and support from IBM.”