Pague Menos finds the best medicine for Initial Public Offering with IBM and SAP

Published on 12-Jul-2012

Validated on 07 Jan 2014

"We are extremely happy with the way that IBM Global Business Services managed this very complex project. The methodology that was used ensured that the solution was delivered on time and within budget, and IBM was always there to address any issues as they arose." - Pedro Praxedes, Systems and Logistics Director, Pague Menos

Customer:
Pague Menos

Industry:
Retail

Deployment country:
Brazil

Solution:
BA - Business Intelligence, Business Resiliency, Enterprise Resource Planning, Information Integration, Small & Medium Business

IBM Business Partner:
SAP

Overview

Pague Menos is one of Brazil’s leading drugstore chains, headquartered in Fortaleza. It employs approximately 14,000 people at more than 500 stores across the country. The company is growing at a rate of 25 percent annually, and reported revenues of 2.9 billion Brazilian reals ($1.5 billion) in 2011.

Business need:
Pague Menos has ambitions to expand the size of its retail pharmacy network by 50 percent, and is structuring an initial public offering to raise the capital needed to pursue this growth strategy. However, the company was concerned that its existing systems were capable of meeting rigorous financial standards and strict regulatory requirements that a public listing would impose, and sought a way to modernize its financial system to meet those demands.

Solution:
Pague Menos chose to replace multiple existing solutions with integrated SAP ERP applications, including Financial Accounting, Controlling and Materials Management. Pague Menos selected IBM Global Business Services to manage accelerated implementation, based on the IBM Express Solution for SAP Business All-in-One.

Benefits:
Reduced the time taken to close monthly financial accounts by 75 percent, from approximately 30 to 40 days to less than ten days. Cut error rate in financial reporting process by an estimated 35 percent. Improved integration and insight into company processes delivered by SAP ERP will help Pague Menos to meet the regulatory requirements for becoming a publicly-traded company. Increased the speed of business process execution by as much as 70 percent in certain areas.

Case Study

Pague Menos is one of Brazil’s leading drugstore chains, headquartered in Fortaleza. It employs approximately 14,000 people at more than 500 stores across the country. The company is growing at a rate of 25 percent annually, and reported revenues of 2.9 billion Brazilian reals ($1.5 billion) in 2011.

Pague Menos has ambitions to expand its operations even further by doubling the number of drugstores it manages. In order to raise the large amounts of capital needed to pursue this strategy and fuel additional growth, the privately-held company is structuring an initial public offering, which will eventually see its shares traded on the São Paulo Stock Exchange.

The rules for taking a company public are complex, and the process requires months of rigorous planning and financial auditing. When listed on the exchange, Pague Menos will be subject to strict new regulations and will be required to open its accounting practices, sales figures, and marketing plans. All of this will make it essential for the company to keep immaculate financial records and have an accurate overview of all of its business processes.

Meeting the challenges of going public

Pague Menos, however, was not convinced that its existing financial accounting systems were capable of meeting these demands. The financial department relied on a number of disparate legacy systems running on different operating systems. Information from these systems had to be integrated manually, using time-consuming and error-prone manual processes based on spreadsheets. The company had additional concerns about the integrity and security of its financial data, as existing systems had no audit logs and a very limited degree of access control by user profile.

Pedro Praxedes, Systems and Logistics Director at Pague Menos, explains, “With our old systems, it would take us anywhere from 30 to 40 days to close the financial accounts for a single month. This was because the information we needed was spread across several systems, and had to be manually integrated and reconciled. For example, our banking conciliation system was not integrated with accounting, which meant that we had to perform all bank payments manually.

“On top of this, there were often inconsistencies in the data, with numbers not matching across the systems. This meant that the team would frequently have to work extra hours; sometimes they even had to work in parallel on financial accounts for two different months at the same time. The whole system was very impractical and we knew that there was no way we could continue to operate like this if we wanted to become a public company.”

Rapid, best-practice implementation

Pague Menos turned to IBM® Global Business Services® to help evaluate possible solutions, and later, as a full implementation partner. “We knew that modernizing our financial systems would be a huge undertaking, and we needed a partner with the experience and expertise to successfully manage the project,” states Praxedes. “We had worked with IBM in the past and were very satisfied with the level of service we received, so we were fully convinced that we were making the best choice.”

The IBM Global Business Services team recommended replacing legacy systems with a centralized SAP ERP solution, which included modules for Financial Accounting, Controlling and Materials Management. As the project scope was extensive, covering the company headquarters and more than 500 drugstores across Brazil, IBM proposed using a pre-configured IBM Express Solution, based on SAP Business All-in-One software, and implemented following the IBM Express Methodology. The project took shape in four stages, and IBM Global Business Services based the implementation on best practices from the IBM Express Methodology for SAP All-in-One solutions.

The IBM Express Methodology is designed to be highly scalable, and is based on two major components: work breakdown structures and work products.

This allows different work elements to be easily defined and flexibly grouped, creating a common project framework that helps to organize the total work scope and accelerate project delivery.

The solution comprises a collection of pre-packaged SAP Best Practices templates, which provide pre-configured business processes and project accelerators to streamline implementation. The templates cover approximately 80 percent of the configuration workload, and the remaining 20 percent of the solution was tailored to meet Pague Menos’ specific needs.

“The IBM Express Solution allowed us to rapidly deploy the standard SAP ERP applications we needed, and also gave us the flexibility to customize individual elements to our own specifications,” explains Praxedes.

“By combining the full functionality of standardized SAP ERP software with custom enhancements that address our unique business needs, IBM Global Business Services gave us the best of both worlds.” With the advantage of the preconfigured IBM Express Solution and the use of the IBM Express Methodology for SAP All-in-One, IBM Global Business Services was able accelerate the implementation and deploy the solution in five months.

“We are extremely happy with the way that IBM Global Business Services managed this very complex project,” remarks Praxedes. “The methodology that was used ensured that the solution was delivered on time and within budget, and IBM was always there to address any issues as they arose.”

Improved integration and process efficiency

The new SAP ERP applications have tightened integration across Pague Menos’ large retail network and its range of financial processes. The SAP software is currently used by around 60 people at the company, and will help Pague Menos to comply with the regulatory requirements for publicly traded companies.

“The main driver for this project was to have a robust system with a unique interface, allowing greater agility and trustworthiness on the data,” comments Praxedes. “IBM Global Business Services has delivered just that with its implementation of the SAP ERP solutions. The integrity of our financial process is now fully ensured and it is much simpler to assess, audit and close the monthly balances. With SAP ERP applications in place, we now meet the regulatory requirements for becoming a publicly traded company.”

Where previously it took up to 40 days to close the monthly financial accounts, with the new SAP solution Pague Menos is able to complete the process in less than ten days, an almost 75 percent improvement. Pague Menos expects to reduce this figure even further – to less than five days – as the team familiarizes itself with the new system. These gains will help the company to effectively manage the pressure of meeting strict budget and audit deadlines once Pague Menos goes public. The SAP ERP solutions deliver accurate information at a much more rapid rate.

“Now that our financial systems are all integrated, it is much easier to obtain the data we need,” remarks Praxedes. “The integrated SAP ERP applications have automated many processes, and have significantly reduced inconsistencies and inaccuracies in the data. We estimate that we have lowered the error rate for our financial reporting process by around 35 percent.”

Pague Menos has further benefited from a reduction in the complexity of its application environment, which drives greater consistency and control throughout its business processes. By creating a standard framework based on SAP ERP software and optimizing the integration between business processes, the company has improved information flow throughout the business. Combined with the improved insight delivered by SAP ERP, this has increased the speed of business process execution by as much as 70 percent in certain areas, allowing the company to make more informed and accurate business decisions, which will help it to grow more effectively.

“We consider this project to be a complete success,” concludes Praxedes. “The IBM Global Business Services team handled the entire process very efficiently and quickly. This reduced the overall cost of the implementation and disruption to the business, allowing us to focus our efforts on getting to grips with the new system and laying the groundwork for a successful IPO.

“Standardizing on SAP ERP software has facilitated the integration of new acquisitions and helped us to improve our overall company performance. Thanks to IBM Global Business Services we now have a solid SAP ERP platform in place, which will support us during the process of going public and beyond.”

Products and services used

IBM products and services that were used in this case study.

Service:
GBS ISV Community: SAP, IBM-SAP Alliance

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