SAP S/4HANA Just the Medicine for Kiara Health’s Complexity, Cost Challenges
Companies wishing to transform their operations through digital technologies often face a hard choice: stay with a legacy system and make the best of a legacy investment, or transition to a new digital platform but risk causing disruption in the lives of customers, partners and employees.
For one African pharmaceutical company, neither option was suitable, and so an exemplary digital transformation project was initiated that would completely transform its systems without any disruption to the business or its customers.
Kiara Health (Pty) Ltd is an African pharmaceutical manufacturing and healthcare solutions company headquartered in Johannesburg. It serves as a the local, non-exclusive manufacturing partner for a global top five pharmaceutical company and as a commercial partner for several global pharmaceutical and medical technology companies.
The acquisition by Kiara Health of a multinational pharmaceutical manufacturing facility, sold to fulfil a need for transformation in the local pharmaceutical sector, sees the dawn of a new type of pharmaceutical company that offers an end-to-end solution along the patient journey. Kiara Health, a 100% black-owned company, purchased this plant together with twenty-five marketing authorisations.
Kiara Health’s leadership was left with a vital decision: keep to the highly-customised SAP ECC system of the outgoing multinational company (with cost-prohibitive separation terms), or invest in a standalone cloud-based digital platform to streamline operations. They chose a turn-key ERP system by SAP to support its operations.
Dr Skhumbuzo Ngozwana, CEO and President of Kiara Health, says that the driving force behind the leadership team’s decision was to ensure that their customers do not suffer due to a transition to the new system. “We partnered with Seidor Westrocon and adopted SAP S/4HANA to simplify and automate our end-to-end processes, from product ordering through to production, packaging and distribution. We achieved go-live in four months, and within budget, with no disruption to our business. This implementation is potentially unprecedented in an organisation of similar size and type.”
This decision has proven to be a success story as the transition from the old multinational modified system to the implementation of an off-the-shelf SAP offering ensured that the production facility remained operational throughout the SARS-CoV-2 lockdown period. Without any teething problems that would halt manufacturing, no employee jobs were put at risk due to the lockdown.
“This decision was taken by an extremely agile and highly qualified team of experts within Kiara Health and fully supports President Cyril Ramaphosa’s South African Economic Recovery Plan to generate 800,000 jobs,” says Dr Ngozwana. “Kiara Health sees these executions as part of their mission to progress the health of all on the continent, underpinned by job creation and not ‘job saving’.”
The manufacturing site previously operated on a complex and expensive legacy enterprise resource planning system. However, with the emergence of the COVID-19 pandemic, local manufacturing capability became more important than ever for new owners, Kiara Health. The company needed a system that could increase throughput by streamlining processes across business areas, and which could place greater control in the hands of the leadership team.
“We consolidated our operations on a standalone cloud-based digital platform with SAP S/4HANA Cloud,” says Dr Ngozwana. “This off-the-shelf solution gave us a flexible yet standardised system that is adaptable to our needs, allowing us to maintain best-practice. It has also future-proofed the digital foundation of our business, and enables our Industry 4.0 aspirations for the future.”
The implementation involved all Kiara Health stakeholders that are currently still involved in ensuring world-class manufacturing from the site. These experts worked in close collaboration with implementation partner Seidor Westrocon to develop a deep understanding of each department’s responsibilities, and how the SAP processes can support them.
“The transition from working in multinational company silos to operating as a team has improved our internal responsiveness and enabled significant value creation across our supply chain, procurement and manufacturing processes,” says Moosa Areff, Kiara Health Chief Operating Officer.
The implementation team streamlined Kiara Health’s procure-to-pay processes to shorten the time between order placement and goods receipt. Following the implementation, the company has reduced its days to close from eight days to one, greatly improving cash planning.
“We have tightly integrated and simplified on-time delivery processes to enable our team to get through work faster and troubleshoot with full visibility,” says Dr Ngozwana. “Each team member can diagnose any challenge to understand what is impacting production or the release of the end-product. The improved usability and support has helped us reduce the total cost of ownership by 10%, while our on-time and in-full delivery performance has improved from 80-85% to 100% – an outstanding achievement.”
Following the implementation, Kiara Health has enjoyed higher settlement discounts and improved brand reputation thanks to direct payment cycles. Costs are also contained due to greater visibility and through leveraging economies-of-scale in the procurement process.
“Our business is now more responsive as our planning and production teams are connected to our warehouse,” says Conrad Strydom, Kiara Health Head of Site . “We are also enjoying greater end-user sourcing compliance and increased savings in sourcing, in both direct and indirect spend. As a whole, the implementation of SAP S/4HANA has empowered our teams to make better decisions and improve the total performance of our business, setting us up for a bright future.”
On Kiara Health’s role in the implementation, Martin Van Wyk, Managing Director of Seidor Westrocon says the collaboration was first class. “The Kiara Health and Seidor Westrocon teams worked unwaveringly during the COVID-19 lockdown in South Africa, and pulled off the project and go-live together. The contribution from the Kiara Health leadership team, with their deep understanding of their business operations, extensive process knowledge and SAP expertise, was a considerable game-changer, making this mammoth task achievable. A big thank you to this team.”
Cameron Beveridge, Regional Director for Southern Africa at SAP, says Kiara Health has reduced complexity in its environment through greater control across its operations. “By building its operations on the powerful S/4HANA digital platform, Kiara Health has achieved immediate business benefits while enabling greater future innovation and easing the process of integrating Industry 4.0 innovations. Transforming its total operations in a mere four months with no impact on product or service delivery is a great accomplishment by Kiara Health and its implementation partner Seidor Westrocon.”