METRO moved to a new cost management process on October 1. The purchase to pay project envisaged the introduction of a unified budget management system concerning the cost of purchasing services and materials. It will employ 700 people from various divisions in all shopping centers of the company and the central office. The implementation of the project took 9 months from the idea to commissioning.
Business Challenges and Project Objectives
The Russian division of METRO is the central office in Moscow and 93 shopping centers in 51 regions of the country. The company employs about 12 thousand people. With this scale of business, the procurement process in Excel has become inefficient, with each business unit operating in its own spreadsheet or system using its own approaches to managing it. In addition, such a process involved a large number of manual operations and complex manipulations, for example, collecting data for calculating expenses or tracking purchases.
The company decided to combine the work on organizing procurement within the framework of a unified expense management system, it should reflect the entire process – from ordering a service to paying for it. The goal of such a system is to make purchases transparent at all levels, ensure integration with related functions and automate operations and, as a result, to improve control over budget spending, gaining new opportunities for analytics and correction of business indicators.
The implementation was carried out by Axenix specialists (formerly Accenture). The permanent team consisted of 12 people (project manager, five developers and six consultants), which included additional staff as needed. On the part of METRO, the work was supervised by a project manager, three specialists in improving business processes and three employees of the IT department.
It is worth noting the role of key system users who took an active part in the project. Each department selected the employees most interested in the changes. At the first stage, they became carriers of knowledge about the current process, during the implementation of the project they gave feedback and helped to improve the system, at the final stage they acted as ambassadors of the new solution, and they continue to train other employees to work with it.
Phase One: Review Current Process and Needs
The survey of current business processes and the systems in which they are conducted took about two months. It included the collection of information through interviews, as well as self-study of the involved IT systems. The result of the analysis was a visualization of current processes, where problems and growth points were clearly shown.
At the same time, the project team collected the wishes of interested departments for the organization of the process and the future system. The proposals were prioritized – partly included in the project, partly fixed to be taken into account during the development of the system.
Phase Two: System Development and Testing
The solution was developed using SAP as a platform. The company has already implemented the functionality of the FI (financial accounting) module. The project has implemented MM (Materials Management) modules for Procurement Chain and Inventory, PM for Maintenance and Repair, PS for Project Management and CAPEX Budget Control (CAPEX), FM (Funds Management) for Active Budget Control OPEX (Operating Costs). A program for accruing accruals in the financial accounting module was also developed. Some business tasks cannot be solved within the standard capabilities of the platform, so some of the functions had to be customized and finalized. The result was a hybrid solution that took into account the goals and features of the company. Its development took five months.
The system was developed iteratively: the project team collected feedback from future users of each function, if necessary, finalized or adapted the implementation of each business process. In August 2022, testing of the system began.
Phase Three: Launch and Scale the Solution
Implementation of the solution began on October 1. A roadmap has been developed to scale the system – departments are connected in turn, depending on the type of costs. We started with specialists in repair work and maintenance – these are engineers of all shopping centers of the network, then we connected employees of the marketing department. That is, future users have an understanding of when exactly they will switch to a new process.
By the spring of 2023, METRO plans to complete the transition to a new system and connect all key users – there are about 700 of them.
Phase Four: Change Management Program
In projects that change key processes and with a large number of employees involved, the most difficult thing is the involvement of people. Therefore, in parallel with the implementation of the system, work with personnel was carried out: it was necessary to explain the advantages of the new approach, train people to work in the system, motivate them and work with objections.
The project team conducted trainings for users, prepared instructions for working with the system, filmed a video about the benefits of changes in Russian and English. All materials are posted on the corporate portal.
In addition, the project team acts as technical support for users, helping them master the new tool.
Nuances of the project
Within the framework of the project, several interesting functions have been implemented. For example, we have fulfilled integration with the internal workflow program to reconcile Directum RX orders. Thus, an end-to-end process is organized, where the purchase chain is correlated with the data of contracts and additional agreements. Previously, these were disparate processes that were combined under the new system. This allows you to minimize the number of approvals at different stages of the purchase, as well as display in one place the service, its cost, supplier, contract conditions, and payment documents.
Another non-trivial task was the implementation of the accrual tool (accruals is accrued expense, obligation to pay for goods or services received before receiving supporting documents). Prior to the introduction of the new system, employees collected and made such accruals through complex manual operations. In the new process, such expenses are recorded automatically.
One of the main challenges for the project team was the development of a solution for automating budget control based on the FI-FM (budget management) module from SAP, while the company’s accounting was already automated on it. Technical difficulties were associated with the fact that updating the system when launching new functions did not disrupt the functionality already used by the business-critical functionality. But this task was realized.
The main goal of the project – to make the procurement process and budget control transparent and automated – has been achieved. Economic goals were not fundamental, but thanks to the implementation, it was possible to achieve cost reduction within the processes. Automation of processes will allow employees to improve the efficiency of their department. Advanced analytics capabilities will help company executives see process weaknesses and plan for their transformation, as well as find opportunities to optimize costs. For example, answering the question: why in one shopping center they spend one amount on the purchase of services, and in another one it is significantly more.
The result of the project should be an improvement in the quality of work with the budget. The automatic charging of expenses during the period when the service is rendered or the material is purchased allows you to revise the cost structure. In addition, the responsibility of budget managers increases – and this is another point for improving procurement.
It is important for businesses to understand clearly how budgets are spent. In this process, there are many growth points that become visible only if the work is organized transparently. A unified spending management system is a modern solution that allows you to take a fresh look at budgets and the principles of their spending.
By Svetlana Timonenkova, Head of METRO Finance and Accounting