The King Oscar brand, known for its canned fish with a characteristic portrait of King Oscar on the packaging has been present on the world markets for as long as 110 years. In recent years, it has undergone restructuring and ownership changes. First, in 2009, it was carved out of the structure of the Rieber & Søn group as a parent company of King Oscar in Norway with subsidiaries in Poland, Belgium and the United States. Then, in 2010, the majority of shares were bought by the investment fund Procuritas Capital Investors IV JP A, based in Stockholm. Rieber & Søn still owns a part of shares in King Oscar and its companies distribute products in Poland, Norway, the Czech Republic and Slovakia.
The headquarters of King Oscar remains in Bergen with one of the fish processing plants located in northern Norway, but the main production plant is based in Gniewino, a Kashubian village.
Rieber & Søn uses the SAP system, which of course covered also the King Oscar company. One of the consequences of changes in ownership was also a need to provide the company with an integrated IT system, in which King Oscar would manage its business processes on its own.
This entailed a serious operation of carving out and “cutting off” the SAP system and selecting a maintenance strategy that would ensure its reliability, high availability, comprehensive maintenance and application management as well as service at the highest level to which users were accustomed.
The plant in Gniewino occupies an important place on the map of King Oscar. Here in Gniewino near Wejherowo, the company’s main production plant is located. Why was it decided to invest in Poland?
Jakub Rutkowski: The Norwegian food group Rieber & Søn has been present in Poland since 1996. The next stage of the expansion was to take control of Big Fish, a Gniewino based producer of canned fish in 1998.
Already at the beginning, a strategic decision was taken to gradually transfer the production of canned fish from Norway to Poland. Since 2008, there has been only one production facility in Norway. Low labour costs were a decisive factor for locating the main plant in Poland. Our industry is characterised by a high proportion of direct labour costs – the fish are hand-packed into cans. The location near the main sources of raw fish supply – fisheries in the North Sea – was also important.
From the beginning, modern technologies were also transferred from Norway to Poland, including a unique process of smoking Norwegian sardines for overseas markets. Using modern techniques of management and optimisation of the production process, the productivity was greatly improved.
Significant investments in the plant were subsidised under the sectoral operational programmes of the European Union. Over the following years Gniewino was reaching increasingly higher sanitary and veterinary standards. We currently produce over 70 million cans a year, of which over 80% is exported. We meet the most stringent global standards of production quality, including ISO 22000, FSSC 22000, OUP kosherness.
The headquarters of the King Oscar group is located in Norway.
Previously, as a part of the Rieber & Søn group, King Oscar used the corporate SAP ERP system. What standard of its maintenance, administration and user support are you accustomed to?
Dariusz Bakiera: The SAP system in Rieber & Søn was used by over a thousand users from more than a dozen European countries. The support was provided by an in-house Competence Centre, which together with the IT Department occupied a separate floor in the company’s office. The company had a large data centre, where IBM AS/400 servers, being an SAP hardware platform, were located in addition to a few dozen PC servers.
The SAP maintenance model in Rieber & Søn was based on the role of key users, who were responsible for solving most frequent problems and facilitating contacts between end users and the Competence Centre. The latter was responsible for organising external support if necessary. Currently, in cooperation with SNP, King Oscar continues the model based on the role of key users.
The decision on King Oscar’s necessity to deploy its own SAP system was taken in mid-2010. It was assumed that the project would be completed by the end of 2011. This period was too short for the company to set up its own SAP competence centre practically from scratch. Additionally, in the case of a company of our size, the development of such a centre would be an investment hard to justify in financial terms. Therefore, we decided to find an external partner for both SAP hosting and application management.
J.R.: In Rieber & Søn some processes in SAP ERP were centralised. An example can be the creation of new indexes, elements of closing periods in FI/CO or daily loading of currency exchange rates. Data structures were also managed in the headquarters. After the carve-out, some competencies had to be built within our organisation because it would have been ineffective to engage SNP for these simple tasks.
In the time of Rieber & Søn we were exempted from managing authorisations and roles in the system. At present, in cooperation with BCC, we are at the initial stage of the project aimed at structuring authorisations and adopting a uniform model for King Oscar.
It is said that the operation of carving out a part of the system for an independent entity out of a larger corporate installation is a complex project, not only IT-wise but also businesswise. How did you prepare for it, what was the biggest challenge?
J.R.: The carve-out process started with the business part. First, we carved a new company out of the assets of the organised part of the enterprise. The same thing happened in Norway. In SAP ERP, new companies were set up as new, separate business units. The next step was to carve out a system in IT terms. In the SAP system, new business units were carved out in their entirety.
D.B.: In order to simplify the project and make it feasible within the assumed time frame, we decided to leave the data from the period preceding the carve-out of separate business units of King Oscar only in the system of Rieber & Søn. Therefore, there was no need to divide data and structures of any business units. Designated SAP users at King Oscar can still refer to historical data in the old system. The only exception to this rule was the HR module, in which a copy of the whole payroll area was made, and then data on employees who did not work in the factory in Gniewino were deleted from the system of King Oscar.
The biggest challenge in the project was to find potential partners with experience in conducting similar operations. As it turned out, situations analogous to ours are extremely rare. Usually, companies of a similar size to King Oscar which migrate from a larger SAP installation decide to deploy another solution (and it is necessary to convert the data) or are incorporated into another SAP structure which is already functioning. We faced the need to launch a new SAP system, functioning on the basis of the part of data copied from the previous installation.
At the stage of selecting a new partner, the project, which I managed, was conducted by the Steering Committee whose member was also a representative of Rieber & Søn. I am glad that I could benefit from the previous company’s vast experience in conducting similar projects. At this stage, King Oscar also benefited from the support provided by an external consulting company. During the proper deployment, I was supported by a coordinator appointed by Rieber & Søn, the Competence Centre staff and my own team of key users.
The first preparations pertaining to the project began in summer 2010, so the project took about a year and a half. In short, the project schedule looked like this:
- December 2010 – sending requests for proposal,
- Spring 2011 – analysis of proposals, meetings with potential partners,
- June 2011 – decision about accepting the proposal of SNP,
- August 2011 – signing contracts,
- November 14, 2011 – going-live.
Originally, we planned to perform the operation of carving the system out of the previous KO system with the support of SNP. From the technical side, the operation was supposed to consist in making a backup copy of the existing system, and then deleting the data about other than KO’s business units from it. The very operation of deleting the data on indicated units was to be executed using tools provided by SAP AG as part of the System Landscape Optimisation service (SLO).
However, the implementation of this plan was hindered by a too-busy schedule. We made the decision about selecting a partner in June 2011, and it was already clear then that the only time when the new SAP system could still go live in the same year was a long weekend due to the Independence Day, November 11. The analysis showed that the new service provider would not be able to meet this deadline because of the need to become familiar with the specific nature of the KO’s system.
The only solution allowing for the planned deadlines to be met was the execution of the carve-out operation by the Competence Centre of Rieber & Søn, which had many years’ experience in supporting the existing installation and did not need additional time to get acquainted with our system.
Perhaps the biggest challenge was the necessity to coordinate the project tasks carried out by representatives of several multinationals: at Rieber & Søn, in addition to Norwegians, Poles and Czechs were involved in the work; King Oscar and SNP were represented by employees from Norway and Poland. And finally, SAP AG – a Norway subsidiary, but also consultants from Argentina as part of SLO.
After these experiences – let us add, successful ones – what conclusions could you share with other managers who are preparing for similar projects?
D.B.: Looking from today’s perspective, we can say that we attached too little importance to launching interfaces in the new system. This refers in particular to interfaces with the King Oscar logistics operator. We decided to use a middleware platform other than the one used in Rieber & Søn. For King Oscar, it was to be SAP Business Connector. Therefore, the interfaces could not be easily transferred from the previous installation, but they had to be developed practically from scratch. We did not realise that this operation would be so time-consuming. Despite the dedicated commitment displayed by SNP consultants, the interfaces got launched really last minute.
As mentioned earlier, the project practically took about one year and a half to be completed. However, it must be admitted that during the first few months the work was not too intense. As a result, there was really little time just before going live. I think that if we could have postponed the go-live of the system till the end of the year, the atmosphere would have been a lot less tense. But such things are always easy to judge after the fact, and difficult to plan in advance.
J.R.: A proper preparation of key-users for effective cooperation with consultants is an important aspect here. The knowledge and experience of key-users must be at the adequate level. This was particularly important in our case because we had incomplete documentation on the processes in SAP ERP. On the technical side, there is always a possibility to obtain support from an external partner. But it would be very difficult to carry out a similar project without perfect knowledge of our own business processes.
The SAP system for King Oscar has been carved out – and what next?
J.R.: We had to know the answer to this question before carving out the system for King Oscar. Where the system will be located and how it will be maintained – these are some of the important questions you must ask yourself before the whole operation.
So which SAP ERP maintenance models were considered for King Oscar, which were chosen and why?
D.B.: As I mentioned earlier, it was clear from the beginning that we wouldn’t be able to build our own SAP competence centre within the assumed time frame. This meant the need to find providers of both hosting and application management services. The general objectives of the project provided for the option of two separate entities. Fortunately, however, the offer of SNP in both areas was so good that it allowed us to put the entire responsibility for our system in the same hands.
J.R.: The SAP ERP system should be perceived also from the investment perspective of our owner – a private equity fund.
The analysis of TCO (Total Cost of Ownership) shows that in the period of 5-7 years the full outsourcing is the most cost-effective solution and provides support for existing business processes. Our organisation is too small to build its own competence centre.
We hope that the right outsourcing partner will also allow us to roll the existing SAP ERP solution to new entities. The plans of our investment fund include also acquisitions of new companies from our industry in Europe to increase the value of the King Oscar group.
What criteria determined the selection of providers of outsourcing services? Why was the offer of SNP chosen?
D.B.: The basic expectation was obvious – the quality of service at a level comparable to the service provided by the competence centre of Rieber & Søn.
When choosing a partner, the cost of system maintenance was of course an important parameter, but not the only one. The experience of a potential partner, especially in supporting entities of similar size to King Oscar, was for us equally important. We feared establishing the cooperation with large international corporations. I think that they would not have given adequate – from our point of view – importance to our problems. In addition, the offshoring, which is often used nowadays, would have generated new types of problems (a language barrier, various time zones, etc).
We verified partners’ experience during many meetings, talks and reference visits. We also tried to find in the references of potential partners examples analogous to the carve-out of King Oscar’s system, but for reaSøns mentioned earlier, it turned out to be difficult. We managed to identify two quite similar cases in the references of SNP. SLA parameters proposed by SNP were also important for making the final decision. The flexibility in negotiating the parameters was considerable enough to make sure that the service provider would not have problems to comply with them.
We also made a visit to the SNP outsourcing centre. We were intrigued that unlike with other potential partners we were not allowed to enter the server room at SNP. Today, however, I am sure that this massive steel door which ended our visit was not a dummy. And the ban on admission was due to the stringent safety rules.
Thus, the concept of SAP ERP carve-out from Rieber & Søn was ready and a system maintenance partner chosen. What was the next step?
D.B.: The very migration of SAP to SNP (“technical migration”, in our case we carried out the so-called heterogeneous SAP migration), although it involved the database conversion, was one of the least problematic operations from our point of view. Perhaps it looks like that only from King Oscar’s perspective because it was almost entirely carried out by Basis consultants from SNP. During the so-called long weekend of system separation (from Thursday, 11:00 p.m. to Monday, 9:00 p.m.), this migration took only a few hours. Although after going-live it gave us “moments of terror”.
Well, after several days of King Oscar’s system operation, a damage to one of its tables was identified. We suspected a corruption of data at the stage of the export from Rieber & Søn system. The use of the back-up copy made a few days earlier was at that stage hard to accept. However, after a sleepless night, it appeared that there were technical SAP notes describing the fault and the error was quickly corrected.
This situation proves that such a complex system like SAP is difficult to test in 100%, though.
What were the consequences of the system transfer to SNP for its users?
D.B.: We tried to make the change of the partner to be as little problematic as possible for normal users. I think we managed to achieve this goal. In practice, they were informed only that from that moment on the principle of reporting all problems to key users in the first place would have to be strictly observed. Although similar rules were also formally in effect in the case of Rieber & Søn, they were not always obeyed. In the case of SNP, the access to the service desk is, however, contractually limited only to key users.
What is the functional scope of SAP at King Oscar?
J.R.: SAP at King Oscar supports most of the company’s business areas, according to the list of modules in use. The functional scope of the system covers the finance and controlling areas as well as fixed asset management, sales and distribution, materials management and warehouse management, production planning and quality management. We also have a rarely used functionality for managing recipes (Recipe Management) and a data warehouse. King Oscar Poland uses also the SAP HR module.
Fortunately, very few custom solutions were applied in the system used by King Oscar. This greatly facilitated the hand-over of the system to the new service provider and the related transfer of knowledge.
It should be noted that as part of the project in question the separation and launching of the new SAP installation were not the only activities completed. In parallel to the work related to SAP, together with BCC we carried out the deployment of a new electronic document flow system. This was due to the fact that ending work in the SAP system shared with Rieber & Søn, King Oscar had to choose its own solution in this field. Since the electronic document flow system had been functioning in the company for many years, we no longer imagined working without its support. Thus, the new solution had to be ready simultaneously with the go-live of SAP.
SAP administration is a very wide concept. And specifically? What work do SNP consultants do in King Oscar’s SAP system?
D.B.: As part of the administration and hosting of the SAP system, SNP consultants not only monitor the systems and proactively react to potential problems, but also solve Basis-related problems reported by key users.
Problems with logging in, changes of authorisations or issues relating to the handling of print-outs can be an example. In addition, SNP also deals with the maintenance of our newly deployed electronic document flow system under the hosting agreement.
In addition to the system administration, SNP remotely supports Norwegian and Polish users of SAP under the SAP application management agreement. How do users find this service?
D.B.: As a result of the decision to continue the previous model, the first line of support consists of key users. Only the problems beyond their competencies are forwarded to SNP via the service desk application. We like its operation a lot as it organises the flow of information.
In the case of the previous company, a similar tool was also available, but it was not consistently used and as a result, the picture it presented became quickly outdated. In cooperation with SNP, even the communication through other channels, such as e-mail, phone, which is sometimes also necessary, is always reflected in the relevant entries in the service desk.
The most common are “standard” requests, but the ones going beyond the competencies or the scope of authorisations of key users. They include requests for modification of system tables (e.g. new PCGS codes, renaming storage locations, implementation of SAP notes – particularly frequent in the HR module). However, there are also more complex orders regarding, for instance, the reorganisation of some business processes. Particularly complex issues are separated as an individual project. Here an example can be the adjustment of the authorisation model to the needs of King Oscar.
As the project manager for the “delivering” organisation, this was a new kind of project for the Rieber & Søn team. But the cooperation between King Oscar, SNP and Rieber was working well. We had regular meetings aligning our tasks. SAP were also helpful and they were doing the actual technical work. Thanks to the good system knowledge at both King Oscar and Rieber, we were able to execute the carve out with minimal stop of operation in King Oscar. The difference in this project compared to other SAP projects was of course the technical scope with deleting critical parts of the SAP system. As the structure in SAP is very much linked to the company code, it was to our advantage that King Oscar had already been separated from Rieber & Søn with their own company code. During the SLO (deletion), we actually deleted all non-King Oscar company data, while keeping King Oscar and general data.
As previously mentioned, historical data has been kept in the Rieber system. What needed to be agreed and was much discussed was the level of access needed for KO users in their old SAP system. Also, it was important to be able to do a test deletion. After four months of running in separate systems, I think we can say the carve out was a success.Synnøve Tverlid, Project Manager, Member Executive Board, Rieber & Søn
Since November 2011, the SAP system of King Oscar has been maintained and administered in the SNP outsourcing centre. After a few months, it’s time for the first summary.
D.B.: Generally, we are satisfied with the level of the received support, both in terms of the system administration and application management. However, it is a little too early for a detailed summary. The settlement of the first quarter of cooperation is still ahead of us, and this was a period in which we still solved a lot of issues related to the system carve-out. During this period, the first closing of the month in the new system, for example, as well as its preparation for work in the new financial year took place, which was important from the viewpoint of the HR area, among other perspectives.
I think that only the months to come will show how the labour-consumption assumed in the contract relates to the reality. In the case of big discrepancies, I hope that we will be able to amend the contractual provisions for the mutual benefit.
The role and importance of the Polish company in King Oscar, as well as a selection of the Polish outsourcing company as a partner in maintaining SAP both confirm the trend of the increasing importance of Poland on the business map of Europe, which can be also observed in other international companies. What is the reaSøn for this in your opinion?
J.R.: In the King Oscar group we create a tightly integrated multinational organisation in Norway, Poland, Belgium and the United States. The shared service structures present in Poland are run by local managers. The management of King Oscar is very centralised. The main decisions are taken at the level of the group. Two members of the group board come from Poland and have a key influence on strategic decisions regarding the whole King Oscar group.
For Norwegians, the underlying rationale for the investment in Poland was associated with relatively low labour costs. Gradually, high professional qualifications of managers and administrative staff were also recognised. I think that other corporations have gone a similar way and over time began to appreciate not only the cost factor, but also other potential of our country.
Outsourcing SAP for King Oscar in Norway and Poland
Since November 2011, the SNP Outsourcing Centre has been working for King Oscar. The SAP system maintained in the data centre in Złotniki near Poznań is availed of by users from the headquarters of King Oscar in Bergen, Norway, and production facilities in the Pomeranian Gniewino and Norwegian Svolvaer.
King Oscar AS decided for a comprehensive outsourcing contract with SNP, including SAP hosting, SAP administration and SAP application management. After the migration – the transfer of the SAP system to the SNP data centre – carried out by SNP, the system administration is a responsibility of SNP specialists. SNP also provides hosting and administration of an additional IT system integrated with SAP, which supports the flow of invoices.
In addition, SNP supports remotely Norwegian and Polish users of SAP under the SAP application management agreement. The SAP application management contract covers the finance and controlling areas, materials management and warehouse management, production and quality management, sales and distribution, as well as human resources and payroll.