www.themanufacturer.com Special edition
Clyde Pumps selects SAP and itelligence
Introduced by Allan Dowie
Presenting at SAP World Tour event
Interview
Jim McColl CEO Clyde Blowers
Introduction from Allan Dowie
In May 2007,
over 135 years after the Weir brothers founded their business, Jim McColl (chairman and chief executive of Clyde Blowers) announced the acquisition of Weir Pumps (Glasgow) from The Weir Group plc. Weir Pumps (Glasgow) was incorporated into Clyde Pumps Ltd and is a member of the Clyde Blowers portfolio of companies. As a result of this transaction, the diverse portfolio of technologies, process knowledge and expertise generated by Weir Pumps has been transferred into Clyde Pumps incorporating Weir Pumps, Glasgow. Our company is a world leader in the design and manufacture of pumping solutions. The five-year plan is to increase turnover from £100 million to £1 billion and in the process, become the industry’s world leader. Among the first major decisions of the organisation was to replace the ageing IT infrastructure with an ERP system capable of supporting and sustaining future growth. And only one supplier proved equal to that task: SAP. Our objectives were to:
Replace multiple, unsupported legacy IT systems and interfaces Improve project planning and analysis by establishing a single point of worldwide information access Catch up on five years’ lack of IT investment and strategy
“We are now moving to being a truly global organisation, so it is important that we have a single source of information and understanding around the world. SAP is uniquely able to help provide that vital resource.” p
Build a platform to support ambitious global acquisition and growth targets, transforming the company into a world-class business Implement rapidly and smoothly to avert imminent business risks Exploit integrated IT to understand and fulfil customers’ requirements
Allan Dowie Dowie, Financ Finance Director, Clyde Pumps Ltd
The articles that follow show how we progressed to select SAP as our system and itelligence as our implementation partner. Progress at Clyde Pumps is rapid and we will shortly benefit from Jim McColl’s latest acquisition of US Fortune 500 Textron’s entire fluid and power division. This $1 billion deal will immediately benefit Clyde Pumps, as the Union Pumps company will be shortly integrated with it, doubling its overall size – more challenges for our new business system.
2
Contents Case study 4
The transformation of Clyde Pumps The turnaround of Clyde Pumps part one
Case study 6
The Clyde Pumps journey continues The turnaround of Clyde Pumps part two
Interview 8
Raising the bar Jim McColl, CEO of Clyde Blowers, talks about the elements of successful management
Project overview 10 SAP at Clyde
SAP at work across Clyde’s business areas Two of the articles in this publication are based on white papers written by researchers at the Strathclyde Institute for Operations Management, University of Strathclyde, Glasgow, UK. The original papers can be downloaded from our landing page www.itelligencewhitepapers.com.
In order to receive your monthly copy of TheManufacturer kindly email c.penn@sayonemedia.com, telephone 01603 671300 or write to the address below. Neither The Manufacturer or Say One Media can accept responsibility for omissions or errors.
Head Office Elizabeth House, Block 2, Part 7th Floor, 39 York Road, London SE1 7NJ T + 44 [0]207 401 6033 F + 44 [0]0207 202 7488 www.sayonemedia.com
3
The transformation of
Clyde Pumps The story behind the re-establishment of Clyde Pumps as a global leader in the design and manufacture of pumping solutions illustrates what can be achieved with vision, energy and a well-grounded approach to business transformation
This article
charts the progress of the turnaround of Clyde Pumps under the leadership of the Clyde Blowers organisation. The intent is to shed light on the factors that were limiting the company’s ability to meet its business objectives, and then to examine the techniques that proved to be effective in restoring its competitiveness.
130 years and for most of that time was under the control of the founding family. New management appointed in 2005 had inherited an organisation that was bureaucratic, authoritarian and structured along functional lines. There were few cross-functional teams and little cooperation between departments. In addition to the outdated structure, the company suffered from a lack of investment in infrastructure and poor staff morale as a result of a downturn in business in recent years – over half the workforce lost their jobs between 2001 and 2006. Until the intervention of Clyde Blowers, management strategy had inevitably focused on survival and returning to profit, which involved firefighting and short-term goals.
Jim McColl, owner and CEO of the highly successful Clyde Blowers group of companies, believes strongly in the potential of the manufacturing sector in the UK. He demonstrates his commitment to the future of British industry by acquiring companies that have core strengths, but for a variety of reasons, are performing poorly. His ability to turn around such companies has resulted in the growth of Clyde Blowers from £3 million in 1992 to Defining the vision over £700 million today – an impressive The initial step taken by the Clyde achievement by any standard. Blowers board was to outline a clear vision for the future of Clyde Pumps. In An in-depth interview with Jim McColl better times, the company had grown on page eight provides thought- to become an international leader provoking insight into his business across a broad range of sectors which improvement methodology, which included oil, gas, nuclear and water. features the establishment of a process- The new, aggressive strategy aims to oriented organisation and promotion re-establish its prominence as a worldof a collaborative, communicative and, class pump manufacturer in terms of above all, positive culture. With the product excellence, market presence right organisation structure in place, and profitability. the management team can focus on providing the necessary resources, such In order to put together a meaningful as people skills, processes, IT systems transformation plan, it is first necessary and facilities. to define the attributes of the intended target business. The management team When Clyde Pumps was formed from the laid out the specification for a modern, acquisition of Weir Pumps in 2007, the responsive organisation engaged in company was a prime candidate for this a full spectrum of business activities improvement process. It had operated encompassing development, OEM from the same location in Glasgow for supply, services and spares.
4
Case study The company consists of two separate structures, one addressing the OEM business and the other for the Service and Spares business. The overall Clyde Pumps organisation of the future will be as flat as possible and feature crossfunctional teams built around processes. The objective is to create a collaborative style of working focused on end-toend processes, from winning business through to after-sales service. A central feature of the renewed business is an ambitious strategy for growth. This comprises a combination of organic expansion in existing markets, aided by new product development, in addition to a programme of acquisitions and joint ventures that either target new industry sectors, or enhance the product range. Great emphasis is placed on personal development, and on engendering a ‘can do’ attitude within the workforce. A recently established Pump Academy will be used to develop skills and capture key knowledge, plus ensure the supply of trained staff to underpin long-term business growth. Investment in people and a clear vision for the future are essential ingredients for a motivated and optimistic workforce.
The key enablers of transformation The high aspirations for the venture will not be achieved, however, unless the right systems and resources are made available. Consequently, the management have identified two major initiatives as the top priorities for the regenerated company. The first is to provide the workforce with world-class engineering facilities. The second, which is absolutely essential for a modern enterprise, is to implement a fully integrated ERP system across the business. This major investment in infrastructure is crucial to enabling the strategy for business growth, which is based on the building blocks of joint ventures and acquisitions, together with a programme of new product development. The emerging markets in the Middle East, China and India present a huge opportunity for the company, but rather than developing capabilities in new industries and geographies, the approach will be to explore partnerships with companies already established in these areas. Clyde Pumps also intends to develop its own IP to reach new customers, building on the heritage of Weir Pumps as a world leader in the design and development of innovative pumping systems.
The management have determined that the successful execution of this strategy requires a complete overhaul of the current outdated business systems infrastructure. A comprehensive ERP system to facilitate the design and management of consistent business processes throughout the organisation is viewed as a key transformation enabler. The system will be instrumental in implementing the company’s policy on performance management, which will be based on data-driven measures, and focus on benchmarking against competitors and industry standards. The aim is to encourage best practice and a market-led approach to business, centred on customers. After preparing a detailed and comprehensive business case for the ERP investment, and carrying out a careful evaluation of the available options, SAP was selected for the project. The deciding factors in the choice of software was SAP’s proven track record in the industry and its well-established reputation as a leader in ERP. Working closely with the highly experienced SAP vendor, itelligence, Clyde Pumps has prepared a blueprint for the target system and has begun the process of implementation. Process improvement teams have been set up and already the benefits are being seen in the improved design of business processes. Turn over to read about the ERP project in detail and to find out what part it plays in the transformation of Clyde Pumps.
“The emerging markets in the Middle East, China and India present a huge opportunity for the company, but rather than developing capabilities in new industries and geographies, the approach will be to explore partnerships with companies already established in these areas” This article is based on a white paper written by researchers at the Strathclyde Institute for Operations Management, University of Strathclyde, Glasgow, UK. The original paper can be downloaded from our landing page www.itelligencewhitepapers.com
5
The Clyde Pumps
journey continues This article continues to chart the transformation of Clyde Pumps, recounting how the company regained its position as a global leader in the design and manufacture of pumping solutions under the leadership of the highly successful Clyde Blowers organisation
The previous
article identified the challenges facing the management of Clyde Pumps, which ranged from a lack of investment in infrastructure to low morale and an inflexible, bureaucratic organisation. The initial steps entailed the creation of an ambitious vision for the future, plus restructuring to prepare the company for industry leadership and growth. With guidance from Jim McColl, the innovative Scottish entrepreneur and owner of Clyde Blowers, the management of Clyde Pumps put a new,
6
flatter, more agile and process orientated organisation in place, with emphasis on cross-functional capability. A positive, ‘can-do’ culture was promoted, together with greater investment in training and personal development. The next step was to arm the workforce with the systems they needed.
Finding the right ERP solution Having established an effective organisation and defined a clear business strategy, the company’s management knew they needed a
world class ERP system to execute their vision. This article examines the rigorous selection and evaluation process they enacted to ensure that the right technology and solution provider was chosen for this critical function. A high-powered programme team sponsored by the managing director of the service and spares division was put together to drive the process. The team started by putting an aggressive five-month plan in place for the exercise, which comprised the following three main stages:
Case study This stage was complete in a month and resulted in a shortlist of four credible candidates, who were then presented with high-level requirements in the form of a comprehensive 20 page ITT, supported by over 100 pages of detailed functional and technical specifications. These vendors were given four weeks to prepare their responses, plus the opportunity to meet with Clyde Pumps staff to gather additional information, before being asked to present their solutions. A rigorous evaluation of the functional, technical and commercial aspects of the proposed solutions, which involved scoring against weighted criteria, was carried out. Two clear leaders emerged from this process, both of which had put forward solutions based on SAP, the ERP software that best addressed the broad and varied scope of Clyde Pumps’ intended activities. For the third and last stage of the selection process, the two finalists were asked to prepare a more detailed proposal, covering the project’s phasing, roles and responsibilities, risks and commercial considerations. They were also required to deliver a series of weekly workshops, which involved product demonstrations and face-to-face reviews of all aspects of their solution, from technical specifications to project management methodology.
Stage one – identification of possible solutions and partners plus initial evaluation of proposed solutions Stage two – invitation to tender (ITT) and high-level functional and commercial evaluation Stage three – detailed functional, technical and commercial evaluation and partner selection The first stage consisted of an interactive evaluation of 11 potential partners, all of which were known to provide solutions based on world class ERP software. The key attributes measured were the depth of their experience in complex engineering, the quality of their responses and the availability of solid references. Also evaluated were their support capabilities in the UK and globally, especially in China to align with the company’s overseas growth strategy.
Key success factors The success of the selection process was largely due to the formal, structured approach taken, with detailed plans being developed for each stage of the process. Execution was carried out in a disciplined manner, which required that each stage be completed and documented before starting the next. But perhaps the greatest contribution to eliminating risk from the decision making process came from the availability of a comprehensive and detailed specification of the target ERP solution. This was because the company’s vision for the future features a broad range of activities, from design to manufacturing and supply of complex pumping solutions involving internal and external suppliers, and is extremely demanding in ERP terms. The Clyde Pumps management had previously carried out a thorough analysis of their ERP requirements, fully documenting the results. This comprehensive specification provided a sound basis for measuring the proposed solutions with a high degree of accuracy. The objective scoring against this specification clearly demonstrated that SAP was the only ERP system that fully met all their requirements.
A key element of the evaluation was a visit to a reference site identified by the candidates, to see their solutions in operation and obtain valuable third party input. Again, the proven technique of measurement using weighted criteria was employed, which provided objective assessment of both the completeness of the proposed solutions with respect to the requirements, and the performance of the vendors themselves.
Clyde Pumps chose itelligence as their SAP partner. itelligence is one of SAP’s largest global full-service partners working with mid-market customers. It is an organisation that specialises in providing SAP Business All-in-One solutions, which are pre-configured, templated versions of SAP, developed for the needs of specific industries. Using this approach, itelligence is able to implement SAP both rapidly and itelligence and their SAP solution cost-effectively. emerged as the outright winner of the gruelling selection process. The experts The article is based on a white at itelligence demonstrated proven skill paper written by researchers in implementing complex manufacturing at the Strathclyde Institute of systems and SAP had credible solutions Operations Management, University for all the processes envisaged. Most of Strathclyde, Glasgow, UK. The importantly, the management at Clyde original paper can be downloaded Pumps had complete confidence in their from our landing page www. choice because of the thorough, highly itelligencewhitepapers.com structured and verifiable methods used in the evaluation. “We are now moving to being a truly global company, so it’s important that we have a single point of information and understanding around the world. SAP is uniquely able to help provide that vital resource,” said Allan Dowie, finance director of Clyde Pumps. Published in association with: itelligence Business Solutions (UK) Ltd Tel: 0203 1623712 www: www.itelligencegroup.co.uk
7
Rai s i n g the bar
From apprentice to Scotland’s 10th richest man and owner and CEO of global group Clyde Blowers, Jim McColl has refined the process of success. Industry needs a new generation of good leaders, he tells Gay Sutton, ones with ambition, hunger, and the ability to think big
One year ago,
Jim McColl returned to the company where he had trained as an apprentice and bought it, adding Weir Pumps to his rapidly growing global business empire, Clyde Blowers. McColl, who is renowned for his ability to turn around ailing companies and lead them to success, has followed an impressive career ladder: from engineering apprentice, through a BSc, MBA and MA to management. “Then I was head hunted by Coopers & Lybrand to go into what they called corporate care, which was a kind way of looking at companies in trouble financially.” From there, he became self employed as a consultant, “because I was really quite keen on buying into my own company. My model for doing that was to become self employed
8
as a consultant, charge a very modest fee, but a share in the upside of the business I was looking to turn around. It was attractive to the people I was working for, and showed my faith in my ability to perform. If I didn’t do it, I didn’t get paid.” In 1992 McColl achieved the first part of his ambition, acquiring 29.9 per cent of Clyde Blowers. He then proceeded to buy six of its seven global competitors, and then further grew the business by acquiring companies in a range of related business areas, and reshaping the entire group into four ‘platforms’ based around the market sectors they serve. “Now the combined turnover of our group is over £700 million, from a starting position in 1992 of £3 million. That’s good growth,” he said.
Interview Jim McColl
are important because of the type of business we’re within. And obviously our main goal is to be as profitable as possible, so you have to have an understanding of finance and business management. But I think there is one ingredient that overarches all of that, and that is having a very positive mental attitude, a can-do attitude that you have to spread within the business. So when challenges come up, as they do, it’s not that people say, ‘oh my God, we’ve got a problem’, but ‘how do we solve it?’ That’s probably been the biggest factor affecting our success.” His recruitment policies reflect this, in that the company pays considerable attention to attitude as well as qualifications and experience. He has very firm views on the long-term destructive effect of the old style of dictatorial management. “In some of the businesses that we have taken over, they still
“In In some of the businesses that we have taken over, they still have this old style of British management where, because it’s a manufacturing business and it’s engineering, they feel they’ve got to be tough” tough have this old style of British management where, because it’s a manufacturing business and it’s engineering, they feel they’ve got to be tough and they talk about kicking arses. That sort of management style – the arrogance and the power – can work in the short term, but it’s unsustainable in the long term. It stifles the business and holds back further growth. I believe you have to unlock the capability within everyone and make them feel they are an equal part of the team. Allow them to contribute and be creative: that’s how you get real growth.”
With this weight of knowledge and experience behind him, McColl has evolved a clear vision of what makes good management and leadership, and the elements that define the truly successful company. “You have to understand the market in which you’re operating. You have to understand what the customer is looking for, what their pains are and how you can help solve their problems. That is at the heart of it. Then the only thing that can hold you back is your own mind.
McColl is very concerned by what he sees as a lack of good leadership in many areas of UK industry, and he defines this as a lack of ambition and hunger, and a reluctance to take risks. “Businesses in places like India and China are growing, advancing at an incredible pace in terms of the knowledge and technology they are using. And many of those large businesses are out to buy American and British businesses. But,” he warned, “I believe if British industry doesn’t get up to speed, think bigger and think more positive, a lot of businesses are going to disappear under overseas ownership,” However, he was quick to point out that overseas ownership could be a very good thing. “I’m sure that Tata, for example, will provide Jaguar and Land Rover with the leadership that was lacking under Ford. They will be much more ambitious for the company. Ford has been about for a long time, and they weren’t as ambitious as they should have been because they were too big. We’re seeing the hungrier, more ambitious smaller players coming in and building big serious businesses.”
“I think the design of the organisation, interpersonal skills and culture are very important. We operate a flat structure. We like to think of all our companies as a network of businesses – not a hierarchy – with a collaborative and communicative culture. Engineering knowledge and skill
One of the things he believes we have to do is encourage young people to think big and set their sights high. We have to develop the leaders of the future. “A friend of mine, Tom Hunter, is working on an initiative with young people. He initially picked eight kids out of a range of public and
9
Jim McColl
Biography 1968:
Joined Weir Pumps as apprentice
1974-78:
BSc technology & business studies
1973-85:
MBA while at Weir Pumps
1981:
Joined Diamond Power in senior management. MA in international accounting and finance
1985:
Joined Coopers & Lybrand as senior consultant in ‘corporate care’
1986:
Became a self-employed consultant
1992:
Bought 29.9 per cent share in Clyde Blowers. Grew business through acquisition and organic growth
2001:
Awarded an OBE and Ernst & Young Master Entrepreneur of the Year Award
2007:
Bought Weir Pumps
2008:
Honorary Doctorate of the University of Glasgow
Public service includes: Member of the Singapore Britain Business Council Member of the Council of Economics Advisors to the Scottish Executive Cornerstone funder and honorary president of the Kilbryde Hospice
private schools, who were selected as leaders by their peers. He’s put together a programme and is calling it, not a gap year after they leave school, but a bridge year.” The programme includes working with the Clinton foundation in New York and working in rural African communities for a few months, and balances educational opportunities with leadership development and humanitarian activities. The young people have access, for example, to Harvard and universities of that quality. “In the beginning some of those kids had set their sights on going to university in Scotland and maybe not one of the better ones. They’ve all changed their aspirations six months into the bridge year. Two of them have now selected Harvard as their choice. They’ve applied and they’ll get in. That’s the kind of leadership that we need to get. We need to get the bright people at the top and bring them through as the leaders of tomorrow.” Clyde Blowers operates around the globe, and I was curious to hear McColl’s views on the security of intellectual property (IP) within joint ventures in the far east. “You hear a lot of talk about it and we’ve seen it with companies that we have taken over. When we ask the management why aren’t they in China, we get: ‘well we don’t want to lose our IP’. Well, it’s an excuse for inaction, in my view. You have to operate in these countries and you have to take your IP and your technology there.
10
“When we did our first joint venture in China… we shared the latest technology with our Chinese partners. Our competitors at the time were giving them the old technology and keeping the new technology to themselves for the very reason you suggested – they didn’t want it stolen. But if you go to steel mills or power plants in China they’ve got the best from around the world. And if they can’t get it locally, they’ll buy it, reverse engineer it, and then you’ll lose the IP anyway.” McColl explained his strategy. “It’s mainly our hands-on management approach that protects our IP. In China we employ Chinese nationals…who look after our well being and our rights because their ambition is married up with the company.” For example, he explained how in the first Chinese joint venture in 1995, the manager was paid the equivalent salary of someone working in the UK or America. “We could have got them for a fraction of the price. But the alternative was to send over someone from here. You then have to pay them a full salary plus overseas allowance, plus accommodation and expenses. It just becomes horrendously expensive. In the selection process [we look for an] individual with a track record of being educated or living in the UK, Europe of America, so they have had exposure to western management and business experience. And then give them a good salary, incentivise them, and probably give them some share options in the company.” Looking closer to home, the next few years are likely to see the skills crisis deepen in the UK as the ageing workforce comes to retirement age. To help combat the problem McColl has set up a Pump Academy at Weir Pumps. “I was told that when taking people on it would be two years before we could get added value out of them because of the time it takes them to learn the specific skills we need. When I looked into it, the reason it takes two years is that we were putting them into [busy] departments where they were given jobs to keep them out of peoples’ hair for 75 per cent of the time, and then for 25 per cent of the time they were shown something that added value to what they could do. So we’ve set up the pump academy to fast-track them. We’ve taken 40 people on since we acquired the business last May. “We’re now talking to a couple of universities about accrediting the modules so that, should our graduates want to do a masters degree, then the modules they have done will give them credits towards it.” McColl is also talking with Strathclyde University about taking some undergraduate students into the company to do work experience and to undertake the academy’s training modules as part of their university degree. “That then makes the student a better balanced all rounder. We would then be able to take them straight on, and know that because they’ve done certain modules in our business then can ‘get up and go’.” It’s challenging work in a fast moving world. “I just thoroughly enjoy what I’m doing,” McColl said. “It’s fantastically exciting, and the satisfaction that you get from building these businesses and creating wealth – I can’t think of anything else I’d rather be doing.”
SAP SAP Working for Clyde Pumps working for Clyde Pumps
Clyde Pumps has four business areas that need to be supported by the SAP solution: OEM Clyde Pumps has(pumping four business areas that need to to order), be supported by the SAP solution:systems OEM Engineered systems engineered OEM Standard (pumping Engineered (pumping systems engineered to order), OEM Standard (pumping systems configured to order), Spares and Service. One solution, with common data, supports each configured to order), and Service. business stream Spares in the required way.One solution, with common data, supports each business stream in the required way. The diagram below illustrates the SAP functions implemented. The diagram below illustrates the SAP functions implemented.
OEM Engineered
OEM Standard
(Engineer-to-order)
(Configure-to-order)
Spares
Project System Sales and Distribution Materials Management Production Planning Document Management Customer Service Quality Management Human Resources Finance and Controlling Yellow shaded areas indicate reduced use of system
This has been a challenging project both for Clyde Pumps and their implementation partner, itelligence, as it combines a high functional requirement with aggressive implementation timescales.
Service
itelligence is pleased to support the implementation of SAP at Clyde Pumps. itelligence. We make the most of SAPÂŽ solutions.
Your industry is our business. As one of the leading SAP partners world wide with more than 1,300 specialists, we develop ready-to-use solutions tailored to suit your business. Our solutions stand out for a fast implementation at a minimum risk, and we have succeeded in setting the standards in a number of industries.
itelligence Business Solutions (UK) Ltd.
â–
Phone: +44 (0) 203 1623712
â–
www.itelligencegroup.co.uk
Â? Â?
â–
infouk@itelligence.de