Magnet between two lights: SAP implementation program will have to be adjusted, but 1C is not quite suitable

2022

"Magnit" between two lights: the SAP implementation program will have to be adjusted, but "1C" is not quite suitable

In view of the changed circumstances, Magnit plans to adapt the program for the transition to SAP, which began two years ago, said on June 16, Aleksei Kornya, executive director, deputy general director of the retailer. The top manager announced this at the SPIEF site in St. Petersburg, in the same place where in 2018 Magnit and SAP CIS signed a strategic partnership agreement.

The project of digital transformation in Magnit based on SAP with a budget of about 8 billion rubles began about two years ago. However, against the background of Russia's special operation in Ukraine, SAP CIS decided to curtail business in the country by the end of 2022.

Aleksei Kornya says that Magnit is creating its own SAP expertise center, some modules and elements will remain, which the company has already managed to implement. However, some elements will be replaced.

Key elements related to the business part, including replenishment of warehouses, warehouse management, can be developed on the basis of domestic solutions, on the basis of "1C" in the first place. Also, for example, the company will implement the HR module on domestic solutions related to 1C. In 2020, it was announced that the transfer of human resources processes to SAP had begun.

At the same time, at the moment in the market there is no full-fledged domestic ERP solution for such a scale of business as Magnit, Kornya believes. This is precisely why Magnit began the migration project from 1C to SAP, which for its scale - 370 thousand employees, 27 thousand stores and 15 million customers per day - 1C solutions are not fully suitable.

For a slightly smaller business, it is probably workable, but for such a scale of business it is less effective than the solutions that exist, SAP first of all, - said Kornya.

The deputy chairman who was present at the same event Government of the Russian Federation Dmitry Chernyshenko reminded the top manager of Magnit that there is an import substitution center ERP created on the basis RUSSIAN RAILWAY of, Gazprom Neft"." Rosatom These large companies also have plans to replace SAP. Aleksei Kornya said that Magnit was ready to participate in it.

Magnit is a unique company in the sense that almost the entire IT business landscape is built on domestic solutions, said Aleksei Kornya. According to him, about 70-80% of the entire landscape works on domestic software. This is still the legacy of Sergei Galitsky, the founder and former owner of the Magnit chain of stores. Everything from cash registers, warehouse management, replenishment systems, auto-order to corporate systems is built on Russian solutions. By the time Magnit began its digital transformation based on SAP, he had been collaborating with 1C for about 25 years.

The Minister of Digital Development Maksut Shadayev also mentioned that some on the market paint apocalyptic pictures related to the fact that due to interruptions in the work of software, interruptions in the supply of food in stores may occur. Aleksei Kornya ruled out such problems.

The main task that we see before ourselves is to ensure product stability, and the issues of import substitution of software should serve this goal in the first place, says Kornya.

Magnit, despite the increased risks, will not abandon the implementation of SAP

[1]Despite the increased risks, the Magnit retail chain will continue the ERP transformation project based on the product line of the international company SAP. TAdviser was told about this in the press service of Magnit.

The SAP implementation schedule has hardly changed. In particular, a pilot project was implemented in three business units of the company and in two Magnit Cosmetic stores, - commented TAdviser in the press service of Magnit.

Back in October 2021, the company in an official press release reported that SAP employs employees of the General Service Center (CSC), accounting, budgeting and controlling management. Within the framework of the project, SAP S/4HANA (end-to-end commodity and financial accounting, a digital core that combines all business processes of the company), SAP CAR (modern check storage), SAP ATT (compliance of operations with the legislation on traceability of goods), SAP Process Orchestra (tools for rapid automation, integration and optimization of business processes) were launched. Pilot launches of hotel ERP modules will take place throughout 2022, the end of the system scaling is scheduled for 2025.

According to a company representative, now, due to political uncertainty, the schedule has "moved" a little, but the project is in the final stage, all the necessary SAP licenses have already been acquired, and the international company promised to continue supporting the projects already being implemented.

At the same time, a source familiar with the progress of the project told TAdviser that work on the implementation of SAP, at least partially, was suspended and the sub-contracting companies participating in it began to lay off employees.

General contractors of the Novardis project, T1 Consulting, Witte Consulting declined to comment. Novardis is responsible for the Tovarodvizhenie i Logistics project, T1 Consulting - Finance, non-commercial purchases and real estate, Witte Consulting - Personnel Management.

A source close to the Ministry of Digital Science told TAdviser that back in 2019, when Magnit made its decision, he was not recommended to migrate from 1C products to SAP. However, the decision was made under pressure from VTB, which a year earlier became a shareholder in the retail chain. According to the interlocutor, the bank pursued its goals - to increase the value of the asset in the eyes of potential investors.

2020

Launch the Human Resources project as part of the SAP-based ERP transformation program

On November 12, 2020, Witte Consulting announced the start of the Personnel Management project, implemented as part of the global Transformation Program ERP retail network "Magnit" based on SAP solutions.

Human Resources is one of the four projects of the Program, the main goal of which is to create a single digital platform based on the high-performance SAP S/4HANA for Retail system. In addition to it, the Program includes three more projects affecting the key processes of Magnit: Finance, NKZ and Real Estate, Commodity Movement and Logistics, and Information Technologies.

The Human Resources project plans to implement nine SAP HCM modules, which will cover the main processes of the function - from organizational development and payroll to performance management and personnel evaluation.

Among the main goals and expected results of the project is the acceleration of business decision-making by creating a single information space; increased efficiency of personnel management services employees due to standardization and unification of business processes. In addition, the base will be created both for the development of planning and forecasting systems, optimization of control procedures and management processes, and support the scaling of Magnit's business and improvement of key performance indicators in general.

It is important for us that our HR processes are transparent, understandable and convenient for employees. It is precisely to improve and improve the quality of current processes that the "Personnel Management" project is aimed at, which we implement within the framework of the ERP Transformation Program. Automating key HR cycle processes will help us improve employee engagement, eliminate human error, and reduce processing time. - notes Anna Bobrova, HR Director of Magnit

The project consists of two stages: in mid-2022, the pilot implementation will end, and the subsequent replication of the solution for the entire Magnit group of companies within the scope of the Program will take another year and will be completed in 2023.

An important component of the success of any project is a professional experienced team that works as a single mechanism. The HR team includes Witte Consulting experts with significant experience in implementing SAP HCM and Magnit employees who have a deep understanding of the internal processes and features of current systems. We are confident that working together will allow us to achieve the goals of both the project and the Program as a whole, - comments Svetlana Medvedeva, Director of the Transformation Program ERP retail network "Magnit"

For the successful implementation of such a large-scale project, Witte Consulting has all the necessary components: confirmed 20-year project experience in the field of personnel management; in-depth industry knowledge, methodology and expertise; Developed practice of managing SAP HCM implementation projects at large enterprises, including industrial holdings, banks and retail chains; A highly professional consulting team with more than 10 years of SAP implementation experience and user training skills.

We are part of a landmark project for the industry with great enthusiasm and desire to bring to it the best practices, qualitatively high expertise in the field of HR and the relevant experience of the Witte Consulting team for the implementation of projects based on SAP HCM. We will be glad to contribute to Magnit's digital transformation program in terms of improving the efficiency of personnel management services, establish ourselves as a reliable partner and acquire a new, largely unique, retail experience, - shared by Andrey Lee, HR Project Partner, Director of HR Systems at Witte Consulting

Launch of the largest ERP transformation project in retail

On October 26, 2020, Magnit announced the largest retail transformation project. ERP The company completed the planning stage of this program based on products SAP and selected partners for its implementation.

By the end of October 2020, the ERP transformation program developed by Magnit includes four projects. For the project "Commodity Movement and Logistics" the company was chosen as the general contractor. Novardis The general contractor of the Finance, Non-Commercial Procurement and Real Estate project became Technoserv Consulting"," and the company was chosen as the contractor for the Human Resources project. Witte-consulting All selected partners are one of the leading integrators of SAP solutions in the Russian IT market.

Magnit presented the largest ERP transformation project in retail

The IT project, which includes the introduction of a complex for ensuring the integration of information systems and the construction of the SAP Competence Center, will be implemented by Magnit on its own.

As a Delivery Partner with Magnit, the company will continue to work, Accenture which will share the best world practices in the field of ERP transformation and carry out quality control of the work of integrators.

The ERP transformation program includes the following SAP products:

• SAP S/4HANA for Retail, a high-performance system that enables end-to-end financial and commodity accounting to become a digital core that integrates all of the company's business processes;
• SAP Central Finance, which will allow you to combine the finances of the main enterprises of Magnit;
• SAP CAR, on the basis of which a modern check storage will be implemented;
• SAP Advanced Track and Trace, which will be responsible for compliance of Magnit's operations with product traceability legislation (Fair Sign, EGAIS, Mercury);
• SAP Business Objects and SAP Analytics Cloud, which will be used to build enterprise analytics and unify management reporting.

Magnit plans to spend 8 billion rubles on the implementation of SAP

Within five years, Magnit expects to spend about 8 billion rubles on the company's ERP transformation program based on SAP. Such data were provided by the executive director of Magnit Florian Jansen, speaking at the opening of the retailer's digital office in Skolkovo on September 11, 2020. The top manager designated this program as the largest in retail in Eastern Europe.

He recalled that the introduction of SAP is one of 27 digital transformation initiatives adopted at Magnet.

The ERP system itself is considered to be essentially a separate transformation process, because it requires a very large investment. We expect and hope that there will be no more than this amount - in the region of 8 billion over the next five years, - translated the words of Jansen, who spoke in English, translator.

Florian Jansen told new details of the SAP-based ERP transformation program at Magnet "(screenshot of Jansen's speech)"

Magnit previously talked in detail about plans to implement SAP, but the volume of planned investments was not publicly announced. Florian Jansen also provided data on the scale of the teams that are planned to be used in the SAP program. So, he pointed out, an internal team of about 150 people will work on the project. Magnit plans to develop its own SAP competence center. In addition, another 300 people from eight implementation partners will be involved in the ERP transformation program.

This large area of ​ ​ work in the company is supervised by Svetlana Medvedeva, who previously headed the IT consulting department in the Russian office of PwC.

These are big opportunities for us. One of the possibilities that is a consequence of not only the implementation of ERP, but also other factors is the increase in the availability of good, high-quality data. And our work is now to use this data, - said the executive director of Magnit.

Speaking about the prerequisites for digital transformation in general, the top manager of Magnit believes that in recent years the company has underinvested in the field of technology. During the active development, Magnit's business has grown out of existing solutions due to scale and complexity, technologies have made a leap forward, and the expectations of customers and employees have changed. At the same time, the company lacked a focus on technology, Jansen said.

We just had other priorities. We invested in the growth of retail space, introduced and developed new formats, - said Florian Jansen.

Now, he added, Magnit is committed to the idea of ​ ​ returning the company to leadership in technology in retail.

At the time of the announcement of the start of digital transformation using SAP solutions in February 2020, the company announced that it expects an effect from the implementation of the program, amounting to billions of rubles, over several years.

TAdviser wrote in detail what SAP transformation products Magnit plans to implement and what place in the new landscape will be allocated to 1C-based solutions, which the company has been using for about 25 years (see blocks below).

Announcing a Digital Transformation Project Based on SAP

In February 2020, the Magnit retail chain announced the launch of a digital transformation based on SAP solutions, which is planned to be carried out within three years. The company signed a number of agreements with the Russian office of the German vendor for the comprehensive implementation of IT solutions.

Digital transformation will affect more than 20 thousand Magnit outlets and about 300 thousand of its employees throughout the country. The company calls it "the largest digital initiative in the history of Russian retail."

What solutions are planned to be implemented

According to the announced plans, SAP solutions will penetrate almost all key business processes of Magnit. Most of the information systems will be deployed in the Russian SAP data center based on the SAP HANA Enterprise Cloud (HEC) cloud solution. The digital core that unites all business processes will be the SAP S/4HANA Retail solution, with which end-to-end commodity and financial accounting will be carried out.

SAP solutions will affect almost all key business processes of Magnit

The transformation of the company involves the introduction of more than 40 SAP S/4HANA modules: at the first stage, the system will cover the automation of finance, commodity movement, personnel and reporting. SAP Central Finance allows you to combine the finances of the main Magnit enterprises. The digitalization of human resources based on the SAP HCM module will affect personnel accounting, organizational structure, payroll and other related processes.

In addition, check storage based on SAP CAR will be introduced, due to which Magnit will be able to track balances online, forecast demand and develop solutions for managing assortment and auto order. And the SAP Advanced Track and Trace module will be responsible for compliance with the legislation on traceability of goods sold using the Honest Sign, EGAIS, Mercury state systems.

SAP Business Objects will be used to build enterprise analytics and unify management reporting, and SAP Analytics Cloud will be used.

Accenture was chosen as the partner of the transformation program for planning and quality control, and later Magnit also plans to choose an integrator company.

Quarter century of cooperation with 1C

Historically, the main platform for automating business processes in Magnit was the 1C platform. In total, companies have been cooperating for about 25 years. Not so long before the announcement of digitalization plans based on SAP - in June 2019 - 1C and Magnit entered into a strategic cooperation agreement. Within its framework, they reported on plans to optimize the capabilities of the 1C platform so that it better meets the requirements of Magnit's growing business and the tasks that the network has set itself as part of a major business transformation.

Initially, on the basis of 1C: Enterprise, Magnit independently wrote applications for automating various processes, and later the company also began to use 1C development applications: for example, ERP for production sites and the agricultural direction of Magnit, 1C: Payroll and HR Management, 1C: Document Flow, maintenance and repair solution (TOIR).

The application for the retail chain "Magnit" won the competition "1C" "App Parade"

One of the largest systems implemented at 1C: Enterprise in Magnit are financial flow and cash management systems. On the basis of the 1C platform, a cash register management center was created, providing control over the revenue of thousands of stores and cash registers.

Magnit has an internal 1C competency unit, which, as of June 2019, employed about 200 developers and 150 testers and support specialists.

Goodbye, "1C"? And here it is not

The press service of Magnit told TAdviser that they do not plan to completely abandon 1C.

We plan to transfer to the S/4HANA platform, primarily financial processes, part of the commodity movement processes and part of the human resources processes. Not all organizational units will fall into the scope of transformation. Thus, we will have a hybrid of SAP and 1C solutions, "a retail representative explained to TAdviser.

The company added that 1C-based solutions have proven themselves well in industrial operation, and Magnit plans to continue to develop the best practices and developments that were previously implemented. In particular, it will continue to use industry solutions based on 1C: production sites, task and development management, other tasks of functional units.

The company relies on the introduction of industrial stable transactional systems, which are easily integrated with both applications from various manufacturers and cloud platforms, but at the same time will continue to use the best practices of current information systems and best-in-class systems to automate individual lines of business for the rapid supply of the necessary functionality, - said TAdviser in the company.

The decision on digital transformation based on SAP was preceded by a change in the general director of Magnit: in June 2019, Olga Naumova, who in the same year signed an agreement on strategic cooperation with 1C, left the company, and the position of general director was later taken by a new influential manager - ex-head of Lenta "Jan Dunning.

Magnit, however, says that the decision on a platform for digital transformation has nothing to do with this and is justified only by business logic.

We looked at all ERP class solutions that exist on the market, including 1C. We had several main criteria: the functionality of the proposed solutions, performance and scalability to the size of the network, the presence of integrators in the Russian market with knowledge of large retail, and so on. According to the totality of these criteria, the SAP platform was chosen, "a Magnit representative explained to TAdviser.

I must say that SAP software is used as the main platform for automation in the nearest competitors of Magnit - X5 Retail Group and Lenta.

Magnit also told TAdviser that they plan to create an SAP competence center. At the same time, the 1C competence center will continue its work, since not all processes will be automated on SAP solutions, and not all companies of the Magnit group will switch to it.

Photo source - "Magnet"