1. In 1993, H.F. & Ph. F. Reemtsma decided to set up its own production facilities in the
Ukraine and founded joint ventures with two tobacco plants operating in Kiev and
Cherkassy. Now both tobacco plants, Reemtsma-Kiev Tabachnaya Fabrika and Reemtsma-
Cherkassy Tabachnaya Fabrika, are part of Reemtsma-Ukraine; this company also includes a
trading subsidiary with foreign investment, "Reemtsma-Ukraine", that has created a distribu-
tion network covering the whole of the Ukraine (representative offices in 11 regions of the
Ukraine and warehouses in 15 regions). The company's headcount is over 2100. Reemtsma
has invested a total of approximately DM 130 million in the Ukraine. The target market is
the Ukraine, C.I.S., and the Baltic states. In 1999, the Reemtsma-Ukraine produced 52% of
the total volume of Ukrainian tobacco plants' cigarette output.
Background
By the end of 1998, the business management system originally in use, COMET, was signifi-
cantly behind the times: it did not allow the corporation to consolidate the data of its three
companies, and remote operation was not stable; the system-specific operating platform
could not cope with the increased load; and the cost of modernizing the COMET system
would have been prohibitively high.
The business volume in the Ukraine objectively required a brand new management tool that
would allow the company to consolidate the activities of its different divisions. The period
of hyperinflation in 1998 played a significant role in the decision to replace the existing sys-
tem with the SAP R/3 System, since the SAP System allows you to exclude the effect of a
fluctuating exchange rate when analyzing key business figures.
Success Story
REEMTSMA-UKRAINE
H.F. & Ph. F. Reemtsma is
one of the largest European
cigarette manufacturers.
The company employs
about 15 000 people
working in 70 countries.
2. The SAP R/3 System is the Reemtsma cor-
porate standard, and it is installed in all
companies of the corporation once they
reach a specific volume of transactions.
This meant that SAP software was the
automatic choice for Reemtsma-Ukraine
when it decided to phase out its legacy
system.
Implementation Goals
s Disseminate corporate business man-
agement standards to all Ukrainian
Reemtsma enterprises
s Consolidate management and reporting
capabilities at Ukrainian Reemtsma
enterprises
s Increase efficiency of managerial solu-
tions
s Control business transactions
s Improve quality of customer service
s Implement the following functionality:
Financial Accounting, Management
Accounting (Special Purpose Ledger),
Investment Management, Sales and
Distribution, Inventory Management,
Production Planning and Control.
Technical Environment
Before System
Implementation
At the time the enterprise decided to
implement the SAP R/3 System, the 390
users in different regions of the Ukraine
were integrated with each other and with
corporate headquarters in Hamburg
through the global computer network.
Windows NT and Windows NT Server
were used as the operating platform. MS
Exchange was used as the document
exchange management system.
Implementation
itelligence (previously APCON) was
selected as the consulting firm for the SAP
implementation project. This company
has experience of implementing and
supporting both the R/3 System and the
COMET system, as well as knowledge of
the business processes of the companies
that comprise Reemtsma-Ukraine. itelli-
gence has a great number of successful
SAP R/3 System implementations in vari-
ous European countries to its credit.
The SAP R/3 implementation in
Reemtsma-Ukraine is being performed in
two stages.
The first stage of the implementation pro-
ject covered the following modules: FI,
CO, AM, IM, MM, and SD. These modules
were implemented in all Reemtsma-
Ukraine organizational units – 3 compa-
nies and 11 representative offices. The
second stage concerned the implementa-
tion of the PP, CO-PC, and CO-PA mod-
ules, as well as business process optimiza-
tion on the basis of the functionality
implemented during the first stage.
The overall implementation blueprint and
the project organizational structure were
defined at the beginning of the project. An
important step at this stage was to identify
power users in each functional area. The
power users provided a vital source of
information during the analysis phase and
played a key role in decision-making dur-
ing the business blueprint phase. The
managers responsible for specific modules
received overview-level training at the
SAP Training Center in Moscow, enabling
them to competently make decisions on
fundamental issues in the course of pro-
ject implementation. The steering commit-
tee and the Reemtsma-Ukraine general
director personally oversaw the execution
of the project.
The goals of the first project stage were to
ensure that the SAP system went live and
replaced the operational COMET system;
that data was migrated from the COMET
system into the SAP R/3 System, and that
corporate standard procedures were
implemented as fully as possible. On the
one hand, these factors set strict parame-
ters for the execution of the project in
terms of both time and functional scope.
On the other hand, the availability of
defined business processes facilitated sys-
tem implementation.
"My first impression of the soft-
ware was that it was cumbersome
and complex, but this was just
a first impression, and it turned
out, as first impressions often do,
to be misleading. The software is
so logical and consistent that once
you get to know it, each new step
is easier than the previous one,
and all transactions gradually fall
into place to form harmonious,
logical whole."
Lyudmila Ivanova,
Logistics Manager
Basic Project Phases:
November 1998 Decision to implement the project in 1999 taken
December 1998 General project concept developed, contracts
through January 1999 concluded with vendors
February through April 1999 First implementation stage started, analysis phase
May through July 1999 Business blueprint phase
July through October 1999 Realization phase
November through Final preparation phase (150 end users of the system
December 1999 trained in one month)
January through Go live and support phase
February 2000
March 2000 to date Support users (Help Desk)
April 2000 Second implementation stage started
3. These goals were reached successfully. The
whole implementation cycle was supported
by AcceleratedSAP (ASAP), SAP's rapid sys-
tem implementation methodology.
iteligence consultants have been support-
ing Reemtsma-Ukraine users since the sys-
tem went live.
Functionality Implemented
Financial Accounting (FI), Asset
Management (AM), Investment
Management (IM)
One of the fundamental problems facing
the implementation team was ensuring
that the system complied with Ukrainian
legal requirements in terms of the imple-
mentation and integration of financial
accounting and tax accounting.
The implementation of the financial mod-
ules began on the basis of the financial
accounting standards that were effective at
the time, but, two months before going
live, the team decided to start working in
accordance with Ukraine's new account-
ing standards. This decision resulted in a
much heavier workload during the final
project implementation phase, because
testing on the basis of the old standards
had already almost been completed. At
the same time, it permitted the corporation
to avoid the transition to the new stan-
dards in the middle of the fiscal year. The
changeover to the new chart of accounts
took place one month before going live,
and Reemtsma-Ukraine became one of the
first Ukrainian enterprises to successfully
switch over to the new standards. The sys-
tem supports the corporate chart of
accounts, which is also new since 2000,
alongside the Ukrainian chart of accounts.
The financial modules were implemented
in accordance with both Ukrainian finan-
cial accounting requirements and specific
corporate requirements, with the follow-
ing results:
s Accounting complies with the principles
of Ukrainian financial and tax account-
ing, while also taking corporate require-
ments into consideration. The resolu-
tion of the contradictions between these
two sets of requirements was one of the
project's major successes.
s All of the modules are based on dual-
currency accounting, with the Ukrainian
hryvnia as the local currency and the
euro as the corporate currency.
s Depreciation for accounting and insur-
ance purposes is calculated according
to both Ukrainian and German regula-
tions.
s In the Investment Management module,
several valuation areas have been set up,
using the hryvnia for local valuation and
the euro for corporate valuation. The
implementation of this module enables
the corporation to maintain the market-
ing and investment program budgets.
Controlling (CO)
The CO module is also based on dual-cur-
rency accounting – the currencies in ques-
tion being the hryvnia and the euro.
Overhead cost controlling is based on the
distribution of primary and secondary costs
according to cost center. The system also
supports order controlling, and this allows
more detailed cost specification. Direct cost
accounting was also implemented in CO.
The CO module enables you to plan costs
for the next year, and to subsequently
update the plan, taking actual costs into
account. You can also maintain several
versions of the plan.
Actual costs are calculated using the tar-
get-actual method, which is determined
using corporate standards.
Detecting and justifying the variances
between planned, target, and actual costs
falls within the competence of the
employees responsible for cost centers.
Sales and Distribution (SD)
The SD module is one of the most impor-
tant modules for Reemtsma, and is used
by two plants and 11 representative offices
in different regions of the Ukraine.
SD enables users to enter customer orders,
reserve goods, issue goods on credit or in
return for advance payment, taking into
account customer-specific sales conditions
(price lists, discounts, and so on). The cred-
it management functionality is an important
part of the module. It enables automatic
control of credit limits and of customer
adherence to the terms of payment.
"The new SAP software enables
you to carry out tax accounting
and financial accounting in paral-
lel. It also gives you the option of
posting transactions that are rele-
vant to tax accounting but not to
financial accounting. At the end of
the accounting period, you can get
results for both financial account-
ing and tax accounting simultane-
ously in the system, without manu-
al corrections. For many accoun-
tants in the country, this is still a
theoretical ideal, but it is one that
we have attained in practice."
Tatyana Pugach,
Key Tax Specialist
