Cementos Pacasmayo identified construction industry services as its next strategic opportunity. How could a company built on product sales move into the value-added services marketplace?

With IBM Services, the company deployed SAP S/4HANA on‑premises and in the IBM Cloud, gaining operational excellence and insight to help drive strategic transformation, and reaching new markets.

Peru’s construction industry is predicted to boom, with its value rising from USD 29 billion in 2018 to a potential USD 37 billion by 2023, driven largely by an extensive government infrastructure program. In this high-growth market, leading cement producer Cementos Pacasmayo decided to expand beyond product-based sales and offer value-added construction services.

Luis Miguel Soto, Chief Information Officer, Cementos Pacasmayo, explains the shift in strategy: “We’re happy with our place in the market—we’re industry leaders in northern Peru. But we realized that the most promising growth avenue for our future was in becoming a construction solution company: instead of selling cement through our distribution partners to construction companies, Cementos Pacasmayo can offer complete services, such as building roads and bridges, and many other concrete structures.

“By working directly with end-users, we would keep our finger on the pulse of the construction industry and build deep relationships with our clients, helping us to understand the market and tailor production to meet demand more closely.”

However, rather than selling to a settled group of distribution associates, this new business model would involve transactions with thousands of buyers.

As the company embarked on this new strategy, it rapidly became apparent that its existing ERP systems and infrastructure could not handle the complexity. For example, order processing times slowed, frequently delaying customer deliveries and potentially harming relationships.

As an additional consideration, Cementos Pacasmayo had relatively limited insight into maintenance inventory—the tools and instruments it used for the upkeep of the cement manufacturing equipment. Ordering new parts could be time‑consuming – sometimes taking weeks or even months if the company had to import a new part or tool from abroad.

To avoid costly periods of manufacturing downtime, employees would often order surplus equipment—itself an unnecessary expense that the company wanted to eliminate.

Luis Miguel Soto comments: “We wanted to provide our customers with the best possible products and services, while also boosting our own efficiency and cutting costs. We looked for a way to resolve our technical issues, improve our manufacturing performance, and enable our value-added services strategy.”

As a long-term user of SAP ERP solutions, Cementos Pacasmayo chose to migrate to a comprehensive suite of SAP S/4HANA applications, including Finance, Sales, Controlling, Quality Management, Materials Management, Plant Maintenance, and Funds Management.

Luis Miguel Soto recalls: “SAP S/4HANA was the logical next step for us, as we’d recently migrated our SAP ERP applications to the SAP HANA® database. We were very impressed with the increased speed of the in-memory database, and we were confident that SAP S/4HANA applications would provide the performance and insight into our operations that would enable us to manage transactions and relationships with thousands of customers.”

Cementos Pacasmayo partnered with IBM Services to manage the migration, based on proven SAP S/4HANA expertise and on a history of successful digital transformation work.

The company worked with IBM to define the strategic roadmap for migration to SAP HANA technologies, originating with the migration to SAP Business Suite powered by SAP HANA, and ultimately leading to the S/4HANA project itself.

Luis Miguel Soto comments: “We selected IBM Services because we know that IBM offers deep experience of SAP S/4HANA migrations—which is a rarity in South America. Cementos Pacasmayo has been working in a highly effective and productive partnership with IBM Services for a long time, and we were very confident in their capabilities and their understanding of our business.

“Additionally, we knew that IBM Services could draw on global expertise and resources to solve any issues that might arise.”

IBM Services and Cementos Pacasmayo completed an IBM SAP HANA Impact Assessment, which reviews the business effects of a move to SAP S/4HANA, and defines the migration, implementation and transformation roadmap. The assessment identifies quick wins to be gained from implementing SAP S/4HANA, helping to accelerate project ROI.

The IBM Services team deployed assets such as SAP S/4HANA Conversion Best Practice, which provides a detailed step‑by‑step of the conversion processes.

The team also used SAP S/4HANA Conversion Process Flow as well as lessons learned, to optimize financial and operational processes, and maximize efficiency. Combined, these steps enabled four conversion cycles prior to the go-live to ensure smooth transition to SAP S/4HANA solutions.

Luis Miguel Soto adds: “The IBM HANA Impact Assessment was absolutely essential to success—I would recommend it to every company planning a migration to SAP S/4HANA.

“The IBM HANA Impact Assessment helped us identify the business areas and processes that would need most work to adapt to SAP S/4HANA, which saved us significant time, cost and anxiety during the migration itself.

“Cementos Pacasmayo was very happy with the way IBM Services managed the SAP S/4HANA transformation project.

“We already had an excellent partnership with the IBM team, and this has continued to grow and deepen during the program.”

Cementos Pacasmayo elected to host its development, test and quality assurance SAP S/4HANA instances on IBM Cloud for SAP Certified Infrastructure, while deploying the SAP S/4HANA production environment to on-premises servers.

Luis Miguel Soto explains the decision: “We were very impressed with the flexibility and cost-effectiveness of IBM Cloud for SAP Certified Infrastructure. We wanted to gain the experience of runninag systems on the new platform before making the full transition with our production environment, and we are very pleased with what we see so far.

“It makes sense to work with IBM as our cloud partner—since IBM Services is our primary IT provider, being in IBM Cloud will ensure integrated capabilities across the entire IT landscape. The flexibility of IBM Cloud for SAP Certified Infrastructure is very impressive. As our business and customer base continues to expand, we want the ability to scale our SAP S/4HANA environment accordingly to reach new markets, and we look forward to migrating our production systems to gain the full benefits of IBM Cloud for SAP Certified Infrastructure in due course.”

Having worked with IBM Services to convert to SAP S/4HANA, Cementos Pacasmayo has gained the agility and operational insight to establish a solid framework for its new customer‑focused business model.

For example, customer satisfaction through reliable and punctual distribution is vital for Cementos Pacasmayo’s new way of doing business, and accelerated sales and distribution processes based on SAP S/4HANA ensure that buyers receive their orders on time.

Luis Miguel Soto continues: “With satisfied buyers, we can build up an extensive customer base that will enable us to track purchasing trends across the entire north Peru construction industry.

“Equipped with this market intelligence, we will be able to predict future demand and adjust production accordingly, to ensure that we can serve the industry with the right products and services to fuel continued growth and reinforce our market leadership.”

As well as deepening customer relationships, Cementos Pacasmayo’s SAP S/4HANA implementation with IBM Services provides the company with greater data visibility.

This capability drives efficiency gains, cost savings, and operational excellence, with new insight that will assist the strategic transformation in reaching new markets.

Luis Miguel Soto explains: “With SAP S/4HANA deployed by IBM Services, we plan on gaining insight into our supply chain management, so we can deliver critical maintenance parts and tools to teams on time. This will help us to avoid manufacturing breaks, eliminates the costs associated with ordering surplus equipment, and meets our delivery commitments to customers.”

Additionally, Cementos Pacasmayo has increased the speed and ease with which the accounting department can generate financial statements and run analysis. This provides senior management with a clear picture of the company’s finances at any given point and enables them to take more agile decisions—vital in the company’s current transitional period.

Cementos Pacasmayo is currently working with IBM Services to migrate manufacturing processes to SAP S/4HANA, which will further boost the integration and efficiency of operations, and enhance data visibility.

In future, the company plans to deploy SAP® Ariba® to help streamline its buyer and procurement processes. Cementos Pacasmayo is also evaluating the opportunities to introduce artificial intelligence (AI) solutions in several business areas, and is working with IBM Services and the IBM Watson® platform.

Luis Miguel Soto concludes: “SAP S/4HANA deployed by IBM Services opens up the strategic development path that Cementos Pacasmayo wants to take.

“We’re looking forward to migrating our SAP S/4HANA production systems to IBM Cloud for SAP Certified Infrastructure and working with IBM Services to expand and optimize our deployment, to continue driving growth in the Peruvian construction industry.”

Cementos Pacasmayo S.A.A. (link resides outside of ibm.com), a cement company, produces, distributes, and sells cement and cement-related materials and services in the northern region of Peru. The company was incorporated in 1949 and is headquartered in Lima, Peru. Cementos Pacasmayo S.A.A. is a subsidiary of Inversiones ASPI S.A.