Logistics technology: Pacer preps for SAP implementation

Company expects to see about $20 million in annual savings

Jeff Berman, Group News Editor -- Logistics Management, 5/29/2008

CONCORD, Calif.—In an effort to streamline its disparate IT systems, freight transportation and logistics services provider Pacer International Inc. said it has finished the “Blueprinting” phase of its SAP information technology system.

Pacer said this endeavor, which will provide the company with complete integration of all its business units under a singular IT platform, has been under development since October 2007. The full implementation is expected to kick off during the second half of this year.

Pacer EVP and CFO Larry Yarberry said in an interview that Pacer—as a collection of 12 companies it has acquired over the years—has worked with various IT platforms simultaneously. And today, the majority of them are still using their legacy systems.

“We have various IT platforms throughout the company,” said Yarberry. “As an example, even though we bought Stacktrain [now Pacer Stacktrain] from American President Lines in 1999, American President Lines continues to handle IT for Pacer Stacktrain operations.”

To make a break from this scenario and others, Yarberry explained Pacer decided to move to a singular IT platform for all of its operations. And he added that Pacer has been working with SAP for more than a year in analyzing Pacer’s needs and what they need to do to satisfy those needs.

After a year of collaborating, the two companies inked a contract and began the blueprinting phase, which is comprised of finalizing Pacer’s IT requirements in terms of what it needed from SAP IT-wise and what SAP was going to be able to provide for Pacer.

The first SAP implementation for Pacer will be a general ledger system for accounting. Yarberry said this will replace the five separate accounting systems Pacer is currently using.

“The entire SAP implementation is expected to take up to two and a half years to complete, and the range of savings is estimated to be $20 million or more per year when everything is implemented,” said Yarberry.

Some of these savings will come from headcount reductions, IT system maintenance, and no longer having to use outsourced IT partners like American President Lines, explained Yarberry.

When SAP is fully in place at Pacer, he said shippers that are customers will have much better insight into where their shipments are, how they are performing, and he added Pacer’s overall operations will be improved.

“Today, operating with a lot of different systems, you have to move data from one system into another, but with SAP, data will be automatically available in one system,” noted Yarberry.

The biggest challenge for this SAP implantation to be successful is diligent and adequate system testing, according to Yarberry.

Earlier this year, SAP rolled out a release of its supply chain management application, SAP SCM. This version, which will be made generally available to all customers by the middle of this year, will offer augmented functionality for things like supply network collaboration, extended warehouse management, and enhanced planning, with various benefits for shippers such as closer collaboration with business partners to improve visibility, maximized workforce planning to increase productivity, and enhanced planning to improve efficiency.