The largest Uzbekistan supermarket chain, Makro, successfully transitioned to international financial reporting standards (IFRS) and implemented best practices for business process management within the current SAP ERP system.
Customer Overview
Makro is a part of Orient Group, a financial holding and one of Uzbekistan's largest private investors. Established in 1999, Orient Group includes The Tower Mall Management Group, Central Asia's largest crushed granite mining and processing facility, state-of-the-art logistics center, FT Textile factory, and more.
Initially, Makro operated as a supermarket, but transformed in 2015, rebranding itself as Makro Express — a convenient store format. This strategic shift aligned with the contemporary approach of grocery retailers to sway consumer preferences towards supermarkets and convenience stores, veering away from conventional open-air bazaars.
Keeping pace with this evolution, Makro expanded its footprint in 2020, adopting a compact store area ranging from 65 to 450 square meters. Within these stores, customers are presented with an array of 4,000 store-keeping units catering to nearly 500 daily necessities. Presently, Makro boasts an extensive presence, encompassing more than 50 Express stores across Tashkent and various regions. Moreover, the chain is unique in its own distribution center, logistic system, and food production facility.
Makro's dedication to serving its customers is evident as it accommodates approximately 20,000 patrons daily. The brand's unwavering commitment to enhancing the shopping experience has undoubtedly earned it a significant following in retail.
E-Makro, the company’s innovative app, offers cashback rewards ranging from 1% to 3% based on promotions, purchase amounts, and accumulated points. It is already a hit, with 140,000 downloads and a staggering 350,000 participants in the loyalty program. Embracing online payments proved to be a game-changer, doubling expected orders and leaving customers delighted with the seamless service.
In recognition of its triumphant endeavors, Makro secured prestigious accolades, including the esteemed titles of “Convenience Store of the Year” and “Domestic Retailer of the Year (Uzbekistan)” bestowed upon it during the distinguished Retail Asia Awards of 2021.
About the company:
- Number of stores: 109*
- Number of employees: 4,285
- Total retail area: 70,000 sq.m.
- Number of visitors per day: 88,000
- Number of purchases per day: 85,000
* as of 2022
Makro has over 109 supermarkets in 30 Uzbekistan cities. The chain was founded in 2010 in Uzbekistan and ranks as the country's largest food retailer by store count.
“In 2022, Orient Group finalized its strategy with a special focus on Makro. We see great potential in modern retail formats in Uzbekistan. Therefore, in 2023, there’s a special focus on developing our supermarket chain,”
said Andrei Maslov, CEO of Orient Group.
The company intends to further reboot the format and concept of its supermarkets throughout Uzbekistan.
Customer’s Business Case
In 2015, Makro successfully integrated the SAP ERP system, encompassing FI, CO, MM, and SD modules. However, in 2021, the company identified the need to adapt to evolving market trends and comply with changing legal requirements. They set new goals to automate processes and align with international financial reporting standards (IFRS) to achieve planned goals. As part of the strategy, the company aimed to reengineer and automate various aspects of its operations, including accounting, sales, logistics, and controlling processes.
The company identified several improvements that needed to be made, including:
- Transforming accounting processes to implement IFRS, thus improving sales, logistics, and controlling processes.
- Ensuring transparency of financial and management accounting for owners of diversified businesses, thus reducing labor costs on operational tasks.
- Integrating with third-party system faktura.uz in terms of receiving/sending invoices and signing them with EDS in the ERP system, integrating with the state inspectorate of the Republic of Uzbekistan.
- Automatic updating of currency exchange rates by the exchange rate of the Central Bank of the Republic of Uzbekistan and calculation of prices considering the current exchange rate
- Increasing warehouse turnover.
- Reducing processing time for incoming and outgoing documents.
Discovering New Business Opportunities
To upgrade the existing SAP ERP module, LeverX suggested using a gradual migration of the existing SAP systems. The SAP Activate Methodology proves highly advantageous for SAP experts navigating the transition to SAP S/4HANA, forming an integral component of the comprehensive SAP Activate framework.
This methodology benefits internal project managers and those engaged in consultancy roles, aiming to harness SAP's finest practices and guided configurations for a seamless and prosperous transition to S/4HANA. By adhering to the roadmap provided by the methodology, project managers efficiently carried out SAP solution implementations with elevated simplicity and effectiveness.
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Key Project Deliverables:
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The LeverX consultants made three visits to the customer in Tashkent over a span of two weeks. These visits underscored the crucial role of direct, face-to-face communication to ensure seamless and successful implementation of SAP solutions.
Kick-off meetings and country missions were organized to give guidance and reference in the data collection, including the following activities:
- Functional testing
- Staff training
- Preparation and launch of go-live project
Personal interactions allow an in-depth understanding of the customer's unique requirements, facilitate real-time issue resolution, and foster stronger collaboration between the consultants and the customer's team, leading to a more tailored and effective implementation process.
How We Made the Success Happen
The primary goal of the audit is to empower businesses with insights into their current operations, identifying areas that require optimization or complete reconfiguration.
LeverX consultants worked closely with the Makro experts during the audit, meticulously analyzing and assessing their existing business processes. They ascertained which processes are still relevant and effective, while identifying those that could benefit from optimization or required a complete overhaul. LeverX's hands-on approach ensured that all aspects of the customer's operations were thoroughly evaluated, leaving no stone unturned.
As a result of the audit, LeverX consultants identified areas for improvement and went a step further. They crafted tailored solutions to facilitate the smooth transition of accounting processes to comply with International Financial Reporting Standards (IFRS).
Audit of customer's business processes
During the audit, LeverX consultants, together with the customer, determined which of the current business processes were relevant and which should be optimized or configured from scratch.
LeverX consultants also designed and offered solutions for accounting process transformation to move to IFRS and enhance sales, logistics, and controlling processes.
SAP Financial Accounting (FI)
Within the SAP FI module, experts made the following changes:
- Provided three registers for accounting: IRFS (main register), NAS (National Accounting Standard of the Republic of Uzbekistan), and tax register (income tax).
- Configured a general ledger chart of accounts.
- Implemented indirect tax accounting.
- Implemented deferred expense accounting process.
- Implemented automatic generation of bank payments.
- Transformed cost accounting processes and processes of accounts receivable and accounts payable.
- Activated the material register, which allows the most accurate calculation of material prices in two currencies.
- Configured an instrument that allows you to fully automate the process of closing the period in accounting and management.
Among the integration tasks, the following was implemented:
- Integration with a third-party system, faktura.uz, regarding receiving/sending invoices and signing their EDS in the ERP system. The third-party system faktura.uz, in turn, is integrated with the tax inspection of the Republic of Uzbekistan.
- Automatic updating of exchange rates under the National Bank of the Republic of Uzbekistan and price calculation under the current exchange rate.
SAP Controlling (CO)
LeverX consultants, together with the customer, formed the concept of accounting and analysis of enterprise performance. This ensured that when the customer’s experts enter the main financial transactions, there's only one accurate record. The SAP CO module combines different details like cost centers, orders, and more and adds essential information like a profit center and functional area.
It also keeps track of the money flow for other financial transactions and helps the customer see how different parts of the business are affected.
SAP CO realized the following opportunities:
- Transparent organizational structure based on cost center hierarchy and profit center.
- Ratio analysis of administrative and production costs.
- A detailed accounting of investment measures based on SAP CO investment orders.
- Implementation of management reporting that simplifies the analysis of budget expenditures.
SAP Material Management (MM) and SAP Sales and Distribution (SD)
Implementing SAP Material Management (MM) streamlines inventory management, procurement, and material planning processes, while SAP Sales and Distribution (SD) enhances order processing, sales, and customer relationship management; their implementation in a supermarket chain can optimize stock levels, ensure timely replenishment, and enhance customer satisfaction through efficient order processing and improved inventory visibility.
LeverX consultants, together with the customer, solved the following business issues related to procurement and sales:
- Audit and standardization of business processes
- Modification of sales pricing schemes for new business processes in terms of pricing management that increases the competitiveness of the customer’s goods and improves customer loyalty.
- Automatic calculation of VAT from the cost of goods and the transition to the net price.
- Differentiating logistics processes by displaying different flows to track statuses and transparent reporting development.
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Project Results
Today's accounting world operates with a unified accounting and financial reporting standards system. The IFRS plays a decisive role as a basis for this.
With LeverX, Makro gained a deeper understanding of their processes, unlocking the potential for increased productivity, streamlined operations, and improved profitability.
Joining a unified system of accounting and financial reporting standards highlighted the following improvement indicators for Makro:
- Enhanced financial transparency — Two main registers for financial accounting were allocated: IFRS (main register), tax accounting (additional register), and additionally a special register (profit tax). The improved accuracy and consistency in financial reporting showcased a clear and transparent view of the supermarket chain's financial health and performance under the IFRS framework. The customer reached the expected performance levels concerning payment processing, bank reconciliations, and automatic disbursements.
- Efficient resource allocation — With the new SAP system in place, the customer increased the warehouse turnover by 20%. Driven by streamlined business processes within the SAP ERP system, optimizing the allocation of resources led to better cost management and resource utilization. All resources are unified in the register of materials, which allows the calculation of material prices in two functional currencies as accurately as possible.
- Increased productivity — Processing time for incoming and outgoing documents was reduced by 40%. The effective work with financial data allowed the customer to solve the problem of disjointedness, make decisions faster and avoid costly mistakes.
- Compliance and risk management — Successful adherence to IFRS standards minimizes financial risks and ensures compliance with international accounting norms, enhancing the chain's credibility and investor confidence.
- Improved stakeholder relations — Enhanced financial transparency by 30% due to the FRSI standards implementation and adherence to global standards positively impact investor relations, fostering trust and credibility among stakeholders.
- Scalability and growth — The successful transition to IFRS and optimized business processes position the supermarket chain for scalability and expansion, both domestically and internationally, due to increased financial clarity and operational efficiency.
Thanks to the completed project tasks and the implementation of new business processes, the customer realized:
- Proper accounting and tax accounting maintenance following legal requirements.
- Analysis of cost items in all subsidiaries (stores). This analysis helps to make the right management decisions on cost adjustments.
- Transparent accounting and management accounting.
- Reduction of labor costs in dealing with operational issues, allowing the customer's employees to spend more time solving analytical and strategic issues.
The above mentioned benefits will enable the customer to raise their profile using the globally recognized IFRS accounting standards, especially in accessing international capital markets.
The amalgamation of IFRS adoption and efficient business process management within the SAP ERP system highlights Makro’s successful transformation, marked by improved financial practices, operational effectiveness, and overall business performance.
Products and Services
Customer’s Testimonial
“LeverX has become a reliable partner on the path of digital transformation for the Makro company. The LeverX team has swiftly assisted in executing substantial projects related to transitioning to IFRS and implementing electronic document exchange with our suppliers. In our collaborative projects, all LeverX team members have demonstrated a high level of professionalism and have been able to provide the best solutions for us, taking into account our constraints. To this day, we continue to work closely with and trust the LeverX team to address crucial tasks in achieving operational efficiency, amid increasing competition in the modern retail market of Uzbekistan.”
Ali Karimov, Head of ERP System Development Division.