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ERP REVISITED: ERP REVISITED: Document Transcript

  • A CGT WHITE PAPER ERP REVISITED: MIDSIZED COMPANIES ACHIEVING BEST IN CLASS PERFORMANCE WHILE KEEPING COSTS IN CHECK PRESENTED BY
  • Dear Consumer Goods Executive: SAP is sponsoring this Consumer Goods Technology white paper for a very simple and powerful reason. When it comes to business solutions for midsized companies, the rules have changed. They have changed in ways that offer important opportunities to you and your company. Consumer products (CP) companies of all sizes are seeking ways to meet the demanding requirements of retailers, regulatory agencies, and consumers—without increasing their own costs. This presents a particular dilemma for midsized CP companies, who must meet the same demands as the “ industry’s giants, without the advantages of their financial and SMALL AND MEDIUM- manpower resources. SIZE BUSINESSES STAND There are new solutions available to help you deal with this TO BENEFIT OVER THE NEXT dilemma. New enterprise resource planning (ERP) solutions FIVE YEARS FROM REDUCED that incorporate captured best-business practices have OWNERSHIP COSTS, IMPROVED changed the rules of the game. Rule Change number one is DOMAIN EXPERTISE, AND that ERP solutions are not just for the giants. And Rule Change number two is that ERP solutions can be precisely BETTER SUPPORT AND SERVICE tailored to the business needs of midsized companies across a DELIVERY THROUGH DIRECT wide range of CP verticals. INTERACTIONS, NEW SAP offers preconfigured ERP applications that are designed COMPETITORS, AND STRONGER to meet the business needs and operational needs of midsized ” PARTNER NETWORKS. CP companies. In addition, SAP’s global experience in working with thousands of CP companies allows SAP to bring —R. “Ray” Wang, Forrester Research best practices knowledge to help you with your company’s particular challenges. State-of-the-art solutions can be deployed quickly, bringing business-process benefits and a financial ROI faster than you may have thought possible. In the following pages, information from leading CP industry analysts, along with several SAP customer success stories, will provide you with more detail about how the rules for ERP have changed—in your favor. Robert W. Frey Industry Principal, Consumer Products SAP Americas
  • Regardless of size or segment, consumer products (CP) companies are under constant pressure from retailers BUSINESS BRIEF to lower prices, while providing higher service levels, shorter response times, and lower inventories. This pressure is most acute CONAIR on small to midsized manufacturers, as they cannot rely on the Conair Corporation’s strategy of growth through innovation enormous economies of scale or the vast human and financial and acquisition has allowed it to build on its own brand resources available to CP giants. name with some of the best-known trade names in consumer products, including Cuisinart and Waring kitchen products, and Scunci hair care and accessories. But acquisitions bring Nonetheless, like the giants, the small and midsized companies their own challenges, including integrating a new company’s have seen the need to develop and deploy enterprise resource systems into those of the acquiring company quickly enough planning (ERP) and other business solutions to satisfy demanding to bring a fast ROI. retailers. However, the conventional wisdom holds that state-of-the- art business performance and enabling software are too costly, too Conair’s ongoing use of SAP solutions has helped it speed the complex, and take too long to deploy to be an option for a acquisition integration process. Following the March 2005 midsized manufacturer. As is so often the case, however, the acquisition of Scunci, Conair was able to “bring them up on conventional wisdom is outdated. our SAP system and integrate it completely into our processes within three months,” says Jon Harding, Conair’s CIO. “Usually, mergers and acquisitions take a long time, but in large part Forward-thinking CP companies are revisiting ERP because recent because we have a fairly standard set of systems and innovations have changed the rules of the game. Midsized CP procedures, we were able to integrate Scunci quickly.” manufacturers now have the opportunity and the ability to match performance metrics of the best-in-class competitors, while That standardization has been accomplished with help from increasing financial returns to their shareholders. The key SAP, which Conair has been using since 2000 to bring its innovation is the availability of solutions that enable business different geographic markets under one system. “At that time, processes based on industry-specific best practices. SAP, for each market had its own software system,” Harding explains. example, brings such knowledge to the table due to its work “Now we have one central instance of SAP with one database, collaborating with key system integrators in a wide range of CP running out of our New Jersey data center, for more than 95% of our global markets. It covers everything: distribution, verticals. These best practices are delivered in the form of purchasing, planning, financials, etc.” The centralization allows preconfigured templates that are deployed rapidly and are flexible Conair to implement best practices more easily in the multiple enough to adapt to unique or differentiating business requirements. markets the company serves. Conair is also making use of more of SAP’s solutions, such as mySAP Customer Relationship Management (mySAP CRM). “ Conair operates its own call centers, both to handle consumer queries and to provide a way for consumers to purchase WE HAVE A LOT OF PROGRAMS products. “We’re using mySAP CRM to log these calls as well TO SHIP TO RETAILERS IN THE WAYS as to pass orders through to the core SAP systems,” says Harding. In France, Conair is using mySAP CRM as a complete THAT THEY WANT, AND SAP HAS field sales automation tool with merchandisers in stores HELPED WITH THE EVER INCREASING entering sales orders into mySAP CRM running on Tablet PCs. These orders are wirelessly transmitted back to the core SAP PRESSURES TO COMPLY WITH THE system, and route plans and sales reports are then received back wirelessly. ” VARIOUS RETAIL STANDARDS. —Jon Harding, CIO, Conair Corp. SAP has also been instrumental in Conair’s ability to meet the requirements of some of the largest retailers, including Wal-Mart. “We have a lot of programs to ship to retailers in the ways that they want, and that’s one of the areas where SAP helps, especially with the very large order volumes,” says Harding. “I don’t believe our legacy systems would have survived with our current order volumes, but SAP has helped with the ever increasing pressures to comply with the various retail standards.” 3
  • The business case to deploy a preconfigured, best-practice a best-practice solution, rather than incurring the expense solution is compelling when compared with competitive of developing a custom-process design or blueprint for options. Industry best practices drive improved performance each of the company’s business processes. metrics, while the preconfigured solution dramatically lowers the time to deploy the solution and accelerates It is important to note that best-practice ERP solutions time to benefit. Companies of any size can achieve these reflect the configurations of standard software offerings, benefits by adopting preconfigured business processes in not a new code base. The preconfigured business processes are comprised of modular “building blocks.” These allow companies to maintain and enhance their BUSINESS BRIEF own unique business processes and to adapt the best- practice building blocks of business processes that make TASTY BAKING COMPANY financial and strategic sense for them. Of course, The Tasty Baking Company is a true Philadelphia manufacturers may still elect to develop custom success story, with gross annual sales in excess of “blueprints” for special areas providing them with a U.S.$250 million. But in 2003, the company found competitive advantage. itself facing serious challenges from within. The company’s technology infrastructure was a patchwork of some modern technologies and some old, poorly CHANGE BRINGS OPPORTUNITY implemented technologies that had low customer- Although the benefits of implementing a new-generation service levels and questionable performance. The ERP system may be compelling, many CP companies— systems were prone to error and underperformance. especially midsized companies—are hesitant. These As a result, the Tasty Baking Company was a perfect companies are “loath to move off their existing platforms,” candidate for a best-practice solution designed to as AMR Research, Inc.’s Simon Jacobson says, because meet the needs of the food industry. of institutional and personal memories of difficult implementations in the past. Finances also play a role in In January 2004, the Tasty Baking Company began this hesitancy. However, by acting aggressively with this implementing the mySAP™ ERP application, and the kind of implementation, a midsized company can seize a project went live in November of that year. The project was a success, according to Autumn R. Bayles, CIO of significant competitive advantage and position itself to the Tasty Baking Company. “There was a lot of business anticipate and exploit the next system evolution. value gained, and more to come,” she says. Forward-thinking organizations see the innovation of The specific improvements that Bayles attributed ERP best-practice solutions as a prime opportunity to build to the deployment of mySAP ERP were: and use technology to support their underlying business I Lower inventories strategy today and as a technology foundation for the I Fresher product future. New-generation ERP solutions are particularly well I Better order-fill rates suited for midsized companies for the reasons stated above. I Lower labor overtime I Less inventory write-offs Moreover, these applications also have other significant I Enhanced automation of high-volume tasks benefits. As R. “Ray” Wang, John Ragsdale, and Ian (such as order entry) I Real-time data for visibility and reporting Schuler write in Forrester Research, Inc.’s Trends 2006: I Freshness compliance and regulatory compliance ERP Applications for SMBs, “Small and medium-size by batch tracking businesses (SMBs) stand to benefit over the next five years from reduced ownership costs, improved domain “We implemented on time and within our budget range,” Bayles reports. She advises other midsized companies seeking to emulate the Tasty Baking Company’s success to choose a preconfigured, best- practice ERP application such as mySAP ERP. “Keep it vanilla,” she says. “Simplify your outdated processes and avoid customization if possible.” 4
  • expertise, and better support and service delivery through It is possible, however, for FORTUNE 1000 companies to direct interactions, new competitors, and stronger partner attack these challenges individually, allocating highly focused networks.” resources like commando units. Not so for the midsized CP companies. Midsized companies, working with relatively limited MIDSIZED COMPANIES FACE A CHALLENGING ENVIRONMENT capital, time, manpower, and expertise, must confront the In an AMR Research, Inc. article*, Colin Masson and Simon challenges in aggregate. So instead of applying unique solutions, Jacobson describe the current situation facing CP companies achieving operational excellence for a midsized organization succinctly. “Small and midsized businesses,” they write, “face requires a focus on overall business process improvement. the same manufacturing challenges as their counterparts in the FORTUNE 1000: increasingly complex manufacturing and Such a focus requires strategic thinking and strategic tools. For supply chain compliance, proliferation of product variants, many midsized CP companies, the best tool is an ERP shorter lead times, increased demand volatility, demand signals application featuring industry-specific templates. This provides coming from multiple sources, and managing—or adhering to the user with a robust set of capabilities while lowering both service-level agreements (SLAs) as the provider of—contract cost and risk of deployment. manufacturing services.” ENTERPRISEWIDE ERP BENEFITS It is worth a moment to revisit the underlying value of an ERP application. First and foremost, ERP software redefined the BUSINESS BRIEF software industry by providing applications that support the foundational business processes of order to cash and procure to ONEIDA LTD. pay. Use of these applications enabled visibility across the With annual revenues of U.S.$350 million and 1,000 supply chain, versus traditional, point-software solutions with employees, Oneida Limited is one of the world’s largest silos of information. The support of these core processes is marketers of stainless steel flatware and tabletop products, illustrated in the graphic below. with operations in the United States, Canada, Mexico, United Kingdom, and Australia. The company markets stainless, silverplated and sterling flatware products, china dinnerware, Enterprise Resource Planning and crystal and glassware items worldwide. Recently, Oneida made the decision to implement an industry-specific best- practice ERP application; one geared to meet its business objectives and support its business operating model. According to Rob Hack, senior vice president and CIO of Oneida, the decision to deploy the mySAP Business Suite family of business applications was the clear choice for Oneida, based on the strength of SAP and the fit of the industry-specific ERP application. “SAP is the ubiquitous industry standard,” he explains, “which makes it the best long-term platform decision for Oneida.” Oneida selected IBM as the system integrator for the implementation. “With an 85% out-of-the-box fit with IBM’s industry-specific ERP application,” Hack says, “Oneida was Source: SAP confident in selecting IBM applications services to meet our overall business objectives, timing, and cost.” Oneida was also able to leverage its existing IBM hardware platform and the years of experience invested in the IT staff. Hack believes that for Oneida, the decision to deploy the ERP application was absolutely the right decision. “There are risks inherent in any other solution, risks we’re *Midmarket ERP Providers Must Accelerate SOA Adoption, Part 2: Using SOA unwilling to take,” he says. to Accelerate ERP-Base Manufacturing. 5
  • With ERP software, the entire enterprise is able to see With strategies and operations more closely aligned, the overarching company strategy and planning and can productivity and efficiency can be increased by extending therefore work toward implementing both business the reach of real-time business processes to users within— strategy and plans in a unified manner. This visible and beyond—the enterprise. The new generation of common goal, in turn, greatly improves decision making preconfigured ERP applications delivers system-wide throughout the organization. Performance analysis is also access to a single version of the truth—a unified and improved, with agreed-upon metrics readily available so consistent business-process view. The best of these underperformers can be identified and rectified early. applications also incorporate active alerting, preconfigured BUSINESS BRIEF CAROLINA TURKEY Carolina Turkey is the fourth-largest turkey producer in the world—with U.S.$500 million in annual sales—and operates the world’s largest turkey processing plant, in Mt. Olive, NC, that comprises more than 1 million square feet under one roof and processes roughly 20 million turkeys each year. With it legacy systems, Carolina Turkey had departments and functions that were not always working with the same information and still required significant manual effort to collect and process information for monitoring and decision making. After finding that the company’s legacy systems were a constraint on growth Carolina Turkey opted for an ERP application from SAP that was preconfigured for the meat industry. The implementation was completed in two waves. The first wave went live in October 2005, and the second wave was rolled out in phases, going live in April 2006 and May 2006. According to Ed Kacsuta, CFO for Carolina Turkey, the goals were clear. “We had a business imperative to grow capacity and market share,” he says. “We wanted to continue to grow our business profitably, maintain our competitive advantage as a low-cost producer, and increase our mix of higher-margin further-processed products.” Kacsuta reports that the implementation was a success, and is expecting the following results: I Increased integration of operations I Improved customer order-fill rates I Reduced working capital for packaging and spare-parts inventory I Improved transportation planning and reduced transportation expense I Improved flock-to-customer traceability I Improved production yield in further processing I Improved employee-skill tracking I Increased timeliness and accuracy of management information I Reduced manual labor for data collection and report preparation I Stabilized ERP platform to support growth The success, Kacsuta says, was the result of hard work and selecting the right ERP partner. “Choosing a partner sets the stage,” he says. “We could not have done this on our own. The fit between the organizations, cultures, and work ethic made a difference.” He adds, “This will transform the way Carolina Turkey does its work. It will affect many different areas of the company and will serve to make the supply chain, human resources, and reporting much more efficient. It represents our commitment to the future of the company, its people, its investors, and its customers.” 6
  • “ work lists, and embedded analytics, enabling virtually any user throughout the enterprise to identify concerns early and pursue SMALL AND MID-SIZED opportunities aggressively. BUSINESSES FACE THE SAME Once the concerns or opportunities have been identified, a MANUFACTURING CHALLENGES AS decision on the appropriate response can be reached quickly THEIR COUNTERPARTS IN THE FORTUNE and assuredly since the organization’s goals and strategies are now widely visible and understood throughout the enterprise. 1000: INCREASINGLY COMPLEX By putting information in the right hands in near real time, the MANUFACTURING AND SUPPLY CHAIN organization becomes more flexible and better able to recognize COMPLIANCE, PROLIFERATION OF and respond proactively to changing conditions. PRODUCT VARIANTS, SHORTER LEAD Those changing conditions frequently involve industry-specific TIMES, INCREASED DEMAND regulations and requirements. An ERP application that provides comprehensive analytics and reporting improves the VOLATILITY, DEMAND SIGNALS COMING accessibility and transparency of information for improved FROM MULTIPLE SOURCES, AND compliance. As midsized companies grow, this transparency MANAGING—OR ADHERING TO SERVICE- and reporting capability increases in value, easing the process of compliance across regulatory domains. LEVEL AGREEMENTS (SLAs) AS THE PROVIDER OF—CONTRACT ” CONCLUSION MANUFACTURING SERVICES. Given the challenges facing CP companies in this highly competitive business environment, it should go without — Colin Masson and saying that any opportunity to seize an advantage should be Simon Jacobson, AMR Research seized, especially by midsized organizations. And it’s clear that implementing a preconfigured, best-practice ERP application is just such an opportunity. Yet, that understates the case for migration. The fact is that The time to act is now. CP companies of any size—but many CP companies, particularly midsized companies, have midsized companies especially—can dramatically increase been slow to act, making it an even greater opportunity for shareholder value by deploying a best-practice ERP those who move aggressively. application. Such solutions drive tangible benefits in all key value drivers: revenue growth, operating efficiency, According to an AMR Research, Inc. survey, 53% of asset utilization, and customer satisfaction. Moreover, a respondents said that their organizations were not using, state-of-the-art ERP solution provides CP companies with considering, or considering for the first time an ERP the foundation to explore the benefits of advanced supply implementation. Another 11% reported that their chain that are fueled with real time information from an organizations were not evaluating a replacement ERP ERP platform. I system, nor were they adding functionality to, or upgrading, their current application. This represents a dramatic opening for proactive companies who realize that the best time to move forward is when the competition is content to stand pat. 7
  • ERP REVISITED: MIDSIZED COMPANIES ACHIEVING BEST IN CLASS PERFORMANCE WHILE KEEPING COSTS IN CHECK ABOUT SAP FOR CONSUMER PRODUCTS The SAP for Consumer Products solution portfolio combines industry-specific software and market-leading mySAP Business Suite applications to drive the processes that move the CP industry, including trade-promotion management, category management, and new product development and introduction. With 2,123 customers worldwide ranging from small and midsized companies to large enterprises, SAP for Consumer Products delivers a single, integrated solution that helps goods makers increase collaboration with retailers, partners, and suppliers, driving innovation and efficiency in managing product life cycles, customer relationships, and the supply chain. Built on the open architecture of the SAP NetWeaver® platform, SAP for Consumer Products enables companies to create a foundation for a more alert and adaptive business network at a lower total cost of ownership. Additional information is available at www.sap.com/consumer.