Corporate acquisitions can immediately impact your company’s growth and revenue, but they may have an even bigger and more immediate effect on your IT team, which has to find the right strategies and technologies to mesh the existing and new companies together as one.
That, of course, doesn’t always happen easily or quickly, especially in key IT systems such as your Supply Chain Management (SCM) infrastructure.
Tate & Lyle, a food and beverage ingredients company, knows that conundrum all too well. Although the company acquired another business four years ago, the two SCM systems are still not fully-integrated. By next summer, that will finally happen, but it has definitely taken time to accomplish, says Bill McClure, the company’s vice president of business process management.
Maple Leaf Foods, which makes and sells chicken, pork, baked goods and other products, knows the same kinds of pain, says Rob Dombkowski, the senior director of operations and food safety systems. Maple Leaf has also grown through business acquisitions, the company has acquired 14 different Business Planning and Control Systems (BPCS), as well as eight different Warehouse Management Systems that were being used by the new additions. “A global template is needed for future acquisitions,” Dombkowski says. “Our scalability was maxed out.”
McClure and Dombkowski both recently shared their stories at an SAP Supply Chain Management Summit held at SAP’s U.S. headquarters in Newtown Square, Pa., and described the trials and tribulations of making multiple SCM systems work together.
Their messages were clear — when your company acquires new businesses, the real work is truly only beginning for your IT department.
At Tate & Lyle, the strategy is to merge multiple existing SCM systems into one SAP system in an effort called Project Genesis, McClure says. Genesis began in January and is scheduled to go live next February. “We have a really disparate group of systems today,” he says. That causes big problems because different divisions are then working with different sales, marketing and revenue numbers because they’re all using their own data. “Today there is collaboration going on, but unfortunately, they’re not always the same numbers. That kind of led us to this project. “
One of the key goals of the new unified SCM system is that all the different divisions will be able to see their own business metrics as well as view how their own numbers affect the whole organization, McClure says.
While the new integrated system continues in the deployment phase, an operational model is also being built to ensure that the system meets the needs of its users and customers, he says. “This really is at the heart of the organization.”
At Maple Leaf, a new SAP SCM deployment — Project Leapfrog — began in August 2009 with the first go-live to bring each of the different acquired companies under one integrated system. The SCM rollouts in other divisions have been continuing on a regular basis as the new systems are brought in, run and then optimized as they are used, according to Dombkowski.
The new systems include a wide range of SCM tools, from Supply Relationship Management to Human Resources, manufacturing, CRM, Materials Management, Quality Management, Production Planning, Finance/Costing, Production Planning Process Industry, Advanced Planning Optimization and Extended Warehouse Management.
One key to making all of the deployments easier is the company’s “no customizations” Golden Rule, which discourages application customization for users and departments. If someone wants a customization of a core SAP application, they have to get clear approval from the company’s CEO after proving that there is no other way for the task to be accomplished, Dombkowski says. “The leadership perspective is that when we customize, we can’t upgrade easily” because the custom code won’t be compatible with the vendor upgrades. “They really took that to heart. They told the users that they will have to adapt their processes to the best practices from SAP.”
So far, there are only about 111 customizations across all the new SAP SCM deployments at Maple Leaf. “That’s a fantastically low number compared to all the ones that are requested,” he says.
Because Maple Leaf is such a fast-moving business, the new SCM deployments are more than welcome, Dombkowski says.
Deployments for the company’s chicken warehouses started last October and five have been completed, making the distribution of its fresh chicken products much more efficient, he says. “It is a fast-moving product with a short shelf life. We like to say, ‘if you don’t sell it, you smell it.'”
The company’s pork business is also very busy, processing some 18,500 hogs a day at its facility in Brandon, Manitoba, Canada. The SCM deployment went live over the July 4 weekend and went smoothly. “We’re pretty much up and running,” he says. “It’s quite a success for us at this point in time.”
So how smoothly did that latest deployment go? There were only 22 Priority One trouble tickets generated right after the go-live, he says, which was 66 percent lower than the number received following previous go-lives. “That’s not a lot of trouble tickets,” according to Dombkowski.
The deployments in the company’s bread operations are also proceeding well. So far, a deployment is complete in one of four bakery regions — the Atlantic Region — and that system is live, running SAP’s Extended Warehouse Management application. Having a modern SCM system for this part of the business is huge, Dombkowski says, because it’s also one of the busiest divisions. “Inventory turns over three times a day,” and has to be able to manage ingredients coming in, delivery trucks arriving and departing, delivery routing and much more.
Maple Leaf is scheduled to complete its SCM deployments company-wide by the first quarter of 2013.
Part of its success so far has been that it is using a rapid-deployment plan to get the systems installed, according to Dombkowski. Why rapid deployment? “We know that once we get everyone on board, we can go back in and optimize further as needed,” he says. “Some companies try to do it all at once, installing and optimizing at the same time, and then they never get it done.”
So what does all of this mean for your enterprise and what can your company learn from these real-world SCM lessons?
One lesson, says Bob Ferrari, an independent analyst and principal of The Ferrari Consulting and Research Group, is that enterprises have to take a deeper look at their SCM systems today because they’re a key tool to help find and lock down operational cost savings.
“In some companies, such as consumer-focused business, supply chain is absolutely mission-critical,” says Ferrari, who also attended the SAP SCM Summit. “Our SCM icons in the consumer area are Procter & Gamble and Apple, both of which really get its importance.”
Other businesses, such as pharmaceutical and life sciences companies and automakers, are also beginning to again see the importance of SCM systems, he says. “They’re starting to get it now because they’re faced with increasing costs. Now supply chain systems are moving a little more onto the front burner.”
For years, the importance of SCM systems have been underappreciated by many enterprises, but that changed in a major way this past March after northern Japan was devastated by an immensely powerful earthquake and tsunami that disrupted thousands of businesses and supply chains with effects that continue today, Ferrari says. “Supply chain people were always aware of the risk. The problem was getting everyone else on the same page. “
Since the destruction and tragedy in Japan, “there’s been a new awareness that some of this relates to your corporate IT systems” and has to be planned for, Ferrari says. Most companies have contingency plans of some kind in case their primary suppliers are disrupted by weather, war or other factors. But most businesses don’t have similar contingency plans if their smaller second- or third-tier suppliers are also knocked offline, he says. And that, unfortunately, is what happened for many manufacturers in the aftermath of Japan’s double-barreled natural disasters.
“The wake-up call we got with this event is that the disasters probably eliminated [parts of] supply chains that companies didn’t normally look at in the past,” he says. “They discovered that a major vendor could be affected by this.”
At the same time, Ferrari says, “crisis always brings opportunity.”
What happened in Japan alerted companies of the need to take a deep look into their existing SCM systems to see where improvements can be made to keep their enterprise operations running smoothly, he says.
“The organization that gets to the alternate supplier ahead of time and gets whatever supplies they need in the event of a disruption is the one that receives a competitive advantage,” Ferrari says. “Those who are agile and quick afoot, who know where the alternative suppliers are and locks them up, well, they are being opportunistic about it. We’ll see that now in the bottom line of some companies that are planning ahead.”
None of this is a surprise, according to Ferrari. Instead, it’s what SCM systems have been doing for enterprises for decades, as they help companies plan, adjust and save money. “Supply chain has always been there and has always been pushing the envelope.”
Todd R. Weiss covers Enterprise Applications, SaaS, CRM, and Cloud Computing for CIO.com. Follow Todd on Twitter @TechManTalking. Follow everything from CIO.com on Twitter @CIOonline and on Facebook. Email Todd at firstname.lastname@example.org You can also join Todd in the “CIO Forum” group on LinkedIn.com to talk with CIOs and IT managers about the things that keep them up at night.