The Client
A small Midwest food-packing company struggling to show ROI on the ERP investment
The Challenge
Although the implementation itself was successful, the company did not realize the operational and financial efficiencies it had deemed necessary to achieve its return on SAP investment. Indeed, senior management felt their savings to date were minimal and/or nonquantifiable. The company decided to aggressively identify, quantify, and pursue any and all post SAP implementation efficiencies. Senior management also decided they required a strategy to “lay out a road map” that would define the savings alternatives, the corresponding risks and rewards, and restated financials that leveraged these differing alternatives.
Day-to-day challenges included:
- Manual intervention on a high percentage of orders; EDI transactions were requiring manual review, manual tracking, and customer-specific SAP manual adjustments
- Old business practices and under-utilization of SAP resulting in a high number of nonvalue-added activities resulting in labor overcapacity and poor labor utilization
- More than 60% of invoices sent to customers were paid with an unauthorized cash discrepancy that required manual review and interaction, sometimes involving the customer
- Limited ability to shorten the “order to ship” windows and efficiently react to last-minute customer requests and order changes
The Haverstick Approach
Haverstick Consulting’s strategy for solving our client’s business challenges was to engage the services of our business consulting practice. Following our proven business process improvement methodology and leveraging our in-depth experience with operational business systems, Haverstick Consulting analyzed the business processes and developed a road map that would position our client to achieve the desired ROI. In working with the client, Haverstick Consulting took a four-pronged approach:
- Determine the existence of post-SAP implementation return-on-investment savings criteria within the business processes
- Evaluate the savings potential per external vs. internal action items
- Evaluate operational and/or IT system requirements and options that would help to attain the return on investment
- Develop step-by-step action plan to test, implement and measure post implementation savings
Haverstick Consulting delivered a solution that focused on the following three areas of opportunity:
Labor utilization
- Developed activity-based costing model(s) and crewing model, which determined the correct amount of labor hours required to properly service existing customer base
- Developed measurements for both productivity and efficiency, which linked directly to the company’s standard cost system
- Determined economic cost to service and process customer orders
Customer deductions
- Analyzed, quantified, and categorized unauthorized customer deductions by specific account
- Evaluated industry “best practices” and identified how the industry is attacking abusive deductions
- Recommended deduction governance, accountability, and business-review process at the national account level, which formed the basis for future pricing strategy
System utilization
- Determined proper economic mix of EDI and MRP uploads/downloads to maximize process and production scheduling
- Determined proper management reporting for specific reports (e.g., stock status, back orders, customer delinquency ledger, etc.)
- Evaluated differing inventory carrying levels given proper SAP utilization, perpetual inventory visibility, freight efficiencies, etc.
The Result
Upon completing the strategic analysis, Haverstick summarized and presented its findings to the company’s senior management for review and next steps. These next steps quantified an economic blueprint and risk analysis that identified three implementation scenarios that will help realize post SAP implementation savings. Along with the implementation scenarios, Haverstick recommended a list of seven key performance metrics that will help the client better manage future labor utilization, unauthorized discounts, order fulfillment costs, and SAP maximization.
By working with Haverstick Consulting, our client has taken a giant step toward leveraging SAP functionality, identifying and realizing its return on system investment, and providing greater order process flexibility to its current and future customers.
As a result of its partnership with Haverstick Consulting, our client now has visibility into its most critical business measures and a solid foundation for enhanced analysis of other varied aspects of its operations. |
