From spirits to style: similar strategies

What are you going to prioritise for IT investment? What's your strategy? Are you looking 'upstream' at your supply network to get that more synchronised and achieve greater collective customer responsiveness and reduced stock holdings, obsolescence and costs? Or are you focusing on cracking forecasting so that production and procurement, theoretically, are more watertight, and everything runs more smoothly? We're assuming, of course, that your ERP system is in and working well; that production planning and management are slick; that you have a handle on your customers, prospects and pipeline; that your after-market is under control… If you haven't, there's a very long list of calls on the inevitably finite budget. The following is about the IT strategies at two quite different companies in different sectors – that turn out to be remarkably similar. The first is £230m Scotch whisky group Edrington, best known for its Famous Grouse and Macallan single malt brands, which sells the vast majority of its product through 40 distributors around the world. The second is £30m corporate clothing maker Simon Jersey, which has more than 50,000 customers, including the likes of Best Western and the NHS, and distributors in 25 countries. Edrington IT director Alan Carlile was responsible for managing a change from three separate sales and marketing operations to a single service centre in Glasgow, implementing SAP R/3 ERP to run it all. It's an aside, but it wasn't all plain sailing: the project went live in July 2003 on schedule but, at around £1.5m, was 20% over budget. Carlile comments ruefully: "I feel that, at the time, the expectations of some of those we were delivering to were a little over-optimistic. There's a hell of a lot of intellectual challenge in ensuring that a package performs in the way managers are led to believe it can." A very good point. However, Edrington achieved all the right things with the system: visibility of information for business analysis, financial reporting times slashed, better materials planning with all those benefits, and so on. But that was then, and this is now. Most recently, it's been extending its system with SAP's enterprise portal system and its BIW (business intelligence) – and it's also upgraded SAP from 4.0b to 4.6c. First the portal which is being aimed at both customers and suppliers – although, interestingly, Edrington chose the customer side first to enable more accurate forecasting by customers themselves using the web, and to provide a channel for interchange. Since launch, the firm has been sharing information on its customers' forecast accuracy with them in a bid to improve everyone's demand management and get to the elusive 'win-win'. Carlile insists that for his company, with the internal visibility sorted and the upgrade road-map established, this was the next business-critical initiative, simply because of the scale of potential business capture and cost savings. In one sense it's been easy. "We started with two customers, and rapidly expanded to 40 big distributors around the world, which is 80% of our market." If you've got hundreds of customers there will be issues, but it's worth thought. Incidentally, he warns: "Choose your piloting partners very, very carefully: you need to point out to them that the pilot will evolve on the basis of the experience you will be sharing with them." That said, he reckons the cost of setting up the portal was £150,000 including software, development and consultancy. Asked about payback, he demurs: "It's difficult to say: we saw it very much as a hygiene function for customer relations, getting more accurate forecasts." However, he points out that whatever you do, once you've got one portal under your belt, the additional cost of another is marginal. In fact, the Edrington supplier portal is due to pilot in the next couple of months. "The suppliers – one glass and a cardboard packaging supplier – will have views into our intended production so they can manage delivery in time." It's about moving to vendor-managed inventory (VMI): he's not going the supply chain event management (SCEM) and alerts route, but it will get away from phoning and faxing, with suppliers automatically seeing MRP. Turning to BIW, Carlile says simply: "Business intelligence software is hugely underrated and misunderstood. We've been using if for a few years now and it's wonderful. You've got to populate it with data ... but once you've shown a few users how to get analyses, they never look back." He reckons in one case, analysis was reduced from 10 man-days to just one – and by the user, not IT. "The spin-off benefits of business intelligence software are dramatic," he insists. Smarter outfit Moving on to Simon Jersey, the firm, which used to manufacture in Lancashire, now outsources production of its 10,000-plus lines (70,000 SKUs) to around 20 'cut, make and trim' (CMT) companies, mostly in Portugal and the Far East – and focuses on brand management and customer service. Its most recent IT and business project has been upgrading from a highly bespoked ERP system to Geac System 21, with minimal customisation and a web-based, configurable, single user interface for all applications – Geac and non. That went live a couple of months ago, and finance director Chris Davenport says that although it's difficult to assess ROI yet, it's certainly addressing the firm's issues. "We had a bespoke system which was costing us a lot to maintain; that's all gone. Beyond that, there are all the efficiencies in everything from order entry across the departments, to improvements in customer service. We're going to be able to dramatically improve on our 48-hour turn-round of catalogue orders, and I'm also expecting around a 20% reduction in stock holding." Given the scale of business process mapping she presided over before defining the IT, any other outcome would have been astonishing. Simon Jersey spent four months on it, with the modelling demonstrating a need to get forecasting better, to link the rest of the business into its existing customer relationship management (CRM) system and to improve its customer-facing e-business. All of which has been done, and is due to be followed up with web-based SCEM at Phase III. Advanced forecasting, covering both sales forecasting and production demand management, was very important. Simon Jersey needs to anticipate peaks and troughs so it can manage its global CMT suppliers, given their typically 13 week lead times, and deal with issues around stock or capacity. It can, for example, bring on local UK CMTs, chopping lead times down to six weeks – but at a cost. Earlier and more accurate demand visibility helps optimise all of that. Like many, the firm splits sales forecasts according to key accounts and the rest, and the system now provides links into production management for the former, while regular catalogue items are managed on min/max stocks. Key account figures now come from customer orders, forecasts and demand history, all available for analysis by sales and production, and Davenport reckons she's getting good customer satisfaction scores while also lowering costs through slicker, more responsive operations. Moving on to CRM, the firm has maintained a separate system for some five years. "CRM is incredibly important," says Davenport, and she means for keeping the business aware of contacts, how they were acquired, sales history, successes and failures. Now the system links to sales, credit control and so on, via ERP so all customer-facing functions get an overarching and detailed view to support their activities. Incidentally, to those that spurn CRM, Davenport says: "They should look again. You've got to capture your customer and prospect information, and make that information available to help your business. It's the key to seeing the low performing clients, the potential to sell them what they're not buying…" Meanwhile, the company is also reviewing its electronic customer communications. Although it's used EDI and email, and has run a website catalogue for years, recently it undertook a project with Securicor, one of its global customers. That development involved a catalogue-based e-procurement system from Biomni, which now means that when staff at Securicor buy uniforms, that system generates an order which automatically loads to Simon Jersey's ERP system via the web and XML. With that kind of automation, and the low cost of getting set-up, the strategy is clear. "We're using XML for all automated data transfer, and we expect to make much greater use of that now," confirms Davenport. The message: it's worth getting experience of this because it's a powerful doorway to business transactions without human intervention or the development of point-to-point integration. Ultimately, you get ever more automated business processes – and incidentally, that can be both externally and internally. Finally, on the supplier side, although at the moment communication is largely by email, Phase III of Simon Jersey's implementation will look at transforming that into a web-based SCEM system. The objective there will be to enable suppliers to look online at proposed production, thus automating some of the processes there and saving admin and time, as well as reducing stock levels across the supply chain as confidence and accuracy grow. Two very different companies; two remarkably similar strategies. Pause for thought.