Read about how one of Pakistan’s oldest food companies managed the fastest implementation of SAP
Anyone who thinks that the processes involved in the purchasing, production and distribution of products within just one company in the Food sector are not complex enough, needs to look again.
As the local palette migrated overseas in search of faster, better and more, the opportunity for the export of products also grew exponentially. The logistical challenges involved in managing the production and distribution for both the local as well as the export market, make this a story ripe for the kind of challenge technology platforms have the potential and ability to address.
Most companies in the industry still depend on manual processes or isolated applications for managing each department within their company. This really isn’t a shocking revelation considering that most companies are also run as seth-oriented businesses that are in some cases, still lean on investment and mean on the bottom line. “In 2001), National Foods implemented iScala, an ERP solution that offered us a way to keep track of some of our processes. Obviously back in 2001, the technology was still evolving and it was a learning processes for the company to have an ERP to help manage the way the business was run back then” comments Muhammad Danish Nafay, Assistant Manager SBS (Systems and Business Support).
[Gallery not found]As a company grows, explains Danish, the needs change, the variables involved such as the number of users and the number of sites, also grow. “Software then becomes limiting in its operations and there is only so much that we can tweak it to suit our needs. There comes a time in a company’s lifecycle, where you simply have to make the decision to move onto a larger platform completely afresh.” However, National Foods used iScala for their reporting needs. They built their own reporting applications, the data was input through iScala and custom-built reports would get generated using their own application)
With the growth of a company, its requirement also grow, which results in evident limitations of a software such as frequent tax implementation, changes in prices and environment, policies. “We needed to make the technology shift and began looking at SAP through our consultants.” The company followed the methodology of ASAP or Accelerated SAP, which makes the 6 months implementation an impressive record for the company, in addition to making them the first in the food sector to deploy SAP.
“This is a medium-sized implementation for SAP in terms of our size however a relatively large deployment in the context of Pakistan.” But the more obvious question to ask the company is why they opted for an ERP solution back in 2001. The implementation of technology is always executed with a keen eye on increasing profits, which usually means that there is a lot of competition in the sector. What was the situation like that early on?
“You see, the business of FMCG companies works something like this – there is a huge investment on the procurement of materials. Certain ingredients are seasonal while others are influenced by quantities and pricing, which the company will always try and optimize. Therefore, the pre-planning required to procure these materials at an optimal time so that a product can be produced and sent to market at the correct time to meet the market demand, is a formula you have to get right.”
For example, Ramadan begins in the first week of September this year, which means the products should be available in the market by the 1st or 2nd of the month so as to ensure that the brand customers find the product in time. This, of course, is seasonal, but the company would need to accurately plan all of its pre and post production activities to preempt the customer timeline and suit their buying behavior.
“This gives rise to the concept of MRP, or Materials Requirement Planning.”
The company identified areas where processes could be more optimized to increase efficiency and reduce wastage. “The difference in the way IT managers work today is that the skillset is beyond just the technical programmer working in isolation. The IT Department today needs to be made up of people who have an understanding of business, operations and empathize with the operational challenges that a manager goes through on a daily basis. That’s the only way you can tell which process is struggling with which methodology, and how the interference of automation can help improve that.”
The shift in the mindset and the role of IT in the Business
With a strategy like this, a company’s IT department plays an integral role in leading the change to create optimized behavior from its workforce.
Perhaps the question that most people will want to ask if how can you quantify the ROI when we don’t necessarily work in ideal situations. “We can assess or predict how software is going to benefit but we can’t know the exact figure for obvious reasons. But if we waited for the ROI to show itself before making the investment, there is no concept of risk involved. The implementation of an ERP such as SAP can be in the billions over the course of a long duration, but the long term benefits it will bring, will be many times greater than that.”
Today, the role of the IT Manager isn’t what it was traditionally meant to be. An IT guy needs to know more about every part of the business in order to bring the actual benefit into it. Every vertical that is there in an organization, must have a leader to champion the integration of technology into it.
Today’s businesses, regardless of which part of the world you work in, are very modular. Technology enables the shift from having everything on-site to allowing departments to more accurately coordinate with each other and develop remote links to optimize costs and balance the work load. The assembly line concepts have expanded from working in synch on one straight conveyor belt, to spreading it to better manage availability of time and resources. “We need to understand all of these processes so that IT can make all of this happen” says Danish.
How difficult was it to convince the management to make the shift from iScala to SAP? “It’s an interesting question and the answer is an extraordinary one. It took no convincing at all because over the course of time, we’ve learned that until you don’t have the ownership of the transition, migration or implementation from the top management, no change can take place in the organization.” The decision to make the technology shift came from the top management.
As a large-sized organization continues to compete in the local market, create milestones and expands its operations, the role of technology definitely changes, but then the ownership of the longterm vision of the company, also has to be in line with these changes. A company that is already the leader in the local industry, still strives to increase the void between itself and the others in the sector, is a fairly critical strategy to employ. Though there are exceptions to the rule, there is a general consensus that the older the industry or the attitude is, the more hesitant it is to adopt to change.
“Earlier, the business and IT were two different expertise. But now, the importance of business has become more important. Now, we look for those people who have technical skills as well as business knowledge. A programmer cannot develop a business application or configure one, unless he has enough knowledge of business, policies, taxations, and importance of future aspects.”
The implementation of technology, in addition to just the investment it brings, influences a lot of changes in the workspace. Of course it increases accountability and time management, it also allows the possibility of increasing the skillset that each employee has. Computer skills or reading and understanding dialog boxes or computer-generated messages in English. These are skills that allow the overall increase and rise of the skillset that an industry has employed in the workforce.
The implementation of SAP Software is always a huge operation that brings about many changes within a certain organization. The whole process, in some cases, can take several years, depending on the methodology of implementation and costs. Every employee of an organization, whether related with the ERP or not, automatically becomes a part of the SAP implementation process. “Knowledge share. This becomes a tremendous exercise in sharing and accumulating the intellectual capital of an organization” explains Danish. The objective of the SAP implementation is to achieve high performance and efficient working modules that can enhance the level of communication and information management.
For that reason, as it is very important, the implementation process needs a lot of attention and careful decisions, which can either result in development or destruction in terms of inefficient deployment. There are various method of SAP implementation such as IBM’s ascendant, ASAP and a few others which differ in features and methodology.
The procedure is divided into four main stages where the vision of project preparation is created, a blueprinting phase that discusses sizing of the projects, a functional development phase and the final preparation phase. Besides, many implementations are also done employing ASAP (Accelerated SAP) methodology, which has been derived from best practices in SAP.
Perhaps one of the biggest reasons for this change is that a lot of industries in Pakistan that were previously only run by seths and family-owned businesses, are now having the influx of the second generation businessmen and women inducted into the business. Whether it is textile or any other industry, by the early part of the decade, the younger generation has studied overseas, studied the impact that technology could be playing, come back to decision-making positions in their own business environments and begin to make the assessment of how technology integration should make the difference in legacy setups.
As the company continued to grow and expand, the role of the IT department also grew in its importance to operations. “At present there 5 locations within Karachi; 2 in SITE, 2in Clifton and 1 at Port Qasim, and all of these sites are connected through a wireless link. Six sales warehouses and one salt plant are connected via VPDN.
Efficient and timely decisions save money
As you’ve correctly assumed, profit margins directly correlate to the time when a decision is taken. It’s not as much what decision was made for a purchase or for the stock inventory of an ingredient, as when it was taken. In the food industry, everything depends on decisions, if a company procures more, it will end up wasting the material and if procured less, problems will occur, resulting in low productivity and late deliveries. Therefore, the MRP solution, which is a core difference between an ordinary software built by any company and standard applications.
“To deliver our products even before the deadlines, we have to work ahead, plan ahead. Procurement comes before the production, at this stage.” Said Danish
He further explained the concepts of Material Requirement Planning MRP, which helps in planning the procurement process. “Business Intelligence helps us to analyze the manual process with all the variables involved, and then see what the optimal time to make a specific purchase is. How long prior to the production of a certain masala should the material bill be created based on what forecast and still take into account, the cost versus benefit.”
Making systems communication with each other
Software from different vendors being used within the same company, will always create issues. How do different software link to one another, how do you make the different solutions having different roles in the solution map, communicate and synch with each other? More importantly, how do you streamline the resultant output that you need in order to run an analysis of the performance of a department or company. “As our operations and functions became more complex, our teams were spending a lot of idle time migrating data from one software to another. Different vendors do not support each other” explains Danish. To achieve this communication, the IT department at National Foods could have either changed their configuration to plug in a middleware client to manage the coordination, but they chose to migrate all their operations onto SAP.
Before the implementation of SAP, the management faced several problems, in dealing different panels at different platforms, managing accounts, renovation and figures, which encircled maintenance of the plant and related issues, all of which created problems for the end user and ultimately resulted in delays and low productivity. On the other hand, the product demands were continuously increasing, which needed some advanced and organized system to encounter all the problems. The company was in a continuous process throughout the year, because you can’t really turn off operations just because you have a software implementation in the making. “We planned intensely for a year and adopted the ASAP methodology. It took us 6 months to complete the implementation of SAP. This was a record implementation time for a Pakistani company based on our size and structure, and we became the first SAP migration in the Food sector in Pakistan.”
Bringing it all together
SAP is a multi-functional software which has been deployed with its basic six modules at National Foods. These include, Material Management, Financials, Sales and Distributions, Production Planning, Quality Management and Plant Maintenance, all of which are integrated, having just one view, solving a big deal for the operational personnel. It allows the users to monitor each module from all of the rest. In that case, if something goes wrong in Quality Management, for example, it can be monitored from Sales and Distributions, which helps, saves time and allows easy management.
“We regularly have our IT audits and with SAP, just a click of a button gets us all the information, which we received after a plenty of procedures, which is the tangible benefit of SAP, it saves a lot of time. It has a lot of features and a space to build more on the same platform, making it easier for us to manage, and we are continuously evaluating its several new features with the passage of time, it is becoming more interesting.”
During the implementation period, which is very critical, the company cut off one system and transferred all balances and materials to the other system, with all financial figures in a categorical order. Financials figures were moved to the financial section of the new system, management data was put together in management section and the figures of sales and balances was moved in sales and balances figures of the new system. The company kept both the new and old systems in running order for an entire month to tie up figures of both the systems in the end of the month. After a month of running dual systems, the company made the leap of faith. SAP fueled the infrastructure at the organization.
Change Managers
It is a very critical stage when the chances of failures are greater than before, at peaks. Company has to go back to cut off date, if situation becomes worse. When things cannot be handled perfectly, everything has to begin from the very start, which is something that a company cannot afford to survive.
Danish gives the solutions to these problems, “If there are two initiatives that must be followed globally in any ERP implementations, they are High Management Involvement, and Power Users. We opted for both of them and it wasn’t a bad decision.”
“Because all operations are being derived from a certain place, the user operating SAP should have existing functional knowledge of projects, business skills and he should be visionary enough to see the changes that have the possibility in the future. Configurations should be made scaleable enough to cover other things in the years to come. That is why we made Power User groups.”
The company used its power users just for SAP project, and they do not work in any other except theirs. These power users help existing end users in this phase of parallel running of the new systems as well as the trainings.
There were 4 power users working in Manufacturing Module and 1 in Quality Management. However, in Financial Module, there is a huge team of 7 people who handle Costing, Financials, and GL Accounts. Therefore, the number of allotted users entirely depends on the complexity of a certain module. The more functions it has to perform, the more will be the users handling it. “You can never have success if you keep power team distracted in other projects – they have to be the change managers that will inspire the innovation in the entire system.”
Integrating Business Intelligence?
What’s next for a team as capable as the one that is running the engine at National Foods? “There is no limit to what we can plan. The Business Intelligence and HR modules are both in the pipeline at the moment. If we have a production planning, we can also opt for product life cycle management easily and it is scalable to accommodate a larger sized company as well. There are several other options and the details of a particular module keeps extending.”
Bringing all the different technologies for the better, greater more effective use in the company’s different processes, is where the team considers next. RFID tagging and inventory tracking, better planning and observing how IT can make a more tangible impact for any company is what the IT Department focuses on.
There is nothing that technology cannot enable you to achieve. It’s a matter of the ownership, the right people, the right environment and most importantly, the right vision and commitment to make that solution work for you. We see it in businesses all the time, and we’ve seen it for sure in the SAP implementation at National Foods.
National Food’s IT department and Project Team head consists of:
Shakaib Arif, COO of National Foods and Project Director for SAP
Zahid Sheikh, Head of IT Department
Systems and Business Support (SBS)
Muhammad Danish Nafay
Nizar Lakhani
Haris Ahmed
Network and PC support (NPS)
Muhammad Abdullah Saqib
Muhammad Jawwad
Sami Rehman
Waseem Shah
Syed Shayan
Danish Shamim
Saud
As far as SAP PRoject implementation team:
Shakaib Arif (COO- NFL) and Project Director
Zahid Sheikh (IT Head- NFL) and Project Manager
Fayyaz Abdul Ghaffar( Company Secretary-NFL) and Functional Head
Production Planning Module
Muhammad Danish Nafay
Naueen Mukhtar
Rizwan Siddiqui
Hamid jamal
Financial and Controlling
Tahir ilyas
Kashif Iqbal
Farhan
Jamshed Abubakar
Tanveer Rajabali
Kashif Ismail
Arif Khan
Sales and Distribution
Rizwan Mirza
Asad Alvi
Plant Maintenance
Wasi Haider
Sami Qureshi
Quality Management
Aijaz Rahim
Owais Ilyas
Materials Management
Rashid Masood
Rashid Lodhi
NFL IT department:
Zahid Sheikh (Head of IT)
Systems and Business Support (SBS)
Muhammad Danish Nafay
Nizar Lakhani
Haris Ahmed
Network and PC support (NPS)
Muhammad Abdullah Saqib
Muhammad Jawwad
Sami Rehman
Waseem Shah
Syed Shayan
Danish Shamim
Saud
BASIS(rights/authorization/backups) and ABAP (Programming language within SAP)
and the team was
Nizar Lakhani
Haris Ahmed
Muhammad Abdullah Saqib
Muhammad Jawwad
