The taming of ERP

Posted on 9 Sep 2010 by The Manufacturer

Notorious for the trauma it can cause to business infrastructure, enterprise resource planning has nonetheless become a necessity for competitive companies today. How can manufacturers tame this intractable software shrew to optimise system potential and return on investment? Shepherd Neame tell their story.

Enter Tom Falcon
Shepherd Neame is the oldest brewer in the UK, a company shaped by its long heritage and committed to brewing excellence. In 2008 the Shepherd Neame board took a radical departure from tradition to appoint Tom Falcon as production and distribution director. A six sigma black belt and business improvement specialist with a background in logistics, Falcon had no expert knowledge of brewing but he says: “I was brought on board to bring a new angle – a different skill set in business efficiency and process excellence. I think it took a lot of courage on the part of the Shepherd Neame board to depart from tradition in this way but arguably it is what a lot of established businesses need to do in order to gain new insight and become more competitive.” They could hardly have chosen a more opportune moment to embrace his skills.

Alongside his task of establishing an operational excellence programme to build on Shepherd Neame’s inherent product quality culture, Falcon’s first task on joining the company was to manage the imminent go-live of Shepherd Neame’s state of the art ERP investment.

It was a time of trepidation for the whole organisation says Falcon. “A big ERP implementation ought to involve some pretty rigorous process re-engineering prior to go-live and I think that, had not been done to the extent that it could have been, the experience would have been very tough.

“Introducing an ERP system is all encompassing in the impact it makes across departments previously existing as silos. Finance, marketing and sales, manufacturing and so on – all these departments are suddenly connected and unable to pull away from one another. When the first customer order comes in, this creates an overwhelming tug towards demand.

At this point everyone gets dragged along by it but in the meantime we had a situation where people didn’t know how to enter a credit note or complete an important form. We were not as confident in it as we needed to be because the training was weeks before and only lasted four hours. At this point I have seen many companies brought to their knees.”

Facing the challenge
Determined not to meet this fate, Falcon drew on his knowledge and recruited help from within the business to start harmonising his lean improvement ambitions and effective use of the new ERP technology.

Falcon chose Ben Wright to become his right hand man in the fight to transform Shepherd Neame from being simply an excellent brewer into an exemplary modern enterprise. In his role as business improvement and supply chain manager, Wright has been responsible for gaining some of the company’s biggest lean wins including an IQPC process excellence award for the Best Improvement Project Under 90 days.

Key to the success of this project, and many others in Shepherd Neame’s portfolio, has been ERP technology but not simply in terms of the system’s capabilities.

Falcon knew that: “The payback from all the pain of implementing ERP can be vast. If you can get your arms around the system you can be knowledgeable about data that you never had before.” And seek more ambitious improvement goals with new confidence.

In order to get the company’s arms around its technology investment Falcon married user progress and confidence to his broader business improvement initiatives. “We spent an intense period gathering all the different business issues together using affinity matrices, value stream mapping and other lean methodologies to draw out the organisational building blocks for improvement. This resulted in five key objectives for improvement one of these five objectives is called ‘SAP perfect’.” ‘SAP perfect’ is now a key pillar within all Shepherd Neame’s lean improvement projects.

Individual and organisational expectations are set around progress in this area and performance has a significant impact on lean maturity ratings. Falcon’s innovative approach has built understanding around how the use of ERP and continuous improvement in operations function together. This enables employees to use lean thinking in their interrogation of ERP data. According to Falcon: “The key thing was to have people identifying the right questions to go after in each process, and more importantly to give the right person responsibility for chasing that question within the system – key areas for us were supply chain efficiency and procurement.” Wright was among those who thrived on this joined-up approach and he acknowledges that the award winning transformations he achieved in the company’s inventory management would not have been visible without ERP. “We had no idea about customer service levels so we weren’t seeing the effect of stock levels and discrepancies on our customer – it was not visible,” says Wright. “In terms of inventory level management, we get by the minute updated stock values and stock turns. On the old system I truly knew our stock value maybe three or four times a year after a stock take and to calculate the stock turn would have taken me about a day.

ERP has changed everything.” Falcon attributes some of Shepherd Neame’s success in mastering its ERP challenge to the size of the company. “The key thing is to after the waste that the system highlights fast,” he says. “Because we only have fifty or sixty users on our system we have found that we are very flexible in doing that. We had daily meetings on how to hammer out problems but stayed operational throughout when I know other companies have had to switch the whole system off, realign, and switch it back on again.” Within six months Shepherd Neame was utilising its ERP technology for advantage, gathering management information and acting on it effectively.

“It was during this first six months that we undertook our inventory control project and in less than ninety days we had learnings that we could start applying across all our other SKUs. Some of the outcomes from this particular project have been dramatic and will become more dramatic.” One of the most important developments gained through the inventory control project has been increased on shelf performance. This improvement has transformed Shepherd Neame’s standing with major retail customers enabling them to be flexible and effective in responding to the inconsistent and unexpected demand that often arises as a consequence of unscheduled supermarket offers or because another supplier has failed. The project has achieved a lost sales reduction of 92%. Falcon says this is because: “Our attitude and abilities have been transformed from selling what we had when we had it to selling what the customer wants when they want it.”

To be continued
Shepherd Neame is now in new hunting ground with its lean projects and discovering new challenges and opportunities in the ‘SAP perfect’ pillar.

To learn more about how this cornerstone objective was created and integrated into Shepherd Neame’s lean maturity roadmap or to hear about how the company prioritised its next steps, attend TM’s ERP Connect event in Manchester on October 21. Ben Wright will share his insights into lean ERP transformation.