It's not every day that most companies have to deal with a corporate takeover big enough to more than double their size, but that's exactly the situation in which savoury foods manufacturer Patties Foods found itself after buying American-owned Simplot Australia in late 2003.
2004-5 revenues of AU$105 million
Overnight, the acquisition turned Patties Foods into Australia's largest pie, pastie and sausage roll manufacturer through the addition of three iconic brands: Herbert Adams, Nanna's and Four 'n' Twenty. With that brand strength, however, also came the realisation that business at usual for the 350-strong Bairnsdale, Victoria based manufacturer was simply no longer good enough -- and neither were its obsolete AS/400-based IMAS applications.
-Our business grew substantially both in terms of SKUs [stock keeping units] and transactions," recalls chief financial officer Andrew Beeson. -We had survived for 15 years on IMAS, a specific, heavily customised system, but we were considering a change of systems even prior to the acquisition because it just wasn't very flexible. We knew if we acquired a company the size of Simplot, we would certainly hit problems -- and the purchase sent us over the edge in terms of capacity."
Adjusting the recipe
By mid 2004, the Simplot business was edging towards full integration with the Patties business and staring down increased manufacturing demand that would eventually push revenues to AU$105 million for that financial year. To meet growth, the company began actively scoping out a plan to modernise its systems.
The company's key goals for the new system were both to provide enough headroom and efficiency to accommodate the Simplot business, and to revisit the merged organisation's control and reporting structures to ensure that they were operating optimally. Also important was support for standards such as electronic document interchange (EDI), which is all but mandatory to communicate with customers in the fast-moving consumer goods (FMCG) market.
Over the course of the next year, a detailed business review and tender process had given Patties an audit of its business processes, identified key inefficiencies and potential for improved internal controls, and laid out a roadmap for its major business process optimisation (BPO) project.
-There [were] some very real constraints with the previous system in getting the types of reports we needed to run the business, both on the manufacturing and sales side," explains Beeson, who joined Patties in late 2003 just after the Simplot merger went through. -I was aware of the workarounds people were using with the current system -- everyone had an Excel spreadsheet to do this or that -- and I saw the need to try and simplify some of our business processes."
All that remained was choosing the best technology platform, and this decision was eventually made after examination of competing solutions -- particularly through conversations with existing users with similar business activities -- leading the company to opt for Intentia's M3 enterprise resource planning (ERP) platform (subsequently purchased by Lawson and renamed M3).
As the M3 implementation kicked into gear in mid 2005, Beeson, as CFO, took an active lead as the project champion. This hands-on role involved close and constant collaboration with the company's three-person IT team, customer service manager, financial controller, production supervisor, and production planning manager to ensure M3 was as closely tailored to Patties' business needs as possible.
Just after Christmas 2005, the team went fully live, and, despite the rapid changeover, the project went off smoothly. That first phase saw M3 introduced across its inventory operations, with goods scanned into dispatch and some data generated from the manufacturing floor. The second phase of the project, which was rolled out more recently, extended the scope of the application to involve capture of all manufacturing data.
-Within that week, we were dispatching and invoicing without any major dramas," Beeson recalls. -Prior to this, we had no electronic data coming from the manufacturing floor. Now we have some, and we still have some gaps which we filled manually, but the next phase is filling all of those gaps electronically."
A new data diet
Just as Patties' project was driven by a comprehensive business audit, implementation of M3 involved a major rethink of the way the company handled its data and reporting on that data.
More than two years of sales information, and a host of other data, were cleansed using data scrubbing tools. Data was migrated, then checked and rechecked. Patties Foods also introduced PACS (Professional Accounting Control System), a promotion management system from Trade Systems Technology that lets Patties track the success of discounting campaigns at its retail customer outlets.
Data in PACS, as well as that contained in M3, is made available to a Cognos reporting system that has provided a far greater range of reports tracking areas such as manufacturing performance and financial efficiency. Backed by tighter internal controls and a streamlined Chart of Accounts, the new environment has delivered far improved visibility of the company's operations as well as offering tighter internal controls and better responsibility for data maintenance.
-IMAS reporting was not easily integrated into Excel in the past, but using Cognos over Movex has given us benefits in terms of better reporting and visibility of data," says Beeson. -Our financial month-end processes are improved, and people are spending more time looking at data and reviewing data, and using data to run the business, than actually looking at spreadsheets and reconciling them."
Since the implementation, EDI has become intrinsic to the manufacturing process, bolstering Patties Foods' communication with key customers like Coles and Woolworths, while smooth data exchange also allows improved communications with business partners like the many cold storage providers upon which the company relies to manage its stock.
Although it's too early to talk about ROI for the project after just six months, Beeson is confident that the improved reporting and better process visibility of Patties Foods' new environment has positioned the company for further growth.
After reaching the six-month milestone, Beeson initiated a second systems review to identify areas of the environment that could be even better utilised, and to ensure that the revised business processes were indeed operating more efficiently than they were previously.
-The major benefit of the rollout has been in using the opportunity to rationalise a lot of what we do, and to get more visibility of data," says Beeson. -We're still getting enhancements to the system and want to improve our initial rollout, but the system is just the basis for our growth now. The company is eager to grow and I'm confident that when that happens, we can integrate M3 through the business without any major strategic issues along the way. We now have the tools we need."