No ERP? No New Markets

Perhaps more so today than ever before, the name of the game in the business world is consolidation. In fact, the names themselves often indicate how the game is being played. For instance, the brand name for a large corporation's line of widgets may have been, just a year or so before, the company name of a widget manufacturer the corporation later acquired. Dig deeply into a growing company, and you're likely to find an IT infrastructure also in flux.

The collective product lines of wholesale wines and spirits supplier Brown-Forman Beverages Worldwide (BFBW), itself a division of a larger corporation, $2.2 billion Brown-Forman Corp., reflect a repeated application of the consolidation model. Established in 1870 to sell Old Forester bourbon (still a BFBW offering), the original company didn't make its first acquisition until 1923 and waited more than 30 additional years for the second. But, since the mid-1950s, the company's acquired offerings have steadily increased. Among the numerous name brands acquired over the years are Jack Daniel's, Bolla, Southern Comfort, and Fetzer. BFBW also maintains contracts that give it exclusive distribution or import rights to brands it supplies but doesn't actually produce - for example, Korbel champagne and Finlandia vodka.

By the mid-1990s, the model of growth by acquisition, which had driven BFBW's rise in the U.S. beverage market, was being replicated across the industry. And, the trend toward consolidation threatened to turn BFBW from big-time to small-change. Says T.J. Graven, BFBW's director of enterprise systems, "The consolidation of the competition had taken us from being a fairly large player with a sizable market share to being a relatively small producer with a small market share."

To regain and, hopefully, exceed its previous market ranking, BFBW clearly needed to drive more business through international distribution channels. But, that effort would depend on the company's ability to transform its scattered business operations into a cohesive order fulfillment machine. Unfortunately, BFBW's existing IT infrastructure was a hodgepodge of outdated, inflexible, and unscalable systems. "With nonintegrated legacy systems running in different locations, there was no way we could become a serious global company," Graven says. So, the ability to coordinate all transaction processing and order fulfillment activities from BFBW's Louisville, KY headquarters became IT priority number one.

ERP Needs Line Of Business Buy-In
To put all transaction, production and shipping operations under one IT umbrella, BFBW decided to purchase a full-blown, single-vendor ERP (enterprise resource planning) package. It chose SAP, and deploying the suite as an enterprise-wide solution meant shutting down legacy systems in Louisville and elsewhere. "Initially, it was like Charlie Brown's reaction when Lucy pulls the football away," says Graven. To spearhead what turned out to be an 18-month-long project, BFBW formed an implementation team primarily comprising departmental and line of business managers. "The team had one or two people with IT expertise. But, we had learned from talking to people with SAP experience that project leadership had to come from employees who understood the business at a functional, operational level," Graven explains. "Otherwise, we couldn't be sure we would get long-term buy-in from all users."

One key decision the implementation team made was to allow the company's comfort level with SAP to evolve. That meant not turning on modules or tools that would force BFBW to re-engineer any of its longstanding business processes - at least not right away. For example, SAP allows a single sales order to be broken out for multiple deliveries over time. But, that's not the way the BFBW had been handling the order/delivery process. "Using that method might have decreased our efforts on the sales order side," admits Christopher Ford, BFBW's manager of logistic systems. "But, the multiple delivery feature wasn't available in our legacy systems. So, we just configured SAP to replicate our traditional practice of creating a single delivery for each sales order." Nevertheless, a few years into the rollout, BFBW now plans to adopt even more of SAP's standard configurations. "Now that we're comfortable in the environment, we're beginning to make decisions about reconfigurations that will result in process improvements," says Graven.

In the meantime, BFBW has been relying heavily on other SAP order fulfillment features, including the ability to group orders for delivery. Having this capability is particularly useful for distributing the Bols line of liqueurs, which BFBW produces in a contract manufacturing relationship for another company, William Grant & Sons. Following a procedure carried over from the old system (in this case, a practice worth keeping), BFBW often links sales orders for Brown-Forman-based products and Bols-based products to be shipped on the same truck. In the legacy orders processing system, there was no way to tie orders together for shipment. Instead, traffic coordinators in the warehouses had to wade through pages of paper sales orders to match orders that belonged together. If the coordinator missed an order that should have been grouped, the resulting short shipment caused costly supplemental rush deliveries and higher, LTL (less than truckload)-based freight charges. Says Ford, "We had no way of knowing beforehand if we were about to ship something wrong. It would be safe to say that the operation was running blind."

Don't Leave RF Alone
Of course, the SAP initiative brought with it several integration challenges, not the least of which was tying in BFBW's existing warehouse processes, including RF (radio frequency)-enabled data collection. When BFBW went live on SAP in early 1998, SAP did not have a sophisticated WMS (warehouse management system) module, nor did it have integrated RF capabilities. "At that time, there was an entire industry built on filling the gap in SAP's WMS functionality," Ford says. "Another of the software's shortfalls was the inability to do native RF. But, when we bought SAP, we had only one warehouse using RF for data collection. So, during the product review process, we overlooked the need for integrated RF."

BFBW's strategy for addressing this "oops" situation was twofold. First, the company decided not to purchase additional software that could pull RF-based data collection into SAP. Estimates for such packages ran between $600,000 and $800,000. Instead, BFBW built an interface between its legacy RF-enabled WMS and SAP, even though the vendor for the WMS had gone bankrupt during the SAP implementation. "We knew we would eventually have to replace the legacy WMS because, even though the interface was well-designed, there were still discrepancies between the two systems," says Ford. "So, we took a gamble on a temporary fix, hoping that SAP would develop a WMS with native RF capabilities." (BFBW has since gone live on SAP upgrades that include the advanced tools.)

Second, BFBW replaced its entire RF infrastructure, upgrading from a UHF (ultra high frequency) system to a more powerful 2.4 GHz (gigahertz) system from Intermec Technologies Corp. A key impetus for change was the fact that BFBW's existing RF vendor had been acquired. Consequently, its products were coming off market, resulting in nightmares for BFBW when it came to replacing or getting service for the equipment. "Just to squeeze a bit more life out of the old system, we looked all over the place for the old radios. The funny thing is, we actually found some on e-Bay," Ford says. Eventually, BFBW abandoned the old system, and brought in Intermec, which had already been supplying BFBW's bar code printers. According to Ford, the integration has gone smoothly. While BFBW does customize the types of transactions it runs on Intermec's data collection devices, all of those transactions can be processed using standard SAP functionality.

Watch WMS Double Your Throughput
While BFBW hasn't yet formally measured the effects of the SAP rollout, the company has studied the impact of having integrated WMS and RF functionality. In only the second month of using the system, utilization of warehouse space increased by 50% and operator throughput by 20%. With the old system, the Louisville warehouse moved 25,000 cases per day on straight time and, at best, 30,000 to 40,000 with overtime. Now, it is already moving nearly 40,000 per day, all on straight time. "I love the numbers," Ford says. "We went into this project purely as a replacement strategy. But, with the efficiency numbers already climbing, we expect to double our previous throughput and move 50,000 cases per day with no overtime."

Beyond the warehouse, there is, of course, a larger, enterprise-wide picture. Both Graven and Ford confirm that the SAP rollout has given BFBW the kind of automated processing it needed to maintain worldwide distribution channels and drive products through them. As Graven puts it, "We have benefited from the power of integrated systems to handle the entire scope of our supply chain operations. We have seen the immediate, simultaneous impact that a single, efficiently processed transaction can have on procurement, production, warehousing, sales, distribution, and, most importantly, our financial ledger."