A Fresh Approach to ERP

"Life is like a box of chocolates. You never know what you're going to get." It's one of the single most famous lines of dialogue ever uttered in a motion picture and a phrase that created a pop-culture icon in Forest Gump. Now, suppose we could turn back time and consider what the world would be like today if good 'ol Forest decided to unwrap a package of sweets manufactured by The Tasty Baking Company of Philadelphia, Pennsylvania. "Life is like a batch of Jelly-filled Krimpets. You always know what you're going to get."

While life will never be this reliable, Tasty Baking is on a mission to make sure that its business execution is, by bringing its consistently fresh-baked products to the masses via a code of business strategy, comprised of five pillars, created and executed by the company's CEO, Charles Pizzi:

1. Build Brand Equity - Keeping the great TastyKake brand top of mind to existing customers and reaching out to those who are not familiar with the brand to make them new customers
2. Deliver Product Innovation - Keep customers feeling fresh with new items, oftentimes short-term products that bolster the TastyKake brand, i.e. seasonal items, different flavored pie crusts, etc.
3. Grow Core Routes - 70 percent of the company's business lies in the direct-store-delivery arena. Strengthen it.
4. Enter New Markets - Ambitious "bolt-on" strategy of adding new routes to grow the core geography of distribution.
5. Operational Excellence - Process excellence across the business.

Mid-Market Challenges

With 2004 gross sales at $261 million, Tasty Baking is a company with a big brand name and mid-market resources. Limited resources, however, haven't fazed Chief Information Officer Autumn Bayles or Director of Enterprise Applications Brendan O'Malley, who were both brought on board a few years ago to primarily help facilitate the turnaround in company technology. They both describe their 14-person IT staff as a group of "superstars", more than capable of taking their company's business to the next level.

When the duo first examined the company's information systems, they were "in bad shape", according to Bayles, who says the application backbone in place was not built with capabilities to scale out, yet to change the architecture the application would have to be upgraded. "There were thousands of customizations made to the ERP package, which was relatively new and yet already out of maintenance on all levels and not able to handle current demands. It was unsustainable, and an upgrade really meant an expensive re-implementation."

The former Tasty Baking IT backbone was a product of the classic mistakes made when companies executed ERP in the late nineties. Demand for ERP couldn't keep pace with quality, forcing companies to improvise on their own, thus spawning a breed heavily customized systems. "People installed a lot of technology during that time but they didn't think about the process behind the technology," says O'Malley.

A Fresh Approach to ERP

The company embarked on a long consideration process for a suitable ERP vendor before settling on SAP. During the testing and piloting phase, IT and Business first looked at what they should be doing differently and fed that data into the new set of requirements. They also talked to several SAP clients, mostly competing bakeries and mid-size food companies, to find out as much as they could, including the total cost of ownership. "This was not just an everyday project for us to do, this was something we were going to have to live with," says O'Malley. "One of our biggest concerns was if we would be perceived as a little mosquito to SAP."

Their SAP concerns were squashed, they say, virtually from the get-go. "They were out here all of the time. We could not get rid of them," jokes Bayles. Another factor in favor of SAP was the fact that it listened to business and IT concerns and understood the company's business challenges with a fresh product and tight daily delivery. "I also liked the fact that the customers we spoke to said the high-level of attention does not end," says Bayles. "SAP has helped us out many times. They are changing to understand this market, so in that respect, I hope we also helped them out."

Accurate Implementation Ingredients

Once Tasty Baking settled on SAP, another search was conducted to find a compatible consulting partner. O'Malley believes that when a consulting investment is made, it means buying into a group of individuals. While there is a methodology and backing and resources, it involves buying into the team. "We tried to spend as much time as we could getting to know the people who were going to be on the team and pushing the consulting partners to show the team, project managers and anyone else who would be a part of our strategy," says O'Malley. The company ultimately picked Deloitte. "They were very interested in the account, their price was competitive and they also have the Big-Four methodology and bench backing."

Because Deloitte has plenty of resources on hand to fill gaps, it executed a bulk of the systems integration piece and was heavily engaged on the technical side of the SAP implementation. Answerthink was also utilized in the early stages for some of the business process work. "In transforming this business we see real opportunities to integrate process, boost communication and share information," says Bayles. "Without an integrated process there's really no way to enable things like analytics to understand what is really going on in the business. But this is a huge change and transition in thinking."

Bayles says communication across the entire organization has improved due to its efforts to integrate business procedures. The company now has, for instance, the visibility to understand what is happening everyday with its supply chain each morning and how that effects the next 48 hours, a critical advantage in managing fresh-baked goods.

"We've tightened up the entire people, process and technology imperatives," says Bayles. "It was a tough transition but now that we are aware of what we can do, the transformation is remarkable with the collaborative environment and continues to be optimized."

As far as business process change is concerned, Tasty Baking is "not done yet" but is aware of its challenges and is now able to take the right steps to address them, according to Bayles. Adds O'Malley: "It's given us a way to look at the business clearly to understand what is going on. We don't always like what we see but at least we can address these situations because we have visibility to them."

Creating Tighter Inventory

With the creation of satellite warehouses, Tasty Baking is able to push more inventories closer to its customers, a critical step in boosting customer service levels and, ultimately, growth. When the company rolled out SAP, it was a tough transition to outfit seven warehouses with the ability to handle perpetual inventory.

Today, Tasty Baking is running perpetual inventory closer to its customers and is better able to replenish.

"We haven't quite perfected our inventory to the point that we want to, but we're actively working on it and have the capability now to do so," says Bayles.

And due to the makeup of the company's products, the freshness aspect is obviously very important. "We're batch-managed now so we know for every batch when it was made, where it went and who got it," explains O'Malley.

Now that Tasty Baking is creating a collaborative environment where inventory is now closer to its customers, how the company monitors service levels is the next big project.

Under the prior process, an order would be baked, plus some extra. Now, the MRP process gives Tasty Baking the visibility into how much inventory resides at its satellite warehouses and main distribution center, which carries a huge impact on the baking process. "We are getting tighter on reducing what we call thrift, which is baked cake that needs to be sold to discount chains or thrown away because it's too old," says Bayles. "Cuts (out-of-stocks) are also huge for us. We service most of our customers every single day so we obviously don't want to cut them short. In addition, we also need to get all of our shipments out on time. It's a very delicate and difficult balance and MRP helps us do that."

Procurement and User Acceptance

Tasty Baking has also centralized purchasing so now it has the ability to be tighter on raw materials and packaging. How much do I need to order and when, based on lead times and transportation efficiency balanced with inventory levels? "There's a whole new level of management that we have the ability to do now," says Bayles. "People were extremely good at managing the manual process before but there comes a point in time when you can only do some many things manually. It makes sense to provide a tool that helps. We have some very skilled people working here and they have done a fantastic job. As we continue to grow, this helps us become better. Like any new technology implementation, the change in process is a huge adjustment, but now that things are stable, people can see how the tool can help them," says Bayles.

O'Malley agrees and also underscores the amount of change the company has undergone and the areas where the change was implemented. "It's been massive. We had maybe 60 users total across the whole enterprise and we have over 350 now. It makes you step back and say, 'Gee, my user base just grew by 400 percent!'"

Users who had never really been familiar with technology or had to report into a system before now have to input their progress. "It's all about understanding the flow," says O'Malley. Under its prior process, for instance, the biggest shipping concern involved getting goods from the bakery to the distribution center as fast as possible. "Today, that is only a piece of the puzzle," says O'Malley. "They now have to input information about the quantity being sent over into the SAP system."

Lords of the Ring

Tasty Baking employs its Direct Store Delivery (DSD) system in eight states that extend beyond its Philadelphia base in concentric rings. Distributors and third parties make up the next rings and so on. The company's bolt-on strategy, which means generating more DSD rings, relies heavily on third parties simply because it by-passes the difficulty in getting distributors to sign off on routes where products haven't taken hold. "We engage third parties and can then turn them into routes as they gain market share," says Bayles. "Then we also ship direct to Wal-Mart and others, who then stock our products in their distribution centers to be shipped wherever they want."

The growth of its concentric circle concept is a core business strategy going forward. Two years ago the company expanded distribution into western geographies like Pittsburgh and Cleveland. This year, it was New York and Boston. "SAP definitely makes things easier to track what was ordered and shipped," says Bayles. "There are opportunities in there as well like transportation management to see costs around different geographies. More opportunities arise as you get more third parties and run in more lanes."

Clearly, Tasty Baking's fresh approach to ERP is reaping big rewards and as the business grows more complex, IT can rest easy, knowing that the sure, steady hand of SAP will be there to help take them to the next level. "All the functionality we need is within the bundle of software that we've got," says O'Malley. "It's now a question of what we need to accomplish next from a business perspective."