Colombia ERP Business

Requirement Gathering

Prepared By Agustin Ramirez

19-12-2012

Context & Overview

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Rich de Colombia SAS (RdC) is the third largest Rich’s operation in Latin America, with annual sales of around $15M usd. The growth rate expected for the next 3 years indicates that RdC will require a robust back office including business processes and ERP System.  RdC is currently using a local small ERP (SIIGO) to support its back office operations and was implemented in early 2010; the local system implemented is mainly Finance and Accounting software with some Sales and Distribution functionality, however is not as robust as the leading ERP systems available in the market. The level of business growth during the last 2 years is adding complexity to RdC operations; new customers mainly in the ISB channel will be added and new product codes will be introduced into the Colombian market, this will require more control and enhanced ERP functionality to support the Demand Fulfillment business processes .

Customers & Sales

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• Estimated total sales in 2012 of $12M USD.• Estimated total sales in 2015 of $25M USD• 35 Customers (Sold-to)

– ISB – 4 customers (Olimpica, Carrefour, Exito, Makro) – Major supermarkets in Colombia– Distributors – 3 customers (TEAM, Santillana, Calsa)– Key Accounts (Major Independent Bakeries) – 25– Wholesalers – 3 (only Flavor Right skus are sold to them, 7 FR’s skus)

• 300 Ship-to locations for the 35 customers (mainly stores).• New ship to locations are created on demand requested by the Sales team.• 600 sales orders per month, 5 lines average per sales order.• 600-700 invoices per month.• Electronic invoice is not a mandatory government requirement.• Distributors customers are invoiced in USD but the AR collections are in COP (Colombian

Pesos) using the exchange rate of the day of customer’s payment. • Key Accounts customers have a 6% commercial discount applicable to the invoice total

amount.• All the sales operations are with credit, 30 – 45 days.• Financial discount of 1% is applicable if the customer pays in advance during the first 8

calendar days of delivered product date.

Sales – in country sales zones and distribution coverage

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Centro Zone Antioquia Zone Barranquilla Zone

Santanderes Zone Eje Cafetero y OccidenteZone

RdC Sales & Gross Margin Jan – Oct 2012

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Cases Net Sales (Millions COP*)

Gross Margin

Average Exchange Rate: 1USD = 1,800 COP (*Colombian Pesos)

Product Sales Mix

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•40 SKU’s, Product sales mix: 80% Toppings (Frozen) 20% Others (Dry - fillings, Icings, premixes, etc.)

Product Sales Mix (Acum 2012)

•RdC does use the same FG product codification as RPC does.

Sales order

• Sales orders are received in a daily basis by phone and email from Sales team and from the customers.

• For ISB customer, the order is received by EDI but manually integrated into the system.

• 600 sales orders per month, 5 lines average per sales order.• Orders typically entered at 3 pm every day.• Every day RdC sends to the 3rd Party Logistics (Colfrigos) a consolidated file with the

orders which has to be delivered.• With this information Colfrigos pick the product and prepare the trucks, then they

confirm to RdC the product loaded in order to prepare the invoice for the customer.• The invoice is printed in the RdC office and then is sent back to Colfrigos in PDF

format by email.• Colfrigos do the distribution and product/invoice delivery, and get from the customer

the delivery evidence that is used for the Finance AR team to support the collections.• There are not back orders, a new order is entered for backorders.• All orders are CIF, direct ship orders to the customers, delivery date is most of the

time in 24 hrs, few routes takes more time, from 2 to 5 days at the most.

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Returns and Cancellations

• Customer returns product unexpectedly or damaged to the warehouse with a return note in the invoice. Product is added to inventory.

• Customer Service send a notice to AR to make then aware of the return and apply the adjustment during the collections process.

• A sales order can be cancelled before its been invoiced, inventory its not affected at this point, no additional notification to Finance is required.

• An invoice can be cancelled during the current month, a reverse movement in the system is required to do not affect inventory and receivables, this has to be approved by Finance Manager.

• An invoice can be cancelled during the following month, but in this case a credit memo has to be released to apply the credit to the customer. This process also has to be approved by Finance Manager.

• Additional freight charges are incurred when a return took place.8

Samples and Free Goods

• Samples sent to Customers. This gets treated as an order. Although these are no-charge orders, there is a fiscal rule that the price must be stated on the invoice so government can collect tax on the goods. But customer is not charged for the product.

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Accounts Receivable

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AR as of October 2012

past due AR target = less than 10%

1 to 30 Days

31 to 60 Days

61 to 90 Days

More than 90 Days

Current

Sourcing

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•RdC does not have local manufacturing facilities

•RdC sources their finished products from US, México and Colombia

•90% are imported products•10% are locally sourced from Colombian producers

• Origin of the imported products (trade transactions in USD)– 95% from US– 5% from México

Around 15 -16 containers are imported per month.

Supply Planning is based on Demand planning (forecast) for the next 3 months, including inventories level and suppliers lead times analysis.

Sales Orders to import products from US are placed weekly in SAP by the Latin America CS&L team based in México.

Local Vendors & Accounts Payable

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•50 vendors including FG suppliers and back office/admin suppliers

•250 indirect vendors (indirect vendors which do not create an account payable but all transactions with them has to be reported to the Fiscal government office, this is mostly for travel expenses).

•Most payments are made by electronic transfer, very few checks are created in a monthly basis.

•Around 50 payments per month.

•The payment term is 30 days.

•2 bank accounts – BanColombia (one in COP Colombian pesos and one in USD)

General Ledger

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•RdC accounting procedures and journal posting are based on the PUC (Plan Unico de Cuentas or Unique Accounts Plan) which is a local accounting regulation.•Chart of accounts is different than RPC ones.•RdC chart of accounts must comply with PUC requirements.•In order to present Financial reports to RPC, RdC do the match manually and in excel every month.•Basic Cost center definition, budget by individuals for sales and SG&A by department.•Basic profit center definition.•Financial RdC calendar is a monthly calendar.•All transactions are reported in COP, for those in USD are reported at the exchange rate of the day of the transaction.•There is just one entity: Rich de Colombia, S.A.S.•Financial reports: trial balance, aging reports for AR & AP, P&L’s at Gross Margin level, inventory and sales reports are required.•P&L’s are reported to RPC in Excel.•Payroll interface will be required.

Fiscal

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•Value add tax (IVA) is 16% applicable to all of our products•Colombia localization requires 3 more tax id’s:

– Rete IVA– Rete Fuente – Rete ICA

•These tax conditions are applicable at the invoice depending on customer specific data, it mostly depend on how the customer was set up in the government tax office (DIAN)•These tax conditions are specific % applicable to specific rules based on the amount of money invoiced.•Additional tax regulation requires to RdC to report on a monthly and detailed basis to the DIAN all the transactions (expenses or payments) indirectly made mostly for travel expenses; ex gasoline, meals, hotels etc.

Fixed Assets

• Fixed assets – Finance run a calculation of the depreciation monthly and book the number every month.

• Straight line depreciation – ex: IT equipment is 4 years – monthly at 1/48 per month - starting with the next month.

• Book and tax are the same depreciable life. • Fixed assets may have residual value.

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Demand & Supply Planning

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Distributors

Supermarkets

Wholesalers

Supply Planning

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Product is received the third month, to cover fourth month demand

Monthly sales distribution

Week 1 20%Week 2 20%Week 3 25%Week 4 35%

Week 2 Week 3 Week 4

2 Cont 2 Cont 3 Cont 4 Cont

Month 3

* Cont = Conteiner

Week 1

Week 1

Month 1 Month 2

Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4

Local Products (Fillings)

Deployment to distribution

centers

20th – 25th each month

Month 1 Month 2 Month 3 Month 4

Ordered after the forecast consensus (Sales & Logistics) meeting with a three-month horizon

Imported Products

Ports where RdC imports product

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Route Port (Barranquilla / Santa Marta) – Bogotá (1,000 km)

Route Port (Buenaventura) – Cali (122 Km)

Warehouse & Distribution

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Barranquilla:Warehouse and Distribution hub for Costa zone (Port)Medellin:Warehouse and Distribution hub for Antioquia zoneBogotá:Warehouse and Distribution hub for Centro zonePereira:Warehouse and Distribution hub for “Eje Cafetero” zoneCali:Warehouse and Distribution hub for Occidente zone

Warehouse and Distribution is a 3rd Party service:•Warehousing: Colfrigos (95% of the operation) and Frigoper (5% of the operations)•Distibution: Colfrigos (90%) and FrigoAndinos (5%), Others (5%)

Warehouse and Distribution

• Distribution costs are defined based on the size of the truck and distance.

• Routes and route scheduling is clearly defined but managed manually in excel.

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Inventory Management

• FG inventory is managed by Colfrigos• Daily inventory conciliation between RdC and Colfrigos'

systems is made in order to keep inventory accuracy. • The conciliation is made manually based on daily

inventory reports from both systems.• The inventory control has to be made by warehouse (5

different locations around the country).• All inventory transfers from and to warehouses has to be

made through the system.• There is frozen inventory and dry inventory, 80% of the

inventory is frozen.

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Organization Chart / Current and incremental 2013 headcount

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Coordinador DespachosC. Claves

Carlos Polanco

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PasteleroExito

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PasteleroCarrefour

5

PasteleroOlímpica

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Gerente Servicio al Cliente y Logística

Camilo Torres

Gerente FinancieroAdministrativaPatricia Conde

Gerente MarketingNuevos Proyectos

Vacante

Gerente Nacionalde Ventas Rich´sRene Rodríguez

Gerente Nacionalde Ventas Presto /

Flavor RightAlbert Bravo

Gerente Nacionalde Ventas Cadenas de

SupermercadosBibiana Montero

Gerente de ServiciosTécnicosVacante

Gerente ComercialVenezuela

Raúl Ramírez

Planeador de Demanda Abastecimiento

Iván Pedraza

ContadoraGinna Rondon

EjecutivaC. Claves

Paola Mejía

Asesor Técnico Olímpica

Roger López

Coordinador DespachosCadenas

Romulo Rico

Importaciones / Cartera

Diana Valbuena

Auxiliar de CarteraY Administrativo

Vacante

Asesor TécnicoCuenttas Claves

Jhon Eduar Cortes

Asesor TécnicoCuenttas ClavesAlejandro Sierra

Asesor TécnicoCuenttas Claves

VictorAraque

Asesor TécnicoFlavor Right

Adrian Garcia

Temporales Temporales Temporales

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Gerente GeneralEver Varón ?

Auxiliar ContableCarolina Vieira

Asistente ComercialVacante

Organigrama Actual(Vacantes)

Telecomm Infrastructure

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InternetFastEthernet Link4 MBPS

Fortigate 55B

Switch CISCO 24 ptos

Modem NTU

Gateway de VoIP

PBX Panasonic3X8

Multifuncional HP

FileServer SIIGO Server

VPN to RPC- Email

VPN to Mexico HQ-DNS-VoIP

Access Point

4 Troncales analog

ColfrigosVPN to Colombia Office from Colfrigos office in Bogota-Access to SIIGO by Terminal Services

RPC

México

Colfrigosin Bogota