ACHIEVING OPERATIONAL EXCELLENCE BY IMPLEMENTING ERP

Agenda

My Background Saladino’s Overview The ERP Decision Current Systems Landscape The SAP Decision Success To Date Road Map What an Executive Should Know About ERP

Projects

Background

Education Bachelor of Information Technology /

Telecommunications Master of Information Systems Management Master of Business Administration (Cohort 5)

Experience 4 years U.S. Coast Guard 5 years consulting (systems engineering) 6 years corporate IS, including 2 years as CIO

Saladino’s Overview

Over 3,700 deliveries per week across California, Nevada, and Idaho to over 2,300 customer accounts 394,000 cases shipped per week between both Dist.

Centers

Expected 2008 Revenues of $395 million Extensive growth in last three years, added Ontario

distribution center in April of 2007 Two Distribution Centers

Fresno, CA ~109,000 sq. feet Ontario, CA ~100,000 sq. feet

The ERP Decision

Why Saladino’s needed a Tier-1 ERP system Reduce IS software and hardware maintenance costs Reduce the time and resources required to close

accounting periods Improve integration of business processes and access to

real-time business data across functional areas Improve warehouse management capabilities Improve management of vendor rebates & charge-backs Adapt to growing customer needs (e.g. improved reporting, B2C

integration, etc.)

Ensure that our system capabilities will scale to future growth and needs

Current Systems Landscape

AS/400 Based Legacy System (ERP) Multiple batch interfaces needed for online sales, order

entry, and analytics Inflexible platform for companies growth Inability to keep up with new customer demands and

requirements (new requirements usually require custom AS/400 development)

Costly to maintain Insufficient accounting system

Current Systems Landscape

Accounting System Detached accounting system that requires journal balances

to be transferred between systems Decentralized AP payments, (expense vendors are paid

through external accounting system, inventory vendors are paid through legacy system)

Insufficient managerial accounting capabilities No concept of cost/profit centers or budget control

Current Systems Landscape

The SAP Decision

Quick SAP Facts Over 38,000 companies run SAP software $1.7 Billion invested into R&D in 2006 Currently holds over half of all Fortune 500 44,500 installations world wide More than 2,200 SAP partners including IFDA More than 13,000 developers

The SAP Decision

SAP Business Drivers Single Integrated Solution

Real-time business process automation for operational speed and accuracy

Improve decision making with better visibility across the entire enterprise

Platform for Growth Rock-solid platform with proven scalability Reduce TCO with modular deployment

The SAP Decision

SAP Business Drivers Embedded Wholesale Distribution Best Practices

Optimize business processes with industry-specific, preconfigured solutions

Leverage best practices for successful business transformation

Configured for rapid implementation and time to value Ability to recruit associates that have SAP experience

which allows shorter training period

Retirement Systems Landscape

Future Systems Landscape

The SAP Decision

The Selection Process Started evaluating ERP software January 2007

Only evaluated Tier One Software Solutions Made Decision to move forward with SAP October 2007 Signed SAP contracts December 2007 Selected Consulting Partner January 2008

Partner had specific knowledge and capabilities within Wholesale Distribution and Foodservice. Partner was very flexible and has experience with implementing catch weight management

Cost of installation was a major concern, our partner was able to overcome any cost concerns and deliver a complete solution

Current SAP Success

Phase One Go-Live completed May 12, 2008

Eight week implementation of SAP Development, Quality Assurance, Solution Manager, and Production Systems

Eight week implementation of Accounts Payable, Expense Purchase Orders, General Ledger, Asset Accounting, and Full Financials

Typical SAP financials implementation is 6-8 months Utilizing SAP “New GL” in ECC 6.0 Utilizing Profit and Cost Center Structure Not one code modification was required (SAP is highly

configurable)

Road Map

Phase Two Started phase two of the project June 2, 2008

Phase two will consist of order to cash, completion of procure to pay, and warehouse operations

Fujitsu Consulting will continue the implementation of this project

Implementation of Vistex Rebate and Chargeback module Anticipated go-live for phase two is January 31, 2009

Road Map

Phase Three Starting phase three early 2009

Phase three will focus on the advanced Warehouse Management System (WMS)

Voice Picking is being considered

Phase Four Starting phase four the middle of 2009

Human Resource Management (HRM) module Payroll and Employee Self-Service

What an MBA Should Know

Clearly document ERP requirements and goals• This will ensure project confusion is avoided

Make sure all vendor research is completed prior to committing to a vendor• This will take out the possibility of bias to a single vendor

Speak with the vendor in specifics and not general terms• Doing so will eliminate the possibility of capability gaps during

implementation

What an MBA Should Know

Clearly define what partner qualifications are required for the project• The matching process will not become a popularity contest

For project success• Work with the ERP vendor and partner to establish trust and

open communication. This will promote flexibility

Be careful with partner pricing schemes • Remind the partner who the customer is, and that the project

will be completed your way. Explore out of the box pricing models such as a modified fixed bid, and shared risk

What an MBA Should Know

Formulate your own ROI for the project• Many partners will show huge gains in ROI to justify their consulting

fee

If the ROI is not high enough for the project, don’t discount the intangibles• Don’t discount the capabilities that can’t be quantified, for example

customer satisfaction and attracting new customers

For an ERP project to be approved a leader must show where the value will be derived• ERP projects should not be considered “technical projects”, ERP

systems are for business users. The leader of the system may not be the CIO but a business executive that see’s the overall vision and competitive advantage

What an MBA Should Know

Don’t allow the project team to focus on a solution, focus on the problem or business case• When ERP projects are implemented, many times there are cost

overruns related to loosing focus of the goal (business case)

Send in an experienced negotiator • Software and consulting firms negotiate deals everyday, make sure

to do your homework when preparing. Make sure your representative has had a chance to get to know the negotiator on the other side

Make sure you are very conservative when doing financial calculations• DO NOT make any assumptions related to the cost of the project, it

will come back to haunt you

What an MBA Should Know

Do your due diligence and create a solid scope of work (SOW)• This is directly related to the financial impact of the project. If a

fixed bid is negotiated, the SOW is the only guarantee you have the project will be completed to your specifications

Build flexibility into your project scope (SOW)• Work on negotiating a flexible project scope and project plan with

your partner, no matter how well the SOW is put together changes will need to be made

If as an Executive you want the project to go well….• DO NOT underestimate the organizational change management

(OCM), and training requirements. The project can not only be a technical success, but needs to be an enterprise success

What an MBA Should Know

Don’t forget to market your accomplishments along the way• An ERP project is a major undertaking, probably the largest any IS

Department will ever take on. Market your accomplishments internally and externally

Become a technology market leader• Think outside the box, don’t keep business processes the same and hope the

new ERP will be the “magic bullet”, do things differently and make sure you involve all level of associates to find better ways to complete the process

If the budget starts to get away from you…. And it will• Don't be afraid to stop the project and make the best decisions / changes for

moving forward. The original project plan will not always work the way you thought it would. It will cost the company more to continue to make the same mistakes

What an MBA Should Know

Run as a textbook project…• This is always what project teams strive for, unfortunately this is

not always possible and adjustments need to be made. The business will always want the solution faster than what the textbook approach and budget will allow

Find a unique style for running the project that conforms to YOUR organizations culture• Consulting firms will always try and get YOU to adapt to their

culture, project management style, and pace. Make them move at your pace, using your style

What an MBA Should Know

Learn to manage conflict• There will be several different stakeholders involved in your project,

you need to identify them and formulate their stake (what they want to get out of the project), each stakeholder has a different priority your job is to figure out what it is and how to manage it• The CEO• The CIO• The CFO• The various VP’s• The consulting firm• The business users• The software company• Your customers

Contact Information

GOOD LUCK WITH YOUR PROGRAM!GOOD LUCK WITH YOUR PROGRAM!

Craig Urrizola

currizola@saladinos.com