1. ACHIEVING OPERATIONAL EXCELLENCE BY IMPLEMENTING ERP

2. Agenda

My Background

Saladinos Overview

The ERP Decision

Current Systems Landscape

The SAP Decision

Success To Date

Road Map

What an Executive Should Know About ERP Projects

3. 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

4. Saladinos 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

5. The ERP Decision

Why Saladinos 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

6. 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

7. 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

8. Current Systems Landscape 9. 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

10. 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

11. 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

12. Retirement Systems Landscape 13. Future Systems Landscape 14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. 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, dont discount the intangibles

• Dont discount the capabilities that cant 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 sees the overall vision and competitive advantage

21. What an MBA Should Know

Dont 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 NOTmake any assumptions related to the cost of the project, it will come back to haunt you

22. 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 NOTunderestimate the organizational change management (OCM), and training requirements.The project can not only be a technical success, but needs to be an enterprise success

23. What an MBA Should Know

Dont 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, dont 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

24. 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

25. 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 VPs

• • The consulting firm

• • The business users

• • The software company

• • Your customers

26. Contact Information

• • GOOD LUCK WITH YOUR PROGRAM!

• • Craig Urrizola

• • [email_address]