A bumper harvest from your supply chain

Key benefits Saving of £2m by reducing debtor days initially from 55.3 to 42, meaning around £100,000 less bank interest annually Supply chain synchronisation and automation saving estimated £330,000 a year Despatch on-time, invoice same day and get paid more quickly Accurate dynamic raw materials costs More efficient production planning across multiple sites Headcount reduction in accounting and through the business . Indeed within one year it had saved more than £2m from debtor days improvements alone. And it’s set to make even more returns with SAP’s APO (advanced planner and optimiser). Its project was initially prompted by a need for radical thinking in the face of crashing margins – and that led it to the view that it needed to link its suppliers and products much more seamlessly and automatically to customers and plants. That meant changing the corporate infrastructure and the IT. “We had acquired plants and divisions around Europe, so we had several different systems, most of which were accounting systems and spreadsheets,” says Roger Barker, Muntons’ finance director. “SAP wasn’t even on the shortlist because we thought it would be too expensive, but we were told we should talk, and it turned out to be no more expensive than the competitors – and it had the supply chain optimiser technology on the horizon.” So SAP was selected with Logica as the implementation partner. Looking at the supply chain aspects, the system now handles raw material procurement primarily from around 150 farmers and merchants. Malt characteristics demanded by Muntons’ customers are predetermined by barley attributes and qualities, so the firm initially runs MRP against contract requirements to determine grain types, quantities and receipt dates. But since it can’t dictate yields, qualities and times accurately, the system constantly reconciles the real and desired worlds, re-allocates and calculate appropriate pricing allowances on the fly. Meanwhile, since sales contracts are still being negotiated during the harvest phase, the system also needs to reflect forecast, history and actual orders – potentially changing the stock purchasing requirements profile all the time. Barker’s views of the benefits are instructive. “Working with the system you soon find that real-time, accurate information is important for it to work. But then you know your raw materials accurately, which means you can plan production efficiently and accurately at the right site. That means you can despatch on-time, invoice same day and get paid more quickly. Before SAP we were on 55.3 debtor days; now we’re at 42 which, for a £60m company, means £2m.” He rightly wonders how many companies overlook this key measure, which wasn’t in the project cost justification. And he says that massive saving also equates to around £100,000 less bank interest annually, “which more than pays for the support and maintenance contract, so we’ve got free IT for ever!”