SPRINT at a butter and cheese manufacturer

SAP and the dairy industry

Until recently, dairy companies were most likely to use IT solutions dedicated to this industry. Good adaptation to requirements and support for specific production processes were their greatest assets. However, the lack of integrated management capabilities not only for production, but also for finances, as well as effective controlling tools, was a sore point for dynamically growing companies. Rotr Dairy Cooperative, as the first company in the industry, decided to implement in cooperation with 7milowy from the BCC Group (currently All for One Poland) the SPRINT solution – a SAP system dedicated to medium-sized companies. A tool was used which, in the ready-made business processes of the system’s standard functionality, at the same time provides internationally recognized management practices.

Under SPRINT, BCC offers a ready-made concept and prototype of an integrated system, which during the project and later, in the form of additional extensions, is adapted to the specifics and business expectations of the client. As a result, the system also supports production and distribution processes typical of the client’s industry, and the implementation project itself is less costly and time-consuming than implementing the system using the classic method.

Masmal, after a long period of verification in many meetings with representatives of various ERP systems, has selected the SAP system. It most closely matched the criteria and promises the possibility of expanding functionality as the company grows. After an implementation project lasting six months, a productive start of SAP SPRINT took place at Masmal on June 1, 2011.

SPRINT’s standard functional scope for manufacturing companies was launched, including finance and controlling, materials management, production planning and sales and distribution. Extensive use was made of the standard solutions offered in SPRINT. However, what sets the dairy industry apart is the many processes specific to dairy processing in raw material and production management. Without their implementation, it is difficult to imagine using SAP at Masmal.

Data straight from the tanker

The primary form of raw material procurement for dairy processing companies is the purchase of milk from dairies and individual farmers. Due to the scale of daily purchases and the large number of contractors, dairy companies are looking for ways to automate the receipt and recording of milk. This is important, especially since even milk from the same farmer varies in quantity and quality parameters from day to day. Masmal uses state-of-the-art solutions to record purchases, including basic parameters (contractor, how many liters, etc.), as soon as the milk is poured into the tanker. This data is recorded electronically on the tanker’s device.

Since the information is already available in electronic form at such an early stage, it was logical to use it in an integrated system. To this end, BCC consultants created an interface through which they are imported into SAP.

This firstly eliminated the need for manual data entry into SAP, minimizing mistakes. Based on this data, purchase orders and material receipt accounting records are automatically created. As already mentioned, the tanker driver also measures and records the basic parameters, and after these data are automatically entered into the system, the laboratory completes the milk batches with the appropriate characteristics (e.g., fat units, plasma units).

Milk unequal to milk

In dairy processing, there are several alternative units of measurement for raw material parameters, used both in billing with suppliers and in the production process. In addition to volume (liters), fat content (given as a percentage) and plasma units are also important. These units are alternative to each other, and it is impossible to use a simple converter. The parameters of milk are highly variable, and it is not unusual that in the same billing period raw material from one supplier can vary significantly in terms of fat content per liter. For the purpose of accounting for production, the mechanism of alternative units was implemented in SAP.

Batch consolidation

When the milk is concentrated, the tankers return to the production plant, where, in turn, the entire daily batch of raw material goes into a large tank (so-called tank). The mixing results in milk with certain average parameters, which are the resultant of the parameters of all batches of raw material from individual suppliers. In SAP, each purchase of milk from a farmer is treated as a separate batch of raw material. Based on the implemented algorithms, the system calculates the average parameters of the batch in the form of fat and plasma units.

Integration with Microdome

Most Polish companies involved in milk purchasing and contracting use Mikrodom 2000 application. This industry-dedicated solution is recommended by the Agricultural Market Agency, which deals with the distribution and settlement of milk quotas allocated to Poland under the European Union’s Common Agricultural Policy. In addition to handling purchases and settlements with suppliers, Mikrodom is used to control purchase volumes and prepare annual reports for the ARR. Integration of the integrated system with Mikrodom is a mandatory point for dairy implementations.

Thanks to the data exchange interface created by 7milowy between SPRINT and Mikrodom, the data in both solutions is consistent, allowing the automatic generation of reports for the ARR.

EDI and retrospective discounts

The network’s primary requirement of its suppliers is electronic data exchange using dedicated electronic communication platforms (EDINET and ECOD). The network’s requirements in terms of communication precision are very high. As part of the project, it was necessary to integrate the SAP system with the two platforms most commonly used in retail chains. As a result, now the entire process – from order registration and handling to invoicing – takes place automatically.

In addition, tools for handling retrospective discounts have been prepared at Masmal. This is also a feature in cooperation with retail chains. This process is supported by the SAP system standard and, for the needs of the company, has been included in the SPRINT solution.

Fighting for every penny

Szymon Rybczynski, President of Masmal Company

As Szymon Rybczynski, CEO of Masmal, points out: “The distinguishing feature of milk and meat processing companies is very low margins, at 1-2 percent in the case of butter production. This is influenced by high competitiveness and price pressure from the main customers, i.e. retail chains. Therefore, at Masmal, the entire process of buying raw material, production and distribution is very carefully examined from a cost perspective. Here every penny matters, because as a result, in relation to the entire sales volume, it can significantly affect the company’s result."

On a continuous basis, scheduled product calculations are carried out, where the record price of a product is calculated on the basis of component data from all stages of production.

Reliable data and valuation of each item separately allow quick production calculations with changed data (e.g. raw material prices, labor costs).

Product profitability analysis and product calculation simulations are carried out in SAP controlling tools. For this purpose, the company uses SAP CO-PA functionalities, which enable such analyses and margin calculations for individual products, assortment groups, distribution channels, customers, customer regions, provinces, etc.

During the project, great care was taken to accurately parameterize the components and data in the system, so already from the start of the system the analyses in CO-PA are reliable. Of course, over time and with the growth of historical data in SAP, they will gain precision, and it will also be possible to correct and make realistic the parameters for the valuation and calculation of individual finished goods.

The most important thing to start with

Other aspects of Masmal’s SAP implementation project also reveal a concern for the financial efficiency of the measures taken. The company decided to run first the basic functional scope offered in SPRINT, along with dairy-dedicated extensions prepared by 7milowy. The system is now the company’s core financial-controlling and logistics platform, where key business processes are handled. Thanks to such a strategy – we launch only what is necessary, the start of the system was possible in a short time.

Now that the support and stabilization period for the system has ended, it is time to plan for expansions and additional features. The company is not neglecting other distribution channels either, and conceptual work has already begun on a mobile device application for sales representatives serving retailers and wholesalers.

In addition, BCC (currently All for One Poland) provides full hosting of the hardware platform, outsourcing of administration and ongoing support for system users. For Masmal, this is also part of the cost rationalization of the integrated system implementation.

SPRINT and the food industry
The food industry uses a lot of specific applications and specialized equipment, saturated with electronics and recording a lot of data. The SPRINT solution was developed precisely with manufacturing companies in mind, so it is characterized by openness and ease of integration with other industry applications. As a result, SAP guarantees the integration of distributed data in a single system.
In addition to the solutions for the dairy industry described in the article, 7milowy also has experience in developing SPRINT interfaces with solutions dedicated to the feed and poultry processing industry. The solutions developed during the implementations allowed our customers to automate many activities, such as the automatic creation of specifications and production versions for newly developed feed recipes, or the acceleration of raw material billing and reporting thanks to direct access to data in SAP.
In manufacturing companies, the landscape of IT solutions is wide. Only their integration in a single system and synergy of activities can ensure full business benefits.
Adam Kozlowski, Project Manager, 7milowy