Edrington Group Ltd - An SAP Case Study from the Food & Drink Sector
by Grant White - Edinburgh

Edrington is one of the first Scotch Whisky companies to deploy SAP. Since installing the system in July 2000 the company has added an Internet portal, the Business Warehouse module and it has upgraded to 4.6c, which went live in August 2003.

Edrington is the UK’s leading independent Scotch whisky group, with a £230m turnover and 900 staff. Its head office is in Glasgow, where it also has a bottling plant and carries out blending and packaging. Its offices in Perth house sales and marketing, with finance, HR and IT shared between the two offices.

The company’s best-known brand is The Famous Grouse, the best seller in Scotland for over 20 years. It also produces The Macallan Single Highland Malt, Highland Park, from the industry’s most northerly distillery, in Orkney, and it produces the Cutty Sark brand.

Edrington also owns five distilleries, its own cooperage and The Famous Grouse Experience, a BAFTA award-winning visitor attraction at Glenturret, Scotland’s oldest working distiller, located in Perthshire.

The Business Need

In 1998 Edrington produced cased goods for three separate sales and marketing operations. They each had their own customer service unit. The decision was taken to establish a single service centre in Glasgow addressing all of the key brands. A new computer system was required to support this new business centre.

The first step towards this was producing a sketch of the business model. “We then reviewed available ERP systems and a comprehensive invitation to tender was issued to eight potential suppliers,” explains Alan Carlile, Edrington’s Director of IT.

A shortlist of three suppliers was established and evaluated on the basis of presentations matching the business requirements to products and on the basis of small presales prototypes. “It was evident that the internal user population was highly impressed with the capabilities of SAP R/3 and they were clear winners,” said Carlile.

The main consideration for Edrington was to achieve a single integrated source of data. It needed sufficient modules to address the company’s main business functions, namely sales and distribution; production planning; materials management; warehouse management; finance; and HR.

Implementation - Phase 1

The implementation was in two phases and started with the HR module. “We wanted to test the configuration and our implementation partner, and it so happened that the HR department was looking for a system at the same time,” explained Steve McGinley, IT Support Manager at Edrington.

“The payroll implementation highlighted the lack of clarity in some of our business processes, however the project provided the opportunity to resolve many of these issues. We were successful. The project had a deadline of 1 April 1999 when the new financial year started and this was achieved. ” said Carlile.

Implementation - Phase 2

Having someone from the HR department full time in the initial development team to assist with configuration and implementation demonstrated the importance of getting staff involved in the customer service centre development, which was the real business driver for SAP.

A large team was put together in March 1999 to develop the processes and structures required, and ultimately configure the system. The first requirement was to determine the processes for the new business centre. This blueprint was compared against basic SAP functionality and from this the team could see that about 20% of the development would need to be bespoke.

The team was made up of eight business users, four internal IT developers, four SAP consultants and up to six freelance consultants. There was also a business project manager and an IT project manager. “The involvement of business staff was key to ensuring that the project was a success,” believes Carlile. “They needed total focus on delivery of the project divorced from their day job.”

“A challenge was that business rules changed frequently during the development,” said Carlile. “But probably the biggest change occurred when in the middle of the project The Edrington Group acquired Highland Distillers plc.”

The acquired company, (which owned The Famous Grouse, The Macallan and Highland Park) was one of the three customer service units feeding into the production centre as a customer of Edrington. Carlile assumed responsibility for the acquired IT department that, coincidentally, was itself wrestling with a SAP implementation.

The new system went live in July 2000 on schedule. The overall cost, of around £1.5m, was just 20% over budget. The licence costs were less than 20% of the full cost.

“We produced whisky on the day we said we would and kept up with commitments to customers, but for the next six months it was a superhuman effort by everyone,” said Carlile.

80% of the functionality was provided ‘out of box’, including all the business critical features. Most of the 20% needing bespoke configuration was also available for 3 July, the implementation date. One example of the customisation was handling customs and excise documentation, as the requirements for the spirits industry are very specific and demanding. “We have had SAP customers contact us since then to ask how we did it,” said Carlile.

Delivery

Having achieved the implementation deadline, Edrington went into a challenging introduction period with the SAP system.

“I feel that the expectations of some of those we were delivering to were a little over optimistic,” said Carlile. “Delivery of IT systems is a complex detailed process, with perfection the goal. Some snags did take time to resolve.”

The development group acted as champions of their particular function. Finance and customer services benefited quickly from this approach, but other areas took a little longer to settle with the new system. “This may have been because of less familiarity with IT in general,” said Carlile

“Although the team was involved in the project for a year, many were still novices,” said McGinley. “So getting things sorted after the introduction of the system took longer than it does now. In retrospect we could probably have benefited from increased training.”

“If doing a project like this again I would highlight the importance of frequent demonstrations of the system to users, training and the provision of as many “hands on” pilots or tests as possible,” said Carlile. “Until you actually get the real experience, it is a difficult concept to get over to operational staff.”

“Some of the greatest challenges came from the lack of quality in the data and the introduction of the ERP system highlighted that very quickly. We put lots of effort into cleaning the data but it was not until the introduction of this new system that the importance of keeping it up to date and accurate became fully apparent to the user base,” believes Carlile.

“It took some time before people said that R/3 is better than what we had before, but if I asked people now would they like to go back, I am confident that the answer would be no.”

Benefits

One of the major benefits is that the system can analyse the business in new ways and in much greater detail than before. It can analyse down to the component parts if required.

“The information had been there in the past, but we couldn’t get at it and the general user needed a specialist to get what information was retrievable,” argues Carlile.

Company managers now have visibility of how the business is performing on a daily basis and they can get much of this information themselves.

The system has reduced financial reporting times from 14 days to eight and it is being halved again.

Stock level visibility improved and the company has made better use of materials planning. “Every night, on the basis of forecasts, production planning is being told what is needed, when and in what quantities,” said Carlile.

Perhaps the key measure is that the business has grown strongly since the implementation of R/3 and has been able to manage this with the same staff. In the three years since implementation it has grown from 6m cases to 8.5m cases annually.

Further Developments

Portal:

One of the subsequent developments was to establish an Internet portal and this has allowed Edrington to get closer to customers and suppliers.

The main motivation for the portal was to facilitate more accurate cased goods forecasting by customers.

The aim for Edrington is vendor managed inventory. The company has provided access to its customers to place forecasts and orders. These orders are then planned and materials called forward. It is planned to put a similar arrangement in place for suppliers, who will then provide inventory to meet planned production.

Edrington currently shares with its customers forecast accuracy in an effort to learn and improve on the process in readiness for the future.

The portal will also facilitate traceability. Not just to identify the location of a particular batch in case of recall, but also to check that product destined for specific markets does reach its planned destination.

Business Warehouse:

When the Business Warehouse (BW) module was implemented, Edrington began a relationship with Absoft Ltd, and Absoft is working on phase two of the portal.

BW went live in February 2003, the motivation being to deliver information that had previously been hard to retrieve, specifically marketing data.

With BW, Edrington can gather information from a dozen different sources on subjects such as whisky sales in a particular market measured against, say, vodka and brandy. Edrington can also compare its performance in these markets with other whiskies. BW also measures depletions out of the distributors’ warehouses so that it can suggest appropriate replenishments.

Upgrade

But by far the most significant development for Edrington and Absoft has been the recent upgrade to 4.6c.

“Version 4.7 - Enterprise was available but to the best of our knowledge in late 2002, no one in the UK had implemented it, so we were not willing to be pioneers,” said Carlile.

The motivation for the upgrade was the loss of SAP support for Version 4.0(b) from the end of 2003. Furthermore, 4.0(b) had limited functionality for new SAP products like portals and some of the new requirements for operational needs.

The project kicked off in January 2003 with a planning phase that included identifying the super users within the organisation, the skill set in-house, and the skills required. “We had too much work internally and Absoft had experience of other upgrades. So their involvement significantly reduced the risk associated with this project,” said Carlile.

Edrington was able to continue its existing production systems on its existing hardware and purchased two new AS400s to establish a new development environment. This allowed Edrington to upgrade in a reduced risk fashion.

During the upgrade weekend, Edrington had to move all existing applications to the new hardware. “Our aim was to be fully functional at end of the upgrade and we achieved this,” said McGinley. “Had we encountered any unforeseen difficulties, we needed to be able to switch back to the old system but everything went smoothly and after a day’s processing, we were well past the point of no return.”

The upgrade has some features that were immediately noticed by staff. “Favourites and “Enjoy” transactions are now available. A simple thing like Favourites can save 30 seconds per order. It was a simple, visible, benefit and helped encourage users to take enthusiastic ownership of the upgraded system,” said Carlile.

The Future

Those using the system are now demanding more of it, for instance increased traceability. The system has all the data but does not produce it instantly. Developments in the pipeline will address this.

The case goods warehouse is controlled by a bespoke system and that may well be brought into R/3. The rationalisation of systems brings advantages, in that Edrington’s IT department can minimise its range of IT skills and therefore has to deal with fewer suppliers.

“Following the upgrade, Absoft is working on an optimisation report that will contain suggestions for improvements and we will look closely at this,” said Carlile.

The HR department’s vision will now be driven forward as a result of the functionality available from the upgrade. The Group wants to get information to managers in a simple format that is easy for them to use. HR will then look at what else employees can do for themselves, moving more and more to a self service system.

Conclusion

“When implementing originally we had six months of serious challenges and then six months of consolidation, enhancements, then stability. We added new features before performing the upgrade. SAP in Edrington has evolved pretty much as I had expected.”

“When we formed a project team for the upgrade we mixed new staff with experienced folk from the implementation team. It was clear that we did not have to sell them the SAP system and this was a big step forward,” said Carlile. “Indeed, now staff are actively asking what else the system can do and the upgrade delivery has been very smooth. The upgrade was a more pleasant experience, than the original implementation.”

“The end result is that we could not imagine today’s business activity with the old system. SAP is critical to the management and operations of the company and to facilitating its future development.”

Ends

Absoft Limited
Davidson House,
Campus 1 Aberdeen Science & Technology Park
Bridge of Don
Aberdeen
AB22 8GT
Scotland

Tel: +44 (0)1224 707088
Fax: +44 (0)1224 707099
Email: info@absoft.co.uk

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