SAP at ROTR Dairy Cooperative

Focus on the core issues

In recent years, Rotr Dairy Cooperative has recorded a dynamic growth and systematic increase in processing capacities. Moreover, the company has introduced modern production lines, expanded its product range and consistently strengthened its brands.

The limited capabilities of the IT solutions in use were no longer sufficient for the growing business. The demanding area of integration of sales activities with production planning, limited traceability of batches in the logistics chain, and lack of full management information, e.g. about product profitability, limited further opportunities for business growth.

In the food industry – especially in dairy production, time is of the essence. That’s why the decision was made quickly.

The Cooperative’s Board decided to implement an integrated SAP system. The project started in November 2008.

7milowy, a BCC Group company, a company from the BCC Group, was selected to be the solution provider. It proposed SPRINT – a ready-to-use SAP system for mid-sized companies, allowing them to use the best management practices in the areas covered by the project.

The implementation strategy proposed by 7milowy, a BCC Group company assumed the launch of the full range of SAP functionalities included in SPRINT, without engaging in building extensions, which might be ultimately useful but not critical for the company. This approach was justified in view of SPRINT’s best business practices for manufacturing companies.

Rotr estimated that SPRINT would allow it to achieve at least 80% of the benefits attainable by implementing such an extensive IT tool as SAP.
The efficiency at the level known from the Pareto principle (80% of benefits for 20% of efforts) was fully satisfactory to Rotr.

Trusting the solution provider resulted in the acceptance of the proposed implementation strategy. Such an approach brought benefits of two kinds. Firstly, it enabled cost reduction and secondly, it ensured quick and timely work completion.

Another important decision was related to the SAP maintenance model. Rotr decided to use SAP in the outsourcing model, concluding with BCC a contract for system hosting at the BCC data center, and for solution administration by BCC service specialists. This is another element that has helped reduce SAP investment costs, simplify the implementation project, and release the company from the necessity to build its own SAP administration competencies.

As a result, the IT area in Rotr can be still managed by one person only – just as before the implementation. “In companies like Rotr, all activities are subordinated to production and logistics processes. The outsourcing agreement with BCC guarantees the availability and reliability of the system at the level expected by Rotr and essential for the continuity of our business, and this is of key importance to us”, emphasized Ryszard Piotrowski, head of implementation at Rotr.

The art of motivation

In addition to production processes, which form the basis of Rotr business, the Cooperative’s activity is strongly oriented towards maintaining good relationships with suppliers on the one hand and with customers, especially retail chains, on the other hand.

This is reflected in the employment structure. About 180 employees out of nearly 250 work in production. The sales department as well as departments dealing with contracting and buying-in are also strong.  As mentioned earlier, IT systems are managed by one person.

During the implementation, a significant motivating factor for the employees participating in activities of work teams dealing with individual areas of the system was the awareness that they were creating solutions that would be used by them on a daily basis. This translated into great commitment and good preparation at each stage.

7milowy, a BCC Group company consultants trained one or two key users in each functional area. They in turn took over responsibility for training end users. As a result, key users have high competencies in their areas.

The implementation went smoothly largely thanks to the CEO’s personal involvement in the steering committee, as well as a clear message to the employees that the implementation of SPRINT is a project of the highest importance to the company.

In the internal communication on the project, a message about the adopted implementation strategy, including the focus on key needs and taking over good business practices contained in SPRINT, was clearly stated.

The collaboration between Rotr employees and 7milowy, a BCC Group company consultants as well as the support provided by the Board resulted in the timely closure of individual phases of the project as well as the smooth go-live that took place in early May 2009. Thereby Rotr started using SAP functionalities in finance, controlling, sales and distribution, materials management, production planning as well as human resources and payroll.

“This introduced discipline to the project work. Work team members focused on how to best utilize the potential of the solutions available in SPRINT. We did not waste time discussing what else would be useful to us in the future", summed up Ryszard Piotrowski.

Talking about the effects of the project, it is worth noting three areas that correspond to three pillars of Rotr’s business: effective processes at the interface between production and sales, relationships with milk suppliers – breeders; and effective cooperation with key customers, which are large retail chains in the case of the cooperative.

Production planning in the dairy industry

Launching of the production planning functionality in SAP has helped streamline production processes. First of all, electronic production recording has been introduced, enabling daily raw material consumption to be accounted for more efficiently. It is worth noting that for milk the consumption control is carried out in liters and fat units. The use of active ingredients enables the system to record at milk buying-in the parameters that are important in the dairy industry, such as fat units and plasma units.

At Rotr, a repetitive manufacturing model was used. Its advantage is a simplified confirmation system, which minimizes the time needed to operate the system. Production confirmation based on production standards, as well as reporting of additional costs to dedicated cost centers are fed with data by controlling tools on an ongoing basis.

Another important functionality introduced at Rotr is the integrated batch management. Thanks to SAP system capabilities, it is very easy to identify individual batches in the entire logistic process. This is particularly important in the food industry, where food inspection bodies can at any time request detailed information about products from a given batch, from a specific breeder or produced on a given day.

The identification of batches is also of great importance in handling complaints, for example, if there is a need to withdraw from the market all the products manufactured on the basis of a specific batch of raw material and already delivered to various customers.

Batch management also allows you to organize the operation of a warehouse. A warehouse worker can in a single operation transfer the material needed to meet all production requirements resulting from a specific date.
The FIFO principle (first in, first out) fully automates this process. SAP also allows you to keep track of inventory levels on an ongoing basis.

Breeders vs. SAP

The handling of contracting, buying-in and settling accounts with suppliers is a typical and important issue in several sectors of the food market – meat, beer, sugar production, grain and tobacco processing – and, of course, in the dairy industry.

At Rotr, the accounts with suppliers are settled in Mikrodom 2000, an application for dairy cooperatives and milk processing establishments that buy milk directly from suppliers. This solution is recommended by the Agricultural Market Agency.

Mikrodom is a tool responsible for providing services to farmers and reporting to the Agricultural Market Agency. Therefore, it was important to integrate this application with SAP.

The bi-directional interface built by 7milowy a BCC Group company consultants enables any data required to issue an RR invoice for a farmer to be entered into Mikrodom or imported from the SAP system. Invoices issued and other financial data are sent from Mikrodom to the SAP system, where payments for farmers are handled and accounting and financial services to companies are provided.

Integration with systems of retail chains

The majority of Rotr production is sold through large retail chains, including Makro Cash and Carry and Carrefour. That is why an important part of SAP implementation was a solution for electronic communication (EDI) with IT systems of key customers. At present, orders of key Rotr customers are sent through the electronic communication system directly to the SAP system in the area of the cooperative’s sales and distribution. Once the delivery is completed, the system automatically generates an invoice, which is sent to the customer via EDI.

The electronic communication system allows for more efficient order management, eliminating errors in this area, streamlining and speeding up the invoicing process, and as a result, reducing the time it takes to collect receivables from customers.

Maximum benefits

The result of the SAP implementation at Rotr Dairy Cooperative is the significant streamlining of business processes and improvement of operational efficiency in all key areas. The initial assumption to make full use of the SAP functionalities included in SPRINT, as well as the decision to use the solution outsourcing hosting, significantly reduced the implementation time and Rotr staff involvement in the project. As a result, the costs of the whole project were also lower.

As you can see, the Pareto principle: maximum benefits with minimum efforts – also applies in the dairy industry.