Resources > APICS Magazine > May 2004 > Spotlight on Food and Beverage > Finding the Right Fit

Finding the Right Fit

Making a bottom-line difference with software implementation

Morgan Foods, based in Austin, Indiana, is a family-owned business striving to be a leader in the food processing industry. Over its 100-year history, Morgan has implemented many technologies that not only improved product quality, but also improved the company's relationship with its customers, vendors, employees, and community. Morgan Foods employs approximately 500 people and sells to 35 customer groups, including Wal-Mart and Save-A-Lot.

One of the hallmarks of Morgan Foods is its implementation of a state-of-the-art information technology system that optimizes the overall efficiency of multiple business processes.

With the assistance of Computer Sciences Corporation (CSC), formerly Holland and Associates, Morgan Foods went live with mySAP All-in-One in 1999. The impressive six-month time-to-solution was driven by CSC's industry expertise coupled with prepackaged solution offerings that are based on historical industry know-how and templates.

Facing the challenge
Morgan Foods markets products in 18 different categories, ranging from canned broth to refried beans. The company sells directly to grocery stores as well as to food distributors. Manufacturing is comprised of nine different processing lines and involves more than 100 different canned items. The processes include raw material inspection, water treatment, computerized batching, in-line blanching, pressure cooking, and multistage filling and seaming operations. Douglas tray formers and loaders, finished goods storage, and a sensory lab are also used in the processing operations.

Morgan is pursuing a high-level strategy to lower costs, maintain product quality, and improve its ability to service its customers. This strategy consists of focusing on inventory management, financial close, and production planning and scheduling.

For this project, Morgan focused on lowering the costs of raw materials and finished goods, as well as improving its cash position.

Given the size of Morgan Foods, the company perceived SAP as too powerful for its current needs. After almost choosing the J.D. Edwards solution, CSC convinced Morgan Foods that SAP was ultimately a better long-term investment due to its ability to grow with the company.

Morgan's final decision was based on the SAP solution partner's expertise coupled with the flexibility enabled by prepackaged, industry-specific business applications. CSC brought the SAP solution live in approximately six months, which was right on schedule.

The results
Prior to the mySAP All-in-One implementation, production planners would review a stack of orders and then visually compare those orders to the current raw material inventory level. Run sequences were not optimized, product shelf life was not closely tracked, and in-process aging was not monitored as effectively as possible.

This lack of control caused product bottlenecks, decreased throughput, and increased cost of raw materials inventory. In addition, the highly manual process increased the instances of inappropriately labeled products and, in some cases, product shortages.

Now, mySAP has automated the entire production planning and scheduling process at Morgan Foods. All-in-One generates a feasible product schedule with little or no user interaction in a production environment driven by work orders.

Based on prelabeling, the oldest lot code within the work-in-process or finished goods areas is automatically chosen. Considering the sensitivity of food processing, SAP enabled Morgan Foods to monitor freshness dates and lot codes across the entire preproduction process.

These important measures have enabled Morgan Foods to automatically optimize run sequences, monitor the shelf life and age of the raw materials, monitor in-process wait time, and adjust for ramp-ups. Through employee attrition, the ability to completely automate all of these processes has reduced by $80,000 a year the cost of the production planning and scheduling group.

The implementation has also improved inventory control, which previously was a highly manual process. Inventory identification was manually determined by reading a card attached to a pallet. Since going live in 1999, Morgan Foods has not conducted a physical inventory. Inventory accuracy has improved from an annual manual-count accuracy of 45 percent to a real-time accuracy of 99.95 percent, and inventory turns increased from 4.9 to 6.6 times per year. This improved accuracy has saved Morgan Foods approximately $500,000 each year.

In addition, improved inventory accuracy reduced the amount of product that must be salvaged as a result of it being out of date. The improved accuracy of the finished goods inventory enabled by mySAP has helped Morgan Foods to reallocate inventory management positions, yielding a total savings of approximately $80,000 per year.

Also, the real-time monitoring of finished-goods inventory reduced product misbatching costs by $250,000. In the past, when a product was misbatched, it was not uncommon to scrap an entire lot or a day's worth of product based on the inability to label the product with 100 percent confidence.

Reducing the number of misbatched products saves Morgan Foods approximately $150,000 each year in unnecessary shipping charges.For years, Morgan relied on financial information that could be up to 30 days old. This was conducted using disparate systems and spreadsheets carried by hand. The company now generates financial documents with mySAP All-in-One. Closing activities now occur during the month instead of every 30 days. By month's end, 90 percent of the activity is complete.

Morgan Foods has been able to make strategic business decisions based on improved reporting, more accurate actual versus budget reports done weekly instead of monthly, and accurate inventory cost figures. The company saved money and time by reallocating employees that had worked on redundant tasks and cut out waste, saving approximately $150,000 per year and improving cash position by $90,000.