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Case Study

 

Leprino Foods Manages Supply Chain Simplicity

by Ken Murphy, Senior Features Editor | insiderPROFILES, Volume 5, Issue 3

July 1, 2014

Leprino cheese pizza

Read about how the world’s largest manufacturer of mozzarella cheese simplified its IT landscape and instituted best practices across the corporation. SAP ERP replaced a legacy system that had been in use for 25 years, and the adjustment was not always smooth. Learn how a revisiting of the implementation led to increased understanding and efficiency between users in the corporate office, IT, and plants around the globe.

 

As the world’s largest mozzarella manufacturer and cheese supplier to most of the large nationwide pizza chains, Leprino Foods is using about 5% to 7% of the milk supply in the US at any given time. For a large dairy buyer such as this, supply chain considerations like planning, warehouse management, and procurement are particularly important. As the saying goes, cows don’t have the slightest idea what day the Super Bowl falls on, which happens to be the highest-selling day of the year for pizza.

Family-owned Leprino Foods is also the largest exporter of whey products in the US; its dairy segment provides the whey, lactose, and proteins found in a variety of products, including yogurt, baby formula, and animal feed.
 
Headquartered in Denver, Colorado, with nine manufacturing plants throughout the US, two plants in the UK, and three innovation labs (including one in Singapore), Leprino Foods relies on both a centralized and decentralized supply chain model — with its headquarters responsible for warehousing, corporate purchasing, forecasting, and medium-term scheduling. Each plant is responsible for its own direct purchasing and daily execution tasks, including short-term scheduling and warehouse management. 

 

“We needed to get to a place where we could act on real-time data to support our just-in-time business model.”
— Ramesh Cooke, Associate Director of SAP Supply Chain Applications, Leprino Foods

 

About five years ago, Leprino Foods began an SAP ERP implementation to replace its homegrown legacy system, rolling out functionality according to the existing corporate and plant divisions, such as a single corporate instance of the functionality for financials and HR. SAP Extended Warehouse Management (SAP EWM) and the SAP plant maintenance component were implemented at each plant, and SAP Advanced Planning and Optimization for indirect procurement was marked for a plant-by-plant rollout.
 
The company’s primary objective was modernization that would allow for consistent market and acquisition growth, and to drive a proactive approach to business that had been somewhat hindered by about 25 years of built-in rule sets in the legacy system.
 
“At the manufacturing level, our legacy environment was defined by overnight inventory reconciliation and weekly batch processes, and we needed to get to a place where we could act on real-time data to support our just-in-time business model,” says Ramesh Cooke, Associate Director of SAP Supply Chain Applications at Leprino Foods.

Big Bang Revisited

While Leprino Foods first viewed the implementation as an opportunity to whet a rather large IT appetite that had been building for 25 years, the organization realized fairly quickly that taking on too much too soon would likely prove counterproductive, for a few reasons. First, user adoption across the nine plants would be a major challenge. More importantly, however, Leprino realized it needed a foundation before it could scale to the higher floors. “In some cases, we were designing tools we wouldn’t be using for another three to five years,” Cooke says. “That’s when we took a step back and developed the concept of foundation first, and optimization or continuous improvement second.”
 
This strategy set the stage for the second phase of the SAP rollout, dubbed R2P2, where Leprino sought overall landscape simplicity as it added functionality, including rolling out SAP Advanced Planning and Optimization to all plants and implementing the quality management component. After committing to a methodical, layered approach, IT reconsidered how it had been interacting with various business units. At the project’s onset, it still maintained a “drop everything,” reactive approach to all plant requests. As time passed, prioritization and organization within IT became part of that foundation for change, aided greatly by proactively engaging business users as part of the project portfolio methodology.
 
“We have a lot more user acceptance now that they’re part of the driving force on the end result,” says Steve Ciarrusta, Leprino’s Configuration Manager responsible for inventory management, plant maintenance, and logistics execution. “That has been very advantageous. After the original rollout, our user group hadn’t matured enough to handle all that functionality; it’s not that it wasn’t good or that we didn’t want it eventually, but the right thing to do at the time was to take that small step back and re-assess.”

Leprino employee

Crossing Ts and Dotting Is

With the R2P2 project, then, Leprino was accomplishing two main objectives. First, by following a well-defined scope for the plant-by-plant SAP rollout, it could revisit whether it missed anything in the original implementation. Second, by revisiting that implementation, IT could determine if any optimizations could be made. Was the functionality changing business processes for the better? Were users adapting to change?
 
Warehouse and inventory management efforts led to disabling the handling of unit management, for example, to focus on more value-added initiatives. “We needed to capture a lot of data points, and although the information was effective and useful, it was hard to manage,” Ciarrusta says. “On the front end, we didn’t get the bang for the buck, so it didn’t make sense to go after it. It’s not that it didn’t work well; it did, but we had to work smarter.”

This realization crystalized the need to understand the full impact of the initial implementation, and not only its impact on user adoption. With IT stretched thin, resources were an important consideration, including meeting agreed service levels and supporting turnaround times.
 
A newly identified business liaison position in each IT group now vets projects to ensure centralization: Does a certain project make sense for the entire landscape of the solution, and across various plants? “This is a fresh opportunity to homogenize our processes throughout the landscape, and it empowers the warehouse to come up with new ideas,” says Ciarrusta.
 
Optimization in the purchasing arena meant revisiting the materials requirements planning (MRP) functionality in SAP ERP; users who had been familiar with the legacy system were struggling to understand the incoming data. To remedy this, purchasing agents and materials managers were trained on optimizing the settings that needed to be populated, and it was successful enough to carry over to the other plants. This represented one of the hallmarks of the R2P2 project: an effort to enable procedural simplicity by following best practices whenever possible.
 
Manuel Solis, Leprino’s Solution Architect for Procure to Pay, says, “While MRP isn’t a one-size-fits-all solution, there are things you can do to homogenize the solution across numerous plants. Even minor tweaks here and there can help achieve a solution simple enough that everyone can understand and that can also be replicated.”

Leprino corporate office

Company Snapshot

Leprino Foods, Inc.

Headquarters: Denver, Colorado

Industry: Consumer manufactured goods

Employees: 4,000

Company details:

  • Mike Leprino started the company in 1950, selling cheese under the Gina Marie brand out of a small Italian grocery store
  • Holds more than 20 patents, many of which were credited to Les Kielsmeier, a Wisconsin cheesemaker who joined Leprino Foods in the 1960s
  • Took over the mantle as America’s leading pizza cheese supplier in 1992, and became the largest mozzarella cheese manufacturer in the late 1990s
  • Ranked by Forbes as the 165th largest private company in the US in 2009
  • The average American eats about 46 slices of pizza (23 pounds) per year — the top five days for pizza sales are Super Bowl Sunday, New Year’s Eve, Halloween, the day before Thanksgiving, and New Year’s Day (pizza.com/fun-facts)
  • www.leprinofoods.com

SAP solutions: SAP Advanced Planning and Optimization, SAP Billing, SAP EWM, SAP Process Integration, SAP ERP Financials, SAP BW, SAP Enterprise Portal, SAP BusinessObjects BI solutions, and SAP CRM

Excelling in Planning

For the overall supply chain group, the plant-by-plant rollout created visibility between the plants and the corporate office that had been lacking in the previous system. Historically, corporate handled forecasting and medium-term scheduling, with the plants responsible for short-term scheduling — up to roughly two weeks out. But, Cooke says, with rolling out SAP Advanced Planning and Optimization to all the manufacturing plants, the plants started to realize the benefits of using the same scheduling processes as the corporate office.
 
“There’s now agreement on a communal set of processes and tools that our centralized supply chain group uses,” Cooke says. “And this is seamlessly integrating or linking back to what planners are using at the plant level. In the past, everything was offline and in spreadsheets, so we didn’t have that link, or clear visibility into what other plants were doing.”
 
That, Cooke says, is one main benefit of the R2P2 project. Homogenized processes across various plants enable tracking capabilities that had been non-existent under the patchwork legacy system. Another benefit is more from a methodology standpoint. Moving forward, there are now agreed-upon best practices for an SAP-based implementation, a cleaning out, if you will, of what had been a far more murky improvement pipeline.
 
Leprino holds more than 20 patents related to cheese production, so manufacturing innovation has long been a hallmark of the company. Now, Ciarrusta says, that same innovative mindset is part of IT as well. “Leprino is known for coming up with innovative ways to solve problems, and we’ve taken great strides in IT to be just as proactive and efficient in problem-solving. It’s a culture change at Leprino, and that makes it a very exciting time,” he says.

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