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Case Study

 

Mexican Company Goes Global with SAP NetWeaver Process Integration

insiderPROFILES

November 9, 2009

After acquiring a US-based company, GILSA, a Mexico-based dairy manufacturer and distributor, committed itself to ensure smooth business process integration — internally and for longstanding retailers and customers — by building a flexible data system to serve its growing, global customer base. CIO Mauricio Castillo shares how the company was able to keep these new customers operating in a business-as-usual manner.
 

When Grupo Industrial LALA (GILSA), one of the largest dairy companies in the world, decided to break into the United States market from its headquarters in Mexico, the company jumped in with both feet in January 2008 by buying its first US-based manufacturing plant: a yogurt production facility in Omaha, Nebraska, purchased from Wells’ Dairy, Inc.

 

Acquiring the new manufacturing plant from Wells’ Dairy meant acquiring the market share as well as a new set of well-established, large retail customers. As with so many acquisitions, it also meant understanding and aligning an organization that was working from a completely different business model than the parent company. To address this, GILSA assigned its SAP team to bring the data from the new subsidiary into the corporate fold and ensure that the data worked seamlessly.

In Mexico, GILSA not only manufactures its dairy products, but also distributes them with a fine-tuned supply chain that delivers its product lines (about 450 stock-keeping units) to a large number of retail customers as well as thousands of small neighborhood stores throughout the country.

Because customer service is of the highest priority to GILSA, adding a new regular client to its customer base requires a review of its operational model to verify that the shipping points, number of routes and customers, and truck types will still meet optimal fill rates and arrival times. The US acquisition brought with it a large customer base with many additional variables that the company quickly had to address to ensure post-acquisition business continuity.

Integrating 52 New Customers

The new yogurt plant in Omaha distributes its products to 52 large retailers in the US, including Wal-Mart, SUPERVALU, C&S Wholesale Grocers, and Target, among others. Losing any one of these valued customers would have a dramatic impact on production, revenues, and profits. So keeping these customers happy after the acquisition was of paramount importance, and to do that, GILSA turned to SAP solutions — with the commitment of ensuring smooth business process integration.

Mauricio Castillo
  Mauricio Castillo, CIO

“We now have a complete solution from SAP, as well as an adjustable template that can support our business through future deployments.”

Mauricio Castillo, CIO

Wells’ Dairy had long relied on a homegrown electronic data interchange (EDI) system that both the yogurt plant and its customers used to place orders, distribute invoices, and collect payments — a custom-built system that the GILSA team knew it would have to completely replace and integrate into its corporate SAP ERP environment. But the timeline was tight. According to the transition agreement, the GILSA team only had two months to make the switch.

“We did it in one month,” proudly says Hector Curiel, TI-Technology Planning Manager at GILSA in Mexico. Curiel headed up the project along with Carlos Herrera, SAP and EDI Solution Architect.

The GILSA team relied on SAP NetWeaver technology to make the transition and integrate the 52 customers — and accomplished this with minimal cost and maximum efficiency, all without compromising supply or service levels that these customers had come to expect.

Hector Curiel
  Hector Curiel, TI-Technology Planning Manager

Matching Technology to Requirements

GILSA looked at this project not just as a single, standalone project, but as part of a larger strategy. As GILSA continues to grow, integrating new companies through acquisition, merger, or partnership, it wants to be able to incorporate the full business operations quickly and efficiently. “We didn’t want to make it a technology challenge, we wanted to make it a business process challenge,” says GILSA’s CIO, Mauricio Castillo. Thus the project was twofold: Replace Wells’ Dairy’s EDI system, and integrate the data relating to its financial, production, logistics, and sales and distribution processes into GILSA’s SAP ERP system.

The flow of data from customers to Wells’ Dairy and from Wells’ Dairy to GILSA’s corporate headquarters represented a gamut of business processes. Purchase orders from US customers feed not only the sales department, but also logistics and production. In turn, GILSA’s SAP ERP system drives the production of invoices. All of this information is parsed based on product or division, and then consolidated and processed into reports using SAP NetWeaver Business Warehouse (SAP NetWeaver BW).

Carlos Herrera
  Carlos Herrera, SAP and EDI Solution Architect

The Business Challenge

GILSA in Mexico started its implementation of SAP ERP in 2006, which extended through 2007. According to Castillo, the company selected SAP software because it was the only product in the market that offered all its solutions in an integrated fashion, and this would allow the company to focus on business transformation. “We now have a complete solution from SAP, as well as an adjustable template that can support our business through future deployments,” he says. “We wanted to exploit those capabilities so every time we assimilate a new business, in any part of the world, we want to integrate it with the SAP systems we have in place.”

In addition to the SAP systems, GILSA operates 150 distribution centers in Mexico with crucial custom solutions developed in-house that integrate with SAP NetWeaver Process Integration (SAP NetWeaver PI) to connect various data (sales, stock, prices, orders, etc.) with SAP ERP. This experience with SAP NetWeaver PI gave the GILSA team an advantage when it came to the task of migrating Wells’ Dairy’s homegrown EDI solution and other tactical systems.

When considering a replacement for Wells’ Dairy’s custom EDI system, the GILSA SAP team was challenged to find a solution that would integrate with SAP ERP using SAP NetWeaver PI functionality — one that would be relatively painless for its customers and the GILSA dairy business line people who are the main users of the solution.

The GILSA team was confident it could execute on delivering the solution. “Although we had no EDI experience, we had a good knowledge of the capabilities of SAP NetWeaver PI, and we did not want to run our core business processes on more black boxes with limited flexibility,” Curiel says.

SAP NetWeaver Process Integration: The Only Choice

From the start, the GILSA team knew it would employ SAP NetWeaver PI functionality to replace and integrate Wells’ Dairy’s EDI system. “We came up with the idea to integrate the Wells’ Dairy customers using the same concept that we use here in Mexico,” says Curiel. “Since 2006, we have been using SAP NetWeaver PI for our internal sales interface, to transfer sales documents from our distribution centers in Mexico to our SAP ERP system.” GILSA integrates its thousands of customers into a centrally administered command center, which contains a series of interfaces to manage data for sales, commissions, inventory, operations, and financials. There are a variety of alarms and notifications based on a defined set of business rules.

The GILSA team believed that it could employ a similar model for this project. “The role of SAP NetWeaver changed from being an inside information broker to a business process enabler and customer-business integration suite,” says Curiel. To tackle the integration part of the project, GILSA elected to develop the competencies in-house with the support of a certified SAP partner. To help fill in the knowledge gaps pertaining to its EDI experience, the company turned to an outside vendor, SEEBURGER AG, which has a series of EDI adapters that are certified to work with SAP ERP as well as a standalone B2B gateway.

The GILSA team built a business case for the solution and conducted a feasibility study of the architecture design — using SEEBURGER’s Business Integration Server platform and integrated into GILSA’s SAP ERP system using SAP NetWeaver PI. “Then we decided to go for it,” says Curiel.

GILSA architectural diagram
  An architectural diagram including GILSA's SAP and EDI solutions that integrate with SAP NetWeaver PI

 

Building and Securing the EDI Solution

With the plan and architecture design in place, the GILSA team and its technology partners knew what they had to do and when. The two-month deadline was rapidly approaching.

“In fact, the EDI customer integration was completed in a month,” says Curiel. “We achieved this because we never lost sight of our goal. We discussed the business priorities with our US commercial executives, stayed focused on securing the key deliverables, and kept the team members constantly motivated through each phase of the project.”

While much of the SAP NetWeaver PI integration between the SEEBURGER platform and GILSA back-office SAP systems was built by the GILSA SAP team, technicians from SEEBURGER and B2B Consultores (a reseller of SEEBURGER technology in Mexico) assisted with its AS2 protocols to ensure all Internet-based data exchanges were encrypted and secure.

“We needed to have control over the AS2 and VAN communication components and develop the mappings, which are elements used to translate data into SAP language using XML/iDOC instructions,” says Curiel. “Each customer has its own communications constraints, rules, and requirements, so we needed to develop the mappings according to each customer’s profile. It was quite a challenge to learn and develop those components. With AS2 connections linked with SAP NetWeaver PI, we have real-time operations with our customers, while with VAN, we have a passive process as if it were a batch data processing interchange.”

A Winning Approach

From a technical perspective, Castillo marvels at the team’s progress and the expertise it developed. “It used to take us about two weeks to make a client available on the EDI solution, but today, we only need a couple of days to get a new customer up and running,” he says.

Herrera adds, “We’ve been streamlining our mapping processes and SAP NetWeaver PI configuration, and we are very satisfied with the performance, control components, and stability of the solution as well as the SEEBURGER solution.”

The GILSA team used a service-oriented architecture (SOA) approach to manage the integration, breaking the project into a series of individual functions, specifically:

  • Electronic funds transfer
  • Organizational relationships
  • Ship/notice manifest
  • Purchase order
  • Purchase order change request
  • Application advice
  • Invoice
  • Credit/debit adjustment
  • Functional acknowledgment
  • Text message
  • Product activity data                

Little, if anything, was customized. The GILSA team wanted to employ SAP standards to structure the data as much as possible to avoid a higher TCO.

GILSA Headquarters
  GILSA headquarters, Durango, Mexico

Going Live

Over the course of the project, the 52 customers were divided among a team of six people who were responsible for migrating them to the new EDI solution. As the go-live date approached, the GILSA team was augmented by four specialists from SEEBURGER and B2B Consultores. The customers were prioritized by the business, and over the course of one month were migrated.

The migrations were a team effort between GILSA’s technology staff in Mexico and the operational business people in Nebraska. While all the customer interfaces were constructed in Mexico, where the customer call centers would be hosted, the business people on the ground in Nebraska were critical for assisting in the migration.

The project required a team of 10 to build and implement. After the go-live, the operation and administration aspects of the project required two full-time employees. While it took two weeks to integrate the first few customers to the new EDI system, today that timeframe is down to two days.

EDI Commerce for All?

GILSA is taking the expertise gained from the US acquisition and adapting the EDI system for some of its larger customers in Mexico. According to Herrera, “The division that serves the little stores on the corner wouldn’t use an EDI system for orders. For these customers, we are launching a similar kind of electronic interchange. We have another division to manage the orders from larger stores like Wal-Mart, Soriana, H-E-B, Comercial Mexicana, and others. For those stores, we are pushing for them to use EDI commerce as soon as possible.”

Having added EDI to its stable of technologies and used SAP NetWeaver PI for the Mexico and US operations, Curiel says he is extremely pleased with the results. “It’s quite flexible and adaptable to any type of operation,” he says. “You can use it for widely different business models. You can easily build interfaces for all different types of operations. And you can do it synchronously or asynchronously.”

Currently, GILSA transacts approximately one million SAP NetWeaver PI messages monthly — interchanging between 6,500 and 11,000 messages daily just with Wal-Mart in Mexico. “Because now we are aware of the benefits of these types of integrations, we have the confidence to take on more customers, and we want to do it with nearly every customer,” says Castillo.

Looking Ahead

While orders are placed and tracked using automated systems, reporting is still done manually. “We send each customer custom reports for invoice dispute, order monitoring, and service-level monitoring,” says Curiel. In the near future, the GILSA team plans to implement a self-service and automated system. “We also want to upgrade to SAP NetWeaver PI 7.0 and possibly implement SEEBURGER message tracking,” he says, in hopes to further speed integration and reduce manual intervention in the system. Presently, the IT team has enabled a set of self-service reports so that users can quickly ascertain the current status of customer orders.

When it comes to supply chains, time is an important and strategic asset. “The more time you have to know your customers’ requirements or needs, the more time it takes to react and plan your production to optimally cover the demand,” says Curiel. With the integration of EDI and SAP NetWeaver PI, GILSA will save time and will continue building and expanding its systems to be more flexible and adaptable and to serve a growing global customer base.

 

 

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