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Case Study

 

Pushing the Supply Chain Envelope at Hallmark with Data-Driven Capacity Planning

by Dave Hannon | insiderPROFILES

July 1, 2012

As many businesses operating in the consumer products industry know, it can be extremely difficult to predict consumer demand. This was the driving factor behind Hallmark Cards’ complete business transformation — to enable its supply chain to efficiently and effectively respond to consumer demand spikes. Most important in this project was a rollout of SAP software that would replace most of the company’s existing legacy systems.
 

Because the consumer products market sees such volatile demand fluctuations, businesses in this industry must keep an eye out for supply chain processes and technologies that can handle this rapid change. For example, Hallmark Cards, Inc. — a company best known for its greeting cards — recently elected to embark on a complete business transformation that would help the supply chain meet the ever-changing consumer demand spikes most efficiently.

The business leaders at Hallmark identified three clear goals for this endeavor:

• Leverage consumer data to help guide internal decisions

    • Improve how the business develops and delivers innovative products and services

      • Build more flexibility into the supply chain

        As the leadership’s vision for the business transformation became clear, so too did the company’s need to have a single enterprise IT platform in place to support the changes. Central to Hallmark’s transformation has been a rollout of SAP software to replace the majority of its existing legacy systems.

        “We wanted to apply a company-wide integrated technology to help improve and streamline our business processes and increase our flexibility and speed, while reducing costs,” says Larry Lawson, Supply Chain Optimization Director at Hallmark. “More specifically, based on the complexity of our products, the number of materials we process, and the number of facilities we use to produce and distribute our products, we discovered that we needed more advanced planning tools to be successful.”

        Hallmark

        SAP in the Hallmark Landscape

        Hallmark began its implementation of SAP ERP in 2008, rolling out functionality in two process-focused waves. The first wave focused on technology covering the procure-to-pay and record-to-report processes and included a very limited project to test rough-cut capacity planning in SAP Advanced Planning & Optimization (SAP APO).

        Wave two was more extensive and had a deeper focus on supply chain planning, which included the rollout of SAP APO across North America. The concentration of planning changes primarily focused in inventory and production planning. The extensive network of legacy systems that interface in this space directed a calculated approach to reduce risk of the overall solution. Additionally, some of the capabilities these legacy systems provided were critical to maintain. So the SAP APO implementation had to work around some of those challenges. (This resulted in creating more than 300 RICEF objects to interface the SAP system with existing business processes like product development, inventory management, and sales and distribution.)

        “After you select what to implement, you have to look at your legacy systems and map out all of the touchpoints that will now be required to interface with this business solution,” says Sheli Blakemore, Senior Supply Chain Optimization Project Manager at Hallmark. “For example, one legacy system at the core of our everyday forecasting process was a stake in the ground that would not go away. So we had to interface SAP APO with our legacy systems in order to retain our unique product substitution capability.”

        Sheli Blakemore, Senior Supply Chain Optimization, Project Manager (L) and Larry Lawson, Supply Chain Optimization, Director (R)

        Sheli Blakemore, Senior Supply Chain Optimization, Project Manager (L) and Larry Lawson, Supply Chain Optimization, Director (R)


        Today, Hallmark has more than 3,200 SAP ERP users and over 370 SAP APO users helping the company plan and provide supply solutions through procured and produced products to meet demand requirements. SAP APO is now integrated with the vital legacy systems and provides consistent and time-phased signals that let Hallmark’s supply chain organization meet its demand.

        “When we receive the demand plan or forecast, we can then develop capacity plans across our supply chain network to ensure we satisfy that demand,” says Blakemore. “That starts with rough-cut capacity planning, which determines the sourcing solution (procure or produce). It moves to distribution requirements planning where it dives down into the SKU-level plan. And then it works into production planning to create the actual production orders.”

        Learning New Supply Chain Processes

        Because the initial directive for the business transformation project was business-led and IT-supported, it wasn’t difficult to get the individual businesses on board with the broader SAP rollout. Business leaders knew they had to firmly grasp the new functionality in their various business processes to execute on their new business goals. 

        But the introduction of new processes and technology at Hallmark did require some change management in the supply chain organization. While the technical implementation of SAP APO was complicated by legacy integration, one of the bigger challenges for Hallmark’s SAP APO project team came in helping the business users become comfortable with changes resulting from the project. Some supply chain roles had to be altered significantly to fit new processes and leverage the new technology, which created some challenges.

        For example, Lawson explains that previously, the inventory management group at Hallmark initiated new orders to be produced and worked with manufacturing sites to establish the priority for those orders. With the introduction of a new production planning organization, the production planners now initiate the orders to the plant and set priority based on the deliverable dates and capacity availability.

        “As part of their old work processes, some inventory planners had built relationships with people at the plants and their inclination was to continue to provide direction on orders based on those relationships,” says Lawson. “The issue is that additional factors now influence the overall delivery date of each order — like lead time and capacity — which the planning system has taken into account. Additionally, the production planners have a better perspective of all current demands and the overall influence on capacity. Changes to those plans or orders made independently can significantly affect the delivery schedule and the planning process. We have done better in this part of the communication process, as well as understanding job roles and trusting the system to provide the proper solution.”


        Education Is Not Training

        “Asking business partners to change both the technology and the processes they use to do their daily jobs can be a bit overwhelming,” says Blakemore. At Hallmark, the project team emphasized the benefits of the new system during training and leveraged a super user strategy to keep the messaging strong during the project.

        Some of that training revolved around basic terminology. As Lawson explains, rolling out a new platform brings an entirely new language that everyone — from IT staff to end users — needs to learn. There are new acronyms and phrases that can slow training if they’re not properly spread across the organization.

        Also, Lawson says it’s important to schedule sufficient training for project team members on how to use the modules for rough-cut capacity planning, distribution requirements planning, and production planning in SAP APO before the project kicks off. Training on the fly and throughout the project can put some additional pressure on the project team and the system integration partner and slow down the project’s progress considerably.

        However, training alone is not enough to make an implementation successful. “The education element is not the same as the training element of this level of project,” says Blakemore. With this in mind, Hallmark took extra steps to increase the education of its project team. Blakemore says that the most effective method of achieving an end-to-end understanding is to educate project team members, who represent multiple sub-teams, about each other’s processes. Hallmark started informal education with weekly meetings of process leads, but the frequency of those meetings and the number of attendees increased as the project grew to more complex levels. These sessions helped expose each sub-team’s design “assumptions,” which would not have allowed for a successful integrated solution.

        “If you can educate your people on the big picture, it will increase buy-in and improve willingness to change,” says Blakemore. “And that education doesn’t end at go-live. You need to educate the various business teams not only about how their roles change, but how the roles of other business teams have changed as well — because those changes can have a ripple effect throughout the end-to-end business processes.”

        Greeting the Future

        Wave two is not the end of Hallmark’s SAP journey. The company plans to continue evaluating additional SAP technology in the near future, in both directions — from SAP Product Lifecycle Management (SAP PLM) to SAP Customer Relationship Management (SAP CRM) to sales and distribution functionality — and continue to review its legacy systems for opportunities to upgrade.

        “The intent is to expand our SAP landscape over time,” says Lawson. “We have to figure out where we go next in light of what we’ve already implemented. The integrated nature of the SAP landscape has implications throughout the organization. So understanding how that translates into additional business opportunities is critical to achieving the most benefit.”

        Hear It from the Experts

        To hear an exclusive podcast recorded live at SCM 2012 with Larry Lawson and Sheli Blakemore of Hallmark, visit insiderPROFILES.wispubs.com.

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