Johnsonville Sausage’s namesake community in Wisconsin is where the country’s number-one national brand of sausage was founded nearly 70 years ago. While Johnsonville’s headquarters remain in Sheboygan Falls, Wisconsin, where the unincorporated community of Johnsonville is located, the company long ago reached across those modest borders; consumers can now purchase Johnsonville products in all of the 50 US states and in about 30 other countries.
Trade promotion, then, is far more important to the bottom line today than when Johnsonville consisted of a single butcher shop near the shores of Lake Michigan. “Trade promotion management is a key imperative for most consumer-packaged goods organizations, as trade spending represents a significant line item on profit-and-loss statements. Anything we can do to optimize our trade spend by ensuring we have the right price for the right product, at the right time, is going to result in additional profitability for Johnsonville and our customers,” says Ron Gilson, Vice President and CIO of Johnsonville Sausage.
Flipping the Ratio
Demand management is an essential component of a successful trade promotion; the more visibility Johnsonville has into point-of-sale (POS) data at each retail location, the better it can optimize inventory levels across the entire supply chain. For years, POS data, market research data, and other demand signal data had been scattered across multiple data sources. With a consistent increase in sales, as well as the launch of new products, it became more and more difficult for Johnsonville to harmonize these data sources and provide an end-to-end view of the business.
While key performance indicators such as product performance and availability certainly exist, the time and effort it takes to generate an enterprise analytical view is a key impediment to delivering new insights in a timely manner. At a basic level, this means that supply chain inventory may be out of sync with actual consumer demand. For product launch, especially, this is a concern, as the first few months of a product’s launch often define success or failure, and real-time visibility into this stage of a product life cycle is absolutely critical.
“It can take weeks to understand how products are actually moving through the supply chain to our consumers. Promotions, weather, and other causal factors can have a significant impact on volume on a weekly basis,” says Gilson. “We need to get to a point where we have near real-time visibility to inventory in the supply chain.”
To do that, Johnsonville knew it had to address its “80-20” problem. Says Gilson, “The people who we are relying on to drive insights from the data are spending 80% of their time gathering, cleansing, and harmonizing the data and prepping it for analysis, and only 20% of their time analyzing the data. We need to flip the ratio.”
And even after prepping the data for analysis, the fact that there are multiple data sources creates other issues, such as unstandardized and inaccurate reporting, unnecessary complexity, and inconsistent naming conventions.
“Promotions, weather, and other causal factors can have a significant impact on volume on a weekly basis. We need to get to a point where we have near real-time visibility to inventory in the supply chain.”
— Ron Gilson, Vice President and CIO, Johnsonville Sausage
Total Cost of Ownership Drives the Technology Decision
To address this issue, Johnsonville kicked off a large-scale trade promotion optimization initiative. Central to this strategy for the long-time SAP customer, which counts SAP ERP 6.0 and SAP Business Warehouse (SAP BW) among its full suite of SAP applications, was a migration to SAP BW powered by SAP HANA.
SAP Demand Signal Management is a critical component to the overall trade promotion optimization initiative, and it requires SAP BW on SAP HANA. Given much of the data required for the optimization already resided in Johnsonville’s BW environment, the decision was made to migrate the existing BW environment to SAP HANA and deploy SAP Demand Signal Management in the same instance. “That deployment was our business case for investing in SAP HANA,” says Gilson. “Given that it was our first purchase of SAP HANA, we needed to find a provider for the hardware, and it took us a few months to run through all of our options for hosting the SAP HANA environment. We looked at SAP HANA Enterprise Cloud and multiple on-premise solutions from different hardware partners.”
Johnsonville ultimately chose to partner with Cisco, its existing infrastructure provider, for an on-premise SAP HANA installation. From a total cost of ownership (TCO) perspective, this was the clear choice, because Johnsonville’s entire infrastructure runs on Cisco’s Unified Computing System (UCS) server platform in Cisco’s Virtualized Experience Environment (VXI) with VMware vSphere software.
The Cisco SAP HANA appliance, then, would be as close to plug-and-play as possible, while maintaining the scalability that made the Cisco UCS platform appealing to Johnsonville, and part of the reason that the business transitioned to Cisco after decommissioning its legacy server environment about five years ago. (For more information about Cisco’s UCS platform, refer to the sidebar at the end of the article.)
“We had a lot of confidence in running SAP HANA on a Cisco UCS environment; our SAP software is already 100% virtualized on Cisco hardware, and this seemed the logical choice. Although SAP HANA is not currently running in a virtualized environment, recent announcements from Cisco, SAP, and VMware, and our past experiences with these technologies, provide us a high level of
confidence moving forward,” Gilson says.
Johnsonville went live with SAP BW powered by SAP HANA in May 2014 to complete a key milestone in its trade promotion optimization initiative. While this decision was primarily to satisfy the requirements for the SAP Demand Signal Management implementation, Gilson cites several other benefits Johnsonville hopes to realize with SAP BW on SAP HANA. These benefits include optimizing performance for new and existing SAP applications, such as SAP Business Planning and Consolidation and SAP Trade Promotion Management, enhancing end-user satisfaction through SAP BW and SAP BusinessObjects BI performance improvements, and providing Johnsonville with new capabilities for advanced statistics, modeling, visualization, and predictive analytics.
Knowing that SAP HANA is the default platform for SAP moving forward, Johnsonville identified SAP BW on SAP HANA as a great starting point from which it could learn the SAP HANA technology and evaluate future business cases.
“As we look forward from a TCO perspective, it is critical to have SAP HANA deployed in a totally virtualized environment,” Gilson says. “The SAP HANA environment requires a lot of expensive dedicated hardware, so that relationship between Cisco, VMware, and SAP to enable SAP HANA to be run in a virtualized environment is a key factor for us.”
There is a reason why Johnsonville’s trade optimization strategy centered on SAP Demand Signal Management, which was in 2.0 ramp up when the company started its phased implementation after its SAP BW powered by SAP HANA migration. (Johnsonville expects to complete its initial SAP Demand Signal Management rollout in Q4 2014.) With this application, Johnsonville will finally have its long-sought single source of the truth and a single repository for demand signal data, allowing it to aggregate data from multiple data sources and respond quickly to changes. This includes retailer POS data, syndicated market research data, internal shipment data, and other third-party information. Not only is the data available more quickly, it is also able to be re-used throughout the organization.
“For the first time, we can have a single harmonized view of the business, which in turn should allow us to generate new insights that weren’t possible before,” Gilson says. “Real-time data promises to have a positive impact on our business, just by knowing what’s happening in the market on a daily basis.”
With SAP Demand Signal Management, the “80-20” ratio will be flipped. “This will give us one view of three very disparate data sources that come together in a single analytical environment for the end user. Today, this is something that would take our strategic insights and analytics team days or more to bring together to even make sure they have valid data, let alone act on it,” Gilson says.
“A benefit of our current infrastructure is speed to market, and being able to rapidly respond to new business opportunities. Our virtualized environment allows us to spin up new environments very, very quickly, and SAP Demand Signal Management is definitely a product we will continue to enhance over time. So we’re making sure we have the internal resources to grow that environment as our business needs evolve,” Gilson says.