When browsing the aisles of your local grocery store, how often do you pick up a product from the shelf and review its label for nutritional information or ingredients? Probably fairly often. And, when looking at that item, how often do you wonder how that product is characterized by the store, or if all stores refer to the product in the same way? Likely never. To a consumer, that information is meaningless. To a grocery distributor, however, the smallest details are critical in a market with some of the lowest of margins. As the volume of this product data — which can contain hundreds of thousands of articles and data attributes — continues to expand, its cleanliness and accuracy is of the highest priority to ensure efficient operations and grow the business.
To achieve these goals, New Zealand’s largest grocery distributor, Foodstuffs, has embarked on a massive data journey involving three separate, concurrent projects designed to make its supermarkets run more efficiently, better serve customers, and drive revenue growth. These projects, which are still underway and have not been without challenges, are paving the way toward a higher degree of data accuracy and a common data language across its landscape, enabling better decision making, easier data management, and improved visibility across store locations.
The Foodstuffs organization, which has been 100% member-owned since its inception in 1922, is separated into two regional cooperatives — Foodstuffs North Island and Foodstuffs South Island — that share 15 national retail, wholesale, and liquor brands, including PAK’nSAVE, New World, and Four Square. Foodstuffs North Island, which is the result of a 2013 merger between the Lower North (Wellington-based stores) and Upper North (Auckland-based stores) regions, supplies over 350 stores in the north island of New Zealand and is the cooperative driving and participating in the three data initiatives — known as Project Lightning, Project Bolt, and Project One Data.
Project Lightning: Growing with SAP Software
Foodstuffs Auckland, the organization’s founding location, first implemented SAP ERP in the mid-1990s for its finance division and later for the eight wholesale brands then in existence. At that time, business was booming; its annual sales for 1995 passed the $1 billion mark, and together with Foodstuffs Wellington and Foodstuffs South Island, the business held a 54% market share of New Zealand’s wholesale grocery business. Five years later, the collective wholesale turnover of the group surpassed $4 billion.
“At that point, the organization went through some major strategic reviews of its long-term future, and a big outcome was that Foodstuffs needed to embark on a large IT investment — rebuilding the whole IT infrastructure from the ground up — meaning the data center, network, core server infrastructure, storage, and desktops,” says Ashley Colyer, Solution Delivery Manager for Foodstuffs North Island. “A core pillar of that change was the decision to migrate away from the legacy systems that were supporting the grocery stores and undergo an SAP ERP reimplementation.”
When Colyer arrived at Foodstuffs Auckland in 2012, the business was just beginning its SAP reimplementation journey, called Project Lightning, which involved building out from the initial SAP rollout and expanding it to other functions within the organization’s support center and retail network. “The aim of the SAP reimplementation was to turn the art of grocery retailing into more of a science in terms of how we manage our stock — both in the warehouse and in the store — and to do that, we need accurate and aligned data. With this project, we are asking our stores to provide a lot more data around their inventory, such as where it’s physically located, how they manage incoming goods, how returns are processed, and so forth.”
A key objective of Project Lightning was to standardize processes and systems to deliver consistent and actionable business information. The project plans centered on deploying the SAP for Retail industry solution for grocery and rolling out a new point-of-sale (POS) solution to its supermarkets. The reimplementation meant moving all the core processes associated with retail grocery (such as pricing promotions, ordering, merchandising, and traditional retail processes) off legacy systems and onto SAP for Retail, excluding some areas like warehouse management and payroll, which currently remain managed with non-SAP solutions. The reimplementation also included deploying other on-premise SAP applications, such as SAP Promotion Management for Retail, SAP Forecasting and Replenishment for Retail, SAP Business Warehouse (SAP BW) powered by SAP HANA, SAP Solution Manager, and SAP BusinessObjects solutions for front-end reporting.
Another impetus for the reimplementation was to provide the business with timely access to data. In the previous environment, it could take months for store operators to receive reports on the impact and success of promotion campaigns, even at some of the most successful stores. “One store manager, for example, was looking back at a successful Christmas promotion and realized that if he had reports showing the margin percentage at the time, he would have gone even harder and had more success,” Colyer says. “The SAP software was intended to address the timeliness of that data.”
To date, approximately 2,500 support center and store team members have been up-skilled through Project Lightning, enabling them to perform their daily tasks more efficiently and make better-informed decisions. And almost 200 stores have rolled out the new POS system and been incorporated into the new network, enabling the support center to work with any of these premises remotely and wirelessly. The full rollout of SAP solutions for the first three pilot retail stores was complete by the close of 2014 (the first go-live concluded in November 2013), and additional rollouts followed in 2015 after a brief period of solution optimization. The pace of this huge deployment program has steadily increased and will achieve full speed in the second quarter of 2016.
Project Bolt: Adding a Merger to the Mix
Well after the start of Project Lightning, which was initially intended solely for Foodstuffs Auckland, the merger with Foodstuffs Wellington was announced. The Lower North stores had previously operated on a non-SAP back-end ERP system, which complicated matters from an integration standpoint considering the supply chain, warehouse management, and other systems involved. The decision was to stay with the originally intended solution and find a way to bring the Lower North stores onto the SAP system. This integration initiative was named Project Bolt and commenced in March 2015.
“It was an interesting journey, trying to bring the two organizations together from a systems perspective,” says Colyer. “Initially, the strategy was to centralize the support-center-based office functions on the SAP system first, and then start rolling out the SAP system to the Lower North stores. After some analysis and investigation, we switched that strategy. Essentially, we decided to focus on rolling out to the stores first to make them more efficient and better placed to serve the customers, rather than focus primarily on the potential cost savings of removing an old system.”
The implementation strategy was to deploy the software and migrate the data across the retail network in mini go-lives on a store-by-store basis. The plan detailed that each store must go through a methodical, structured process of preparation, training, and data migration before the actual cutover, with a process timeline of roughly four to five months from start to finish. Foodstuffs North Island recently rolled out its first Lower North wholesale store on the SAP system, and the first Lower North retail supermarket is scheduled to go live in April 2016.
The main implementation challenge of Project Bolt has not been a technical issue, but rather one of change management and training, according to Colyer. “We have employees at 350 stores who all need to learn how to run their businesses with a new set of processes in a new system. For example, stores now have a more formal process for entering stock they receive into the SAP system,” he says. While supporting this level of change on such a large scale is a challenge, it is not an insurmountable one. He adds, “We have a large deployment team — that’s still growing — that has custom-built a suite of online training materials for Foodstuffs business users to help with SAP competency and more general computer-literacy skills.”
Project One Data: Creating a Common Language for Product Data
As Project Lightning and Project Bolt progressed, Foodstuffs North Island started realizing how crucial it was for its newly merged stores to communicate in a common language. “We wanted greater visibility into what was going on in our stores — what our customers want, what they are buying, and where — so we can know what to sell in every store,” says Colyer. “To do that, we needed to maintain a greater set of data, which created a significant data challenge for us.”
Prior to Project Lightning and Project Bolt, the stores followed a hybrid distributed data model, where disparate master data teams created a core set of article attributes relevant to both Upper and Lower North stores, but each store operator had the freedom to source local products and register those products in their local systems using their own set of article numbers. For example, say a store operator at an Upper North store assigned one article number to a brand of baked beans. If a Lower North store stocked the exact same line of baked beans, it could — and usually would — give it a different article number.
With this model, there was limited visibility into product data for the support center. The need to align the data was clear, but migrating each store’s unique set of article numbers would have been a nightmare. For this reason, a strategic decision was made to fundamentally change that data model with a national master data alignment initiative called Project One Data, which challenged teams to determine which data was important. The goal was to create a single master data set across a multitude of systems with common values and key attributes, bringing Upper North, Lower North, and Foodstuffs South Island all onto a common article number called the Foodstuffs Article Number (FAN). The ability to reference the same FAN across all regions immediately removed the load of translational mapping and conversion that was required up until that point for reporting analysis.
The national Project One Data is still pending go-live, according to Colyer. “A huge amount of effort was required to first consolidate our data sets and then go through a cleansing cycle, which we are still in the midst of right now,” he says. “The majority of the alignment work is complete, but the actual official go-live, when we all start referencing the same FAN, happens later this year.”
We certainly came to recognize the increasing importance of maintaining well-managed and well-governed data, and that having aligned data is critical to achieve operational efficiencies.
— Ashley Colyer, Solution Delivery Manager, Foodstuffs North Island
Better-Managed Data Leads to Benefits
Maintaining accurate, reliable data is at the heart of each ongoing initiative — from standardizing processes and systems, to migrating legacy systems, to creating a common language for product data — especially as the volume of data and the organization’s dependence on that data continues to grow. “We certainly came to recognize the increasing importance of maintaining well-managed and well-governed data and that having aligned data is critical to achieve operational efficiencies,” says Colyer.
In one of the early go-lives with Project Lightning, the deployment team tried to tackle data cleansing with some homegrown tools and data experts, but it turned out to be a lot harder and more taxing than expected. During Project Bolt, when bringing Upper North and Lower North together, the team decided to engage a specialist to help and selected BackOffice Associates, a partner Colyer first encountered a few years prior in Melbourne, Australia, at an SAP conference. “We chose the Data Stewardship Platform because we thought it was a quick way to help us match up and cleanse our data. Also, we were impressed by their actual expertise in the field — not just the technical constancy of their people, but how incredibly hardworking they proved to be.” (For more information about BackOffice Associates’ crucial role in the project, see the sidebar at the end of the article.)
With help from BackOffice, Foodstuffs North Island began creating a set of core competencies around data governance. “Governance has proven to be critical today because we have so many systems to align, and the Data Stewardship Platform has provided us with a newfound visibility into the quality of our data and where that data is starting to become misaligned,” Colyer says. “We have a whole swathe of reports now that allow us to see what’s happening to our data, so we can see where two systems are out of line. And that is allowing us to start managing that data proactively rather than reacting to a process not working or to a pricing discrepancy.”
Having aligned data helps the business know that it is selling the same products at the same prices and running the same promotions across the organization. “When we run national promotions, it is vital to know that the promotion data has flowed through all the systems and that we are delivering prices as advertised, ensuring price integrity,” Colyer says. “Because Foodstuffs North Island is not on a single platform yet and still running a complex hybrid landscape, aligned data is a very tangible benefit.”
This alignment also proves especially important to the business when considering invoice reconciliation, for instance. “Because we’re still merging legacy and new SAP systems, it can become incredibly complicated reconciling a supplier invoice if one system shows a certain pricing condition for something we bought or sold but a downstream system shows another number,” he adds. “Fighting these discrepancies causes a huge amount of extra work, and now, through the data alignment, we are starting to see the benefits flowing, where we need fewer people working on discrepancy management.”
The changes that Projects Lightning, Bolt, and One Data have brought don’t just help the business in terms of data reporting and reconciliation. There’s a huge impact on the stores and customers themselves — aside from the obvious changes, such as store clerks learning a new POS system. Most people in the stores are either directly or indirectly affected by how the business is starting to capture and manage better-aligned data, and this impact is heightened with the use of SAP software.
A very tangible advantage for Foodstuffs North Island customers as a result of SAP Forecasting and Replenishment for Retail is enhanced inventory management. “Not only will customers find the right products on the shelf, but they will also benefit from fewer out-of-stock products, for example,” says Colyer. Another business benefit unfolding is the ability to not only better understand what an individual store is selling, but get that visibility across all stores on the island. “We want to see what our customers are doing and wanting and be able to filter that across the wider group,” he adds.
A key takeaway from the experience, according to Colyer, was the importance of investing in point-of-entry data validation. Data that comes through electronic means, such as information fed directly through supplier portals, generally tends to be of a better quality. If invalid values are entered when data is initially captured, that inevitably flows downstream and can permeate through multiple systems. “My advice is to allow enough time and resources to analyze where you capture data, particularly where manual entry and paper forms are involved, and how you can validate that to make sure you get it right the first time,” he says. “A lot of the effort that’s gone into our projects around data has been trying to cleanse data that otherwise might have been clean if we had more validation at point of entry.”
Stepping into a New Foodstuffs Paradigm
While it’s a little early to discuss metrics, according to Colyer, the business should have more empirical data on these projects’ successes in about six months. “It feels like we’ve only just gone live with the SAP reimplementation, but we are already looking at a refresh cycle and investigating the opportunities SAP S/4HANA or the cloud might bring — so we are starting to look at things like SAP S/4HANA Finance and SAP HANA Enterprise Cloud,” he says. “We’ve got some exciting questions to ask, but the expectation is that we will continue to streamline all of the operations directly involved with data management, as well as the processes that flow as a consequence of more accurate data.”
The business is stepping into a new paradigm where Foodstuffs and its retail brands are embarking on a journey toward improving its customer relationship management by introducing customer loyalty programs and online shopping. “Clean data is a real prerequisite and enabler of those things, which are critical to understanding our customers,” says Colyer. “We cannot start exposing our data to the outside world, with no filter between our data and the customer, unless it is clean. So the first requirement is to make the whole merged business operate much more efficiently, and then the loyalty and online programs in the very near future are a must.”