For 15 consecutive years, Topco Associates has been the largest buyer of Certified Angus Beef in the world. The grocery purchasing cooperative, based in Elk Grove Village, Illinois, spends about $1.5 billion annually on beef, pork, lamb, and veal, which it distributes to more than 50 members throughout the United States, Mexico, the Dominican Republic, and Puerto Rico.
Fresh meat represents a small fraction of the cooperative’s aggregate purchasing power and is one of 10 programs that fall into three primary business units: Center Store (Frozen Foods, Grocery, HBC/GM, and Dairy/Bakery); Fresh (Fresh Meat, Seafood, Branded Meat, and Produce/Floral); and Value-Added (Indirect Spend, Pharmacy, and National Brands). The grocery retailers, wholesalers, and food service companies that comprise Topco’s membership look to the cooperative to help drive savings by aggregating demand, driving innovation in its product offerings, and providing knowledge management related to the industry, quality assurance, marketing, and merchandising best practices.
To ensure a high level of service, efficient order processing is essential; without it, aggregating volume to secure the best price — the service that members depend on above all — becomes extremely difficult. In 2013, after visiting directly with members to find out how it could improve its level of service, Topco determined that its legacy IT systems were ill-equipped to meet evolving member expectations. Some of these expectations included shorter delivery windows, more agile pricing, robust analytics, an up-to-date sourcing calendar, and increased visibility into ordering processes.
“With this in mind, we kicked off a three-year transformation project to invest in people, processes, and technology and, ultimately, to modernize our platforms and effect the kind of change our members told us they were looking for,” says Jonathan Morse, Topco’s Vice President of Technology and Continuous Improvement.
Creating a Shopping List
According to Morse, Topco’s legacy systems included multiple order-processing systems in addition to a central system for finance. This multiplicity led to a lack of standards between the various programs, high levels of customizations, rudimentary business intelligence (BI) capabilities, and a great deal of manual work.
A modern, integrated platform would allow for greater collaboration and communication between the company and its members and provide more visibility into the supply chain, including more granular product details that could help facilitate better sourcing and procurement. It would also make it easier to have a single version of the truth as it relates to information, without having to chase it down from a hodge-podge of disconnected systems. “When members would ask questions, we wanted the ability to gather the information we needed to answer them quickly, and we wanted our answers to be more precise and data-driven,” says Morse.
Shortly after visiting its members on a fact-finding mission to see how it could drive efficiencies, Topco put together a list of requirements for a modernized infrastructure and put out a request for a proposal (RFP) to four vendors, SAP included. After scoring on-site demos and the RFPs, Topco narrowed its choice and ultimately signed a contract with SAP in 2014 to implement SAP Business Suite powered by SAP HANA, SAP Business Warehouse (SAP BW), SAP BusinessObjects Business Intelligence (BI) suite, SAP Ariba Network, and the SAP Solution Extensions such as SAP Incentive Administration by Vistex, SAP Data Maintenance for ERP by Vistex, SAP Paybacks and Chargebacks by Vistex, and SAP Invoice Management by OpenText, option for OCR.
“We were impressed by the reporting and analytics capabilities and the overall robustness of functionality in transaction processing and order management, which is important because order processing is a huge part of our business,” Morse says. “Add to that the capabilities of SAP HANA and being able to run SAP ERP on an in-memory database, and it was evident the technology could get us to where we needed to be. Right away, it became very clear that this would be better than anything we were currently using.”
A Manageable Shopping Basket
Because Topco viewed the project as an opportunity to transform the business rather than as a mere upgrade, the company was very deliberate about which processes and customizations would migrate over to a single SAP ERP instance. Morse ran a four-person review board, which named itself the “Office of No” and had jurisdiction over system customization. Its aim, Morse says, was to strive to maintain SAP best practices, avoid recreating legacy customizations, and put the onus on the business to own the solution, rather than IT. Any deviation from SAP standards had to be justified. In total, the Office of No received 609 customization requests and approved only 213 (35%).
“When you get into a transformation of this magnitude, everyone has an extensive wish list,” says Morse. “Unless you have a very clear method of sifting through and prioritizing all of these requests, your scope and costs are going to quickly spiral out of control. Our default was to say ‘No’ unless the business owner could convince us otherwise.”
To help arrive at more standardization, Topco started cleaning master data in its legacy system even before it decided to implement the SAP solutions. This included reworking its product hierarchy in alignment with members’ product hierarchies and streamlining naming conventions. The company also reached out to its vendors months in advance to request they clean up any incomplete data. Having 10 different programs for 50 members, however, presented a challenge to arriving at a one-size-fits-all standard across all processes.
“We tried to design a process that worked for 80% of our programs,” Morse says. “But there will always be differences because private-label grocery is very different from floral and produce, which is different from fuel or indirect spend. As we architected the system, we focused on the similarities instead of the exceptions and what would work for the bulk of the business.”
Designing a Long-Term Menu
In late summer of 2015, Topco rolled out SAP Business Suite powered by SAP HANA, SAP BW, the BI suite, SAP Ariba Network, and the SAP Solution Extensions for its central finance operations as well as its center store programs, fuel, and warehouse operations.
In March and May 2016, Topco went live with its National Brands and Pharmacy programs, respectively, and currently is completing the Phase 2 rollout, which includes Fresh as well as the Indirect Spend program.
One of the company’s objectives during the phased go-live, according to Morse, was to strike the optimal balance between speed and quality, forgoing design changes at the expense of additional cost with a continuous improvement approach. “It’s not just about going live with SAP software,” he says. “It’s about going live with the understanding that you’re never finished; there are always opportunities to improve your processes and technology for years to come.”
Topco deployed the SAP solutions in a private cloud managed by a hosting partner; the idea of continuous improvement was one of the reasons it chose a cloud deployment with a flexible, pay-as-you-go model that could scale with future growth.
It’s not just about going live with SAP software. It’s about going live with the understanding that you’re never finished; there are always opportunities to improve your processes and technology for years to come.
— Jonathan Morse, Vice President of Technology and Continuous Improvement, Topco
A Satisfied Customer
Because order processing is so integral to Topco’s bottom line, transactional accuracy in SAP ERP is one of the more noticeable improvements over its legacy system, where data workarounds were common because the system did not demand accuracy. For example, previously, a member could submit an order for a certain number of an item (say, 100) without stipulating the accompanying measure of unit — be it number of cases, pallets, or eaches. This could entail a manual workaround from the user who would have to know the member’s order history or deduce the measure by matching it to a pricing list that made sense.
While the new system’s accounting restrictions took some getting used to, users have now fully embraced the new technology platform, as it was designed with the business user in mind, not as an IT-owned solution. “SAP software demands accuracy in the data, prices, transactions, and order flow,” says Morse. “Out of the gate, some users initially resisted the change, but it didn’t take them long to successfully climb the learning curve and realize the improvements the SAP software offers them in order processing.” With enhanced accuracy and less reliance on manual intervention, Topco has improved its hands-free order flow from 11% of orders to more than 40% with fully automated processing.
Other direct benefits are improved pricing processes that enhance pricing communication with members and vendors as well as robust SAP BusinessObjects BI reporting tools that provide capabilities for member-specific pricing reports — something beyond the capabilities of its homegrown BI tools. In addition, with clean master data, Topco can ensure greater accuracy and integrity of information and fewer failed electronic transmissions.
A big improvement with the SAP Solution Extensions has been a complete overhaul of Topco’s rebate processing procedures. “When we went live in this area, the business users immediately said the Vistex solutions were easy to use and much more intuitive than what we had before,” says Morse. “The ease in setting up rebate agreements and the ease in which transactions flowed into those agreements and calculated rebates really stood out.”
Topco’s modernized platform is helping the company to achieve greater communication with its members and, ultimately, drive toward achieving its overarching objectives of bringing more value to the cooperative — by providing superior demand aggregation, driving innovation in its product offerings, improving its knowledge of the market, and passing that expertise on to its members for their benefit.
“As a voluntary cooperative, we have to continually prove our value and cost savings to our members,” Morse says. “Our transformative SAP project enables Topco to continuously improve our processes and drive increased clarity within the business, allowing Topco to become a more strategic partner with the membership.”