Mamee Double Decker discovers the sweet spot for business control with SAP and IBM

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1 we know they know Mamee discovers the sweet spot for business control with SAP and IBM Overview The Challenge Snacks and candies producer Mamee (M) Berhad found that paper-based production planning and quality management processes were error-prone, wasteful and relatively slow. To maximize efficiency and manufacturing throughput, the company wanted to introduce the latest edition of SAP ERP and implement new components but the existing infrastructure was not capable of supporting the expanded workload. The company needed a trusted advisor to help them integrate their systems more fully. The Solution Mamee engaged with IBM Global Business Services to roll out new SAP functionality, most importantly SAP ERP production planning, to link up the manufacturing plants and their beverages arm. In phase two, IBM also helped the company implement costing and quality management components, roll out SAP ERP to the beverages plant in Kuantan, and implement SAP NetWeaver Business Warehouse. IBM offered the expertise and the solutions to help the company upgrade their SAP system from version R/3 4.6C to ERP 6.0, implemented on IBM System x3850 M2, x3650 and x3250 servers, powered by Intel Xeon series processors, running Microsoft Windows Server and Microsoft SQL Server to support SAP ERP applications including financials, controlling, materials management, sales and distribution, production planning, and quality management. The Benefits Able to produce month-end cost reports in less than four days. Production forecasting accuracy has improved and raw materials wastage has been reduced. Full track and trace capability has been introduced for every ingredient, manufacturing and delivery stage, enabling Mamee to comply with national and international food safety standards. The new infrastructure supports existing users and solutions, and has the capacity to scale up as Mamee grows. Key Solution Components Industry: Consumer Products Applications: SAP ERP applications including financials, controlling, materials management, sales and distribution, production planning and quality management Hardware: IBM System x3850 M2, x3650, x3250 powered by Intel Xeon E7330 and E5405 processors Software: Microsoft Windows Server, Microsoft SQL Server Services: IBM Global Services Application Management Services

2 IBM Global Business Services helped us to implement key components such as production planning to link up the manufacturing plants and SAP NetWeaver Business Warehouse. IBM brought the expertise that we needed for the implementations, offering excellent technical and business advice. Mamee (M) Berhad of Malaka, Malaysia, produces an extraordinarily wide range of snacks, noodles, yoghurts and potato chips, destined for both local and export markets. With some 1,800 employees in five principal sites, Mamee generated sales of more than MYR 400 million (approximately US$ 135 million) in The company operates manufacturing sites throughout Malaysia, with an extended national and international sales and distribution network. Many of its plants run at full capacity, and it is therefore important to maximize production efficiency. This entails sharp focus on coordinating raw materials, production and delivery across this diverse business. As an additional challenge, the ingredients for many products, such as noodles and yoghurts are highly perishable, and ensuring timely processing helps to reduce wastage and control costs. Lawrence Heng, IT Manager, comments, One of the key business challenges is to meet customer orders within the shortest possible time. We need to have ingredients and finished goods in stock, and be able to change production to meet demand, typically within a couple of days. Availability and visibility of inventory is essential, and if we cannot understand our stock position then we cannot fulfill production for customer orders. Enterprise-wide solution Mamee originally selected SAP ERP applications to manage the business, replacing independent legacy systems at each site with integrated, enterprise-wide solutions. Introducing SAP ERP allowed Mamee to view, control and manage the end-to-end business processes, from goods inwards to final sale. The company implemented core SAP financials, controlling, materials management and sales and distribution components, supporting around 150 users. At that stage, production planning was handled manually, and quality management was a paper based-process. Already experiencing the benefits of the integrated SAP solutions, the Mamee team chose to implement the SAP ERP modules for production planning and quality management, and upgrade to the latest edition of the software. The manual processes were prone to inaccuracy, says Lawrence Heng. It was all too easy to miss out necessary ingredients in a supplier order, or under- or over-order the quantities. Gathering and understanding the data, such as the current stock

3 position and the necessary new quantities, was a relatively slow process, and there was always the chance that an error could be introduced. As the business expands it becomes more and more important to introduce rigorous quality management. When we order materials, we want to check the incoming products and keep a record of the quantity, quality, expiry date and so-on. During manufacturing, we want to store quality reports organized by batch and lot number, and keep track of the finished goods data. With the paperbased process, some checks could be missed or skipped, giving us problems when it came to auditability of manufacturing. Leveraging IBM expertise Lawrence Heng invited tenders from consulting partners, and selected IBM Global Business Services based on the very wide range of expertise available from a single source. IBM provided a comprehensive offer, with a team of technical and SAP BASIS consultants, alongside infrastructure sizing and industry specialists who were able to advise Mamee on the best way to take advantage of the new SAP solutions. The Mamee team specified a detailed list of business requirements in faceto-face meetings, resulting in a blueprint that IBM used to build prototypes and test systems. Mamee upgraded each SAP ERP component in turn, and users accessed test systems and gave their feedback. Once the functionality had been agreed, each system was moved into production. When users had accepted the upgraded components, the IBM and Mamee teams implemented the new production planning and quality management components, unifying the entire enterprise on the same software platform and application suite. Finally, the completed landscape was rolled out to a newlyacquired manufacturing site at Kuantan, replacing legacy systems and integrating its operations with the central SAP business solutions. Mamee engaged with IBM Global Business Services Application Management Services, with full outsourcing services provided by Application Innovation Services and Business Application Modernization Services. Collectively, these services provide a complete solution to Mamee, removing the need for in-house capacity for all the infrastructure and application requirements, leaving the Mamee team free to focus on business value. IBM Global Business Services helped us to implement key components such as production planning to link up the manufacturing plants and SAP NetWeaver Business Warehouse, says Lawrence Heng. IBM brought the expertise that we needed for the implementations, offering excellent technical and business advice. Addressing infrastructure issues The original hardware had reached capacity, and to enable the upgrade and addition of new SAP ERP components the IT team wanted to reconsider the infrastructure strategy. Working closely with IBM, Mamee selected IBM System x servers, with We chose IBM System x for our business-critical SAP software because of the combination of IBM build quality, reliability, expandable capacity, and the in depth expertise of the IBM support service. These elements directly enable Mamee to meet its business objectives with the SAP solutions. TECHNICAL LANDSCAPE Servers: IBM System x3850 M2, x3650, x3250 with Intel Xeon E7330 and E5405 processors Software: SAP ERP applications including financials, controlling, materials management, sales and distribution, production planning, quality management, Microsoft Windows Server, Microsoft SQL Server Users: 150 users of SAP

4 virtualization provided by VMware, running the Microsoft Windows Server operating system and Microsoft SQL Server. The production systems run on an x3850 M2 server powered by an Intel Xeon series quad-core E7330 processor, with x3650 servers powered by Intel Xeon series quad-core E5405 processors for development, test and quality management SAP landscapes. Further IBM System x servers (x3250 or others) support general business administration services, such as file serving and . Intel Xeon Processor 7000 Series processors offer advanced reliability for the most data-demanding applications, with intelligent performance that automatically adapts to the diverse needs of a virtualized environment. Intel Xeon Processor 5000 Series processors offer next-generation intelligent technology, automatically regulating energy consumption to combine industry-leading efficiency with performance that adapts to workload. System downtime has a severe impact on Mamee, and every aspect of our delivery and distribution would suffer. We need to ensure we are always able to meet our customer orders, and without the ERP system we have no way of knowing who should get what, when, says Lawrence Heng. We chose IBM System x for our business-critical SAP software because of the combination of IBM build quality, reliability, expandable capacity, and the in depth expertise of the IBM support service. These elements directly enable Mamee to meet its business objectives with the SAP solutions. More detailed control With the upgraded SAP ERP applications and new production planning and quality management solutions in place, Mamee is now able to control its business in greater detail, helping to drive efficiency and meet customer demands. The production planning application allows Mamee to optimize its raw materials, manpower and machinery requirements by matching sales orders and estimates to the actual inventory levels, staff and plant capacity. The information required for production planning is generated automatically, eliminating manual errors. Bills of materials needed to fulfill specific sales orders are produced by the system, adjusting the amounts ordered depending on the current stock position, removing under- and over-ordering, and therefore reducing wastage and costs. In the past, a month-end cost report took more than five days to produce, says Lawrence Heng. With the integrated SAP applications we are able to analyze our costs in a way that was not possible before. We can now report on all the cost components of each product, from raw ingredients through to the proportion of overheads allocated, all in less than three days. This data helps make us more efficient, by highlighting areas where costs are rising, showing us the effect of administration costs, and allowing us to calculate the volumes that we need to sell. With the integrated SAP applications we are able to analyze our costs in a way that was not possible before. We can now report on all the cost components of each product, from raw ingredients through to the proportion of overheads allocated, all in less than three days.

5 In the past, our production planning was based on sales figure estimates that were given on paper to the factory managers, who in turn calculated their raw materials, machinery usage, staffing and management needs. Often there were changes between the initial estimates of sales figures and the production plans, which meant that the plans no longer matched the forecasts. The SAP solutions have removed the delay in production planning, as they automatically prompt the sales teams for regular, updated figures. The more structured approach to data input has improved forecasting accuracy, and the production plans help us to identify likely manufacturing bottlenecks that could prevent us from fulfilling a customer order on time. We use the software to try out what-if scenarios, for example looking at the delivery and cost consequences of interrupting a long production run to fulfill a shorter, more urgent customer order. By integrating data from all aspects of the business, SAP ERP helps us to optimize the business for customer service and profitability. Similarly, the quality management process has been fully transferred to the SAP applications. Should a quality issue arise, Mamee is able to track and trace every ingredient, manufacturing and delivery stage. This is an essential capability when selling internationally, since most customers require full audit data. Heng. It also helps meet regulatory requirements in Malaysia and in new markets across the continent. Looking to the future Mamee is now considering SAP warehouse management and trade promotions components. With greater control and visibility of inventory, the company will be able to ensure that products nearing expiry dates can be promoted and sold, generating sales that might otherwise be lost and the products wasted. Based on the integrated data captured by the SAP applications, the company is also considering business intelligence solutions, that will allow senior managers to gain greater insight on costs and profitability on a daily basis. Where previously paperbased management reports could not provide the data in a timely manner, and could contain manual errors, the data generated by the SAP applications can be relied on as a consistent source of information that can be examined for efficiency gains and margin improvement. Together, the SAP applications, IBM Global Business Services and IBM infrastructure give Mamee the capability to grow, delivering strategic solutions that help us meet our business objectives. Together, the SAP applications, IBM Global Business Services and IBM infrastructure give Mamee the capability to grow, delivering strategic solutions that help us meet our business objectives. Quality management helps us improve internal processes, and enables proper monitoring of suppliers, manufacturing operations and finished goods, says Lawrence

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