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King's Hawaiian has seen rapid business growth in the last few years, as customers around the world get a taste of its sweet baked goods. In order to manage this growth, the company is undergoing a digital business transformation centered on an SAP S/4HANA implementation.
The S/4HANA implementation has been in development for the last two years and is scheduled to go live in January 2019. The new S/4HANA system will not only enable the company to manage the rapid growth but is expected to open new business possibilities by providing details about customers and markets that were not possible before, said Luis Cupajita, CIO of King's Hawaiian.
Embarking on a greenfield S/4HANA implementation is not an easy decision, but it was a necessary one, Cupajita explained.
The main problem that faced King's Hawaiian was a legacy on-premises ERP system. It was not only aging, but the Sage 500 ERP was a mismatch for King's Hawaiian's needs, according to Cupajita. The system is designed as a discrete manufacturing platform, while King's is predominantly a process manufacturing business, so a lot had to be done to customize the Sage system to account for process manufacturing functions.
"Just keeping it running was, at times, a rigorous effort in and of itself," Cupajita said. "There was a lack of visibility, and sometimes, it even impeded us from doing some pretty standard things, like managing EDI [electronic data interchange] effectively, so there was a lot of manual rigor involved. There was also this rift because I think it was intended to be a solution for a smaller company that wasn't growing as rapidly as we are, so it was starting to show signs of failure last year."
Driving digital transformation
King's Hawaiian -- headquartered in Torrance, Calif. -- began to look for a system that could not only handle its current needs, but drive digital business transformation for the organization.
"Most ERP implementations have some aspect of business transformation that's the driver behind the implementation, so initiating this transformation was part of why we looked for a solution that could take us into the future -- not only from a mechanical, capabilities or functionality perspective, but also for the business," Cupajita said. "So, [we are] going from an organic, ad hoc, fragmented set of processes and procedures that have been put in place over the years, now moving toward a best-practices, integrated set of processes that now run our business."
About two years ago, King's Hawaiian initiated a project to determine what future-oriented ERP would be implemented. This effort involved listing vendors based on criteria that included their current technology, the future scope of the system, whether it was suitable for King's Hawaiian's consumer packaged goods (CPG) requirements and the quality of platform integrators. After narrowing things, the list came down to SAP, Microsoft Dynamics and Oracle JD Edwards.
S/4HANA wasn't ready, exec says
The project was put on hold as the growing company faced other initiatives, but this may have turned out to be an unlikely advantage for S/4HANA.
"S/4HANA wasn't quite ready for prime time; it was still a new product, a little risky," Cupajita explained. "We looked at traditional ECC [ERP Central Component], but we put the effort on hold and started to look at the projects again in 2017, where we continued to shortlist SAP and Oracle."
At this point, it became apparent that waiting too long to implement a new system might lead to real trouble. For example, the old system was highly customized, and if something went wrong, the people who knew the customizations best were often no longer with the company. So, King's Hawaiian went through a structured ERP selection process. The first step was to evaluate the systems in a generic manner and then do two pilot rounds. The first round explored some basic functionality, such as procure to pay and order to cash, with the organization's data. The second round involved the integration partners that had been shortlisted.
"Now, it was, 'Let's get into the planning; let's run MRP [manufacturing requirements planning] and demand planning; and how would you interface with our factories, what are the mechanisms and technologies that you use and how can you do that on your platform?'" Cupajita said. "That was the deciding factor for both the platform itself -- SAP S/4HANA -- and for the integration partner that we chose, who had deep knowledge in CPG foods."
Go private cloud and don't customize
Once it made the choice of a platform, King's Hawaiian started an aggressive, nine-month plan for the S/4HANA implementation. Two things were important, Cupajita said: Run it in a private cloud, and have few software customizations.
Luis CupajitaSenior vice president of IT, King's Hawaiian
"We were interested in keeping it as out-of-the-box as possible so that we can benefit from future upgrades and enhancements," he said. "By putting S/4HANA in a private cloud, we have the ability to maintain our personalization to it, because I'm not in the job of owning and acquiring a lot of assets. We looked heavily at the service-level aspects of it, making sure that we're taking care of our business needs, but it's really somebody else's boxes."
Change management is a huge issue because the new system will be radically different from the legacy one. This challenge has entailed an extensive campaign of training employees on the system and a broader awareness campaign for new processes, procedures and terminology. The company is extending this training to customers and suppliers.
"Our EDI customers and our suppliers will be made aware of the change and how it will impact them, so it's a comprehensive approach to change management, which we were conscious of before we even launched the project," Cupajita said. "We have executive sponsors on the change side of the implementation and executive sponsors on the execution side making it happen."
Process improvement and better analytics
Once the S/4HANA implementation is complete, Cupajita expects to see dramatic improvements, both in processes and in business development. The system will introduce automation; some processes that took 20 steps and 30 minutes in the old system will now take four steps and five minutes.
"There will also be richer content for decision-makers. We're raising the bar in terms of what you can see happening with our products, our customer relationships, introductions into new markets and how they perform," he said. "It's tighter into our demand planning and our demand scheduling into the factories, and we're tying that into our POS [point-of-sale] information and determining the true lift of particular activities from our marketing system. So, we're getting a better read on what's happening with our products."