Duty Calls
Distilling is a specialized and highly regulated business. It's also unusual in that the larger part of its product price to the end consumer is not accounted for by manufacturing costs, nor by distribution and retail, but by a government-imposed levy-excise duty.
Customs & Excise (C & E) require that distillers must account for all movements of bulk spirit, including in or out of bonded warehouses (secure facilities that allow firms to store spirits without incurring ruinous amounts of duty).
As a producer of alcohol, G & J must account for both incoming and outgoing goods that contain alcohol. It is also responsible for paying duty on any alcohol content which is unaccounted for.
"Maintaining 100 per cent accuracy regarding our stocks is essential: we need to track purchases, movements during storage and production, and sales of finished goods," explains information systems manager Pete Revill.
As part of the larger De Vere Group, G & J had made use of central IT resources to support its own IT infrastructure. However, its systems were fragmented, and it was obvious to Revill and other managers that a more unified approach was needed. At that time, the company was also facing an immediate reality-the need to achieve Year 2000 compliance.
In addition, "With the disposal of the pubs business, the group couldn't justify its central support facility, which included property, IT, payroll and several other functions. It became clear that we would have to set up an autonomous IT infrastructure," says Revill.
In retrospect, Revill says, the Year 2000 issue was a blessing in disguise for G & J. "Year 2000 gave us extra impetus," he says. "We didn't just want to achieve compliance-we felt that would be money wasted. We wanted to make a real improvement in the performance of our systems."
To this end-and after a comprehensive competition that, initially, involved 20 different vendors-G & J selected the Epicor Tropos ERP system, as the basis of its solution.
Integrated C & E Reporting
Before implementing Tropos, G & J had managed its business using a modified JBA AS/400-based system, with a separate package to cover bulk spirit movements. One of the attractions of moving to a new system, Revill says, was the potential ability of Tropos to incorporate C & E reporting and the management of the key bonded warehouse facility into the main package.
Why did Tropos win out? Revill says that the approach of Epicor team to the thorny problem of C & E reporting, as well as Tropos's class-leading traceability and lot-management functions, produced confidence that the C & E issue could be properly solved.
"There are specific C & E reporting solutions available off the shelf," he explains, "but these products don't interface seamlessly with ERP components, such as financials, and we couldn't identify any supplier that had a total solution. We didn't want to commission bespoke software to manage the interface-we'd been frozen in bespoke history before and were clear that we didn't want to go that way again!
"We were looking for an ERP supplier who could develop the C & E side and integrate it with its core product. Several vendors suggested they could offer us the reporting we were looking for, but we didn't have confidence in their ability to achieve that. Epicor impressed us with the research it had done into our business and its honesty about what the software could achieve. That gave both sides a high degree of comfort."
"The onus was really on Epicor to prove that the new functionality worked both to our and C & E's satisfaction. We certainly couldn't have spared the time and resource needed to manage that process internally-and we now have a highly effective C & E reporting system that's tightly integrated with the rest of our applications."
Implementation in Four Phases
Using Epicor implementation methodology, the new system was implemented in four phases, covering purchasing, sales and finished goods, stock management and finally bulk spirit movements. This last phase dealt with spirit movements from the moment of arrival up to the point of bottling. "This is the most complex area of the business and has never previously been controlled by software," Revill explains. "The configuration of Tropos to handle this area has been extremely intricate."
"It's a testament to the success of the project that the shopfloor has so completely embraced the Tropos system since it rolled out. That level of buy-in has been vital, since we were moving towards self-sufficiency in IT. Everyone had to grow their role, and become more self-sufficient."
Pete Revill, Information Systems Manager
This last phase also required assessment by C & E. It could only be considered fully live after a complete financial month of parallel running post C & E approval. Earlier phases, as well as implementing the core Tropos modules, included implementing CODA Financials, reporting tools from Cognos and export documentation.
"Project management and training were vital at every level," says Revill. "We're lucky to have a management team that's very IT literate, but that wasn't true of the entire company. The project involved training people who'd never even used a keyboard before.
"It's a testament to the success of the project that the shopfloor has so completely embraced the Tropos system since it rolled out. That level of buy-in has been vital, since we were moving towards self- sufficiency in IT. Everyone had to grow their role, and become more self-sufficient. We couldn't just ring the group helpdesk if we had a problem."
With close support from Epicor consultants, the implementation came in on time, and 20 per cent below the agreed budget.
So what benefits is G & J seeing as a result of the Tropos system? Revill says that, from top to bottom, the firm is more responsive and better managed. Tropos will also help G & J respond to increasing pressure from own-label customers such as supermarkets, who already demand a three-day lead time for orders.
"That wasn't a major issue for us in the past, because we are a small, flexible company -but it is less of an issue now," says Revill. He adds that Tropos also provides the information G & J needs to work more proactively with customers on areas such as forecasts, giving the company a more professional image. Improved visibility of data, as a result of implementing Tropos, is helping G & J to reduce its lead-time for production orders delivered worldwide. He says. "That has allowed us to reduce inventory levels, and also gives us greater flexibility over what we produce and when."
In fact, the finished goods inventory was reduced by 40 per cent in the first six months after Tropos went live-paying for the system three times over. And raw material inventories have been cut, too: G & J has moved goods inwards to a just-in-time (JIT) model, with daily deliveries of products such as glass bottles and other packaging. As well as the obvious and significant cashflow improvements, this change has freed up important warehouse space, allowing the company to cut back on the amount of expensive space it rents from third-party bonded warehouses.
On top of this, Tropos is providing significant benefits in the back office. Automatic matching of invoices has cut the time taken to process purchase orders, while improved costing information is allowing G & J to identify areas where further savings can be made. "We've been able to reduce dramatically the time taken to produce end-of-period results, with consequent improvements in management effectiveness," says Revill. "Now, if a period ends on a Friday, the reports are available that evening. Management decisions are only as good as the data used to produce them, so more timely information means better decision making."
Further Development
The story doesn't end here though. G & J's original implementation-other than the specialist C & E reporting functionality-was necessarily bare-bones, to meet the immovable millennium deadline. Since then, though, G & J has continued to develop the system, adding handheld terminals and shopfloor data capture software in its warehouse to speed the process of stock location.
By upgrading its Tropos version, G & J has gained access to Epicor extensive portfolio of web-based technology. And, the company is now looking to use e-business methodologies to integrate its business with suppliers, with the expectation of making more savings.
"We were looking for an ERP supplier who could develop the C & E side and integrate it with its core product. Several vendors suggested they could offer us the reporting we were looking for, but we didn't have confidence in their ability to achieve that. Epicor impressed us with the research it had done into our business and its honesty about what the software could achieve. That gave both sides a high degree of comfort."
Pete Revill, Information Systems Manager
G & J has also taken a managed ser vices contract from Epicor, enabling internal IT staff to concentrate on resolving business issues within the new system, rather than addressing technical problems. "We didn't really want to take on board a high level of technical expertise, such as having an internal Oracle DBA," says Revill. "We have the ser ver on site, but remote management by Epicor means we can regard it as a black box. That allows us to concentrate on improving our use of the Tropos system, and I think our business has gained as a consequence."