How to Get More from Your ERP Investments. Sweat the Asset to Achieve Greater Value in Consumer Packaged Goods

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1 How to Get More from Your ERP Investments Sweat the Asset to Achieve Greater Value in Consumer Packaged Goods

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3 The Journey Toward Value Enterprise resource planning (ERP) continues to be at the center of the chief information officer (CIO) agenda for large consumer packaged goods (CPG) companies striving to profitably grow. To achieve the required agility and flexibility to be able to expand to new markets and reach consumers in a volatile environment prone to disruption, businesses will need to have squeezed out every opportunity for efficiencies from their backbone ERP. Why now? Compared to the past, the business is now more frequently challenging the value realized through ERP investments. Furthermore, companies that have historically harmonized core functions, such as finance, order to cash and human resources, can now extended their ERP to other areas of the business. CPG companies can also renew and refresh existing models to improve user adoption. Not taking advantage of these new efficiency opportunities puts CPG companies behind their competitors in the digital ERP wave. Where to? CPG companies are spending more attention on figuring out where they want to go before embarking on large investments involving transformation of their core ERP. They aim to maximize the benefits of ERP, wherever they are in the journey. For example: Those defining the core ERP backbone are prudently launching smaller initiatives rather than massive rollouts, verifying results and adjusting the approach accordingly. Companies that are rather extending the core to functional domains in line with their centralized operating model develop a solid business case and focus on the areas that deliver the most benefit. CPG companies looking to get more out of their existing ERP are initiating continuous improvement capabilities. Those moving into the digital wave prefer to pilot standalone technologies, verify their stability and benefit, and then fully integrate them with ERP. When refreshing the ERP landscape with new technologies, companies are not investing aggressively unless there is clear business case, such as cost reduction or game-changing performance improvements.

4 What s next? Businesses must establish a new level of vigor as they determine how to enable more effective usage, adoption and quality improvement of processes and functions. They must adopt a sweat the asset mentality that embeds a value focus across the enterprise. They must also organize around and govern ERP in a way that enables utilization and uptake of the ERP model. By taking these steps, CPG companies can continually get more from ERP as they evolve their business capabilities. Figure 1. CPG companies at various stages of ERP implementation are setting a renewed focus on value realization. CPG Push Ecosystem Leverage Consumer Pull Relationship & Experience Driven Real Time Digital None Front-end Process Driven Back-end Package Driven Archetypes Consolidated Fragmented Processes & Technology Few and Far Between Most of the industry Some Companies Very Few Companies First Movers Enabling Capabilities Buisness & Operating Models Local Regional Global Super Global/ Super Local Consumer Centric Network

5 Design for Value Establishing a foundation for success Capturing more value from ERP calls for laying firm groundwork. Specifically, defining a solid business case is fundamental to fully exploit the benefits of any ERP initiative. While setting up a strong business case is a relatively common practice for an ERP-related initiative, two elements have become increasingly important: Managing the business case from an end-to-end perspective, from the ideation to go live, including handover to a continuous improvement program. Looking at the 360 horizon within the broader picture of the enterprise architecture. Traditionally, very few companies address all phases of the ERP transformation in a business case. Even the measure of benefits generated was applied with different rigor and consistency within the same organization. Also, few CPG companies have initiated a continuous improvement process to ensure value is regularly and rigorously squeezed from the ERP from end to end. Today s convergence of cost pressures, volatile technologies and the need to adapt capabilities to respond to market changes proves the need to take a broader view of ERP. By putting the business case of an ERP transformational initiative in the context of the overall enterprise architecture, CPG companies can identify which capabilities will be impacted, and what evolution they will go through.

6 Building a business case that defines a value-led ERP program. The business case can be a compass for getting to value, but it should not be created as a standalone exercise. The business case should outline scope, priorities, timing and budget. These are some of the steps a CPG company could take to build a value-focused business case: Assessing current capabilities. Examine the current level of performance of capabilities through a lens of the overall enterprise architecture that spans processes, people and applications. Create baseline key performance indicators (KPIs) that articulate how capabilities are currently performing. This exercise should not just happen once. Monitor KPIs and continually stress them to maintain a persistent focus on benefit realization. Setting targets. After benchmarking capabilities to see how they measure up, whether internally or externally, establish target levels of performance, determine which new or evolved capabilities will allow to reach them and determine which initiatives are best suited for improvement. Prioritizing. Determine the steps to exploit value in the right sequence. Businesses can first prioritize initiatives based on the cost and time required. With this framework in place, CPG companies can create a business case to measure and monitor benefit realization. A Gartner survey showed that 44 percent of respondents had not measured the payback from their ERP investments/projects, and 10 percent had tried to measure, but without success. Source: Gartner; Achieve Postmodern ERP Benefits Realization by Focusing on Value Measurement Disciplines; May 2014.

7 Organize for Value Building a compass for getting to benefits With a firm business case in place, and an extended picture of the enterprise architecture context, CPG companies can guide the organization in making all key decisions with the end state in mind. The key performance indicators established in the business case also will later enable measurement of outcomes after the implementation of any ERP-related initiative. There are, however, some forces that can steer efforts off course. CPG companies often face two key challenges as they strive toward value realization. First, they don t have the right organization in place to own, control and drive improvements for a specific ERP initiative and on a continuous basis. Second, they don t have the right toolsets and methodologies to consistently sustain continuous improvements in an automated fashion. Set up a value realization office to ensure benefits are achieved. Managing the business case through the ERP program may be key for success, but who will manage it? Ensure program return is being delivered not just when you launch, but also when you run and complete an ERP initiative by establishing a value realization office. A value realization office, a solution architect team and process owners tower will need to work seamlessly to achieve the desired benefits. Solution architects. Solution architects have the function and domain knowledge to manage IT governance. This group might include senior executives who have past ERP project experience. They have deep knowledge of the existing solutions so that they may identify opportunities to improve, standardize and make more efficient processes with existing functionalities that companies have already paid for, but simply have not leveraged. Perhaps more importantly, they would seek to be aligned with the company s expected vision and strategy and they will support the company in making tough decisions about how to squeeze more value from IT assets. Process owners. Process owners are responsible for the results of processes from end to end. The team may comprise senior business leaders who have a deep knowledge of existing process and who can interact with business and IT sides of the house. This group must also be fully aligned to the expected vision and strategy, and they will support making decisions about processes, organizations and rules.

8 Value realization office. This governing body would manage the value realization measurement and achievements, guiding the actions of process owners, solution architects and business stakeholders, keeping in mind the final benefit targets. For many CPG companies, there has been little control around effective utilization and adoption of the original ERP model in different business units. As companies rotate staff or see attrition, this results in usage worsening over time as basic extensions are not implemented properly and data maintenance has degraded. Identify, implement and use the right toolsets and methods. Solution vendors and system integrators all have an offer comprising software and service to address a customer s need. However, there is not a single solution that covers every need and complexity of current ERP models and solutions. Solutions range from technical ERP scans to user adoption assessment, to business process monitoring tools that track the monetary impact of business performance. So how can companies decide what is the right fit? After exploring best-in-class tools and methods and building awareness of what is most effective, it is wise to pilot a chosen solution in one domain. From there, automate and industrialize the exercise, extending the solution to other domains while building the right governance and organization to support a continuous improvement practice.

9 Realize Ongoing Value Using ERP as the map for guiding all changes The reasonable ERP transformations are characterized by a relentless focus on value realization, seeking to help increased adoption across the business and driving continuous improvement after each system goes live. Accenture calls this a sweat the asset mindset an approach critical to consistently squeeze every drop of value from ERP investment programs. Sweat the assets. Large CPG companies with many business units may not know where to begin focusing attention. Therefore, it is important to first assess the list of priorities, verify if the adoption of more advanced functionalities could provide benefits and then create a list of opportunities based on their projected value generated. Implement those initiatives that are expected to yield the most benefit. Realize the value. Unlock new opportunities by extending operating model efficiencies and standardization to domains that were not part of the core of the ERP journey (areas such as transportation or R&D). Or, revisit and refresh the existing ERP model and solution, looking for uplifts in set-up, increase of user adoption, improvements in master data maintenance and business performance expansions. Measure outcomes. Benefits are realized when the outcome is measured. It is critical to measure outcomes to ensure the business is driving improvement throughout the ERP journey. Through the KPIs and benchmarks established during the business case, the business can use these tools to monitor and measure ongoing progress. Businesses that monitor system performance can persistently fine-tune or simplify processes to generate more value. Figure 2. Enterprise architecture guiding map across all transformation decisions. Enterprise Architecture Sweat the Asset and Continuous Improvement Drive Transformation and Investment Decision Benchmark Current Business Innovation Funnel Realize Find the Value

10 Tools for Improvement Equipping the business for the future While the destination of high performance is the same for many CPG companies, the journey to getting there may be different based on a company s current ERP landscape. From newly implementing, expanding, consolidating or fine-tuning ERP systems, Accenture brings the people, process and technology assets to accelerate the path to benefit realization. Our value realization approach, assets and methods for CPG comprises: ERP Value Diagnostic to benchmark business capabilities, measure KPIs and value levers. ERP Value Design that ranges from building the business case to designing the operating model. ERP Value Implementation to define the delivery plan, tracking, management and metrics. Post-ERP Value Assessment to assess solution fit, process, people and technology. Getting to value Amid shrinking budgets, an intense competitive landscape and IT disruption, CPG companies must pay more attention to getting value from ERP investments. And, as they grow globally, the need for one single global process model is all the more important. ERP can enable the transformation needed to evolve capabilities pragmatically and become a digital enterprise. No matter where you are on your journey, stay focused on value as your destination.

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12 Contact Us About Accenture For more information, please contact: Pietro Pieretti Accenture Consumer Goods & Services, Products Technology Lead Andy M. Seikel Accenture Consumer Goods & Services, North America Accenture is a global management consulting, technology services and outsourcing company, with approximately 319,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, Its home page is Herbert Callens Accenture Consumer Goods & Services, Europe herbert.callens@accenture.com Alex Andrenacci Accenture Consumer Goods & Services, Asia Pacific alex.andrenacci@accenture.com Alberto Cavalli Accenture Value Realization Lead alberto.cavalli@accenture.com Copyright 2015 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.