Published on 01-Dec-2010
Validated on 06 Dec 2013
"Thanks to IBM and SAP, we are now fully prepared to compete in the global market. I think for any company looking at transforming their business, IBM and SAP should be in their shortlist. " - Aju Jacob, Director at Synthite Industries
Business Integration, Enterprise Resource Planning, Information Infrastructure, Information Integration, Optimizing IT, Optimizing IT
IBM Business Partner:
Synthite Industries specializes in fresh and dried spices and their extracted essences – known as oleoresins – for the foods, flavorings and fragrances markets. For example, almost every ketchup, seasoning and sauce uses a mix of oleoresins to add color, flavor and spice. As the world leader in the field of oleoresin extracts, Synthite has a portfolio spanning more than 500 products. It has a turnover of $90 million and is targeting $500 million by 2020.
Flavorings and spices company Synthite set ambitious sales growth targets that existing back-office procedures and systems struggled to support. Separate purchasing, manufacturing and documentation processes could not be integrated, which prevented management from gaining a whole-company view of order status and manufacturing efficiency. Delays in collecting and analyzing information led to missed opportunities for consolidating procurement and production.
IBM Global Business Services helped Synthite perform a fit-gap analysis to see where existing processes could be enhanced by replacing legacy systems with SAP ERP. IBM then helped to implement a suite of SAP applications and introduce new capabilities. The result is a fully integrated sales order, manufacturing, quality control and product delivery solution with business analytics capabilities, based on SAP NetWeaver Business Warehouse.
Synthite uses integrated sales order and manufacturing data to match procurement quantities precisely to production, which helps to control inventory levels, reduce waste and cut costs. Integrated materials and quality management help Synthite to comply with stringent international food standards, making it possible to expand into new markets and geographies. Executives scrutinize enhanced operational data to discover true raw materials and production costs.
Synthite Industries specializes in fresh and dried spices and their extracted essences – known as oleoresins – for the foods, flavorings and fragrances markets. For example, almost every ketchup, seasoning and sauce uses a mix of oleoresins to add color, flavor and spice.
As the world leader in the field of oleoresin extracts, Synthite has a portfolio spanning more than 500 products – from fresh and dried spices to oleoresins, floral extracts, value added products and application oriented solutions. It has a turnover of $90 million and is targeting $500 million by 2020. Synthite is spread over five locations and has an annual production capacity of over 60,000 tonnes.
The company’s executives understood that existing processes, which were managed by separate legacy systems at each location with no interconnection, would not be able to scale up to meet the challenges created by growth.
For example, raw materials procurement orders and the size of each order were based on typical historic usage rather than an accurate sales pipeline figure. Similarly, where several orders from different customers arrived for the same product, there was no way to share the information between systems, which meant that Synthite lost the opportunity to consolidate the order to a more cost-effective single production run.
At a larger scale, international markets for foodstuffs and fragrances require detailed product traceability, quality and safety standards. Separate business systems at each location made it difficult and costly for Synthite to provide evidence of compliance with regulatory standards. To make growth into new markets possible and cost-effective, Synthite wished to embed automated product traceability and quality control into its business processes.
Aju Jacob, Director at Synthite Industries, says, “A few years back, we decided to accelerate our growth rate. We were looking at new markets, capturing more market share and we wanted better control over pricing and inventory. We wanted to be able to forecast demand. But, we realized that we couldn’t do any of this because our legacy set-up was not integrated and had too many incompatible systems. So we wanted a unified and integrated IT solution to align and optimize our business processes to our strategic goals.”
Minu Thomas, Head of Planning and Information Systems, Synthite Industries adds, “Some of the challenges we faced due to our legacy systems were lack of standardization, and wastage due to sub-optimal tracking in the areas of material planning, manufacturing, quality control and finance. Since we didn’t have a formal planning department, traceability of orders was a problem. Synchronization between sales, production and purchase was a challenge. We also wanted better control over product costing.”
Looking for the right ingredients
Synthite turned to IBM Global Business Services to help evaluate possible solutions, and later, as a full implementation partner.
“We chose IBM because of their deep industry knowledge and their proven expertise as a SAP consulting and implementation partner,” says Aju Jacob. “What impressed me was the fact that they didn’t just talk about implementing SAP; they talked about transforming our business using SAP. IBM demonstrated a clear understanding of our strategic intent and our business goals.”
The principal objectives were to integrate the different legacy systems, moving all the production sites onto a shared business systems environment and to replace manual processes with automated solutions.
For example, due to separate “islands” of legacy systems across Synthite locations, compiling the overall production planning demand and arriving at an overall material requirements plan was a serious business challenge. There was no easy way to link sales forecasts, production, procurement or inter-plant material movements as part of their planning process. Hence, ability to respond to customer enquiries with likely delivery dates was also equally challenging.
The lack of detailed information on production costs also made setting product prices a real challenge, which had an impact on the company’s ability to respond quickly to new customer enquiries for different blends of spices / spice ingredients in order to win new business and ensure its profitability objectives.
Sabu Gopinath, IBM Global Business Services’ project lead, comments: “Synthite’s management had a vision and we understood that vision perfectly. Smaller customers like Synthite need proven integrated solutions that provide rapid ROI. At IBM Global Business Services, we have years of experience delivering such solutions across industries, so we were able to tailor the perfect solution for Synthite very quickly.”
A recipe for success
IBM Global Business Services recommended replacing legacy systems and with a centralized ERP solution from SAP. Working closely with the Synthite team, IBM performed a fit-gap analysis, comparing the existing business processes with the capabilities offered by SAP applications. As a result, Synthite decided to re-engineer some of its processes to align with SAP best practices, while also choosing to develop additional functionalities in the new SAP environment to meet the unique needs of certain business units.
Following the Ascendant methodology – an end-to-end framework specifically designed for SAP implementations – IBM Global Business Services helped Synthite deploy a core set of SAP ERP applications to manage group-wide financials, controlling, materials management, sales & distribution, production planning and quality management processes. SAP NetWeaver Business Warehouse (BW) was also deployed to provide detailed analysis capabilities based on standardized, accurate data.
“The SAP solution IBM set up for us provided tighter integration between operations, sales, logistics and financials, and gave us visibility across the business,” says Minu Thomas. “The larger solution included IBM System x servers, infrastructure and technology services and software.”
Developing unique flavors
IBM also helped implement new functionalities in the SAP environment – for example, active ingredient management at a material-batch level, which calculates costs based on the specific characteristics of the materials used in each product. The IBM Global Business Services team was able to leverage experience from previous implementations in similar industries to deliver this functional requirement effectively.
The advantages that these new functionalities give to the business are considerable. For example, the active ingredient management functionality helps to track and monitor costs at each batch level, based on the active ingredients content (e.g. capsaicin content for chilli). Now, the SAP solution can track raw materials, warehousing, production and delivery costs, generating a complete picture of product costs. Synthite uses this new understanding of input costs to ensure that pricing meets product profitability and margin objectives as part of the larger enterprise commitment to sales and business growth. The company also uses the same data to help understand how to improve manufacturing performance and drive costs out of the business.
Serving up SAP to the business
With the planning and development stages complete, IBM Global Business Services managed the SAP implementation using a phased go-live model. In the first phase, the core SAP ERP functionalities were introduced at the company’s main spices and oleoresin manufacturing plants in Kerala and Karnataka. Next, the solution was extended to three manufacturing locations across the country – a spice ingredients division in Kerala, a floral extracts plant in Tamil Nadu, and a spice pre-processing plant in Andhra Pradesh. The third phase was the introduction of SAP to the manufacturing facility at Calicut subsequent to its merger with Synthite.
“IBM standardized the business processes across our various divisions and locations, and aligned its business goals with organizational Key Performance Indicators (KPIs),” comments Pramod J Simon, Head of Production at Synthite Industries. “Consequently, Synthite is now confident and geared up to handle any amount of future growth and innovation.”
Adding spice to the mix
Synthite executives wanted to increase control of the business by examining operational and product data and understand the impacts of financial, product and business decisions. For example, this included establishing end-to-end traceability at any level for product batches, from raw materials to finished goods and scrutinizing slow-moving goods against sales and inventory.
The standardized SAP application environment ensures that accurate operational data is captured in a uniform manner for the Synthite group. Every manufacturing site now accesses the centralized SAP system and every purchase, production information, quality result, sales order and delivery instruction is captured.
The captured data provides Synthite with a valuable resource to examine operations using SAP NetWeaver BW to analyze operational performance by customer history, current contract status, or by volume, value and profitability. These latter figures act as an essential check, allowing Synthite to assess the accuracy of its production costing and sales revenues at the customer level, by product, by product categories, regions, and other similar dimensions.
Leveraging business intelligence
IBM Global Business Services helped Synthite to define and implement a range of departmental KPIs to help analyze this data and present it in an easily understandable way. The NetWeaver BW solution was then used to create customized dashboards as decision support tool for senior management.
Learning with the master chef
Implementing SAP applications with the associated configuration, customization and training effort would have placed a comparatively high workload on the Synthite IT team. Much of the work required specialist knowledge only useful during the implementation process, and the peak workload would have over-stretched an internal IT team that was busy supporting ongoing operations. In consequence, the skilled resources provided by IBM Global Business Services were crucial to the success of the project.
“I was very impressed with the IBM team through the entire implementation process,” says Aju Jacob. Our senior management team came to regard them as so much more than just SAP technology consultants, but as business consultants. They remain a true business partner and trusted advisor. What we achieved through IBM was business transformation.”
“The IBM approach to this SAP implementation effort was extremely methodical, structured and disciplined, which was key to delivering the project on schedule and ensuring the intended benefits. They first did a system baseline assessment study to identify the gaps in our legacy systems and also the benefits thereof in an SAP system, before proceeding with the implementation. They did several change management workshops to ensure our users are comfortable with the new system so that the overall business performance did not suffer.They also did a very good job of knowledge transfer to our employees before they left,” remarks Minu Thomas.
Tasting sweet success
With the SAP applications embedded in the fabric of the company, Synthite is reaping the benefits of an integrated information infrastructure. For example, all sales are available as an online report, by various dimensions like customer, product, plant or sales groups, etc. The enterprise-wide view of sales orders allows planners to predict manufacturing workload and assess capacity on a plant-by-plant basis, and shift production between plants if necessary in order to meet customer demand.
Full batch traceability is maintained, enabling Synthite to meet its regulatory obligations and customer requirements, which removes barriers to entering new markets.
Aju Jacob comments, “It helps to have all the relevant information at my fingertips in near real-time. IBM helped us with an executive dashboard that gives me end-to-end visibility of all key metrics on a single screen. This exceptional reporting tool helps me and the department heads manage performance much more efficiently. All in all, this new, stable and scalable IT solution provides us with the perfect platform to deal with future growth, giving us that critical edge in an increasingly competitive international market.”
Vanitha Narayanan, IBM Managing Partner - IBM Global Business Services, IBM India South Asia, comments: “Companies in India have several advantages today: they are in one of the fastest growing economies in the world and have access to incredibly talented yet competitively priced resources. They have access to worldwide markets, and they have the best of technology at their doorstep. IBM and SAP is helping several such organizations achieve their business aspirations, by taking their journey with them. We bring our global experience and knowledge and combine it with local insight and capability to help our clients innovate and succeed.”
Aju Jacob concludes, “Thanks to IBM and SAP, we are now fully prepared to compete in the global market. I think for any company looking at transforming their business, IBM and SAP should be in their shortlist.”
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