Heinz Supply
Chain is an intense unit that functions within the firm. The Heinz warehouse
requires IT solutions that give efficiency and cost-saving gains.
4.1
Tangible benefits
The tangible
benefits that SAP gives to Heinz Corporation directly affect the bottom line.
The following examples are manufacturing companies that were able to achieve
value from SAP HANA. As explained above in the cost analysis, SAP HANA is the
specific SCM component of the SAP Business All-in-One ERP solution. The CIO of
Usha International said, “They were able to reduce up to 50% of inventory; on
an average 60 to 70 minutes of users’ time is also saved by using SAP HANA (F.
Business, 2013).” Another example of tangible benefits within SAP includes
ConAgra foods, they are a $13.3 billion U.S. consumer and commercial food
company (SAP HANA, 2014). With the help of SAP HANA, ConAgra reduced
their ending monthly financial close and forecasting cycle by 3 days; also
reducing transfer of material ledger data by 93% (SAP HANA, 2014). Purchasing a SAP
Warehouse Management Solutions (WMS) for Supply Chain has tangible assets for
Heinz Corporation. In previous parts of the team project, we have described SAP
SCM solutions, such as SAP HANA and Business All-in-One solutions.
A good quantitative firm model of tangible benefits is
Victaulic. They are a mechanical pipe manufacturer that functions in 140
countries. SAP developed a value proposition that shows the benefits Victaulic
had in buying SAP (Sonnenber,
2015). We can use this model to illustrate Heinz
Corporation’s tangible benefits of buying SAP HANA:
(Sonnenber, 2015)
Table 4
(Sonnenber, 2015)
Table 5
We will need to take the same considerations when configuring
the estimated Value of SAP HANA for Heinz Corporation. Looking at these
charts, we see that tangible benefits show in certain areas of a firm,
including: supply chain, manufacturing, aftermarket service, human resources
and finance. According to the charts, manufacturing and human resources
represent the most benefits, totaling out at 84% of the estimated recurring
benefits.
4.2 Intangible Benefits
Intangible benefits
cannot be measured in monetary terms but still have a significant business impact.
Historically, the difference between tangibles and intangibles can be defined
as goods and services. Intangible benefits sometimes are ignored in companies
because they are hard to quantify. By using SAP, Heinz receives many benefits
that help to improve profits in the company. The following list are example of
intangible benefits (Murphy, K., & Simon, S. 2002)
:
- Improving productivity
- Lowering costs of products/services
- Shortening cycles
- Reliable Supply
- Better utilization of resources
- Increased transparency
- Improved customer service
- Time-saving in data entry
- Uniform reporting for global standards
- Facilitates Strategic Planning
- Speed, accuracy and agility in Supply Chain
4.3 ROI
It is important to factor in ROI and IRR when assessing the value
of implementing SAP HANA. The illustration below relates the internal rate
return (IRR), payback and return on investment (ROI) in a food company (such as
Heinz) when implementing IT solutions.
Image 5 (LeGrande, C., &
Vandermerwe, A. 2006)
According to Image 5, we can see consumer products have a “run of
the mill” ROI percentage of 86% which is where Heinz Corporation would compete.
We can also see consumer products have a Payback rate of 71 months which
means it will take approx. 5-6 years after deployment to experience serious
gains.
In summary, SAP solutions (including SAP HANA) can provide Heinz
Corporation a host of tangible and intangible benefits that will create
success. After initial large costs, Heinz will experience benefits that have a
long-trail of success for years to come. Our assessment has proven to be pretty
beneficial and we recommend implementation.
4.4 Value and Cost Combined
Team SCM can combine the
data from the cost analysis with the data from the value assessment to
determine whether the value outweighs the cost. Table 4 and 5 quantify the
tangible benefits at an optimal cost of $5,649,000 for the Victaulic model. The
figures from the Victaulic model are higher because the model is considering an
industry of “normal products” that require higher cost. Heinz Corporation sells
many inferior goods which will bring the value down. From field to
factory, Heinz Corporation creates value by extending quality, sustainability
and customer service. These qualities provide value to the products Heinz Corporation
offers. Excelling in Quality, sustainability and customer service make up
for the inferior goods and low prices of products. It is also important to note that 60% of SAP’s
consumer-product customers were able to generate new revenues or increase
margin contribution through improvements in their business practices (Murphy,
2002).
References
F. Business, (2013). SAP HANA: Is The ROI Worth
It? http://www.firstpost.com/business/biztech/sap-hana-is-the-roi-worth-it-1894063.html
SAP Business Suite powered by SAP HANA, (2014). Supply Chain: Delivers Business Value in Real
Time. Hana.sap.com/content/dam/website/saphana
Linkedin Slideshare, (2015). Victaulic –Quick Value
Assessment. http://www.slideshare.net/RyanSonnenberg/victaulic-quick-value-assessment
Murphy, K., & Simon, S. (2002). Intangible
benefits valuation in ERP projects. Information Systems Journal Inform Syst
J, 301-320.
Al-Shammari, M. (2006). Maximizing Value for
Customers. Customer Knowledge Management People, Processes, and Technology,
269-313.
Mainstay Partners LLC (2006), Enterprise
Resource Planning ROI & Best Practices, 33-33.
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