Shrink to Fit

Blueberry and raspberry cereal bars and chocolate syrup for an ice cream sundae. If these types of yummy foods are on your list of favorites, then Sweet Ovations is the company to thank. The Philadelphia-based firm creates an array of sweet ingredients for makers of dairy, frozen desserts, bakery goods and beverages, and makes other products such as coffee syrups, frozen smoothies and toppings. It’s a delicious line-up, manufactured with the most superior raw materials and to the highest possible quality standards, via SAP-based business processes.
But aside from creating unique and tasty products, Sweet Ovations faced a unique challenge when it migrated its SAP applications. In 2005 it was spun off from German chemical giant Degussa AG. To make the transition from a large public company to small, privately held firm, it had to shrink its existing SAP-based systems to fit the new, smaller size. The systems infrastructure that previously supported a company with annual revenue of approximately 12 billion euros had to be streamlined to fit the needs of the new firm, which had annual revenue of about 70 million euros when sold in 2005.

Downsizing without disruption

“SAP can be run in a small enterprise and be very successful,” says Joe Cleary, vice president, finance, for Sweet Ovations. As one of his company’s key champions of taking SAP along to the smaller entity, Cleary says he knew it could be done because he saw Powell Electronics and other small firms run SAP with great results. “We felt we could run SAP in a controlled manner and it wouldn’t be excessively costly,” he says.
From February 2005 until the end of that year Degussa provided transitional IT support and then worked closely with Sweet Ovations on the migration. At the same time Sweet Ovations got its own small IT department up and running and service providers in place. The final migration was seamless, on Memorial Day 2006. “It was almost a non-event for the user community,” says Cleary. Because of careful planning and diligent work, the migration went off without a hiccup to the business. Today Sweet Ovations uses SAP for materials management, inventory management, warehouse management, production planning, quality management, sales and distribution, accounting, finance and other tasks. It has about 140 users in two locations, Philadelphia and Gardena, California.
And now, about a year after the migration, Sweet Ovations reaps the benefits of transparent, closely controlled manufacturing processes. “We are pleased. I think it has helped us grow the business on a yearly basis since we separated from Degussa,” Cleary says.
A key benefit comes from Sweet Ovations ability to manage the interconnections between inventory management and production reporting, for instance. SAP is an ideal tool for those important food processing tasks, Cleary says. Also, the company must track each process step-by-step to ensure proper ingredient handling and shipping and to meet stringent quality requirements. “We have seen the system work well for us,” says Keith Pogoda, Sweet Ovations’ IT head.

Focus on data cleansing

Of course Sweet Ovations faced challenges during the migration too. They included data cleansing, documentation and ancillary IT needs. Managers also felt some strain due to the increased workload of migrating IT systems while still operating the business. Data cleansing required specific focus because Sweet Ovations and Degussa had a lot of sensitive, integrated data that had to be separated. Once the companies were completely separate, they had to be sure one didn’t retain key data about the other. Since Degussa has a decentralized IT infrastructure, different people in different places had to participate in the process. For instance SAP application support was located in five cites, and Basis support was in multiple countries. All had to help to get the data cleansing done correctly.
Documentation was crucial too. While Degussa had plenty of staff with knowledge about how the SAP-based systems work, Sweet Ovations had more limited resources. In some cases it had only one person with the necessary knowledge. And because it outsourced support services, employees needed to learn to work with the new providers instead of turning to Degussa.
Today, Sweet Ovations strives to bring SAP and other IT knowledge in house. “Our challenge has been to broaden knowledge, documentation and training so we continue to grow and don’t atrophy,” Cleary says. “We don’t want to be at risk if someone leaves the company and takes knowledge out the door with them.”
Ancillary IT challenges included the need to set up a new wide area network, a new telecom infrastructure and a new e-mail system. For a company with just three full-time IT people, these tasks created plenty of extra work. And along with the hardware and software migration, Sweet Ovations had to migrate technology licenses. That was no easy task because of complex international regulatory requirements. Executing new licensing agreements took more time and effort than expected.

SAP xMII for real-time information

At the annual Americas’ SAP Users’ Group (ASUG) conference, Cleary and Pogoda presented details of their big-enterprise-to-small-enterprise transition. They also offered a list of advice for others considering such a migration. The list includes suggestions to document and cross-train staff to ensure knowledge retention.
They also suggest that companies carefully select and prioritize projects to be outsourced and negotiate all outsourcing contracts. “The lesson is that you can succeed with this type of migration, but you must manage it closely,” Cleary says.
While Sweet Ovations has completed its major SAP work for the moment, it does have an innovative implementation on the horizon. By the end of the third quarter of this year, it plans to deploy the new SAP xApp Manufacturing Integration and Intelligence (SAP xMII). This will enable the company to draw real-time information from the factory floor into a dashboard that shows productivity data, production plans and other key information.
SAP xMII will also give Sweet Ovations employees Web-based access to ingredient recipes right from the shop floor. And it will automate quality assurance functions so that products stay both delicious and safe. Over time the idea is to even further fine-tune Sweet Ovation’s manufacturing processes to achieve even greater efficiency.
And why not fine-tune the business as much as possible? That will leave staff with more time for creative thinking. After all, the next, delicious, sweet smoothie flavor may already be cooking in the labs at Sweet Ovations.

Sarah Z. Sleeper
Sarah Z. Sleeper