This is the third part in a series looking at fire truck manufacturer American LaFrance’s efforts to emerge from bankruptcy protection following a botched ERP implementation. Sunny Delight Beverages chief information officer Greg Winholt has steered his company through two successful ERP transitions. He shares lessons learned with CIOZone.
In May of 2004, Greg Winholt was coaxed out of retirement to take on a daunting task.
A private equity firm, J.W. Childs Associates of Boston, was about to purchase the Sunny Delight Beverages business from Procter & Gamble. As part of the purchase agreement, Sunny Delight would be allowed to continue using P&G’s SAP-based information systems for a period of 12 months, until August of 2005.
At that time, Sunny D, as it is known to kids across the country, would have to begin flying on its own. That meant implementing an entirely new information system infrastructure from scratch, including messaging, networking, an ERP system, and associated hardware.
“It was a bit of a crazy ride,” concedes Winholt, a former P&G executive who became Sunny D’s CIO. “But at the same time we were confident we had the best people for the job and that we had made the right preparations.”
Winholt and his team were able to pull off the challenge. On Aug. 1, 2005, Sunny D unplugged itself from P&G and began operating entirely on its own. In this case, the company chose to use Microsoft Dynamics (which at the time was called Axapta) as its core ERP system, hosted by OneNeck IT Services of Phoenix.
And to dispel any notion of beginner’s luck, Winholt did it all over again in October of 2007. Sunny D acquired two businesses from Kraft Foods, Veryfine Juice and Fruit20, and transitioned those businesses over to its Microsoft Dynamics system in four months.
While the ERP transitions were successful, allowing the $500 million company to continue operating with no interruptions, Winholt points out it wasn’t a breeze. In the weeks following the switchovers, staff needed to iron out dozens of communication problems between the new ERP system and the company’s customers, major retailers like Wal-Mart, Kroger, and Ralphs. If orders and invoices were not submitted in exactly the right electronic form required by the retailer, they would either be rejected, or bumped into a queue for alternate or manual processing. The end result being that payment for beverages shipped would take longer to be processed, and that in turn, could create a cash flow crisis for the young company.
“That was a huge challenge, because each customer has unique needs,” says Winholt. “It’s almost like each (electronic) transaction has to be customized to each customer. That takes some work, and it’s really difficult to test before you turn the systems on.”
Winholt says the thorough planning that went into preparing for the switchover, and a fierce determination to “test the crap” out of processes before making the switch, ultimately led to success.
CIOZone asked Winholt to share some of the lessons learned from the transitions. He says it helps to begin by understanding what you must get right in order to survive.
“In a carve-out like ours, or like the one American LaFrance faced (see Part I., and Part II of blogs looking at American LaFrance’s ERP struggles), the biggest risk the company faces in the first year or two is the transition – being able to separate from the parent company. There are really five musts you’ve just gotta have, and that you gotta make sure work.
“The first is, you have to make sure you can receive an order from your customer. If your customer wants to buy a product, you have to be in a position where you can receive that order effectively and in a way that the customer is comfortable with.
“Second, you’ve got to be able to produce what the customer wants, and you have to be able to produce it in the time that the customer needs it. That covers a lot of things, such as being able to order your materials to produce the products. But the key thing is you have to be able to manufacture what the customer wants.
“Third, you have to be able to ship that product to your customer when they need it.
“Fourth, you have to be able to invoice your customer in the manner they require, and fifth, you have to be able to pay your bills.
“If you ensure those five musts, and effectively execute on those five musts, everything else you can fix, and for the most part can fix on the fly,” says Winholt.
Of course, ensuring those five months requires an incredible amount of planning and testing. Winholt notes that one of the smartest moves the new company made is that it hired on a number of key staff members who previously worked at P&G and who were involved in the Sunny D business. In that way, they were already familiar with the business processes and with key customers.
The overall project was also broken up into bite-sized chunks, so no individual project was overwhelming. And as pieces were put in place, they were thoroughly tested. The company set up a conference room which served as a simulation facility. Sunny D and its consulting partners could test a process, such as placing a customer order, and watch on a bank of some 30 laptops as orders were received, passed into the ERP system, and handed off to forecasting and production.
Close attention was paid to making sure the data was passed efficiently and accurately between applications. “We were always sure what system is the system of record, what system provided the truth about the respected business process, and we were sure that the data coming out was as clean as possible,” Winholt says.
In February of 2005, Sunny D took part in a thorough four-day vetting of the system. A month later it brought North American operations live on the system – still four months from the official unplugging from P&G on Aug. 1. On June 1, European operations were switched on, still giving the company two month’s breathing room.
Finally, as systems were turned on, Winholt made sure there were plenty of hands on deck to troubleshoot and to resolve any concerns with customers and suppliers.
An additional factor in the company’s ultimate success was the relationship between IT and senior management. Chief executive William Cyr gave Winholt the freedom to build the new infrastructure as he saw fit, but with one condition: he wanted to know when there was an issue, before it developed into a full-fledged problem.
“I don’t want to be surprised,” Cyr told Winholt. “If you need people or resources, let me know and we’ll get them.”
Winholt says he doesn’t want to give anyone the impression that carving out a company and installing an entirely new ERP infrastructure is easy. “We stumbled a lot,” he says. But when it all came together and the company began to experience such benefits as improved business processes, it was a reward that very few CIOs get to experience. For one thing, Winholt is in no rush to go back into retirement.
“It’s been an exciting, really fun role for me . . . and the bottom line is I’m still enjoying it,” he says.
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