Every business day, buyers at culinary consumer products maker CF Sauer check the Chicago commodities market for the price of soyabean oil. The oil is a core ingredient in many of the Virginia-headquartered company’s products – from margarine to mayonnaise – so the health of their business rides on setting competitive prices for the goods it sells to supermarkets and other retailers throughout the US.
Not long ago, the procurement specialists had to wrestle with multi-layered spreadsheets of price lists, and found it difficult to accurately derive prices from costs. Now, they simply feed the soya prices into the pricing module of their PeopleSoft Supply Chain Management package, confident that the details will ripple through the pricing structure.
“We [use the package] to set up contracts, price programmes, price sets and price lists. We take the cost of the raw materials that it takes to make a particular product, apply a formula, and use the cost rollup process to determine a starting point for the cost basis,” says Wayne Puglisi, IT director at Sauer.
In the case of soyabean oil, he says, “the pricing module generates some three hundred odd price quotes for different customers”, which are then sent to standing customers and made available to sales and customer service staff.
The pricing algorithm reaches further into the company’s operations, because at any time scores of products will be part of a promotion. “Whenever we have promotions, we set those up in the system with a price set that has a beginning and end date, so when a customer orders, if they’re qualified for that promotion, the discount automatically applies,” says Puglisi. “And on invoices we split those discounts out, so the customer can see that the discount has already been given. That’s cut down our billing inquiries.”
As that highlights, over the past two years Sauer has transformed its business processes – in many areas creating real-time processes – through the adoption of supply chain management (SCM) software. The company first implemented PeopleSoft Supply Chain Planning in the summer of 2001, building on top of the vendor’s manufacturing suite of supply chain management applications. It has since added further software for customer fulfilment management and supplier relationship management.
That has had a positive impact on many aspects of Sauer’s business, says Puglisi. It provided greater visibility into customer orders; improved the alignment of the company’s complex manufacturing with its planning; ensured the availability of more accurate and timely information for reporting and analysis; and provided better understanding of customer and product profitability across the supply chain.
The main reason CF Sauer needed the SCM was that as the company grew, it became more complex. Over the two years to 2002, the number of products in its portfolio grew four-fold. That meant customer demand, planning and scheduling become much more critical. Moreover, operating out of five facilities across the US, required “real-time visibility”.
“In our business, visibility into order information is key – timely, real-time, accurate information on customer orders as they come in,” says Puglisi. “[Our SCM system] gives that to our employees – everyone from production schedulers and people in our plants, all the way up to senior management.”
He explains, “We have some pretty short turnaround times, and real-time inventory availability and visibility have to be accurate. Sales and marketing now know up-to-the-minute numbers of available quantities.”
The outcome is better-managed profitability. “Now, we can easily identify our profitability – which products are making us money,” says Puglisi – no matter what happens to the price of soyabean oil.