1hin Crust

How Shakey's streamlined its information system

By Heinz Bulos
April 2002


hakey`s or Pizza lut - undoubtedly
a worthy subject o debate. Say what
you will about the merits o their
recipes, but it really boils down to this:
thin, thick, or pan. A true pizza loer
always goes or thin. Lxcess pizza dough
only gets in the way o the laor. And
lour crumbs go straight to the trash.
Shakey`s, o course, is best known or its
thin crust pizzas.

It`s only itting then that International
lamily lood Serices, Inc. ,IllSI,, the
holder o the exclusie territorial license
o Shakey`s International in the
Philippines, recently cut down the excess
baggage in its work low and inormation
process to get right to the meat o the
matter: releant and timely inancial data.

Shakey`s in the Philippines has been
around since 195, and anyone aboe
twenty has ond memories o the dimly-
lit, ye old pizza pubs that sered mouth-
watering mojos and beer. 1he pizza chain
has recently turned amily-wholesome
while retaining the menu it`s well-loed
or. \ith oer a hundred stores opened in
a span o a quarter o a century, it has
been a lilipino staple. Right now, it
operates 48 company-owned stores and
oersees 40 ranchisees.

Information as a competitive
advantage
n the local ast ood industry,
Shakey`s is currently third in its
category, ariably changing positions
with rials Greenwich and Pizza lut. 1he
industry has become a iercely competitie
and highly crowded one, especially with
the entry o newer pizza and pasta joints
as well as theme restaurants. Italliani`s,
Don lenrico`s, Piadinna, Napoli, 1GI
lridays, and Chili`s are just some o the
newer competitors. In such an
enironment, the battle is no longer just
about tasty recipes and special ingredients.
Quick, accurate inormation also becomes
a competitie adantage.

Knowing which stores are proitable and
which ones are bombing, determining the
cost o raw materials, analyzing the most
eicient deliery routes, and keeping
down stockable inentory costs are just
some o the critical inancial inormation
that aect management decision-making
on sales, promotions, ranchising, and
distribution.

Getting the wrong data or getting it too
late can make or break a restaurant
operator. In the ast ood business, ast
inormation is required. Already, the key
players in the industry are going into LRP
systems.

Out with the old
t is or this reason that the board o
directors and upper management o
IllSI decided near the end o 1999
to change the old inormation system that
it has already outgrown. And the task o
oerseeing the transition ell on the lap o
Armina Andres, MIS Manager o IllSI,
who came on board in 1998, and her lean
sta o three.

IllSI management made it clear what
they want: to speed up the reporting and
to centralize all the inormation in one
data depository center. 1hey wanted to
hae the reports eery ith o the
S
I
I
ollowing month, or een earlier, or een
haing them on their desks in real-time,`
says Andres.

1he old setup proed to be inadequate or
the task. 1he inancial and materials
management system was decentralized,
with a multi-user general ledger sotware
package separate rom the stand-alone
inentory management program, both
deeloped in-house using loxpro and
Clipper, respectiely.

Prior to the 1998 consolidation o seeral
Shakey`s-related companies, when IllSI
was just handling the ranchising
operations, the company was using the
home-grown Balmori sotware as its
inancial system. 1hey adopted the
loxpro proprietary program or the
company-owned stores when they merged
all the related companies.

On lebruary o 2000, IllSI began to
seek out a real, honest-to-goodness
enterprise resource planning system that
can grow with the company. 1hey
approached candidate LRP endors and
went through a stringent screening
process. 1he criteria were clear-cut: cost,
lexibility, manageability, user-riendliness,
conigurability, and scalability.

lrom ie endors, the shortlist came
down to just two. By June 2000, they hae
picked the winner: SAP. 1he R,3 package
consisted o ie modules - lI or
inancial reports, CO or cost control, SD
or sales and distribution, MM or
materials management, and PP or
production planning - subsequently made
to run on Compaq serers using \indows
N1 with MS SQL as its database.

SAP was not a diicult sell, ater all, SAP
is almost synonymous with LRP, the
Germany-based sotware giant haing
practically deined the category and
remains the current market leader. But the
clincher or IllSI was SAP`s capability o
supporting purchase o third party
materials, such as sot drinks ordered
rom Coca-Cola that are deliered directly
to the stores. 1he other endors are not
able to adapt to this peculiar industry
practice.

\hile IllSI maintains central control or
ordering perishable raw materials, these
are deliered directly to the stores.
Stockable items such as marketing
collaterals, pizza boxes, and the like are
stored in IllSI`s warehouse.

1he costs of implementation
AP Philippines tapped one o its
implementation partners, Strategic
Systems Inormation Proessionals
,SSIP,, to handle the consulting project.
\ith extensie SAP experience working
with clients such as Intel, Nokia, Paciic
Bell, Lquitable PCI, Procter and Gamble,
and Shell, SSIP already has a proen track
record, with particular expertise in lR
implementation, a global presence, and
capability o extending SAP to the
Internet.

1he SSIP was headed by one o its
consulting managers, Jose Lorenzo Diaz.
\ith a team o seen consultants, SSIP
kicked o the project on August 2000.
1he irm ollows a ie-step process:
project preparation, to orm and prepare
the consulting team, business blueprint
design, to study the inormation process
and conduct business process
reengineering, realization, which is the
implementation proper, inal preparation,
or the sta training, and go-lie, which
marks the deployment o the R,3 system
or normal operations.

Most LRP implementations are hardly
smooth-sailing, but SSIP managed to
proide its delierables on time. \ith the
S
AcceleratedSAP ,ASAP, rapid
implementation solution introduced by
SAP, consultants that hae adopted this
standard methodology hae learned to
optimize the entire implementation
process. 1he project took six months, and
a ew more months or migrating the data,
a task that proed to be bloodiest part o
the process.

Andres points out that the olume o
transactions was just oerwhelming. Diaz
adds, It`s like 48 companies that we`re
implementing all in all.` And in the
transer o data rom one system to
another, there are the ineitable errors in
data encoding that cause delays.

1he project also went slightly oer budget,
which took a month to justiy to SllI`s
board. 1his was primarily due to the
unctionalities o SAP that were added to
the system, which the SllI`s team
subsequently discoered as useul as the
project progressed.

SllI and SSIP declined to gie the total
cost o the project but claimed it`s not as
expensie as commonly perceied. 1he
sotware cost is based on a per user
license. And the hardware and consulting
costs are directly proportional to the
number o users. Diaz explains, I you
hae more users, the system coniguration
is more complex. 1he more complex, the
more time, the more money.`

1he payoff
pper management, howeer, is
pleased, as they can get the
reports they want and on time.
Andres says, \e can present the inancial
statements on the required date. \e can
see the sales report o all our products or
all the stores.` She adds, One major
actor that management like is, because o
SAP, we were able to streamline the work
process.`

Diaz explains, \hen it comes to security
and controls, the changes to the business
practices were signiicant. lor example, in
the warehouse, i you`re going to release
some o the goods, where are the controls
there in terms o monitoring the
inentory SAP was able to capture most
o the critical business processes or that,
thus minimizing risks.`

SAP was also able to adapt to the
intricacies o the industry and the business
practices. Diaz adds, \e customized a
lot o reports because the board is ery
sensitie to inormation, because they
need to analyze most o the data that you
get, rom gross proit ratio, ood cost, etc.
\ou hae to get the data real-time so you
can adjust ariables like marketing
promos.`

In some cases, current business practices
that were quite suspect had to be changed
to adapt to the SAP system. Andres recalls
that in the old system, they had a
customer that had around ie sales terms
or IllSI`s accounts receiables. In any
other business and in SAP, there should
only be one term gien to a customer.`
Accounting was orced to change that
particular procedure to relect best
practices.

1he MIS team and the 30 users rom the
accounting and materials management
departments hae become more
productie. Beore, there were redundant
procedures and een glaring ineiciencies.
Now, SAP can just handle it in one
transaction and one user can do it. lor
instance, the stand-alone inentory
management system was not connected to
the general ledger, and so data rom the
ormer had to be manually encoded to the
latter. Andres recounts, Beore, when we
were using the old system, we tend to
work oertime.` Diaz quips, Now, vagbo
U
bortivg va .ita.,they can already play
bowling,`

Qualitatie and indirect beneits make it
diicult to quantiy the exact return on
inestment or an LRP project, in terms
o cost saings and additional reenues
that can be attributed to better
management decisions drien partly by
better and quicker inormation.

Neertheless, SllI is already enjoying the
beneits o a streamlined work process, an
integrated management inormation
system, timely and accurate reports, and a
more eicient and productie head oice
workorce.

Andres explains that the ability to orecast
demand is one o the critical success
actors in the ast ood industry. \e
sere our customers. All our products
should be aailable to them during
business hours, meaning raw materials
should be gien to them as orecasted, not
only with our company-owned stores but
also our ranchisees, with whom we hae
to maintain good relationships in terms o
deliering raw materials on time ad as
requested.`

Already, the company is getting ready or
phase two o the project, with SSIP
working on the B2B aspect o linking the
stores to the head oice R,3 system,
urther cutting down on the time it takes
to grab data and analyze costs and trends.

Its \eb site, deeloped also by SllI,
allows online ordering o pizzas, which are
routed to their call center or telephone
eriication. \ith an adanced and
lexible LRP system in place, expanding
into online procurement and Internet-
based transactions using mySAP.com
becomes easier. Indeed, there`s a whole
lotta shakin going on.