The sweet business of making candy

Returning Allan Candy Company Ltd. to its roots as an independent confectionary company with an artisan feel was the thinking behind creating an enterprise with candy-making at its core wrapped in virtual operations.

“Our philosophy is that we are good at ideating, creating, manufacturing and marketing candy. And that’s it,” said president and CEO Steve Diakowsky.

The Mississauga, Ont.-based company, started in 1931, wants to focus on what it does best – making candy – while extending the enterprise to let service providers do what they do best. Services like IT, distribution and warehousing, and other functions exist “mile-deep within that virtual enterprise mentality,” said Diakowsky.

Following a 12-year period owned by Cadbury Chocolate Canada, a confectionary company with a broader multi-national focus, Allan Candy got the opportunity in 2007, after being sold to a private investment firm, to re-build itself from “white space” into the independent, regional brand that it always had been.

“What was really sold was a plant, some brands and some people, a P&L and a balance sheet,” said Diakowsky, formerly a management consultant who had spent eight years doing system implementation work. Diakowsky realized the vital role that technology would play in building a virtual enterprise that could just focus on making candy.

Allan Candy retains only two IT staff among its 425 employees because the IT infrastructure is hosted and managed by Mississauga, Ont.-based IT services provider Metafore LP. “We don’t own any boxes and wires,” said Diakowsky, explaining that the two sole IT staff work, instead, on high-level tasks like overseeing reporting and analytics and various IT development projects.

While Cadbury was an SAP shop, the plan was to run Allan Candy’s assembly line and supply chain activities on an ERP platform that better fit the company size. Microsoft Dynamics Great Plains is now the core platform upon which all activities are consolidated, be they sales forecasting and convergence into the master production schedule, issuance of manufacturer orders, order to produce, material requirements planning, manufacturing order, or shipment to the distribution centres.

A candy-maker whose annual revenue, according to Diakowsky, falls north of a $100 million, requires bulk materials like sugar, flour and corn syrup delivered in an accurate and predictable manner. Using analytics as part of the master production schedule makes this happen, he said.

Similarly, candy shipments must make their way from the factory gate to a Mississauga-based distribution centre – also a third-party provider – and ultimately to store shelves. Maintaining system uptime is critical to ensuring this, said Diakowsky, explaining that system redundancies are built in with “mirrored servers” and the ERP backbone is Citrix-based so employees can, if need be, access systems remotely.

“Fundamentally, our customers expect 99.5 per cent order, line and case fill rates,” said Diakowsky. “If they order 10 cases, they want 10 cases.” Besides wanting to deliver great customer service, another incentive is avoiding a fine imposed by the consumer packaged goods industry if shipments don’t align with promised orders.

But that raises an interesting dilemma, said Diakowski, because fulfilling orders requires an adequate amount of inventory, yet there can’t be too much lying around. Again, analytics resolves this problem.

“We have really spent a lot of time managing the demand and supply conditions and aligning them,” he said.

Building an independent enterprise following the split from Cadbury – or as Diakowski put it, “separating from the mothership” – was a transition that didn’t necessarily happen smoothly. Switching from a shared services business arrangement to one of third-party service providers presents diplomatic challenges because there must always be alignment among partners. It requires co-ordination, collaboration and consensus-building, said Diakowski, “versus me walking down the hall to a 10-person IT staff and saying, ‘Do this.’”

The partners have all embraced the virtual enterprise approach, but that’s not to say there aren’t hiccups, noted Diakowski. A robust project plan is key to minimizing those hurdles because “in our view, in the virtual model, you can overcome it, but it requires a little bit more planning and orchestration.”

Challenges emerged internally, as well, with some system users being hesitant to give up the familiarity of native and custom capabilities of the previous SAP platform. “It’s been more of a change issue than an IT capability issue,” said Diakowsky.

Looking to the future, Diakowsky’s IT wish list for Allan Candy is a “deep” one, that includes RFID and a better-integrated supply chain, particularly upstream with raw materials suppliers.

But Diakowsky is thinking beyond just keeping those store shelves stocked.

“One could argue the real value we can drive to Loblaws or Walmart is not in putting a bag of sugar confectionary on their shelf, because frankly there are about 10 others who could do that as well as we could,” he said. “The real value is helping figure out how to accelerate the turn on that bag of confectionary, the science of how a consumer shops that category.”

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