A Look at the Digital Transformation of McCormick with SAP

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CEO talks about the digital transformation plans of McCormick in a conference call with fellow management leaders and other participants.

In the early 2000s, McCormick announced the deployment of SAP solutions such as the mySAP Customer Relationship Management, Enterprise Portal, Business Intelligence, Supplier Relationship Management, and SAP Strategic Enterprise Management (SEM). It was a step to help improve its business processes, performance, sales, customer, and supplier service relationships. It was the last time the company upgraded its ERP system.

At the ASUG held in August 2019, Stephan Waechter shared digital transformation plans of McCormick intended to support its growth while it also sustains the previous goals they had when they first turned to SAP solutions.

The factors that drove the need for transformation were explained in McCormick’s CEO Lawrence Kurzius Q4 2019 Results Earnings Conference Call on the 28th of January, which was published by Seeking Alpha. McCormick’s VP for Investor Relations Kasey Jenkins, Executive VP and CFO Mike Smith were present. Other participants included Barclays’ Andrew Lazar, J.P. Morgan’s Ken Goldman. UBS Securities’ Steven Strycula, Deutsche Bank’s Faiza Alwy, Credit Suisse’s Robert Moskow, Goldman Sach’s Adam Samuelson, Stifel Nicolaus’ Chris Growe, Bank of America Merrill Lynch’s Peter Galbo and Jefferies’ Robert Dickerson.

In the call, Kurzius said that the company has doubled in size over the last two decades and shared how SAP plans to discontinue support for the current platform pushing the need to modernise the existing ERP system to transform their business.

Kurzius said:

“We want to be ahead of the curve in achieving an advanced integrated platform, which will allow us to realize the benefits of a scalable platform for growth sooner and enable growth in line with our aspirations.”

He added that they plan to promote a larger scale of business transformation, which will include the integration of software applications within the global HANA solution.

Supply Chain Dive shared an interview with some analysts who talked about the reliance of large companies on an ERP system and how the digital transformation of McCormick will impact its business.

Forrester’s Liz Herbert told Supply Chain Dive that one could not operate a business without knowing what their financials are. Herbert has a robust research background on ERP systems. She also added that most vendors have customers that are still running on outdated systems.

She explained that old ERP systems lacked maturity and may not have all the features needed. Furthermore, these systems might have been operating on custom extensions of workflows, which made the system so complicated that it became inflexible.

Meanwhile, updated ERP systems like SAP’s HANA gives business owners the capability to have faster real-time access to information. And with the help of more intelligence built into systems such as machine learning or artificial intelligence (AI), human involvement may not be required in identifying errors.

Herbert concluded that the decision to change over to a new ERP system means reevaluating a business’ processes, and a consulting firm may be needed in the process for further guidance, which contributes to the million-dollar price tag of the transformation.

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