Snyder’s of Hanover: New Systems
for an Old Family Company |
Harry V. Warehime began tempting the taste
buds of southern Pennsylvanians with his Hanover Olde Tyme Pretzels 1909.
Since then, Snyder’s of Hanover, as the company came to be known,
has expanded its business beyond any scope that its founder might have
dared to imagine. Snyder’s of Hanover remains a family-owned and
family-run company, but it has become the world’s second largest
pretzel maker, with 12.1 percent of the pretzel market. Snyder’s
pretzel and chip varieties include Old Tyme Pretzels, Jalapeno Pieces,
Butter Snaps, and EatSmart All Natural Veggie Crisps, as well as other
popular snacks. In 2002, Snyder’s posted revenues of $164 million,
trailing only Rold Gold, the reigning champion of the pretzel industry.
In addition
to manufacturing its complete line of snack foods, Snyder’s distributes
its own products, as well as those of other snack food companies such
as Tasty Baking Company’s Tastykakes. With 40 distribution facilities
all over the United States and Europe, over 4,500 products, and over 150
product lines, the home office in Hanover, Pennsylvania, has a considerable
amount of data to manage.
If there was
one last vestige of old-fashioned business left at Snyder’s, it
was the company’s method of managing and analyzing data. Although
Snyder’s sells more than 78 million bags of pretzels, chips, and
organic snack items each year, some of its core systems were still heavily
manual and paper-based.
Snyder’s
financial department was using electronic spreadsheets for much of its
data-gathering and reporting. Lois Stambaugh, Hanover’s financial
analyst, would spend the entire final week of each month collecting Excel
spreadsheets from the heads of more than 50 departments worldwide. Then
she would consolidate and reenter all the data into another Excel spreadsheet,
which would serve as the company’s monthly profit-and-loss statement.
The financial data were harvested and consolidated the same way at the
end of each fiscal quarter and the end of each year.
The overwhelming
presence of the human factor made data-entry mistakes a concern. If a
department needed to update its data with last minute information after
submitting its spreadsheet to the main office, the head analyst had to
return the original spreadsheet, and then wait for the department to resubmit
its data, before finally entering the updated data in the consolidated
document.
Perhaps most important, this system
of gathering the company�s financial
statistics at regular, but infrequent,
intervals meant that important
data simply were not available as
often as they were needed. Snyder�s
lacked the ability to react to sudden
trends and unpredictable events
because the data were supplied too
late to adjust shipping schedules,
pricing schedules, or delivery counts.
CEO Michael Warehime
and his management team could track the gross profits of business units
but not the performance of each of Snyder’s 4,500-plus products
and over 150 product lines. For example, the spreadsheet-based system
lacked the detail to show whether a specific snack product such as Sourdough
Hard Pretzels or Pumpernickel & Onion Sticks was actually making or
losing money. For a business focused on both production and distribution,
this was a hindrance to growth.
Additionally,
the spreadsheets could not reveal which distribution routes were worthwhile
and which were cutting into the company’s profit margin. Under these
circumstances, Snyder’s could only use the sales data it collected
to make rough predictions about how much of a product should be manufactured
and how quickly a product run should be repeated on particular distribution
route. Snyder’s market share had been growing steadily until 2002,
when it suddenly stalled; its annual sales growth, which had outpaced
the industry’s for years, was then no better than average. It was
time to leap forward to a more modern approach in which the company could
react to data immediately.
In
late 2002, Snyder’s of Hanover solicited the help of Satori Group,
a provider of business performance management solutions to the consumer
packaged goods industry that is headquartered in Conshohocken, Pennsylvania.
Satori Group demonstrated how Snyder’s could implement its proCube
software to gather better sales and marketing data and, therefore, make
better business decisions. ProCube would automate Snyder’s budgeting
processes, creating accurate forecasting facilities, improving financial
reporting techniques, and refining Snyder’s product marketing analysis
so that Snyder’s could evaluate the viability of each of its individual
brands and products. Such analytical power was just what Snyder’s
would need to compete with Rold Gold, which is backed by the corporate
powerhouses of Frito-Lay and PepsiCo.
What
Snyder’s found so appealing about proCube was the ease with which
it could be integrated with the company’s existing information systems.
ProCube enables Snyder’s department heads to continue using Microsoft
Excel spreadsheets to collect sales and returns data. These data are collected
in a large data repository, where they are consolidated and organized
before being used by proCube reporting software for analysis. The proCube
software also uses manufacturing data from Snyder’s enterprise system.
Snyder’s
financial department now spends a couple of days preparing those same
monthly, quarterly, and yearly statements that used to devour weeks’
worth of productivity. This is only the first step in what Snyder’s
hopes is a chain of improvements that will result in new growth.
The
next step is to add new levels of detail to the profit and loss data that
Snyder’s can collect and report so that the company can track and
assess the profitability of individual products. Management could then
use the proCube software to find out information such as how many bags
of Honey BBQ Pretzel Pieces were sold in Michigan last week, or which
stores and delivery routes are best servicing customers who like this
product. The system will also enable managers to project sales for their
unit for the next quarter or next year.
Such
a system requires additional work to implement. Dave Thomas, Snyder’s
director of information technology, noted that to achieve the desired
level of detail in its data analysis, the company must study all of its
business processes. A comprehensive review will enable Snyder’s
to determine what types of data result from their business processes and
which data they actually want to use.
These
system enhancements will eventually provide information enabling Snyder’s
to increase production and distribution frequency of its most popular
products almost immediately, rather than having to wait for an end-of-the-month
report. Likewise, production and shipping of less popular products can
be curbed. In other words, Snyder’s will be able change its business
model from one dependent on forecasts to one that’s more demand-driven.
The
first two phases of the proCube implementation carried a price tag of
approximately a quarter-million dollars. The next phase introduced a corporate
portal to provide Snyder’s department heads and executives with
easier access to sales figures and distribution plans. The portal features
a user-friendly Web interface through which managers can retrieve key
data, as they require them. Upon completion, the cost of the entire venture
should approach a half-million dollars.
Snyder’s
has also incorporated improved IT into other areas of its business. In
2003, Snyder’s chose Gelco Trade Management Group’s TMS Passport
solution for its trade promotion funds management. Again, Snyder’s
found an IT solution that could be implemented quickly without sacrificing
power. Gelco’s TMS Passport promises a quick return on investment
(ROI) for a competitively priced and scalable software package. The package
features fund management, deduction management, payments, and analysis
and reporting capabilities. In turn, Snyder’s is confident that
it can effectively plan and manage its trade promotion activities for
years to come, even as the business continues to expand.
The American consumer
has continued to increase its intake of pretzels over the last decade,
and the snack food industry as a whole continues to boom. Snyder’s
faces stiff competition from rival Frito-Lay and other major players in
the snack food industry such as Utz, Kellogg’s, and Kraft Foods.
At the very least, Snyder’s has made a sincere attempt to transform
its business practices with an eye toward rocketing to the top of the
boom. The question remains whether a family-owned organization can continue
to compete with major corporate players in an industry that has yet to
hit its ceiling.
Source:
Larry Barrett, “Twisted Logic,” Baseline Magazine,
January 2004; “Solutions for the Consumer Packaged Goods Industry,”
www.satorigroupinc.com, accessed March 31, 2004; “Snyder’s
of Hanover Selects Gelco’s TMS Passport Solution,” www.gelcotrade.com,
accessed April 5, 2004; “Snyder’s of Hanover Company Profile,”
biz.yahoo.com, accessed April 5, 2004; “Snacks: The Next Generation,”
www.consumerreports.org, March 2004; and www.snydersofhanover.com, accessed
March 31, 2004.
Case Study Questions
1. |
Assess Snyder’s competitive standing in the pretzel and snack
food industry.
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2. |
What types of information systems
are essential for this company?
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3. |
How well did Snyder’s
information systems support its business? Explain.
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4. |
How much did
proCube improve Snyder’s systems? Which management, organizational,
and technology issues did it address? How does it provide value?
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5. |
Assess the impact of Snyder’s
new systems on the way it runs its business and its business model.
How much do these systems improve its competitive position?
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