SunSystems and Manufacturing – A Transylvanian Tale

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Imagine Transylvania in 1997, a part of Romania still largely populated by vampires and werewolves. It’s a place that’s bitterly cold in winter, scorching hot in summer, and most terrible of all, it was then a dark corner of the world where accounting was done largely on paper by huge armies of accountants, and a place where manufacturing planning systems were entirely unknown.

Welcome to my accounting department….

draculacastle

Imagine, also, that South African Breweries (SAB), a newly acquisitive international brewer, had acquired Ursus, in Cluj Napoca, one of Romania’s best-known breweries.

ursus

Acquisitions at any time, and in any place, are a cultural nightmare, but international acquisitions are the most difficult, especially in emerging markets. The nominal cost might be attractive, but the challenge can be almost unmanageable.

The first step in any acquisition is to establish reliable financial systems, but the brewery’s army of accountants couldn’t tell SAB what they really wanted to know about Ursus, at least not in a timely, GAAP-compliant way.

What they really needed was a flexible financial system that could meet Romanian statutory requirements and report intelligibly to their South African headquarters. Given that SAB manufactures beer, a large system such as SAP or Oracle might be the obvious choice because they do manufacturing, sales, purchasing and distribution as well as accounting. But there wasn’t a hope in hell, nor in Transylvania, of implementing such complexity. And local financial software systems were fit only for the undead nature of Romanian statutory accounting, not for the sophistications of GAAP reporting.

So we, LLP Group, and our recently formed subsidiary in Bucharest got the job of implementing Infor’s SunSystems and of making it work in a manufacturing environment.

Manufacturing accounting is all about calculating the cost of finished goods. A finished item, such as a labelled bottle of beer, comprises packaging  and content. Content, in turn, comprises this and that – water, sugar, yeast and whatever else goes into a bottle of beer. There’s a bill of materials that describes the component parts of every item, and the cost of labour and machinery involved in producing it. Most companies calculate a ‘standard cost’ for each item and component based on estimated costs of components and labour, and in many countries it’s perfectly permissible to value stock on the basis of standard costs, as long as the actual costs vary within reasonable limits.

But not so in Transylvania. The law demands that ‘actual’ costs be calculated, or the next best thing, a rolling average of actual costs. You can do this in SunSystems, using a T-code for each finished or semi-finished product, crediting a production account with all the products that come out of the production process at standard cost, debiting all the materials and labour consumed at standard costs. Purchase price variances, and manufacturing variances emerge, that must then be allocated against materials consumed at the next higher level in the bill of materials, and materials still unused.  It’s an intricate calculation, and one that even manufacturing systems didn’t do well in the 1990s, but to do it in SunSystems takes more courage that knocking on the door of Dracula’s castle.

It helps, of course, if the number of finished and semi-finished products is few, and in the end the packaging materials were more complicated than the beer itself. It helps, too, if you know manufacturing systems, and we used Fourth Shift, a small but powerful manufacturing system, solely for the definition of bills of materials and the calculation of standard costs. It doesn’t help, though, if inflation is running rampant and you have to recalculate your standard costs several times a year.

But we made it work, or rather my colleague Jiri Stiller, now manager of all of LLP Group’s operations in Central and Eastern Europe, did it, spending a year in Romania, in Cluj Napoca and Bucharest. He wore garlic next to the skin and never went out after dark, but as far as I can tell, his blood is still human and he’s very much alive.

SAB used SunSystems for many years, but eventually moved to their standard software system – SAP. Romania has changed too, and Cluj Napoca is now a pleasant, modern, easy city, where you needn’t fear vampires nor accountants.

SunSystems is a wonderfully well-designed financial system. Its unified ledger and transaction analysis concept makes it one of the most flexible and versatile in the world. It can do almost anything, even in Transylvania.

NOT Jiri Stiller – at least not during the day.

vampire

 

 

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