information system Portfolio TABLE OF CONTENTS 1 Introduction 11. 1 Purpose 11. 2 Scope 11. 3 Format 12 Business Environment 2 o Example 1 – Pepsi Americas Inc 2 o Example 2 – Parmalat Australia Ltd 3 o Example 3 – Coca Cola Bottling Company Egypt 63 Enterprise Systems Portfolio 9 o Example 1 – Pepsi Americas Inc 9 o Example 2 – Parmalat Australia Ltd 12 o Example 3 – Coca Cola Bottling Company Egypt 16 o In General 184 Analysis 19 o Example 1 – Pepsi Americas Inc 19 o Example 2 – Parmalat Australia Ltd 21 o Example 3 – Coca Cola Bottling Company Egypt 245 Conclusion 266 References 271 Introduction 1. 1 Purpose The purpose of this report is to analyse the impact of Enterprise Systems (ES) in contemporary organisations in the Beverage Industry and to determine the most popular and suitable solution. In doing so it will provide insight into role that ES plays by analyzing the Information System Portfolio of three different organisations – all in the Beverage Industry – but on four different continents, each with different markets and cultures.
It will be shown in this report that Enterprise Systems are critical to the operational success of any organisation in these markets, and that no matter where they are geographically they face similar challenges and use similar architectures. 1. 2 Scope The report is designed to provide the reader with a basic understanding of the business structure, products and services of the example organisations. It will then go on to discuss each organisations Enterprise System history, implementation phase, standard software and extended software. This will provide the reader of an overview of there Information System (IS) portfolio. The report does not discuss the technical aspects of the implementations, it is limited to the purpose, strategic ‘fit’ and the impact the systems had on the operations of the company.
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1. 3 Format The report is divided into 3 main sections, Business Environment will provide and overview of each business, ES Portfolio discusses the history and ES usage in the business and Analysis will analyse the suitability of each solution and prescribe the most suitable package for the Beverage Industry. 2 Business Environment The industry and type of organisation plays a large role in the selection of an Enterprise System and the challenges of implementation. An organisation such as a Law firm which sell peoples time and services bears little resemblance to a company such as General Motors which manufactures motor vehicles.
There keys to operational and strategic success vary dramatically as does there size, complexity, supply chain and structure. Companies in the Beverage Industry all have something in common. They take a raw material from a syrup or a cow, process to make it safe for human consumption, package it in containers suitable for end user purchase and deliver to the retails or customers – all before it spoils. An overview of our sample organisations and there unique challenges is described below. o Example 1 – Pepsi Americas Inc 2. 1 According to the Brewing, Food & Beverage Industry Suppliers Assoc, the Beverage Industry Sector is the subset of the overall Food and Beverage Industry which encompasses all companies involved in the products and services required for the manufacture, distribution and retailing of food and drinks for human consumption.
2. 2 Pepsi Americas is a public company which manufactures, distributes and markets a range of carbonated and non-carbonated, non-alcoholic beverage products in the United States, Central Europe and Caribbean. As the name implies Pepsi Americas is a key ‘bottler’ of Pepsi-Cola and associated products – it accounts for 19 percent of all Pepsi-Cola beverages sold in the United States and serves a total are with a population of 119 million people. With revenue in 2003 of US$3236 million and 14, 500 employees they are the one of the largest beverage manufacturers in the world. 2. 3 They manufacture, package, sell and distribute products under brands licensed from Pepsi Co and other companies in a range of exclusive territories.
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In these territories they are responsible for selling products, providing timely service and finding new customers for these licensed products. Their portfolio of beverages contains more than 50 of the most famous brands in the world including Pepsi, Diet Pepsi, Mountain Dew, Lipton Teas, Gatorade, Dr Pepper, Sunkist, Schweppes and Tropicana. Pepsi Americas buy concentrates from Pepsi Co and other soft drink companies, mix them with ingredients such as water and carbon dioxide and bottle them in containers ranging from “8-ounce” cans to two litre bottles. 2. 4 As the company has operations in 18 states of America and 12 countries across three continents they are broken business units based on geographic regions. The three regions are the United States, the Caribbean and Central Europe, within each region each country then operates as a Single Business Unit.
o Example 2 – Parmalat Australia Ltd 2. 1 Parmalat Australia Ltd specialists in the manufacture of both milk based and non-dairy based beverages for Australian and overseas consumer markets. Core business activity focuses on manufacturing, distribution, sales and marketing of top quality products, hence logistics functions play an integral role in the overall success of the business. Effective management and control of Parmalat’s manufacturing processes are key to ensuring products are produced efficiently and to a high standard of quality, whilst delivering a profitable return to the company. Production planning, orders control, warehouse and inventory management are important functions that impact on the cost-effective manufacture of its products. Maintaining close working relationships with its suppliers, especially its milk suppliers, is also crucial to the overall manufacturing process.
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Parmalat prides itself on the quality of its products and has built a reputation amongst Australian consumers for producing top quality beverages that consumers can trust. Hence, the company’s quality assurance procedures are of strategic importance to the business. Sales and distribution is another core activity for Parmalat, as without it consumers could not purchase its products. Parmalat manages its own network of franchise distributors that operate nationally. It also utilizes third party distributors to access markets outside of its own distribution network.
Parmalat operates a team of sales representatives within each state and also uses the sales teams of third party distributors to sell its product range. Parmalat’s beverages are sold via a number of trade channels, including grocery, independent supermarkets, petrol and convenience, route and food service. Parmalat also exports its products to over 24 countries, mainly throughout South-East Asia and the Pacific region. The company is dedicated to research and development to ensure its beverages meet the needs of Australian consumers, and remain at the forefront of innovation. Constant analysis of products at every stage of their life cycle enables Parmalat to maintain a competitive advantage and develop innovations in new product development. 2.
2 Parmalat Australia Ltd, previously known as Pauls Ltd, is recognised as one of the major manufacturers of milk, dairy products and beverages in Australia. Parmalat Australia Ltd is a wholly owned subsidiary of the Italian based global dairy company, Parmalat Finanziaria SpA. The company was acquired by public takeover in August 1998, when it was called Pauls Ltd. Pauls has a proud history in the Queensland dairy industry, commencing in 1923 when an ice cream factory was established at West End in Brisbane under the “Peters” brand. Pauls was established at South Brisbane in 1933 and the Peters and Pauls companies merged in 1960 to become Queensland United Foods. QUE changed its name to Pauls Limited in March 1998, and Pauls Limited changed its name to Parmalat Australia Ltd in September 2003.
Parmalat currently has around 1300 employees nationally, with 800 computer users and around 600 SAP users. The company operates nine factories across Australia, five of these are in Queensland, two in Victoria, one in New South Wales and one in Northern Territory. Parmalat has over 600 farms supplying approximately 1. 4 million livres of milk each day.
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The huge volume of product it processes every week requires more than 11 terabytes of data storage, and involves processing more than 800 000 order lines every week. Parmalat has sales offices, distribution centres and manufacturing facilities located all over Australia (including WA, NT and TAS), however the majority of its operations reside in QLD and VIC. In QLD, Parmalat has approximately 407 farmer suppliers currently supplying 289 million livres of raw milk per annum. It has more than 795 employees in QLD, and operates manufacturing plants at Labrador, Warwick, South Brisbane, Nambour and Rockhampton. The company’s head office is located at South Brisbane, and there are seven sales offices and eight distribution centres in Queensland.
In Victoria Parmalat has more than 490 employees and operates manufacturing plants at Row ville in Melbourne, and in Bendigo. It has two sales offices and five depots / distribution centres. Its intake of raw milk from 176 suppliers in Victoria is approximately 227 million livres per annum. Financially, Parmalat Australia is very stable and profitable. In 2003, the company recorded in excess of $650 million in sales, and returned an increase in profits from 2002. 2.
3 Parmalat proudly markets its beverage products under brands that are household names in Australia and overseas. Parmalat’s range of beverages include: o The “Pauls”, “Trim”, “Slim”, “REV” and “Skinny” range of white milks, o Specialty white milks such as “PhysiCAL”, “Pure Organic”, “Soy Life”, and “Zy mil Lactose Free”, o Flavoured milks such as “Ice Break”, “Breaka”, “Rush”, “Shakes”, “Egg Nog” and “Malt & Honey”, and Juices marketed under the “Santa”, “So Juicy” and “Sandhurst” brands. The white milk beverages are primarily sold via the grocery channel, due to their larger pack size and in-home consumption. Whereas the bulk of the flavour ed milk and juice beverages are sold via the route and petrol & convenience channels.
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This is due primarily to impulse consumption and smaller packaging sizes such as 500 ml and 375 ml. Parmalat’s range of flavour ed milk beverages is extensive with a wide range of flavour offerings and pack sizes. Packaging formats also vary according to the target audience. For example different pack sizes are produced for different end users.
Different products within the Parmalat product range require different types of warehousing and distribution. All of the company’s fresh flavour ed milks are produced with a relatively short shelf life, up to around 14 days. They therefore require chilled distribution, which is costly and requires efficient storage and transportation procedures to maintain quality assurance. The majority of the juice products however are shelf stable and therefore only require ambient distribution and storage. Parmalat’ products are sold to an extensive array of customer types, including in-home users, impulse consumers, and food service customers such as restaurants, catering companies and airlines. Parmalat also produces beverages for fast food chains such as McDonalds, such as their milkshakes and thick shakes.
Parmalat also has the only “Coca-Cola” franchise left in Australia (only non-Coke managed facility) located in Darwin, NT. It therefore also produces the full range of Coca-Cola soft drinks such as “Coke”, “Vanilla Coke”, “Diet Coke”, “Diet Coke with Vanilla”, and “Diet Coke with Lime.” Therefore, the company must deal with and manage an extensive array of different customers. Parmalat also produces beverages that are not branded under a Parmalat logo. These products are known as generic or house brand products, and are usually produced for large customers such as Coles, Woolworth’s, Bi-Lo and Aldi Supermarkets. These may be branded under the customer’s name but are actually produced and manufactured by Parmalat, who are contracted to produce the products to exact specifications. These house brand or “no name” products are currently experiencing tremendous growth within the white milk market segment, as consumers look for cheaper alternatives.
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2. 4 Parmalat has a centralised organisational structure, with a quite extensive, tall organisational hierarchy. The structure is a nationally focused one, that emphasizes consistency in its processes, as opposed to having state based operations. The advantages of this structure are that it encourages consistency in approach and operations, develops national brands (as opposed to regional brands) and enables cost efficiencies through economies of scale. The company is also able to ensure its products are consistent in formulation and quality, so that a consumer who buys “Breaka” in QLD purchases exactly the same product when they are in VIC. Parmalat’s organisational structure is organised according to its core business activities.
The structure is presided over by the Managing Director, and is then divided into single business units including Finance/IT, Legals, Sales, Marketing, Operations, Human Resources, Technical/R&D, and Commercial/Farm Services. A General Manager sits in each of these divisions under the Managing Director. He or she is responsible for this business division on a national basis. Under each of these general managers are then other managers, which are divided according to the specific functions of that business division and or according to geographical region (eg.
For example, under the General Manager Marketing, there is a Marketing Manager for Milk & Beverages, and a Marketing Manager for Soft Dairy. However because this business division is managed from the Head Office there are not any state based managers. In Sales however, there are both functional specific managers and state based managers, due to the nature of the sales function. o Example 3 – Coca Cola Bottling Company Egypt 2. 1 Egypt has a population of over 70 million which makes it the largest and fastest growing nation in the Arab world.
Therefore, Coca Cola Egypt is in a highly competitive industry as the Egyptians represent one of the most important soft drink markets in the Middle East. Their core business activity is to provide the consumer market with their trademarked beverage products. The Coca Cola Bottling Company in Egypt (TCCBCE) is a locally rooted enterprise committed to delivering quality refreshments. Whilst it is a subsidiary of the well known multinational the Coca Cola Company, they are a critical link as they sell the beverage brands to businesses and institutions. These may be retail chains, supermarkets, restaurants, neighbourhood grocers, sports and entertainment venues amongst many others.
The company not only manufactures the beverages, but is also responsible for promoting the trademarked brand across Egypt. The aim is to ensure that Coca Cola not only continues to hold the greater percentage of the soft drink market, but delivers new and appealing ways to deliver those brands to thirsty people everywhere. TCCBCE is responsible for the production and bottling of Coca Cola beverages, marketing, sales and delivery of these products, and maintenance of customer’s merchandising and service needs. They play a role in upholding the global reputation of the Coca Cola Company world wide and continuing the standards set by their trademark products.
2. 2 TCCBCE is a beverage manufacturer of the world’s most recognisable brand. It is a subsidiary of the Coca Cola Company which was originally founded in 1886. The Coca Cola Company spans over 200 countries and produces over 400 beverage brands – principally carbonated soft drinks. TCCBCE is part of this world wide organisation and is responsible for ensuring that trademarked Coca Cola products in Egypt dominate the soft drink market.
Although part of a global company, this subsidiary operates as a distinctively local company, and the network of bottling partners, suppliers, distributors and retailers all contribute to the success and future of the company. It acts independently allowing for the local business to exert its strong influence on the economic development of the area, and the company is well known for actively participating in community life. TCCBCE has been continuously operating since 1942, (with the exception of Arab boycott period of 1967-78) and directly employs 7, 400 people. Based in Cairo, it owns and operates 11 bottling plants which are located throughout Egypt, (Cairo, Assi out, Aswan, Beni-Sue, Alexandria, Ismailia, Kalioub, Mansour a, Suez, T nata, Zagazig) and controls 29 sales and distribution centers. TCCBCE services around 132, 000 customers and 120, 000 coolers across 1, 000 plus distribution routes nationwide. This EGP 800 million-per-year (approx US$131 million) bottler is a critical link to the multinational organisation.
TCCBCE was privatized in 1994 and is said to hold approximately 54% of the soft drink market in Egypt. 2. 3 Coca Cola is the world’s leading manufacturer within the beverage industry. The company manufactures and sells beverage concentrates, syrups, carbonated and non carbonated beverages including juice products and water. These products culminate to produce nearly 400 beverage brands. TCCBCE produces a large range of these non-alcoholic drinks.
The company’s range of trademarked beverages includes: Carbonated Beverageso Coca-Cola Coca-Cola Lighto Fanta (Orange, Apple, Strawberry, Tropical) o Sprite o Sprite Lighto K rest (Tonic Water, Club Soda) o Canada Dry (Tangerine, Apple) o Schweppes (Tangerine, Lemon, Orange, Apple, Cloudy Lemon, Tonic, Club Soda, Cr’e me Soda, Water) Non-Carbonated Beverageso Sunfill Far hao Play o Frutopiao Crush (Orange, Cloudy Lemon) Beverage Concentrates Sunfill Powder Sunfill FarhaThe varying nature of these beverage products allows them to be widely aimed and sold to a diverse consumer market. Although Coca Cola is the most well known of the company’s products, Coca Cola Egypt also produces a range of other soft drinks and juice based products as listed above. The beverages are manufactured in a range of sizes and containers. The world wide brand recognition allows Coca Cola to dominate the market within Egypt, although with recent world events they have needed to further promote these products to ensure that due to its American affiliation, that this market share is not reduced.
2. 4 Although Coca Cola does owe it’s origins to the United States, it has become a truly universal drink that now sees operations producing and marketing these Coca Cola products in over 200 countries. Whilst some of these are wholly owned subsidiaries, some are independently run affiliates with the Coca Cola Company. TCCBCE however is a wholly owned subsidiary and therefore has an organisational structure that not only includes those working within Egypt, but it also includes management personnel from the global Coca Cola company. TCCBCE is overseen by a board that is elected by the share owners of the multinational company.
Their responsibilities are to ensure the successful growth of the business and financial strength. They oversee the senior management who conduct the business of the TCCBCE, but the board are ultimately the decision making body of the company whether it be local, nationally or world wide. Within the TCCBCE itself, senior management oversee the operation of the company within Egypt nationally. This covers all areas of the day to day running of the bottler, which include the following single business unit; Sales, Marketing, Finance, Operations, Plant, Distribution, Research and Development and Human Resources. Each of these areas has managers to control these departments and oversee the staff within these areas. This organisational structure ensures that the global standards that the Coca Cola Company are known for are continued wherever their operations may reach, and that the beverages themselves are manufactured with the same processes and quality that is expected by the trademarked brand.
3 Enterprise Systems Portfolio The Enterprise Systems Portfolio of an organisation is the collection of applications that are integrated with the core ERP modules used to operate the business. All organisations require modules of from the generic set of applications such as Financials and Human Resources – as all companies have these requirements. An organisation will then extend these core modules with additional applications and tools that are integrated in but provide functionality that’s specific to that organisation or industry. These systems may be from one or many suppliers but are integrated in that information flows from one system to another are provide a management information system from end-to-end. o Example 1 – Pepsi Americas Inc 3. 1 Pepsi Americas was formed by the merger of five individual Pepsi Bottling businesses across the United States, the Caribbean and Central Europe.
As a result is started life with a wide variety of legacy systems which covered the spectrum of business system software (Beverage World, April 2001).
These systems ranged from custom written accounting software on an AS/400 to logistics software from Descartes. In 1999 it began a consolidation project, to standardize the entire organisation on People Soft ERP and to assemble around that platform an Enterprise System portfolio. The implementation began in 2001 and was due to be completed across all 120 sites in the United States in September 2003. (web June 2004) 3. 2 In 2003 they began implementing Extended Enterprise modules, which is evidence they are in the final phase of the life cycle in which the standard modules have been implemented enterprise wide and now the extended systems are being integrated.
3. 3 They have focused on four of the generic enterprise system modules, Human Resource Management, Financial Accounting, Materials Management and Logistics. The People Soft modules do not align perfectly with the generic definition, the People Soft products and modules implemented include: o Financial Management Solutions Accounts Payable Accounts Receivable Expense Management Financial Planning and Budgeting Financial Reporting Fixed Asset Accounting General Ledger Supply Chain Management Demand Consensus Demand Forecasting Production and Distribution Planning Production Scheduling – Process Strategic Network Optimization Tactical Network Optimization Human Capital Management Human Resources Management Manager Self Service Payroll Processing Time and Labour 3. 4 As Pepsi Americas is a manufacturing and distribution company they are reliant on their supply chain and their human capital. They require a large workforce to manage the manufacturing process, and that manufacturing process involves accurate scheduling of both the supply side and the customer side – particularly as their manufactured goods have a limited shelf life. The Human Capital Management module they have implemented includes the ability to manage multiple sites in multiple states with multiple pay rates.
These labour expenses are then automatically transferred to the General Ledger and Manufacturing systems. (web one / him /module / time labor. j sp, June 2004) The People Soft Supply Chain module includes demand forecasting, production scheduling, distribution planning and network optimization (web one / all ent one products. j sp, June 2004) which are critical when managing 15 production plants manufacturing over 430 million cases of beverages per year. (Beverage World April 2001) 3. 5 There are many applicable uses of Extended Enterprise Systems at Pepsi Americas.
The use of Enterprise Systems enables Pepsi Americas to gain a strategic advantage over there competitors by extending the standard ERP modules which all their competitors have. The most strategic and visible of these Extended Enterprise Systems has been their Customer Relationship Management which was completed in September 2003. It has formed the basis for a new business strategy which involves having call-centre based telephone sales staff contacting customers on a regular basis and collecting the customers order. This is a significant change from past practice when a truck loaded with beverages simply visited each customer on a set round – often running out of some stock and then returning with to returns of other stock.
The new pre-sale system will allow trucks to load up with the exact customer requirements making for less frequent more accurate deliveries. Another important strategic Extended Enterprise System is the use of a Transportation management system from Lean Logistics (web 02 21 03. html).
This system extends the standard Transportation Management system of simply tracking and scheduling inbound and outbound shipments by creating a Transportation Marketplace that allows carriers to bid on loads. The web based system is integrated with People Soft and allows Pepsi Americas carriers and suppliers to gain visibility across the transportation network. o Example 2 – Parmalat Australia Ltd 3.
1 Parmalat Australia currently operates SAP R/3 v. 4. 6 c as their Enterprise System software. The company has a SAP Business Suite Licence, which gives them access to a range of applications outside the core R/3 system. These include Business Warehouse (BW), APO (SCM), PLM, CRM, and SAP Portals. Parmalat first went ‘live’ with SAP R/3 (version 3.
0) in July 1996. The implementation process took 13 months to complete, commencing in June 1995. Parmalat used a team of consultants from Price Waterhouse to assist with the implementation. A team of Parmalat IT staff were involved that comprised of a Project Manager (the General Manager of IT), and managers from key business divisions. The project team worked together with the SAP consultants through each stage of the SAP development cycle. They used “as is” analysis to model how the business operated at the time, and used “to be” analysis to redefine business processes for SAP.
All training was done in-house by the SAP trainers, who trained Parmalat IT staff, Business Managers, and key users in the core business areas. The ‘go-live’ date saw the implementation of four SAP modules – Sales & Distribution (SD), Materials Management (MM), Financial Accounting (FI) and Controlling (CO).
However not all modules were implemented at all geographic locations. Queensland sites had all four modules implemented, Victoria had all modules except SD implemented, NT had only MM implemented, and there were no modules implemented in SA or NSW as Parmalat’s operations were fairly limited in these states at the time. 3. 2 Parmalat is in a very mature phase of its ES life cycle.
It has been eight years since the company first implemented SAP, and during that time they have experienced two system upgrades. In 1998, Parmalat upgraded from version 3. 0 to version 3. 1. This was a fairly small upgrade compared to the upgrade they implemented in January 2001, which involved upgrading from version 3. 1 to version 4.
6 c, as SAP had launched a number of new versions since 3. 1. Parmalat Australia plans to conduct another system upgrade in late 2004. Since the initial implementation in July 1996, Parmalat has implemented additional modules, and has extended existing modules to other geographical locations. In April 1997, the SD module was implemented in NT, and in July 1997 SD was also implemented in VIC. In 1998, Parmalat implemented a new SAP module – Plant Maintenance (PM).
This module was implemented at all manufacturing locations. In July 1999, Parmalat then implemented all modules at its joint venture operations at Labrador (QLD), Warwick (QLD) and Raleigh (NSW).
Later that year, Parmalat implemented another new SAP module – Human Resources (HR) in all of its existing SAP sites. And, in August 2002, Parmalat implemented the Warehouse Management module (part of MM).
Over the last eight years Parmalat has also conducted numerous enhancements to the system that has given the company the opportunity to gain maximum benefit out of the system. In summary, the user enhancements, along with the system upgrades, new module implementations and extensions to new geographical locations, has given Parmalat the experience and confidence to utilise the system effectively to gain the maximum possible return on their investment. 3. 3 Parmalat uses the following generic ES modules – Human Resources (HR), Financial Accounting & Controlling (FI/CO), Sales & Distribution (SD) and Materials Management (MM).
The majority of SAP use is confined to these R/3 modules, as they represent a major part of Parmalat’s core business operations. Parmalat also has cross applications implemented, including Workflow Management, IXOS Archiving Technology and Business Documents.
Outside of the generic ES modules implemented, Parmalat also has a number of extended ES, including Business Warehouse (BW) and Supply Chain Management (SCM), namely APO. However functionality in these modules is fairly limited, compared with the use of the core R/3 modules. 3. 4 Parmalat uses the generic ES modules according to their intended use, although not all sub-modules are utilised. For example, within FI/CO Parmalat uses a large majority of the financial accounting tools within the R/3 system, as referred to in the SAP Workbook, by Calvert. It uses the General Ledger module to perform GL postings and run GL reports, Cost Centre accounting to control and manage costs within different areas of the business, Profitability Analysis, and Travel Management.
Parmalat has an Accounts Payable department that uses the Accounts Payable module (FI-AP) on a daily basis. It also has a separate Accounts Receivable department that uses the FI-AR module. The information entered in these modules is then posted to the GL module (FI-GL) by the Finance department. The balances of GL accounts are then used by the Finance department to calculate the company’s financial statements. In terms of the CO module, Parmalat mainly uses this module for reporting purposes. Within the SD module, Parmalat uses Sales Order Processing, Goods Issue and Inventory Control, and Billing & Invoicing.
These sales and distribution modules represent core business functions, and assist in standardizing these business processes to ensure the opportunity for error is minimise d. It is crucial that these functions operate efficiently as they have a significant impact on the overall success of the business and the maintenance of customer relationships. Within Materials Management, Parmalat uses Production Order and Inventory Control, Purchase Orders and Contracts, Production Planning & Control, Warehouse Management, Inventory Management and Plant Maintenance. These modules also represent core business activities within Parmalat. The activities on the buyer side of Parmalat’s value chain are key to reducing procurement costs, reducing inventory, and minimizing waste. These areas provide the business with an opportunity to realise cost savings within their factories, warehouses and depots, and more effectively manage Parmalat’s raw materials, capital equipment and saleable goods.
The SAP modules assist in classifying, storing, and managing the plethora of different materials ordered for a range of different products and customers. With nine factories located throughout Australia, each factory has different processing capabilities, different raw materials requirements and different maintenance requirements. The needs of the factories must also interface with the sales functions, as their production schedules are dependent on the rate of sale, and other variable factors such as new customer contracts, or changes to existing customer orders. Therefore the integration of the SD modules and the MM modules reflects the business functionality required at Parmalat. Parmalat’s use of the HR module is restricted to those modules that are relevant to the business.
These modules include Payroll, Time Management, Organisation Management, and Training & Event Management. With over 1300 employees Australia-wide, the Payroll module assists in streamlining the payment of salaries, and reducing the chance for error. Parmalat also has many casual and part time staff that work varying hours, according to changing production requirements. The Time Management module assists in easily calculating wages to be paid, using rules and processes that reflect the needs of the business.
Organisational Management allows Parmalat to replicate the companies organisational structure into organisational units and positions that are attached to different cost centres. This assists in managing the expenses associated with employees located in different departments. In summary the use of these four generic SAP modules (FI/CO, SD, MM, HR) at Parmalat assists in representing the company’s business processes and integrating data and processes from different areas of the business. 3. 5 Extended Enterprise Systems are clearly applicable to Parmalat’s business operations. The Extended ES that are of particular relevance to Parmalat include Business Warehouse (BW), Supply Chain Management, Product Lifecycle Management (PLM), and Customer Relationship Management (CRM).
Parmalat currently uses BW, which it implemented in 1999. All SAP data is available in this data warehouse, including sales information, purchasing data, farmer payments, production data and human resources information. Business Warehouse allows Parmalat to manage and analyse the huge amount of information that is generated every day by the activities of the business. BW enables users at Parmalat to run a range of reports in order to analyse an area of the organisation in as much detail as necessary. For example, a marketing executive may want to analyse sales results for a particular brand. They are able to use BW to look at sales data for that brand on a national basis, in a particular state, or within a defined sales region.
They can even drill down according to distributor or promotional account group. The opportunities are only restricted to the information hierarchies set up in the system. BW is an extremely useful tool for many of Parmalat’s executives across different departments to analyse the core business activities. It essentially turns data into information that can be used to make important strategic decisions and help answer business questions. Supply Chain Management is another relevant and useful extended ES for Parmalat. In March 2004, Parmalat implemented a small section of APO – Advanced Planner & Optimiser, a supply chain management tool.
APO can be used to assist Parmalat in its production forecasting, demand scheduling, supply network planning, and to optimism its transport costs. These tools are extremely important in the business of manufacturing, as they are key to improving workplace productivity, reducing procurement costs, and reducing inventory costs. Transportation and distribution logistics are also important areas for Parmalat to control its costs. APO will enable the company to identify the most cost effective transportation routes and schedules for each of its factories, depots and warehouses, across all geographic locations.
Essentially SCM programs provide a single view through one system across the whole supply chain to the end-customer. The production of Parmalat’s beverage products can be controlled from the farm to the customer. Parmalat currently uses APO to conduct supply network planning. This tool is particularly relevant to Parmalat as it provides highly complex cost-benefit analyses thereby delivering important information about its core business activities.
For example, the system can look at the production of a particular product, and take into account the various factories, customer locations, geographic differences, transportation options and other factors, in order to establish whether it is cheaper to produce ‘Breaka’ at Parmalat’s Nambour factory or at its Labrador factory. These highly complex analyses provide very useful information to key decision-makers, and enable the company to achieve significant cost savings. Product Lifecycle Management is another extended ES of relevance to Parmalat. With such a wide portfolio of products, all at varying stages of their product life cycle, this extended ES would enable the company to manage all aspects of product life cycle management such as recipe management, project management and consumer research. Parmalat places a huge emphasis on research and development, and therefore PLM would assist in managing these projects from concept through to finished product.
Customer Relationship Management is also relevant for Parmalat although to a lesser degree in the short term than the other extended ES mentioned. This is primarily due to the fact that the manufacturing industry has not yet identified a huge need for it based on the investment required and the return it would provide. This is a different view to companies that operate within services industries. For manufacturing businesses such as Parmalat, the most relevant aspect of CRM in the short term is that relating to web enabled ordering. This would deliver cost savings through greatly reducing the amount of paperwork and manual entry currently required to enter and check orders. CRM would also assist Parmalat in understanding and better meeting the needs of its customers, however with such a broad customer base, and many small customers, it is not practical to implement this extended ES at the current time.
o Example 3 – Coca Cola Bottling Company Egypt 3. 1 TCCBCE operates Oracle E-Business Suite as their enterprise system. This was implemented late 1996 but the time it took to complete this implementation was not specified. This suite of applications contains 14 modules, and can either be purchase as a complete suite or by individual module. As specified on the Oracle web site, TCCBCE chose to implement the following modules; Financials, Order Management and Inventory Mangement. In 2002, TCCBCE also implemented Oracle 9 i Lite.
This application provided a software platform that synchronized their existing Oracle applications as well as any mobile devices / operating systems that may be in use. 3. 2 TCCBCE is at the mid to late stage of the enterprise system life cycle. Implementation of the system was completed over 8 years ago and the company has since had time to evaluate both the effects it has had on its business processes and profit margins. This review is what caused the company to uncover an area of their business which could still be vastly improved – order placement and delivery.
Due to this, TCCBCE set new project goals to work towards to further enhancing this successful operation. Whilst additional modules were not implemented, TCCBCE approached Oracle to deliver a system that would provide a platform between their existing Oracle applications and hand-held devices. This allowed their sale teams and delivery drivers to place orders the same day whilst on site with their customers on these hand-held devices. Using the old system, an order would take up to 2-3 days to be received and processed.
TCCBCE now achieved fast and efficient ordering with this new addition to their enterprise system. TCCBCE now had a system which they felt completely covered all aspects of their business effectively. The enterprise system life cycle will continue, and TCCBCE will now need to evaluate how these additional changes to their business will impact on their success 3. 3 The generic enterprise system modules are Human Resource Management, Financial Accounting, Logistics, Sales and Distributions and Materials Managements.
Of these modules, TCCBCE had the equivalent of the four of these implemented as Oracle’s differ slightly in what these generic ones cover. The equivalent generic modules are Financial Accounting, Logistics, Sales and Distributions and Materials Management. 3. 4 TCCBCE uses these modules to complete and record all operations within their business. Their core business is to manufacture, sell and distribute beverages across Egypt and they utilise their implemented modules effectively to do this. The financial application manages the flow of cash and assets within the enterprise.
It allows the company to enter and track all transactions within the company, evaluate how the departments are operating and plan for the future and this is all contained an integrated and secure financial application. In the oracle module of this, Logistics are included here rather than as a separate module. Calvert defines the Sales and Distribution process as establishing and maintaining customer relationships, and ends with the delivery of goods or services to the customer. TCCBCE does use this module, but within Oracle it is spread over two modules, Financials and Order Management. When the sales team takes the order from their distributors / customers , it is processed in the Order Management module. Once this has occurred and the delivery has occurred, the invoice is processed through the financial’s module to the receiver of the goods.
Like Materials Management, Inventory Management tracks their levels of product stock as it is both manufactured in their plants and then distributed out to their customers. This in conjunction with Sales and Distribution provides accurate reporting and allows them to project the future requirements of their bottling plants and sales targets. 3. 5 Whilst it was not specified whether TCCBCE had implemented any extended enterprise system modules, there are two examples of these that could be utilized by this or any company within the beverage manufacturing industry. Customer Relationship Manager is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. For example, TCCBCE might build a database about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could access information.
They could then match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased, and so forth. Although they already have this at a much lower level using their existing Oracle Modules, this could provide increased efficiency in the area and would be easily implemented as it is offered by Oracle. Another extended enterprise system that TCCBCE could utilize is something similar to Product Lifecycle Management. Carbonated drinks are able to have a long shelf life, however TCCBCE also produces some juice based products which would have to be monitored to ensure that stock is not wasted due it s poling. This software would allow TCCBCE to monitor all aspect of their manufactured products whether it be the actual way in which the product is made, the way in which it is bottled, products shelf life, and any consumer research that may be applicable. o In General 3.
4 Quality control and product safety is critical for companies that manufacture for human consumption. Beverage companies must have systems in place to constantly test every batch of product so that it not only meets quality standards but that it meets safety standards. Parmalat has a quality monitoring system that monitors testing of raw milk when it arrives from the farm. The system is called Laboratory Information Management System (LIMS).
It is essentially a system for controlling the testing of raw milk in a laboratory setting. It also enables laboratory technicians to record, analyse and report testing results.
The system provides test results quickly, which is important as milk tankers are held at the delivery bay until the testing process is complete and provides a positive test result. Parmalat also uses Production Control systems to control all aspects of production of its beverages. These systems either come with the machinery purchased for the plant, or at some plants additional production control systems are installed that monitor a number of factory machines. These systems essentially monitor the efficiency, capacity, throughput, errors, product defects and waste associated with the processing machine. Pepsi Americas has invested in Vending Machine Maintenance System (web June 2004) as it operates and maintains thousands of vending machines across its marketplaces.
4 Analysis Based on an understanding of the business and the ES portfolio it is possible to analyse the success of the ES portfolio and the suitability of the implementation method used. A business elements diagram is used to assist in the understanding of the operational structure of each organisation. o Example 1 – Pepsi Americas Inc 4. At Pepsi Americas the generic People Soft Enterprise System modules implemented provided a way to standardize and consolidate the disparate systems and processes of five individual companies into one.
Based on the level of discussion in the case studies found it is can be assumed they represented a very high ‘fit’ as it was replacing many smaller systems with the “best way.” However, it appears from the aggressive addition of Extended Enterprise Systems such as Customer Relationship Management, Sales Force Automation and Transportation Management that Pepsi Americas sought to use there IS portfolio to gain a strategic competitive advantage. They have used these systems to radically modify their traditional sales process and carrier selection process. As such they didn’t increase the ‘fit’ of there is portfolio – they used the extension of the portfolio to implement process change – and as a result have a very high level of ‘fit’ as the systems were used to facilitate the change. 5. Selecting the most suitable implementation methodology requires analyzing six different characteristics of the organisation and the implementation. Characteristic Discussion Outcome Organisational Complexity Spanned across 120 sites in 13 countries, manufacturing 300 different beverage products for a range of licensees it is a complex organisation.
Complex Organisational Size With 14, 500 employees, 6000 trucks delivering 430 million cases of beverages per year it is a large company. Large Organisational Structure From the Board of Pepsi Americas down through the regional management and then the individual countries subsidiaries it has many layers. Tall Extent of Controls To manage the production of a beverage through to the on-time delivery to the end customer and the reporting to the brand owner requires tight controls. Tight Number of ES modules By implementing three of the key Enterprise System modules Pepsi Americas took on around half the generic ES modules Medium Customisation required The extent of customization of the core modules is unknown but the relatively short implementation time and the delivery on-time and on-budget would indicate that there was low customization. Minimal Based on these criteria it would be very difficult for Pepsi Americas to use a “Big Bang” implementation methodology. It would be impossible to install software at so many sites and train that many users in the short time required by this methodology.
The only characteristic which would have favoured this approach was the low number of modules and the low customization – however these would be heavily outweighed by the size issues. An “Aggressive” methodology is not as rapid as the “Big Bang” but would still require an aggressive schedule and multiple modules at the same time – this would face similar logistical challenges to the “Big Bang” approach. The “Waved” methodology would be a suitable approach to the implementation across the regions and countries. The implementation of a module should be complete and bedded down in one country before then moving the implementation team and resources on to another country. The implementation team would learn from each implementation and have a ready tool set of materials to utilise in the next country. Within a country the “Phased” implantation methodology would be the most suitable for such a large and complex company.
The phases could be managed by plant or by module – or a combination of both providing a manageable level of organisation disruption and resource use. 6. o Example 2 – Parmalat Australia Ltd 4. For Parmalat, enterprise systems implementation has provided most of the information system portfolio requirements of the organisation.
The implementation of its four SAP modules has enabled Parmalat to achieve approximately a 90% ‘fit’ with the organisation’s information systems requirements. The company has filled in the 10% of unmet needs through customization, building extra functionality, and purchasing specialist systems. In terms of customization, Parmalat used configuration tools and many “user exits” to more closely represent and reflect the company’s business processes. This was particularly important in the SD module, as the generic order entry screen did not enable Parmalat to use both “units” and “crates” in a sales order (eg. “Ten crates and two units”).
It only allowed either “units” or “crates” – not both in the one transaction.
This meant that Parmalat had to build a combination of cover screens to enable this functionality. Another enhancement made to the Parmalat enterprise system was the custom development of a Route Management System built in ABAP. The development of this sub-module was a necessary part of Parmalat’s overall IS portfolio as it provided important functionality in the area of sales and distribution. There was nothing within SAP that provided the functionality Parmalat required, therefore the solution was to build a separate sub-module in ABAP. Parmalat operates a complex route distribution system, where each franchise distributor is allocated a specific geographic region within each city. The Route Management System was needed to link customers with routes, manage incoming orders on a daily basis, manage the delivery of orders via certain distributors, and create optimal routes for daily, weekly and irregular deliveries.
This sub-module also needed to interface with mobile hand held devices operated by the delivery drivers. These devices were sent delivery order sequences, customer order information, pricing, and other specialist information. As there was nothing in SAP that could meet this specialist requirement, Parmalat’s solution was to build this functionality into its system. Parmalat has satisfied the remainder of its unmet needs by purchasing specialist systems. It has purchased a laboratory management system (LIMS) to assist in managing the testing of raw milk when it arrives at plants to be processed. This is a very delicate area of the business that must be managed carefully and safely as it has implications on the correctness and quality of Parmalat’s milk beverages.
The laboratory management system assists in recording, managing and analyzing laboratory tests conducted in-house by Parmalat lab technicians. The tests must be 100% accurate and provide results quickly, as tankers are held until testing results can confirm a positive result. Parmalat has also purchased specialist production control systems for use in its factories. These systems are used to control and manage the processing machines and provide information on levels of efficiency, capacity, errors and wastage. These systems are usually purchased along with the machines, although Parmalat has purchased additional systems that have provided increased functionality and reporting, and can be used on existing machinery. 5.
Based on the number of modules implemented, the customization required, and the complexity, size and structure of the organisation, a phased implementation method is the most suitable implementation methodology for Parmalat. The extent of the implementation, characterised by the high number of modules and the customization required to those modules, means that a phased implementation is far more appropriate than a big bang approach. It would be extremely difficult for Parmalat to coordinate all the module interactions, and the amount of resources required to implement the modules successfully would be far beyond the company’s reach. The level of complexity is higher for Parmalat as some changes to the software were required, which introduces the possibility of errors and forces the need for increased testing of those changes.
In this situation a phased implementation is more appropriate as a big bang approach would be far too risky. Organisational size and complexity is another intervening variable that confirms the suitability of a phased approach to implementation. In Parmalat’s case, its complexity is derived from the extensive array of products it produces, the huge number and types of customers it supplies, and the complexity associated with manufacturing products with varying raw materials, processing procedures, storage requirements, packaging needs and shelf life. Parmalat is also a very large company, with over 1300 employees, 800 computer users, and 600 SAP users.
It turns over more than $650 million in sales per annum, operates nine factories across the nation, has offices and depots in every Australian state, and exports to over 24 countries. Therefore the resource requirements would be far too high in a big bang approach. A phased implementation approach is also more appropriate given Parmalat’s extensive organisational hierarchy and fairly tight control. A phased approach will deliver the benefits of a working system to senior management sooner, which is important in such an organisational structure. In terms of alternative implementation methods a waved approach is also an appropriate method for Parmalat given the system needed to be implemented at a large number of geographical regions.
This approach would supply feedback to the project team so that learnings gained at one location could be used at the next implementation. Each successful implementation would be viewed as a mini victory, which would also keep team morale high. The project team also has the flexibility to implement waves of change when they are needed. For example, implementations may occur when operations expand in a newly entered state as sales increase, when a new market is entered, when a new release of the ES software is made available, or when an enhancement is made within a particular module. An aggressive approach to ES implementation is also appropriate in Parmalat’s case, and in fact was the approach taken in terms of the company’s treatment of the legacy system.
The company was committed to implementing the new system, and treated the link to the legacy system as temporary and not semi-permanent. This was an effective approach in gaining the full commitment of the project team, senior management and the business users of the system. 6. o Example 3 – Coca Cola Bottling Company Egypt 4. TCCBCE has achieved a 85% fit for the enterprise system solution the have implemented to meet there IS portfolio requirements.
Whilst the Oracle E-Business Suite and it’s implemented modules provided a much needed improvement in the way they operated and tracked their business, they still lacked efficiency in some departments. This was evident to them when they reviewed the Oracle implementation during the ES life cycle. Companies can increase the fit of the enterprise system through customization, modifications and the use of other packaged solutions. TCCBCE increased their fit through the addition of Oracle 9 i which expanded the accessibility of the system to include those members of staff that may not be able to be in front of a desktop computer that was linked to the information system.
For their staff who visit customers everyday, this became an issue, as when customers placed their orders with the sales staff it would take between 2-3 days for delivery to occur as the order would have to be taken back to the office, processed through the system and then prepared for delivery. Now through the implementation of the platform and use of hand-held devices, Loan El Dessouky, Chief Financial Officer of TCCBCE says “our pre-sales teams increased order accuracy from 75% to 95%, doubled the productivity of our delivery trucks, and cut administration costs by 50%.” 5. The most suitable implementation method for TCCBCE is the phased implementation. As the company is quite large in size with 7, 400 employees and 11 bottling plants and 29 sales and distribution centers, it would beneficial to spread the implementation over various modules and areas to limit the impact on business operations. Also, the complexity of the company and its operations could see that the risk of a big bang implementation would be far too great. Although the number of modules only amount to three and the customization is limited, these cover all aspect of their business and so a phased methodology would be more appropriate.
This would ensure the modules were properly implemented, staff correctly trained and that they interface with each other appropriately. 6. 7. Within the beverage manufacturing industry a few enterprise systems are utilized and all appear to work well for those companies. However, after reviewing these three organisations and their chosen enterprise systems, SAP appears to be the most suited for the manufacturing industry and the most popular. SAP provides a large amount of functionality that is well suited to the manufacturing industry and also offers extended ES modules that would be directly utilized by this industry, such as Supply Chain Management, Customer Relationship Manager etc.
With un-customized implementation, a manufacturer could most likely achieve a 85%-90% fit immediately. With further customization and modifications, SAP can be developed to cover all needs that a company may have. Whilst Oracle E-Business Suite and People Soft offer excellent enterprise systems also, the overall package that SAP provides is most suited to the selected industry. 5 Conclusion Enterprise systems provide a means of transaction processing management, by supplying common databases and business processes. With the implementation of a system like this, confidence in accurate and detailed reporting is gained. Whilst no system may completely encompass all areas of your business, through customization of individual modules and modifications as well utilizing any other packaged software that could complete the system, all requirement of your Information System portfolio will be covered.
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