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Unifying global operations

Unifying global operations

Greg James was on sabbatical following a year-long assignment in Europe with the New Zealand Dairy Board, when he was offered to head what he describes as a "small business initiative"called Jedi. The call came from an executive of the then newly-formed Fonterra, and the job was director of the dairy group's biggest business transformation program to date.

Jedi, which was rolled out in two-and-a-half years, entailed moving Fonterra's commodity business to a common ERP platform and "a single global way of doing things".

James says the Jedi program aimed to look at the supply chain of the dairy giant "from cow to manufacturing to storage to happy customers".

The change involved was massive, for Fonterra's supply chain covers four million cows producing 20 billion litres of milk each year. It has offices in 70 countries and employs nearly 19,000 staff. Fonterra, says James, would be recognized as New Zealand's largest company if it were listed in the Stock Exchange.

In order to implement the new environment, "We had to reinvent ourself; analyze every part of the business, all processes, all organizational structure,"says James.

In the midst of this process, James got an offer to head global business processes, one of three business units created from the Jedi project.

As head of global business processes, his primary responsibility was to consolidate the dairy firm's common business processes across the organization. "At the formation of Fonterra, everybody did things differently,"he explains. "Even for a block of cheese, there were different systems and processes."

Less than a year after taking that job, Fonterra's chief information officer Stephen Wallace moved to the newly-created role of commercial director transformation.

A year ago, James became Fonterra CIO while retaining his other position. "I wear two hats,"says James who believes the CIO/general manager global business processes role is unprecedented in New Zealand. But, he says, having the two portfolios actually provides "an opportunity to get synergies "across the global business group and the IS community.

In effect, the Jedi program dismantled traditional silos in the organization and standardized global processes. "It has enabled us to effectively bring all components that previously existed in each group, in other business units, bring them all together and get commonality in terms of the way we do things. It has driven consistency of processes, and has enabled us to draw consistency in approaching framework in terms of how we operate."

Today, he notes, "We do the things the same way in Germany, Mexico and New Zealand."

As James explains, Fonterra was set up in 2000 as an amalgamation of the old dairy industry, with self-contained business functions. Fonterra consolidated its back office functions globally within New Zealand, into a business transactional services activity based in Hamilton. James says the Hamilton operations fared well when benchmarked against BPO organizations locally and overseas. "Our model is better than most international models."

Instead of having disparate sales offices for various business units, a customer service center was set up at the Auckland's Princes Street headquarters. This center operates round the clock, providing multilingual support for customers across the globe.

"From a New Zealand perspective that is good because we have been able to bring those jobs back to New Zealand, which previously were in other countries."

Fonterra looked at different models for the consolidation, but James says there was also detailed analysis for a model that would suit its "points of uniqueness".

"We operate predominantly on the fact we are based in the deep Southern Hemisphere. Our location is a bonus in producing milk but the challenge is getting product to our customers.

"If you are operating in Europe as a business, Europe is very tight so you can ship products from one country to the next, it will be there within the day or a couple of days. Sometimes it takes us six weeks to get a product out of New Zealand to a plant in Europe. We have to plan in advance to make sure all the components of our supply chain can deliver a product to a customer when the customer wants it. We have to work that out and make sure that is very, very cost effective and timely."

For Fonterra's 200-member IS team, the new system means being exposed to areas of the business they traditionally would not have had. "If they worked in this part of the business under the old structure, they tended to stay in that part of the business. But now we pool the resources together so it means they could be working on X, Y, or Z within any given period. They are given a lot more flexibility and ability to learn the various parts of the business in the new model."

He believes this set-up also helps in staff retention. "It does give us the ability to retain staff as opposed to having staff leave to go to other organizations to experience different types of skill sets."

James is such an avowed advocate for shared services that during a recent CIO Leaders' Luncheon, he stated, "If anybody needs convincing on the shared services model, I will be willing to spend time with them."

Consolidation, he says, is an "absolute must"for big companies. "Technology has improved to the extent now you can run a global operation on a single instance, [when] in the 90s there were impediments. It certainly makes the whole concept of shared services viable.

"It gives you the ability to rationalize and provides you with a natural framework and control mechanism that is not bureaucratic by nature, so it enables you to follow good, pragmatic, logical processes."

On the ICT front, he says, there is less pressure than having multiple operations and environments. "It makes accountability and responsibility very clear. You have control, therefore you need to make it work. Whereas, if you have lots of activities, it is always hard, particularly running across multiple geographies and multiple time zones."

The key -- and imperative -- for shifting into a shared services model is planning and executive support. "Really focus on getting the initial plan, the initial business model right,"he says. "Understand what it is you need to deliver. Start at the business model and deconstruct it back to what that actually means."

Spending all this time up-front is critical. "While it might seem a long time to get into a position where you can say now we can start to implement these, that time actually saves you time at the end of the day. So you are very much focused on what the business objectives and outputs are." Support from the top, and in Fonterra's case, the chief executive, is essential. "It worked exceptionally well because when you have conflicts you can make decisions quickly and you can move in and get resolution."

If there is one thing he would have done differently, it would be spending more time defining what the reporting requirements would be as he and his team went through the lifecycle of the activity. He says they underestimated the transparency of the amount of information that the new system was able to capture.

"We now have this huge demand for information, because people can now see from end to end what was actually going on,"he says. "The more information we have, the more we need to make sure we have got the right sort of content management and access methods."

The end of ICT projects

If there is another thing James is empathic about, it is that these days at Fonterra, "There is no such thing as an IT project by itself." "We sit down with the business in terms of our planning, and we align our plans to their plans."

He says there is now an "enterprise road map"that consists of all the activities the business wants to undertake over the next 18 months up to three years. "Underpinning that we have an IT road map which says these are the nondiscretionary things that we must do to maintain the business in a viable state of operation. Then we work with the business in terms of how do we bring the innovation factor into the collective mix to make sure we are driving to the business strategy. "So for every initiative, we have a business sponsor,"he explains. "We go through a very formal process to evaluate project based activities based on the investment solutions."

Dialogues

James says Fonterra's business groups work closely with key partners, suppliers and customers. In his case, these would include those outside ICT, like shipping companies so they could discuss ways to improve information flow around container handling.

He says the business groups meet with major customers every quarter. "We will support them in terms of the activity as required so we tend to get involved at least once a year with some of these activities."

James sets time for meetings organized by Fonterra's ICT providers where he gets to meet CIOs from other industries. "I find the partner forum-councils effective because they give me the opportunity to understand where my key suppliers are heading. It also gives me an understanding or option or ability to meet others in other companies globally and really talk about where they are heading. So you get the mix of the internal strategy from your suppliers and then what other organizations are actually doing."

Locally, he has met with Pat O'Connell, chief information officer at Carter Holt Harvey. The two brought their IT leaders together late last year. "We are both big SAP houses,"says James. "Therefore, if we are going to do something of a major scale, it has the potential to take off a lot of resources out of the market which means [one of us] may struggle to do it."

It was the first time both CIOs and their team leaders met in such a fashion. James says there are plans to hold these types of meeting every six to nine months.

"It is a good idea, we should to it more,"says O'Connell. "I like to keep them [vendors] on the hop, keep them guessing."

A fascinating industry

It is, indeed, a full-on job for James at Fonterra. "We are constantly looking at ourselves and our competitors, deciding what would be the next optimum model,"he says. "We look constantly at the supply and demand picture, project and program disciplines, work at being better the first time and to be first in services."

But it is where James -- who has extensive consulting experience in government and various industries, including being CIO of the New Zealand Dairy Board -- wants to be. "The dairy industry appeals to me, it is close to what New Zealand is all about. It is a fascinating industry. It has an amazing amount of very, very good people, interesting people.

"It operates in New Zealand and competes globally, so it sort of gets in your blood a bit. I like it so much I decided to join as an employee,"he says, smiling.

And what is his primary advice for ICT professionals who wish to move on to chief information officer and other C-level roles? "Make sure that you understand the business that you work with."

There is an element of technology on the job, notes James. "I can't and would never be able to operate a detailed level across the raft and space of emerging technologies. But it is important to understand enough in terms of what outcome would enable us to ultimately enable us to derive business value from technology."

A good team is imperative for success. "Make sure you have the right people in the right roles that have the skills in the specialty areas that you need to operate. Make sure you pick your team very, very well because at the end of the process it is all about teamwork.

"Whether it is CIO or CFO -- it is about leadership. It is about giving clarity of vision and setting the objectives clearly and then picking the right people to make sure collectively we can deliver."

As well, "Keep a watchful eye on very, very competent people that you might need to hire one day to be part of a bigger team."They could be people in your current organization or people you meet outside, in industry functions.

And lastly, he says, "Never ever fear hiring someone in your organization that is actually smarter than you. You actually need a lot of smart people working around you."

Greg James, Fonterra chief information officer and general manager global business processes, spoke at the recent CIO Leaders' Luncheons in Auckland and Wellington sponsored by Sun Microsystems .

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