Ripe for improvement

Ripe for improvement

A failed project provided lessons for the successful rollout of Turners & Growers' new warehouse management system. Darren Greenwood travels to Nelson to check out how the fruit distributor managed this turnaround, and how other companies can learn from it.

Turners & Growers came out of its merger with ENZA as the country's leading distributor and exporter of fruit and other fresh produce. The merger resulted in it having 28 sites across the country, electronic links with 140 other suppliers and overseas markets for 60 per cent of its produce, mostly apples and pears. But it also meant managing several divisions with different IT infrastructure and technological capabilities. An inventory control system called ICS, for example, simply tracked pallets and products in the warehouse, but not sales. A fruit inventory system, called PIPS that handled grower payouts, needed double-entry typing to work.

By the late 1990s, explains Nelson-based logistics manager Hans Krabo, the venture was looking for a more modern system, one suited to working in a global environment.

In 1999, ENZA implemented a SAP-based system but, says Krabo, "the system was inflexible and did not have a warehouse module".

The company then developed a warehouse system using Jade, but found "problems" in maintenance and communications between the SAP and Jade systems, which created "a costly environment".

Keeping the faith

Turners & Growers reviewed its options and decided to stick with SAP. Auckland-based MIS manager George Dixon says his predecessor realised that, because the company had already bought SAP, "it made more sense to implement SAP properly than to go through a process of looking at opposition systems".

"Initially, SAP was used only for sales, distribution and financials but it had cost an awful lot of money and had not given much value. We realised it wasn't SAP at fault but the implementation," says Dixon.

The purchase decision had been made by "people sitting in Wellington", he continues, and the implementation was "too theoretical".

Some $28 million was spent on the system, including licences. "But in essence this was a write-off, as we did not do an upgrade, we installed a new system," Dixon admits.<p/>

Since then, Turners Growers has spent a further $4 million on SAP.

Dixon was brought in as project manager for the second implementation, which involved a pilot project called Paris 1, creating a SAP-based warehouse system in Nelson and Hastings in 2003. This was so successful, says Krabo, that it was extended to warehousing in other parts of the business.

Passion succeeds

Dixon notes onsite users such as Krabo are "passionate" about the new system, and such acceptance by users is essential for an implementation to succeed.

"As long as you get the users onside, reflect on the ways they want to run the company, it will work. Technically, you can fix anything in SAP. Hans Krabo was the leader of the users, they owned the system and they were allowed to own it.

"I ran a project and made sure they set the requirements. They ensured the requirements were met by testing. They sold it to the rest of the business," Dixon explains further.

Krabo confirms the implementation was "driven by the business, not IT".

"This took away all the issues, as well because the business writes the specifications, rather than being told 'you are going to have [to do this].'" Krabo says the original SAP system required re-engineering of some of the business processes and that was another reason why it failed.

With business setting the implementation, there was a turnaround in fortunes for SAP within Turners & Growers. Thus, SAP has expanded from packhouse work to production and transportation. Having the same system means staff are spared from re-entering the data. Managing the movement of pallets is easier, with one process that formerly needed seven transactions now being done with one.

"We made sure initially we put in a Morris Minor. Slowly, we are developing a Rolls Royce. A lot of the nice-to-have functionality was not implemented, but in January 2005 we implemented a whole lot of desired functionality. Now the business understood what it was capable of, they started to want more, they saw the benefits," says Dixon.

Originally, when T&G first implemented SAP, it used consultants from Intelligroup plus freelance staff because the company had few SAP skills. However, Dixon says the company is now almost self-sufficient in the knowledge it needs to handle future SAP projects.

"Our (second) SAP project was on time and on budget. It was one of our better implementations. The regional nature of our business made things more complicated and there are regional differences in cultural and business practices. It means we had to build flexibility into the system, with some bits of code required by one region but not another. But some differences have been taken out now. You can then standardise after a successful 'go live'," he says.

Turners & Growers has around 850 PCs, typically running as thin clients through Microsoft terminal server (it has 85 servers), including a Network Appliance NAS for data storage. Some operations run on Citrix and the company is looking at eventually migrating from Microsoft to Citrix. Storage needs are currently three terabytes but are about to increase to nine terabytes.<p/>He emphasises the ease of implementation in the new system. "The only thing we have to do is find a machine and hook up to a network. All you do is hook up to a big enough pipe," Krabo explains.

"SAP is the nominated core system, so we're moving towards removing all other legacy systems and replacing it with SAP in the next 12 months," Dixon continues.<p/>Turners & Growers expects to spend around $3 million on SAP alone, by extending its use into non-pipfruit distribution, domestic imports and marketing for other fruit and vegetables.

Fresh pressures

Dixon says the company is "under pressure" from UK supermarkets to use RFID tagging for inventory management, but its use in New Zealand remains "some way off yet"

"We're redesigning our web services and website to generate higher enquiry traffic and in 2006 will start electronic trading," he explains.

With the SAP Business Connector, using electronic document interchange, the company can communicate with 140 packhouses and cool stores owned by third parties. "Even if the stock is not owned by us, we have traffic going through the system 24x7, with all submissions, dispatches, shiploading and warehouse movements. It's not just a network of four sites, but 150," Dixon adds.

Back in Nelson, Krabo surveys a busy scene of seasonal staff packing fruit and vegetables for export, aided by a variety of machinery.

Some warehouses keep goods fresh using 'contolled atmosphere' warehouses with their oxygen extracted, so these are unsafe for humans to enter, but do not harm the fruit or affect their future consumption. X-ray systems even grade the fruit by colour and defects. Other pending technologies include online labelling and RFID tagging and serialisation.

Krabo says such tagging is already underway to pallet level, but in time, even individual cartons will be tagged.

"Legislation for track and traceability has become a big part of the export <p/>environment. We need to complete track and trace for recall management, which is why inventory management systems have to be so sophisticated," he explains.

Krabo describes himself as a "business person, not an IS/IT person." As logistics manager, he handles the logistics operations at Nelson including inventory management, distribution and shipping.

"I am simply after any system that will make our job faster and simpler. Yes, we rely on IT, but we have to remember a business is built around people and what you do," he says.

Krabo answers to the Turners & Growers South Island general manager and has one IT staffer below him, with most technical support coming from company headquarters in Auckland, thanks to the use of thin clients.

Krabo originally came from Sweden, where he gained an agricultural degree and had a farm and riding school, before arriving in New Zealand and Turners & Growers in 1989. "I come from an agricultural scene but ended up in operations in horticulture," he explains.

He says there are times he works 60 hours a week, but there are compensations. "I came to New Zealand as I had an urge to travel. I was keen to get out of a cold climate, but I still wanted mountains and brilliant trout fishing."

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