Jedi has kicked out the Boss at Fonterra

By ADAM GIFFORD

Dairy giant Fonterra has completed the first part of New Zealand's largest roll-out of SAP, tying together thousands of users and processes in its domestic supply chain in a deal worth an estimated $120 million.

The next step is introducing the system to the Fonterra offices and joint ventures around the world, starting in September.

Information systems strategy manager Donald Moore said this stage of what is known within Fonterra as the Jedi programme was delivered on time and on budget, taking into account the delaying of the original go-live date to allow for more testing and training.

Fonterra will not release the project cost - possibly because of concerns about what its farmer shareholders will say - but industry insiders put it at the high side of $120 million.

Moore said the new order management and logistics system replaced a custom-built system called Boss, which ran on part of a mainframe leased from the Livestock Improvement Corporation.

"It comprises large parts of SAP R/3, a whole new set of business processes and some redevelopment of our custom warehouse management system, Aims, which has been redesigned to fit in and integrate to the supply chain," Moore said.

Fonterra had also made extensive use of enterprise application integration (EAI) middleware from WebMethods, which has a close relationship with SAP.

"We decided to embed WebMethods into our applications rather than write point interfaces, so we go through an EAI layer which gives us greater flexibility as we deploy the remainder of the solution over the next 12 months."

Moore was brought in to head the panel which in 2001 chose SAP over Swedish rival Intentia to provide supply chain and advanced planning and optimisation software.

Once that decision was made, it became logical to replace the Oracle Financials with SAP, giving the German vendor an even greater share of Fonterra's IT spend.

The new SAP financials modules are due to go live in September.

"We will be consolidating multiple general ledgers. That will improve our ability to forecast," said Moore.

The genesis for Jedi came in 1999, pre-Fonterra, when dairy industry leaders started talking about ways to streamline processes and remove cost and complexity.

"Jedi as a programme is not so much about the SAP system but implementing a new operating model for Fonterra," he said.

"The largest piece of the system is defining how we want the business to operate, defining a single set of processes to work across all geographies and regions and all customers.

"We are changing the organisation from product push to customer pull so we are more integrated to customer demand than in the past."

This can mean sourcing third-party product when New Zealand-made milk products are not available.

The Jedi programme has involved more than 400 people, with staff handling much of the work on business processes and consultants mapping them to SAP.

"We will end up with a smaller IT services organisation because of the reduction of complexity of systems, so we did not want to hire extra permanent staff for the project," Moore said.

The company also tried to avoid customisation of SAP, relying on the vendor to provide systems which supported industry best practice.

Alistair Lane, Fonterra's general manager of supply chain operations, said this would make upgrades easier and help integration with customers.

"A lot of our key customers use SAP, so much of what we have been doing to change our business practices will bring us in line with them," Lane said.

The new system would also end widespread duplication of effort, caused by the need to manually re-key data into different systems.

Lane said the new system allowed the company to handle growth in output.

In 2001 sales peaked in October with a record 167,000 tonnes. The next year 217,000 tonnes were sold during the peak month, and last year the company packed and shipped similar tonnages in October and November.

To prepare for the switch to the new system, branches got orders in early, meaning six weeks of product was packed this month.