With growth in mind, a dairy co-operative of around 4000-plus members is investing more than a million dollars in an enterprise resource planning project.
Murray Goulburn Co-op, which markets of Devondale brand products and is Australia's largest diary co-op, accounts for more than 30 per cent of the nation's total milk production and has eight production plants in Victoria.
From his base in the Melbourne suburb of Brunswick, business project manager Richard Zimak said the project follows a review of IT infrastructure when the company realised legacy systems needed to be replaced with one integrated enterprise package.
"This project isn't about cost cutting, cutting labour, or just to have something flashy, it is preparing for the growth in years to come; a forward planning strategy," Zimak said.
Zimak said the old legacy system had been upgraded a number of times, was not integrated, originated from the US, and was around 12 years old and finding staff to support the old systems was difficult.
The response to the call for tenders involved 10 vendors including heavy hitters such as SAP, JD Edwards, QAD, Intentia and PeopleSoft. Three made the shortlist: JD Edwards, SAP and Intentia.
In the end after a very close race, according to Zimak, SAP was chosen because "we wanted to work with a company that has a proven and good track record, good credentials, industry leadership and reliable customer support".
With around 50 people working on the project plus SAP consultants, Murray Goulburn went live with the first phase of its multiphase implementation in March.
Zimak chose a phased implementation. "We didn't want the whole business to focus on the implementation or be disrupted more than necessary."
The completed first phase, which Zimak said was a success, saw Murray Goulburn running on a new financial and procurement system that handles more than $300 million worth of purchases a year.
"Due to the new purchasing system we're now in a better position to negotiate prices, rebates or discounts with out suppliers. Consolidation of our contracts improved our negotiation structure and reduced our overhead processes. We were limited in this are before as the old systems were not integrated and could not deliver the necessary information to make appropriate decisions, Russell Gardiner, group purchasing manager at Murray Goulburn, said.
Phase one also saw provision of a centralised control of transactions with suppliers using the procurement system which eliminated instances of overpayment or payment for goods not received which previously was not guaranteed.
Zimak said Murray Goulburn is now preparing for a bigger challenge: phase two of the project that will include manufacturing, sales and distribution, and inventory management of finished goods.
"We want to go live with phase two in 2003, and phase three in 2004. By then there will probably still be a few modules left over that we'll decide when to implement," he said.
Zimak said Murray Goulburn is already experiencing huge benefits from an integrated system.
He said there are currently 200 licences operational, with a further 200 licence users by the end of phase two.
So far, the biggest challenges especially in the first phase, according to Zimak included the integration, which "needs proper attention and time", but "nothing else major to complain about".
Zimak said it is hard to quantify the return on investment as it is "hard to put a dollars figure on risk mitigation", but money is being spent on licences, the implementation, hardware training, and "our own people investing time".
He said Murray Goulburn runs on Sun Solaris Unix boxes, through Fujitsu.
"We are regarding this project as a business project, not IT. It is a joint effort of IT and business, and was vital that business people got involved and were driving this. Although they can blame me for choosing SAP [if it doesn't turn out as well as we had hoped for]," Zimak said.