2012

SunWest Foods case study

Names : Eirini Lamprou George (Giwrgos) Panagopoulos Date : 28/10/2012

Course : IS Management Exercise : Case Study Chapter 9

SunWest Foods was established in 1986 to provide superior quality California rice and wild rice to National and Global rice markets. SunWest initially included SunWest Wild Rice Company, SunNuts Company and SunWest Organics. The firm further expanded with the construction of three significant Milling and Warehousing projects: SunWest Milling Company, SunWest Wild Rice and SunWest Specialty Rice Distribution. The case study highlights the advantages of the use of an integrated IT solution by SunWest Foods and focuses on the reasons of its necessary implementation by attesting the numerous problems the company encountered for a long time.

Question 1
Explain the waste at SunWest prior to integration. Why was there so much waste? SunWest Foods is a big multinational company, which copes with vast pieces of information during its daily operation. The effective and efficient exploitation of these pieces of information is a critical success factor for the organization as it gives it the opportunity to optimize its activities, reduce its cost and acquire competitive advantage against other companies. Prior to integration through IT, various problems existed in the most functional areas of the firm related to the limited monitoring, collecting, storing, processing and discriminating activities used to obtain the data which would help the firm to take decisions. To begin with, there seemed to be a serious malfunction in the department of finance. The firm conducts a significant number of transactions each day during the production and selling processes. Nevertheless, the TPS data entry was not automated sufficiently and consequently the employees who used to take on that job could easily make even more mistakes if we consider that auditing in this period was more difficult comparing to todays ERP era. Moreover, there were major delays in the production of financial reports, which are extremely significant for an international company such as SunWest. The reason why there was so much waste is that many additional employees had to be used and money was lost due to the insufficient usage of sources. Certain problems were also found in the department of logistics. Companies normally aim to maximize intelligently the value of the budget that they spend for operational functions such as inventory control,
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procurement and distribution. To achieve that, they have to optimize the procedures related to supply chain management. SunWest Foods in the past used to have an inaccurate understanding of their inventory because it was very tricky to record the amount of rice that they received from their five different suppliers at that time. This situation prevented the staff and the executives from targeting changes quickly, assessing business processes and planning procurement. As a result, either money was spent to store more product than was needed or there were outof-stock situations. For the same reason, multiple issues concerning packing and distribution were problematic and consequently order fulfilment was defective. Finally, there were deficiencies in productivity due to inefficient operational awareness among the departments of the organization. The employees who implemented the various business functions could not cooperate with each other efficiently and, in many cases, the work force had to be paid to reenter data in order to complete different tasks; these tasks included the production of custom reports for each manager of the department. Additionally, the problem of communication was also extended to customers and suppliers who had difficulties in exchanging data and establishing a strong relationship with the firm. To conclude, these were serious malfunctions which were significantly and easily countered by the introduction of information systems such as ERPs and RFID scanners.

Question 2
Why were multiple data entries of the same data necessary? SunWest Foods is a large company which incorporates many functional areas. The departments which belong to the organization ought to cooperate in order for the company to produce the optimal result. For this reason, systems which give employees the opportunity to communicate through a sophisticated network play a crucial role in the operation of the firm. Moreover, a unified language such as XBRL was essential for the more effective exchange of data among the members of staff. In this case study, there seems to be inefficient communication between the departments due to limited connectivity between information systems. Earlier information solutions at SunWest were preventing easy internal and external communication. A combination of Peachtree, TradeWinds, FileMaker, Microsoft Office Excel, and Microsoft Office Word solutions was
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used by various facilities and departments, giving staff mismatched electronic formats; they had different user interfaces, data entry patterns, and report screens. All this gave rise to disparate procedures from one facility to the next. They required repetitive manual order reentry, usually up to ten times, in order to complete the required tasks. The first consequence of this situation was that the procedure of reporting was very difficult and time consuming. The reaction of Jim Errecarte, the CEO and president of the company, is characteristic: It was all stops, starts, and new paper for every task. To create reports I needed, staff had to compile data from 15 to 20 reports in other programs. Its a tribute to them they worked so hard and got it done. In addition, as expected, the inconsistent procedures bred many errors which continually needed fixes and tweaks. In serious business you cannot afford to have inaccurate data because many functional areas can be affected and extensive problems created in the company. Moreover, it was natural that the administration did not have time to cope with all these organizational issues, which required many extra steps; as a result, they had to rush in order to take decisions which were based on incomplete, and sometimes inaccurate, reports. These problems can be very harmful to an agile enterprise, which has to adapt quickly to the changes in the global market, be more competitive against other companies and acquire strategic advantage against them. Last but not least, a lot of employees were needed in order to complete these processes. As the company was growing, SunWest Foods would either have to increase the working hours per staff member per week or recruit new employees to deal with these issues. In any case, as the manager says, hiring more people to produce information needed for growth is not an option . For many aspects, creating multiple data entries seemed to be inefficient and Information Systems integration was the only solution to the fundamental problem of the organization.

Question 3
Why, prior to integration, did SunWest have a fragmented IS? SunWest is a relatively old company, with 26 years of presence in the market. There are various reasons why it used a fragmented IS in the beginning of its operation, although this proved to be a significant mistake
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when the company started to grow: the need for an integrated system with more operational awareness and responsiveness among all departments became a critical success factor for the company and a prerequisite for its future operation. The most significant reason why SunWest did not have an integrated information system is that the company did not realize that information systems should have internal and external communication with the various systems inside and outside the company. When the corporation was still new, the managers lacked vision and did not understand why it would have been so important to have integrated information systems as the company was growing. Later factors, such as global competition agility in order to adapt quickly to continuous changes and operational planning, made this upgrading necessary for the efficiency of the organizations functions. It very possible that Sunwests managers did not have as first priority to invest in an integrated IS system during the first steps of the company. They considered it as an expense which was not going to improve dramatically the function of the enterprise and that the ROI was going to be small and long-term. The choice to invest in this case in an economic legacy system (during 1986 erps where not offered yet in the market) would have added more value in the corporation with out being an expensive solution. Moreover they seem to have been locked in a Microsoft Excel culture. This software is the most widely used in data reporting especially in small-medium companies. Employees used it because it was effective in performing the everyday activities of the organization. However, this prevented them from sharing efficiently their calculations company-wide. The result of this situation was confusion and even risk from unreliable data. Furthermore the sense of data security was not advanced yet , thus files were transferred from office to office as pieces of information were difficult to leak from a small team of people who knew each other well. Finally, SunWest Foods did not have an advanced IT department (this function was probably outsourced) and as a consequence multiple issues arose. The strategic planning of the company had not taken into account the fact that network systems between members of staff were very important for the members of the team. The tools used until then, gave staff a lot of capabilities but soon they discovered the various opportunities that they could have taken advantage of if they had been using an ERP system.

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Microsoft Navision was an ideal solution for them as it could easily cooperate with the existing systems which were compatible with the ERP. Question 4 What functional areas have benefited from the integrated IT solution? SunWest Foods is following the road to overall success and growth by having implemented an integrated IT solution. The use of an enterprise resource planning (ERP) system made a significant impact on all of the companys operations and led to immediate changes in every functional area with a view to managing already existing inefficiencies. More specifically, one of the functional sectors which has benefited from the newly IT system implemented, is the sector of manufacturing and production. Up until now, the different formats the employees used, in order to collect and analyze data, resulted in many data reentries and numerous errors. The information exchanged among the different departments of the firm was inaccurate due to the different user interfaces, data entry patterns and report screens. Microsoft Navision helped, right from the beginning, in better data management, which is the efficient approach for capturing, storing, processing, integrating, distributing, securing and archiving data. Additionally, the function of just-in-time inventory management was ready to proceed in order to minimize the cost of holding inventory, the cost of ordering and shipping and the cost of inventory shortage as well. Data re-entry time dropped 80 percent, making perfect orders the rule and freeing up 30 staff hours per week while panic calls on incomplete orders dropped from monthly to less than quarterly. The improvement on the sales and marketing sector, related to the use of the new IT system, should also be highlighted. Emphasis is drawn on customer relationship management supported by Microsoft Navision since SunWest Foods managed to bind customer loyalty by fulfilling clients needs such as the need for monthly shipping totals their systems could not provide and the use of timely and accurate information with regards to distribution tracking. What was also of high importance was the quick adjustment of prices; a need very much related to high competition. The newly integrated system also made an invaluable contribution to the accounting and finance division. With Microsoft Navision, commodity reports
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that took weeks were instant and saved 15 hours monthly. Information was available to everyone at a shorter time. The processes of financial controls, planning and reporting improved and top executives successfully managed the periodic, exception and ad hoc reports for the process of decision making. Profit and loss were known for every profit center while performance could be measured and managed. Last but not least, SunWest Foods depends on its people. Its people make the company and their efforts lead to the growth of the firm. Microsoft Navision was chosen for its best value and return on investment which are proven by the fact that its employees became more productive, enthusiastic and more satisfied with their job. The system now everyday promotes collaboration and teamwork. To conclude with, the major capabilities of the newly integrated IT solution, such as the storing of huge amounts of information which is accessible via private networks and the automation and facilitation of complex decision making, contributed greatly to the growth and amelioration of several functional divisions of the firm. The major improvements can nowadays be recognized in the functional areas of sales and marketing, manufacture and production, accounting and finance and the human resources and are responsible for the companys overall success. Question 5 Why is real-time reporting and trusted data critical to SunWest? A real time system, such as Microsoft Navision, is an Information System that provides fast enough access to information or data that an appropriate decision can be made, usually before the data or information changes. It can provide fast and accurate communication while improving productivity, facilitating decision making and providing feedback on performance. Real-time reporting and trusted data is of high importance for SunWest. It is critical for business entities to ensure that data is secure and accurate and that data integrity is maintained. Databases must be protected from destructive forces and the unwanted actions of unauthorized users while consistency of data must be reasonably assured. More specifically, the availability of information in real time regarding the use of the newly integrated IT solution became one of SunWests competitive
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advantages. To begin with, efficient management of inventory is now a fact not just a goal. Inventory control systems result in the minimization of several cost categories such as the cost of holding inventory, the cost of ordering and shipping and the cost of inventory shortage. Inventory levels are instantly known instantly, thus, purchasing decisions are made using more reliable and easily accessible data. Furthermore, sales and marketing, one of the functional areas which is responsible for marketing planning, implementation and control has also benefited from real-time reporting. Prices, a main factor of profit, must be adjusted quickly which cannot be achieved without the use of instant information. SunWest foods manages to stay competitive in a constantly moving environment by implementing this new information system. New products may be introduced in the market since managers of the company can make careful analysis and provisions for the future. Moreover, trusted data play an important role in the process of financial planning and budgeting. It can be used in order to identify the availability and also the cost of money with a view to measuring performance and recognize the firms strengths, weaknesses, opportunities and threats. To conclude with, the more developed a business is, the more effective strategy is needed in order to balance the multiple structures that influence business success. Long history and good results certify the fact that SunWest Foods successfully takes advantage of all the positive aspects a new integrated IT solution may offer. References 1. Information Technology for Management, Wiley, E. Turban, L. Volonino, ISBN-10: 1118092252 2. Financial Accounting, by Short D, Libby R., Libby P. , Edition: 7 edition (1 Jun 2011) ,ISBN-10: 007131394X 3. SunWest Foods: Grain Distributor Blends Silos of Data into Rivers of RealTime Business Knowledge,28/10/2012, http://www.microsoft.com/casestudies/Microsoft-DynamicsNAV/SunWest-Foods/Grain-Distributor-Blends-Silos-of-Data-intoRivers-of-Real-Time-Business-Knowledge/4000007133

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