Abstract

The following report discusses the importance of information system in today’s

business environment for Heineken USA. The four main issues that are

discussed on this report are:

1) The technological background of the company and E-supply chain

management

2) How did the information system implemented in the organisation have a

strategic impact?

3) How did the organisation improve its business in today’s work

environment?

4) What are the alternatives to achieve maximum benefit after deployment

of information system?

The information system used by Heinekens have been analysed by using porters

five models, Value Chain analysis (Primary and Secondary activities),SWOT

Analysis and how an organisation can have a competitive edge in the industry.

Integration of information system with the business process in an organisation

will always result to competitive advantage.

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Table of Content

Introduction

Information Technology is very critical in today business environment.

Organisation and managers face great obstacles to develop their business when

handling day to day operations and while making very important decision for the

business. Information plays a very important role in the e-commerce, operations

of e-commerce and for strategic success of the business that operates on the

global internet environment.

This report reviews about the obstacles of managers such as

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 1. How can information system have an impact on organisational

effectiveness

2. How to improve customer relationship electronically?

3. How can we achieve maximum benefit with the deployment of the

information system?

For a detailed description is a multinational company in the beer industry. The

company chosen is Heineken which is located throughout the world.

Company Profile

Heineken N.V. owns and functions the largest networks of breweries in the world,

producing the popular Heineken and Amstel brands of beer.Heineken N.V had

brewery which were located in Amsterdam and Netherlands during the year

1952.During 1863 the first beer was introduced and named as Heineken. As the

growth of the company expanded in 1931 Heineken decided to have joint venture

with a Malaysian based brewery company. Currently Heineken ranks second in

the world for Breweries. It has expanded itself into having ownership in more

than 110 breweries and also available more than 170 countries worldwide

.Heineken is one of the largest breweries in the world which generated sales

around 11.8 billion Euros in 2006.Heineken is available in every part of the world

most international premium beer brand.

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In the early days Heineken was only exported to private distributors in USA under

their agreement act. However when they introduced they were only 30 imported

brands of beer was available in the market .During the 80s competition in the

beer industry grew tough which led to rise of more than 300 beer companies.

Due to tough competition in the industry it affected the sales of the company

.Heineken decided to buy the distribution rights in USA during the year 1955 and

established its headquarters in New York with a plan of adopting a new market

push.

Technological Background

During the year 1997 Heineken developed web based extranet system known as

HOPS by American company. Heineken USA did not have an EDI link to help

their new e-business model. When it had started operation Heineken found that

the company that they acquired importing rights had very few computer

resources. More over having only two percent share in the beer industry market

in states and hence asking them to install the new infrastructure was out of

option. As a result Heineken decided to web based system that linked with the

supply chain software. HOPS introduced the first software that was known as

collaborative planning, Forecasting and Replenishment (CPFR) (Carlos,

1997).The advantage of this software was that it helped the business partners on

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information about sales and forecast. This software also has an option called

Resource chain Voyager which will help Heineken to produce individual Web

pages for the distributors. Distributors only needed Netscape to accesses it .They

need provide any specialized software that was proprietary and did not incur any

high communication cost. The software had calendar so that distributor was

notified of the schedule and also emails were send in case of problems arose

and also new product developments. HOPS supported with all kinds of

application such as oracles and on Windows Application. When HOPS was

introduced into Heineken it reduced the time process in order delivery from ten to

twelve weeks deducting to four to six weeks leading to increase in profitability.

Due to high growth Heineken needed to expand its New York facility which

included physical facility and also the cable networking to help in future growth of

the company. One of the major benefits that Heineken achieved was it had a

great relationship with its distributors which led way to innovative in business.

Customers and suppliers are benefited and provided an easy and cost saving

method by the web system. The system could be even operated by

inexperienced personnel. The most benefit out this programme was that it easily

integrated into the distributors system and only required was a personal

computer and a web browser. HOPS created instant conversations between the

distributor and the supplier which enabled both the parties looking at the same

data at the same time. The company and the distributors were benefited in

reducing their procurement costs, less inventory and short life cycle. The time for

order planning has been cut from three days to forty five minutes. Through the

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Web page the distributors were able to track their orders and accurate forecast

could be predicted.

HOPS changed the industry, became innovative and had competitive advantage

over the beer competitors. To increase the efficiency in its distribution process the

company introduced the Remote location filling programme .It helped to reduce

the number of ocean carriers from fourteen to four and also reduce the number of

customs from fifty to two. Heineken USA was awarded the (VICS) which stands

for top in Logistic award and also for leading in business intelligence, E-

commerce and also supply chain industries.

Supply Chain Management

The Headquarter in New York consisted of all the functional departments such

finance, operation, Marketing and Data centre. Being an European brand

Heineken had to position itself in the USA market. All the U.S Heineken beers are

manufactured from Netherlands, shipped to various demand points in U.S. When

orders are placed from the distributor side the goods are placed to the nearest

demand point and truck delivered to the distributor. The distributor then places

the products to the final consumer through restaurants and bars etc. Heineken

created personalised website for individual distributor that could help in creating

a demand forecast. Once an order has been placed by the distributor the system

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creates an electronic order. This information is passed on to the Heineken

officials and used for analytical purposes allowing them to plan the brewing and

delivery dates. The distributors can locate their orders from the website .In

addition to this HOPS system that helped the distributors to be aware about the

new products and promotional events. Heineken introduced the reverse logistic

system that is taking back the used bottles from the customers which was quite

difficult and expensive task. Heineken stuck microchips to the bottles to know the

full logistic cycle in how much time is spend from breweries to customers and

vice versa. The important issue here is that Heineken identified reverse logistic

system as a strategic component for their operation which helped them to save

million of dollars. Heineken tied with IBM and introduced the Beer living lab

project that paved the way for e custom solution. This project helps the company

to high benefit such as transparency, security, less physical inspection by the

customs and other benefits.. This project made it easier for international trades.

The web technology was implemented in the entire supply chain .This was very

essential for Heineken as result of distributing 120 trillion hectolitres of beer

Heineken for utilizing the supply chain.

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Porters Five Forces of Competition

Threat of substitutes:

Very little technical composition of beers

The growing segment of wine industry

Threats of new Entry:

An investment amount of $250 million dollars to build 4 million barrel brewery

There is risky entry since there is no alternative use of breweries

Top positions have not been cracked by new entrants

Bargaining power of buyers

No true brand loyal to any particular brand

The Demand for the major competitor brand Budweiser is Inelastic

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Bargaining power of suppliers

There were fewer amounts of Brewers and larger plants.

High cost of production due to rise in price of products such as grains glass and

aluminium.

There were many number of buying supplier of input (Wheat field).

Rivalry Between established competitors

During 1947 Heineken established itself in top 5 acquired 19% of the market in

U.S.

During 2001 Heineken was included in top 5 and generated 87% of the U.S

market share.

The beer industry is very highly competitive industry due to this reason many

brewers leave the industry.

Value Chain Analysis (Primary Activities)

Inbound logistic: Heineken is distributed globally stored in warehouse

strategically.

Operations: Heineken was limited to grabbing smaller breweries but by 2003 it

became the biggest beer maker in seven countries across Eastern Europe

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Outbound Logistics: Heinekens has brewers around the world so that it can

ship the finished products to local areas to minimise shipping costs.

Marketing and sales: Heineken is the fifth most recognised beer in the world .By

acquiring smaller breweries they spread their brand name more.

Service: Heineken has diversified itself into the non-alcoholic malts and fruit

flavoured drinks as way to get into all customer segments.

Value Chain (Secondary Activities)

General Administration: Heineken was the top selling beer brand for a very

long period. In the U.S. Heineken was the number one imported beer brand until

Corona arrived. It diversified with other brand names with Heineken as its core

brand.

Human Resource Management: Management positions were created by

Heineken giving responsibility for nine different functional areas and five different

operating regions.

Technology Development: Heineken uses their technology for better customer

relationship, shipping purpose and for better organisational effectiveness.

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SWOT ANALYSIS

Strengths

1. Heineken has very different brands in thirteen markets.

2. It is a global brand and established itself in international strategy

3. The company have purchased a lot of national breweries.

4. There is Recognition of bottle (Green bottle) dispenses and different

instruments such as (Mini keg)

Weakness

1. Heineken has a conservative and safe play culture. The company had

struggled to obtain larger Breweries.

2. Young Beer drinkers don’t prefer Heineken

3. Prices are costly when compared to domestic market such as $10 would

be for six packs and in the domestic market it is $7 for six packs.

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Threats

1. Government restriction to drunken driving laws.

2. High competition in the beer industry to increase the market share.

3. Joint ventures and acquisition of other companies which tend to become

larger than Heineken.

Opportunities

1. The trends of the society changing to consumption of healthy beer with

low calories.

2. In Asia and Russian there is increase in population which the company is

having high market share.

3. In the U.S industry a particular segment the Hispanic are growing

tremendously

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How information systems have impact on organisational effectiveness?

With Heineken deployment of mobile technology it had significant impact on the

business. When the organisation enters into different countries each country has

its own currency and different markets.

Business impact

As a result of using the technology the company increased its efficiency,

sustained competitive advantage over its competitors and increased its revenue.

Employee Productivity

The major advantage is the mobile productivity. Earlier before the implantation of

this strategy the employees would have to wait until their supervisor reach for the

job designation. . Then they would have to go to supply stores for carrying out

their equipments and go to job sites. But with the help of the new mobile

technology programme they just have to log on to the system from home and

receive their work lay out schedule. The company implemented a new approach

named “Just in time” .Rather than giving employees 10 jobs in a day the home

office would send one job at a time. After each is job is completed the home

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office would send message through the mobile. Managers saved a lot of time

since they did not have to develop a complex work plan and there is lack of

pressure from the employee side. Earlier payroll administrators did the employee

time sheets manually requiring more people to do the task with the arrival of the

technology the job reduced from eight days to two days leading to a greater

productivity.

Overhead Cost Reduction:

The company also reduced cost by joining the multiple applications and software.

Earlier the company had many applications used for different purpose which

was very costly to implement different softwares. With the implementation of the

windows mobile it helped the company to save $200000 per year. This solution

also reduces the amount of paper work.

Inventory efficiency: It helped in increasing inventory efficiency. Earlier the

stock was managed on a daily basis through the home office now employees

could control their own van stocks with the handheld devices. It enabled the

employees to maintain their own Van inventory and they could plan on their

inventory prior to two weeks in advance. This resulted travelling to central stores

once in a week or twice rather than going to the central store daily .It helped

them to identify what they want and contact the home office from their vans.

Revenue Increases: The services of the company are delivered faster and

employees use their time more efficiently and effectively .After implementing the

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solution sixteen percent of more work has been increased after implementation

of the technology leading to increase revenue.

How can we improve our Business process in today’s competitive world?

Leading companies need to be close to their customers. “Customers are king”.

So Heinekens decided to use its sales channels and the distribution channel.

Heineken decided to restructure its customer base model with customer

relationship management solution. The advantage Heineken acquired after

building the CRM was it could rapidly display customer’s detailed history while

handling the call. Standardised and integrated process was created by the new

organisational concept with Saps’ ERP implementation. ABC company in the

middle east owned by Heineken had problems earlier in coordinating the

customer orders due to lack of integration between its retail outlet and the call

centres .After implementing the Microsoft CRM and Microsoft retail management

system Heineken was able to have control measures for the business .It proved

to be effective in saving the cost up to twenty percent as well as cut customer

delivery time by fifty percent resulting in handling ninety percent of the customers

within forty five minutes. Heineken was the first company in the Middle East to

introduce with centralised call centres helping the customers to place their orders

over the phone and get delivered to their homes. Efficiency and effectiveness

have been created with the help of this system. The system reduces the delivery

time for the customer by fifty percent and also information on each step of the

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customer orders and completion process. When a customer makes a contact to

the call centre, the order is immediately entered into the system to determine the

stock of the beverages and there the driver is available. Having a complete

history of the customer on the system enables the operator to personalise each

call. That is they would be able to know the stores of the customer and also

inform the customer about the promotional activities. Moreover it helped to gain

control over each retail outlet which resulted to improvement in store

management.

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What are the ways to achieve maximum benefit after deployment of new

technological trends?

The word innovation almost defines as a new product. Heineken delivered an

information technology strategy that handles more than 500 employees with

technology as well suit the individual business needs. The information technology

department had full evaluation of the organisations current process and how it

dealt with the customers. The IT department had four guiding principles

1. To become a more customer facing organisation IT organisation, join with

their needs and priorities.

2. Increase anticipatory, Ability to drive solution to the customers.

3. Training efforts to be increased to the customers and guide them to use of IT

to the fullest use.

4. To increase attention to the business core and return on investment (ROI)

The IT department is one of the main elements in supporting the organisational

goals. Customer involvement was critical for creating sustainable competitive

advantage. The IT department could create profiles in accordance to each

employee and customer needs. With the development of the technology they

17
found that the catalogue offered them multiple choices for different users in

different business areas. The company is dispersed in geographical locations IT

department created an online portal that help the employees to communicate

with each other. The IT department created an online portal so that customers

could download the catalogues on products. Deployment of standard devices

and reduced number of providers significantly not only reduce the cost of

operation but also reduce customer dissatisfaction and decrease technical errors.

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CONCLUSION

Heineken communicated with its distributors through HOPS. Distributors

accessed to website and each was given passwords. The major concern was the

security for the company as well as its distributors. It provided an obstacle in the

confidentiality for business to business as well business to consumer in the

internet e-commerce. The company web based supply chain system is slowly

being erased because competitors are able to implement inexpensive web based

solution. Overall Heineken had a competitive edge over its competitor with the

deployment of the latest technology in the market .Mangers must decide how

their firms will compete with the technology available. They can sight on rapid

changes come to a better decision about which strategies are necessary to

achieve success. However one of the main challenges would be to retain number

one position in beer industry of U.S market .Another major issue when

implementing systems would be Training and specialization for long term service

and product needs. The main priority would be to analyse the implementation of

information technology in Heineken to associate the IT cost with the

performance of the organisation. However there is no compromise in term of

investing in information technology .An overall conclusion would be utilizing

information technology that can support the communication for an effective

management in an organization through out its life cycle.

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