Task

As the IT Consultant you have been hired to recommend how the use of modern information systems
and technology might ensure the continued success of the Aalsmeer Flower Auction.
Write a management consultancy report that addresses the following:
1. Identify and analyse the business and information requirements of the board of the Aalsmeer Flower
Auction, suggesting a suitable information strategy which will help them to achieve their business
objectives and ensure competitive advantage in the industry. (35%)

2. From your knowledge of systems theory and systems development discuss an appropriate
methodology which would help the Aalsmeer Flower Auction to identify and develop a new information
system which would help them to cope with a changing environment. (35%)

3. Consider the impact and effectiveness of a new system for the organisation, management and
employees. (25%)

4. Your answer should be set out as a formal report and written in good business English.
Presentation should be neat and should include appropriate tables and diagrams, a bibliography and
word count. Any appendices should be minimal. (5%)

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Introduction
Aalsmeer Flower Auction is the largest flower auction and the largest commercial edifice in
the world (Guinness World Records, 2001) located in Netherlands offers global growers,
wholesalers and exporters to trade flowers and plants. It is a grower's cooperative with over
3,500 member companies. Most of the flowers come from the Netherlands but some also
come from Israel, Kenya, Zimbabwe, Zambia and other foreign countries. (Aalsmeer, cited
plantsgalore.com, 2009) The flowers around 20 million stems per day are waiting for over
1,000 buyers to be bid and there are 13 auction rooms available in the unique form of auction
that is distinctly Dutch. (Trunick P., cited logisticstoday.com, 2007)

Objectives
From the case study, I have defined the current situation of Aalsmeer Flower Auction. The
following objectives are the most relevant in order for the company to improve and move
forwards:
• To be able to cope with the change of consumer tastes
• Improve communication within the company, with customers and also with the
suppliers
• New technologies opportunities – by developing a new modern information system
and technology within the company
• Increase trade outside the auction
• Increasing of power of retailers -threats rather than objectives
Figure 1: Aalsmeer Flower Auction Organisational

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Above shows a layout of Aalsmeer Flower Auction and the department within the
organisation. Currently there is very little data shared between the departments. This shows
that communication is a big problem that needs to be rectified which could result in the
organisation being changed to fit a more efficient pathway where data can be freely shared.

As illustrated in the organisation chart, the Aalsmeer Flower auction uses two main channels
to play its role as a mediator among growers and buyers:
• Auction: by using the auction clock and most of the supply from growers is divided
into smaller units to be sold by exporters and wholesalers. (Van Dantzig T and
Boonstra A., 2005: 30)

• Direct mediation: teams of mediators combine specific supply and demand to

generate transactions for day trade and futures. In this process, they often follow the
auction prices. (Van Dantzig T and Boonstra A., 2005: 30)

Figure 2: Flowers and Plants

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 Exporters
Importers
Growers/Trader Growers

Commissioner
Grower-florist
Auction

Breeder
Cash & Carry

Retailers

Netherland is a flower exporting country therefore, Dutch flower auctions play an important
role in the international chain of flower and plant sales. Growers are the initial suppliers and
demand comes from exporters, importers, wholesalers, cash & carry and retailers. (See
figure2 and Table 1)
In the organisation, auctions play a mediating role between growers and exporters buy
bringing supply and demand of product together. The role of Dutch auction is also to
increase the efficiency of transactions by breaking up large numbers of uniform products
from grower into small amounts for buyers. (Haak, M., et al, 1992)

The Value Chain

The value chain model highlights specific activities in the business where competitive
strategies can best be applied (Porter, 1985) and where information systems are most to
have a strategic impact. The model indentifies specific, critical leverage points where a firm
can use information technology most effectively to enhance its competitive position. (Laudon
and Laudon, 2009: 91-92)

Figure 3: Value Chain of Organisation

Administration and Management

Activities
Support

Human Resource Management (HRM)

Procurement
Information Technology Firm
Value
Chain

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 Auction Mediation Inbound Operations Sales and Customer Outbound
Primary Activities

Logistics Marketing Service Logistics

Between the auction and mediation departments, there is a cultural difference. Employees of
both departments see each other as competitors. In the past, the emphasis was clearly on
auctioning, while mediation was mainly a by-product. Now, business is gradually moving to
mediation but the mediation process is following the price setting at the auction. (Van Dantzig
T. and Boonstra A., 2005: 31) As the result, both channels are strongly organised, just the
cooperation of the two channels gains advantage for growers and buyers. They can choose
which percentage of selling or buying they want to do in each channel and therefore they are
almost assured of selling or buying what they want.

The departments in Aalsmeer Flower Auction, such as logistics, IT, finance and human
resource management are providing all kind of services to the commercial auctioning and
mediation department. The following are the most activities in each department:
• Inbound logistics: activities will bring input into the organisation, such as receipt of
good, warehousing etc.
• Outbound logistics: activities that dispatch products and distribute them to clients
• Operations: activities that transform the product into its final form, whether it is
physical good or service
• Marketing and sales: activities concerned with locating and attracting customers for
the purchase of the product – for example advertising
• Customer service: activities that provide service and support to customer, for
example maintenance, installation etc.
• Organisation infrastructure: activities that support the whole value chain, for
example general management and financial planning etc.
• HRM: activities concerned with training, recruitment and personnel resource planning

• Information Technology: activities that identify and develop ways in which

machines, software and other kinds of technology can assist the firm’s activities.
(Curtis G and Cobham D., 2008:61)
Continuing developments in information technology, have enabled business to exploit new
opportunities to change the nature of competitor. The Value Chain allows an understanding
of the way competition affects strategy and the way information provision, in its turn, affects
competition. (Curtis G and Cobham D., 2008:60)

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 Information technology is used to reduce the cost of the information component of each
activity. For example, inbound logistics activities use IT to provide information on goods
received and use this to update inventory records. Financial planning, an infrastructure
activity, will use IT to collect information provided by many of the firm’s activities to generate
forecasts on future performance. IT may also be used to increase product differentiation for
specific customer needs. For example, operations can use information technology to control
the production process to generate custom-made output for customers.
Figure 4: Information Technology in the Value Chain
Organisational Financial planning models Administrative information
infrastructure Space optimisation Building management systems
Support activities

Development Computer-aided design marketing analysis/ modelling

product/technology
Human Resource Optimisation of distribution of personnel

Margin = Value Added - Cost

management
Procurement Electronic procurement e.g. electronic data interchange (EDI)
Automated Customisation Processing orders Telemarketing Online monitoring
Primary Activities

warehousing of (through EDI) and servicing of

manufacturing and automated equipment.
process distribution Scheduling
servicing
Inbound Operations Outbound Sales and Customer
logistics (manufacture logistics marketing service/after sale
(receipt/ of product) (distribution of service
warehousing product)
of input)
Adapted from: Curtis G and Cobham D., 2008:62

From the figure 4 shows how the information technology can change the value chain within the
organisation. The study of Evans and Wurster (1997) describe how information can impact the value
chain in three ways;
1. Reach: a business can share information with more stakeholders or gain a larger audience at
relatively low cost.
2. Customisation: information can be more readily tailored for sharing with a large number of
partners.
3. Dialogue: interaction between the parties is two ways rather than the traditional push of
information. For example, it is possible for a supplier to anticipate a retailer’s product
requirements from examining their inventory forecast rather than awaiting a faxed order.
(Evans and Wurster, 1997:80)
This shows that the information system can help the organisation in many ways such as; it
reduces time for information transfer as it takes shorter time for messages to arrive. Information
system also enables the organisation to share and distribute of information by placing information
on a server, either as a file or within a database, it can made accessible to all departments that

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 need it and the flow of information in the company will be improved.
SWOT
S- Strengths
• By using the Dutch auction clock method – is very
efficient for small lots trading.
• Very efficient transfer of product from seller to buyers
as the auction facilities are a central hub providing
logistics support
• The auction provides systems for order tracking,
payments and settlements with efficient one-day
settlement periods.
• Very efficient and low costs for shared
communications infrastructure – simple visual
communications for competitors, product, price and
other trading information on the clock.
• The product is representing by itself, and simple
codes identifying grower and a gross level quality
grade. Therefore, buyers can directly inspect the
product in the auction hall if they want to do so.
O- Opportunities
• A simple computerised for communication bids
• The old system can be used as a back up to the new
system when it is put in place.
• New information system can helps the company
transfer the products quicker
W- Weaknesses
• The buyers have to come to the auction hall and
sellers have to deliver products to the auction hall.
• By using the Dutch auction clock method, auction
price for specific products decrease during the day.
To assure fairness, assignment of auction sequence
for different growers is done by lottery system.
• Packaging costs are in occurred multiple times for
transport to and from the auction. Multiple handling
of flowers can damage rating.
• Buyers and growers perceive quality grades as too
broad, artificially inflating valuation of products at
the lower end of quality rating.
• Requires synchronous communications for trading
and collocation of parties to the limited trading floor.
Growers do not know final demand patterns for
products.
T- Threats
• The auctions can exclude growers and buyers who
do not meet various criteria, therefore; auction rules
are tend to favour the growers
• Dutch growers face increasing competition for
lucrative European markets from low-cost foreign
competitors such as Kenya, Spain, Israel, India and
Colombia etc.
• Foreign competitors have lower labour cost, fewer
environmental regulations and lower trade tariffs.
• The global diffusion of agricultural technologies and
cheaper air transport make international growers
more potent competitors.
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PEST analysis

P- Political
o Health and Safety Regulations set in place from the government
o Environmental Regulations
o Political trends to reduce the subsidies for gass price

E- Economics
o Inflation levels affect prices and profits
o Fuel tax will have the large impact on the transportation of flowers and plants
o There are economies of scale in the purchase and distribution of flowers,
leading to greater buyer concentration

S- Social
o Netherland is the 11th most populous country in Europe and 61st
most populous country in the world (Netherland Population
Statistic, 2007)
o Netherland is the world known country of exporting flowers and
plants
o Auction market will help the farmers and reduce the role of
intermediaries
o Terrorism threat will impact potential customer base for many years to
come

T- Technological
o Development of the internet and technologies will impact on the auction
system
o Development in technology can helps the company transfer the flowers to
abroad quicker
o Development of technology can helps the organisation tracking idea from
their customers (especially with the retailer) what kind of product they looking
for and how much should it be produce for retailers.

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Porter and Millar’s Five Forces model
Porter and Millar’s five forces model is a model for analysing the different external
competitive forces that affect an organisation and how information can be used to counter
them. (Greasley A et al., 2006:589) The five forces are: rivalry between existing competitors,
threat of new entrants, threat of substitutes, the power of buyers and the power of suppliers.

Figure 5: Porter and Millar’s Five Forces model

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 QuickTimeª and a
decompressor
are needed to see this picture.

(Adapted from: Porter M.E. and Millar V.E, 1985)

This model originated in 1985 and has remained one of the classic tools by which an organisation can
assess its current competitive position in relation to a number of external factors:

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Recommend information system
Supply Chain Management Systems
Supply Chain Management (SMC) systems help businesses manage relationships with their suppliers.
These systems provide information to help suppliers, purchasing firms, distributors and logistics
companies share information about orders, production, inventory levels, and delivery of products and
services so that they can source, produce and deliver goods and services efficiently. (Laudon and
Laudon, 2009: 61) The SMC systems will help Aalsmeer by lowering the costs of moving and making
products and by enabling managers to make better decisions about how to organise and schedule
sourcing, production and distribution. SMC systems will give Aalsmeer advantages within the
organisation, such as:
• Helps to decide when and what to produce, store and move
• Rapidly communicate orders
• Track the status of orders
• Check inventory availability and monitor inventory levels
• Reduce inventory, transportation and warehousing costs
• Track shipments
• Plan production based on actual customer demand
• Rapidly communicate changes in product design

Aalsmeer can also use SCM systems to provide information to coordinate all of the business
processes that deal with customers in sales, marketing and service to optimise revenue, customer
satisfaction and customer retention. This information will help Aalsmeer examines customer orders,
factory schedules, carrier rates and availability and shipping costs to produce optimal lowest-cost
delivery plans. (Laudon and Laudon, 2010: 87) The SCM systems can adapt to use with other systems
within the organisation such as the system in the warehouse to help tracking and controlling the flow of
finished goods from suppliers to its customers etc.

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References
Guinness World Records (2001), Guinness World Records 2002 (Guinness Book of Records),
Guinness, Enfield Middlesex.

Aalsmeer Flower Auction, 2009 at:

www.plantsgalore.com/gardens/netherlands/Netherlands_Aalsmeer.htm (accessed 23/02/2010)

Trunick P., “The sweet Smell of Success”, 2007 at: www.logisticstoday.com (accessed 23/02/2010)
Product and Trade in Flower and Plants, 2004 at:
http://www.dutchflowerlink.nl/engels/Lessons/economy/economy_prod_trade.htm (Accessed
23/02/2010)

Netherland Population Statistic, 2007 at: http://statline.cbs.nl/StatWeb/publication/?

DM=SLEN&PA=37556ENG&D1=0-44,53-
60&D2=1,11,21,31,41,51,61,71,81,91,101&LA=EN&VW=T
Haak, M., H. Tap and A.M.A. Heybroek, 1992, “A View of International Competitiveness in
the Floristry Industry”, Rabobank Nederland i.c.w. LEI-DLO, Eindhoven-/The Hague

Laudon K and Laudon J., 2009, Essentials of Management Information System, 8th edition,
Prentice Hall
Laudon K and Laudon J., 2010, Management Information System: Management the digital
firm, 11th edition, Prentice Hall: Pearson Education Limited.

Van Dantzig T. and Boonstra A., 2005, International Journal of case on Electronic
Commerce“ Bringing e-business to the world’s largest flower auction: The case of Aalsmeer”,
Vol. 1 No 1 January-March.

Evans P. and Wurster T., 1997, strategic and the new economics of information, Harvard Business
Review, September- October, page 70-82

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