IS strategy at NZ Milk

Group members: Bina Waheed 07-0414 Ayesha Imtiaz 07-0456 Mohsin Akhtar 06-0492 Hina Malik 07-0403

Background of NZ milk
Whangarei Milk Company was formed as a private company in

1946 to supply home delivery milk in the growing town of Whangarei. In 1990 the company changed its name to NZ milk and became a fully owned subsidiary of North land region of Northland milk products. N o w N Z m i l k c o u l d r e q u e s t t h e v o l u m e o f m i l k i t r e q u i r e d b y obtaining a milk tanker delivery from Northlands major processing factory. NZ milk had become 4th larger supplier of fresh white milk in New Zealand with annual sales of 25million. It also occupied a modern plant on the out skirts of Whangarei in one of the fastest growing regions of New Zealand

Setting the stage

y Until 1996 the home delivery of milk was tightly regulated. y however after that deregulation was forced on the industry y

y y y

by the government. NZ milk saw deregulation as a business opportunity and a way for the company to grow. After the deregulation milk companies began to supply their product's into competitor's previously protected areas. NZ milk then changed its brand name to NZ fresh. Pricing was another area that changed. At times the competitors cut the prices of milk, particularly during the summer and spring when milk was plentiful. This meant that pricing policies had to be flexible and able to respond to competitive pressures in the market place,

Case Description
N Z m i l k h a d g r o w n f r o m a s m a l l h o m e m i l k s u p p l y

company providing a single product in glass bottles for a local market, into a progressive, highly sophisticated organization which even manufactured its own plastic milk containers. D e v e l o p i n g h i g h s t a n d a r d s o f p r o d u c t q u a l i t y w a s a n important priority. I n n o v a t i o n w a s a l s o a n i m p o r t a n t c h a r a c t e r i s t i c o f the company. N Z m i l k p l a n n e d t o g r o w b y c o m p e t i n g o n q u a l i t y and service to extend sales.

Summary
N Z m i l k i s a s m a l l f r e s h ; m i l k s u p p l i e r t h a t i s c o n t e m p l a t i n g

using IS to a greater extent to become more competitive. T h e y h a v e l o w I S s k i l l s a n d e x p e r t i s e . I n p a r t i c u l a r t h e y h a v e l i t t l e I S m a n a g e m e n t expertise/knowledge so they do not know how to proceed to devise an IS strategy. NZ milk recognized that they would have to fight hard to retain and increase their share in the market to become competitive and successful. T h e g e n e r a l m a n a g e r w a s c o n v i n c e d t h a t i n f o r m a t i o n s y s t e m had a greater role to play at NZ milk beyond just the accounting and order processing that was currently undertaken.

As the government imposed deregulations on the industry there was a potential threat for the new entrants in the present market. Since milk is a basic commodity with no other substitutes, market was really competitive. It was an industry with low entry and exit barriers which was encouraging for the new entrants.

Decline in volume sold through independent home delivery

45

1991

36

1995

20

2000

By that time, most home delivery vendors have purchased hand held computers so that they could respond easily to changes in price and demand. NZ milk began rationalizing its distributions system by reducing number of new contractors and amalgamating various supply companies.

NZ milk has 6 business processes

B u s i n e s s p r o c e s s :

The unique ways in which the organizations coordinates and organize work activities, information, and knowledge to produce a product or service.

manufacturing facilities

quality assurance

order entry

production planning

invoicing and accounts receivable control

financial planning and control

Major challenges
The sales and marketing managers of NZ milk were faced with a lot problems each day lets start with the complaints that had to be handled promptly and professionally which soaked most of their time each day. They had burden of invoice checking and reconciliation was high priority for supermarket managers. Their MIS system was less attractive for perishable goods like milk which had short duration best before dates.

Manufacturing facilities
NZ Company was concerned that the production schedule seemed to be disrupted every two or three days in order to meet urgent delivery needs. Due to the disturbed production schedule the consignments have different best before dates which is another problem for the company because the vendors or the customers prefer to receive consignments where all products had the same *best before dates*.

The major problem was with: Input

output processing

Processing
input

INBOUND AND OUTBOUND LOGISTICS

Order Entry
their order system is not computerized and organized they dont have a proper channel through which vendors and customers can order which results in disorganized production schedule. This also results in wrong order delivery to the super stores.

Invoicing and accounts receivable controls

Because of the very different business processes and billing arrangements with vendors that had arisen from previously regulated environment, off the shelf order and billing systems were not suitable for NZ milk needs and the development of the custom system had been required. The major function of milk flex was to produce invoices and acc receivable reports, after sales order data had been entered from the order sheets. Milk flex was originally written to invoice home delivery vendors, but was modified to include centralized weekly billing, and to incorporate different pricing policies.

Two perspectives of IS system

functional perspective constituency perspective

Flaws with MIS system

Major flaws with their existing system i.e., Multiflex are: It was not user friendly It could record only basic financial transactions It could not provide detailed reports and analytical models

It used complex formats and employees were not skilled enough to work with those soft wares Current system was not originally designed for all the business processes, it was just a modification of system used at accounting and finance department.

The major function of milk flex was to produce invoices and acc receivable reports, after sales order data had been entered from the order sheets. Milk flex was originally written to invoice home delivery vendors, but was modified to include centralized weekly billing, and to incorporate different pricing policies.

Financial planning and controlling

NZ had been using modules of the standalone pc based charter accounting package since the early 1980s for creators, general ledger and fixed assets. The system was upgraded in 1995 after the company looked for friendlier product .

They decided to stay with charter as the only obvious replacement could not be supported locally. Data input times were typically less than 15mins each time. The charter system met most accounting needs, but its reporting feature were very limited.

Production planning
The IS system seems to be right for the front office but not user-friendly for other people. Milk flex system was designed to assist with the control of finished goods. It was not user friendly failed to help when stock data did not balance and had a poor data entry screen

Quality assurance
he received about 200 complaints from customers each year and a further 150 from staff at NZ milk all of which had to be handled. He suspected there was an opportunity to use computers to assist in the monitoring and handling of complaints, which was currently a paper based system.

Information technology and growth strategies.

y EDI with supermarkets although it seemed that it

would be difficult at present but may be possible in coming few years.

y Internet based ordering with vendors and

supermarkets
y Invoice at point of sale through in-truck computer

systems.

y A fully automated warehouse. y Business process reengineering. y A telemarketing system to contact stores, solicit

orders and sell additional products.

y Additional of home delivery of groceries via

telephone or computer ordering.

Pressure for change!

how should I get this process underway?

Maurice was also interested in changing his information system but he was not sure whether to update MilkFlex or design a new one.

Recommendations.
y We recommend that NZmilk should have a new information system

which should cater to each and every problem stated.

y They should make an IS system which is user friendly, easy in

formatting and through which information can be easily accessed.

y Daily invoicing would allow better control over in-store stocks, and

avoid some of the batching and reconciliation steps presently required.

y

EDI system should be introduced which increases customer intimacy this will organize their order system and increase companys effectiveness.