Fonterra picks German partner

By ADAM GIFFORD

Fonterra has decided German software company SAP will be its supply chain partner as it seeks to become a global dairy industry giant.

Industry sources say the deal, made last week, could be worth $15 million to SAP, which has found it difficult to pick up new New Zealand customers in recent years.

NZMP chief information officer Marcel Van den Assum, who is in charge of Fonterra's information systems integration project, said for now it would be a much smaller sum.

The emphasis would be on determining what was possible and building prototypes that could be put in place quickly to prove the concepts.

"We're starting with planning and optimisation. It's not large in scale but it's large in intellectual property," Mr Van den Assum said.

Consulting company Accenture is also involved, particularly its Australian supply chain guru John Gattorna. Mr Van den Assum said Swedish company Intentia was in the race until the last minute.

"Both Intentia and SAP can do the job."

"What we are looking for is the intellectual property a partner can bring to the table, what is the best practice, what are standards for the dairy industry supply chain."

He said Fonterra was committed to Oracle for databases and manufacturing applications. It was consolidating its manufacturing processes on Oracle, converting activities at the former Kiwi Dairies site at Hawera over to the application suite developed for the New Zealand Dairy Group plants.

When Fonterra talks about supply chain, it means all the processes required to get its milk products to markets worldwide, including logistics, demand and forecasting, order to delivery and taking payments.

Mr Van den Assum said Fonterra was keen to move quickly.

"The thing that has driven us is the opportunity cost. Every month that goes by is a month the integration benefits are lost from the supply chain and logistics area.



"Every business builds its own quirky ways of doing things, so what we want to do is remove the quirky bits, standardise and optimise the supply chain process, and invest in those areas where we can create some differentiation - typically that's less than 5 per cent," Mr Van den Assum said.





He said implementing a standardised system had to be handled carefully, because Fonterra's workforce ranged from large, sophisticated operations in North America and Europe to two or three-person offices in countries like Vietnam.



As well as choosing its main application providers, Fonterra has made several key appointments.

Rather than having a Fonterra chief information officer, it has separate chief information officers for the NZMP ingredients business and the fast-moving consumer goods business NZ Milk, administering a combined $100 million a year IT budget.



NZ Milk chief information officer Ron Peake was formerly at ENZA. Mr Van den Assum himself came to the dairy industry from a 20-year career with Unisys.

Donald Moore, the former chief executive of consulting company Azimuth, is in charge of technology strategy and architecture, after spending the past year consulting to the Dairy Board on e-business.

Former Dairy Group chief information officer Wayne O'Halloran has left, but former Kiwi Dairies staffer Don McPherson has been appointed to manage manufacturing applications. He will be based in Hamilton.

One of Mr McPherson's tasks will be overseeing the transfer of the consolidation of the applications on to a Compaq 16-way Alpha server, one of the biggest sold in this country.

Former Dairy Board staffer Anna Shires is in charge of supply chain information systems, working from Wellington.

John Crane, ex-Dairy Group, is leading shared services, to be run from Hamilton.

Mr Van den Assum is looking outside the company for someone to head IS infrastructure, which includes running common services like directory and e-mail globally.

He is also looking for someone to head programme management.