Enterprise Resource Planning
BrainFreeze (BFZ) is a boutique ice cream manufacturer. There are two operating entities within BrainFreeze: a shop-front (that sells ice cream to the general public) and an ice cream manufacturing facility (factory).
The factory accounts for 90% of the revenue for the company. Structurally the company has a Board of Directors comprised of the 5 partners who started the ice creamery in 2001, one of whom is the Chairperson, and the Directors of the Divisions of Finance, IS, Marketing & Sales, Production and Human Resources.
The factory produces and sells 15 types of ice cream and a seasonal specialty that varies with time of year. Summerfest is available from Dec 1 – April 1 and Winterblue is available from Apr 1 through to Aug 30. All ice-cream is produced using fresh organic ingredients (raw materials). The raw materials are sourced locally with the exception of menthe poivrée (peppermint) which is sourced specially from France.
The markets for ice cream are expanding and currently consist of a domestic market that is primarily all Australian states. The foreign markets consist of Canada, The West coast of the United States, Singapore and Japan.
The distribution channels include customer direct (through the shop-front for people who come to the shop to buy ice cream tubs or cones), large 5-star hotels, and to reseller customers through warehouse distribution centres.
Resellers include grocery store chains and independent ice cream shops. The distribution centres include: Adelaide, Sydney, Brisbane, Darwin, Melbourne, San Francisco, Portland, Calgary, and Tokyo. Company owned freezer trucks are used to transport the ice cream from the distribution centres to the customers in the surrounding area of each centre. Rail is used to transport the ice cream from Adelaide to Sydney, Brisbane, Darwin and Melbourne and from San Francisco to Portland, and Calgary. Cargo ship transports product to the Pacific Rim ports. The company wants to open a distribution centre in Singapore, but the market there is still too small to warrant the investment.
Strategically BrainFreeze wants to sell all the ice cream that they make and they want the ice creamery to run at full capacity 11 months out of the year. During October each year the plant runs at 80% capacity so routine equipment maintenance can occur. The markets can be expanded in the foreign countries and also domestically. As the company has money to expand, it wants to grow, but the conservative partners want the debt to equity ratio to remain low. The current production is approximately 600,000 litres of ice cream per month.
Historically the company began as a small ice creamery in 1990. Selling all they made, the partners established a corporation in 2001 and separated the shopfront sales from the factory and began selling ice cream to local outlets. In 2005 the company built a new facility and expanded to a 200,000 litres per month (roughly 10,000 litres of ice cream per day) capacity and the company grew to make and sell their capacity until 2008 when it expanded to the current capacity. It moved from being a micro-business to a Regional Boutique ice creamery. If all goes well the company wants to quadruple in size by 2018.
Customers who buy through the shopfront pay by cash or credit card. Other customers run accounts with net 30 day terms. It is customary to charge a 1.5% interest on any accounts that are over 30 days due and the company gives a 2% discount for accounts that are paid within 10 days of delivery. Orders are handled through the sales force that calls on customers within the distribution channel or through phone calls accepted at the corporate headquarters in Adelaide. Occasionally a customer wants a rush order and a special delivery charge of 5% is added to the order.
The shopfront is actually a hobby for 2 of the partners who like to run the shop, give tours to the local clientele, and chat with the locals and their kids in their spare time. Ice cream that is sold through the shopfront is handled through inter-company sales orders. The shop sells ice cream by the tub/ serve, and cones. Drinks and souvenir items are also sold through the shopfront. Souvenirs include hats in 5 colours, short-sleeved T-shirts and long sleeved sweatshirts. The shirts come in M. L, XL and XXL and the colours for all things are white, black, red, blue, and yellow. Drinks are sold off the menu and there are about 10 items on the limited menu with a daily special. The shop accepts cash, cheques and credit cards and all sales are paid at the time of service.
BrainFreeze plans to expand the shopfront so it is twice as big in the next financial year. They are also installing a full bakery and plan to produce hot dogs and doughnuts. They want the ice cream shop and the bakery to be separate profit centres. They may also cater for special party events. If the catering venture is successful this operation will also spin off into a separate company.
BrainFreeze has grown from a micro-business to a Regional Specialty ice creamery in the past 10 years. The sales figures (by quantity) for the past few years are below.
Shipments in litres (average per month)
BrainFreeze competes with Royal Copenhagen ice creamery, Baskin Robbins, Cold Rock ice creamery and EverCream for the market of specialty ice creams in nearly all states in Australia. In addition, there are a number of local microbusinesses that compete with BFZ in any market area. Sierra Nevada is perhaps the most vigorous competitor in the U.S. markets and little is known about the Japanese and Singapore markets, although the specialty ice cream industry in Japan has been booming for the past few years.
Failure rates among companies that try to compete in this industry are about 1 in 4 and BFZ believes that the key to success is quality control and assurance so the product is of high quality every time it is manufactured. For this reason there are no plans to open new plants or new manufacturing facilities. Expanding the current facility is the only option for growth and to that end BFZ bought adjoining lots to the current facility that account for about 10 acres of land.
The Current Information Systems
The Information Systems to support the company are out of date. There is an integrated financial accounting system called Solution 7 that the company uses but this system does not have a manufacturing module and does not support marketing and sales. They use Excel spreadsheets to track warehouse inventories, a small shipping system to track distribution by the different transportation types and no automation for production and packaging operations. There are clipboards available throughout the facility that tracks the data needed for production. Raw materials inventory is tracked through a Peartree Module that never got converted over to Solution 7 but the Vendor payments are handled through the accounting system. Solution 7 is also used for internal accounting, billing and invoicing of customers. However, its ability to handle international sales is questionable.
Requirements of a New IS
In short, the company wants an Integrated Information System that can expand with the business and replace all the legacy systems currently in place. They want a client server and/ or web based system that can start out small but grow and expand as the business grows. They want access to the system (worldwide) through all distribution centres using a range of devices (desktops, portable devices such as smart phones) and they want data about customers available to all centres throughout the world at any given time.
They want accurate currency conversion and the ability to meet external tax and reporting requirements unique to the manufacturing industry. The company sees a big advantage in having the production and packaging operations automated with sales so that accurate information about product availability is also accessible by all departments.
BFZ would also like to be able to sell their products online through an e-commerce platform within the next 2 years and they also want to develop a mobile application that would facilitate online orders on the go i.e. customers can order ice cream just before arriving at the ice cream shop.
BFZ has a small IT department comprise of 5 degree qualified ICT professionals. They complain about the bugs in the current legacy systems and they spend a lot of their time resolving those bugs. However, the current IT department does not have any ERP system implementation related knowledge and they think that implementing an ERP system is a waste of their time.
You and your partner are required to jointly write an ERP Proposal of approximately 2500 words and develop a PowerPoint Presentation of approximately 10 slides for the Board of Directors of BrainFreeze (BFZ).
You are to assume that you and your partner are the Senior Managers of Information Systems of BFZ. The Chairman (your Course Coordinator) of the Board has asked you to jointly prepare the ERP Proposal and its accompanying PowerPoint Presentation for next month’s Board meeting. In particular, he wants both the proposal and the slides to be easy to read, clear, concise and factual.
The presentation slides must represent the content of the proposal but it cannot merely be a verbatim copy of the proposal.
• A description of BrainFreeze’s existing “legacy” information systems. [5 marks]
• At least 3 key (current) business processes identified and described using flowcharts or EPC diagrams. You will have to research (and assume) how certain operations would run in a medium size business because the case study does not provide complete business process descriptions. [15 marks]
• A clear justification on how conducting Business Process Reengineering helps the organisation, in particular, how an ERP system streamlines the 3 business processes identified above. (You can use more process map diagrams if they help you explain!) [10 marks]
• An explanation of how this ERP adoption is going to provide BFZ with new information and a competitive advantage over their nearest rival companies and an analysis on how an ERP system would assist the future business operations of BFZ. [10 marks]
• A summary of factors that the Board of the BFZ should take into account during the entire process of the implementation. These factors should come from those generally considered to be critical for the successful implementation of an ERP system. [5 marks]
• A justification for the broad implementation strategy to be adopted (big bang approach versus phased approach). [10 marks]
• An analysis and a justification for the hosting approach. The options are either to buy en ERP license (annual license fee), required hardware and run it in-house OR run the ERP system through a SaaS approach (monthly usage fee). You must consider all the expenses of both these options and calculate the Net Present Value (NPV) [for a 10 year period] and make a recommendation. You are expected to use real world cost figures and provide a realistic recommendation.
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