Sydney’s Harris Farm Markets is a 25 year old company which operates 21 large-format fruit and vegetable stores around Sydney, with a 20 year old AS/400 application ticking away in its back office to manage affairs.
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But the company has recently diversified beyond fruit and vegetables into myriad grocery lines, a plan that has grown its business in ways that showed how creaky its infrastructure had become.
“Centralised market buying is now less than half of our business,” explains Mark Hudson, the company’s CIO. “One fifth of line items account for less than half of the business.”
The fifth is nearly all fruit and vegetables and was managed by the AS/400 application that Hudson says was designed specifically for that class of products. But as the company diversified, adding more than 6,000 grocery lines along the way, Hudson says the company felt like “a frog in boiling water. We realised stock control was failing and our systems were paper-based and could only scale by adding more people.”
Another issue was that grocery suppliers tend to be larger entities than fresh produce vendors. Larger entities demand more rigour from their customers, and Harris Farm could not respond.
“At the markets, you do not buy something with a purchase order. You buy something by shouting at people. When you are dealing with [wholesale bakery] TipTop and [dairy giant] Parmalat you are working with big organisations who want more formal processes than that.”
Hudson decided that Harris Farm “needed a purchase-order based system for the groceries and products we buy on lead time,” and therefore looked at enterprise resource planning software’s potential to meet the company’s needs, eventually selecting Microsoft’s Dynamics despite reservations about its suitability for the retail industry.
“In my summation of the market there were two broad flavours of ERP that would have done the job. There were some with strong financials – a strong general ledger, strong backend, very much document-driven and process-based. Then there were those that were very retail and merchandise focussed.”
Hudson could not, however, find one ERP package that did both.
“From the Harris Farm point of view, as a $300 million business, we have a significant requirement for financial and analytical rigour. If we had five or ten stores we could have done with a product that does merchandising better than Dynamics. But buying into this product we were getting strong retail and financials.”
Another critical factor informing Hudson’s choice was the fact that another retailer, Macro Wholefoods, had already implemented Dynamics, and the services company behind that implementation was ready to take on his work too.
Implementation of the application commenced in March 2009, with financials going live on July 1st. Hudson says some inventory control functionality will go live during October and November 2009, with auto-replenishment of groceries due to commence early in 2010.
“We have improved margins through cost control, knowledge of where wastage goes, and greatly reduced over ordering,” Hudson says. “We are getting better and more timely inventory control and are not experiencing stock outs.”
“We are reducing duplication of data entry and paper-processing costs will fall. I think we will get a return on our investment in two years.”
Harris Farm is running its Dynamics ERP on a collection of seven IBM blade servers, virtualized under vSphere 4.
“Microsoft talks about the stack and that requires lots of moving parts,” Hudson says. “You need Exchange, Web front ends” and other applications. “Each of those typically needs a box and the operating system,” an arrangement Harris Farm found expensive and complex.
Virtualization has eased the administrative overhead of its new systems.
“The virtual machines can freely float [between physical servers] to load balance and can failover,” an arrangement Hudson says is important because Harris Farm has periodic activity spikes during which downtime is not acceptable.
Hudson adds that he chose VMware, rather than Microsoft’s own Hyper-V, because of the former’s incumbency. “I am familiar with Hyper-V and certainly would have given it a go,” were it not for the fact that the company already ran VMware and possessed licenses for its software.