Keep on Trucking
- 05 February, 2003 14:30
Think you've got integration problems? Toll Holdings transport group has acquired at least one new company every year since 1986.
Determined to "own" transportation in Australia - including ports and boats, containers and trucks, planes and warehouses - Toll Holdings Limited has had a seemingly insatiable appetite for acquisitions since 1986. That was the year CEO Paul Little bought a run-down trucking business for $1.5 million and began the task of turning it into Australia's only true "integrated total logistics provider".
There's been at least one takeover every year since.
But under Toll's metamorphosis into the $2.25 billion global transport giant that is now Australia's largest road transport group, presenting a single face for the highly diverse group is a major challenge. So a company that has always spent enough on IT without ever going over the top looks to strong IT governance and standards to ensure all the newly acquired companies can be integrated into a relatively uniform IT architecture with minimum fuss. Solutions development manager Andrew Rossington says with new companies being added to the group at least annually, Toll's acquisition strategy could have led to disaster without an architecture specifically designed to allow rapid integration of new companies.
"I think in a company like this you can put forward your preferred platforms and set up arrangements for procurement and set up your support and maintenance services to ensure that you can provide the best level of service for those platforms of choice. But at the end of the day, being an acquisition company, we will end up inheriting things," he says. "We have a multitude of different hardware and software platforms out there and one of the jobs as part of this whole integration is to start to bring them all together, to get rid of what we don't want and merge it into what we do want. That's going to be ongoing. To be honest, I can't see it ever ending and that's why we need to have a standardised architecture for developing software, which allows us to integrate things quickly, because otherwise we will end up with 101 different systems around the company."
Rossington says with a business strategy to own transportation from door to door, and a determination to provide maximum transaction visibility so customers can track their goods all along the way, perhaps the biggest challenge facing Toll is to bring together all the systems and services - including business processes - of the diverse companies in the group. The alignment of all the various business units to ensure that happens is difficult, particularly where the supply chain is not always owned wholly and solely by Toll. "For example," he says, "in auto the PDI or the pre-delivery contract might be held by someone like Patrick Autocare. We have to interact with Patrick Autocare as part of that supply chain, and still be able to provide that level of visibility across part of the transactions which we don't necessarily own. It's incredibly difficult, and we're working our way through that now."
Coals to NewcastleToll has been growing virtually since the outset when Newcastle businessman Albert Toll set up the company in 1888 to haul coal by horse and cart. Integrated into the Peko Wallsend Group in the 1960s, Toll succumbed to a management buyout led by Little in 1986. Today the highly diversified company describes itself as a "market leader in one of the country's most dynamic and competitive industry sectors", spanning automotive, beverages, food and retail, industrial, ports and resources and removals. And its aggressive expansion continues. In 2002 year the company, together with Lang Corporation, bought Australia's two biggest rail networks: National Rail Corporation and Freight Corporation.
Toll's key strength and competitive advantage in the face of such rapid expansion lies in its ability to design and manage innovative supply chain solutions that provide customers with flexibility, reliability and cost competitiveness in managing supply chain requirements. As such the internal IT group headed by group general manager IT Martin Dunne (who reports to the CFO) works closely with Toll Solutions, set up in March 2000 to support Toll's growth as Australia's leading provider of logistics solutions. Toll Solutions has a number of successes under its belt, the most recent being the implementation of its Managed Transport Services which includes electronic billing and proof of delivery (POD), and electronic freight tracking and warehousing systems to create seamless business transactions for customers.
The internal IT area also works closely with Toll Transitions, which manages more than 30,000 relocations each year nationally and internationally. It is also growing its e-commerce capabilities to bring faster, more reliable service to its public sector and corporate customers and streamlining its transactions with its huge supplier base.
Rossington says one part of the internal IT group's role is to work with the customer-oriented groups and to share resources. The other major part of its effort is to integrate, as best it can, the IT systems within all the many diverse arms of Toll. As part of that effort the internal and external groups are collaborating on an internally-developed webMethods-based product called Toll Exchange, which has been set up under Toll's architecture to allow Toll to communicate with external partners and to ease integration of new companies (see "Madness Into Method ", below).
Playing It SafeToll has always taken a conservative approach to IT spending, investing enough to secure good operational systems without ever going over the top or forgetting that transportation is its core business. While the dotcom boom played out before Rossington joined the company, he understands Toll did not rush into e-business because it was determined to prove a value proposition before making any great investment.
"They weren't standing back from it, but they were looking for the value proposition," he says. "And I don't think they could establish it back three years ago. I think they were saying: 'If we do this we are going to be so far ahead of our customers that we're not really going to be able to enable any solutions, aside from simple track-and-trace type solutions.' That's not where the real value proposition is, so they looked at where they were going to be able to save money, make money or provide a better customer service, and I think three years ago with dotcom the numbers weren't adding up."
The e-business strategy has been evolving ever since (see "Little 'e' and the Holdings Company", below). Rossington says the company is very happy to spend money on technology where there is a genuine business proposition and a return, which can come in one of three ways. An IT investment must provide a much better customer service proposition, a genuine cost saving or allow revenue growth. "If it doesn't fit into those three principles, then basically it doesn't go anywhere," he says. Every proposition is required to meet an established business case built on rigorous metrics and parameters that must be satisfied, and must be signed off by the board.
"For example, we're spending a lot of money at the moment on an internal project on data warehousing and business intelligence because what we see is that we have a lot of valuable information internally, mixed among our different business units and business groups and operating centres," says Rossington. "There is an incredibly high-value proposition in consolidating all of that data and better understanding our relationships with customers and our trading with customers. Also, from an operational and profitability point of view, we can look at a very granular level at the data that's coming out of our systems and have a basis for making decisions."
A Common PurposeRossington says Dunne realised as the pace of acquisitions picked up around five years ago that Toll would need to maintain some commonality at the IT level to drive the business at the business level. The realisation has led to a couple of strict conditions coming into play at the earliest stages of every potential acquisition. For a start, Dunne is involved with every merger from the beginning. The company also relies on a rigorous methodology to justify any proposed acquisition, with a hefty IT component that examines any likely synergies or added value to be gained from the acquired company's IT systems, and the level of integration that would be required.
"On the internal perspective, one of the tasks that we're doing, and have been doing for a while, is integrating our internal systems, Rossington says. "We need to present the face of Toll being the one Toll vision, so a customer potentially won't have to deal with many different back-end systems, or many different people or processes."
During his time with Toll one of the major challenges has been rollout of a global freight management system to the many diverse different business units, whether acquired or "organically grown". Another has been integrating the many disparate systems inherited by virtue of acquisition. That means integrating those from a functional and data perspective to achieve a single view of the customer and transactions across the business. Standardisation of business practices internally has also been a big challenge. A third challenge has been extending that to the outside world, via a strategy for B2B services to trading partners and customers.
Customers everywhere are becoming more demanding of information. Toll customers want to be able to generate quotes, translate those quotes into orders to move freight, place that order onto Toll systems, and then have Toll generate consignment notes and deliver the freight. At any one point in time the customer wants to know where the freight is, when it will arrive and costings for various legs of a route and so on. Hence Toll's next evolution will be to an ability to interface directly with trading partners' or customers' systems to supply that information, as part of its pledge of delivering innovative supply chain solutions.
Architecting a SolutionRossington says architecture is critical to achieving all of Toll's IT goals. The company, a Sun shop, has now standardised its platforms of choice. It runs a Sun E10K, and has standardised on Java for the applications framework it is working on for developing software. It runs Microsoft at the desktop and Sunos Unix or Solaris Unix, with webMethods now sitting on top as the integration platform. It uses mainly Progress and Oracle as databases, although there are instances of plenty of other platforms including Microsoft SQL Server within the group.
However, standardising on an architecture is not the same as mandating that architecture throughout the group, which will take many years. And with so many merger and acquisition companies running diverse systems, supporting them remains a challenge, Rossington says. "Support is a challenge, and I suppose you once again get back to that statement that we are trying to standardise as much as possible because we need to build our support. Support and maintenance in any organisation needs to offer a service level agreement and a quality of service, and having 50 different platforms won't let you do that very easily.
"We've got a fairly extensive operations centre out at Mt Waverley [Victoria] with a fairly wide-ranging skill set. I don't think life is going to get any easier for them for a little while. Architecture will be one key, and making the best choice with what we know at the time, because being an acquisition company we're not sure what could happen next," he says.
Toll relies heavily on process analysis to ensure it gets things right. Rossington says that in his experience too many IT shops ignore the work of analysing processes before designing solutions. "It's something people have ignored a lot. They've looked at IT solutions in a very technical manner. We try and take the opinion that the technology is getting easier. Where the biggest challenges lie, and what people need to work on, is business process in the whole solutions design space.
"The way we look at it is to say technology is there to support business, and business is there to support business process. Before we do anything we've got to go out there and have a look and say: 'What are we actually trying to achieve here? How does the business currently work, how is it going to change, how can we make things better?' The very last thing that happens is we start designing a technical solution," says Rossington. "When you're looking at the B2B space or the integration space, that [effort] becomes complicated by a factor of 10, because you're starting to talk about not only business processes dealing with other business processes, it's systems dealing with systems as well."
And with Toll's acquisition bent showing no sign of abating, Rossington is determined to ensure the work continues to deliver value to the business, suppliers and customers in the years to come.
SIDEBAR: Madness into MethodNew tools are helping Toll to speed up the integration process
As Toll Holdings continues on its acquisition trail, there will be a host of challenges for IT and solutions development manager Andrew Rossington. He says the decision to purchase webMethods is designed to give Toll a platform enabling it to integrate new systems quickly.
"WebMethods is a piece of middleware and a bit more," Rossington says. "There's two components to the product set: the EAI [enterprise application integration] component and the B2B component, and essentially they are there to allow you to integrate various disparate systems easily at a data level and a transaction and functionality level.
"Bringing that platform in-house means we look at the IT part of acquisitions in a different way now." Previously, when acquiring a new company, there were two choices: either run concurrent systems until Toll was ready to migrate users into the Toll system or turn off the acquired system immediately. Now Toll can integrate an existing system into its production system and then slowly migrate off it or, where the system provides unique functionality, maintain the system and use webMethods to provide integration at transaction layer and a data layer between the two systems.
That work is by no means complete, Rossington says, with three major systems currently having some cross-functionality.
"We'll bring that down to two, very shortly," he says. "Then the remaining two, we will integrate between them and keep the second one going for quite some time, because it offers some specific things that we really don't want to put in our core freight management system. It's for internal and external customers, but mainly it's about joining the internal systems up in order then to give a better level of service to our external customers."
SIDEBAR: Little 'e' and the Holdings CompanyCustomers are the cornerstone of Toll's e-business strategy
Toll Holdings' e-business vision seeks to harness the potential of Internet-based trading to redefine the physical tasks of warehousing and distribution, especially in the food and beverages sector. By combining its logistics expertise with the most advanced systems, Toll says it is helping customers take advantage of these opportunities.
The company has embraced four key strategies in the drive to achieve its e-business vision. 1. A transport and logistics information network to enable information sharing among businesses in the logistics chain. 2. An integrated purchasing and fulfilment function to make it easier and more cost effective for customers to do business with Toll and with their own customer base. 3. Alliances with global partners to assist Toll to develop the necessary information networks, while partnerships with software providers are already giving Toll the means to develop industry and customer-specific solutions. 4. Investment in technology ventures to add value to Toll's service capabilities.