Food Processing

Shortly after joining Arnott's a little over half a year ago, new CIO Sue Sutton gave a presentation to the leadership team outlining her diagnoses of the current state of affairs on people, process and technology, and suggesting her vision for the road ahead. Several of those attending were clearly nonplussed, with one of them remarking what a new experience it was to have IT coming in and telling the team what it should be doing. Not that he was displeased - the experience may have been new but it was clearly welcome.

For Sutton, the meeting gave graphic evidence of the sea change that has been under way in manufacturing over recent times, where until recently IT has been a utility function and the emphasis has been on engineering, not IT. Indeed there are signs of a new world order in FMCG (fast moving consumer goods) companies, heralded by a growing sophistication and rigour in IT.

While only able to speak for Arnott's, Sutton has little doubt other FMCG companies are also being forced to make significant new investments in IT to meet the demands of their trading partners. Consumer goods manufacturers find themselves squeezed from both ends, as major retailers move aggressively into full electronic collaboration with suppliers, and suppliers like Amcor and Goodman Fielder pressure FMCGs to react and react fast to calls for vendor managed inventory and other technologies.

"Because the retailers in the food or retail based consumer goods [areas] - like Woolworths and Coles - are now driving a very aggressive, technology-based agenda around collaborative commerce, and even some of the large suppliers - the Amcors of this world - are driving for collaborative commerce type scenarios, all of a sudden IT has become critical to the actual trade and to the supplier," Sutton says. "It's now very much on the agenda of the supply chain. So I suspect we'll see in manufacturing more generally a complete evolution of the role IT plays, and that's certainly what I'm seeing here at Arnott's."

The phenomenon is not unique to Australia, as Sutton's colleagues at parent company the US-based Campbell's Soup Company have made clear. In America, Wal-Mart and retailers are leading the push. In Europe, Tesco is the prime mover. As Sutton positions herself to take a process leadership role, in Europe her counterpart Roberto Depani is being asked to perform exactly the same function within the European leadership team, although admittedly facing much more complex issues because he must deal in multiple companies with different business models. In the US also, the supply chain IT people have to take leadership on process to cope with a seismic transformation in how Campbell's deals with organisations like Wal-Mart, and vice versa.

For instance, in April Campbell's announced plans to consolidate the multitude of intranet sites from which its sales force, other employees and eventually some business partners will be able to get information. Director of enterprise architecture Joe Brand said the portal, which is based on IBM software and is being developed through an IT services contract with IBM, has an infrastructure that should let Campbell's rapidly bring its other applications and databases online. The next applications to be tied to the portal will be sales force automation tools. Campbell's also plans to add business processes, such as online procurement activities.

In her new role Sutton works with a global CTO based at Campbell's in the US who looks after all technology for the entire operation. "We have a good relationship, we're peers, we're on the same team. We get an opportunity to get together three or four times a year," she says. "He came travelling around Asia with me so he could get a better understanding of what the Asian environment is like, as well as the Australian environment." Sutton and the CTO negotiate on planning to achieve a joint view on global infrastructure projects and she also keeps him informed on any local developments with infrastructure implications. The arrangement, she says, is working very well.

But with the relatively unsophisticated manufacturing industries under pressure on IT like never before, for Sutton the main game is to ensure Arnott's can work with its customers to build the future, rather than being pushed into it prematurely, and to take a process leadership role within the organisation.

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Time For A Change

Sutton knows a lot about moving IT from a utilitarian to a strategic approach, after a two-and-a-half year stint at Foxtel. Until her appointment, Foxtel had never had an executive-level person responsible for IT. Her role was to develop an IT strategy and then progressively implement it with a heavy focus around providing additional support for the parts of the business involved in the management of subscribers.

By the time she left, her team was well into a CRM program using PeopleSoft CRM and had implemented the exchange campaign management product Valex. They had also done a lot of work around infrastructure. She significantly lowered Foxtel's infrastructure costs by introducing standardisation, and rationalised external support costs by introducing one prime relationship to replace a myriad tiny relationships. And after a lot of work around data warehousing, she turned that into a fundamental part of the systems capability at Foxtel, ensuring all reporting was done through the data warehouse, which had become "quite a rich source of information" by the time she left.

The Arnott's job lured Sutton away because she was ready for a change and was attracted by the Arnott's culture.

"I met the managing director of Arnott's, John Doumani, and he was just the sort of person I wanted to work for," she says. "He's an inspiring kind of guy - lots of energy, very bright, clearly taking the company somewhere - whereas Foxtel was, and still is in the doldrums of the shareholders, and it's very hard to understand whether it is going to do anything or go anywhere with digital and the like. I was sick of waiting. I wanted a company that was making money, had a clear agenda of where they were going and where you could really sink your teeth in and get things done."

Arnott's was that kind of company, she says. One of the many Australian icons now owned overseas, Arnott's has been making biscuits in Australia for more than 135 years, including some of Australia's most famous such as Tim Tam (billed as the biggest selling chocolate biscuit in the world) and Sao. Now owned by Campbell Soup Company, the company today employs about 2500 people in Australia, with its biscuits made in Australia, by Australians. Campbell's in turn is one of the world's largest food companies, with a portfolio of more than 20 market-leading food brands in more than 40 countries around the world.

But when Sutton came on board she says she found an organisation in which IT had been very under-resourced. The systems were old and heavily customised, with lots of bespoke development and with such lean teams supporting that infrastructure there was very little opportunity to do anything new. She says the new forces battering the industry have forced the company to a conscious decision to ramp up its investment in IT. Building more capability will allow Campbell's to improve its relationships with customers and suppliers and move to the "future promised land of collaborative commerce where everybody wins".

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Taking the Lead

With the pressure on Arnott's to respond to the new forces shaping the industry, Sutton says her early presentation to the leadership team was pivotal, both in raising Sutton's own credibility and in turning around some of the leadership team's attitudes toward IT. "It was like the beginning of this light going on," she says. Since then, as Sutton has increasingly become involved in leadership team meetings, planning sessions and the like, she says it has become evident she is ideally situated to progressively take a "process leadership role", with an eye to getting the executives to think about the fundamental ways in which the business model must change if Arnott's is to support new demands and initiatives of customers and suppliers.

While not all CIOs are fortunate enough to be part of an executive team, Sutton says those who are will increasingly need to expand the job into being a process role that happens to incorporate technology, rather than a pure technology role. "We have to work out that business model change first, before we can get into detail around what the processes need to look like, and then eventually look at what technology we want to apply to those processes," she says.

"It's early days. The first thing has been to develop business models for how we actually look today, and then to extrapolate from those business models what will happen if we don't have a point of view but just allow our customers and suppliers to drag us where they want us to go. We've given them [the executives] a vision of what that future might look like. We have actually drawn business models that display all the different kinds of processes we would have to support if we just sit here and dig our heels in and only do the things that customers and suppliers ask us to do. And that future model is incredibly complex and ugly looking.

"That was kind of the catalyst to then start a conversation around looking at what our business model really should be so that it meets the customers' needs, but also meets our needs." It is a conversation Sutton is happy to lead and an approach she feels entirely comfortable with. But she says in order to achieve her goals, clearly she needs a good solid strategy, a sense of where the company is going and a plan for getting there.

With Arnott's having invested, shortly before she arrived, in middleware to support a third-party logistics company, much of her early focus is on strategy and architecture work aimed at leveraging that middleware to allow it to talk electronically to customers and suppliers, without massive amounts of work on core applications. In June Arnott's announced it had selected Tibco products to automate and integrate its supply chain partners with its internal applications. The aim is to drive maximum efficiency from the distribution and supply processes and provide real-time integration of the supply chain, from suppliers to customers.

The need for the project came out of the business, which was outsourcing warehouse and distribution in Victoria to a third party. Business told IT its requirements for sending orders, confirmations, invoices, receipts and so on to the third-party providers. The IT group then decided that to provide a fully-functional, secure solution it needed a really good, loosely-coupled, B2B message-based integration and, as a direct-to-store supplier (DSD) to Woolworths, a good messaging system to send and receive electronic data interchange (EDI) and to be able to process those messages.

Middleware was the obvious solution. The integration will link trading partners with Arnott's internal inventory, order entry and warehouse control applications, which are hosted on the company's IBM AS/400 iServer. The project will also be extended to accommodate EDI with the company's major customers.

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Automatic Supply Chain

Currently at either end of the supply chain - supplier and customer - the processes Arnott's uses are the same ones that have been in use for many, many years. It still uses paper purchase orders. Goods still arrive and are manually receipted in and checked for quality. At the customer end the processes for taking orders and delivering stock to store are just as outmoded.

"Those have all now fundamentally got to change, but there isn't anyone inherently in the business who understands how to re-engineer those processes and then apply technology to them, to enable us to participate in collaborative commerce," Sutton says. "So in our case, because IT tends to all be about process and if you have IT people that have come cross industry they're used to major process change-type projects, the leadership team are looking at me and my team to deliver process leadership."

Since the team accepts it cannot do everything at once, part of Sutton's role is to decide which projects will give Arnott's the greatest "bang for its buck", she says.

With those decisions made, the next step is to define all the new processes underlying the new business model, in extensive detail, and win agreement from the business - and when appropriate from customers - for them. Only then will she seek the proper technology to apply to the project. "So it goes: business model first, detailed process definition next and then technology last," she says. "It's a long process. By the time the whole thing's done including all the technology, you've got to expect it's a three- to five-year journey."

During the entire course of that journey, Sutton says, effective IT governance will be vital in helping the organisation achieve its goals. "When we're talking about embarking on a program of large-scale technology change, governance is everything, because you can have monumental failures or monumental successes based on how well you manage it all," she says. (An in-depth look at IT governance starts on page 40.)When she joined Arnott's there was no IT governance structure in Arnott's locally, although there was a very ambitious program globally to set up both global and regional program offices for IT, with processes for checking investment decisions. Her job has been to help the Arnott's subsidiary catch up.

To that end Arnott's has hired a highly experienced regional program management officer (PMO), who is currently engaging with the global project to ensure the Arnott's view is being heard. The PMO is also setting up local prioritisation committees comprising the Asia Pacific leadership team, and initiating processes for resource allocation, project management, reporting, risk assessment and so on.

"And part of it has also been getting those disciplines across the business," she says. "It's not an IT issue as such, it's a total business issue. It's not just about IT governance, it's about project governance more generally and trying to get that in place.

"At the same time that's been kind of Â'overlaid' with a governance structure around architecture, which again is being driven from the US by the CTO with local pieces to it. It means we have got a way to sign off on the architectural part of the project, and if it's going to go outside standards, the process for getting that dealt with."

Her own experience and conversations with peers leave Sutton in no doubt that when IT governance fails to work it's because there is no true engagement from the leadership team. She says unless the executive is on the prioritisation committee, and is actively engaged, governance cannot work.

"I think a lot of the CIO's role is actually getting the people on the steering committees and so forth to really understand what their role is and how critical their role is, and what happens if they don't actually live the role properly. I spend a lot of time with people here doing exactly that," she says.

Like many CIOs she foresees the biggest potential barrier to progress into the future as resources - whether it be in people or capital - not being marshalled to achieving all the ambition Arnott's has as a company. Arnott's may make lots of biscuits, but it will take some pretty big bikkies to get where it is heading now.