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For weeks, even months now, my colleague Ann Rosenberg has been telling me about the great customer story and business case provided by Arla Foods in Denmark, so no surprise that, indeed, Claus Qvistgaard, Arla’s director of Strategy and Architecture delivered on the promise of the best customer content of my SAP Insider BPM2008 experience thus far. As a side note, Arla is one of the first ecological food companies in the world.

Arla is a consumer product (dairy foods) company with a long history of constant acquisitions and mergers.  When talking about BPM the Ett Arla (one Arla) program was presented as an actual living and practical example of a company moving after mergers  from a silo think to entirely changing its organizational structure.  Claus described the concept of harmonization:  making a common business model with processes that go across the company and very importantly creating an IT that supports this harmonization.

I’ve already seen a base diagram that Ann uses that delineates and maps his organization, processes and IT before during and after the mergers and changes.

Claus began by using the Dan Woods quote: “the fundamental challenge facing businesses today is to determine whether IT is the solution to problems or is the underlying program itself” (Dan Woods, Enterprise SOA 2006)

Switch out the name Arla and you can find commonalities with any organization facing issues after acquisition.

Merger posed challenges
  • Data and work processes not integrated
  • Many different IT systems
  • Global customers have global demands
  • Increased international competition
  • Demand for growth and profit
  • IT platform must be “future proof”
  • Synergies to be exploited globally

 

Harmonization Goals:
  • One business model
  • IT systems working together
  • Global master data
  • Integrated work processes

 

Business Objectives:
  • Integration
  • Simplification
  • Effectiveness
  • Increase bottom line
  • Higher quality without effort
  • Efficient setup

 

Business Challenges:
Market demands
  • Fast-moving goods with short shelf-life (duh Milk)
  • Supplies are no longer stable
  • Increasing emond on product quality and labeling accuracy
Cost reduction demands
  • Reduce costs in all stages of supply chain
  • Reduce head counts
  • Reduce Number of base products

Liked his slide on standardization in the software industry showing evolution of software industry from company-unique programs in machine code on through standard services.

Arla’s program was run “from the business” and had a specific steering group to harvest business benefits.  You can read the full case study in the newly released Business Process Management: The SAP Roadmap just released from SAP Press.  Excerpts are available here

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  1. Bernd Eckenfels
    One of the things I dont like about those strategic service enablement initiatives is that they look into the future and are no retrospective to learn from.

    Greetings
    Bernd

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    1. Marilyn Pratt Post author
      I think I may have understated the session which actually delineates present as a 5 year accessment of past. Arla already has the history and retrospective.  I went into the full book case study to try to illustrate this better.
      Here are some quotes that might help explain this 3 generation strategy.  The Ett-Arla program is the one that is presently implemented and there is already room for retrospective as it was initiated in 2001 (more than your 5 years)
      I quote from Business Process Management – The SAP Roadmap (SAP Press, November 2008)

      “All IT systems at Arla Foods are implemented according to the Ett Arla
      business model and the underlying processes. This is in complete alignment
      with the IT strategy of June 2001.
      The systems of the second generation — by nature — implement the
      business processes end-to-end, meaning that today, the entire value
      chain is more or less hard-wired in the application systems. This will support flexibility, stability and extensibility only for a non-changing operating environment.
      End-to-end integration leads to a requirement that the information (data) entered into the system must support this end-to-end integration.
      That means that feeding the system can become difficult at the time of data capture and the complexity of the system becomes visible. Simplicity is not the prevailing characteristic of today’s solutions.
      Fundamental changes in the processes — such as market changes, changes in business environment, outsourcing, and so on — will be expensive and time-consuming to implement in the IT systems because of the hard-wired integration of the processes. As a result, IT becomes an obstacle to agility.
      Finally, full integration means that it may be difficult or impossible to reverse a single transaction made in or with error because this transaction may already have caused consequences elsewhere that cannot be reversed. This leads to lower quality of the information delivered —
      information is thus not completely reliable.”

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      1. Bernd Eckenfels
        Yes, but I question the asumption that “not hard wired” services are cheaper to change. I think we still have no proof that this fundamental asumption of SOA holds true.

        Changing a complex system is expensive, the actual technology the system is based on is only a very small influencer in the overall cost of change.

        Greetings
        Bernd

        PS: this is totally unrelated to Arla, its a general thought, I was just animated to post this in response to this article.

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        1. Marilyn Pratt Post author
          Interesting.  My biggest take-away from the weeks I’ve spent engaging with the internal Business Process Transformation Consultants is that this isn’t really about the technology so I think they would tend to agree with you.  BPM from what I understood from my colleagues “covers a manual and an automated (technology enabled) perspective and automated activities are only 20% typically of the landscape.  But (if I understood correctly) of the 20% of the automated activities only 20% of those are candidates for SOA and have the potential to deliver competitive advantage as differentiating activities.  If that is where your “quarrel” lies, I profess I am out of my depth and will need to refer to my colleagues for further response.
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