Morrisons’ focus on producing its own food through its vertically integrated manufacturing businesses has provided the supermarket with some challenges as it has overhauled its IT infrastructure, finance director Richard Pennycook tells just-food. Glynn Davis looks at the solutions that the retailer has found.
With three meat processing factories, two bakeries, four fruit and vegetable packing houses, four food preparation factories, the Flower World wholesale business and a sea food operation, Morrisons is no ordinary food retailer.
It’s a fully-fledged vertically integrated business that is now “few and far between” around the world, according to Morrisons group finance director Richard Pennycook, who suggests this model brought unique challenges when it started planning a radical overhaul of its IT infrastructure.
“We’ve a different supply chain model. We sort, grade and pack [produce]. And we also take stuff apart – as we take animals apart in our abattoirs,” he says.
With this activity running alongside the group’s UK-wide store portfolio and a planned internet operation, the combination creates a complex scenario.
Dubbed ‘Evolve’ the group’s GBP300m (US$479.7m) six-year transformational IT project began in 2007 – in the aftermath of its major acquisition of Safeway – and will run through to 2013 and beyond.
After the Safeway deal, the group realised its IT systems were simply not fit for purpose, recalls Pennycook.
“Our IT was holding the business back. People in the office were still using black and green [monitor] screens. A simple promotion of six bottles of wine for the price of five took six months to programme and to give colleagues discounts on their food purchases took nine months.”
Such was the change needed to improve this scenario that Pennycook says Evolve became the “biggest IT transformation project in the world”.
Needless to say, the potential for things to go wrong would have been very high and so, in order to avoid this, Pennycook says Morrisons took a close look at what had gone wrong at other retailers’ IT implementations.
One conclusion was to source the best third-parties to help with the task.
To this end Morrisons selected the Oracle platform because of its broad suite of products that encompassed all of Morrisons’ needs. These included technology solutions to take care of stores, distribution, finance, HR, manufacturing and the trading and supply chain aspects.
And, to handle the integration of these various IT elements, Morrisons ran a 12-month pilot of working with various systems integrators. This ultimately led to a short-list of three – Wipro, IBM and Oracle – before the decision was taken to go with Wipro.
Another conclusion the Morrisons’ investigation team found was the need to take responsibility for the project internally. Paul Dickson, vice president at Oracle Retail, says: “There has [almost] been a level of over-sponsorship of the project. Richard [Pennycook] has kept his hand on the tiller and the heads of divisions have all sat on the steering committee. There have also been monthly meetings with each line of the business having to deliver on its targets.”
Giving responsibility for the various IT implementations to the people within the different parts of the business is extending into the way the new systems are being used – as they individually come on-stream. Pennycook highlights the fact there is a four-hour fix for IT problems, which has one price, and a 24-hour fix with a lesser price and that the “business [areas] choose” which option they want.
This close involvement of many Morrisons people in the project has ensured it – unlike many others of its long-length and magnitude – stays on track.
“The consistency of the Morrisons project has been the constant revisiting of where it is trying to get to,” says Dickson, adding that this has been combined with an essential willingness to make changes. “You can drive a vanilla standard of implementation but you then end up getting a copy of your legacy systems.”
Implementing change is a delicate business because it is essential that the “secret sauce” of a business is retained during any business transformation. But Dickson argues that everybody in an organisation believes their bit is a part of this special sauce and therefore should not be meddled with. “In reality, it is often not the case and so you need to avoid just replicating the existing business.”
The company has also made efforts to avoid over-complicating what is already a complex project.
“We do the 80:20 rule so when we are in micro-level discussions we’ll think again about the vanilla out-of-the-box option and ask whether we can get 80% out of this and get it up and running quickly,” explains Pennycook.
This thinking further manifests itself in the view that Evolve is a “business project and not an IT project that is driven by the businesses needs and not those of IT”, according to Dickson. It is also a process of evolution that has aimed to find “non-threatening ways of building the various solutions”.
This has certainly helped bring Morrisons’ employees along with the project. What has also helped is that the early results from the parts that have gone live have made their lives easier. So far these have included the areas of HR and payroll, the product file, a warehouse voice picking system (from supplier Zetes), and manufacturing.
At store level Pennycook says the old systems meant all outlets had to be treated the same but now segmentation is part of the armoury and promotions can be sent to specific superstores. The till systems have also been brought together into one type compared with the five different varieties that had been in operation previously – within the cafes, pharmacy and banking areas. And the store signage can now be produced for specific stores, which means sales assistants can commit more time to dealing with customers.
There have also been major benefits to the manufacturing division – with Pennycook stating that the ability to run the Oracle platform across the businesses different areas enhances the group’s vertically integrated model.
“In manufacturing we can see the levels of stock and raw materials usage as well as having traceability and provenance. This enables us to get the raw materials just-in-time so the products are fresher for the stores and our customers,” he explains.
What is particularly exciting for Pennycook is that upon completion of the project the business will be positioned to undertake planned new developments such as expanding into convenience stores with multi-pricing, developing a multi-channel capability, and whatever else appears on the horizon.
“We’re excited by the fact all our legacy systems (of 30 years) are going into the bin. Our competitors don’t have the luxury of that. They’ve a large tail to drag along and it’s a real challenge for them with new developments,” he suggests.
But for now the project continues to move on towards its point of completion in 2013 in a process that Gary Barr, chief information officer at Morrisons, has described as being akin to conducting a heart and lung transplant while the patient is still walking around.