Benefits of the System
Improved Decision-Making Information
Given the size and scope of the Fonterra project, the acknowledged inefficiencies arising from the merger, the duplication of the existing information management systems and the changes to core business operations as a result of the refocusing on the supply chain, it is difficult to objectively quantify expected and realised benefits from Fonterra implementing the JEDI system per se, distinct from other benefits arising directly from the merger. However, the stated objective of reducing the company's management and administrative workforce by a half once JEDI is fully operational offers significant savings in staff salaries alone that cannot be achieved without an integrated information system. It is also noted that the full benefits of the merger hinged around better use of information to co-ordinate activities across the industry, and that these benefits would not be accessible without significant investment in the Information and Communications systems, and the technologies that support them, throughout the organisation.
Thus, the benefits of the system are perceived by management to be primarily based upon the production of more accurate, reliable, timely and relevant information at all levels of the business upon which to base decision-making. Furthermore, the system is intended to reduce, wherever possible, reliance upon specific individuals for key data and processes. Thus, the emphasis is on not just improving the collection and processing of information, but also on improving the quality of the information that is stored, with particular importance being placed upon there being only "one source of the truth" for all applications. The cost of duplication, inaccuracies and time spent reconciling differences will be significantly reduced, allowing decisions to be made in a timely manner.
The organisation-wide focus of JEDI means that the benefits of improved information quality and timeliness will be available at all levels of the business. Specifically, however, there is a focus in the initial stages upon improving information for the governance arm of the new, merged entity, which had not necessarily been well-served by the old systems. By better understanding the supply chain of the business and the key sources of profitability, and having better operational information available on these supply chain activities, the quality of decision-making should improve. This level of responsiveness will relieve the frustrations currently faced by the directors in accessing accurate and relevant information, and is crucial if Fonterra is to achieve its strategic objectives.
Fonterra management are treating JEDI as an investment. Whilst there is a significant up-front cost, the benefits will accrue over time. Expectations of the system are tempered by the understanding that it will take time to accrue some of the benefits, not least as it will take time to build up accurate histories of the "one source of the truth" from which to make forecasts and projections. In this sense, Fonterra is treating both the electronic systems and the information that the systems utilise as organisational assets.
A Necessity for the Business, Not a Sustainable Competitive Advantage
It is recognised that the system will not "solve" all of the information problems facing Fonterra. Key elements of the system still rely upon forecasts and projections that are subject to the normal errors of forecasting. Even with accurate data, the key outcomes of the organisation still rely upon the quality of decision-making undertaken using this information at all levels of the business.
Fonterra executives acknowledge that at best, the system will allow them to remain in the market. Alex Duncan states that the system is the firm's "entry ticket" to the international milk products business, and without it the inevitable result would be reducing market share. Fonterra's only real source of competitive advantage remains its low-cost milk production at the farm gate - all other aspects of the processing, marketing and distribution of milk products must remain competitive for the company to maintain its world leadership. JEDI helps maintain that competitiveness.
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