Decision to Implement Technology
As an experienced fish broker, Toby was very familiar with the "information exchange" role that the brokerage played in the New Zealand industry. Toby was also aware of the opportunities that computer technologies offered in the management of information. As his product was information, not surprisingly he looked to information management as a way of finding a new business rationale for Southfresh. Motivated by the challenge of reducing transaction costs in the industry, Southfresh began by automating and computerising its own operations. This began with the supply, order entry and accounting functions, using an SBT system. Up to seven Southfresh telesales staff would phone suppliers to ascertain product, quantity and price details and enter them into the database. Telesales staff would then supply the relevant details from the computer system to customers phoning in. As new technology became available, the system was upgraded to a "Stay-in-Front" application based on FoxPro database. Version three, however, based on Progress, was web-enabled to provide real time information to buyers and suppliers.
A web-enabled connection directly with customers and suppliers offered significant possibilities for the transaction cost savings that Southfresh had been enjoying to be shared amongst other participants in the industry. By extending the ability to suppliers to directly enter their own supply details, Toby saw that all of Southfresh, suppliers and customers would accrue timesavings from telephone conversations. Furthermore, suppliers would gain flexibility from being able to enter supply details at times that suited them, rather than when phoned by Southfresh telesales staff. Customers could scan all line items and all offers directly themselves, again at convenient times (e.g. during the evening), and be exposed to different products that they may not have previously considered purchasing. Customers would benefit from being able to see all available offers made via the Southfresh system and negotiate via the system directly with the preferred supplier by placing a "bid". The supplier would then assess the bid, accept or decline it and proceed with the necessary subsequent actions. While a negotiation was underway, stock status information made available to other buyers would reflect the stock tied up in the "pending" transaction, so the buyer saw only uncommitted stock. This would save time for customers pursuing orders that could not be fulfilled due to prior sales not being recorded as a result of time delays in the previous system.
Clearly, the system offered significant savings for Southfresh, as the more suppliers and buyers that used the web interface, the lower the telesales costs at Southfresh. However, Toby also saw the potential for the system, having captured the information, to further reduce transaction costs for suppliers and customers by assuming management of accounting processes on behalf of the transactors (e.g. invoice production) and managing other processes such as preparation of picking, packing and dispatch documentation, liaising with couriers, preparation of receipt advices and other such activities. By centrally managing the information via the system, but displaying and printing the requisite information remotely, the Southfresh system could substantially reduce the transaction costs for buyers and suppliers who had not already installed automated systems to undertake these processes. Alternatively, the Southfresh system could provide direct transfer of information into computerised systems at these sites, reducing time and error relating to data capture and media transposition. Moreover, for customers, the potential existed for the system to create detailed order history reports and to undertake stock management for customers, creating automatic orders to specific criteria when stock fell below a specified level.
Toby Warren estimates that in total, transaction costs amount to around 10 percent of invoice value, meaning the potential for supplier and customer savings was substantial. Southfresh applications, he estimated, would reduce this to around 2 percent of invoice value. The value of improved management information, timeliness and the ability for customers to get better deals was real, but extremely difficult to quantify.
Southfresh commissioned the initial system development of the application from a software development house, then recruited developers to continue to develop the software portal in-house. The web portal was introduced as an option for suppliers and customers, whilst the business continued trading as a fish broker using traditional forms of communication such as the phone and personal visits. To run the new operation, Southfresh employed a team of 5 brokers and expanded to employ a team of two developers to enhance and modify the Varenti software application. Although the initial application was developed for fish sales, Toby was aware of the possibilities of using the same model for other products. The investment in the web marketplace was seen as a way of reducing the reliance of Southfresh solely on fish broking. Toby admits that he was aware that "there was more to life than fish", and that he was looking towards creating a business "beyond fish".
Back to Top