Supermarket giant Morrisons is now half way through its a five-year business transformation project, which it expects to invest some £310 million into in order to change almost every area of the company and the technology it uses to run its business.
The move comes ahead of growth plans, including the launch of its home shopping business and smaller convenience stores in 2011.
The Evolve programme is a total review of people, process, systems and hardware, began in 2007.
Gary Barr, Morrisons’ CIO, said: “This was more than a systems replacement programme. It is a business change programme enabled by the replacement of the existing IT systems, in order to support the continued and future growth of the business.
“The greatest challenge is that we needed to replace the systems across the entire business. The decision was taken four years ago to do a complete refresh of absolutely everything, including infrastructure, hardware, software, even email. It’s a complete replacement of every system in the business, and hence the Evolve programme was branded.”
Morrisons had been running large mainframe solutions which had been developed in house over the past 20 to 30 years.
The high level of bespoke design and legacy systems meant that they could no longer support the business efficiently and could not effectively support plans for growth.
It was also proving very difficult to integrate the systems from the Safeway stores that Morrisons acquired in 2004. The company was running three different systems for its warehouses alone.
The cost of maintenance was high on multiple systems that were often duplicating processes.
“At the time of the Safeway takeover, the business needed to move onto a single set of processes and systems platforms. The choice was made to move to the Morrisons platform. It was essential that that happened,” said Richard Pennycook, Morrisons’ finance director.
Barr added: “The existing systems were light touch and they did what the business had wanted, but they had been stretched to their limit, and the technology was hugely dated.
“Most of the mainframe systems were developed in flat file databases, and the shops were running on DOS checkouts. It just wasn’t sustainable, and the systems just weren’t capable, for instance to produce the monthly accounts, thousands of spreadsheets were involved.
“Microsoft Excel was probably one of the most important packages in the whole company. The systems weren’t flexible enough, and many things that the business might want to do just weren’t supported by the systems.”
Morrisons undertook a comprehensive review of the market, and selected a number of applications from Oracle’s suite, including finance, manufacturing, retail, supply chain, trading and warehousing.
Phil Goodwin, Morrisons’ programme director, said: “We selected Oracle for the platform, and had come up with our top three System Integrator (SI) partners, which were Wipro Retail, IBM and Oracle themselves…We took the fairly unique move of going through the first stage of the programme, the planning and scoping phase, with all three of the SIs, and that was a real plus for us on the programme because it enabled us to take a really good look at the SIs, and how they would operate with us, and each other.”
In the planning and scoping phase, Wipro Retail led work streams around manufacturing, testing and business intelligence/data warehousing.
Wipro Retail was also offered a combination of on-shore, near shore and off-shore resources to deliver cost effectively for Morrisons.
During the planning and scoping phase, the target operating model was decided. Morrisons evaluated the key areas for investment, for example in the warehouse it was decided that the objective was to achieve cost efficiency, enabling the business to compete with other retailers on price per case, and also simplifying processes.
Wipro Retail is supporting Morrisons to achieve the core objective of delivering effective planning, management and delivery of large scale systems and process change based on an Oracle ERP platform, providing a companywide new IT infrastructure.
Goodwin said: “With our implementation plan, one of the things we wanted to make sure was that we had a pilot site that got off the ground as quickly as possible, where we could learn any lessons, iron out any problems that might occur and then very rapidly roll out, as this process plays to Morrisons strengths.”
Pennycook highlighted the importance of doing the Evolve project as a single overarching programme rather than a series of smaller projects.
“It’s going to take us four to five years to replace our legacy systems,” he said, “and we are currently on time and on budget. We’re replacing everything in the business, and one of the big wins has been that the business has hardly noticed. Our teams have done some plumbing and infrastructure work which in scale terms is huge and yet the business has not noticed any disruption. During 2010 we’ve started to deploy systems into the business that are really making a difference to peoples’ day to day work, and a good example of that is the voice picking which has gone live in our warehouses.”
Morrisons’ entire infrastructure has been replaced, including a new wide area network. The active directory has been completely replaced, so the entire database layer and middleware layer has all been put in.
“One of our biggest challenges, which has proved to be successful is that we’ve had to keep our old legacy systems running, and the process of keeping them going whilst interfacing them into the new system with no interruption to the business. Nothing we’ve done in the programme has had any impact whatsoever in our ability to actually get a product to a shop and to a customer,” said Barr.
Goodwin added: “We have completed the implementation of our financial backbone, including general ledger, purchase ledger and sales ledger is all implemented onto the Oracle platform. We then flow right the way through from planning, forecasting, maintaining our products and our SKUs within Oracle, prices, product descriptions, and representing the deals with our suppliers, right the way through to bringing those in through our distribution centres, out to the stores and then the sales through the stores, through our new Epos solution, and then in relation to the reporting that goes back into financials, it’s all implemented.”
To date, Morrisons has gone live with financials, trading, logistic, manufacturing, HR and EPOS/cash office.
On the financials segment, Wipro Retail worked with the retailer to custom develop the solution, which needed to be configured and designed to Morrisons’ requirements, and covered accounts payable, purchasing, i-procurement and inventory.
Currently the Oracle system is integrated with the legacy systems, which are all to be replaced. The roll-out has centralised financial operations, and is integrated with Cube, Morrisons’ corporate database.
The first phase of the new financial systems and the continued roll out of new HR and payroll processes has already benefitted 82 per cent of employees, with 115,000 colleagues on the new payroll system.
With its manufacturing operation, Morrisons is reliant on its own supply chain to produce fresh food.
Approximately 40 per cent of Morrisons fresh food sales come through its own production sites.
Another aim of Evolve is to create a fast, efficient supply chain to meet its goal of becoming the leading fresh food retailer. The system is live at its Flaxby site, with three further implementations. The roll-out has enabled Morrisons to move from no automation, to a fully automated operation.
The Flaxby site is already seeing benefits since its go-live in the summer of 2010, including increased productivity, the use of hand-held devices, and simplifying processes around the movement of goods. Morrisons has outlined savings of £7 million benefits in the first year of the full roll-out, with around a 12-month payback.
Goodwin said: “We’re pleased that the implementations are going so smoothly in the manufacturing sites when you consider what a complex footprint you’re looking at. The solution also covers enterprise asset management, part management, maintenance, breakdowns, and also overhauled our processes, ensuring good housekeeping.”
The warehouse project started in June 2008, with the first go-live in May 2010. For this element of the Evolve programme, Morrisons wanted to operate at the lowest cost, while meeting its key business drives of availability in store and a wide range of products. It also wanted a more flexible supply chain, especially in terms of deals with suppliers.
Traceability and accountability are also important to Morrisons, and it required a platform that would allow the business to track productivity across every single movement of a product, from picking the cases to replenishment.
This has been achieved, and Morrisons is now able to drill down to a wealth of information. The project has also provided the retailer with a systems driven solution, replacing a very manual paper-based operation, with consistency throughout all its processes.
Morrisons has around 40 warehouses, which include bread, frozen, ambient, beer, wine, third parties, etc, which will all be managed using the best practice processes identified by the project, and will be rolled out to a network of 13,000 staff, and as the project continues, enhanced versions will be created, proving even better functionality and processes.
The next phase of the project will be integrating the supply chain capability with trading (Master Data Management), followed by invoice matching and RMS.
On the store side, the Oracle system will be integrated with Morrisons’ new checkout system, managing ordering, pricing, items, etc.
“All our frozen and ambient warehouses are now on the new voice technology, which has been great in terms of efficiency and also pick accuracy, but the real bonus for us around voice pick, and was the way we communicated it to our operators,” said Goodwin.
“We had a massive pull from the business, and the operators really love the technology that’s been implemented. What we’ve seen is that the forecast benefits that we were hoping to achieve so far through this year for the projects has already been exceeded. Likewise, we’ve had great feedback from the POS team, and we can move products through the tills much more quickly, meaning a better customer experience.”
Pennycook said its important to have the right teams and processes in place for a project of this scale.
“When we started Evolve, we thought hard about the programmes that have stumbled elsewhere,” he said. “We looked hard at how best we should manage the project, and I think one good piece of advice that we were given early on was that you can’t outsource the risks, so therefore you can’t outsource the ownership of the programme, and so although we have lots of third parties helping us with the programme, the ultimate accountability for it rest fairly and squarely with us. We’re managing third parties but we will never allow the third parties to manage us or to be the ones that are driving the programme.”
Goodwin added: “We’ve set this project up completely differently to other programmes. We deliberately invested in our internal projects and programme management capabilities and that was a big mountain to climb because the whole concept of project and programme management capabilities wasn’t there four or five years ago. Our Morrisons programme managers, release managers and project managers are actually embedded in the teams that are driven with the Wipro Retail, Retalix, Oracle or Zetes guys to do the delivery.”
Barr continued, “It isn’t just on the programme project side that this is happening. If you actually look at the Wipro Retail teams on the ground there’s people from my IT department embedded in those teams, so there’s always knowledge transfer. It’s happening all the time, so it isn’t them and us, the teams are embedded together. With our internal teams, and the Wipro Retail and Oracle personnel, there are over 500 people working on Evolve.”
Pennycook added: “Every senior director in the organisation sits on the programme board. The ultimate decision about deploying anything into the business rests with the relevant business director. So if it’s going into the supply chain, then Neil Austin, our supply chain director, has to be ready for it. There’s a high degree of ownership on the board for each individual part of the programme.”
As far as the model goes, the first thing Morrisons discussed was the engagement of business leads and the execs within the programme and the buy-in there. Goodwin said: “In each of the areas we have a comprehensive engagement programme with different levels of the business at the appropriate time and the key thing there is tying the message into the different levels in a way they would understand it. So we’ve spent an awful lot of time and effort making sure that we’re speaking in the language that people will understand it. This ensures we get that real pull from the business as we move into the implementation phases.”
Once complete, this new model is designed to aide Morrisons in its future business goals and growth plans. The supermarket plans to increase its estate to 600 stores, including some smaller stores (but still large enough to fit a market street).
To manage a range of stores sizes efficiently, Morrisons requires not only a scalable IT infrastructure, but also improved processes for all its store sizes, which the Evolve programme will support.
Customer experience is also key. By using Oracle’s software to perform labour intensive, non value-add tasks, Morrisons aims to be able to focus its key staff on higher value and customer facing tasks, which in turn it hopes will help maintain its competitive advantage and support continued growth.
Morrisons is already cutting stock levels and has reduced working capital.
Evolve is set to run until 2013, and in the year ahead, Morrisons plans to complete the roll-out of its new checkout systems to all stores, conclude the population of the new product master file, as well as further rollouts in logistics and manufacturing.
Further down the line, Morrisons will be launching a home shopping trial in the second half of 2011, and that it will launch three small convenience stores in 2011.
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