Dairy Crest Outsources For Business Efficiency
In the UK, many supermarket shoppers are familiar with the dairy product brands Clover, Cathedral City, Utterly Butterly, Frijj and St Ivel Gold. What they're less likely to know is that all of these products come from one company: Dairy Crest.
With a turnover of over a billion pounds, Dairy Crest is the UK's leading chilled dairy foods company. It employs 7,000 people at locations around the UK and serves both the retail grocery trade and major food manufacturers.
As in many industries, food processing companies like Dairy Crest are facing increasing competitive pressures. Consolidation amongst supermarkets and food retailers and a continuing decline in doorstep sales means there is a constant drive to improve business processes, and to make the company more efficient.
Since joining Dairy Crest in 1999, business systems director David Batts has aimed for a combination of value for money and added value from his IT and his business systems. This has been done by driving improvements in business processes, with a focus on business analysis and project management capabilities. Only essential technical skills are kept in-house - the rest is outsourced.
Outsourced application support
Dairy Crest started its relationship with Digica in 1997, under a contract to provide outsourced 24x7 applications support. The food and drink industry is a round-the-clock operation that requires a highly-resilient IT function to support it, and Digica's ability to provide a 24x7 service is essential.
“While our applications were already outsourced when I joined the business in 1999, I would have reinforced that decision,” said Batts. “Dairy Crest's view of life is that it focuses on activities that add value to the business, and we wouldn't want to have an in-house 24 hour IT operation or to be writing applications. I have long believed in the benefits of reducing the hassle factor, which outsourcing does.”
Digica supports Dairy Crest's System21 order processing and financials applications, running on two iSeries (AS/400) machines. It also supports Prism manufacturing software, and systems for warehousing, supply chain management and logistics. The service includes the development and implementation of related interfaces between these applications.
Dairy Crest has a dedicated team of seven Digica people, but its contract allows for an additional 50 days of resource per year. This extra resource is used to investigate and develop initiatives to gain more value from its IT. Strong technical and business knowledge is therefore maintained and increased within the team, while Dairy Crest also has the flexibility to meet peaks in demand and the need for additional skills.
Application development has included EDI (Electronic Data Interchange), where Digica has undertaken bespoke work that mostly handles exception reports. According to Batts, “The EDI work undertaken by Digica has improved our business processes.”
The exception reports make life easier for Dairy Crest's customer service executives, who manage its customer orders. If an order is sent for items in stock it is fully automated, while exceptions such as out of stock items are picked up and managed manually. The majority of business is from UK supermarkets, who have high expectations – by having effective EDI systems in place, Dairy Crest can efficiently meet these demands.
Infrastructure hosting added
While Dairy Crest continues to outsource its applications support with Digica, in 2004 it signed a new three-year contract that also included hosted infrastructure management of its midrange servers.
Digica houses Dairy Crest's machines in its purpose built data centre and high availability suite, both located in Nottingham. It ensures the servers are available around the clock by mirroring the machines across the two sites. This provides a high availability disaster recovery solution in the event of any power failures.
Dairy Crest had previously worked with another outsourcer for its infrastructure management. The transition management went smoothly, as Batts commented: “The project manager did a sterling job, and Digica handled the move very effectively. I wouldn't have described it as being out of the ordinary, it's just what Digica do.”
“The learning curve for Digica taking over running this equipment was steep - the people we had left behind only worked three weeks notice so there was no subsequent backup. We were initially nervous about this handover, but I was very pleased with the way Digica successfully picked this up.”
Open working relationship
Digica and Dairy Crest have an open relationship, where all information is shared, whether good or bad. “If I've made a mistake, I put my hands up and say so,” said Batts. “I expect Digica to do the same, and they do. There's no blame culture, if something goes wrong we identify what happened and fix it - Digica buy into this.”
“Both parties work hard at the relationship - this is what makes it successful. I regard Digica as part of the Dairy Crest extended team,” continued Batts.
Digica has also taken a leading role in setting up a supplier forum, where a number of noncompetitive suppliers meet independently of Dairy Crest, to come up with solutions that can help improve their overall service. This aims to take the concept of the customer-supplier partnership further than one-to-one, and become a one-to many relationship that benefits Dairy Crest.
Effective technical skills
One project that Batts highlighted as a particular success was writing interfaces between systems for Dairy Crest's warehouse in Nuneaton: “Digica did an excellent job in getting the System21 software running on an AS/400 talking to our WMS (Warehouse Management System) running on an RS6000.”
Digica wrote a piece of robust, fault-tolerant communications software called the ITM (Interface Transport Mechanism), which allowed the Dairy Crest systems to communicate with each other, without requiring any third party software. Batts commented: “It was very clever - we put this out to the market, and not even IBM could do this as cost effectively. We knew what we wanted, and Digica made it work.”
Conclusion
Over the last five years, Dairy Crest has increased revenue by 72%, increased profits by 122%, and more than doubled its number of employees. The business systems team has seen a 60% growth in transactions and users, yet with the help of outsourcing it has kept cost increases to just 14%, and has actually reduced its headcount.
Batts concluded: ‘We don't outsource just to save money - we do it because it's the right thing for the culture of the business. We've saved money anyway.”
“Digica has shown continued commitment to improving the value for money service they provide, and I was happy to renew the contract for an extended period”
David Batts, Business Systems Director, Dairy Crest