Sep 23, 2009 (01:09 PM EDT)
Business Intelligence Boosts a Dairy Coop's Profits
Read the Original Article at InformationWeek
Who knew organic farming could be so technology driven? You picture the free range and synthetic-hormone-free cows and chickens. But who would have thought data integration and reporting would be so vital to keeping the whole operation humming? In fact, Organic Valley, the largest organic dairy coop in the United States, has been thriving, with sales growing more than 600 percent over the last eight years to reach $530 million in 2008. In an industry in which slim, two-percent margins are common, business intelligence has been the key to keeping the 1,400-member coop profitable.
The essential challenge for dairy farmers, and indeed many agribusinesses, is that they are part of a push supply chain. They can't turn their cows and chickens off, and because Organic Valley is a coop, it's obliged to take agreed-upon volumes of raw milk and eggs from each member. (In contrast, non-coop dairies and particularly non-organic dairies can subcontract and buy bulk dairy products on the open market.) The intelligence comes in when figuring out what to do with those raw materials, whether it's whole, 2%, 1%, skim or chocolate milk; cream, sour cream, cottage cheese or hard cheese; or dried milk or buttermilk powders used as food ingredients.
"That raw milk can potentially go into 100 different products," explains George Neill, Director of IT at Organic Valley. "At different levels of the organization, the people working on supply management, distribution or different product lines have a different perspective and they require different levels of detail on the same information."
Gauging demand and potential profitability across so many product lines is no simple matter, and it involves lots of information. For instance, Organic Valley uses an Adage ERP system from Infor, and in 2006, the coop launched a major IT initiative to support its first distribution center (DC). The DC required a warehouse management system (also from Infor) and an automated storage management system (for product storage, not data storage). Organic Valley also deployed MIS DecisionWare financial performance management software (soon after acquired by Infor) and demand and trade promotion planning applications from Demantra (since acquired by Oracle).
With all the new technologies and data sources coming on board, it was clear that Organic Valley's existing data mart and hand-coded ETL routines wouldn't be adequate. The coop was already using BusinessObjects software for reporting, but it was happy to discover that the vendor's Data Integrator, Data Federator and data quality software could fill the void.
Data Integrator (now a component of SAP BusinessObjects XI) handled the application integration needs. "With all these new transactional systems, we knew we needed something tighter than nightly batch processing," Neill says. "The initial implementation of Data Integrator was for the Warehouse Management System, ERP and Transportation Management System integration. Once that was in place, we used the same product for more conventional ETL needs."
There are plenty of disparate databases at Organic Valley, including multiple versions of Microsoft SQL Server for ERP, warehouse management and other apps, and Oracle for the Demantra apps. BusinessObjects Data Federator has been used for related tasks where Data Integrator doesn't quite fit.
"We were running into problems doing joins across SQL Server databases and we wanted to avoid creating staging tables for Oracle in the Data Integrator product," Neill says. "Data Federator gave us the flexibility to present Oracle data, SQL Server data, spreadsheet data and other data as a single source."
To address data quality challenges, a business-side "data harmonization" group is helping IT to overcome a confusion of terms and definitions at Organic Valley. For instance, there are at least four different types of "ship date" fields, each with a specific meaning and purpose. SAP BusinessObjects Data Integrator has helped with data quality and data lineage functionality, but the business users have to help IT sort out where data comes from and how it's defined.
"Business involvement and collaboration with IT is as critical as the data quality and data lineage capabilities," Neill insists. "If you don't have all three along with the BI tools, it's going to be far more painful than it should be."
Getting at integrated, clean and consistent data was half the battle for Organic Valley, but it also has to analyze that information. Between the Demantra applications and new BusinessObjects reports, Organic Valley has used BI to improve tracking of perishables, reduce average time in inventory by two days, rationalize products and reduced freight costs.
Integration of the warehouse management system, ERP and a transportation system, for example, led to reports that give supply chain, category and product managers granular visibility into inventory levels across the country. Marketing and sales teams can assess product sizes and packaging options to discontinue weaker products and bolster best sellers. Most importantly, promotional activities are now closely tied to order information and demand planning.
"We report everything out of BusinessObjects, and that has had a big impact because we can pull together data from sales, operations and planning in a cohesive way," Neill says.
Sales and Operations Planning reports are particularly crucial, Neill says, because they present both visual analyses and raw data for further exploration. "People who have been here a long time can look at a spreadsheet and understand the implications very quickly. But we've been growing, and we have to help everybody quickly understand the impact of a seemingly small change in one figure," he says.
Organic Valley hasn't been immune to the tough economy. In fact, there's currently a glut of (non-organic-certified) raw milk, which is depressing prices for most farmers, as recently reported by The Wall Street Journal. Though many small farmers are being pushed off their farms, members of the coop have been protected by its mission to "ensure a sustainable pay price for farmers so we can keep families on the farm," Neill says. He notes that Organic Valley's pay price is currently almost double what conventional farmers are paid. But to keep organic products competitive in the larger market, the coop has had to rely on better BI.
"Marketing campaign adjustments, SKU rationalization, production management: BI plays into all of these areas," Neill says. "It helps us manage from the farm to the shelf."