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Getting the Right Direction
Anita Devasahayam, 1-Apr-2001

Beverage manufacturer F&N Coca-Cola (Malaysia) has no illusions about deploying end-to-end supply chain management (SCM) or applying e-commerce in its business. In anticipation the then impending effect of Y2K two years ago, the soft drink maker took the opportunity to evaluate and upgrade its IT infrastructure to meet the demands of the knowledge economy.

After having spent the initial years improving the automation process in the “financial driven areas” of the business that include production, warehousing and distribution, the company is now in the process of integrating the disparate and individual modules.

“The challenge is finding out how to automate and link every aspect, be it raw material planning, finished goods warehouse inventory, or distribution, to a single loop,” said Ng Jui Sia, managing director, F&N Coca-Cola.

He added that the company is realistic about adopting e-commerce and understands the immediate priority of getting the “e-infrastructure” of the distribution business right before taking the next step. “I don’t want to paint a rosy picture that we will have e-SCM or e-procurement in place soon as the next one or two years will be focused on getting it right in the distribution in our core capabilities that is the soft drink business.” Having laid the basic groundwork, Ng said that plans are underway to “Internetise” its distribution system, allowing its 100 distributors nationwide to place orders electronically.

Distributors will be able to check sales performances, track and check the status of their orders as well as receivables. In turn, the F&N sales team and senior managers will be able to access information related to distributors’ inventory, stock level and sales performances.

By placing access to information at the front-line, Ng expects distributors to make accurate decisions faster. “This will be to our advantage. We don’t run a business sitting in this room waiting to crunch data that comes through our doors. A lot of the decision makers are out there and because of that, they have to have access to that information.” He added that F&N had a huge responsibility to train the distributors because it involves good decision-making to run a smooth supply chain. The issue of security and privacy was addressed as information placed in each distributor’s hand is meant solely for them. They do not have access to information belonging to another distributor.

“It’s like a 1000-piece jigsaw puzzle. We give each of them a few pieces and only we know how the overall picture looks like,” rationalised Ng.

Work on the e-commerce infrastructure, developed by a subsidiary, began last August. Prototypes are due to roll out by mid-2001 and the complete system will be executed over the next two years.

Ng added that a pilot e-distribution project was mooted last month among the more Internet savvy distributors to gauge and evaluate its effectiveness. “Our distributors don’t have the same level of capability. They have the basic hardware and software running the business but it does not mean they share the same level of Internet sophistication.”

The distributors will be graded according to different categories as not all of them have exclusive contracts with F&N. Grading criteria includes capability, accessibility as well as ease of deployment and adoption.

“We are not testing it in the real environment right now as we are taking the most IT savvy of them all to run the prototype. Hence, we won’t experience the problems although we will learn certain things. But we will really learn when we work with the worst,” explained Ng, adding that it was easy to work with the best as it yields a good outcome.

About half of the distributors in West Malaysia are expected to adopt the computerised sales order system by next year.

F&N has a ratio of three persons to one computer among its 1700 employees. If the production and field force are taken off the equation, the ratio is closer to one on one. The high computerisation level is deliberate as it cultivates a knowledge culture-—an aim that it kept in mind during the installation of hardware and software over the last three years.

“At this stage we are moving towards information and communication. It really is about knowledge. We want our employees to use the knowledge as a tool for decision-making,” said Ng.

Acknowledging the Intranet as a base to grow the knowledge culture, the arrival of the Internet fuelled the need for data sharing and communication. The envelope was pushed further when the 50-strong sales force in the central region were given handheld terminals to expedite and ease data collection and tracking. “The handheld terminals are not merely data carrying tools. It serves as a decision-making tool at the front-line when the salesman talks to his customer. He can pull out the customer purchase history or address issues they may have with us,” said Ng. The use of terminals are expected to reduce cost of pre-printed forms, improve sales operation productivity, present accurate data and speed up sales order processing for dispatch, improve route management, credit control and inventory management.

The Windows-based handheld terminals, introduced six months ago, run parallel with F&N e-distribution initiatives. The terminals will be rolled out to 200 salesmen, region by region, over the next year. And Ng hopes to extend its use to the second tier sales force at the distributors level.

Empowering employees through technology is only a part of the total equation. Having positioning itself as a click-and-mortar player, F&N wants to go beyond its traditional customers, mainly the distributors, to reach out to the consumers.

It took the first step by setting up last September. The site enjoys a healthy hit rate and currently averages 200,000 hits monthly. “We see this Web page as a means to build brand loyalty among consumers. And we tailor each brand accordingly. For instance, the Coca-Cola page is entertainment oriented while the 100Plus page is sports oriented.”

The B2C channel also gives F&N a platform to collect consumer data to be profiled for focus studies and surveys. Compared to the past, mounting research to gauge market response has been sped up with the ’Net in place. Pull factors to draw consumers include contests, weather reports, horoscopes, virtual greeting cards and online swap shops.

“The interaction with our consumers give us invaluable data to create new products for the future.”

Having direct access to consumers does not mean the company has intentions of selling direct. “The drop point cost is very high—but in the long term, it is possible that certain immediate channels in high density areas can operate as collection points.”

Ng does not measure the return on technology by the tons of paper saved nor by reducing headcount. “I measure ROI on the fact that, first and foremost, my cycle time is reduced and that my working capital is also reduced. With better profile of inventory and working capital, I am able to make better decision and, therefore, enjoy better revenues.”

Indeed F&N bounced back last year after setbacks during the currency crisis three years ago that saw the performance of soft drinks marred by lower demand. The startup of the Shah Alam plant in 1997, which coincided with the downturn, resulted in low utilisation of production capacity and high overhead costs. Last year, sales of soft drinks grew about 8%. It currently holds 70% market share in the soft drinks business with some brands controlling 95%–100% market share.

The company is set to scale greater heights although it does not expect to conquer the entire soft drinks market. And it intends to do it a step at a time.
“Things like e-procurement, SCM, CRM and knowledge management will happen over time, setting a time frame in stone is not the way. We will do our learning before implementing. If the e-distribution system is effective, we will deploy it faster. Our
requisitions are done electronically so we are ready. But most of our suppliers are not even at the state of ‘e’ yet so e-procurement is not as urgent.”

Anita Devasahayam can be reached at