Enterprise Resource Planning System - Assignment Example

?Enterprise resource planning system The world of business has changed remarkably in the last half decade. Technology has made it possible for businesses to manage their operations easily. Enterprise resource planning system was introduced for the purpose of managing business operation flawlessly while still maintaining the needs of the customers. This system has made it possible for businesses to grow and expand without compromising the quality of their products and services. Peet’s coffee and tea is one of the companies that have invested in the Enterprise Resource Planning system and the management cannot regret. Peet’s coffee and tea had challenges managing their customer needs, finances and raw materials but all that changed with the implementation of the Enterprise Resource Planning system. The company is in a better position to guarantee quality Coffee and Tea products, managing finances better and having a competitive edge over its competitors. Businesses have been availed the Enterprise Resource Planning systems that make their work very easy in managing their customer needs, while maintaining the quality of products and services customers look for, as they grow and expand their customer base leading to high sales and profitability which is the dream of every business. Peet’s Coffee and Tea History Peet’s Coffee and Tea was founded in 1966 by Arthur Peet in Berkley California. Peet was a Dutch Immigrant who believed in absolute quality compared to quantity. In that case, he always insisted on maintaining good quality for the coffee and Tea he roasted in this company. Arthur Pete insisted on getting the best coffee there is in the world, import it and control its production to end up with a high quality product. Tasting for the coffee was done with absolute precision to maintain the quality established in the initial days. Peet believed in direct delivery to maintain the quality of the coffee. He also believed in merchandising with many outlets but still maintain the quality. The way to manage that was to collaborate with franchise shops and outlets (Peet’s Coffee and Tea, n.d). His quality emphasis got him the title, the father of coffee specialty in the United States and the world. The first store Peet opened was at the intersection of Walnut and Vine Streets in North Berkeley, California. His coffee received mixed views from the first customers when he introduced it. While some claimed that the coffee smelt burnt, others appreciated the dark well blend quality coffee Peet introduced. Within no time, Peet’s coffee became popular among students, musicians, writers, artists and practically everyone in within the region. His coffee became so popular that some experts related the group of Peet’s coffee lovers to a cult. It was not well understood what was with his coffee and more and more people joined the club of taking and loving his coffee. This necessitated the opening of the second coffee shop which opened at Menlo Park. He opened the third outlet at Domingo Avenue in 1980. Three years later, Arthur Peet sold Peet’s Coffee and Tea for unknown reasons to Jerry Baldwin, who had founded Starbucks the same year with two other partners (International Directory of Company Histories, 2001). Baldwin also insisted on quality and went ahead to spread Peet’s business principle of quality and not quantity. Baldwin continued with Starbucks and the performance of the venture surprised them. Within no time, they were opening their third store due to popularity of their coffee. Three years later in 1987, Baldwin sold Starbucks interestingly, to a former employee of Peet, Howard Schultz. The reasons for Baldwin selling Starbucks are not well known but is claimed that he stated that Starbucks was not as good as Peet’s Coffee and Tea. Peet’s Coffee and Tea was conservative in some ways and was not looking for expansion like Starbucks, which went on an expansion campaign from the 1980s. Rather, Peet’s coffee and Tea was looking for reputation among customers and the only way that would be maintained was to maintain a small manageable presence (International Directory of Company Histories, 2001). In fact, Baldwin wanted to maintain a small local presence. This was in accordance with the Peet’s principle of a local place. It was also realized that Baldwin preferred a small local place rather than bureaucratic presence where quality cannot be guaranteed. There was no much growth in Peet’s Coffee and Tea in the 1980s as the company introduced one or two more stores every year. In the 1990s, the company started to accelerate especially after the placement of six million dollars by Hambrecht & Quist investment firm. That money allowed the company to start a large roastery which could supply 150 stores conveniently and efficiently. The customer base for the company was growing fast and that can be reflected in the sales history. The company made sales of just over one million dollars in 1990 and made sales worth more than 40 million dollars in 1996. Investors and business experts agree that was a big leap for the business in just six years (International Directory of Company Histories, 2001). Although Peet’s Coffee and Tea was of the opinion of remaining small, the company really needed to expand to other regions in the United States and beyond. It was realized that some people relocated from California to other locations within United States but missed their Peet Coffee or Tea cup. At the same time, order from the online sales had increased to over a million dollars. Peet’s Coffee and Tea needed to act fast to introduce its brand to its lovers across the nation. That would at least wither off the strong competition from Starbucks which had grown to have more than one thousand stores by 1996. Coffee culture was becoming common among many across United States and around the world. Peet’s coffee and tea finally got the expansion bug in 1997 promising to have a store in every American city. The company stated that it wanted to establish at least 15 stores every year. The company had 193 stores by the end of 2012 (International Directory of Company Histories, 2001). The Situation Demand for coffee has been on the increase in the United States and world over. Data from Bloomberg indicate that 83% of the American population took coffee in 2013. This was an increase from the previous years 78% and just 58% in 2011. Coffee consumption increased in all age groups including the youth (24-35 years), the middle aged (35-50 years) and the old (above 50%) (Perez 2013). It seems that coffee is becoming quite popular among Americans and it should only be a matter of time before all Americans confirm they take coffee. With the current rate, it would not take five years for most of the American population if not all to take at least a cup of coffee a day or every few days. As the number of people taking coffee increases, it has emerged that the number of people taking specialty coffee is also increasing. According to espresso business solutions (2013), the percentage of specialty coffee orders have been increasing by 20% every year in the last few years. As of 2013, specialty coffee orders accounted for over 8% of the total coffee consumed in the United States. The value is quite big basing on that the coffee market in the United States is at 18 billion dollars worth. With these trends, the orders for Peet’s coffee and tea are expected to increase. The increase in sales presented a number of challenges to the company. It required have a system connecting all its stores that would manage all things for the centralized system. The company had invested in software system to assist with this. However, the system was not reliable as sales increased. The company’s Chief Supply Chain Officer, Shawn Conway claimed that the software they had lacked reliability and scalability affecting their decisions. The lack of reliable information within the required time challenged the company making smart decisions. At the same time, the software used included many customizations which connected the various software attributes used in the entire system. This was necessary because each of the stores had its own way of ordering and running operations (Leapaldt, 2010). However, all these operations had to be availed to the higher management in one go and for that to happen, a lot of data was combined but its accuracy was doubted. Operations in some cases were very challenging to the staff and the management. According to Shawn Conway, customer care representatives have to go through two systems to access client information, the system could not track the orders and inventories well and the financial data obtained from the system was not sufficient enough to make logical decisions (Edgell communications, 2011). The many software systems connected together were a logistical nightmare especially if one of the system parts failed yet sales and other operations were ongoing. In fact, Shawn Conway confirmed that some of the systems used to crash from time to time disrupting the operations. Some information could fail to be captured or captured wrongly or with errors when the software system failed. In addition, the system could not handle a lot of data and information at once. During the peak hours, the system became very slow which challenged operations of the company and possible inconvenience to the customers. This made the higher management skeptical on the accuracy of the system and had to spend many sleepless nights trying to confirm the authenticity of the details in the system. It is clear that Peet’s Coffee and Tea wasted a lot of time which could translate to a lot of money. At the same time, the management of the system was a challenge as it required resources all the time. There had to be an Information Technology manager on standby incase the system failed (Edgell communications, 2011). At the same time, the company was growing with new stores opened every year. This came with its own challenge as the new outlet had to have its own software system, which had to be connected to the other store systems and the higher management system. This meant that more integration had to be done for all the systems to be connected together. This would not be sustainable with the growth rate of the company. During these challenging times, Peet’s coffee and tea added 20 new stores in a single year in which all the stores had to be connected to the system adding to the challenges already there (Leapaldt, 2010). Peet’s Coffee and Tea was concerned that these challenges would make them lose customers to the other competitors, some of which were ahead of the company in some ways. At the same time, the Food and Drug Administration introduced new regulations which could not be easily provided by Peet’s coffee and tea with the systems used at that time. Compelled enough to maintain the client base and get more as well as manage the operations better, Peet’s Coffee and Tea decided to do an overhaul of the system by investing in Enterprise Resource Planning system which would provide real time information, comprehensive correct reports, enhance productivity and connect all the stores in one system (Leapaldt, 2010). The Enterprise Resource Planning System implementation Migrating to the Enterprise Resource Planning system was not easy for Pet’s Coffee and Tea. The company needed a lot of time to plan and choose the best system for the company. The CIO, Tom Cullen did not know exactly how to approach the choice of the system. However, one thing was clear to him; he did not want a system that involved a lot of customizations. With the planned growth of the company, customized systems would most probably present the same challenge years after. In that case, Tom Cullen clearly stated that he wanted a single system to do all the operations of the company at that juncture and in future. The system he needed was one in which more stores’ system would be added to it but remain as one (Torode, 2009). Once the CIO Tom Cullen had decided the system specifications, design of the system started. At the time, Peet’s Coffee and Tea was a shop for Microsoft and found it easier to work with Microsoft. Microsoft assigned its gold partner junction solutions the assignment of installing the system to Peet’s Coffee and tea. According to one of Microsoft’s general managers, Chetan Malavia, Junction solutions was well experienced in creating systems that brought businesses and customers to a common ground, while maintain the intimate relationship between business and the customers. Malavia was confident that Junction solutions would provide a unique system that would address all the Peet’s Coffee and Tea needs. He also confirmed that Junction Solutions Company was well experienced in creating and implementing effective Enterprise Resource Planning systems (Torode, 2009). Junction solutions presented a number of systems demonstrations for other systems they had done previously to the management. Finally, it was agreed that the system by as CIO Tom Cullen had specified. Junction solutions had to come up with a way to reduce customizations in the system as specified. Peet’s Coffee and Tea chose to use Microsoft Dynamics AX system because it was easy to use and did not require a lot of capital to start compared to other systems like Oracle and SAP. In that case, employees would be trained to use the system faster and they did not need to cram a lot in using the system (Edgell communications, 2011). To make things easier, the vendor, Junction solutions chose to include a layer system on top of the Microsoft Dynamics AX system. The layer was connected to all the stores systems and would collect the data from all and avail it to the management singly. In this case, the higher management would get access to sort of summarized information from all the stores. To ensure that the system was as per the specifications provided, the vendor, Junction solutions and Peet’s Coffee and Tea did a two month discovery project in which Peet confirmed that everything they needed to accomplish was well included. After that, the project was implemented in two stages with the first phase going live in August 2009 and the second phase going live in October 2009 (Torode, 2009). To accomplish all that, Peet’s Coffee and Tea had to get Microsoft BizTalk Server which connected all the systems and made it possible for all the systems to exchange data simultaneously, Microsoft Visual Studio Team System 2008 Team Foundation Server to control all the applications and programming and Microsoft SharePoint Server to converge all the data exchanged into a single system. This system made it possible for all the systems Peet’s coffee and tea use to be integrated into one including the point of sale system, the website, store replenishment system and the labeling and shipping software. The system also had software that would make it possible to track orders, detect errors and correct them. It would also be possible to create and manage orders seamlessly. Some of the Junction solution software integrated into the system could manage marketing campaigns, crating catalogues and meet the stringent standards of the Food and Drug Administration (Microsoft Case Studies, 2011). The process of creating the system and implementing it successfully took twenty months and it is totally worth the cost and the time according to Peet’s coffee and tea management. Business after ERP Implementation There were numerous changes in the operations of Peet’s Coffee and Tea after the successful implementation of the Enterprise Resource Planning system. All processes in the company including order taking, packaging, labeling, shipping and financial transactions are all connected to one system and can be done efficiently without any hitches. It was much easier for Peet’s Coffee and Tea as it has the same processes repeated over and over again. In this case, the system used was easy to manage. The system provides real time information regarding the orders made, which can be tracked all the way, the stock available in the stores and also provides the actions that should be taken by the management at specified timelines. This allows the management to make timely, smart and growth oriented decisions all the time (Microsoft Case Studies, 2011). The Chief Supply Chain Officer, Shawn Conway was very happy with the implementation of the Enterprise Resources Planning system. According to him, one of the greatest challenges of integrating new store system to the main system had been solved amicably. In that case, Peet’s Coffee and Tea growth is unlimited. Conway points out that the company can grow with acquisitions of other companies and operations remain unaffected. With that, Conway and the higher management are confident that the company will grow in accordance with its goals and objectives. Before the implementation of the system, the company was always skeptical on what would happen with the already overloaded and un-updated system. What makes the management even happier is the fact that each department and store can go ahead with their chores without worrying about anything. The system is integrated such that all departments and stores work simultaneously yet all the data provided is in real time and flawless. Customer orders are created well, shipped and delivered flawlessly with high standards of quality maintained at all times. With that, it would be expected that Peet’s customers are satisfied which allows the business to retain existing clients and attract new clientele. Popat from Microsoft agrees that what Peet’s Coffee and Tea did was invaluable in maintaining high quality products and customer relationships. At the same time, the business can accommodate practically any change without compromising the quality of the products and still get accurate data (Edgell communications, 2011; Microsoft Case Studies, 2011). In addition to all this, the company was able to save a lot of money. In the past, the company had to spend a lot of money on the system and support staff just in case the system failed. Accuracy of the new system provides enough information for the procurement department to determine just how much coffee beans they need to purchase to meet the client needs. This helps the company to budget well and to avoid overspending and under-procurement, which was common while using the old software system. In that case, the company is able to take better control of all operations Conway explains. The new Enterprise Resource Planning system also came with marketing advantages as stated above. As such, Peet’s Coffee and Tea does not have to spend a lot of money on advertising. The advertising budge of the company reduced to just five million dollars in 2009 which was about 2% of the company’s revenue. That is a great deal of savings comparing with other companies that spend up to ten percent of their revenues on advertising (Microsoft Case Studies, 2011). Conclusion The Enterprise Resource Planning system is one of the best inventions companies can invest in. This system allows businesses to streamline their businesses saving costs, improving customer relationships and gaining better control of their processes. Businesses that have invested in this system for example Peet’s Coffee and Tea have benefited a lot from the system which has allowed the company to grow better while maintain high quality of products. Businesses that are looking to maintain good customer relationships and competitive edge should consider investing in this system and benefit like Peet’s coffee and tea and other companies that have invested in it. References Edgell communications, 2011. Peet's Coffee & Tea Manages Growth with Outstanding Quality. [online] Available at: [accessed 18 December 2013]. Espresso business solutions, 2013. Coffee Statistics 2013-2014. [online] Available at: [Accessed 18 December 2013]. International Directory of Company Histories, 2001. Peet's Coffee & Tea, Inc, History, Vol. 38. St. James Press, 2001. Leapaldt, A., 2010. Keeping it Fresh: Peet's Coffee & Tea prepares for future growth with an ERP system from Junction Solutions. [online] Available at: [accessed 18 December 2013]. Microsoft Case Studies, 2011. Peet’s Coffee and Tea. [online] Microsoft. Available at: [accessed 18 December 2013]. Peet’s Coffee and Tea, N.d. company information. [online] Available at: [accessed 18 December 2013]. Perez, M., 2013. Coffee Consumption Increases in U.S., Association Survey Shows. [online] Bloomberg. Available at: http://www.bloomberg.com/news/2013-03-22/coffee-consumption-increases-in-u-s-association-survey-shows.html [accessed 18 December 2013]. Torode, C. 2009. ERP system brews business benefits for coffee shop. [online] Available at: [accessed 18 December 2013]. Read More