December 2, 2005
Del Monte Cuts Help Desk Calls by 90%
By Evan Schuman, Ziff Davis Internet
Case Study: The $3 billion food conglomerate eliminates 100 systems, revises its supply chain and adds VOIP to the mix. Its CIO discovers some surprising benefits.
When two major food companies—select H.J. Heinz food operations and Del Monte—merged a few years ago under the Del Monte umbrella, it forced Del Monte CIO Marc Brown to do some radical consolidation.
Almost 100 systems were eliminated and the combined company standardized on ERP, data warehouse and a very different approach to supply chain. Even telecom advanced, with a huge push for voice over IP.
The moves were intended to cut costs and expedite the integration of the business, but IT got a bonus, Brown said: "It drastically improved system reliability."
How drastic? "Help desk calls are literally 10 percent of what they were two years ago," he said.
The combined products have turned Del Monte into a very diversified edibles empire, from College Inn soups, Contadina and S&W canned goods and StarKist tuna to Nature's Goodness baby food to some of the top brands in pet food including 9Lives, Kibbles 'n Bits, GravyTrain, Cycle, Skippy and Jerky Treats.
The diversified nature of those product lines initially forced supply chain changes due to the very different distribution networks needed.
"Now that we're one integrated company, it's really going to be much more demand driven in our supply network," said Brown, who had been with the Heinz side for 10 years before the merger. Historically, we've been very production focused, very supply-side focused. That's the way the industry had worked for years and years."
The difference is mostly in the analysis and what happens when CRM and Point-of-Sale (POS) data is tracked separately from supply chain/inventory.
The first systems might report that a product is not selling well—suggesting that consumers don't like it—but in reality the problem is that the store shelves are empty because of insufficient inventory and the product is actually very popular.
"We're making a lot more use of vendor-managed information to get a better handle on what's on the shelf and what's in the channel," Brown said. "POS information can give us an early indicator of where a product is slowing, but it might just be a supply chain issue because we don't have enough on the shelf."
Part of the challenge is the age-old data analysis conundrum of how much information is enough and how much is too much.
"Where you win the battle of business intelligence with overwhelming volumes of data," it's not necessarily the best way to make decisions, Brown said. "The problem is that it's overwhelming and out-of-context."
That can also lead to "multiple versions of the truth," where data that comes from different sources says the same thing in different—and sometimes contradictory—ways. Different analytical methods on top of that can compound the problem.
"We're trying a much more defined approach. We have selected particular areas to provide the data in a context where it was useful and easier to manage," Brown said. "We still have the mass of data available when we need to" access that multiple-TByte data warehouse.
Brown's team is using Oracle databases with Cognos and Hyperion on top for data and financial analysis.
Although Brown declined to specify the size of Del Monte's IT budget, he said that his IT team had among the smallest IT budgets in the industry, given the overall budget size of the company.
"In industry benchmarks, we are very near the lowest in terms of net sales volume spent on IT," Brown said.
His 104-person team supports more than 8,000 Del Monte workers.
One of the methods initially intended to be a cost-cutting move was experimenting with voice over IP, which has been tested since 2003. But like the consolidation, it's generated strategic advantages that went well beyond a spreadsheet.
With a company with the expansion flexibility needs of Del Monte, it gave Brown's team the ability to move offices without the traditional switchboard infrastructure demands.
"It's given us a lot of flexibility with things like expanding sales offices. Let's say we want to open a new sales office in Peoria. I don't need to put a PBX in small locations," he said. "Even some with 25 people, I need no switch of any kind and I can support it centrally. It gives me the ability to scale out without the step function cost of a phone system."
It also can more easily tie phone functionality into the existing data network, allowing someone in one location to immediately click on a database entry and be connected to that person's line as if it was an extension in that building.
Managing voice traffic on the network is tricky and the current Internet tunnel—using an IP virtual private network (VPN)—can cause periodic voice quality problems, he said.
"VOIP quality is generally good. For the most part, the quality has been fine," he said, adding that "a couple of our nodes have experienced garbled signals, meaning their voice may be choppy" but it's because of the challenge of managing voice traffic. "Those packets are competing with other packets."
Brown attributes many of those difficulties to trying to ride the public Internet and says he is preparing to move voice traffic to a private MPLS network.
"On the Internet, you don't have true end-to-end quality of service control. It's just not possible," he said. "With MPLS, you can set (quality requirements) end to end. You can vary the capacity as needed."
Another crucial advantage to a private voice network is that bandwidth-hogging encryption is not essential, as it would be in an IP VPN tunnel.
"MPLS has other security so you don't necessarily need to encrypt. There's a lot of overhead that is needed for encryption and it adds a big workload," Brown said. "Encrypting and decrypting requires a lot of overhead and it does create bottlenecks."
The initial lure of VOIP—free long-distance courtesy of the Internet—has yet to prove itself to Del Monte, but Brown said that it still might.
"I don't know that we're seeing any dollar savings as of yet, but that's because there is a trade-off with doing more internal communications work, upgrades to our network," he said. "We saw some savings initially when we were no longer traveling over toll-based lines."
Del Monte's VOIP payback experience was certainly typical, at least based on what Forrester Research VP Lisa Pierce sees.
"Typically, a company has be fairly unique to save on long distance in the U.S. with voice over IP. Long distance calls have just become so inexpensive," Pierce said. "It's very unusual to be able to derive a short term business case. It's much more of a longer term situation."
"The real icing on the cake is the integration between our voice communications and our data communications," Brown said. "Video conferencing, for example, is also starting to take hold."
Forrester's Pierce said the long-term value in VOIP is indeed multimedia integration. It not only has the potential to reduce those multimedia costs, but the integration can make it easier for employees to deliver networked multimedia. That, in turn, will make it more likely employees will do it which makes it more likely the company will benefit for those multimedia communications.
What happens—of course it depends on the system you use—is if you're able to use the same administrative function to set up a variety of conferencing—be it audio or video—it makes it easier for people. It's much more intuitive. Certainly, that can help," Pierce said.
More efficient operations and voice communications that are truly strategic. Now there's some food for thought.