Meat processing giant Alliance Group is facing increasing costs in its four-year effort to replace a legacy enterprise resource planning (ERP) system.
As reported last year, the Invercargill-based cooperative, which operates processing plants around New Zealand, is on a mission to replace its legacy ERP system, which is understood to run mainframe hardware from Unisys.
Back then, the coop's annual report costed the project at $57 million, however this year's report, released last week, put the cost at $68 million. There was no explanation for the increase.
The project was billed as one of the coop's largest investments in its history and a key strategic initiative in 2019.
"An organisation as large and complex as Alliance Group needs people to be able to do their jobs as effectively as possible," chair Murray Taggart and CEO David Surveyor said.
"The ERP project will change the way we work across the business from the sales desk, through to the slaughterboard, production and shipping."
It is understood the legacy system is being replaced with US-based ERP giant Infor's M3 cloud suite with software from SAP used to manage payroll and HR.
Alliance Group reported an operating profit of $41.9 million before tax and distributions for the year to 30 September, up from $27.3m last year, despite labour shortages and other challenges.
"Our $68 million enterprise resource planning (ERP) project has continued to roll out and to drive major efficiencies in the way we run the business, supporting our business transformation," this year's report told shareholders.
"Progress this year has generally been successful, however we had challenges with our most recent module, which slowed our ability to ship and invoice product in the final month of the year."
Reseller News asked for more information, including the causes of the cost increase, details of how the project was tracking to schedule and whether the problems with that most recent module had been addressed. We also asked what benefits had been achieved and when the old mainframe-based system was expected to be retired.
A spokesperson for Alliance Group said: “The enterprise resource planning initiative is a whole of company shift in our technology platform. It is changing the way we work across every part of the business, providing greater ability to forecast, optimising the production decisions we make for our suppliers and customers and enabling us to make the best decisions about what products we market and where we put those products.
“The project includes the replacement of our legacy 1980s mainframe IT system with world class technology solutions. It will support our transformation to a dynamic value-added protein producer that takes the best of New Zealand to the world’s markets.
“The first stage of this technology transformation initiative came online last year during the global pandemic and our people have really embraced how it is driving major efficiencies in the way we deliver services.
“Over the past year, we have brought online a range of tools and systems for financial budgeting and forecasting, demand (sales) forecasting, supply (livestock) forecasting, HR support, payroll, export sales, shipping and outbound logistics and account receivables."
While the difficulties experienced in the final month of the year were "disappointing", the company said, technology transformation initiatives of the scale and nature of Alliance's were always challenging and the cooperative remained confident in the project.
"This initiative is supporting our goal of creating a stronger, fitter and more resilient business," the spokesperson said.
Alliance Group also replaced its workplace systems with Microsoft Teams, upgraded its Windows environment and boosted cyber security ahead of the pandemic in a project led by Microsoft partner Lexel Systems.
Alliance Group delivers lamb, venison and beef to tables in 65 countries. During busy seasons, its workforce can increase to 5000.
In 2019, the company announced it would end the use of coal at its plants within 10 years. Initiatives already underway will be completed in 2023 and will deliver a 31 per cent reduction in carbon emissions.