Plantform: horizontal cooperation in realizing integrated information systems for potted plants production

Transcription

1 Plantform: horizontal cooperation in realizing integrated information systems for potted plants production C.M. Verloop 1, C.N. Verdouw 1 and R. Van Der Hoeven 2 1 LEI Wageningen UR, P.O. Box 29703, 2502 LS The Hague, the Netherlands; marco.verloop@wur.nl 2 Florpartners, P.O. Box 666, 2675 ZX Honselersdijk, the Netherlands Abstract Companies in ornamental horticulture have to face developments as increasing power of the retail, growing supply chain complexity, increasing costs and more stringent societal and environmental constraints. Firms cope with these challenges by applying scale enlargement, increasing pace of innovations and transition towards networked enterprises that participate in demand-driven, dynamic and knowledge-based networks. In this context it is of great importance to keep business processes in control. This imposes high requirements on the supporting information systems, particularly regarding flexibility, integration and incorporation of intelligent techniques for optimization and simulation. Furthermore, ornamental horticulture deals with living products, which complicates the processes and causes extra sector-specific requirements on the techniques and solutions used. It was found that the information systems used in Dutch ornamental horticulture do not sufficiently meet these requirements. Usually they are poorly integrated. Mostly, the used systems are developed by small local suppliers that focus on sector-specific software packages. As a consequence, the functionality fits well to sector-specific characteristics, but especially integration possibilities and robustness are weak points. However, comprehensive ERP-packages demonstrated to lack sectorspecific functionality and the required flexibility. A group of about 35 Dutch pot plant growers has initiated the entrepreneurs association Plantform. They cooperate in realizing integrated enterprise software that meets the requirements of ornamental horticulture. A blueprint and a technical integration architecture of the Plantform model are developed. Next, two pilots were started that develop and implement this architecture, one based on a standard available software package, the other in tailor-made software. The paper describes the organization, the working method, the developed architecture, and the current and further developments of Plantform. The results are discussed, and the directions for continuation and challenges for the future are given. Keywords: enterprise resource planning, potted plants production, growers association, simulation Introduction Companies in ornamental horticulture have to cope with developments as increasing power of the retail, distribution of their operations over different locations, internationalization, growing supply chain complexity, increasing (energy) costs and more stringent societal and environmental constraints. Important strategies that firms are applying to cope with these challenges are scale enlargement, increasing the pace of innovations and moving towards networked enterprises that participate in demand-driven, dynamic and knowledge-based networks. Furthermore, ornamental horticulture deals with living products, which complicates the processes and causes extra sectorspecific requirements on the techniques and solutions used. In these complex chains and turbulent environment, it is of great importance to keep business processes in control. This imposes high requirements on the supporting information systems, particularly regarding flexibility, integration and incorporation of intelligent techniques for EFITA conference

2 optimization and simulation. It was found that most used information systems in Dutch ornamental horticulture do not sufficiently meet these requirements. They are characterized by island automation, i.e. isolated software packages for specific applications that are poorly integrated. This results in insufficient management information and a lot of manual data entering with a high risk for errors. The majority of current used systems are developed by small local suppliers that focus on sector-specific software packages. As a consequence, the functionality fits well to sector-specific characteristics, but especially integration possibilities and robustness are weak points. However, comprehensive ERP-packages demonstrated to lack sector-specific functionality and the required flexibility. For ERP vendors, the ornamental horticulture business seems to be a relative small market, but with high requirements on entrepreneurship, technology and innovation. A group of Dutch pot plant growers, facing the problems described above, have initiated Plantform to cooperate in realizing integrated enterprise software that meets the requirements of ornamental horticulture. This type of cooperation is a unique approach to solve a problem that is typical for current primary agri-food production. Observations in other agri-food sectors show that they are facing the same challenges or have to deal with it in the near future. The objective of this paper is to describe the Plantform case, to provide insight that can be used to start similar initiatives in other agri-food sectors and countries. Therefore the paper first describes some conceptual background about ERP in dynamic businesses such as the ornamental horticulture. Next, the origin, organisation, developed architecture, and current developments of Plantform are described. The paper concludes with discussing the implications for agri-food production and addressing challenges for future research. ERP in potted plants production An Enterprise Resource Planning (ERP) system is a standardized software package that combines functionality of multiple business functions into one integrated system. It is based on a single database and contains functionality to support the main business processes including production, distribution, warehouse management, sales, purchase and finance. The major advantage of ERP is that it provides a stable backbone for the registration and communication of information among business functions, and consequently ensures the timely and accurate availability for integrated business process management. As such, it helps to overcome fragmentation between organizational units (functional silos) and systems (island automation). ERP has emerged in the early 1990s as a logical extension of the material requirements planning (MRP) systems of the 1970s and of the manufacturing resource planning (MRP II) systems of the 1980s (Akkermans et al., 2003; Jacobs and Weston, 2007). It has been advocated as essential means for implementation of Business Process Redesign in order to improve efficiency and customer service (Davenport, 2000; Hammer and Champy, 2001). Nowadays, ERP has become a de facto standard in many industries. For example, Aberdeen reported in 2008 that 86% of the manufacturing companies has have implemented ERP (Aberdeen, 2008). Early ERP-systems were not primarily focused on the supply chain (Davenport and Brooks, 2004). Consequently, they failed to meet the demands in current dynamic supply chains. In an often cited critical note Rettig (2007) argues that the ERP concept of a single monolithic system failed for many companies: But these massive programs, with millions of lines of code, thousands of installation options and countless interrelated pieces, introduced new levels of complexity, often without eliminating the older systems they were designed to replace. In a study of Akkermans et al. (2003) European supply chain executives addresses four key limitations of ERP systems in providing effective supply chain support: 1. Their insufficient extended enterprise functionality in crossing organizational boundaries; 218 EFITA conference 09

3 2. Their inflexibility to ever-changing supply chain needs; 3. Their lack of functionality beyond managing transactions; and 4. Their closed and non-modular system architecture. Akkermans et al. (2003) argue that the lack of modularity is the root cause for the other shortcomings. In the research note ERP is dead long live ERP II, Gartner was one of the first who put the limitations of early ERP systems on the agenda (Bond et al., 2000). They defined ERP II as a transformation of ERP into next-generation enterprise systems, which are web-based, open and componentised. The ERP industry has embraced this new philosophy and started to modularize their systems architectures, in particular by incorporating Service Oriented Architecture (SOA) platforms, e.g. SAP NetWeaver (Møller, 2005). Furthermore, ERP vendors included intelligent modules that go beyond transactions (especially Advanced Planning Systems and Business Intelligence). However, the monolithic nature is deeply embedded in ERP systems. It takes much time to unravel the big jumble of software code into a consistent and coherent set of components. Consequently, the componentizing of ERP is still in progress. This implies that, although valuable advances are accomplished, the basic limitations of ERP systems still exist. The rigidity of ERP is not in all industries a severe problem. ERP systems perfectly cover the demands of efficient supply chains that are characterized by stable business processes and low demand uncertainty. However, in sectors with uncertain demand and high vulnerability of production and logistics processes, current ERP is experienced as an obstacle in achieving the required flexibility (Akkermans et al., 2003). Potted plant production is a typical example of such an industry, especially due to the dependence on the growth of living materials. Growers have to cope with great uncertainty in their production planning. They may reduce uncertainty by improving process control, but remain vulnerable to weather conditions, pests and other incontrollable factors. Moreover, this type of firm may face a high degree of demand uncertainty among others because of weather-dependent sales and changing consumer preferences. Flexibility is a critical capability to cope with these high uncertainties in both demand and supply. Small firms in this sector can cope with the high degree of both demand and supply uncertainty by improvisation. However, as stated in the introduction, firm scale is increasing. Growing firms cannot rely on improvisation by some experienced staff members and have to structure their information processing. The majority of current systems are developed by small local suppliers that focus on sector-specific software packages. As a consequence, the functionality fits well to sector-specific characteristics, but especially integration possibilities and robustness are weak points. Consequently, information systems in Dutch ornamental horticulture are often characterized by island automation, i.e. isolated software packages for specific applications that are poorly integrated. This results in insufficient management information and a lot of manual data entering with a high risk for errors. However, existing standard ERP-packages do not provide an effective solution, because of the lacking flexibility as described above. An additional complication is that most ERP-systems lack sector-specific functionality, because until now ornamental horticulture business was a too small market for vendors to develop specific functionality. Plantform In 2005, a group Dutch growers decided to join forces in overcoming the limitations of ERP in potted plant production. They initiated Plantform, an entrepreneurs association, which main objective was to get more grip on the development of integrated enterprise software that meets the requirements of ornamental horticulture. It aimed to realize this by creating a sector-wide platform EFITA conference

4 and by developing a standard blueprint that serves as a basis for software development, certification and selection. This should lead to ERP systems that are well suited for potted plant production. Main identified business benefits are: More accurate and timely management information. Labour saving because of the decrease of manually executed registrations. Improvement of the labour conditions. More reliable validation of investments in e.g. RFID. Improved logistic efficiency by: decreasing transport costs, increased load; shift of direction on transport; same productivity, but using less room and less docking activities; extended order times and decreased transport times; inventory without costs and inventory in the greenhouse; decreased number of failures and search times. In order to establish Plantform, three phases are defined: 0. Startup (commitment and planning): development of a business plan and a high-level blueprint, and organizing commitment of entrepreneurs in the horticultural sector. 1. Development (organisation and architecture): start of the association and further development of the blueprint into an information architecture, i.e. detailed process models, component model, interface definitions and technical infrastructure model. 2. Realization: software Proof of Principle: selection of ERP software that fits best to the developed Plantform model, and development of additional components. 3. Implementation (pilots and optimization): implementation of the developed Proof of Principles at pilot nurseries and, concurrently, refinement and further development of the Plantform model. Next sections describe main results realized so far, i.e. the organisation, architecture, and Proof of Principe implementations. Organization The around 35 members of the Plantform association elect five of them in the board. Three supporting work groups are established: a technical committee, a committee for organisation and communication, and a financial committee. The technical committee is responsible for the development of the Plantform model, the technical specifications, the different architectures, the ICT products and the Plantform standard. It guides and controls the pilots. The results are stored and analysed, and made available for further and continuous development. This committee is supported by technical consultants (non-vendors). The committee for organisation and communication is responsible for the internal and external communication. Internal communication is needed to keep the partners informed about the development of the vision and the products, and to keep commitment for the Plantform vision and organisation. External communication is meant to keep Plantform in the picture. Participation of additional parties in Plantform will be promoted. For ICT partners that deliver ICT solutions it is important that they commit to the Plantform standard. Communication with knowledge institutions exchanges practical and conceptual knowledge. Information exchange with the government will be optimized by digitalization of that information exchange. This committee is leaded by an external program manager. Last, the financial committee is responsible for the good financial operation of 220 EFITA conference 09

5 Plantform. Members pay a yearly contribution. Moreover, the start-up of Plantform is subsidized by the Dutch Commodity Board for Horticulture and the Ministry of Agriculture, Nature and Food. Architecture In line with the developments towards ERP II as described above, Plantform has embraced a component-based approach to achieve the required flexibility. Moreover, a dynamic planning approach is adopted, in which growers can calculate the impact of alternative scenario s before approving a specific planning. These principles are incorporated in the developed Plantform architecture, which comprises of a high-level blueprint and a model of the technical integration architecture. The blueprint describes the main business processes as summarized in Figure 1. The functionalities developed in this Plantform project are indicated by the yellow boxes in this figure. Starting from this general business process description, a process model is developed in which all functions are worked out in detail. Additionally their integration is described. As can be seen in Figure 1, the activities Planning, Sales, Production, Purchase / Inventory, Order Handling and Order Processing are taken into account. The purpose of the planning process is to continuously monitor the synchronization between the production planning, and the planned and realized sales, in connection with the room available. In the sales module is dealt with active and reactive sales, and with the sales communication support. The production module is supposed to be applicable for companies using robotized production systems, but also for companies using less sophisticated systems. Within this production modules several processes are distinguished. Order processing deals with inventory management, picking and provisional sales. Based on the Production Planning a Purchase Plan is active. Based on the Purchase Plan and the Inventory level the purchase demand is determined daily. Additionally the goods received and the purchase orders are handled. The Order Handling handles the different documents (financial, logistic and transport documents) of an order and finishes the order. Orders Delivery documents Sales Purchase / Inventory Auction account Order handling Quality management Plantform Selection / Improvement HRM Planning Order processing Transport Production Administration Finance Instructions crop specific actions Orders Logistic management system Water Fertilizer Pesticides Camera systems Transport systems Order collection systems Figure 1. Horticultural business process as used in the Plantform project. EFITA conference

6 A technical model is developed, in which the application architecture, the data architecture, the middleware architecture and the platform architecture are worked out. An important additional aspect is the definition and description of the communication between the components of the Plantform model. Functional requirements for the different modules of the process model are defined. Pilot implementations In order to validate the Plantform model, two different pilots were started that develop and implement three core Plantform modules (planning, sales and production). In one pilot the modules are built from scratch. Until now, this pilot has not resulted in a working Proof of Principle. In the other pilot, a commercially available standard ERP package was selected that was evaluated to fit best to the Plantform architecture. The selected ERP system was named Q-SMS, a horticulture-specific application based on Microsoft Dynamics NAV. The selected vendor has developed the missing functionality in additional components. Several examples can be given. Direct allocation of direct and indirect costs to the product is important in making decisions. Allocation of costs to specific product batches via price schemes and registration of activities, is made possible. Logistics and added value are competitive factors for horticultural entrepreneurs. Q-SMS makes it possible to fulfil specific logistic requirements (for example on customer level). Bottlenecks in availability of products and capacity in room and labour, must be monitored to make timely action possible. Implementation of a comparison between planning and executed activities created the first step in this direction. Tracking and tracing of individual products becomes more and more important. For that reason the possibility to store specific information, and to use detection systems as barcode and RFID systems is developed. After approval of the adjusted Q-SMS system, it is tested at two of the members. It was found that the newly developed functionality is sufficient but the implementation of the Plantform model is hindered by the insufficient integration of the underlying logistic control systems. Only when the communication between and the integration of the underlying levels of information is solved, the application of the Plantform model will be fruitful. Further developments How will further developments be? As already mentioned, Plantform wishes to facilitate the transition to demand-driven responsive potted plant chains. In order to achieve this, the following actions are defined. Plantform has decided to grow towards a centre for exchange of innovations, knowledge and experience for integrated information systems. This implies that it will go beyond a body for model development and it will function as an innovation network of growers, ICT service providers and knowledge institutions. Plantform will give professional support to the users of the Plantform model. Users competences are developed through training courses, workshops and symposia (supplementing the development of competence on the job in the development of all the above deliverables). At the moment, the Plantform business model is revised accordingly. The Plantform model develops to an integral, flexible and robust information system framework. The necessary components are to be designed and developed, together with a reference process model, standards for data exchange and a Proof of Principle integration platform. A certification method will be implemented for Plantform certified software. The coupling with the logistic (information) systems in the greenhouse remains an important topic. 222 EFITA conference 09

7 Additional modules and management tools will be developed. Proof of Principles will be realized on knowledge-intensive modules for model-based decision support, such as for integral planning, cost price calculation and consignment analysis, including a simulation model for the sustainability effects. Different type of models can be used, as for example economic models and crop grow models. Modules containing this additional functionality must be coupled to the current information system. The actual information will be the basis for simulations, and for the planning derived from that simulation. Simulation and planning are complex topics in the horticulture production and logistic process, even from an information management point of view. Additionally, they cover different aspects and need several expertise for solving. The problems could not always be sharply defined and described in advance. Because of that, solutions cannot be found by one individual organization, but only by cooperation. Essential condition for successful cooperation and innovation is transparency and the attitude to share knowledge and information. Discussion As mentioned earlier, the main objective of Plantform was to get more grip on the development of standard integrated enterprise software that meets the requirements of ornamental horticulture. Organizational and technical aspects are taken into account. Looking to the establishment of the Plantform entrepreneurs association, a sector wide platform is created, in which entrepreneurs work together in the development of complex intercompany innovations focussed on management and control systems. Additionally, this platform enhanced the visibility and realization in the sector of these topics. At the same time it can be seen that it is not that easy and that time is needed to converge in vision and expectations. The development of a standard blueprint and the successful implementation in the Q-SMS standard ERP software are the first steps to the implementation of horticultural aspects into standard ERP packages. Which fits in the Plantform vision to adjust standard software to the Plantform standards. This makes the developed functionalities available for all horticultural entrepreneurs, but not only: other domains can take advantage of these developments. The pilots show that the implementation of management information systems is not an easy job and is easily underestimated. Developments on process control level, as the development of barcode and RFID systems, have higher priority. Integration between different systems appears to be a problem, that has had to be solved before the management software could be fully used. Process integration will only be successful if integration of underlying levels is established. Wolfert et al. (2009) present an integration framework, in which different integration types are distinguished: process integration, application integration, data integration and physical integration. The different types of integration are interdependent. Process integration can only be successful if the other integration types are already in place. In the further developments it is the challenge to continue and enhance the cooperation of growers. Developments must be executed in close cooperation of the partners, using the approach of incrementally development of the Plantform model. Further development in pilots is essential, to guarantee that it is incorporated in the horticultural business environment. EFITA conference

8 References Aberdeen (2008). The 2008 ERP in Manufacturing Benchmark Report, Aberdeen Group: 29. Akkermans H.A., Bogerd P., Yucesan E., van Wassenhove L.N. (2003). The impact of ERP on supply chain management: Exploratory findings from a European Delphi study. European Journal of Operational Research 146(2): 284. Bond B., Genovese Y., Miklovic D., Wood N., Zrimsek B., Rayner N. (2000). ERP Is Dead Long Live ERP II. New York, NY, GartnerGroup. Davenport T.H. (2000). Mission critical: realizing the promise of enterprise systems. Harvard Business School Press Boston, MA. Davenport T.H., Brooks J.D. (2004). Enterprise systems and the supply chain. Journal of Enterprise Information Management 17: Hammer M., Champy J. (2001). Reengineering the Corporation. HarperCollins New York Jacobs F.R., Weston F.C. (2007). Enterprise resource planning (ERP)--A brief history. Journal of Operations Management 25(2): Møller C. (2005). ERP II: a conceptual framework for next-generation enterprise systems? Journal of Enterprise Information Management Executive 18(4): Rettig C. (2007). The Trouble With Enterprise Software. MIT Sloan Management Review 48(5). Wolfert, J., Verdouw, C.N., Verloop, C.M., Beulens, A.J.M. (2009). Organizing information integration in agri-food a method based on a service-oriented architecture and living lab approach. Submitted for publication in Computers and Electronics in Agriculture. 224 EFITA conference 09