Revamping IT System for A2 Milk Company

This proposal analyzes the current system of A2 Milk company, explores its weaknesses and suggests development of a new information system for the company. It also suggests critical success factors, objectives, organizational chart, and proposed system with technology platform.

A2 milk company Proposal
Contents
Introduction...........................................................................................................................................2
Critical Success Factors.........................................................................................................................2
Objectives..............................................................................................................................................4
Organizational Chart.............................................................................................................................4
Current System weaknesses...................................................................................................................5
Proposed System...................................................................................................................................6
Technology Platform.........................................................................................................................6
User View..........................................................................................................................................9
Manufacturing Resource Planning (MRP) & Manufacturing Resource Planning 2 (MRPII)............9
Electronic Data Interchange (EDI)..................................................................................................10
Data Attributes................................................................................................................................11
User Views......................................................................................................................................11
Security Risks..................................................................................................................................11
Accounting Control.........................................................................................................................12
Conclusions.....................................................................................................................................12
References...........................................................................................................................................14

A2 milk company Proposal
Introduction
A2 Milk company was established by Dr Corran McLachlan in 2000. He had discovered the
people respond to A2 and A2 proteins present in milk in different ways and all milk contain
both. So, he started with A2 Milktm which only contains A2 protein. Company has grown
since and had an annual sale of $NZ550 million in 2017 with majority coming from China,
US and UK (Ware & Metropulos, 2017). The company has been using legacy application for
managing its operations with most processes handled internally by employees through
company systems (Walse, 2016). However, systems used are not scalable and thus, company
needs a revamp in its IT system for which it is planning to build a cloud-based system. This
proposal analysis the current system of A2 Milk company, explores its weaknesses and
suggests development of a new information system for the company (práce & Tomíšek,
2015).
Critical Success Factors
In the field of production and daily, significant changes are happening in the market because
of increasing competition and thus, companies need to be competitive and utilize modern
manufacturing technologies to gain more efficiency in its operations. Traditional techniques
of production and management are no more able to provide efficiency processes, reduce cost
and provide increased margins. Dairy companies need to collect milk, transport the same to
their processing centers and then distribute the end product to customers or distributors. In
A2 Milk company, the milk is procured from the farmers and then is transported to the
procurement center where company used manufacturing processes to convert the milk into a
milk with only A2 protein. Post that the produced milk is packaged and distributed to the
distributers across nation. This process needs to be fast considering the perishable nature of
milk and thus, it is important in the dairy industry to have advanced capabilities to tackle
issues and ensure deliveries are made fast (kumar & kumar, 2014).
The industry has certain critical success factors that can be identified here and these include:
Farm profitability: farmers need to have the right skills and so that the farm can generate
sufficient profits by selling the product. It is only when the farmers are profitable that the
advantage would also be reciprocated in the milk production company as they form the
major suppliers of the organization. Thus, it is important to understand the education, skills,
and payment needs of milk suppliers and work towards their benefit to secure the benefit of
the whole dairy supply chain (A.P. SCOTT, et al., 2013).

A2 milk company Proposal
Manufacturing success: Milk producer majorly incurs manufacturing costs for production.
These costs can be minimized or optimized with the use of improved technologies, Moreover,
with increased production and the scope of technology usage, the company would be able to
achieve the economies of scale and reduce its cost of operations in the long. This gives a
dairy organization a sustainable competitive advantage necessary to succeed in the business
(Olsson, 2017).
Customer Relationships: A company can have direct and indirect relationships with
customers based on the supply chain and customer segment. These relationships have to be
managed effectively to able to remain competitive and growing in the market. A2 Milk
company would have direct relationships with the distributers who would be promoting their
product if the company established and maintains goods relationships with them. An indirect
relationships would be established with the end consumer of the milk who would be
interested in health benefits that can be communicated through branding efforts.
Core Competencies: A company needs to use its competencies as they set the company apart
from competition and can help gain significant space in the market. A2 milk has its core
competency in the area of manufacturing such that it is able to produce a milk with only A2
protein which makes its product unique in the market. An integration of its score processes
that include procurement, distribution and marketing can help in strengthening its core
competencies.
Value Chain Enhancement: Having large number of secure suppliers, strong and controlled
marketing, and direct end customer relationship would create an enhanced value for the
company.
Effective Partnerships: A dairy production firm has relationships with suppliers, farmers,
and distributors. These relationships have to be kept strong if the company has to operate
efficiently. Suppliers are the major partners of the company and thus, they must be secured
which can be made possible through a number of measures such as high comparative pay-
outs, strong communication, and good support for farmers.
Marketing Success: The market of the product must give effective returns which is possible
through proper legislative support such as through global subsidies and increased exposure to
a wide market.

A2 milk company Proposal
Future Industry success: With the development of New products and markets, a dairy
organisation would be able to keep expanding and gain future success (Conforte, et al., 2008).
Objectives
The objectives of the company are:
 Increase the efficiency of its management processes to gain operational benefits
 Reduce the cost of operations and management
 To make the information system which can assist managers in taking decisions in the
real time
 To enhance the visibility of the operations in the company
Organizational Chart
A2 Milk company has a hierarchical organization structure with CEO heading the company
and assisted by General Manager. The company has three key officers handling the
manufacturing and distribution operations. They include procurement officer, supply chain
manager, and sales & marketing head each having others coordinating with them or working
under them. Procurement officer coordinates with farmers and other suppliers. Supply chain
manager heads the logistics, distribution, and warehouse department managers.
CEO
Procurement
Officer
Farmers
Suppliers
Supply Chain
Manager
Logistics
Manager
Warehouse
Manager
Distribution
Manager
Sales &
Marketing Head
Marketing
Manager
Sales Manager
GM

A2 milk company Proposal
Current System weaknesses
It receives the milk from a large number of procurement centers. The information about the
availability of milk is obtained through the data banks. The data about the procurement is
entered by the team of data entry people in the company database which contains details of
procurement, milk quality, quantity, and incentives. The farmers have to be paid for the
procurement and the company uses an accounting information system for that. The data is
entered by the company employees in the excel sheets that are used for generating daily
reports that are forwarded to the management (Deshmukh, et al., 2015).
The current system only takes care of one process of information management while it still
has a major part of it managed manually. While employees looking for the status of orders,
billing the company and paying the farmers, the entry of the orders is a manual process which
is handled by the company staff. The current system used for information management in the
company has flowing weaknesses that are required to be worked upon by the company:
 The data about the procurements is entered manually by the people of the company
into the excel files and thus, the level of accuracy is not high
 The manual generation of report is time consuming and is the daily task of the
workers
 The manual processes need more people to work and thus, the payout is also high

A2 milk company Proposal
 The company does not have any real time visibility of the orders or stocks till they are
received by the company at its production unit
 All the processes are segregated with no integration and thus, to get the information
about anything , the departments need to coordinate which is time consuming and
complicated
Data Flow Diagram
Proposed System
Technology Platform
Business processes of the company can be integrated with the use of an ERP system which
can perform multiple functions like procurement planning, data analysis, business process
analysis, and integration. With the use of the ERP system, the company would be able to
integrate procurement, distribution, and accounting systems and benefit each area in the
process.
Procurement: The company can use ERP system for creating procurement plan, real time
procurement tracking, logistics, scheduling, purchase from farmers, quality tracking, receipt
generation, and payments to suppliers. For handling procurement in the company, a

A2 milk company Proposal
procurement module would be implemented in the ERP system which would take care of the
following functions –
 Creation of purchase orders for suppliers and farmers after a quotation has been
received and finalized
 Scheduling of purchases from the chosen suppliers as per the predicted demand
 Creation of purchase inquiry to send to suppliers based on the requirements generated
in the company for production
 Cancellation of quotation if the procurement requirement is no more valid
 Provide control over materials by controlling purchase orders
 Review and approve farmers and other suppliers based on their quality of milk and
capabilities to delivery the quality demanded for production supply
Distribution: ERP on cloud provide functions like route-based procurement planning,
product pricing, quota-based sales, lot system, shelf life tracking, and return of milk. For
handling distribution of milk in the company, a distribution management module would be
implemented in the ERP system which would take care of the following functions –
 Identify best route and vehicle for distribution of the milk products as per demand
 Optimize stock planning and management for the company
 Provide control on the distribution processes through real time reporting
Accounting & Finance: The ERP system would provide an integrated view of financials of
A2 Milk company with margins noted for different procurements and shipments. Managers
would be able to gain a complete position of stocks lot-wise. For handling accounting and
finance in the company, a financial module would be implemented in the ERP system which
would take care of the following functions –
 Recording of daily transactions and allocations for procurement operations
 Managing different types of accounting procedures by reporting General Ledger,
Accounts Payable, Accounts receivable, Asset accounting, and bank accounting.
 Integrate financial and accounting procedures with procurement, sales, and
distribution modules.
 Provide control over costs by identifying, monitoring, and controlling cost centers

A2 milk company Proposal
 Analyzing overheads of the company
 Develop cost estimates for the procurement and production (Bae & Ashcroft, 2004)
The new system is likely to bring the following benefits to the company:
 The company would be able to gain a real time visibility into its system
 Most of its information management process would be automated and thus, would
become faster and more accurate
 With the automation, there would be less administrative expenses and thus,
operational cost of the company would be reduced.
 The proposed system would optimize and organize processes such that process
efficiencies would be improved
 Supplier and other partner relationships would be enhanced with the incorporation of
more efficiency process as the responsiveness of the company would be improved.
ER diagram

A2 milk company Proposal
Entities and attributes:
CUSTOMER
 CustomerNo, FirstName, LastName, Address, Email, PhoneNo
PAYMENT
 PaymentID, Amount, PaymentDate
ORDER
 Order ID, Status, OrderDate, SuppliedDate
PRODUCT
 ProductID, ProductName, MilkType, Description
SUPPLIER
 supplierID, businessName, licenseNo, phone
User View
User view #1

A2 milk company Proposal
List of all orders placed at a particular date – This user view presents all the orders which
are placed on a particular date i.e.. order ID, date on which order has been placed, status of
the order and supplying date. In many cases, customer details are also such as name and
address of the customer who has placed the orders.
User view #2
List of all registered suppliers – This user view presents all the details of suppliers such as
supplier ID, business contact name of the supplier, license number of the supplier and phone
number of the supplier.
User view #3
List of all milk products – This view lists all the milk products manufactured by the
company with details like the stock level of the product, its unique identification number,
manufactured date, etc.
User view #4
List of all registered customers
This user view presents all the details of registered customers such as customer unique
identification number, full name of the customer, address of the customer, email ID of the
customer and contact number of the customer.
Manufacturing Resource Planning (MRP) & Manufacturing Resource Planning 2 (MRPII)
Key features for the technology that would be included in the newer system are given below:
 Feedback – Manufacturing Resource Planning 2 is a set of technologies that has been
proposed by many and comes from the main production floor. It could be used for the
information system and it help in various forms of integration that would help in all
kinds of schedule and allow it to be run at pre-defined intervals.
 Resources Scheduling – Inventory management as well as its control consists of many
different scheduling activities and is heavily dependent on resources such as the
equipment, raw materials, machinery among others. The technology would provide
the given information system with the ability to schedule the resources in a much
easier way.
 Guidelines for batching – There are multiple sets of batching rules which are
integrated in the MRPII system. Such functionalities would be used for scheduling
and batching jobs.
 LFL or Lot for Lot – This refers to those production batches that perfectly meet the
client’s requirements and expectation. Such feature would be integrated and enabled
in the proposed information system.

A2 milk company Proposal
Electronic Data Interchange (EDI)
 EDI or Electronic Data exchange is a set of technologies that provides a great value I
in any given information system. This is because it leads to various time-consuming
and error-prone manual processes related to invoice and order management. Since
EDI would be using the newer proposed information management system, it will
eliminate the traditional invoice and order management system. This would further
enhance the workflow and overall productivity of the employees. Furthermore, it will
bring down the cost associated with such lengthy and manual process at the A2 Milk.
Also, the number of trading partners would go down and so will the operational costs
have associated with it.
 The technology would not demand any kind of expert’s presence of any kind of
secialized skills in order to manage FDI services and operations. As a result, it would
easily be possible for the employees at A2 Milk to handle all of the EDI transaction
and any kind of automated process contained threin. Also, a lot of the operations
would be automated such as exporting and importing of EDI documents. With such
kind of automations incorporated at every level of the system, the probability of errors
would also come down and would mean better engagement for the users and
increased levels of satisfactions.
 There are multitude of EDI software packages which are available in the market
today. Although, these systems cannot be used in an ‘as-is’ fashion, these systems can
instead be customized and configured so as to adapt them to the usage and processes
of A2 Milk’s business operations. With these configurations and customizations
made, the EDI would be moulded according to the business process and therefore the
entire workflow would be less complex and more streamlined.
Data Attributes
The ERP system would be managing all the resources of the company and would schedule
procurement and production processes using material requirements planning (MRP). MRP
would have one master file called item master containing all details and updates on resources.
Item master along with the bill of materials would describe the milk products while routing
along with the bills of resources would describe the milk production processes for the
company.
Item master would have following stages that would be reflecting the company’s resource
utilization:

A2 milk company Proposal
 Raw material
 Work-in-progress
 Processed milk
For each of the stages of the ERP system would identify attributes of the product that can be
general, planning, inventory, inspection, and costing.
General attributes would include product name and quantity. Planning attributes would
include procurement, manufacturing, and transportation. Inventory attributes would include
lot number and lot control number. Inspection attributes would include inspector, inspection
level, inspection class, yield, and so on. Costing attributes would include direct labor,
material cost, overhead, debit inventory, and debit expenses.
User Views
Security Risks
ERP solution can also face certain security risks but if they are known in advance then steps
can be taken to control or prevent them from occurring. These risks include:
Lack of Training: If the employees of the company are trained properly then they would not
be to make an efficient use of the software developed. Moreover, they would not be aware of
security vulnerabilities and thus, can misuse the system because of lack of awareness causing
the company security problems. Thus, it is important that the ERP consultant provides
training to employees after the software has been implemented in pilot before the actual go
live stage.
Poor Interface: Old type of we interface that are based on older versions of frameworks can
open up the attack surface of the company ERP system exposing it to attacks like XSS,
XSRF, and SQL injection. To avoid or at least minimize such threats, the company needs to
make sure that only modern frameworks are utilized for developing interfaces for the ERP
software.
Unpatched software or update delays: If the software is not sufficiently updated or the latest
patches are not installed before go live, it can make the ERP system more vulnerable to
security issues and attackers may be able to hack and steal the confidential information from
the application.

A2 milk company Proposal
Poor Configuration: If the ERP system is not properly configured then it would result into
security vulnerabilities exposing the confidential data of A2 Milk company to threats like
data theft or data loss.
Accounting Control
A financial module of the ERP system would take control of the accounting processes in the
company. It would involve recording of daily transactions and allocations for procurement
operations. The module would include sub modules like General Ledger, Accounts Payable,
Accounts receivable, Asset accounting, and bank accounting. This module would be
integrated with procurement, sales, and distribution modules. For keeping a control on the
cost of operations, a control module would be developed which would have sub-modules like
cost center, cost element, activity-based costing, product costing, and profit center.
Conclusions
This document proposes development of an ERP solution for A2 milk company for
integrating its major operations including accounting, procurement, sales, and distribution. It
has been found that despite the modern technologies used for manufacturing by the company,
management of its information and knowledge is mostly manual. Employees enter
procurement details manually on excel sheets which becomes overwhelming to maintain on
daily basis. Proposed implementation of ERP would automate most of the processes thereby
giving several benefits to the company such as administrative cost reduction, improve
accuracy of work, enhanced efficiency, and more. Thus, it has been proposed that A2 milk
company implement the ERP solution with financial, sales, procurement, and distribution
model with accounting modules integrated with other modules in the ERP system.

A2 milk company Proposal
References
A.P. SCOTT, BOWDEN, S. & J.S. ROWARTH, 2013. Critical success factors when going
global: New Zealand dairy companies , s.l.: The University of Waikato.
Bae, B. B. & Ashcroft, P., 2004. Implementation of ERP Systems: Accounting and Auditing
Implications, s.l.: Information Systems Audit and Control Association.
Conforte, D. et al., 2008. Key Elements of Success and Failure in the NZ Dairy Industry, s.l.:
Lincoln University.
Deshmukh, M. A., Chopde, S. S., Kalyankar, S. D. & Kele, V. D., 2015. Computer
Applications in Dairy Industry. Oriental Journal of Computer Science and Technology, 8(1),
p. 1802.
kumar, P. H. & kumar, J., 2014. Key success factors of dairy value chain in Gujarat: an
empirical study. Int. J. of Value Chain Management, 7(2), pp. 153 - 170.
Olsson, E., 2017. Success factors for profitable dairy farming - A qualitative study on
Gotland, s.l.: SLU.
práce, D. & Tomíšek, B. J., 2015. Cloud computing as a way to information system
development in SME, s.l.: Masarykova univerzita.
Walse, R. S., 2016. Business Applications of Information Technology in Dairy Industry.
(IJCSIT) International Journal of Computer Science and Information Technologies, 7(5), pp.
2281-2286.
Ware, M. & Metropulos, M., 2017. A2 milk: What you need to know. [Online]
Available at: https://www.medicalnewstoday.com/articles/318577.php
[Accessed 24 September 2018].