A brief summary of the SAP Business Suites and how these suites will handle the requirements of current and future business operations. Discuss only those that are relevant for the company. List them and explain why they are needed. Particular attention should be given to the ability to conduct e-commerce and incorporate social media.

Overview

CASE STUDY

Auburn Wine Company (AWC)

These are the operating entities within the Auburn Wine Company (AWC);

A head office in Adelaide housing the Finance/Accounting, Human

Resources and Procurement divisions;

A glass bottle plant that makes bottles used by AWC to bottle its own

wines and also sells bottles to other wine companies in Australia. It is

located in Adelaide;

A large warehouse in Adelaide;

An office in Sydney housing the Sales and Marketing division;

3 wineries (located in the Barossa Valley, in Renmark and in Clare, all

of which are in South Australia and within 200 km of Adelaide);

A restaurant in the Barossa Valley

The wineries accounts for 75% of the revenue for the company. The remaining 25% of revenue is derived mainly from the bottling plant and a smaller amount from the restaurant. Structurally the company has a Board of Directors comprised of a Chairman and 4 other Directors. The senior management of the company consists of the General Manager (CEO), the Chief Financial Officer (CFO), the Chief Information Officer (CIO) and the Heads of Marketing & Sales, Procurement (which includes production) and Human Resources.

AWC has a workforce of more than 460 permanent staff and, in busy months it also employs 250-300 casual workers. The IT department has a staff of 35 of whom all are University or TAFE IT graduates and four of the IT staff have had some direct experience working with SAP systems. The CIO previously worked for a company that implemented a SAP system and he held a senior managerial role during this implementation. Many of the accountants and engineers employed by AWC also have good IT skills that are relevant to their jobs.

AWC is generally regarded as a well-managed company with a competent team of managers at all levels and, a well-trained and dedicated workforce. Most of the senior and middle-level managers have been with the company for 10 years or more. The company has had very few issues with the industry regulators, government departments or the taxation office which would indicate that they have good policies and procedures and maintain good documentation.

The Wineries

The wineries produces and sells 6 varieties of wines; Shiraz, Cabernet- Savignon, Merlot, Riesling, Pinot and Savignon-Blanc. After the grapes are crushed the wine is placed into tanks for fermentation for several weeks or months depending on the variety of wine. In the case of low cost wines, the wine can then be bottled or placed into plastic tanks for transport. In the case of premium wines, the wine is placed into wooden barrels and "aged" for several

years. Wine for sale in Australia is bottled and transported to major distribution centres in Australia by rail. Wine destined for export is exported both in bottles and in bulk (which means that it is shipped in large plastic containers). Wine destined for export is sent by rail to Melbourne.

The 3 wineries have their own vineyards but they also buy most of the grapes they require from many small privately owned vineyards in South Australia. Each winery produces between 2 and 4 of the 6 varieties of wine listed above. Each winery has a small bottling plant so that the wine produced by the winery can be sold through its Cellar Door room or in its restaurant (if it has a restaurant). Note that the bottling plants at each winery cannot make glass bottles; they simply enable the winery to put wine into bottles and label the wine.

Most of the wine (typically 60-75%) produced by all 3 wineries is bottled at the wineries where it is produced. Some of these bottles are kept for sale in their own Cellar Door room but most is sent to the warehouse in Port Adelaide. Wine that is not bottled is sent in large plastic containers to the warehouse in Adelaide and then sent by rail to Melbourne for export (by sea) to other countries. Note that a significant proportion of the bottles sent to Adelaide are also exported through Melbourne. The warehouse and the glass bottle plant in Adelaide are adjacent to one another.

The markets for the wines are expanding and currently consist of a domestic market that covers all Australian states. The foreign markets consist of the United Kingdom, Germany, Ukraine, China, the United States and Japan.

The distribution channels include:

Customer-direct (through the Cellar Door room for people who come to

the winery to buy wine by the bottle). All 3 wineries have a Cellar Door

room.

Online through the AWC website. Orders are placed for wine and the

orders are processed manually by the back office staff located in Adelaide. The company currently will only accept orders for delivery within Australia through its online facility but they hope to expand this operation to all parts of the world. The Directors believe that online selling has enormous potential and to meet this expected increase in demand the current online service must be automated and integrated into the new ERP system.

To "reseller" customers through warehouse distribution centres. Resellers include grocery store chains, independent bottle shops and large warehouse operations like Dan Murphy and Booze Brothers. The distribution centres include: Adelaide, Sydney, Perth, Brisbane, Darwin, Melbourne, London, Los Angeles, Hamburg, Odesa, Hong Kong and Tokyo. Company owned trucks are used to transport the wine from the distribution centres to the customers in the surrounding area of each centre. Rail is used to move the wine from Port Adelaide to Sydney, Brisbane, Perth, Darwin and Melbourne. Cargo ship transports product from Sydney to the ports in London, Hamburg, Odesa, Los Angeles, Tokyo and Hong Kong. The company wants to open up more distribution centre in several major centres in Asia, but the market there is still too

small to warrant the investment. The company also sells wine to liquor brokers who in turn sell the product to restaurants and some liquor stores not serviced by the company directly. This is usually for stores outside a 200 km radius of a distribution centre.

Strategically the company wants to sell all the wine that they make. The Board of AWC is confident that the markets can be expanded in overseas markets and also domestically. As the company has money to expand, it wants to grow but the Directors want the debt to equity ratio to remain low.

Historically the company began as a small privately-owned winery (and a small Cellar Door) in Clare operated as a partnership by 3 brothers in 1994. Most of the wine sales were made through their Cellar Door. In 2000, the partners established a company in 2000 and began selling wine directly to local outlets. In 2002 the company purchased 2 new wineries in the Barossa Valley and in Barmera and expanded its output capacity from 255,000 barrels per year in 2002 to 990,000 barrels per year in 2004. Additional capacity was added over the next 10 years and its current capacity is 3,445,000 barrels. A restaurant at the Barossa Valley winery was established in 2004 and has proved to be very successful. In 2006 the company set up a glass bottle plant in Port Adelaide and built an adjoining warehouse. Further increases in capacity through additional purchases of more wineries or by adding additional capacity to its existing wineries is planned for the next 5-6 years. If all goes well the company wants to double in size (as measured by revenue) by 2020.

Customers who buy through the Cellar Door rooms pay by cash or credit card and customers who purchase wine online pay by credit card only. Large customers (resellers, etc) run accounts with net 30 terms. It is customary to charge a 5.5% interest on any accounts that are over 21 days due and the company gives a 2% discount for accounts that are paid within 7 days of delivery. Orders are handled through a mobile sales force that calls on customers within the distribution channel or through phone calls, faxes or emails accepted at the Sales and Marketing office in Sydney.

Cellar Doors and Restaurants

The Cellar Door rooms are an important marketing aspect of the company and visitors are given tours of the winery and the opportunity to talk to the wine- makers about their products. There is a significant tourism potential for the company (and the prospect of increasing Cellar Door sales) but they will need to set up restaurants in the Barmera and Clare wineries and increase the capacity of the current restaurant in the Barossa Valley. The Barossa Valley winery is the largest one owned by the company and has the largest tourist potential. The Cellar Doors sells wine by the bottle. They also sell souvenir items. Souvenirs include wine glasses, wine carry-bags, hats, T-shirts and long sleeved jumpers.

The company plans to expand the Cellar Door rooms to twice their current size. A restaurant will be set up next to every Cellar Door room at each winery. The

company plans to make each Cellar Door room and adjoining restaurant to be separate profit centres. They may also do catering and special party events. If the catering venture is successful this operation will also spin off into a separate company.

Competition

In the past 20 years, the Auburn Wine Company has grown from a small local winery to a large winery that sells its wine throughout Australia and overseas. The sales figures (by quantity) for the past 12 years are below:

2020 2,120,000 2019 2,050,000 2018 2,150,000 2017 2,550,000 2016 2,745,000 2015 3,105,000 2014 2,835,000 2013 2,486,000 2012 2,170,000 2011 1,715,000 2010 1,495,000 2009 1,303,000 2008 1,265,000 2007 1,210,000 2006 1,180,000 2005 1,150,000 2004 990,000 2003 755,000 2002 255,000

The AWC competes with many large wine producing companies throughout Australia. In addition, there are a large number of small wineries that compete with the AWC for Cellar Door sales. AWC also faces intense competition for market share from Californian, French, Chilean and Italian wine companies.

Overall wine sales in Australia have grown strongly for the past 20 years but failure rates among companies that try to compete in this industry are high and the AWC believes that the key to success is quality maintenance so the product must of high quality every time it is made. The directors are also aware of the importance of effective marketing and maintaining very good relationships with both customers and suppliers.

Developing new techniques for blending different grapes to make new varieties of wines are also an important aspect of successful wine production. Development of a new wine is an expensive project that must be managed carefully.

Wine is a product where tastes change and wines that are popular today may not sell well in several years time and so getting the product to market as quickly as possible is important for some wines. Note however that premium wines need to be "aged" for several years and so getting premium wines to market quickly is not a reality.

Inventory management is extremely important to ensure that we do not end up with a lot of wine that we may not be able to sell profitably in the future. For this reason AWC constantly reviews the contracts it has with grape growers to ensure it is not locked into contracts for grapes that go into wine varieties that are not selling well. Planting new grapes must be planned carefully as it takes several years before the vines will produce commercial quantities of grapes.

AWC has its own vineyards that need to be managed. AWC must review the vineyards that it has under cultivation and they regular buy new vineyards or sell off existing lots of land.

AWC employers a mobile sales force consisting of more than 20 salespersons who need to be able to get up-to-date information from any part of the world. These salespersons also frequently attend wine expositions and various functions that are useful for promoting their wine. Participating at some of the wine expositions must be planned (and budgeted) carefully as they are very important to AWC for promotional, marketing and sales reasons and the cost of participating is considerable.

In the wine industry presentation and packaging are very important and can be very profitable. Product ideas (shape of bottles, design of labels, ways of packaging, combining wine with other products into gift packs, etc) need to be developed through concept development. AWC management expects that the new system will give its marketing team good support in product (concept) development.

Both of Board of Directors and the Senior Management of AWC are aware that implementing an ERP system will require changes to the way the business operates in most areas. This may require changes to the staff with new staff being hired and some existing staff made redundant. However each wine producing company has its own style of making wines and this aspect of the company is not likely to change significantly.

The Current Information Systems

The Information Systems to support the companies are out of date. There is an integrated financial accounting system called DataAction that the company uses in its Adelaide headquarters but this system does not support marketing and sales. Raw materials inventory for the glass bottling plant is tracked through a Peartree Module that never got converted over to DataAction but the Vendor payments are handled through the accounting system.

The Procurement division has a computer system that runs a proprietary SCM (Supply Chain Management) system that is not integrated to any other system. The Sales and Marketing office in Sydney also has a separate computer system which runs a proprietary logistics program that helps it with the shipping of wine to the overseas distribution centres and another application that is used to provide basic IT support for its sales and marketing activities.

Each winery has its own network of PC connected through a server to the internet. Production data is stored on separate databases in each winery and this data is regular transmitted to the headquarters in Adelaide where it is consolidated into the company's main database. Production planning at each winery and inventory control is done largely on Excel spreadsheets. There is no automation for production and bottling operations. DataAction is also used for internal accounting, and billing and invoicing of customers. DataAction also is used to calculate payrolls and other worker entitlements. Its ability to handle international sales is very questionable.

Requirements of a New IS

In short, the company wants an ERP system that can expand with the business and replace most, if not all the legacy systems currently in place. They also want a system that can grow and expand as the business grows and be up-to- date with information and communication technology (ICT). They want access to the system worldwide by all distribution centres and they want data about customers available to all centres throughout the world at any given time. They want accurate currency conversion and the ability to meet external regulatory (legal) and reporting requirements. The company sees a big advantage in having the production and bottling operations integrated with sales so that accurate information about product availability is also accessible by all operating concerns. All company salespersons and representatives will be issued with iPhones and iPads and therefore an adequate mobile infrastructure is required.

AWC management wants to be able to take full advantage of all e-commerce possibilities to improve and expand their business. Their current website which is used to enable customers - usually low volume customers - to purchase their wine must be integrated into the new ERP system and expanded to allow up- to-date e-commerce including web auctions.

The Directors of the company have noted that wines are frequently a topic of conversation on Social Media. They are keen to incorporate tools within the new system that will enable the company to develop this potential market. They are also keen to apply advanced Business Intelligence technologies to drive the business.