A supply-chain fish story

When CIOs belly up to the bar to swap stories about their supply chain, John Henry Larsen can hold his own with the best of them. The tale of his supply chain is a yarn well worth listening to. So grab yourself a stool.

Think your supply chain is complicated? Try wearing John Henry Larsen’s hip waders for a day. Larsen is the Toronto-based CIO of Stolt Sea Farm Inc, North America’s largest producer of farmed salmon, and the world’s fourth largest aquaculture company.

Larsen has to ensure that Stolt’s IT systems are capable of orchestrating the firm’s supply chain several years in advance. If that sounds improbable, reflect for a moment on that delicious Atlantic salmon you treated your special someone to on Valentine’s Day. Without meticulous planning, you might just as easily have been swapping dreamy glances over a slab of beef.

You see, in order for that Valentine’s Day salmon to arrive on your plate so that you can enjoy it and Stolt can make a profit on it, a great many things have to be taken into consideration. It’s not just a matter of throwing a bunch of fish in the water and harvesting them whenever needed. The margins in this business are razor thin, and every step in the process has to be managed to the optimum.

First of all, the fish have to be put in the water at just the right time — three years is just about perfect for Atlantic salmon — but it’s not quite as simple as it sounds. Because of such things as storms, algae and temperature, there is a very narrow window in which the fish can be stocked. And in the three years leading up to harvest, a lot of things have to be done correctly to ensure that the fish reach their optimum size at just the right time. For example, the feed has to be precisely regulated; if not, there goes the profit, since feed is the main cost driver in this business, and once farmed fish attain a certain size they don’t grow any larger. In other words, they literally start eating up the profits.

And then of course there are those Valentine flowers you presented to your sweetheart. They have to be figured into all this as well.

Huh??!! What the heck do flowers have to do with the price of fish? A lot, as it turns out.

A great many flowers shipped to North America during the winter months come from Chile. And because of its excellent salmon-farming waters, Chile also happens to be a huge supplier of salmon to the North American market. During peak demand periods, such as Valentine’s Day, there isn’t enough excess airline shipping capacity for both flowers and fish. Because flowers are so light they are more profitable to ship, and thus they get the extra space. So in order for Stolt to make sure it has enough salmon to meet the Valentine’s Day demand, the company must plan in advance for alternative farms to be running at full harvesting capacity when the big day approaches.

Pretty unbelievable, eh? Well, we warned you this was a fish story.

Now if you had trouble swallowing that one, try this one on for size. The three-year planning cycle described above applies only to Atlantic salmon. And in this business there are plenty of other fish to fry — like sturgeon, for example.

What the heck do flowers have to do with the price of fish? A lot, as it turns out.TextOkay, okay, maybe you don’t fry sturgeon, but you do farm them for their eggs, which of course make caviar. If you’re in the caviar game, like Stolt, you want to make sure you produce the highest grade product possible — after all, a lot of money is at stake. And the time it takes for a female sturgeon to reach its prime egg-producing age, when it is harvested for its eggs, is ten years. That’s ten years of carefully husbanding the fish so that the texture of the eggs is just right, the consistency is just right, the colour is just the right shade of gold. And that’s all part of John Henry Larsen’s supply chain too. Like I said: think your supply chain is complicated?

Changing directions

In the mid-1990s, Larsen was a consultant for Ernst & Young, living in Minneapolis, Minnesota, about as far away from the ocean as one can live in North America. But his roots were much closer to the sea. His family was Norwegian, and his goal was to live in Norway for a few years. In 1998 he got his chance, signing on with Stolt in Oslo as Group Business Systems Manager. Eventually that title was changed to CIO, and after four years in Oslo, Larsen moved to Toronto, where he continues to helm Stolt’s worldwide IT operations.

Larsen’s first two assignments were to complete the company’s JD Edwards ERP implementation on a global basis and to upgrade from CC Mail to Lotus Mail. He admits wryly that he completely failed to implement both of those assignments.

“I did just the opposite,” he recalled. “I ended up taking both JD Edwards and Lotus out and I replaced them with Navision and Microsoft Exchange.”

Larsen is quick to point out that these moves had nothing to do with the quality of the products involved. Both JD Edwards and Lotus were favoured by parent firm Stolt-Nielsen A.S., a publicly traded global transportation service company, but they simply weren’t right for Stolt’s aquaculture business. It was too small and operationally dispersed.

The decision to move off the JD Edwards platform was not an easy one for Larsen. He had to weigh his desire for having a nice controlled IT environment, which the parent firm was offering, against users’ needs for local support and flexibility. Stolt Sea Farm is a US$400 million a year company, but it doesn’t operate like one. The company is segmented into four main regions — North America, Europe, Asia-Pacific, and Chile — each with its own unique operating characteristics. The business consists of the sea farms themselves, primary processing facilities (which kill and do basic preparation of the fish), secondary processing facilities (which turn the fish into fillets and other value-added products), and sales and administrative offices.

“We employ 3,000 people worldwide, about 540 of whom are knowledge workers. But no facility has more than 30 people in it, with the exception of some of the larger factories, where there aren’t many end-users,” explained Larsen. “Many of our facilities are in remote areas, so a big part of our challenge is to make sure that we can support them without incurring a lot of IT costs and hiring a lot of staff.”

Need for local support

Larsen and his IT team needed an ERP system that was very strong on the local support side, which they would then deploy with few ‘bells and whistles’, in order to keep things as easy to maintain as possible.

“What we needed was a system that we could customize to meet our local requirements around the globe,” said Larsen. “Instead of having one big IT department and maintaining a single common set of code, we wanted to push that responsibility out to the regions, which would then have the responsibility of implementing the application in the most suitable way for their respective markets.”

Luckily, the company didn’t have to look very far. When approval came to move off the JD Edwards platform, Stolt Sea Farm’s operations in Spain quickly put a plan together and got a Navision ERP system up and running. It was a perfect fit for them because it was implemented in Spanish and there was a solutions centre just down the road.

The implementation proved quite successful, and as Navision appeared to have the kind of flexibility and local-support strength the company was looking for, the decision was made to make it Stolt Sea Farm’s primary ERP package.

The company-wide switchover began in late 1999, but it didn’t go off without a few snags. For example, there was a problem finding the right solution partners. Said Larsen, “There was a misalignment of expectations initially between what we expected a Navision partner to provide us and what they actually provided us in terms of documentation, testing and support. We started working with a solution centre that was bought out by somebody else, and things got very convoluted after that.”

Although the initial implementation had gone well, trouble arose during the upgrade phase. Lack of proper testing resulted in a year in which things started getting out of whack. To get back on track, Toronto consulting firm Axentia Solutions was brought in to implement Navision in North America. Kirk Southcott, Business Application Manager for Stolt, shared project manager duties on the implementation with an Axentia consultant. This turned out to be a good approach.

“We had two matching people working together, which turned out really well,” said Southcott. “We didn’t want to have all of the knowledge sitting with our consultant group so we included three of our own employees on the project team: a dedicated person from sales, from finance, and from the processing, logistics and inventory side. Once we went live they became super-users of the system in their area, responsible for supporting their group.”

Managing the harvest

One of the advantages of Navision is that it’s a generic ERP package, and various vertical applications can be added onto it. That made it a good fit for Stolt.

In the fish farming business, it’s extremely important to have visibility of what’s in the supply chain at all times. Fish are typically bought in terms of size ranges, and if they are not in the predicted range when they are harvested, the supplier must do a lot of negotiating with the buyer to provide substitutions. And that’s only part of the problem. As Larsen noted, “Fish need to get to their buyers when they are fresh, which means they’re shipped immediately. So you can have accurate inventory one day, but then it’s all gone the next, and a whole new set of problems may be heading your way later in the week.”

A key for Stolt in managing its inventory is a system called AquaPlanner, which has hooks into the Navision ERP system. Stolt developed this system itself, but sold the rights to a Norwegian company called Mercatus, which now markets it to other firms. AquaPlanner handles the management of data at the farm sites. Most importantly, it is a forecasting tool that tracks information around the growth rates of the fish, enabling Stolt to optimize harvest dates and coordinate them with the sales organization.

“AquaPlanner is great for managing our business because our inventory is in the water for about two years, from the hatchery all the way through to marine site, and there are a lot of costs that go against the fish as it grows,” said Southcott. “AquaPlanner enables us to capture all of that: such things as feed and diving expenses; environmental variables like temperature, oxygenation and salinity; even our vaccinations. By monitoring all these things we can manage trends and growth patterns.”

Optimizing plant processes

Of course growing the fish is only part of Stolt’s business. Processing them is also critical to the company’s success — specifically, processing them in the most efficient and cost-effective way possible. To help it do that, the company uses WiseFish, another module that sits on top of Navision.

Developed by an Icelandic company called Maritech, WiseFish captures data on the fish as they progress through Stolt’s processing facilities. A top-grade 10- to 12-pound fish, for example, goes in whole at one end and comes out the other as a value-added product. The fish is processed in stages — from skin-on fillet, to skin-off fillet, to portions, to seasoned portions — and at any stage it can be turned into a finished product. The fish is continually weighed in and weighed out, and a product code — with several attributes tied to it, such as size and quality — follows it through the system.

WiseFish enables Stolt to maximize the yield from its products. For example, it monitors the equipment and machines to make sure they are as efficient as possible. If the blade on the skinning machine is calibrated incorrectly, too much flesh will be lost. The WiseFish system identifies the problem and the calibration can be adjusted before too much wastage occurs.

Wise Fish also has a logistics module that facilitates shipping and ties back to the ERP system for invoicing — just one of many interfaces between the two systems.

Using thin-client technology

Another key aspect of Stolt’s IT makeover was the use of thin-client technology wherever possible. Helping it accomplish this task was Norway-based consulting firm ReNet, Stolt’s technical infrastructure outsourcing partner.

“The biggest challenge, from an IT perspective, was just getting our arms around all these different locations,” said Larsen. “A personal computer is a lot of work from an IT standpoint. If you’ve got a PC sitting in a remote office — and most of them are pretty remote — it’s difficult to get out there to help those people fix it.”

Thin-client technology solves the problem. By using a terminal server with thin clients Stolt is now able to keep a firm hand on its desktops. Local staff can’t install software without the IT department in Toronto knowing about it. And the hardware is very robust. A typical thin client will last seven years, whereas a typical PC might need to be replaced after about three years. And to install the thin client, you just have to plug it in, put it onto the network, do a couple of quick configurations, and tell it which server to connect to.

Another big benefit, Larsen explained, is that when people get used to using the terminal server, they start thinking in terms of file-sharing. “We set up a folder structure that is consistent from all locations. When I go into a server in Europe I’ll see common folders where people can share information,” he said. “For example, I’ll see a folder for accounting, and that’s where accounting people put their business-critical information. And we try to distinguish that from a person’s personal directory. Regardless of whether the information is personal or corporate, if something happens to a person, we know where these files are located. It’s very, very important.”

There are about 30 people in the Toronto office, all connected via a terminal server, and that entire application is administered by a small group of people in Norway.

“We have two full-time administrators that do this for us globally. If you go to Oslo or Belgium or Campbell River, B.C., you’ll find basically the same set-up, controlled entirely by three guys in Norway,” said Larsen. “By being very strict in what we allow people to do, we’re able to reduce the complexity and maintain control over the system, which is spread out in a lot of remote areas with very few resources.”

With his IT resources now under control, the supply chain well monitored, and the big ERP swap behind him, Larsen can perhaps take life a little easier now than he did a couple of years back. Maybe he’ll even have time to do a little fishing. We’re pretty sure he knows a few good places to throw his line in. 056231

David Carey is a veteran journalist specializing in information technology and IT management. Based in Toronto, he is editor of CIO Canada.

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