Aalsmeer Flower Auction in Netherlands offers a central marketplace to trade flowers and plants for global wholesalers, growers and exporters. The initial suppliers are growers and the demand are comes from cash and carry stores, exporters, wholesalers, importers, and retailers, while Aalsmeer play a mediation role in this chain. Figure 1 below shows the floriculture value chain of Aalsmeer.
Nevertheless, Aalsmeer has threatened by emergence flower's electronic markets and retailer's merger and acquisition between themselves to enlarge the size and demanding power because auction keeps satisfy the needs of growers and not the retailers. In fact, retailers need to get fresh products, more varieties choice, smaller quantities and multiple deliveries from Aalsmeer. On the other hand, growers become professional with start using the electronic way of selling their flowers
To deal with the threats, Aalsmeer is requiring using appropriate information strategy and methodology to support e-business as a step to achieve auction's new objectives and to ensure the business is competitive advantage within this industry.
According to Zwass (1998), the main objective of information system apply to a company it's because "an organized set of components for collecting, transmitting, storing, and processing data in order to deliver information for action", therefore nowadays information system become more important toward a company (Zwass, V., 1998).
The following shows the business analysis, suggestion of strategy information system and technology, and methodology to support e-business and to cope with various problems and achieve the board's objectives.
1.3 Porter's Five Forces Model
In every industry, each company is looking for gaining competitive advantages and earning high profit compared to the competitors. For instance in mobile phone industry, the current competitors of Nokia is Apple and Google phones (The Innovation Machine, 2008). Therefore, as to gain profit and competitive advantage, Michael Porter's five forces model is applicable to gain the markets by analyzing the strategic advantages on the company itself. This analysis is to enable for companies or enterprises to clearly analyse the business's situation, understand better on their competitors and current position (Mind Tools Ltd, 1996-2011). In contrast, means that Porter's five forces model may apply as a tool to help Aalsmeer to analyse the business environment as gaining competitive advantages in this industry.
Table 2 is the general idea base on Porter's five forces model to analyse the business environment in Aalmseer.
Porter's five forces
Explanations
Competitors
Offer same products and similar services with Aalsmeer
Offer many transaction methods in auction such as by electronic
Efficiency service provide by competitors
New products from competitors is to attract customer attention and sharing the same market space
Supplier
Supplier is those growers, who supply flower and fertilizers to auction and other services to Aalsmeer.
In order to get fresher flower at low-cost therefore connection with many suppliers is necessary for Alsmeer to bargain the best price and high quality between those suppliers.
New Market Entrants
High barriers to entry flower auction industry.
It Involves high capital and currently IT knowledge is needed in flower auction
Existing auction earning high profit in flower auction market, therefore they attract new competitors to join in the market.
New competitors may come from small enterprises and served different types services that relate to flower auction and e-business activity
Substitutes
Many substitute product from other industry, therefore flower price become more elastic when demand on substitute product keep on increasing
Customers willingness and perception might affected by substitute's flower price and variety choice.
Quality services provide by substitute's products
customer
Customers are those buyers and potential buyers, which are exporters, suppliers, retailers and others.
Company performance are depends on the big group of customer.
To remain those customers from switching to competitors, therefore Aalsmeer needs to offer acceptable price and good services to customers.
Merger and acquisition between retailers may affect the flower's price.
Table 2: Porter's five forces
1.4 Low-Cost Leadership Strategy
Low-cost leadership strategy should be applied by Aalsmeer, because this strategy emphasize on the achieving of competitive advantage with produce high quality products meanwhile lowered the production and delivery cost within the company ability (Alagse, n.d.). In fact, to gain competitive advantage and economic of scale, company will always set the price of goods or services as low as possible and by remaining the low input cost to gain a market place. (Walden University, 2010)
Besides, the used of information system to minimize the operational costs and prices in all the companies are famous nowadays. Wal-Mart is a good example on applying this theory with the information technology together. They used information system to help them record the daily operation's transaction and to avoid the unnecessary loss from the inventory replenishment. (Walden University, 2010)
To implement this strategy, Aalsmeer must produce acceptable products for all customers, and therefore Aalsmeer should offer limited flowers choice according to seasonal changing with different features or characteristics to attract customers. Seasonal concern will lead to achieve low-cost and fulfil retailer's needs. Moreover, it can lowest competitive price when there is least differentiation on the products, and end up customers will gain value from Aalsmeer by offer low price. (Open Learning World, 1999-2010)
Nevertheless to successful apply this strategy, there are some efforts must be taken by Aalsmeer to maintains low-costs and creating value for customer, these included tight manage on production and overhead costs, build efficient-scale services when receiving orders, investing technologies, reduce the cost of sales, product research & development and services (Open Learning World, 1999-2010). Nonetheless, now the most significant effort that must be taken by Aalsmeer is investing technologies as to build an information system to its company to achieve the new objectives and competitive advantage in the industry.
Moreover, to maintaining this strategy, effectively linked together the primary and secondary value chain activities must be consider by Aalsmeer as fully adopted this strategy. Hence some criteria must be focused on primary and secondary value chain activities, this included simplify the flowers process and procedure from dealer to customer, achieving effectiveness and efficiency on the connection between supplier and customers, lastly monitoring the costs of activities that related with the company's inbound and outbound logistics that provided by others. (Open Learning World, 1999-2010)
1.5 Enterprise Resource Planning
The information system that suggested to Aalsmeer is Enterprise Resource Planning (ERP). ERP is a system that combines all the data from every department, such as sales and marketing department and HR department in a company, further storing the data into a single central database repository (ERP, 2010). This system would likely to help Aalsmeer to share the previous or current information throughout the whole company and make auction works more closely with one and other departments and more competitive advantage. For example, the information of company performance and customer orders that needs involvement from every department in auction.
Figure 3 shows the ERP systems and the related department to ERP.
Figure 3: ERP traditional system
Source: http://www.extolcorp.com/solution/sea_ecerp.html
ERP Functional Units
If this system applies successfully, auction is able to handle huge amounts of order and going to be more profitable with chaining all the business processes together via every ERP functional unit to a central database repository. ERP functional units are play an important role to help the system to collect all the data information before gathered and sharing the information to other departments. However, if this system cannot be organizes well, no matter in collecting the data or for company's progress, it will lead to inefficiency to exchange the information for all departments. (Brain Mass Inc, 2004-2010)
The explanation of each ERP functional units based on Aalsmeer Flower Auction was shows as below:
Manufacturing Resource Production (MRP)
In order to be more efficiency and effectively in manufacturing and production units, thus its system have to do accurate recording, reporting and control the flower's inventory for other departments to take further steps. Simultaneously, it is to minimize the wastage or shortage of flower when customers need. Furthermore, it is also to ensure the flowers are in fresh condition and high quality in the procurement process. This action is due to the fresher flower demand from customers, meanwhile doing resource and capacity planning to avoid over expectation on the resources. (Top Bits, n.d.)
Financial Resource Management (FRM)
In order to let each department to take next actions on the accounting data and budgetary data, thus the accounting system should record clearly on the transaction as to minimize the problems (Top Bits, n.d.). For instance, increase or decrease the purchasing of flowers during the peak period and off-season. Besides, as rise up of the electronically driven flower market, Aalsmeer must have a standard record format to deal with the business transaction no matter in online customer's purchases or buy in cash and carry.
Human Resource Management (HRM)
HRM system is to record and state the number of employees, benefit and labour rules for workers. All these action is to prevent Aalsmeer over employed or lack of worker, because Aalsmeer has wide networking between supplier and buyers and want to fulfil the customer's need, so sufficient employees are needed to complete the entire task in every department. As consequent, each department must be corporate and stated the qualification of recruitment employees to human resource department. Obviously, this may through ERP system to collect all the recruitment information. Sometimes, it will do some performance measurement to analyse the workers performance in every department. (Top Bits, n.d.)
Supply Chain Management (SCM)
SCM system is to stay connection with suppliers and one of the functions is to decide the procurement planning, it means Aalsmeer can choose which supplier is better to them, while to get good quality products. Furthermore, SCM needs to arrange the time for shipping the flower from supplier. (Top Bits, n.d.)
Besides the responsibilities that mention above, it is also includes three components in SCM system, which is supply planning, demand planning and demand fulfilment (Brain Mass Inc, 2004-2010). Supply planning includes inventory management, products freshness and distribution of the flower. This means Aalsmeer need to manage the flower's stock and make sure the freshness of the flower before sending to customer. However, demand planning is to understand the consumer needs toward the flowers and planning flower demands for short and long-term. Finally yet importantly, to fulfil the customer demand with provides the fast and trustworthy transportation service to customers. (Brain Mass Inc, 2004-2010)
Customer Relationship Management (CRM)
CRM system is to concern the customers that buy Aalsmeer's flower and the relationship between the buyers. It is also responsible on the customer services after sales. These actions are very important to Aalsmeer as to remain the royalty customers and attract new groups of customer. (Top Bits, n.d.)
Meanwhile this system may record buyers and potential buyer's detail to doing survey for the new products or products satisfaction (Top Bits, n.d.). Additionally, through this system, Aalsmeer may know well on the customer's behaviour toward the flower, like the types of flower that customers like and the factors that affect customer buying Aalsmeer's flower, meanwhile these may improve the relationship between customers meanwhile to increase the market share as well.
2.0 System Methodology
In order to developing the information system smoothly in Aalsmeer, thus System Development Life Cycle (SDLC) is applicable to ensure the ERP is workable. SDLC is constructed by sequential step to build the information system (Haag, S., & Cummings, M., 2008), it has included six phases which is started from feasibility, analysis, design, implement, test and maintain (Slepi, 2008-2009). Figure 3 below is the waterfall model method of SDLC, which is base on traditionally method.
The Waterfall Model
Figure 4: SDLC traditionally method
Source: http://www.startvbdotnet.com/sdlc/sdlc.aspx
Feasibility
Before determine to apply a system in company, therefore feasibility must take into account as the first phase in SDLC. In this phase, Aalsmeer know that auction needs to have a new strategy on information system, hence they have to provide information and detail explanation as to accesses to this new information system. In fact, it needs the feasibility study on the projected new information system, as to ensure the possibility for implemented this system (Start vb dotnet, 2004-2010). The feasibility study is consisting of three aspects, which is technical, economic, and operational feasibility analysis. (Slepi, 2008-2009)
Table 5 shows an analysis on these three aspects based on Aalsmeer.
Feasibility's aspects
Explanation (why)
technical
To decide whether auction has enough technical resources to maintain the progress of new information system or not?
such as talent of controlling the system, hardware and software that had in auction
economic
Aalsmeer can afford the costs of new information system or not?
Can this information system bring profit to auction?
To decided whether this system could save up unnecessary costs or not in the long-term.
operational
Would this system change the operational activity? Will it more profitable and competitive advantage or not?
Would this system make operation more effective and efficiency?
To determine will this system used by employees and bring benefit to auction?
Table 5: Feasibility analysis
After feasibility analysis, Aalsmeer should make decision on which system should be chosen as to proceed to the next phase.
System Analysis
After feasibility, following by system analysis as second phase. It is to gather and improve the requirement for the system with stated clearly, what the system would do to achieve the goal when compared to the existing system (Articlebase, 2005-2011). Usually, the requirement of the analysis is to establish, such as; what output the system will produce, what input are needed and what measurement's control is responsible by this system (Zwass, V., 1998). For example, auction needs a system that can help the workload more effective and efficiency with good arrangement of data, because this will increase the operation level.
The tools that use to gather information and making analysis is through study the existing documentation, observation, questionnaire and interview with employees. After analysis, the requirement document might be prepared to make internal and external user such as employees, manager and management team easier to understand and taking relevant decision making on the system. For instance, to develop ERP system, the requirement document was prepared for auction's internal and external user to make decision. (Zwass, V., 1998)
System Design
In this phase, system design decision is driven by the previous stage when auction already choose a system. A blueprint will be prepared, the whole auction is required to be participate in this level as to ensure that the specify requirement on development of new information system are presentable and satisfy by all the users, while has classify properly on the decision procedures that used in company to achieve the auction objectives (Senn, J.A., 1982). Therefore, auction may have a clear picture on this development information system, such as how the ERP does works through department to departments and does it efficient enough to provide data that needed by auction.
Furthermore, control on the system are designed in this level as well, as to make sure the system are maintainable and reliable at all the time because any fault in this level would make it difficult and expensive to solve the problem in the next stage of software development. After all, the system is develops in this phase. (Start vb dotnet, 2004-2010)
System Implementation
Once the design phase is completed, ERP system will be implemented and launch in auction, Aalsmeer needs to prepare detailed user documentation. This documentation is to provide employees a guideline on how to manipulate the system, without this user documentation employee will find hard to use the system. In additional, training must be provided by Aalsmeer to all employees for manipulate the new system. (Haag, S., & Cummings, M., 2008)
On the other hand, coding is very important to all the designs that make in the previous stage because computer programming language or an application generator only applicable to a conventional computer programs. However, the programming tools such as Interpreters and Compilers will be used to creating codes because coding can ensure the successful of the implementation, therefore Aalsmeer need to choose the suitable programming language to auction. (Start vb dotnet, 2004-2010)
System Testing
After implemented, now auction needs to test the system. The whole system will being test now, if compared to the traditional method with only tasted a chain of individual element and it depends on the separate and detailed test. Nevertheless, now to complete the test, the separate elements are bringing together. (Articlebase, 2005-2011)
The objective to test the system is to make sure the boundary between the working outline (integration testing) is applicable, in one platform that can produce budgeted volume of data (volume testing) and does the system fulfil what Aalsmeer require (acceptance testing). (Start vb dotnet, 2004-2010)
System Maintenance
The last phase will be system maintenance. This is a continuously process with maintaining the system as to achieve the auction's target while to improving the business progress as well as moving toward to the auction strategic goals. However, there must have a change in once on the software after developed, because this may caused by some unexpected item to invade to the system, such as technology challenge, thus this may affect the software directly (Start vb dotnet, 2004-2010). Therefore, to maintain the software Aalsmeer is advice to use a help desk to maintain the system or provide an environment to support the system changes.
3.0 Impacts and Effectiveness
After established new system, Aalsmeer must take into consideration on the impact and effectiveness of the new system. This report is to examine the impact and effectiveness on organization, management, and the employees in the auction.
3.1 Organization
In the long-term of the organization view, the new system will help Aalsmeer to gain cost advantage, which mean Aalsmeer can save and reduce the costs from some part of business activities. Operation cost can reduced by the new system, because auction can work more effectively and efficiency within the budgeted time. Besides, due to new system are relying on information technology, therefore a number of employees are no longer needed in auctions, meanwhile means that Aalsmeer can reduce the labour cost. As consequent, this can lead Aalsmeer to offer low-cost flower to customer compared to competitors.
In addition, the maintenance fees of the system are very expensive if the system has any problem after used and it is hard to make changing on the system. Additionally, it is difficult to get into customer's taste toward the flower. Furthermore, Aalsmeer need to make sure the system is always meet the auction objective.
3.2 Management
For management view side, the new system can make easier to management team to get information such as report, invoice, file, and statement within the minimum time. The systematic arrangement on workload for management has helps the manager to reduce their burden and make the works more effective. Besides, the system has made it easy to management team when they want to review the past business's transaction or to make comparison with the current records.
However, management team will get into trouble with customers and disconnection with other departments when system down or bugs. Furthermore, daily operation may affect by system down and get complain by customers. Usually, the software is hard to repair within the shorter time, so this may lead to inefficiency of the system and may incur lost when receiving less order from customers during the system down period.
3.3 Employees
On the employee aspect, they have a chance to learn new technology and attend training that provided by Aalsmeer. Moreover, used of new system may help them to reduce the burden of duty. Besides, employees will more focus on the operation process with more efficiency and effectiveness if compared to the existing system, therefore the production and profit may increase in the auction.
Nevertheless, the employees may fall in trouble as well, because they cannot accept or get to use the new system rather to use the existing system, meanwhile they will felt lost on their position when they do not know how to control the new system and what the correct way to manipulate the new system. In addition, the company might cut some of the employees off since the company no need so many employees.
4.0 Conclusion
In conclusion, implement the new system might have positive impacts and negative impacts toward the auction. However, the system is very useful for auction, because they can use the system to record the information and share it to other departments in a shorter time with accurate information. Meanwhile it can fulfil the auction's objective and solve the current problem that face by Aalsmeer and gain competitive advantage and increase the market share.
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