Case: Selecting and Implementing an ERP

System at Alimentos Peru

OVERVIEW
[1] All individual names, company names, and brand names have been disguised.
J. Martin Santana, Jaime Serida-Nishimura, Eddie Morris-Abarca and Ricardo Diaz-
Baron
ESAN, Peru

Copyright © 2002, Idea Group Publishing.

The case describes the implementation process of an ERP (enterprise resource

planning) system at Alimentos Peru, one of the largest foods manufacturing companies
in Peru. It discusses the organization’s major concerns during the mid- 1990s,
including increasing competition, inefficiency of business processes, and lack of timely
and accurate information.

To address these concerns Alimentos Peru launched several projects, one of which
involved the implementation of an ERP system. The case explains the criteria used to
evaluate and select the system, as well as the main issues and problems that arose
during the implementation process. More specifically, the case focuses upon a set of
implementation factors, such as top management support, user participation, and
project management.

Finally, the case concludes with a discussion of the benefits obtained from the
introduction of the system as well as the new organizational challenges.

BACKGROUND
Alimentos Peru manufactures and sells food products for direct or indirect human
consumption including cookies, nonalcoholic beverages, bakery products, and sweets,
yeast and other ingredients for bread making. It is a subsidiary of International Food
Group (IFG), one of the world’s largest food products manufacturers and sellers. In
Peru, its leading brands are Turtora, Real, Tako and Remo.

IFG has been present in the Peruvian market since 1939, with the opening of its
subsidiary Real Peruana Inc. In 1993, as part of a number of mergers and acquisitions
of food producers in Latin America, IFG bought the Estrella S.A. cookie maker, the
then leader in the Peruvian market. The merger of the Peruvian subsidiaries started
operating as Alimentos Peru.

Alimentos Peru has two production plants. The first one is located in Lima and
concentrates on cookie and candy manufacturing. The other is located in Callao and is
devoted to producing inputs for bread making and powder drinks.

Alimentos Peru has faced a long fall in demand as well as intense local and foreign
competition. Its executives were aware that their success hinged on introducing a
comprehensive strategy that would comprise satisfying the consumers’ expectations
and needs, as well as reducing operating costs. By the mid-1990s, the company
introduced new manufacturing techniques and launched a number of projects to
formalize, restructure and standardize its processes.

Its leading production line is cookie making, the source of the company’s largest
(45%) share of profits. Until 1994, the cookie market was rather dull and led by local
brands. However, in 1995, substantial changes started to occur. The acquisition of
Molinos by the Atlantic consortium and the arrival of a new competitor-Chilex, a
Chilean companyintroduced a new dynamic to the market. Furthermore, imported
cookies started to arrive from abroad including those distributed by Alimentos Peru,
Orval, Rose and Crasp. Imported cookies increased their share of the local market
from 2% to 10%.

To face the new competitive environment, Alimentos Peru changed the packaging in
most of its Estrella products to make them more attractive and improve their
preservation. It introduced new products, including Chocosonrisa and Marquinos, as
well as a new line of imported cookies that are leaders in the international market.
Blanca Quino, head of product lines at Alimentos Peru, told a local publication: “We
have introduced innovations in our line products at least once a year. Now the winners
will be those who can introduce more innovations in a market where the consumer
makes the final decision.”

In 1996, Alimentos Peru’s share in the cookie market exceeded 30% and its Estrella
brand name remained as the local leader with 23% market share. However, the
consortium Atlantic reached the same market share after buying Molinos,
manufacturer of Gloria, Zas and Ducal. Moreover, although aimed at a different market
segment, Empresa Galletera, through its Grano and Pepis brandnames, covered over
21% of the market. This firm’s strategy was to sell cookies at a lower price than its
competitors.

The beverages and desserts market, a line that creates 29% of Alimentos Peru’s
revenues, also suffered changes due to international competition. The company
upgraded the packaging of its Tako line of drink powders to meet consumer
preferences and introduced a larger variety of flavors. Remo beverages went through a
number of innovations including a new range of flavors and a ready- to-drink line of
products launched at the end of 1995.

In 1996, ASPA Alimentos was the market leader for powder beverages with a 53%
share at company level, followed by Alimentos Peru with 37.1%. Tako-Alimentos Peru’s
brand name-was the leader in the sugarless beverages market segment with 19% of
the market. It further benefited from the growth in the sugarless market segment.
Growing consumer preference for sugarless products sold at a lower price
strengthened Tako’s position against the semisweet Kino and Bingo products from
ASPA Alimentos. In the sweet products segments, Alimentos Peru’s Remo held strong
to its 62% market share but faced strong competition from other brands, including
locally produced Dinang and Fructal, a Chilean import.

In its other product lines-bread-making ingredients, candies and chocolates- Alimentos

Peru rose to the challenges in a similar manner by introducing new products and
changing its packaging, and by improving on its distribution system.
Appendix A shows the financial statements of the company for the period between
1994 and 1998.
SETTING THE STAGE
Information Systems

After the merger of the Peruvian subsidiaries, the information technologies divisions at
Alimentos Peru’s Lima and Callao factories merged under one single manager. Carlos
Montero became the systems manager in 1994 and was the second person in charge in
this area after the merger of IFG’s Peruvian subsidiaries. Montero’s main challenge was
to put in place a new information system for the company to replace old systems that
were typically fragmented, duplicate and inconsistent. At that time, the new IT division
employed 19 persons, mostly programmers, and reported to the local financial
manager: “This was a typical data processing division in the 1960s style,” says
Montero.

The company had two AS/400 IBM servers-one at each facility-that operated at about
80% capacity. Each was connected to about 50 terminals and PCs of varying age and
brand names, all operating independently. Each factory ran its own IT systems to suit
its peculiar needs. There were more than 20 independent systems, including two
parallel systems to process purchases, another two to keep warehouse records,
another two for manufacturing, another two for cost and finished product control, and
two more for marketing. Furthermore, there were five systems for payrolls: two for
laborers, two for clerical workers and one for staff. Lotus 123 and WordPerfect were
the standard office software products. The main task at the IT division was
maintenance.

Likewise, each plant imposed its own criteria when giving code numbers to their
ingredients and finished products. Furthermore, some areas within the same plant, for
instance, warehousing or manufacturing, would use different code for the same
finished product. In Lima, costing was based on the number of work hours while in
Callao it depended on product weight.

Little integration of operations also had an impact on the financial system. Closing of
accounts at the end of each month would take more than one week, despite long
working hours (overtime) put in by employees. Cost controls were hard to implement
as was determining which products were actually yielding a profit. Management reports
were put together manually and then sent to IFG’s offices in the US The first integrated
accounting system was introduced in January 1995 thanks to an in-house
development. By that time, the IT division had shrunk to seven people after
outsourcing programming tasks.

Although both factories were already under one single company, both plants continued
to operate separately and their operations showed the same lack of integration that
was apparent in their information systems. Not one business process operated under a
standardized model, not even account closing at month’s end, inventory control or
purchasing, or in general any of hundreds of activities in the production process. About
this issue, Carlos Montero holds:

“Personnel were not used to filling in forms, recording data or examining the
manufacturing formulas (or recipes). Inputs requisitions for manufacturing were sent
casually: Approximate amounts of ingredients were sent to production and leftovers
were returned to warehouse. This led to a large amount of shrinkage and prevented
keeping good records on production costs.”
Alimentos Peru Strategic Initiatives

By the mid-1990s, the company designed its corporate strategic plan. The general
manager, functional managers and the company’s main executives met to determine
the company’s mission and vision, analyze their competitive environment and
determine the main strategic actions to take. As a consequence, a number of projects
were proposed and assigned to various company executives. The following main
strategic actions were introduced:

• To conclude with the corporate merger, led by Tanya Santisteban, the

administration and finance manager.
• To develop new products and reorganize the sales force and distribution
channels.

This task was assigned to Armando Linares, the marketing manager.

• To introduce total quality at Alimentos Peru, in charge of Mario Neyra, the

human resources head.
• To train personnel in MRP II techniques, commissioned to Jorge Figueroa, the
logistics manager.
• To improve and integrate information systems, a responsibility assigned to
Carlos Montero, the systems manager.

After merging the financial and administration, the systems, and the logistics divisions
in 1994, in the years that followed the company continued to merge its other areas. By
year-end 1995, plant management in Lima and Callao was placed under a single
manufacturing manager office. A few months later, the marketing managers’ offices
came under a single marketing division.

A Quality Committee was set up, headed by the human resources head and including
various task forces for each area: logistics, manufacturing plants, internal and final
user physical distribution. The purpose of this setup was to identify and propose ways
to improve processes through Quality Circles that remained in operation until the end
of 1997.

In 1995, the general manager hired Oliver Wight LLC, an international consulting firm
that had created the MRP II techniques and a training specialist to prepare and put in
practice a personnel-training program. Training was mainly directed at manufacturing,
logistics and marketing personnel, initially through talks and in 1996 with video
screenings.

Also in 1996, to improve product distribution and response to customer demands,

Alimentos Peru restructured its sales force. From a geographically based system, it
moved to a client-type system. The new system was put in place in coordination with
local supermarket chains and allowed the company to cut operating costs and to
increase compliance with purchase orders from these channels.

Jorge Figueroa makes the following comments about this stage in the company’s
evolution:

“IFG put strong outside pressure on the general manager. Alimentos Peru’s personnel
saw its workload increase substantially when a series of projects were introduced
simultaneously. The projects were implemented through work teams but individuals
put a priority on the team headed by their immediate boss.”

In 1997, IFG decided to centralize production, supply and distribution operations at its
subsidiaries around the world on a regional basis, with a view at establishing “business
regions” that would profit from relative advantages in each country. Alimentos Peru
and the Ecuador, Colombia and Venezuela subsidiaries came under a single production
and marketing unit. Venezuela was chosen to become the central management seat for
the Andean area.

As a result of the above, the company adopted a new organizational setup. Marketing
split into marketing and sales and all other managers’ offices, including IT, started to
report to the corresponding corporate manager in Venezuela.

CASE DESCRIPTION
A Project To Introduce an ERP System

The aforementioned challenges and problems as well as management’s need to get

timely and reliable information prompted the project to improve the company’s
information systems. In this respect, Montero holds: “At meetings between the general
manager and line managers, frequent comments were ‘We don’t have timely
information’ or ‘Information is very expensive.’”

With support from local consulting firm MISPlan, at the beginning of 1995 Carlos
Montero prepared an evaluation of the company’s information systems. Based on this
evaluation, Montero formulated the following recommendations to the general
manager (see Appendix B):

[2] Carlos Montero was away from Alimentos Peru from mid-1995 until the beginning
of 1996.

• To introduce client server systems.

• To assess the capability and quality of the central servers.
• To standardize office software.
• To evaluate the IT manager’s office structure
• To introduce an enterprise resource planning (ERP) system for integrated
corporate information management.

The question whether Alimentos Peru should get its software off-the-shelf or write it
inhouse was quickly answered. Necessary software functional requirements, the
capacity to integrate with other IFG subsidiaries and the time for introduction
warranted getting an off-the-shelf software product. Marcela Burga, IT development
manager, holds:

“We evaluated the option to develop our own software and estimated a 2-year period
for implementation, slightly longer than would be needed to implement a commercial
package. Moreover, an in-house software would not provide the breadth and scope of
functions that could be expected from a commercial package.”

On this same decision, Jorge Figueroa says:

“In-house development would have required an extraordinary amount of attention

from our people, both for design and implementation. On the other hand, this would be
custom- made software. At that point in time we did not know if what we had actually
suited our processes. Furthermore, using offthe-shelf products would make integration
with other IFG subsidiaries easier.”

The project to implement the new information system started with software selection.
Evaluation of the ERP system started in November 1995 by putting together a task
force organized as follows:
• Steering Committee, made up by the area managers and headed by Jorge
Figueroa.
• Manufacturing and Logistic Function Committee.
• Marketing and Financial Function Committee.
• Technical Committee, made up by systems division personnel.

Choosing the ERP system and identifying the corresponding implementation strategies
was coordinated with IFG, whose systems development policy gave its subsidiaries
freedom to make their own decisions. There was prior experience of systems
introductions in other subsidiaries:
• Ecuador: BPCS for the logistics and manufacturing areas.
• Venezuela: BPCS for the logistics, manufacturing and distribution areas.
• Argentina: BPCS for the distribution and financial areas, and PRISM for the
manufacturing area.
• Canada: PRISM for the logistics and manufacturing areas.
• Puerto Rico: J.D. Edwards for the financial and distribution areas.

ERP systems evaluation at Alimentos Peru went through two stages. In the first stage,
four ERP systems were evaluated: BPCS, J.D. Edwards, PRISM and SAP R/3. The
evaluation was based on the following criteria:

• To provide a comprehensive solution including modules that could be enforced

within all business processes within the company.
• To have a track record at IFG
• To have a local representative in Peru.
• To propose versions for the AS/400 platform.
• To allow work in a client-server architecture.

In this stage, implementation costs and time were almost totally disregarded. A quick
decision was made because Peruvian software suppliers were not numerous and had
little experience. J.D. Edwards software had no local representative and included only
the financial module. SAP R/3 did not have a local representative either nor were there
any experiences of using this system at IFG. Taking these considerations into account,
BPCS and PRISM were prequalified and went on to the next selection stage. Results
from the first evaluation stage appear in Table 1.

Table 1: Results of the first evaluation of an ERP system

ERP Comprehensive Previous Local AS/400 Client-
Solution Implementation Representative Compatibility Architecture
at IFG server
BPCS
SAP X X X
PRISM
J.D.Edwards X X X
As a next step, the task force devoted itself to determining whether either BPCS or
PRISM met the company’s needs.

First, they evaluated the software supplier and its local representative. The Steering
Committee studied the organizations, local facilities and technical support both in Peru
and outside. The shareholding structure of the local representative, experience in prior
implementations, customers and additional products and services offered were other
factors taken into consideration. During visits with local representatives, they were
asked to make presentations about their ERP systems and their organizations. Finally,
references from clients with previous implementations were checked. Alimentos Peru
IT personnel visited other subsidiaries where the selected ERP software had already
been installed and examined the contingencies that emerged during the
implementation stage and verified the systems’ functionality, transaction processing
times and the volume they could support.

Local representatives of each ERP system made presentations before the Function
Committees, who also reviewed the corresponding handbooks and demonstration
versions. The functionality of each system module was compared with the functionality
needed for the business processes by assigning a percent score to reflect the matching
degree between the proposed software and the desired business processes. All the
committees gave BPCS a higher percent score than PRISM.

To evaluate the software’s stability, IT personnel resorted to version evolution over

time. They also evaluated other aspects, including the working platform, programming
language, type of database and handbook language. Cost analysis included the initial
investment required, implementation costs, and annual fees for support and software
updating.

This second stage took 3 months, most of the time for evaluation. At the end of this
time, the Steering Committee chose BPCS. The decision was favored by the system’s
previous implementations at IFG subsidiaries and the longer experience offered by the
consultant, locally represented by XSoft, charged with the implementation.

Results were reported to IFG US headquarters in April 1996. James Robinson, general
information systems manager for IFG, came to Peru to bring the approval for the BPCS
system as the ERP system to be implemented at Alimentos Peru. To conclude with the
selection process, the following task was to design an implementation strategy and to
start negotiations with the consultant.

[3] After finishing the ERP system selection process and internal restructuring, the
company’s IT manager started reporting directly to the local general manager.

The BPCS system would be implemented in the purchasing and ware- housing,
manufacturing, cost control, accounting and treasury, and marketing divisions, thus
fully integrating Alimentos Peru’s operations. Carlos Montero had estimated this
process would take 18 months and involve about 80 persons, including consultants
(both to redesign the processes and ERP software specialists), IT personnel and users.

The project’s total estimated budget reached US $800,000, of which US $450,000

would go to software licenses and US $350,000 to hardware acquisitions,
implementation, consultancy and training. Taking into consideration that other
subsidiaries had experienced cost overruns due to contingencies during the
implementation period, Montero felt that the time and cost estimates were too
optimistic and wondered what factors would facilitate successfully implementing the
new system.

The initial discrepancies between software functionality and the business processes
then in place had already surfaced in the evaluation stage. In this regard, Marcela
Burga, a member of the Steering Committee, holds:

“The accounts payable module involved the accounting and treasury divisions. The
BPCS software suppressed two functions in accounting and added one to treasury. The
head of the treasury division was not willing to take up that function. Despite the fact
that the process as a whole was more simple, we saw things as divisions rather than
processes.”

Towards the end of June 1996, right after the implementation had been launched, the
most experienced consultant assigned by the firm left the project. A much less
experienced replacement came in and Montero thought IT personnel involvement
would become critical in understanding the new project’s functionality and ultimate
success.

The implementation strategy and methodology were determined in coordination with

XSoft, the implementation consulting company that was also the local representative of
SSA Inc., the vendor of BPCS.

Three implementation stages or subprojects were devised to be introduced

sequentially. The initial subproject would comprise the logistics, purchasing and
warehousing, and manufacturing and cost control modules. The second subproject
included accounting, and the third one was for marketing.

Montero thought the members on the task force should exhibit a range of qualities,
most importantly their capacity to manage a project, experience in information
systems implementation, knowledge of business processes, and capacity to lead
change.

To lead the project, there would be a Steering Committee, comprising the respective
area managers, charged with identifying business processes and the implementation
strategy. To line up the ERP system implementation and the MRP II training program,
Jorge Figueroa was named project leader with Marcela Burga as general coordinator.
Burga was also systems development manager and Montero’s deputy.

User personnel were chosen to make up the work teams. Each team would include a
maximum of seven or eight members, with a leader chosen among them who would be
further supported by a member from the IT division. A total of 75 persons would take
part in the project’s 10 working teams. Personnel selection and working team
configuration took place following recommendations issued by each area’s manager.
The candidates were expected to meet the following requirements:

• To be outstanding members in their divisions.

• To show a participatory and proactive attitude.
• To be capable of using the system and possess a research-oriented attitude.
• To know the process well responsibility of IT personnel).
• To have decision-making capacity within their own divisions.
• To be open to communication and have direct contact with their immediate
superiors.
Table 2 shows the implementation methodology recommended by the system’s
supplier.

Table 2: Implementation methodology for an ERP system

Activity Participants Description

Documenting • Implementation teams. Define business processes.
original • Organization and methods
processes specialist (one person. Evaluate each process
• Implementation consultant scenario. For instance: in
• IT division purchasing: inputs, spare
parts, fixed assets, sundries;
in inventory flow: purchases,
transfers, and loans.

Process formalization:
process, procedures, rules
and policy documentation.
Training in • Oliver Wight consulting MRPII training program with
process • Firm an emphasis on “formula
reengineering • Implementation Consultant accuracy” and “inventory
• Implementation team accuracy” as critical elements
• IT division to link the implementation of
the sales plan, production
planning and materials
requisitions
Training in ERP • Implementation consultant Demonstration versions and
system use • Implementation team handbooks.
• IT division
Training of implementation
team leaders.

Training of implementation
teams by their leaders.
Process • Implementation consultant Identify business processes
remodeling • Implementation team prototypes with users.
• IT division
Identify divergences between
functionality of the ERP
system and business
processes.
System trial • Implementation consultant Selecting real data to test
runs • Organization and methods each module.
specialist (one person)
• Implementation team Stand-alone module testing.

Interconnected module
testing.

Parallel trials using original

systems and new modules
Implementing the ERP

As mentioned previously, the implementation stage started with the logistics and
manufacturing modules in June 1996.

With the ERP system implementation underway, Alimentos Peru started to enhance its
hardware and software platforms. Both IBM AS/400 servers were upgraded, increasing
their speed and storage capacity. The two factories were connected through a
clientserver network. One of the AS/400 servers was used as a production server and
the other as development server. New personal computers were installed while some
old ones were upgraded. The company installed a Windows operating system to be
used as the computer network software platform. MS Office was used as office
software. Lastly, MS Exchange provided electronic mail capabilities for both internal
interconnection and connection with other IFG subsidiaries. All of these tasks, including
user training, took about 6 months.

The ERP system implementation teams were configured at head and super- visor
levels. Jorge Figueroa’s participation as project leader allowed the logistics division to
make timely decisions because lack of decision-making capacity was slowing down the
project in some processes. During implementation of the manufacturing modules, for
instance, there was a step back when the area manager did not directly approve a
process change. Regarding the involvement of user division personnel: “Corporate
changes led to high personnel turnover and rightsizing. Some key elements in the ERP
system implementation project were replaced by others who had to get new training.”

Implementing the system required appropriate documenting and recording of each and
every purchasing process and stock movement. Montero and Burga realized that best
business practices and formalizing people’s work would attract division managers’
interest as well as attention from the general manager.

Jorge Figueroa, the company’s logistics head, says:

“When we started implementation, nobody respected the time periods. We had no idea
how big an ERP system implementation project would be because there were no
previous experiences in Peru. As the implementation moved on, management gained a
better understanding of the project’s scope and size, leading to a change in mind-set.
So we were able to make better decisions.”

Since the very beginning, the implementation team had to face the difficulties
stemming from divergences between the ERP system functionality and business
processes. Although the ERP system had been designed as a standard application that
does not require significant changes for specific users, the system needed
configuration so it could be adapted to each process’s individual requirements.

Configuring a system requires much attention and experience. A single change in a

configuration table has a substantial impact on the way the ERP system will operate. At
Alimentos Peru, configuring the ERP system followed the process models prepared by
each user division.

About the differences between the ERP functionality and Alimentos Peru’s business
processes, Marcela Burga holds:

“Together with the accounts payable module rejected by treasury, we also returned the
cost control module. According to users, the cost data supplied by the module did not
provide the depth of detail required by IFG. Systems must not only be good; users
must also accept them. We had to develop these modules independently and design
interfaces with BPCS, thus delaying the implementation process.”

Jorge Figueroa adds:

“The main implementation issues arose when the ERP system functionality failed to
match the processes. When we evaluated the ERP system the consultant told us that
the system had the capacity to do whatever we required from it but later we found
some surprises.”

Carlos Montero remarks:

“The guiding principle during implementation was not to modify the ERP system.”

Implementing the logistics and manufacturing modules took until May 1998. The last 3
months were devoted to final user training, in particular factory workers, and to trial
runs. Their own bosses trained personnel. Bosses would get their people together and
prepare an explanation talk with support from IT personnel.

The final trials included a 3-week test running the original systems and the new
system in parallel. According to project participants, this was the best way to teach
future users how to use this tool.

Marcela Burga has the following comments about the final stage:

“Immediately before launching our manufacturing and logistics modules, we found out
about difficulties in other countries with the system’s start up, and general
management asked us to take every possible precaution. However, our personnel felt
they were ready. When we started the system, we found only very small errors.”

Implementation of the accounting modules started in October 1998 and lasted 3

months. The sales and marketing modules took 4 months, starting in January 1999.
Youth, a proactive attitude and a greater decision-making capacity among personnel in
these divisions led to a fast implementation.

By that time, Montero had realized that implementing the ERP system had effectively
introduced changes in Alimentos Peru’s business practices that would have a positive
impact on the company’s financial position. Some of the changes were the following:

• Availability of consistent information that suppresses the need for manual

integration and reviews that were at the source of many human mistakes and
were time-consuming. With the new system, company managers had access to
a consistent and single version of the data.

• Standardization and simplification: The company started to use a single

language. Materials could be identified in a single way throughout the company
and criteria for the various activities were likewise unified.

• Formalization of operations: Before introducing the system it was usual to ask

and use materials without the corresponding purchase order, as was sending
raw materials to warehouses without using standardized and updated forms.
 When the new information system and the MRP II concept were introduced,
personnel were obliged to fill in forms and check the data for each operation.
“From the very beginning of the implementation, bosses were called at home,
even late at night, to ask authorization to close manufacturing orders needed to
close accounts. Everybody had to get used to operating formally,” says Marcela
Burga. The period for closing accounts at the end of every month diminished
from more than 1 week to just 2 days without any need for the people to work
overtime.

• Better business processes: Sales and manufacturing programming depended on

end-of-month stocks. This practice led to piling up of finished product and raw
materials stocks in warehouses so that orders could be filled at the end of the
month. New ideas introduced by MRP II and using the ERP system allowed for
operations to be spread out homogeneously throughout the month. Two new
positions were created thanks to the new information system: a demand
manager and the master production planner.

CURRENT CHALLENGES AT ALIMENTOS PERU

The implementation of the ERP system at Alimentos Peru ended in April 1999. A few
months later, while he is on his way to work, Carlos Montero thinks about new user
requirements. He thinks about the most valuable aspects of this experience and the
learning process the company went through while implementing the new information
system.

Looking back at the process, Montero remembers the tough decisions that were
needed and the many sleepless hours needed to implement the system and redesign
the business along a road full of switchbacks. He says: “What did we learn? How could
we have reduced total implementation time? What can help us in future
implementations?”

Montero is aware that there is a new role for the IT manager. “More than programmers
and operators, we are now systems analysts and we have to support users to
continuously improve their business processes,” he adds.

Now Alimentos Peru has the ERP system as a foundation for its transactions. The
company, however, has new requirements. Some of the technologies under evaluation
as part of the new technology plan are the following:

• Data warehousing and business intelligence tools to support the marketing user
division in sales planning. In this regard, Montero wonders, “Shall we have the
analysis capabilities to use these new types of tools? Will we be able to use
them well and benefit from these new tools? Will anyone arrive at any
conclusions using the data provided?”

• Interorganizational information systems that would provide an EDI

interconnection with the company’s main customers to enhance supply
operations. Montero thinks that any EDI change must go hand in hand with a
change in mind-set among salespeople. “The salesperson will no longer need to
provide plenty of information or long price catalogs. They will devote
themselves to sell.”
APPENDIX A: FINANCIAL STATEMENTS
APPENDIX B: INFORMATION SYSTEMS EVALUATION AND
RECOMMENDATIONS
Executive Summary

Current Situation
The current information systems include both those originally developed for Real
Peruana Inc. and those for Estrella S.A. These systems are still being used in Alimentos
Peru.

Since the merger in 1993, there has not been any major development/update effort
that would improve the systems. As a result, they do not effectively support the
current organizational business processes. The major problems with the information
systems include:

1. Lack of timely and reliable information.

2. Lack of integration among existing systems.
3. Duplicate systems for a number of functions.
4. Lack of flexibility. Most of the current systems were designed following rigid
structures that do not allow the IT staff to easily update the systems. When
they were designed, no appropriate programming tools were available.
5. Lack of system documentation
6. The IT division is mainly concerned with maintaining existing systems; there is
not enough time for new developments
7. In accounting, finance and sales divisions, information has to be handled or
consolidated using special programs.
8. Systems are not user-friendly.
9. Lack of standard IT policies, rules, and procedures.

Recommendations
The areas needing information systems improvements are the following, by order of
priority:
• Logistics
• Employee Payrolls
• Accounting and Financial
• Commercialization
• Manufacturing
• Human Resources

Improve or replace basic systems using integrated systems including interconnected

modules and applications for these areas, preferably with preprogrammed packages.

Client-server hardware architecture should be adopted by installing a local area

network (LAN). Also, evaluate and follow up the use of AS/400 server capacity and
standardize PCs.

Organization-level recommendations:

• Setting up an IT Steering Committee under the Management Committee to

ensure basically that systems development would be aligned with business
 goals.
• Enhance expertise in the IT division by hiring new personnel and training for
present employees.
• Change the IT division’s organizational structure and create project- oriented
teams. Also establish a systems career path.

ACKNOWLEDGMENT
The authors would like to express their gratefulness to Antonio Diaz-Andrade for his
collaboration in this case and acknowledge the comments provided by the anonymous
reviewers.

ENDNOTES
1. All individual names, company names, and brand names have been disguised.
2. Carlos Montero was away from Alimentos Peru from mid-1995 until the
beginning of 1996.
3. After finishing the ERP system selection process and internal restructuring, the
company’s IT manager started reporting directly to the local general manager.

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