Informations System - Case study essay

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CAROLINA INGREDIENTS AND THE MATURATION OF

A MANAGEMENT INFORMATION SYSTEM

Terri Guidry and Cara Peters

Winthrop University

Carolina Ingredients was a successful food ingredient distribution company that relied

heavily on its information systems to run its daily operations. Doug Meyer-Cuno, founder and

CEO, had recently hired Paul Kunath to administer the company’s networks, as opposed to

continuing to outsource the management of the information systems to an external vendor. When

Paul Kunath came on board, he implemented several improvements to the operating procedures

of the company. But, then he ran into a problem. A newly implemented inventory management

system was not operating as expected. In a weekly meeting of the executive team, Kunath

reported, “Customer service is at risk. Initially when we installed the scanners, we expected to be

able to track every ingredient as it moved through the systems. We thought it would decrease

time from order to shipping and reduce errors. But the scanners are still not working properly.

I’ve had the vendor here working on it--with no success.” Meyer-Cuno then responded, “We’ve

spent what – about $40,000 on the scanners and software? They’re still not working? What

would it take to fix it? Or should we scrap the whole thing?

Company Background

Carolina Ingredients was established in 1990 as an industrial food ingredient

manufacturer, located in Rock Hill, South Carolina. The company offered all-inclusive

ingredient and blending services, and then produced and packaged those custom seasoning

blends, for business-to-business customers throughout the United States. A business could order

anywhere from five to 500,000 pounds of spice blends from Carolina Ingredients. However, an

example of a typical order was 1200 pounds of fajita seasoning for a national restaurant chain.

Carolina Ingredients provided safe, high-quality, value-oriented products and services to

its customers. In fact, they had earned numerous awards and certifications for food safety and

quality, such the Certification of Safe Quality Food (SQF) - 2000 Code. This award was earned

after an intensive 3-day audit in which the company’s food security, traceability, and safety were

deemed to meet the standards of the Global Food Safety Institute.

In addition to providing safe and high-quality products, Carolina Ingredients delivered its

products to customers in a timely fashion. For example, a Director of Research and

Development at a large poultry company, who was a customer of Carolina Ingredients, provided

the following testimonial for the company’s website: “I asked for a sample at 11:30am on a

Monday morning and received that sample at 10:30 the FOLLOWING DAY! Carolina

Ingredients R & D response time is unmatched in this industry and has made my job 100%

easier.”

The manufacturing systems at Carolina Ingredients operated 40 hours per week,

employing approximately 40 people. Fluctuations in demand for their products were minimal

with sales analyses showing a slight increase in orders just before the winter holidays.

According to Meyer-Cuno, past experience suggested that customers had increased demand for

baked goods and food preparation for the holidays.

The leadership team (see Figure 1) at Carolina Ingredients focused on efficient and

effective management of processes, especially with respect to sustainability and operating

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procedures. This focus had paid off as the company was named a finalist for the “South Carolina

Manufacturer of the Year” in 2012 by the South Carolina Chamber of Commerce. This was

quite an accomplishment as the other companies that were nominated, such as The Boeing

Company, Proctor & Gamble, and Cytec Industries, were much larger and more established than

Carolina Ingredients.

Figure 1: The Leadership Team for Carolina Ingredients

Improvements in Sustainability

The sustainability efforts at Carolina Ingredients were unique to the industry. As a

business-to-business industry, this made them a perfect partner for environmentally sensitive

companies. Carolina Ingredients had first incorporated many green initiatives to add value for its

customers but the company quickly realized the benefits of being environmentally responsible.

According to Meyer-Cuno, “one of our niches is working with customers that have

environmental or sustainability programs. And when we started looking at sustainability, we

realized we could save money by implementing certain programs. We could actually bring

money to our bottom line.”

Carolina Ingredients was the first industrial seasoning manufacturer in the nation to be

housed in a LEED Silver certified facility. LEED is a certification that a construction project is

was designed and constructed meeting objectives developed by the U.S. Green Building Council

(USGBC). A 60,000 square foot LEED certified facility housed the production facility and office

spaces. This building was purchased in 1990 and renovated with the goal of sustainability in

2009. The company’s commitment to sustainability and environmental responsibility was seen

throughout the whole facility. For example, visitors to the business offices saw an attractive

computerized display in the lobby that summarized the efficiency of the facility’s energy

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consumption. In addition, the $5 million facility employed many of the more common LEED

certification standards, such as furniture using low volatile organic compounds, use of building

materials produced locally, and extensive use of natural lighting.

During the renovation, much of the material removed was recycled and new materials

were purchased from local suppliers. Complete replacement of heating and air systems and

electrical devices was necessary. The new systems were much more energy efficient. The

installation of a roof mounted, 156 unit photovoltaic solar system produced electricity for the

facility, meeting the energy needs of both the production facility and administrative offices.

According to Meyer-Cuno, since the system’s introduction in 2009, the unit had produced more

than 201,000 kilowatt hours of electricity. In an average month, close to 3000 kilowatt hours

were produced. This photovoltaic system reduced carbon emissions by nearly 25 tons per year.

Additional sustainable initiatives undertaken by Carolina Ingredients included the use of

recycled paper for business papers, an in-office recycling program, preferred parking for

employees driving hybrid vehicles, and timers on the lights in office spaces. In addition to these

initiatives, key sustainability performance indicators were established. Data on these indicators

was analyzed and reports were generated on a variety of measures, such as energy consumption,

materials recycled, waste produced, and office products consumption. Assessment of

performance indicators by Carolina Ingredients, along with LEED certification, helped the

company to ensure continuous improvement and to illustrate to its customers that their claim of

environmental responsibility was valid. According to Meyer-Cuno, “We are not just another

company ‘greenwashing’--trying to leverage minimal efforts in sustainability. Our efforts have

been meaningful. Approximately 5% of our company’s net profits have been realized by

sustainable business practices.”

Improvements in Operating Procedures

Carolina Ingredients had also made continual improvements to operating procedures over

time. In 2010, when the management team realized the centrality that the management

information systems had in daily operations, the company’s current MIS systems were being

managed by an external consulting firm on an as needed basis. Because of the use of an outside

firm, the level of control over management of the systems was not satisfactory. Problems with

the system required contacting the firm and scheduling maintenance, which prevented timely

solutions to problems as they arose. Meyer-Cuno made the decision to hire an internal system

administrator to become a part of the leadership team.

Paul Kunath joined Carolina Ingredients in 2010 with over 12 years of experience in

corporate systems and network administration. As Paul came on board, he began to assess the

current technological systems and safeguards. He found that each employee’s work was stored

on computer hardware assigned to the department. His examination revealed that most

employees were using reasonable methods of creating backups of their own work but there was

no consistency in the methods that individual employees were using to back up data. He

determined that the most likely reason was because there was no standard operating procedure

for backing up data.

Each department had specific productivity software in use for specific tasks. For

example, Sue Curtis, in Research and Development, was using a spreadsheet application

extensively for calculating ratios and keeping records for her department. Lou Quievryn, the

CFO, was using a financial accounting software application for record keeping and automated

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financial reporting. Energy use was being monitored and reported by Mike Cantore using

proprietary software designed for use with solar panel systems. Each department had access to a

shared drive to facilitate backups and sharing of files.

Kunath also implemented a process to back up all employee data, applications, and

shared drives for Carolina Ingredients. Full backups of the domain controller, the SQL server,

the applications server, and the Voice Over Internet System were made three times each day.

The backups were stored using the RAID method (a redundant array of independent disks). The

full set of backups was then stored off site daily. This system of backups also allowed “rolling

back” to previous versions of files for one full week.

In addition to creating a backup process for employee data, applications, and shared

drives for Carolina Ingredients, Kunath created documentation of all network and systems

administration processes. The documentation included IP addresses, logic maps, passwords and

other specific details of this system. Copies of the documentation were then filed in the office of

the system administrator as well as provided to the senior management team.

A second project that Kunath undertook was related to improving security procedures and

processes at Carolina Ingredients. When Kunath started with the company, the employees

exhibited a high level of loyalty and commitment to their work. Security was minimal.

However, the very nature of the food industry necessitates a very high level of quality control.

Customers and end consumers want all food products to be produced in a tightly controlled, safe

environment. In addition, food companies have had to contend with potential threats from

bioterrorism since the September 11 attacks on the World Trade Center.

Even though there had been no known security breaches at Carolina Ingredients, Kunath

and the management team made the decision to implement a proactive approach toward securing

the facility and the company’s information systems. Entryways were equipped with keypad

locks, allowing access to specific areas to be controlled using a computer system. Access to each

area of the facility was made available only to those whose work required access to the area. A

video recording system was installed, monitoring most areas of the facility at all times. This

increased level of security was an added protection for the company, its assets and the safety of

employees. A system of archival for the video recordings was developed. File management

systems were implemented that allowed access to digital information only to those employees

with a need to access the system. Furthermore, security of the room that housed the computer

systems at Carolina Ingredients was improved. Under the changes, the systems were maintained

in a room with no windows and independent cooling systems. Entry to the area was controlled

by password and key.

Although the changes to back-ups and security procedures were substantial, they did not

present much of a problem for Kunath and Carolina Ingredients. All changes were implemented

rather smoothly and in a timely fashion. It was at that point that Kunath began to work on a third

assignment that presented a bigger hurdle for the company to overcome.

The Production Process

Procurement

When Carolina Ingredients placed an order for raw materials with one of their suppliers,

the order was entered into the company’s Enterprise Resource Planning (ERP) system. A Bill of

Lading was received with each new shipment of raw materials and provided details of the

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materials in the shipment. A Certificate of Analysis also accompanied all raw material. Raw

materials were not accepted until the Certificate of Analysis was compared against specification

to ensure that the material met required specifications. Lot numbers on the Bill of Lading were

compared to the lot numbers on the Certificate of Analysis to make sure they matched.

Material Safety Data Sheets were also received with raw materials and included

instructions for handling and storing the product safely, along with physical data, such as the

melting and boiling point. Nutritional data, allergen statements and kosher certifications were

recorded. All of these steps were designed to insure the integrity and quality of the product met

Carolina Ingredients product quality standards.

After careful review of all of the shipment documentation, an employee signed off on the

receipt of the shipment. Lot numbers were recorded on each receipt allowing for the traceability

of raw material from receipt to batching, production, and shipment of finished goods. Product

specifications were scanned and filed electronically with digital copies maintained for several

documents.

Once the raw material was fully accepted and logged as received inventory, a barcode

was generated from the inventory management system and placed on the package of the raw

materials. Upon receipt of the barcode label, the raw materials were finally moved into the

warehouse. The exact warehouse location of the product was also stored in the database as part

of the product record. Although complex, this process eliminated the need for paper-based

inventory management forms and greatly reduced errors due to manual data entry.

Filling an Order

The next step in the production process involved creating the customized product to fill a

customer’s order. An employee would query the database to find the necessary raw materials for

the order and identify their locations in the warehouse. As the products were found in the

warehouse, a handheld scanning device was used to scan the barcode and then enter the amount

of product being moved from the warehouse to the production area. This scan linked the specific

raw materials, along with lot numbers, to the specific product being created for a particular order.

The database system was updated in real time, as raw materials were being moved to the

production area. Each production area was a separate, fully enclosed, ventilated room to allow a

sterile mixing environment with multiple quality control measures. Packaging was also done

within that sterile environment to avoid any contamination.

The original lot number that was created when the order was taken was used throughout

the production process and was displayed on the packaging of the completed order that was

ready to be shipped to the customer. Simply put, the systems at Carolina Ingredients were

designed to facilitate a seamless process, tracking raw materials from the initial customer order,

all the way to the end product that was ready for shipment.

The Enterprise Resource Planning System and Inventory Control

When Kunath began his third project, Carolina Ingredients utilized Microsoft Dynamics

Enterprise Resource Planning (ERP) software, which gave the employees access to the

commonly used productivity tools of Microsoft Excel, Word and Powerpoint. The company also

had a software Horizons International that integrated with the Microsoft Dynamics ERP

software. Horizons International provided an interface between the scanner data software and

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Microsoft Dynamics ERP system. This was important because the manufacturing process at

Carolina Ingredients began with the order being received and logged into the Microsoft

Dynamics ERP. The whole ERP system was then used for logging and displaying correct

ingredient measurement, inventory control, and for real time perpetual inventory and cost

control, production and material planning.

Recall that the hand-held scanning devices were being used throughout the production

facility to facilitate timely data entry and to increase accuracy. Carolina Ingredients had begun

using the scanning devices in 2012 after much research was done on currently available scanning

systems. The vendor was an established company with a reputation for excellence. The system

was capable of recording the necessary data and was designed to be used with Horizons

International. The handheld devices and related software were purchased at a cost of over

$40,000 to enable Carolina Ingredients to seamlessly track inventory from the time it was

ordered through the manufacturing process in real time. The scanning system allowed the use of

barcodes to track inventory from the time it was received throughout the production process. At

the time Carolina Ingredients received an order from a customer, it was entered into the ERP, a

lot number was created, barcode labels were printed and the necessary raw materials were to be

flagged in the inventory system as “allocated.” The raw materials were then earmarked in the

database for use with that specific order. The use of this system reduced the need for manual

data entry, lowered the consumption of resources, and minimized the probability of errors.

However, as Kunath led the implementation of the scanner software, he realized that it

had not worked as planned when it was originally purchased. At the time of the initial

installation of the scanning system, the software had just been released and did not yet contain

the module that allowed the scanner software to interact with Horizons International and thus the

data could not be integrated with the ERP system at Carolina Ingredients. So, the scanner system

was initially installed and put into use in the warehouse with plans to continue the

implementation to other parts of the company as soon as the appropriate software module

became available.

Approximately three months later, the module was delivered and installed at Carolina

Ingredients with the hope of allowing the scanner system to be integrated with Horizons

International and thus the ERP system. And yet, after installation, the module did not work as

expected. Kunath made multiple attempts at installation and configuration but the scanner

system still did not integrate with Horizons International. Kunath contacted the vendor for

technical assistance. Since the module was relatively new, the technical support providers from

the software vendor did not yet have experience with the update, and therefore, they could not

easily resolve the problem. The vendor then sent its own technical support personnel to Carolina

Ingredients to uninstall and reinstall the system in an effort to get the systems to integrate.

The problems between the two systems persisted and time was dragging on. The vendor, who

had indicated that the systems would work together upon the sale, insured Meyer-Cuno and

Kunath that they would work diligently to develop a new update, or “patch,” to the system. The

new patch would be made available to Carolina Ingredients as soon as it would be developed but

the vendor could not provide a specific timeline for development. But time was dragging on and

Kunath was unsure whether the company wanted to wait another three months (or longer) to

potentially have a patch installed that was not guaranteed to work. Meyer-Cuno had scheduled a

meeting for the leadership team to discuss these issues next week and, in preparation for the

meeting, Kunath wrote down four different solutions to the problem that he wanted to present to

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the group for discussion: 1) consider purchasing a different scanner system and implementing it

as soon as possible, accepting the sunk cost of $40,000; 2) continue working with this vendor,

even though a solid timeframe for delivery of the patch for the new module was not provided and

there was no guarantee that the patch would solve the problem; 3) hire an outside computer

systems analysis and design firm to develop a solution to the problem; or 4) dissolve this whole

project immediately and revert to manual processes until an acceptable alternative was identified.

One way or the other, Kunath hoped the group would be able to come to a decision on how

Carolina Ingredients should proceed.