Jollibee #ChickenSad: An IT management case study

Case Study Submitted to the Faculty of University of

Batangas

In Partial Fulfilment of the Requirements for the Degree

Master of Science in Industrial Engineering

Submitted By: Fritz Tejay S. Banta

Submitted To: Allyzza Nichole G. Velasco, CIE
 I. TITLE: Jollibee #ChickenSad: An IT Management System

II. Case Study II. INTRODUCTION/ BACKGROUND OF THE STUDY

Jollibee Food Corporation’s launch of a new enterprise platform — the largest

investment in information technology in the company’s history, amounting to at least half

a billion pesos for 2014 alone — has caused the temporary closure of 72 stores and the

reduction in the menu of many stores. The affected stores are in Metro Manila and

nearby cities, representing 3.2% of JFC’s 2,244 stores nationwide.

“In our estimate, the JFC group has not been able to serve the consumer to the

extent of 6% of its normal nationwide sales in the first 7 days of August, 2014,” said JFC

in a disclosure to the Philippine Stock Exchange. The product limitation has been

caused by the migration to new systems that started on August 1, 2014, which has

resulted in temporary slowdown in sales order taking, product loading and dispatch of

transportation.

According to Jollibee, the migration involves the central integrating system, store

information systems and several other systems. The company’s Chief Information

Officer has not responded to UpgradeMag.com‘s questions regarding the specific

technologies, the provider of the system, and which part of the migration process broke

down.

“The purpose of this major investment is to prepare JFC for an accelerated

business growth in the Philippines and abroad as it pursues its goal to become the
largest Asian restaurant company and one of the most successful restaurant companies

in the world,” according to the statement issued by JFC.

JFC said it is doing its best to restore the availability of all its products to normal

levels in the next few days, to reopen temporarily closed stores and to restore its

service to its customers.

The company maintains that it has sufficient raw materials, finished products and

production capacity to meet the consumer demand for the entire month of August and

for the months ahead, both for local and imported goods.

JFC operates the largest food service network in the Philippines. As of June 30, 2014, it

was operating 2,244 restaurant outlets in the country: Jollibee brand 839, Chowking

406, Greenwich 207, Red Ribbon 298, Mang Inasal 456 and Burger King 38. Abroad, it

was operating 589 stores: Yonghe King (China) 311, Hong Zhuang Yuan (China) 43,

San Pin Wan g (China) 44, Jollibee 111 (US 30, Vietnam 49, Brunei 12, Saudi Arabia

10, Qatar 4, Kuwait 3, Hong Kong 1 and Singapore 2), Red Ribbon in the US 31,

Chowking 46 (US 19, UAE 20, Qatar 5 and Oman 2), Jinja Bar (US) 3. The JFC Group

had a total of 2,833 stores worldwide. JFC also has a 50% interest in joint ventures for

the following stores: Highlands Coffee (Vietnam, Philippines) 78, Pho 24 (Vietnam,

Indonesia, Philippines, HongKong, Macau and Cambodia) 57, and 12 Sabu (China) 12.

III. STATEMENT OF THE PROBLEM/ OBJECTIVES OF THE STUDY

The main objective of the study is to analyse the scenario happen in Jollibee

which may provide lessons to the IT and business community to avoid the all-too-often
costly mistakes of IT projects in the future. In order to achieve the goal, the researcher

also sought to answer the following questions:

1. What are the issues encountered by JFC on their IT management system?

2. What are the possible recommendation in order to avoid this issues encountered by

the company?

IV. Areas For Consideration

It is important to note that UPFI is simply looking for a stable investment. Since

their previous investments in treasury bills have begun to deteriorate, they feel the need

to revisit their investment options. This is what the stock market is offering them - an

opportunity to earn steady returns for their relatively constant financial needs. AB

Capital and Investment Corporation must remember that investing in the stock market is

something new to UPFI; hence, they are only willing to set aside a small amount from its

fund for such an investment. However, it is very probable that UPFI would be willing to

raise and shift its investments into the stock market once it experiences good, steady
returns from it. Contrastingly, UPFI would also be reluctant to raise its investments, if

not completely avoid the stock market in the future if ever it experiences less than

favorable returns.

V. Results and Discussion

1. What are the issues encountered by JFC on their IT management system?

1. System migration

Jollibee had been using a product from software company Oracle to manage its

supply chain, which includes inventory, placing of orders and delivery of supplies to

stores. Insiders said a dispute with Oracle prompted Jollibee to switch to its rival, SAP.

Now, supply-chain software products aren’t out-of-the-box that you can just install

and run. These need to be customized in order to fit a company’s business processes.

The customization usually takes months, if not over a year, and involves programming

and configuration. Jollibee outsourced this project to a large multinational IT service

provider. Jollibee’s Oracle system had been running for years, and most certainly, had

huge amount of complex programming and continuous modifications over time. There

must have been fragile interrelationships between these programs and configurations,

making the migration to SAP a huge and risky move.

2. Staffing and expertise

The migration project was outsourced to a large multinational IT service provider,

with no sizable local team handling SAP, according to members of the Philippine SAP
community I was able to interview. My interviewees have never heard of that vendor

taking on Philippine projects using SAP before, which is why they concluded that the

vendor does not have significant SAP expertise locally.

Also, they said there was a flurry of recruiting for SAP professionals for that

vendor. It was a “red flag” because it seemed the vendor was having trouble filling

positions required for the project. The vendor reportedly brought in people from India

and other countries, but sources said the project remained understaffed.

To assemble a large team of outsiders and have them work on a complicated

project that quickly? It’s troublesome. We can assume the outsiders have not worked

under a common methodology and culture. They don’t have a common understanding

of standards and processes. It takes a while to learn the ropes.

3. Schedule and size

This is a half-a-billion-peso project, but it has an operating schedule of just a little

over a year – from the time the recruitment activity started till the supply chain issue

broke out. Many of the projects I’ve seen costing just 5% of this amount had a two-year

timetable. A project of this size will require 3 to 5 years to properly implement – from

inception to transition. Maybe this was just the first phase, but unfortunately for Jollibee

it was already costly.

4. Testing
 Testing to check if the system’s features and processes are working is one of the

most overlooked aspects of IT projects. Unfortunately, most projects do this towards the

end. The later the defects are found, the more expensive they are to fix.

I asked a SAP expert on how testing is done in SAP, and he replied, “You'd be

surprised at what passes for unit / functional / integration testing in Oracle and SAP

projects.” While the practices and tools for testing have matured over the last two

decades, very few of them are properly applied to most ERP projects like Jollibee’s,

according to my source. ERP or Enterprise Resource Planning is the software system

for business processes.

2. What are the possible recommendation in order to avoid this issues encountered by

the company?

1. Start small

The larger the IT project, the greater the chance of failure. This is because it’s

difficult to accurately predict upfront the requirements, system design, and human

interactions needed in a project. Stakeholders don’t really know what they want until

they actually get to use a system. Engineers can’t validate their designs until they have

built components to test. And the way engineering teams and business units interact

during the course of a project usually has a huge impact on schedules and deliverables.
 It’s better to start with a very small project, one that can be done over 6 months,

with 5 people or less. The project can be presented quickly to stakeholders and used as

input for succeeding changes or enhancements. Engineers will also be able to test their

designs before any huge construction is done, making changes less costly. It’s

important that the initial team include veterans. The team members can then be seed

members of succeeding larger projects or several small projects done in parallel.

2. Testing should be core and automated

An IT project must employ Test-Driven Development, where testing is central.

Basically, this approach means that tests are defined before each piece of work is

started. Testing is done not just by dedicated “testers,” but by every member of the

team. Automated tests are preferred over manual; rich automated testing tools have

emerged over the last two decades, and many of them are free and open source.

As the system is being built, automated tests should be done on even the smallest units

of the system. Since the tests are automated, they can run multiple times a day, giving

the team instant feedback on defects. This results in high quality work at every step of

the project.

3. Delivery must be continuous

One of the riskiest things I see organizations do time and time again is big

migration to a new system. They have an announcement that says, "System X will go

live by (launch date)!" When that day comes, it’s invariably a mess. People can’t get
work done with the new system and the old system is gone. If they’re lucky, the old

system is still around, while the new system undergoes bug fixing.

Compare this to how Google and Facebook roll out their changes. Notice that

your Gmail and Facebook have new features every few weeks or months. If you don’t

like a feature, there’s a button that allows you to go back to the old way of doing things.

This button is Google’s and Facebook’s way of getting feedback from their users. They

roll out the new feature to a set of users. If the users opt for the old feature, then

Facebook and Google know they still need to improve the new feature. Then they roll it

out again to another set of users. When they reach the point when few users opt for the

old feature, then they know they’ve gotten the new feature right and make it a

permanent part of their systems.

You can apply this to business systems. Don’t roll out your system in a big bang.

Roll it out, feature by feature – every few weeks or months – to a set of users, and then

get their feedback. It will be easier and safer to roll out small changes rather than large

ones. Even the deployment and rollout can be automated. This will certainly be less

costly for your company.

4. Be transparent

My final piece of advice: Be transparent to your client. Allow your client to monitor

the progress of a project and catch problems earlier rather than later. Provide concrete

evidence, such as:

 Regular demos. Provide your client with working software, not PowerPoint

presentations. Let them try out the features of the software. Get their feedback.

 Test reports. Automated tests run multiple times a day using centralized systems

called Continuous Integration Servers. These systems give clients reports on

various tests, and whether they’ve succeeded or failed. Some of these tests,

known as Acceptance Tests, can be read by non-technical users so you’ll see

what behavior is being added to the system, and whether the system already

complies with that behavior.

 Quality metrics. Aside from test reports, various tools can be added to the

Continuous Integration Server to generate other reports. Among these reports

are metrics on quality. For example, in Java, there are various tools that can

check if a system contains a code that leads to bugs or logic that is too

convoluted, and if a code violates standards.

 Big visible charts. If the team works onsite, various charts can give the rest of the

organization an idea of the progress of the team. Two of the popular charts

are Task Boards and Burndown Charts.