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The Value of Information Technology

The Value of Information Technology. Anheuser-Busch Companies, Inc. September 29, 2003. AGENDA. Anheuser-Busch Overview Why is there I.T.? Value of I.T. Examples Questions. QUALITY. Refrigerated Railcars. Extensive Bottling. A COMPANY OF FIRSTS. Pasteurization.

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The Value of Information Technology

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  1. The Value of Information Technology Anheuser-Busch Companies, Inc. September 29, 2003

  2. AGENDA • Anheuser-Busch Overview • Why is there I.T.? • Value of I.T. • Examples • Questions

  3. QUALITY

  4. Refrigerated Railcars Extensive Bottling A COMPANY OF FIRSTS Pasteurization

  5. INDUSTRY LEADERSINCE 1957 Nearly 5 out of every 10 beers sold today

  6. ANHEUSER-BUSCH • 100+ million barrels in 2001 • 12 domestic breweries • 2 international breweries

  7. More Than 30 Brands +3 Billion Gallon Capacity

  8. Corporate Overview Anheuser-Busch, Inc. Anheuser-Busch International, Inc. Busch Agricultural Resources, Inc. Metal Container Corporation St. Louis Refrigerator Car Company Anheuser-Busch Recycling Corporation

  9. Corporate Overview (continued) Busch Media Group, Inc. Manufacturer’s Railway Company Precision Printing Longhorn Glass Busch Entertainment Corporation Busch Properties, Inc.

  10. Invested More Than $375 Million

  11. I.T. is Part of the Business • A-B Companies is a $16B Business • A-B spends approximately $200MM on Information Technology • There are approximately 1,300 employees and contractors working on Information Technology

  12. Management Systems Group

  13. Mission for MSG A-B Business Growth • Through the systems we build, run, and maintain for our customers • Through the business strategies we support Cost Reduction • Business initiatives enabled by Information Technology • Internal MSG cost reduction initiatives Standardization and Service Excellence • In maintenance and replacement of infrastructure hardware and software • Service delivery to both internal and external customers

  14. MSG Message to Our Employees, Customers, and Vendors • We are not an Information Technology company. • There will be no Information Technology driven initiatives.

  15. Overview of MSG Design, Develop, & Install Operate & Maintain Applications Support/Maintenance Systems Development Data Center Network Desktop • Supply Chain • Sales and Marketing • Finance & HR Systems • Purchasing Systems • Centralized Information Processing • Communication • E-mail • Internet • Personal Computers • Help Desks MSG designs, develops, installs, and runs the systems that are key to A-B Business Operations.

  16. Evolution of Information Technology IT Automation of Work Business IT Management of Information Business IT Business Transformation of Business Investments are increasing and... ... complexity is increasing!

  17. Why is there IT? • Support the business • Increase sales • Decrease cost • Defensive posture • Strategic in nature for most organizations • CRM, PLM, Order Mgmt, Account Mgmt, Internet, Accounting • IT is all along the value chain

  18. Example • We work for a company that sells computer products to the general public using the Internet • The sales department has requested to add a set of “My” features to the website (I.e. my.yahoo) • As the IT department what are the next steps on this project?

  19. IT is the Business • IT doesn’t exist without the business • IT exists only to enhance the business • IT Supports the business • Increase sales • Decrease cost • Defensive posture There will be no Information Technology driven initiatives.

  20. Increase Sales • Reduce order fulfillment cycle time • Increase order quality (reduce stockouts) • Determine and set pricing • Rationalize discount pricing • E-commerce to acquire new markets • Improve product quality • Improve customer service

  21. Decrease Cost • Leverage buy capability • Warehouse fork truck continuous moves • Automated guided vehicles • Transportation backhaul opportunities • On-line bid purchase or sale • Supplier collaboration efforts • Increase product quality (reduce defects)

  22. Defensive Posture • Follow the leader • Y2K • Replacement systems (old, lost support) • New e-commerce companies • Order consolidators • Buy consolidators • Infrastructure

  23. Other • Product awareness • Environmental • Community awareness

  24. Link to the Business IT Projects Business Objectives Business Strategy

  25. Example 1 Supply Chain Initiative Business Driven Project

  26. Supply Chain Vision Business Strategy: Reduce the total supply chain costs while improving product freshness and customer service. Targeted Business Objectives: • Support purchasing in reducing packaging material price by improving supplier costs • Support operations in reducing brewery conversion costs • Reduce cost of transportation of full goods, trade returns, and packaging materials • Avoid capital spending through asset utilization • Improve product freshness and customer service Click View, Header and Footer... to add file name here

  27. Supply Chain Scope • The integration of all activities that are part of the process of going from raw materials to delivering finished products • Its success requires a balanced scorecard that measures the success of the whole, versus the parts Planning, Scheduling & Execution Processes Suppliers Brewing Packaging Wrhse/Shipping Wholesalers Retail Management / Infrastructure Requirements

  28. Supply Chain Initiative Stability Lowers Costs • The Leadership Team believes increasing stability will lower Supply Chains costs. • We will measure key Performance Indicators (KPI’s) of stability. • We will track Total Supply Chain cost per barrel.

  29. Strategic Network Models The Supply Chain Program Four Major Initiatives for 2001 / 2002 Shipment & Production Scheduling Supply Chain Scorecard Transportation Advantage • Increase inbound packaging material backhaul • Integrate Transportation Advantage objectives into shipment and productionscheduling • New material requirements planning for packaging and support materials • Postpone order content decision by utilizing the most up-to-date information • Reduce the freight costs of trade return movements (cooperage and pallets) • Rollout web based schedule exchange to all plants and selected suppliers - BudExchange.com • Provide a tool to ensure all Supply Chain costs are measured (current prototype is bottle only) • Create a facility location model to analyze optimal locations for production and distribution facilities, responding to shifts in demand and minimizing all relevant costs • Create a weekly planning model that fully integrates brewing and packaging decisions and minimizes all relevant costs

  30. Summary • This project will deliver improvements in: • Management and purchasing of direct materials and supplies • Order Filling decision through automation • Facility location decisions • Trade return management • Inbound packaging material backhaul DCFROI . . . . . . . . . . . . . . . . . . . . . .17.4% Total Spending . . . . . . . . . . . . . $ 20 MM Average Yearly Savings . . . . . $ 6 MM NPV at 9% . . . . . . . . . . . . . . .$ 2.4 MM Years to attain Hurdle Rate . . . . . . . . . .4.5 Click View, Header and Footer... to add file name here

  31. Example 2 IT Process Improvement Project

  32. Manufacturing Process Materials Manufacturing Finished Goods Standard Operating Procedures Machinery Skilled Labor Improve Measure Our plants are very efficient, due to stringent operating procedures, efficient equipment, and skilled labor

  33. Software Manufacturing Business Requirements Software Development Systems Methodology Tools Skilled Labor Improve Measure With a stringent approach to Software Development, cost and time to deliver can be significantly reduced while improving quality

  34. Standardization Benefits Industry estimates 5 – 40%* savings of development and operational costs at maturity (4-5 years) Reduced Cost Productivity Standard Process, Tools and Metrics Reduced Cycle Time Reuse Increased Quality * - compilation of sources – META, Gartner, AG Edwards, SBC, Transcentric, VISA

  35. Business Benefits Increased Quality Reduced Cycle Time Decreased Cost More Benefits Realized Sooner Higher ROI + = IT standardization will result in compounded benefits for subsequent IT projects with an ROI

  36. ABPG IT Objectives • Implement standard process, tools, training and the supporting measurements to enable on-going productivity improvement: • Implement metrics collection around productivity, quality, cost, and continue customer satisfaction • Increase IT productivity 20% by 2007 • Decrease IT defects 20% by 2007 • Reduce IT cycle time 20% by 2007 • Establish a foundation for continuous improvement within the IT department IT will contribute on-going cost savings to our Business Units

  37. PI and Reuse Savings ($M) Annual recurring savings of $1,140 M beginning in year 4

  38. Investment ($M) Total Cost $ 1,400M Total Incremental Savings $ 1,140M ROI (3.2 years) 27.6%

  39. Project Scope Governance Rational Rose Microsoft .NET Requirements Design Develop Test Support Methodology / Process Standards / Guidelines Training / Mentoring Performance Measurement Use MSG’s .NET standardization effort as the base, purchase what we can, and build the rest

  40. How Will We Save - Measure IT will apply metrics and measurement in the same way our plants do today

  41. Project Summary • This project will deliver a foundation for continuous improvement and establish on-going cost and quality improvements: • Quicker development life-cycle • Consistency in practice • Reuse • Less rework DCFROI 27.6 Total Spending $ 1,400 M Average Yearly Savings $ 1,140 M NPV at 8% $ 780 M Years to attain Hurdle Rate 3.2

  42. Summary • IT is part of the business, it supports and enhances the business • IT doesn’t exist without the business • Learn the business of your company

  43. Questions?

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