Jollibee #ChickenSad: A costly IT problem

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Jollibee is losing millions of pesos a day due to an IT problem that forced some of its stores to close. Here are the possible causes of the problem and the lessons we can learn from it

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Last week, Jollibee Foods Corporation announced that a major IT system
change it undertook was to blame for the lack of the popular
“Chickenjoy” in some of its stores. The change affected the fastfood
giant’s inventory and delivery system, forcing 72 of its stores to close.

The brand has taken a hit: aside from its loyal customers taking
their disappointment to social media, Jollibee has lost 6% of its sales
at least for the first 7 days of August due to the problem. Using
Jollibee’s 2013 revenue, that amounts to P92 million. This is on top of
the P500 million ($11.37 million) that the company supposedly shelled
out for its new IT system. (Editor’s note: Other reports say Jollibee stands to lose some P180 million ($4.09 million) in revenues a day)

I asked some of my friends in the industry about what could have
caused Jollibee’s costly IT disaster and the lessons we could learn from
it. Here’s a summary of their insights and mine.

ISSUES

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.

RECOMMENDATIONS

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.

– Rappler.com

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