The Ocado Group is recognised as one of the pioneers in online grocery shopping and delivery in the UK. The brand was early to market 20 years ago and has invested heavily in its digital capabilities ever since. This has resulted in Ocado winning lucrative partnerships with other supermarkets that use its platform to support their own online shopping efforts - most recently signing a deal with Marks & Spencer.
This success has allowed the company to expand, with Ocado now looking to partner with retailers in international markets, including Canada, America, France, Sweden, Australia and Japan.
However, this growth and its plans to enter into new territories has forced the company to rethink its back-office technology capabilities, highlighting the need for modern cloud applications. To this end, Ocado announced this week that it is migrating its existing 20 year old on-premise Oracle R12 ERP system to Oracle Fusion Cloud, which it claims will also enable the transformation of the company's finance function.
This week we got the chance to speak with Richard Exact, Deputy CFO at Ocado, about the project, which is currently four months underway. The aim is to go live with a ‘big bang approach' in Spring 2021.
Exact said that the international expansion of Ocado brought the need for a cloud-based ERP to the fore. He explained:
I was involved in the original selection of Oracle twenty years ago. More recently we have started to go international and looking at how our business is going to evolve to support those clients, we need to move our financial systems forward. After a long selection process we decided to choose Oracle Cloud, which we think is the right solution to help us scale our business and provide a strong backbone for what we are going to do in the future.
We definitely had the option to continue on premise, but we very much took the view that we are a business that is going to be operating in other countries and we want a financial system that can be accessed relatively easily from anywhere and can actually provide information to the management teams in those countries.
So, cloud is definitely the right product from that point of view. The alternative would be to start running on premise in multiple countries, which is not a solution we wanted.
Exact added that with more people and teams working from home now as a result of the COVID-19 pandemic, a cloud-based system will further benefit how quickly employees can access information. At the moment access is gained through a VPN interface, which causes friction, and the aim is to be able to do "finance from anywhere".
Exact said that Ocado chose Fusion Cloud ERP because of the depth of knowledge at Oracle, as well as the depth of the product suite. In particular, Ocado saw a need for the Projects application within Fusion, given that the company is going to be building 30 large capital projects over the next four to five years. In addition to this, the engineering team requested Oracle's Material Requisition Planning application, which allows users to generate and manage their material and distribution requirements across multiple, interdependent organizations.
As noted above, Ocado is four months into what will hopefully be a 12 month project and is currently in the ‘validate' or detailed design phase. Exact said:
The aim is to go live in the late Spring of 2021. People say we can't go any faster than that, so I'm having to be patient. But that's pretty good, given the size of the business and we're trying to migrate from one system to another. We will go for a Big Bang approach, I don't think there's any real option to do anything else for the size of these systems. So we will migrate everything in one weekend or over a couple of days.
At the moment we are looking at the data migrations, the other integrations, and we are clearly going to try and take advantage of the extra functionality that you can get from Oracle. We've got the chance to look at our accounts payable processes, procurement processes, and really move to a document flow, which Fusion gives us great capability to do and really lean forward two or three phases. That will deliver great efficiencies in terms of the cost to serve and the actual process flows.
Ocado is also hoping to automate as many processes as possible, particularly on the procurement side and when looking at the flow of invoices in and out of the organisation.
The aim is to reduce Ocado's reliance on paper-based processes and spreadsheets. Exact said:
We are trying to remove paper invoices from what we do. I think there's also opportunities for much better integration with our Treasury systems, so the whole payments side will be much easier. And then I think at the reporting end there's good opportunities to simplify all of that, to align with some of the reporting functionality in the cloud. We would all love to eliminate spreadsheets, although that clearly won't happen - but to reduce the use of spreadsheets in what we do and to really take advantage of best in breed.
Exact explained that he is keenly aware that introducing a new system won't necessarily immediately result in better outcomes for Ocado and that a broader transformation approach to finance and back-office functions is the real agenda. As ever, this comes down to change management and getting people on board with new approaches. Exact said:
We've tried very much to involve the whole finance team in what we are doing, upfront. I suppose we are relatively lucky in that people know Ocado is changing - it's changing for the better because we are growing, not shrinking. So people are positive about the change. We are then building in a training and change programme to make sure that we keep communicating that change.
There will be some tough bits. At the moment we have what you might call a relatively old fashioned structure, with a traditional accounts payable team, a finance reporting team, the finance business partners do a lot of journals. So part of what we are doing is looking at the target operating model and probably moving towards centres of excellence.
So there will definitely be some pain from the finance team in that change process. But in doing that there is opportunity for people to have more fulfilling jobs across the board, whether it's as an expert or a client facing person. The way Fusion is designed will enable that.
Exact reiterated that whilst Fdusion will allow Ocado to improve its controls, to automate and to document its processes more efficiently, it's important that the company doesn't "just deliver a system and forget about the other bits". He added:
I think it's just making sure that the system we deliver does give people a better experience of finance, reduces the pain points and frees people up to actually talk to their finance customers. To actually have the right conversations, rather than constantly wrestling with spreadsheets.
So, what does success look like for Ocado in one to two years time when the Fusion system is fully operational and this change programme has been implemented? How will Exact be measuring success? He said that he is thinking about success in three key ways.
Firstly, the story of an invoice in Ocado. Do we see any paper in that and does it enter and leave Ocado without a ripple? Success will also be about enabling the expansion of our business into each of the countries we are going into. If we can enable information to be easily delivered to our colleagues in the operations in those countries, that's definitely a big part of success. And then finally, being able to give the Board back in the UK the big picture in a quick and seamless way.