With multinationals like McDonald’s, Pizza Hut and Domino’s gaining ground in the Indian food and beverage (F&B) industry, Indian players have had to overhaul operations to sustain themselves among international players. Shipra Arora finds out how Nirula’s, the long-familiar local fast food joint, plans to use IT to add flavour to its processes

We are conducting the (e-commerce) business on a no-profit-no-loss basis. The idea is to cater to demand from our customers who have enough faith in our brand

According to Devendra Singh, the key IT policy at Nirula’s is using requirement-based technology initiatives rather than deploying technology for technology’s sake

For Nirula’s, a name synonymous with the genesis of the fast food culture in the country, one way to sustain itself among the top players today has been judicious usage of information technology to the extent that IT has become an integral part of the company’s business vision. Today IT helps the company in managing operations spread across 52 outlets in 28 locations and six production units located in Okhla in Delhi and Noida.

The emergence of an IT culture at Nirula’s dates back to 1984, when the advantages of automation were still not so well known, especially so in the F&B industry. According to Devendra Singh, systems executive, Nirula’s Corner House, the driving force behind the early adoption of IT within the company’s business processes has been its managing director, Deepak Nirula. And he continues to lead the constant evolution of automation to drive the company up the value chain. When Nirula returned home after studying in the US, he had already envisioned the role IT would play in his company, and went on to implement that vision across the organisation. This led to the formation of a small IT team, comprising just two people at that time. This team, under the supervision of Nirula and his Canadian friend, built the entire framework, guideline structure and IT policy for Nirula’s. Thus, laying the groundwork for Nirula’s foray into IT.

Early systems - DOS based

Nirula’s business model spans across three areas fast food, restaurants and backward integrated production units

When scouting for software applications best suited for their kind of business, the team couldn’t find any noteworthy applications available in this fledgling user segment. So the company undertook development of the software applications in-house. Some applications were also outsourced to other software development companies. All of these were based on the DOS platform. The company chose to use PC-based systems against mainframe-based systems, in tune with the its futuristic IT vision. “Even during the early 1980s we had an inkling that it would be the PC-based systems that would flourish,” Singh explains.

The front-end (point-of-sales), critical for any F&B industry, was the first segment to be computerised within the organisation, as it is the point of contact for customers. Of these, the billing application that catered to Nirula’s front-end operations (with electronic cash registers being used in some of the outlets), was developed first. The billing software was included for restaurants, pastry shops, waiter service restaurants, bars and home delivery, and included sales analysis and inventory management at the restaurant level as well. It had an interface with a customer display unit, weighing scale, etc. The front office management system on DOS included modules like front office billing for hotels, back office integration hotel related accounting modules linked to the corporate financial management system. This enabled the company to provide better and easier service to its customers.

The IT team then took to the automation of the back-end operations starting with the F&B department. Core to the food-related industry, operations in this department are of top-most priority in terms of automation. The key applications developed to facilitate back-end automation included recipe management (as recipe forms the core of F&B) and costing systems, inventory control, purchase management system and sales analysis. This was followed by the automation of accounts and then the payroll system.

Weaknesses of early systems

Nirula’s e-Commerce initiative fetches around Rs 1.5 lakh per month. The figure is expected to double over the next one year

The team soon realised that the applications served only basic requirements at Nirula’s and were not efficient in terms of functionality. Singh also notes that since the applications were not tightly integrated, islands of information were created within the organisation. “It was like patching together disparate information. However, with growing needs and information requirements it was becoming increasingly difficult to do any more patching,” he adds. The need for a totally integrated system, coupled with the fact that the original idea on which existing software applications were based, had changed, warranted the need for re-designing the entire IT system within Nirula’s.

New systems - Windows

Around the year 1998 having resolved to refurbish operations based on latest technology the company was on the lookout for readymade solutions in the market. This time around, though the market had matured a little in terms of IT awareness, there was still no solution to match Nirula’s requirements. “Nirula’s business model is very unique, spanning across three areas, namely, fast food, restaurants and backward integrated production units (where ingredients like cheese, confectionery and pizza bases are developed in-house). Thus, making it difficult for a single solution to cater to all the distinct requirements,” explains Singh. Once again the company decided to go in for in-house development and outsourcing of development work.

MS SQL was chosen as the back-end server with Visual Basic as the front-end system using Crystal Reports for all reporting purposes. The first module to be developed in-house was the payroll and HR module. Following this, the team started working on the F&B module, which was deployed in April 2001. The F&B control system provides for modules like sales analysis system, consolidated sales reports and MIS reports, inventory management system inventory tracking, management and variance control, recipe management and costing system. The recipe management system, Singh notes, helps in maintaining a balance between sales and inventory. Explicating the system’s functioning, he points out that at any point of time the system has stored the recipe of each of the items. This helps in tracking the use of the raw materials. For instance, the sales at the end of the day are checked as to whether they tally with the volume and value of raw materials used on the basis of the recipe. This prevents the misuse of raw materials.

The Enterprise business intelligence system (BIS), like a data mining system, works on a central warehouse. This software, which was deployed in March 2002, carries out various kinds of sales analysis. For instance, if there is a change in the rates of one of the raw materials like milk, the system scientifically calculates its effect on the change in the finished item’s pricing, like ice cream. Once stabilised, the company plans to evolve analysis of its production system using this software.

Nirula’s recently implemented production planning and management applications includes modules like planning, management, inventory management system, quality management, recipe management system, route/van management, sales management and machinery management. The aim is to achieve proper planning, management and control of the production systems. Every restaurant maintains a daily sales forecast based on the historical sales data of that day during the same period last year. Based on this, the software arrives at the prospective sale for each day. At the end of the day, the system calculates the closing balance and goods-in-hand, and taking into account the prospective sales for the next day generates an order information. This is uploaded and transferred to the company’s FTP site. Similar information from all the outlets is generated and gathers at the server in the factory. Here the system consolidates all the information and production is scheduled accordingly. A consolidated production chart is then made, which allots assignments to each of the production floors. The software also has various recipes along with the ingredients and their volumes required for the corresponding production volumes. Then the system sends the requisition notes to the raw material store and its copy to the production floors. According to Singh, the entire process is tracked in batches. This enables the company to track down the supervisor, ingredients, supplier, etc. of a particular batch in case there is any deficiency. The system further has add-on modules like quality control, maintenance and management of machinery.

Other applications that have been deployed include financial management. The financial management application comprises accounting and financial management system, back office integration hotel-related accounting modules linked to the corporate financial management system. The payroll and HR management application provides for a payroll system, human resource management system, leave management system, loan and staff advance management system, staff medical reimbursements register and PF trust management.

Bottlenecks Changing the systems
The migration from DOS to MS SQL was no cakewalk for the IT department, which had a tough time building new systems right from scratch. Transposing data from the old system to the new format posed a huge bottleneck. The team was faced with a challenging task of pulling the data from the legacy system and transferring it into the new format, as there were many new fields in the latter, which the legacy system did not have. Furthermore, the earlier system was DBMS (Data) as opposed to the new RDBMS one. Though SQL provides for data transforming service, the team still had to unite programs for manipulating the data on the DOS system as well.

In order to tackle this situation, the team evolved a strategy which worked backwards. Starting with the implementation of the new system from April 1, 2001 onwards, the team first migrated the previous year’s data onto the new system. “The previous year’s data is very critical for the company in doing sales analysis. So, in order to avoid any hampering of work, we first decided to migrate data of the year 2000,” explains Singh. This way the team worked backward to cover all the legacy data.

Hardware & OS
At present Nirula’s has established a robust hardware infrastructure that comprises seven servers (Another three are in the pipeline). The company has two e-mail servers with another mail server to be added soon. While the mail server in Okhla is running on Windows XP Pro operating system with VPOP 3 (Virtual Pop 3) software, the one located at the head office in Connaught Circus is based on Windows 2000 and POP3. The rest of the servers use Windows 2000 while one works on Windows NT. Nirula’s is adding another server for its production department and one replication server. While the company had been buying Compaq servers so far, it is now planning to go in for HP for its new requirements. According to Singh, the company has a policy of having no centralised server for security and efficiency reasons. “Our idea is to give each department its separate server though small so that even if one goes down, the entire set up does not come to a halt,” says Singh. Further, all the servers are interlinked, making for a secure hardware contingency plan. As far as the delivery of technology and vendor preference is concerned, Singh says that Nirula’s evaluates it on time tested factors like reliability, market feedback, after-sales support and pricing thereby, precluding any risk.

E-Commerce (B2C)
Though not a huge one, Nirula’s B2C e-commerce set-up has been one of the pioneering initiatives in this field in the country. In fact, the Limca Book of Records has termed it as the first B2C initiative in India, a fact which the company itself wasn’t aware of until Singh happened to accidentally come across it in the record book. Currently, Nirula’s is doing around Rs 1.5 lakh worth of business in this segment per month, which is expected to double over the next one year. Starting from selling only a few products online, Nirula’s today sells about 325 of its products online. According to Singh, this initiative was largely started because of demand from customers and is expected to gain further prominence. “We are basically conducting the business on a no-profit-no-loss basis. The idea is to cater to the demand from our customers who have enough faith in our brand,” adds Singh. Nirula’s receives a lot of orders from NRIs who want to send stuff to their relatives in India. And topping the list of hot selling items are ice creams, chocolate cakes and hot chocolate fudge. The company even delivers on the date and time specified provided the order has been placed at least 36 hours in advance. The company leverages on its comprehensive logistics infrastructure for home delivery.

The key B2C engine, (accessible on www.nirulas.com), being used by the company, provides features like membership, managing address book to its customers, etc. The customer can also track the status of his order and delivery on a real-time basis.

Connectivity
Nirula’s connectivity infrastructure involves a hybrid model using varied technologies as per the requirements of different locations. The 128 Kbps Spectranet cable modem connectivity provides for 99 percent up time. For the Okhla- and Noida-based production units, the company has taken a 128 Kbps link from Dishnet. For its various outlets, the IT team has secured dial-up connectivity from various regional ISPs. According to Singh, the requirements of the various restaurants and fast food outlets did not justify having 24-hour online connectivity. “For these outlets the connectivity with the head office and production units are required only during certain period of time,” he explains. For instance, the outlets need connectivity to upload the sales data or to download rate changes, information on new items, billing data and inventory update. Considering the requirements, the company’s management feels that an online system would not be of much use as the uploading of sales data and the checking of the inventory control, happens only at the end of the work day. “It doesn’t make sense to have an online inventory system because whatever time the data reaches the production units it will be consolidated and analysed only at the end of the day,” explains Singh.

The flip side of having online billing data on a server became evident during a crash, when the entire operation came to a standstill. And considering the influx of customers at the outlets, it was difficult for the company to manage the billing process manually. So, a disjointed system was the best bet.

Benefits
With the production planning and control systems in place, Nirula’s now enjoys better control over its production processes and derives more efficiency from its planning process. Overall, the system has delivered indirect benefits like control over receivables and better inventory control. “This is very critical in our kind of operations, especially since our inventory consists of perishable food items that can go bad,” explains Singh. From the sales point of view, the system has enabled the company to plan out sales promotions in a more effective way and execute them faster, as well as derive significant information relating to fast-selling and slow-moving items. The sales analysis system now makes it possible to predict sales during certain seasons. “It is difficult to point out the tangible benefits derived out of automation. However, these intangible gains, ultimately convert into tangible ROI over a period of time,” says Singh.

According to Singh, the key IT policy at Nirula’s is going in for need-based technology initiatives rather than deploying technology for technology’s sake. All IT decisions are made top-down and come from the top management, after taking all the requirements into consideration. And it is this realistic attitude towards IT that has enabled the company to sustain itself, especially during times when many a bubble has burst due to unrealistically hyped expectations.