Case: Dollar General Uses Integrated Software
Dollar General (dollargeneral.com) operates more than 8,000 general stores in 35 states, with sales exceeding $9.5 billion in 2007, fiercely competing with Walmart, Target, and thousands of other stores in the sale of food, apparel, home, cleaning products, health and beauty aids, and more. The chain doubled in size between 1996 and 2002 and has had some problems due to its rapid expansion. For example, moving into new states means different sales taxes, and these need to be closely monitored for changes. Personnel management also became more difficult with the organization's growth. An increased number of purchasing orders exacerbated problems in the accounts payable department, which was using manual matching of purchasing orders, invoices, and what was actually received in the "receiving" department before bills were paid.
The IT department was flooded with requests to generate long reports on topics ranging from asset management to general ledgers. It became clear that a better information system was needed. Dollar General started by evaluating information requirements that would be able to solve the problems that cut into company's profit.
Integration
A major factor in deciding which software to buy was the integration requirement among the existing information systems of the various functional areas, especially the financial applications. This led to the selection of the Financials suite (from Lawson Software). The company started to implement applications one at a time. Before 1998, the company installed the suite's asset management; payroll; and some HR applications, which allow the tens of thousands of employees to monitor and self-update their benefits, 401k contributions, and personal data (resulting in big savings to the HR department). After 1998, the accounts payable and general ledger modules of Lawson Software were activated. The accounting modules allow employees to route, extract, and analyze data in the accounting/finance area with little reliance on IT personnel. During 2001-2003, Dollar General moved into the sales and procurement areas, thus adding the marketing and operation activities to the integrated system.
Here are a few examples of how various parts of the new system work: All sales data from the point-of-sale scanners of some 6,000 stores are pulled each night, together with financial data, discounts, and so on, into the business intelligence application for financial and marketing analysis. Employee payroll data from each store is pulled once a week. This provides synergy with the sales audit system (from STS Software). All sales data is processed nightly by the STS System, broken into hourly journal entries, processed and summarized, and then entered into the Lawson's general ledger module.
The original infrastructure was mainframe based (IBM AS 400). By 2002, the 800 largest suppliers of Dollar General were submitting their bills on the EDI. This allowed instantaneous processing in the accounts payable module. By 2003, service providers, such as utilities, were added to the system. To do all of this, the system was migrated in 2001 from the old legacy system to the Unix operating system, and then to a Web-based infrastructure, mainly in order to add Web-based functionalities and tools.
A development tool embedded in Lawson's Financials allowed users to customize applications without touching the computer programming code. This included applications that are not contained in the Lawson system. For example, an employee-bonus application was not available at Lawson but was added to Financial's payroll module to accommodate Dollar General's bonus system. A customized application that allowed additions and changes in dozens of geographical areas also solved the organization's state sales tax collection and reporting problem. The system is very scalable, so there is no problem in adding stores, vendors, applications, or functionalities.
In 2003, the system was completely converted to Web-based, enabling authorized vendors, for example, to log onto the Internet and view the status of their invoices by themselves. Also, the Internet/EDI enables small vendors to use the system. EDI is too expensive for small vendors, but the EDI/Internet is affordable. Also, the employees can update personal data from any Web-enabled desktop in the store or at home. Future plans call for adding an e-purchasing (procurement) module using a desktop purchasing model.
Sources: Compiled from lawson.com, and dollargeneral.com.
Questions
Explain why the old, non integrated functional system created problems for the company. Be specific.
The new system cost several million dollars. Why, in your opinion, was it necessary to install it?
What other software should Dollar General consider to reduce its costs?
Another product of Lawson is Services Automation. Would you recommend it to Dollar General? Why or why not?