Jollibe Chicken Sad - A Costly IT Problem

Jollibee #ChickenSad: A
costly IT problem
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
By Calen Martin Legaspi
http://www.rappler.com/business/features/66087-jollibee-chickensad-costly-it-
problem
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 giants 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 Jollibees 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. (Editors 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
Jollibees costly IT disaster and the lessons we could learn from it. Heres a
summary of their insights and mine.
ISSUES
1. System migration
costly IT problem
problem
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 arent out-of-the-box that you can just
install and run. These need to be customized in order to fit a companys
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.

Jollibees 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
costly IT problem
problem
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? Its troublesome. We can assume the outsiders have not
worked under a common methodology and culture. They dont 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 Ive seen costing just 5% of this
costly IT problem
problem
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 systems 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 Jollibees, according to my source. ERP or Enterprise Resource Planning
is the software system for business processes.
RECOMMENDATIONS
1. Start small
costly IT problem
problem
The larger the IT project, the greater the chance of failure. This is because its
difficult to accurately predict upfront the requirements, system design, and
human interactions needed in a project. Stakeholders dont really know what
they want until they actually get to use a system.
Engineers cant 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.
Its 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. Its 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
costly IT problem
problem
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, its invariably a mess.
People cant get work done with the new system and the old system is gone. If
theyre 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
costly IT problem
problem
you dont like a feature, theres a button that allows you to go back to the old
way of doing things. This button is Googles and Facebooks 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 theyve gotten the new feature right and make it a permanent part of
their systems.
You can apply this to business systems. Dont 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:
costly IT problem
problem
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 theyve
succeeded or failed. Some of these tests, known as Acceptance Tests,
can be read by non-technical users so youll 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.
costly IT problem
problem
Rappler.com
Calen Martin Legaspi is the CEO and co-founder of Orange and Bronze
Software Labs, a company that helps other companies improve their IT
processes, and builds custom IT solutions. He is also a member of the
Philippine Software Industry Association board.
No Chicken Joy? Jollibee

corporation temporarily
closes 72 stores
costly IT problem
problem
Blame it on systems upgrade, which caused the limited availability of
bestsellers in food stores owned by the Jollibee Food Corporation
MANILA, Philippines (UPDATED) Fast food giant Jollibee Foods

Corporations (JFC) said on Friday, August 8, that it has temporarily closed
down 72 stores under its umbrella, representing 3.2% of its total store network,
because of the limited availability of chicken, burgers and other bestsellers.
In a disclosure to the stock exchange, Jollibee explained that the companys migration to
a new system that started on August 1, 2014, has slowed down its sales order taking,
product loading, and transport of goods.
As a result, it had to close down some stores in Metro Manila and nearby cities due to
the absence of its best-selling products or because other stores offered very limited
menu.
JFC owns, aside from Jollibee, other food restaurants such as Mang Inasal, Chowking,
Greenwich, Red Ribbon, Burger King, among others.
The company, however, refused to provide a breakdown of the 72 stores that were
closed.
costly IT problem
problem
Jollibee apologized to its millions of customers.
In our estimate, the JFC group has not been able to serve the consumer to the extent
of 6% of its normal nationwide sales in the first 7 days of August 2014, the fast food
giant said.
Jollibee Group said it has sufficient raw materials, finished products, and production
capacity to meet consumer demand for August and for the months ahead, both for local
and imported goods.
The company just has to fix the new IT system it put in place.
The products are in the company's various commissaries, warehouses, and logistics
center. JFC will also enhance its transportation delivery capability in the months ahead,
it added.
Chicken war
Jollibees distraught customers took to social media on August 7, complaining

about their missing favorites.
#ChickenSad, a spoof of Chicken Joy, became a trending hashtag.

costly IT problem
problem
Rival KFC seized the moment and posted this photo on Twitter:
The system that caused the glitch is what the company described as a new enterprise
platform its biggest IT investment amounting to at least P500 million ($11.34 million
*) for 2014 alone.

This involves a central integrating system and a store information system for the entire
Jollibee network in the Philippines, among others.
The purpose of this major investment is to prepare JFC for an accelerated business
growth in the Philippines and abroad as it pursues its goal to become the largest Asian
restaurant company and one of the most successful restaurant companies in the world,
the company said.
On August 6, Jollibee reported that it is putting up stores in Malaysia and Indonesia,

solidifying its footprint in Southeast Asia.
Jollibee Group operates the largest food service network in the Philippines.
Jollibee is already present in Vietnam, Brunei, Singapore, China, Hong Kong,

and the Middle East.
costly IT problem
problem
Missing Jollibee Chicken Joy

more than just a supply
issue, says Publicus
founder
Published August 11, 2014 8:20pm
By ROSE-AN JESSICA DIOQUINO, GMA News
The "missing Chicken Joy" on the menu of fast food giant Jollibee that has roiled it customers could
be more than just a simple supply issue, considering the company stands to lose some P180 million
in revenues a day, a campaign strategist said.
costly IT problem
problem
In a note published Monday on Facebook, political management expert Malou

Tiquia said there are deeper questions about the problem, which the
company's crisis team have yet to respond to and satisfy its public.
In a statement last week, the company said the problem which closed 72
branches in Metro Manila and nearby cities came with a "major systems
upgrade."
Tiquia the founder of Publicus Ltd., a political consultancy firm that provides
campaign services to senatorial and local candidates took note of the need
for continuity in business planning, which "identifies an organization's
exposure to internal and external threats.
This type of planning "synthesizes hard and soft assets to provide effective
prevention and recovery for the organization, while maintaining competitive
advantage and value system integrity," she added.
costly IT problem
problem
"Looks like internal communication protocols have not been drilled to all its
employees and each store," she wrote.
Tiquia said she made the comment because she sees that Jollibee is an
"important" brand, one of the local brands "that was able to go international
due to a business model that recognizes the strength of the OFWs (overseas
Filipino workers) and many Filipinos out of the country.
An endearing brand?
"There are very few Filipino brands that are able to penetrate international
markets," she said in a separate online correspondence with GMA News
Online. "Jollibee is also an endearing brand because every household grew
up with it."
costly IT problem
problem
Jollibee's marketing department declined to comment on this Monday, saying
they have answered the queries in their disclosure to the Philippine Stock
Exchange (PSE) last Friday.
In the statement, made following the buzz over their limited menu, Jollibee
Foods Corporation said the move to the new systems, which began on August
1, was the reason for the product limitation, which included "temporary
slowdown in sales order taking, product loading and dispatch of
transportation."
The systems upgrade "is the largest investment" as far as its information
technology is concerned, the company said, adding that it amounted "to at
least half a billion pesos for 2014 alone."
The new enterprise platform "involves the central integrating system, store
informations systems," and several others.
costly IT problem
problem
"The purpose of this major investment is to prepare JFC for an accelerated
business growth in the Philippines and abroad as it pursues its goal to
become the largest Asian restaurant company and one of the most successful
restaurant companies in the world," the statement read. VS, GMA News
- See more at: http://www.gmanetwork.com/news/story/374332/money/companies/missing-jollibee-
chicken-joy-more-than-just-a-supply-issue-says-publicus-founder#sthash.NB3pt8t8.dpuf
Jollibee & BCRP

Those in the business of managing crisis, the missing chicken joy of Jollibee is not a simple supply chain issue.
With 72 stores closed, a potential loss of P180M revenue a day and increasing, one wonders why Jollibee has
not learned from such an occurrence some years back.
Is the problem an I.T. problem as was revealed (movement from Oracle to SAP) or are there other factors that
led to a supply chain breakdown?
Business continuity planning or business continuity and resiliency planning (BCRP) is crucial to any
business. The problem sometimes is management only acknowledges it when it is in crisis
proportion already. Too late the hero!
BCRP identifies an organization's exposure to internal and external threats and synthesizes hard and
soft assets to provide effective prevention and recovery for the organization, while maintaining
competitive advantage and value system integrity. Looks like internal communication protocols have
not been drilled to all its employees and each store.
costly IT problem
problem
Why it happened, who is responsible and how come there is no engagement with the public at large
who patronize #Chickenjoy are questions waiting for it crisis team/spox to respond to.
costly IT problem
problem
#ChickenSad: Jollibee to
get items back on menu
but 72 stores to close
Published August 8, 2014 5:01pm
By ROSE-AN JESSICA DIOQUINO, GMA News
(UPDATED 9:56 p.m.) No, this is not a "chicken emergency" but it's enough
to temporarily close a number of Jollibee stores in Metro Manila and nearby
areas.
The unavailability of some menu items at Jollibee, particularly its bestseller

Chickenjoy, "is not a supply issue," an official of the company said Friday.
In a statement, Harvey Ong, Jollibee vice president for marketing, said the
limited availability of Chickenjoy and other items "is not a supply issue or a
chicken shortage situation," reiterating that it is due to "a major systems
upgrade" they recently undertook.
costly IT problem
problem
Ong, however, admitted that the limited availability of products "has caused
the temporary closure of 72 stores of various JFC (Jollibee Foods
Corporation) brands" located in Metro Manila and nearby areas.
"Unfortunately, this change in system has initially affected the delivery

schedule of raw materials from our commissary to select stores," he said.
Ong also disclosed that some of the affected stores "have already begun
offering Jollibee favorites," including the Chickenjoy, Jolly Spaghetti, and
Yumburgers, while they work on getting these items back in other affected
branches.
The company disclosed in a separate statement on the Philippine Stock

Exchange (PSE) that it has "sufficient raw materials, finished products and
production capacity to meet the consumer demand for the entire month of
August and for the months ahead."
"The products are in the company's various commissaries, warehouses and

logistics centers," it said, adding that the company is working to "enhance its
transportation delivery capability" in the coming months.
costly IT problem
problem
The move to the new systems, which began on August 1, was the reason for
the product limitation, which included "temporary slowdown in sales order
taking, product loading and dispatch of transportation," it also said.
The systems upgrade "is the largest investment" as far as its information
technology is concerned, the company said, adding that it amounted "to at
least half a billion pesos for 2014 alone."
The new enterprise platform "involves the central integrating system, store
informations systems," and several others.
"The purpose of this major investment is to prepare JFC for an accelerated

business growth in the Philippines and abroad as it pursues its goal to
become the largest Asian restaurant company and one of the most successful
restaurant companies in the world," the statement read.
Meanwhile, some consumers over at Twitter still seem to miss Jollibee's brand
of fried chicken, with sentiments ranging from being funny to seemingly actual
cravings:
costly IT problem
problem
- See more at: http://www.gmanetwork.com/news/story/373994/money/companies/chickensad-
jollibee-to-get-items-back-on-menu-but-72-stores-to-close#sthash.hdB92P4O.dpuf

Jollibe Chicken Sad - A Costly IT Problem

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Jollibee #ChickenSad: A

By Calen Martin Legaspi

By Calen Martin Legaspi

Jollibee outsourced this project to a large multinational IT service provider.

2. Staffing and expertise

The migration project was outsourced to a large multinational IT service

By Calen Martin Legaspi

To assemble a large team of outsiders and have them work on a complicated

3. Schedule and size

This is a half-a-billion-peso project, but it has an operating schedule of just a

By Calen Martin Legaspi

By Calen Martin Legaspi

2. Testing should be core and automated

An IT project must employ Test-Driven Development, where testing is central.

By Calen Martin Legaspi

3. Delivery must be continuous

By Calen Martin Legaspi

My final piece of advice: Be transparent to your client. Allow your client to

By Calen Martin Legaspi

Test reports. Automated tests run multiple times a day using

By Calen Martin Legaspi

No Chicken Joy? Jollibee

By Calen Martin Legaspi

MANILA, Philippines (UPDATED) Fast food giant Jollibee Foods

By Calen Martin Legaspi

Jollibees distraught customers took to social media on August 7, complaining

#ChickenSad, a spoof of Chicken Joy, became a trending hashtag.

By Calen Martin Legaspi

*) for 2014 alone.

On August 6, Jollibee reported that it is putting up stores in Malaysia and Indonesia,

Jollibee is already present in Vietnam, Brunei, Singapore, China, Hong Kong,

By Calen Martin Legaspi

Missing Jollibee Chicken Joy

By ROSE-AN JESSICA DIOQUINO, GMA News

By Calen Martin Legaspi

In a note published Monday on Facebook, political management expert Malou

By Calen Martin Legaspi

By Calen Martin Legaspi

By Calen Martin Legaspi

Jollibee & BCRP

By Calen Martin Legaspi

By Calen Martin Legaspi

By ROSE-AN JESSICA DIOQUINO, GMA News

The unavailability of some menu items at Jollibee, particularly its bestseller

By Calen Martin Legaspi

"Unfortunately, this change in system has initially affected the delivery

The company disclosed in a separate statement on the Philippine Stock

"The products are in the company's various commissaries, warehouses and

By Calen Martin Legaspi

"The purpose of this major investment is to prepare JFC for an accelerated

By Calen Martin Legaspi

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