A PROPOSAL ON THE USE OF MODERN INFORMATION SYSTEM AND TECHNOLOGY FOR AALSMEER FLOWER AUCTION.

IT CONSULTANT Student ID NO: 0971089/1

TO: The Board of Directors

Aalsmeer Flower Auction

_____________________________ Date: 08/05/11

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Chapter 1 Client Breif

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1.0 Client Brief

1.1

Aalsmeer History

Aalsmeer Flower Auction (AFA) is an organization that offers global growers, wholesalers and exporters a central marketplace to trade flowers and plants. The marketplace is located near Schiphol Airport in Netherlands. Aalsmeer, owned by a cooperative of about 5,000 growers, is the worlds biggest flower auction, handling 1,000 transactions an hour. On average, 15 million flowers and potted plants are traded daily in 50,000 transactions, generating an annual turnover of 2.4 billion euro. Most of the flowers that are auctioned come from the Netherland but some also come from Israel, Kenya, Zimbabwe, Zambia and other countries. AFA vision and mission is to maintain and increase its strong market position by offering the best and broadest assortment through offering members a marketplace equipped with up to- date technologies. Aalsmeer is divided into many departments, the 2 main ones focusing on the Auctioning activities and the IT activities.

Board of Directors

Representative Director Man aging Director

Commercial Director

Operational Director

Auctioning Logistic Mediation Marketing and Sales

Finance

HRM

IT

Figure 1.1: Aalsmeer Flower Auction Organizational Chart. Aalsmeer Board of Directors has hired an IT Consultant and set up a team to develop a new information system as part of their survival strategy. Page | 3

1.0 Client Brief

1.2

Aalsmeer Current Situations

The Netherlands is the worlds leading producer and distributor of cut flowers. The Netherlands auctions provide both growers and buyers with an efficient system to trade a variety of products. The auctions are also very efficient in determining price, enabling approximately a thousand transactions per hour, also eliminating haggles and related problems, mediating and settling all buyer-grower disputes. However there are new developments that threaten the market.

The emergence of alternative, electronically driven flower markets. The auction meets the needs of growers, but not those of retailers. That is to satisfy changing consumer taste by providing fresher products, more variety, smaller quantities and multiple deliveries each week.

Retailers and growers that employ new marketing strategies seek interest in formal ways of doing business and in new electronic ways of selling.

Therefore Aalsmeer Flower Auction must invest in a suitable information strategy to achieve their business objectives and ensure competitive advantage in the industry.

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Chapter 2 Literature Review

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2.0 Literature Review

Before Aalsmeer Flower Auction can hire an IT consultant to recommend a modern information system and technology they firstly need to understand what an I.S. is and its importance.

Business Information Systems: Analysis, Design & Practice Written By: Curtis, Graham; Cobham, David Published By: Pearson Education UK Published In: 2005 A management information system is any system that provides information for the management activities carried out within an organisation. The system allows data to be stored and processed thereafter presented in a form suited for managerial decision making and for the planning and monitoring of organizations activities. With information systems the marginal cost to generate information for different purposes in now low. The information is also generated at a faster rate and can be requested at any time since the system acquires interactive qualities.

Strategic planning is a requirement to achieve the organizations objectives therefore they must develop business information system strategies. These strategies is focus on determining what information system must be provided in order that the objectives of the business strategies can be realized.

AFA has experience with utilizing information systems however systems gets outdated as changes in the market occurs. Competition in the Dutch Flower Market Written by: Ajit Kambil, Eric van Heck AFA used computers in the auction hall. Quality inspectors graded flowers as they arrived in the auction hall, and entered information on the flower type, quality, inventory, and grower into the computer. The same information was cross-indexed with bar-code numbers and affixed to each flower lot and flower cart to enable tracking through the auction hall. The computer system consolidated purchases for payment purposes, and generated summary reports and transaction reports for buyers and sellers. It was also used to schedule and coordinate the many functions of this complex auction, making it run efficiently.

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With the growth of volume, buyer power, foreign competition, and need for space, the auction house and growers utilized technology where auctions could communicate product, order, and transaction information to each other.

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Chapter 3 Business Analysis

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3.0 Business Analysis

3.1 Aalsmeer Flower Auction Business Analysis Business analysis provides Aalsmeer Flower Auction with the foundation for a business change. The IT consultant must therefore investigate the business, to find its problem and recommend ways to improve them. Business analysis is the investigation into the operations of a business to expose results on the business. AFAs internal and external environment is analysed to identify its impact on the organization. Thus Aalsmeer Flower Auctions strengths; weaknesses; opportunities; threats; competitors; substitutes; buyer power, supplier power; and new entrants are audited. Furthermore, the effects of political, economical, social cultural, and legal issues are examined. the causes behind the results achieved, and the effects of those

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3.0 Business Analysis 3.2 Aalsmeer Flower Auction internal and external environment S.W.O.T

STRENGTHS -Very efficient transfer of product from seller to buyers -Buyers can directly inspect the product in the auction hall if they wish -The auctions, by centralizing and requiring the product to be delivered prior to sale, minimizes opportunism -Top flower shop in the world

WEAKNESSES - The buyers have to come to the auction halls and sellers have to deliver products to the auction hall - Packaging cost are incurred multiple times for transport to and from the auction - Auction rules tend to favor the growers

SWOT
THREATS - The rules of the auction tend to favour the growers - Trade outside the auction house has increased - Foreign competitors have labour cost, fewer environmental regulations and lower trade tariffs. - Mergers and acquisitions among retailers

OPPORTUNITIES - Strengthen relationship with retailers - A simple computerised system for bidding - A new information system can help Aalsmeer Flower Auction transfer products quicker

Figure 3.1: S.W.O.T. Analysis

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3.0 Business Analysis 3.3 Aalsmeer Flower Auction external macro environment P.E.S.T. Analysis Aalsmeer Flower Auction Political o Environmental Regulations laws that ban individuals from hunting and gathering certain plans; laws that influence the sale o Trade Regulations laws affecting the sale of certain plants and flowers Economics o o The tax placed on fuel have a large impact on the

transportation of flowers and plants There are economies of scale in the purchase and distribution concentration of flowers, leading to greater buyer

Social o o Netherland is the world number one country of exporting flowers and plant The auction market will help the farmers and reduce the role of intermediaries Technological o The current development of the internet and technologies will impact Aalsmeers entire auction system

Table 3.1 P.E.S.T Analysis

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3.0 Business Analysis

3.4 Aalsmeer Flower Auction and the Entire Industry Analysis

Supplier Power

Threat of New Entrants

Degree of Rivalry

Threat of Substitutes

Buyer Power

Figure 3.2: Porters Five Forces model Supplier Power

Within the flower auction, the growers are the suppliers. Their power is high resulting from the current system used by Aalsmeer Flower auction. Therefore forcing retailers to merge with or acquire other organizations to increase their size and power. In order to maintain their level of power, suppliers are requesting new electronic way of selling. Thus forcing AFA to invest in new technologies and an information system.

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Threats of Substitutes

The uses of technology within the industry are minimal. The marketing tools used within the industry can be improved with technology. Therefore the threat of substitute is how to market the product. There has been a rise of internet usage which seems more effective than traditional means.

Buyer Power

As retailers continue to merge and participate in mergers their size and power of buyers has increased. However the flower auction system still favors the growers. Buyers therefore maintain a low power within the industry.

Threat of new entrants

A large amount of capital is needed to establish a market for flower auctioning thus the number of new competitors is relatively small. However small auctions that specialize in niche markets is likely to be a threat. Overall the threat of new entrants to the industry is low.

Degree of Rivalry

Within most industries there are competitors. Aalsmeer Flower Auction has many rivals within the industry and they are likely to be driven out of the market if they do not respond to changes in the market. Such changes are the use of technology and information systems in the marketing and auctioning of flowers which is a high threat to AFA.

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Chapter 4 The Value Chain

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4.0 Value Chain

With the introduction of an information system Aalsmeer value chain must be redefined by removing the non value added chain activities and add value added activities in the organization. The redefined value chain highlights the activities in the business where competitive strategies can best be applied and where the information systems will have a strategic impact (Michael Porter 1985). It identifies specific leverage points where the firm can use information technology most effectively to achieve competitive advantage.

Administration and Management: Electronic scheduling and messaging systems Human Resources: Workforce planning systems Technology: Computer aided design systems Procurement: Computerized ordering systems Inbound Logistics: Automated warehousing systems Operations: Sales and Marketing: Computerized ordering systems Service: Outbound Logistics: Automated shipment scheduling systems

Support Activities

Margin = Value Added - Cost

Computer controlled machining systems

Equipment maintenance systems

Primary Activities

Figure 4.1: Aalsmeer Flower Auction Value Chain Model

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Chapter 5 Systems Developments and Requirements

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5.0 Systems Development and Requirements

Businesses are becoming more and more dependent on their information systems to deal with the complexity and changeability of the markets in which they operate and consequently their internal organization structures. Up-to-date, complete and accurate information has become a necessity to survive in an increasingly competitive world. Therefore for Aalsmeer Flower Auction to develop an information system for business survival they need to understand their ability and capability to have a new information system. AFA needs to identify the requirements to set up an electronic auction market.

5.1 Feasibility Study

Before an information system can be developed Aalsmeer Flower Auction must investigation the potential benefits associated with undertaking the project. The main purpose of a feasibility study is to consider all factors associated with the project, and determine if the investment of time and other resources will yield a desirable result. The cost of having an electronic auction market must be outlined. This aids AFA to prepare a budget and also help during system evaluation to control. It also helps to identify if the benefits of the system outweigh the cost. Even though AFA wants immediate change to maintain its position, a feasibility study must be done.

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5.0 Systems Development and Requirements

5.2 Hardware and Software Requirements

The establishment of an information system requires the use of hardware and software. That is the physical medium and programs required to build the system. Aalsmeer Flower Auction requires computer equipment governed by a computer program to construct their information system.

The hardware is used to perform tasks such as: Input of data Processing of data Out of information

The software is used to perform tasks such as: To process payroll To send bills to customers To provide managers with information to increase profits, reduce cost and provide better customer service.

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5.0 Systems Development and Requirements

5.3 Elements to consider when developing a system

Due to subsequent changes in the industry, the board of directors at Aalsmeer Flower Auction had to change their survival strategy. AFA invest in modern information systems and technology to ensure their continued success. In order for the system to be developed the following elements must be analysed: End users (buyers, suppliers and employees) When developing the system AFA needs to consider whether the end users have suitable skill and experience to use the system to be developed. Security AFA must ensure that the system being developed is secure and trustworthy. Buyers and suppliers must rest assure that their credit cards are safe and cannot be hack while utilizing online trading. Bidding The system must de designed in such a way that bidders information is secured and bid prices can be accessed by registered members only. System maintenance AFA must consider the cost of maintenance and the availability of systems engineers before the system is developed.

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Chapter 6 System Development Methodology

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6.0 System Development Methodology Aalsmeer Flower Auction must identify which system development methodology will benefit their organization depending on the requirements of the information system. System development methodologies are a means of improving the management and control of the software development process, structuring and simplifying the process, and standardizing the development process and product by specifying activities to be done and techniques to be used. The use of a system development methodology will improve system development productivity and quality.

The RAD Methodology

Rapid (RAD) Martin Development developed (1980) is by a Design James software that is

The Waterfall Methodology

The waterfall model outlines the series of steps that should occur when building BIS. These steps usually occur in a predefine order with a review at the end of each stage before the next stage has of started therefore stage phases do not overlap in a waterfall model.

The Spiral Methodology

The spiral model is an iterative systems development model in which the stages of analysis, design, code and review repeat as new features for the system are identified. (Bocij et al 2006).

development

process

used to create workable systems in a very short period of time. RAD takes advantage

automated tools and techniques to restructure the process of building information system

Advantages
Increased speed of development through methods including rapid prototyping, virtualization of system related routines, the use of Computer Aided Software Engineering (CASE) tools and other techniques. Decreased end-user utility Larger emphasis on simplicity and usability

Advantages
Possesses simplicity and usability Easy to manage due to the rigidity of the model each phase has specific deliverables and a review process Works well for smaller projects where requirements are very well understood Phases are processed and completed one at a time

Advantages
High amount of risk analysis Good for large mission critical projects Software is produced

early in the software life cycle.

Disadvantages Reduces Salability and

Disadvantages
Adjusting scope during the life cycle can kill a

Disadvantages
Costly model to use Risk analysis requires

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reduced features when a RAD developed application starts as a prototype and evolves into a finished application Reduced features occur due to time boxing when features are pushed to later versions in order to finish a release, in a short period of time design, code storage, compilers, translation tools and test software

project No working software is produced until late during the life cycle Model cannot be applied to long and ongoing projects Model cannot be applied where requirements are at a moderate to high risk of changing

highly specific expertise Success s dependent on the risk analysis phase Model does not work well for smaller projects.

Table 6.1 System Development Methodologies pros and cons

Based on the pros and cons of the three methodologies, the most appropriate one will be deduced and the most relevant to the case will be chosen for Aalsmeer Flower Auction.

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Chapter 7 Recommended IS

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7.0 Recommended IS

The RAD Methodology

Planning

Analysis

Design
Compress

Build

Test

Deploy

Design

Document Requirements

Develop

Planning

Deploy

JAD

Test

User Review

Iterative Development

RAD
Figure 7.1: James Martin RAD Model RAD takes advantage of automated tools and techniques to restructure the process of building information systems. The system will help AFA by extrapolating the entire IS

organization, resulting in a profound transformation of information systems development. RAD replaces hand-design and coding processes, which are dependent upon the skills of isolated individuals, with automated design and coding, which is an inherently more stable process. In addition to being more stable, RAD is a more capable process, as it is much faster and less error prone than hand coding. RAD enables Aalsmeer Flower Auction to build a software application faster, better, and cheaper.

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Chapter 8 Prototyping and E-commerce

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8.0 Prototyping and E-commerce

8.1 Prototyping A prototype is a preface version of an information system which can be review by end users. Prototyping is an iterative process where users suggest modifications before further prototypes and the final information systems are built allowing employees at Aalsmeer to be involved in the development process which will give users an idea of what the final system looks like. IT will also encourage active participation among users and producer and will enable a higher output for users. Thus Aalsmeer Flower Auction can reduce development cost and increase system development speed.

Bespoke should be an element in the devise of AFA IS. Bespoke is an individually- or custommade product or service. The application would be bought off the shelf and then modified to suit Aalsmeers specific needs. This is recommended due to the limited time that the organization has.

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8.0 Prototyping and E-commerce

8.2 E-commerce E-commerce is the buying and selling of products and services by businesses and consumers through an electronic medium such as computerized information systems, without using any paper documents. Security to computerized information systems and safety to its users in any organization is of vital importance. At Aalsmeer, information systems play a critical role in their business, that they must take special steps to protect their systems and ensure that they are accurate, reliable and secure. Disruptions in this service could result in millions of dollars in losses for the company. Therefore some level of system control, security and auditing must be in place in order to accomplish information systems success for the company and its users.

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Chapter 9 The De Lone and Mc Clean Model

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9.0 The De Lone and Mc Clean Model

For the Information System to be successful, Aalsmeer should employ the De Lone and Mc Clean Model. The model identifies system quality, information quality, use, user satisfaction, individual and organizational impact. The model proposes that system and information jointly affect the use and user satisfaction thereby affecting organizational impact and success.

System Quality

Use

Individual Impact

Organizational Impact

Information Quality

User Satisfaction

Figure 9.1 De Lone and Mc Clean 1992 Model of IS success

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Chapter 10 Conclusion And Bibliography

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10.0 Conclusion and Bibliography

10.1 Conclusion

In order to ensure continued success for Aalsmeer Flower auction, special methods, policies and procedures must be incorporated into the integral design and implementation of an information system. AFA therefore needs to apply computerized applications consisting of a combination of hardware, software, and manual procedures.

Information technologies significantly lower coordination costs and enhance communications abilities. These changes allow transacting parties to separate in space and time the

informational and physical components of the trading process. At Aalsmeer, time is of the essence. This is why using IT and IS is a great idea for grounding Aalsmeers business in any environment.

Word count: 3000

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10.0 Conclusion and Bibliography

10.2 Bibliography

Kambil, A. and Van Heck, E. (1996) Competition in the Dutch Flower Markets, New York University Kambil, A. and Van Heck, E. (1995) Re-engineering the Dutch Flower Auction: A framework for analyzing exchange organizations, New York University Laudon K. and Laudon J. (2009) Essentials of Management Information System, 8th ed., Prentice Hall: Pearson Education Limited

Van Dantzig T. and Boonstra A., (2005) International Journal of case on Electronic Commerce Bringing e-business to the worlds largest flower auction: The case of Aalsmeer, Vol. 1 No 1 Jan - Mar.

Van Heck, E. and Groen T. (1994) "Towards an Electronic Flower Auction?", Wageningen University Van Heck, E. and Ribbers, P. (1997) Experiences with Electronic Auctions in the Dutch Flower Industry, Vol. 7 No. 4

Wright, P., Kacmar, M., McMahan, G., and Jansen, K. (1997) "Impact of Information Technology on Employee Attitudes: A Longitudinal Field Study", CAHRS Working Paper Series, Paper 152, New York: Cornell University

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