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Innovation showcase

Milk pioneer finds ‘highest new common denominator’ with Oracle Cloud Applications

a2 Milk pulls together previously siloed data and standardizes back-end processes, letting it operate as one global company.


By Rob Preston | July 2021

Founded two decades ago on the premise that all milk isn’t created equal, Sydney-based a2 Milk Company is expanding worldwide, supported by a new foundation of cloud applications that ties together its global operations.

The main value proposition for a2 Milk is that its liquid milk and related products, such as infant formula, don’t contain one of the two types of beta casein protein found in most cows’ milk. The company’s milk comes from cows that produce only the A2 protein type, which studies have shown digests more easily than milk that contains the A1 type.

To be clear, a2’s milk is entirely natural. About 30% of cows produce milk with only the A2 protein, 30% with only the A1 type, and the rest containing both proteins. Dr. Corran McLachlan, company cofounder and a New Zealand dairy researcher, developed a genetic test in the 1990s to identify cows that produce only the A2 variety of milk, and the company now works with dairy farmers to isolate their herds accordingly. Today, a2 Milk positions itself as a “dairy nutrition company.”

But even as a2 Milk started to grow rapidly across geographies, disparities in data reporting and processes from country to country made it all-but-impossible to operate as one global company rather than an agglomeration of national ones, says CFO Race Strauss. The company, with annual revenue of about US$850 million, now has operations in Australia, New Zealand, China (its largest market), the US, and most recently Canada.

 

“We've now got all data coming together in a single source, which means we can get information globally quickly—any information. We never had that before.”

Race Strauss, CFO, a2 Milk

Company leaders were hamstrung in their ability to make quick and well-informed decisions because different country units relied on a patchwork of different software to manage their discrete financial, inventory, and other back-end processes, Strauss says. That software included Excel spreadsheets, QuickBooks accounting tools, and outdated ERP applications. The data in those applications wasn’t easy to share and was often inconsistent across countries.

So if a2 Milk executives needed to know the answer to even the most basic questions—how much the company had sold to a particular customer, how much inventory it had on hand, or even how the company’s global revenue numbers were tracking—that required a series of time-consuming phone calls and forays into various disconnected systems.

“It was very difficult to do that because we were playing with multiple versions of the same data, which in some cases matched and in some cases didn’t match,” says CIO James Madigan. “It made it really hard to get any insightful analysis and information across the group.”

The subsequent data reconciliations were also labor-intensive, “held together with a lot of human glue,” Madigan says. The company decided it needed to move to one modern, integrated set of back-office systems.

Easier night’s sleep

In April 2021, a2 Milk standardized worldwide on several Oracle Cloud applications: Oracle Cloud ERP’s accounts payable, accounts receivable, general ledger, cash/collections management, and financial analytics modules; Oracle Cloud EPM’s financial consolidation and close module; and Oracle Cloud SCM’s procurement, inventory management, order management, and manufacturing modules. Later this year, the company plans to go live on Oracle Cloud EPM’s planning and budgeting module and Oracle Cloud ERP’s expenses module.

“We’ve now got all data coming together in a single source, which means we can get information globally quickly—any information,” CFO Strauss says. “We never had that before. There are also benefits of controls. Because we’ve moved to global processes, I now know the processes in place in China are now the same as in the US and in Australia, which gives me a much easier sleep at night.”

He continued: “We have lifted everyone up to a standard that is well in excess of where anybody was with their individual processes and their individual systems. It’s the complete opposite of the lowest common denominator: We’re actually lifting everyone up to the highest new common denominator.”

Process improvements

One potential benefit of the implementation is that it will let a2 Milk close its books faster, now that it’s getting consistent, accurate financial information from the get-go. Cutting the time it takes to complete the quarterly close from the current nine business days to at least four days is a reasonable near-term goal, Strauss says.

a2's milk comes from cows that naturally produce milk with only the A2 type of protein, which is easier to digest than milk that contains the A1 type.

a2’s milk comes from cows that naturally produce milk with only the A2 type of protein, which is easier to digest than milk that contains the A1 type.

One basic process upgrade was in approvals of accounts payable invoices. Previously, when an invoice came in it would get scanned, stored in an unstructured data repository, and then get emailed to the approver, who would look over the invoice and manually send an approval to the AP team, which would then code and input the approved invoice. Now, under the out-of-the-box Oracle Cloud ERP process, the approver gets an email alert and can sign off on the invoice from email on any mobile or desktop device.

All of the processes built into Oracle Cloud applications are world class, developed by Oracle over the years with input from its many thousands of customers. As a result, a2 Milk’s management took a hard line on software customizations, allowing for only a handful of rudimentary ones. “In fact, we made it almost a nightmare for someone to do a customization,” Strauss says. “They’d have to get through James, and if they got through James, they’d have to get through me.”

What a2 Milk’s leaders weren’t trying to do with the Oracle Cloud implementation was to eliminate jobs, Strauss emphasizes. Rather, one of their goals was to free the company’s finance and other people to focus more on forecasting, modeling, and other higher-level analysis, and less on mind-numbing transactional tasks. It’s why the finance team is looking forward to the go-live of Oracle Cloud EPM Planning, as well as tapping the various Oracle Cloud applications’ data analytics capabilities, CIO Madigan says.

“What Oracle is helping us fix is to give us reliable information, accurate information, timely information, and visibility, all of which we did not have before,” Strauss says. “The way we were working was unsustainable, because it was all held together by Band-Aids and string and human capital.”

Cloud all-in

With the exception of a handful of Active Directory servers, a2 Milk’s application architecture is now 100% cloud, “which is something most organizations can’t claim to be,” Madigan says. “A big part of the reason we chose Oracle was we get a very much enterprise-ready, enterprise-grade cloud-based solution.”

Madigan called out Oracle Cloud’s top-notch security, while Strauss noted Oracle’s attentive customer service during the initial implementation, carried out with partner Evosys. “Having access to the senior people in Oracle was important,” Strauss says. “If something went wrong and I needed to pick up the phone, I could pick up the phone.”

Now, a2 Milk is operating like a global business. “We’re now all on one system, one set of processes worldwide,” he says, “which means everyone is talking the same language.”

Photography courtesy of a2 Milk Company

Rob Preston

Rob Preston

Rob Preston is a senior director and story writer at Oracle. He was previously editor in chief of InformationWeek. You can follow him on Twitter @robpreston.