Being one of the Middle East’s largest dairy farmers poses its challenges for the National Agricultural Development Company ( NADEC.) Looking after the welfare of its 75,000 herd in temperatures that can soar to 50 degrees celsius in its Saudi Arabian farms is one of them.
But it is not the largest challenge facing the company. NADEC, created by royal decree in the 1980s to improve Saudi Arabia’s food security, is also facing full exposure to market forces as a range of government subsidies taper away in the coming years. Soon it must stand entirely on its own feet.
The drive to grow profitably and run more efficiently is stronger than it has ever been before. Cost control and greater process improvements are a priority.
The end of subsidies is happening at a time of intense market pressures. The low-margin dairy sector is an increasingly competitive marketplace in the GCC region and NADEC must fight for market share as financially pinched consumers in the region are ever more cost-conscious.
“Today the market is under pressure because of the economic situation and there is high competition from local and regional players,” says Karim Manssour Dahbi, Chief Executive Officer, NADEC Foods
The drive to grow profitably and run more efficiently is therefore stronger than it has ever been before. Cost control and greater process improvements are a priority. NADEC runs 37 state-of-the-art production facilities and is looking to drive as many efficiencies here as it can from automation, says its CFO Adel AlAbdulsalam. “We have raised the bar in terms of extracting efficiencies across the organisation to offset the pressure that will come from the removal of subsidy.”
Running in tandem with this shift to automated processes on the farm, the firm is moving its enterprise systems into the cloud, says Manssour Dahbi. “We believe a move to the cloud is one of the key enablers to better productivity. As an organisation, our aim is to reduce routine work, and for us, the cloud was the most adaptable solution. We are already seeing results with the automation of much of our supply chain.”
The move to the cloud is paying off in other areas,too. “It is bringing us many advantages,” says Manssour Dahbi. “One is to be always up to date in terms of adapting to best-in-class processes, another is reducing the cost of IT equipment. By moving to the cloud we are also making it possible for the different departments to have all the [Enterprise Resource Planning - ERP] modules available, some of which were not available before.”
“We believe a move to the cloud is one of the key enablers to better productivity.’’
Cloud-based ERP will also help NADEC pursue growth opportunities. Its knowledge in running dairies under extreme conditions provides a great opportunity to expand beyond Saudi Arabia. “We have gained a sophisticated know-how in terms of managing these cattle and especially managing them in harsh environments such as the one in KSA,” says AlAbdulsalam.
“This has given us a competitive advantage. We can go outside KSA and manage and construct farms. We are also looking at expanding aggressively regionally and we are finding opportunities everywhere.” Including, he says, a growing taste for dairy products in a region where the per capita consumption of dairy is much lower than the world average.
"Having one integrated system allows the company to have access to data from different angles and in real time."
Better budgeting tools and a daily activity dashboard improve senior decision makers’ ability to gain real-time insights and so make timely decisions to boost operational and sales performance. NADEC has also implemented cloud solutions for budgeting, forecasting, general ledger and accounting, he adds.
“Having these tools will be one of the enablers to help us grow the business and make sure we have the highest productivity,” says Manssour Dahbi. “Having one integrated system allows the company to have access to data from different angles and in real time. It is a major improvement for NADEC for the future. It makes our decision making easier and we can adapt faster to the requirements of the market”
“It is bringing everything together, from the dairy farm to the factory, to logistics, supply chain, procurement and sales. Having it all together in one screen is a fantastic tool that helps in decision making up to highest level of the company.”
Under NADEC’s legacy ERP system, AlAbdulsalam says he and his team had to wait until the end of the month for data that they get instantly. “Because we operate with very short product shelf-life of three or four days, our ability to know the information on a daily basis, in real time, will enable us to capture opportunities or avoid cost.”
Such tools are also evolving the CFO’s role into one that increasingly contributes to shaping and delivering strategic plans. “The challenge for CFOs today is basically forecasting the future, anticipating the future. Projection is now the key element for the CFO more than reporting.”
As it continues to diversify its product offerings and seeks an increasingly global presence, NADEC now has the right tools in place to manage this greater complexity, says AlAbdulsalam. “I’m re-implementing the ERP from scratch. It will help us to communicate better and to communicate more efficiently. The digital transformation will be a key enabler for that journey.