Amway India is using state-of-the-art technologies to ensure that all business information is available in real-time and all Amway offices and distributors are connected anytime, all the time

Efficient information system is the heart of Amway operations. The objective of all our IT initiatives is to ensure that we have a strong heart to support other organs by providing real time information any time, any place

Amway’s long-term IT vision and the deployment of relevant information technology systems to make communication real-time, has enabled it to implement an effective business model

According to Rajeev Arya, the need for a robust IT system was imminent considering the nature of Amway’s work processes

For Amway India the Rs 553 crore subsidiary of US-based $5 billion Amway Corporation, Information Technology has played an integral part in making it one of the biggest success stories in the direct marketing space in the country. With 45 offices and 3.10 lakh active distributors (apart from other distributors), and third-party contract manufacturers spread across the country, contemplating operations without an effective automated system was an unthinkable task for the company’s management.

The company’s state-of-the-art IT infrastructure has prompted Rajeev Arya, director, information technology & business systems, Amway India Enterprises, to call it a “mini technology company.” What makes the company worthy of this title is not just its strategic IT vision, but also its intrinsic technology strength. The fact that Amway has a 25-member IT team, and that almost 60-70 percent of its total capital investment is directed towards funding IT initiatives, is proof that IT is serious business at Amway.

IT Vision
Amway’s direct selling business model, warranted the need for in-house expertise. In this, the company was fortunate enough to leverage the technology expertise of its parent company. This gave the company a strong foundation to build upon. Ever since it set up operations in 1988, Amway has stressed on the importance of IT. The early hardware systems and IT processes including the indigenously developed ERP system were part of the package acquired from the parent company. With the initial systems in place Amway went on to fortify it, with one vision in mind “Networked for the 21st century.”

According to Arya, the need for a robust IT system was imminent considering the nature of Amway’s work processes. Under the direct-selling model, the company has a chain of distributors, vertically as well as horizontally, selling its products. Since one distributor cannot sell all the products, he sponsors another who is below him on the chain. In Amway’s distribution system, the chain can go as deep as possible. Furthermore, the benefit of every sale happening down the line goes to each level of the top line, on the basis of a certain formula. These sales have to be tracked on a monthly basis as the points achieved have to be reimbursed by the month-end itself, and cannot be carried over to the next month.

What makes the managing of such a system a Herculean task is the sheer spread of the business operations. With over three lakh active distributors, the chain ripples as low as the 100th and 1000th level in the system, furthermore the person could be based anywhere in the country. “There is a lot of complexity involved in tracking the sales and accounts of each of the distributors at every level of the chain, as the sum due at each level is calculated on the basis of volumes generated by the distributor, as well as all his down lines,” explains Arya.

Amway’s long-term IT vision and the deployment of relevant information technology systems to make communication real-time, has enabled it to implement an effective business model. According to Arya, “Amway India is using state-of-the-art technologies to ensure that all business information is available in real-time and all Amway offices and distributors are connected anytime, all the time.” This, in fact, is the mission statement guiding the choice of IT systems (hardware and software), applications right from ERP, Interactive Voice Response System (IVRS), SMS, disaster recovery management and e-business, VoIP and the advanced communication system.

Amway’s IT Deployment

• ERP: The ERP system of Amway India was developed in-house. Though generic, the system has been adequately customised to suit Indian conditions. The main modules of the system include order management, inventory management, financial management and bonus calculation, purchase order, HR and payroll systems. According to Arya, some of the modules are also integrated with the global ERP system in order to track the Indian business as part of the global entity.

According to Arya, this system takes care of its distributor accounting, inventory, freight and logistics issues too. Once a distributor acquires a customer, the company has to ship the product to the customer’s location, which is tracked by the ERP system. For instance, if the order needs to be delivered in Patna, the system will find out the closest warehouse from which the order can be shipped. The system’s inventory management control ensures that stocks are always available.

In the event of a sale, the system does all the tracking and automatically issues and disburses the cheques to the recipients down the supply chain. It even credits the money to their individual accounts, even though they may be in different banks.

The complete HR process, from recruitment to salaries, is online. The fully automated HR and payroll system, is a browser-friendly solution, which runs on ASP technology. According to Arya, HURIS, the human resource software, is the complete hub of information for the employee. The system facilitates features like online attendance, mid-year appraisals, annual appraisals and leave. The system’s e-paymaster, is an intensive payroll system, that facilitates employee-related remuneration. Amway’s HR system, and to some extent the payroll system, are currently running on it’s intranet. The company soon plans to include the purchase order and travel approval systems, on the Intranet.

From five offices and a reach of 150 location in May 1998, Amway now has 45 offices catering to around 400 cities and towns across the country. By 2002, it plans to increase this number to 47 servicing spread over 450 cities and towns. The sheer magnitude of Amway’s operations required an efficient information system. All Amway warehouses, pick-up centres (PUCs) and offices are connected online, so that inventory planners have access to real-time sales and inventory data.

Amway is now focussing on integrating the back-end operations of its supply chain (manufacturing and material planning), into the overall process. The vision is to have a fully integrated and seamless supply chain, whereby a product sale at one end generates an order for raw material at the other end.

Other systems

• Complaint Management System (CMS): CMS is another in-house developed Lotus Domino-based package, integrated to the backend. Once the complaint or request is logged, it is assigned to an appropriate assignee. A mail notification with the details of the complaint/request goes to the assignee. Arya says this is a three level escalation process. After the call has been addressed, it goes into the knowledge management database, which generates a report stating the average resolution time taken per call. This system is aimed at analysing performance with regard to customer service in terms of the most frequent mistakes, time taken to resolve a complaint, and reasons for delay. All this ultimately results in improved customer service response, adds Arya.
• Interactive Voice Response System (IVRS): This round the clock service provides complete business information such as product information, new launches and promotions, addresses and contact information and most importantly tracks Amway’s reward points system. This service is available over the phone to any Amway distributor in India. However, currently only the national capital region can access it as a local call. But the overwhelming response that the company has received, coupled with some regulatory relaxations, has prompted it to soon extend the service to other locations through a service provider. Amway is in talks with various service providers for making IP voice calls.
• Short Messaging Service (SMS): Through this service, Amway India is leveraging on SMS to provide critical information to its distributors “any time, anywhere” on their mobile phones. Amway charges its distributors a minimum amount each month for this service. The business information messages are delivered to the distributors automatically using the push technology. As a result, the top line is always informed of the happenings down the line. In order to provide the service, the company has tied up with CellNext as the application service provider. Elaborating on how the backend works, Arya explains that CellNext has tied up with most of the cellular service providers, which enables it to deliver the service to almost all of Amway’s distributors. The software package for this system has been developed in-house.
• Disaster Recovery Management: With so much dependence on technology for efficient day-to-day operations, disaster recovery forms an imminent part of the company’s IT systems. Currently, all locations connect to the central site at Delhi. In order to deal with the eventuality of any disaster, the company has developed a disaster recovery system. A complete copy of its current production set-up has been housed at its disaster recovery location at Mumbai.

A well-defined standard operating procedure has been put in place to deal with a disaster. These processes are audited and validated from time-to-time. Every quarter, there is a simulation of the disaster and its results are documented. This exercise is also aimed at identifying areas of improvement. The aim of disaster recovery management system is, as Arya puts it, to restore normal business operations within 48 hours of a disaster striking the central site at Delhi.

Heading towards e-business
According to Arya, Amway India has a three-phase approach for foraying into e-commerce. As part of the first phase, it launched its website in January 2001. With that, Amway became the first direct selling company in India to have its own site. The second phase saw the launch of interactive website a year later, which enabled the distributors to check their business volume and download various business information. The company is currently working on the third phase, with which it plans to commence its e-business operations. The third phase will allow the distributors to conduct their business online.

Taking consideration of the increased security requirements with the introduction of e-commerce, Amway’s servers will be in militarised zone, whereby nobody will be able to talk to the iSeries directly. To avoid hacking, only the proxy server will talk to the iSeries server. The implementation of third phase is estimated to be completed by end of 2002 or early 2003.

The company is currently deliberating upon using IBM’s Web commerce suite or opting for an in-house software package. Amway wants to leverage the Internet as an additional channel for its distributors, as well as to create synergies in its operations.

• Communication Systems: The communication system forms the digital nervous system of the company, as it provides connectivity to all 49 Amway offices and warehouses across the country. It enables users to connect to the iSeries and other services for their day-to-day operations. All locations are connected with the head office through Amway’s wide area network (WAN) based on VSATs, leased lines and VPN having an uptime of 99 percent. “With the kind of communication requirements that the company has, it is very critical to have dependable and cost-optimised links. Taking the orders and billing invoices is on a day-to-day basis and we cannot afford any downtime.”

The company has evolved a very intelligent communication and networking strategy, which enables both efficiency and cost optimisation. Amway India has established leased line as the primary link, which offers 64 Kbps of bandwidth. VSATs, on the other hand, have been established as the secondary link. As a result, the secondary link takes over if the primary link is down through the implementation of cross-over switch.

On the VSATs front, Amway has judiciously partnered with HCL Comnet and Hughes Escorts Communications. According to Arya, the challenge here lies in managing the large number of communication links and the huge number of users (over 1000), which makes management of the infrastructure a complex task. The company has also got a couple of Virtual Private Networks in place, as they provide for a thicker channel for connectivity.

• Voice over Internet Protocol (VoIP): Amway leverages its existing leased line infrastructure to allow users to make toll free long distance telephone calls between Amway offices. At present, it is available at 12 locations. According to Arya, the company has been able to save about $1,600 for a talk time of 9,300 minutes across the 12 locations over a period of two months. To leverage on more cost savings the company will be extending the VoIP facility to additional 35 locations by September 2002.
• MIS: The IT team has developed an internal decision support system by using technologies similar to data warehousing and data mining. The MIS tracks various areas like taxation, trend analysis, financial, inventory, stock movement reports, information by regions. For instance, the marketing would like to track down the sales of various categories of products, by business line, regions, periods to analyse and understand the emerging patterns.

Hardware Systems
The hardware systems within Amway comprise around 17 servers and 1,000 workstations connected across 49 locations. The company is using IBM iSeries as the centralised database server. The IBM iSeries system (earlier AS 400) is home to Amway intensive data management. The iSeries is, in fact, the lifeline and most critical system for the company. It serves all locations simultaneously with almost a negligible downtime. A dedicated team works round-the-clock to keep it up and running.

The servers are running largely on the Windows NT and Windows 2000 Operating System except for the iSeries, which runs on OS 400. The choice for NT was also determined by the fact that it is a widely accepted platform and runs on Intel Servers, which are inexpensive. The company is still wary of using Linux as a serious production server.

Though the company feels that it is impossible to pinpoint any tangible benefits derived from IT, it has ensured a business case for all its IT investments. Arya sums up the pivotal of IT initiatives when he says, “Efficient information system is the heart of Amway operations. The objective of all our IT initiatives is to ensure that we have a strong heart to support other organs by providing real time information any time, any place.”