This week's merger of New Zealand's top two dairy producers and its top dairy exporter is expected to save the companies a combined $120 million through improved supply-chain management, reduction in staff, and reduced financing and service costs. To help ensure that the merger of New Zealand Dairy Group, Kiwi Co-operative Dairies, and the New Zealand Dairy Board--now called Fonterra Cooperative Group Ltd.--delivers on its cost-savings promise, the organizations will depend on an upgraded wireless network that Compaq Global Services helped put in place earlier this year.

One of the keys to squeezing efficiency out of Fonterra's supply chain is an upgrade that New Zealand Dairy Group made a few months ago to its wireless communications network and equipment. Working with Compaq consultants, New Zealand Dairy Group replaced a 900-MHz wireless environment first implemented in 1994 with a 2.4-GHz environment that's compliant with the 802.11 wireless networking standard and features Cisco Aironet 350 Series Access Points and Intermec Corp. handheld devices.

Mark Junge, who had been New Zealand Dairy Group's computer operations manager and is presently the project manager for Fonterra's IT infrastructure integration, says the original wireless infrastructure was showing some wear and tear by last year. Compaq's biggest role was to recommend equipment used in the upgrade, specifically the Cisco 350 access points, which are hardwired into the dairy group's network via unshielded twisted pair cable. "If we hadn't chosen Cisco's 350 model, we would have had to run electricity out to the access points," Junge says. "It would have cost an extra $300,000 to run the electricity to the New Zealand Dairy Group's 11 manufacturing sites and five store sites." The network has increased to 20 manufacturing and 10 store sites now that the dairy group has merged with Kiwi Co-operative.

The wireless network will help Fonterra track the location of goods within its warehouses. Handheld devices and vehicle-mounted units for the co-operative's forklifts are connected to the network. The network upgrade will improve online management of stock, Junge says. "It doesn't take long for these guys in the manufacturing facilities to have a terrible mess on their hands if the bar-code application goes down," he says. Wireless technology allows workers to scan products from remote areas of the warehouse rather than in one a central location. Workers can also print export documentation remotely.

Much of the cost savings will come from alleviating warehouse bottlenecks that prevent ships from being loaded in a timely manner. As the exporter, the Dairy Board pays for the time a ship spends at port. Further efficiencies will be gained after next week, when New Zealand Dairy Group and Kiwi Co-operative consolidate their data centers under a common IT organization, called NZMP.