Awfully Chocolate dares to be different with an IT–business recipe

Unorthodox and contrarian The story of this home-grown cake empire began slightly over a decade ago when lawyers, Ms Lyn Lee and Mr John Yap, quit their jobs to embark on a three-month adventure in France. Upon their return, reluctant to return to the corporate world and driven by a passion for chocolate – with a dash of impulsiveness – Ms Lee and Mr Yap set up their little cake shop in December 1998 at Joo Chiat.

Like many new startups, uncertainties about financial stability drove Mr Yap back to the corporate world while then-fiancée (now wife) Ms Lee managed the business. On hindsight, Mr Yap need not have worried because the cakes were a hit and within three weeks, the business generated a healthy cash flow.

Awfully Chocolate’s philosophy has always been unique, focusing on quality rather than quantity. In fact, when it first started out, it sold only one type of cake. Even today, its product lineup remains limited with three variations of its special chocolate cake and a single ice cream flavor in what else, chocolate. In addition, it does not display its cakes and only sells whole cakes – never in slices and sans coffee or tea.

Compared with the common cake shops and French-inspired patisseries that sell a myriad of desserts and caffeine cocktails, it is not hard to see why Mr Yap described his business model as one that is “unorthodox and contrarian”.

Growth and expansion

By mid-1999, the duo’s cake shop garnered sufficient attention to be featured in 8 Days magazine. Over the next three years, their delicious cakes gathered a strong following and regularly sold out each day. However, according to Mr Yap, their major break came in 2002, when popular Chinese television program City Beat (Mandarin: 城人杂志) featured their shop in one of their episodes. Overnight, the popularity of the shop exploded and cakes would sell out even before it opened.

“We see Singapore as a blueprint for the overseas franchises. As we expand, we’ve got to build the basic infrastructure with a good logistics system, rather than to simply go by feel… A manual system just isn’t going to work.” – Mr John Yap, co-founder, Awfully Chocolate

For Mr Yap, it was an opportune time to rejoin Awfully Chocolate on a full-time basis. In that year, they opened their second shop. With greater ambitions, Mr Yap realized that simply opening two to three stores was not enough for the couple. “We realized that we would have to look overseas to franchise the business if we wanted to grow,” he explained.

Awfully Chocolate’s first stop – Taipei. According to Mr Yap, Taiwan “started out with a bang.” True to Awfully Chocolate’s “unorthodox” business roots, the first Taipei store was tucked away from main thoroughfare, facing a school and a quiet carpark.

The idea was simple. “When you’re one out of 50 international brands in a prime area trying to create a presence, you’ll find yourself lost,” he said. His business instincts proved right as the single store in a secluded neighborhood would eventually become a multi-million dollar business.

By end-April 2009, Awfully Chocolate would have opened its twelfth global franchise outlet in Beijing, with two more to follow in Dalian and Hong Kong by the end of the year. Not bad for a couple who made a dramatic switch from the corporate world of law to start a business that defied convention.

A turning point

Despite their initial success, their inexperience with managing the first Taipei store came with a painful lesson – they subsequently suffered a massive fraud and were advised by their Singapore auditors and lawyers to terminate the Taiwan franchise to protect the brand.

Mr Yap realized that they needed a better system that could capture real-time sales of their outlets. This would create greater transparency and reduce the accounting risks faced by both their local and overseas ventures. Mr Yap also saw that as his business grew, the company would have to transform in other ways to better manage the processes that were then largely paper-based, manual and tedious. When the couple first started the business, they did not even have a cash register. “We literally kept cash in the drawers. Gradually, we brought in cash registers but our counter staff would still be taking cake orders using pen and paper,” he explained.

Although he describes himself as being “IT un-savvy”, Mr Yap recognized that computerizing the operational processes was an imperative for the long-term sustainability of the company. Singapore was the starting point for this transformational initiative. “We see Singapore as a blueprint for the overseas franchises. As we expand, we’ve got to build the basic infrastructure with a good logistics system, rather than to simply go by feel,” Mr Yap said. “A manual system just isn’t going to work.”

New ways of working

In 2007, Awfully Chocolate enlisted the help of Solution Details, an IBM Business Partner, to transform its operational processes through technology.

It acquired the license for Konverge ERP, an enterprise resource planning system designed for small and medium retail businesses to simplify, digitize and automate finance, sales and distribution processes. Solution Details customized and configured the ERP system to suit Awfully Chocolate’s specific ordering and inventory requirements.

Konverge ERP was implemented on two highly scalable, energy-efficient and robust IBM Power™ servers that are designed for space-constrained environments – perfect for Awfully Chocolate’s headquarters located in a shophouse along Joo Chiat Road.

It also acquired licenses to Konverge POS, a point-of-sales software solution designed for high-volume, multi-site retail operations that would enable real-time monitoring of sales and inventory. The solution was installed across all its six retail stores in Singapore on IBM SurePOS™ machines and was designed to synchronize real-time sales and inventory data with the ERP system back at headquarters. The IBM SurePOS™ machines were chosen for their reliability, durability and strong technical support.

“Imagine if we missed out on an order for a wedding cake! …With the new system, we can be certain that there are no missed orders. That is something that you cannot begin to put a value on.” – Mr John Yap, co-founder, Awfully Chocolate

“There are times when you get so accustomed to doing something one way that you fail to realize that it might be wrong,” Mr Yap shared. “In our case, I really appreciated that the consultants from Solution Details were able to provide us with fresh perspectives. They questioned the necessity of certain old processes and worked with our staff to eliminate a few steps, saving us time as a result.” The implementation of the ERP solution and the new POS systems in Singapore took about a year, finishing in early 2008.

Real-time transactions, real benefits

Within a month, the benefits to both Awfully Chocolate and customers were tremendous.

As part of its service, Awfully Chocolate offers customers the convenience of placing an order at one location and collecting from another. Based on the old system, orders were recorded on paper and then faxed to the other shop. This sometimes resulted in missed orders as the retail staff were unable to check the fax machines or the fax simply did not get through.

After the transformation, orders are now captured real-time into a centralized system that caters for multilocation transactions. “We used to drop about 2–3 percent of our orders with the manual system. Although it is not much, it still means unhappy customers. Now, missed orders have virtually dropped to zero!” Mr Yap remarked.

Another benefit Mr Yap noted was that in the past, staff had to wait each night for order books to arrive from all retail locations so that they could manually extract and consolidate requisite information for Awfully Chocolate’s bakers to work with the next morning. The consolidation process often ended past midnight and was error-prone.

“Imagine if we missed out on an order for a wedding cake!” he described. “You cannot imagine the panic the next day, and it is something difficult to recover from. With the new system, we can be certain that there are no missed orders. That is something that you cannot begin to put a value on.”

With the centralized system, it now just takes up to half an hour to consolidate orders, error-free – down from the three hours it used to take each night. According to Mr Yap, the ERP and POS systems have helped the company save up to 40 percent in man hours.

Furthermore, sales records and information from all the outlets are fed back to the headquarters immediately. “The integrated POS system allows us to keep track and monitor sales and financial accounts in real-time. We are given such granularity that we can even check if the retail staff at a particular shop is playing solitaire onscreen,” he commented. More importantly, this real-time financial feedback was exactly what Awfully Chocolate needed for its overseas franchises.

“The integrated POS system allows us to keep track and monitor sales and financial accounts in real-time. We are given such granularity that we can even check if the retail staff at a particular shop is playing solitaire onscreen.” – Mr John Yap, co-founder, Awfully Chocolate

Gearing up for the future

With the new centralized system successfully in place over all locations in Singapore, Awfully Chocolate is geared towards implementing Konverge POS on IBM SurePOS™ terminals across its international franchises. First up – its four outlets in Shanghai.

Implementation is facilitated by the fact that franchisees need only to purchase the IBM SurePOS™ terminals from their local IBM offices while installation of software can be done remotely from Singapore. Konverge POS’ multi-language support ensures easy adoption and helps simplify the knowledge transfer process, particularly in the primarily Mandarinspeaking environments overseas, while IBM’s worldwide offices ensure extensive 24×7 service and support for the hardware.

In time, franchises will be able to feed real-time sales and inventory information back to their headquarters in Singapore. This benefits both parties as franchisees save time from not having to manually generate sales reports any longer, while the auditing process for the Singapore headquarters would be greatly simplified.

Awfully Chocolate has a high food quality control process that is firmly managed by the Singapore headquarters. With a real-time inventory system, the company would gain visibility over its overseas inventory levels, and achieve greater speed and control over its supply chain.

After Shanghai, Mr Yap will look to set up the POS solutions in other locations. As part of his expansion plans, he intends to acquire additional IBM Power™ servers to ramp up the ERP backend. His eventual goal is to implement the systems in all new outlets to create an integrated network of shops.