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08a S5

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Fashion, apparel, textile, merchandising, garments

Fashion, apparel, textile, merchandising, garments

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08a   S5 08a S5 Presentation Transcript

  • IS5600 - 5 IT Based Organisational Transformation: BPR and Organisational Structures
  • Business Process Re-engineering
    • “ The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance...”.
    • Hammer and Champy (1993)
  • A Generic Model for BPR 8 7 6 5 4 3 2 1 4. Identify IT Levers 5. Pilot/Trial New Process 1. Develop Vision & Objectives 8. Ongoing Continuous Improvement 2. Identify Process for Redesign 3. Understand & Measure Existing Process 6. Develop Support Solutions 7. Make New Process Operational
  • IT as an Enabler of BPR
    • 1. Automation: Elimination of human labour
    • 2. Informational: Capturing/tracking process information
    • 3. Sequential: Changing process sequence, or enabling parallel processing
    • 4. Analytical: Improving analysis of information and decision making
  • IT as an Enabler of BPR
    • 5. Geographical: Coordinating processes across time and space
    • 6. Integrating: Coordination between tasks and processes
    • 7. Learning: Capturing and distributing intellectual assets
    • 8. Disintermediating: Eliminating intermediaries from a process
    (adapted from Davenport, 1993)
  • Choosing the Processes to Re-engineer
    • Symptom - Extensive information exchange, data redundancy, rekeying
    • Disease - Arbitrary fragmentation of a natural process
    • Symptom - Inventory, buffers, and other assets
    • Disease - System slack to cope with uncertainty and mistakes
    • Symptom - High ratio of checking and control to value-adding
    • Disease - Fragmentation, confusion, and mistakes
  • Example: AA + Sabre 1970s
    • Symptom – Data redundancy, rekeying of data, double bookings, telephone calls to confirm seat availability
    • Disease – the process is fragmented across multiple systems, multiple technologies
    • Solution - Sabre, a Reservation System for Travel Agents
      • For all airlines, but AA flights came up first
      • 50% of agents select 1st or 2nd choice on the screen
    • What was the role of IT in coordinating & integrating?
  • Example: Freq Flier Progs – 1990s
    • Symptom – Flights are not always full; passengers fly based on cost, convenience.
    • Disease – (our) passengers are fragmented across multiple airlines
    • Solution – A Frequent Flier System
      • For airlines in our team, with bonus points, check-in and luggage privileges, occasional upgrades
      • If your airline is not part of a major team (e.g. Star Alliance, Sky Team, OneWorld, Asia Miles), then what?
    • What was the role of IT here?
  • Example: Outsourcing – 2000s
    • Symptom – We lose money on packaging, logistics, even R&D.
    • Disease – we are doing many things that are not our core competence
    • Solution – Stick to what we are best at and outsource everything else
      • UPS/FedEx are no longer just transport companies.
      • They do warehousing, logistics, customer delivery.
  • Common IT Problems in BPR Projects
    • 1. Team members unfamiliar with IT possibilities.
    • 2. IT professionals not part of BPR teams.
    • 3. IT people don’t understand the business.
    • 4. IT professionals not knowledgeable about how IT can support BPR.
    • 5. IT consultants brought in too late to have any major impact on process redesign.
    • 6. BPR team members too preoccupied with process analysis and redesign to explore IT applications.
  • IT Lessons Learned
    • IT is not a solution
      • It must be applied sensitively
    • IT-enabled BPR should be part of the corporate agenda
    • IT people must be involved from the beginning
      • But BPR is about business processes, so…
      • Business people should lead the effort
    • Processes should be redesigned with IT in mind
    • Targets should be realistic
    • BPR is not trivial. It requires creative thinking.
  • Getting Serious about BPR
    • 1. What is likely to be the hardest part of reengineering for our company?
    • 2. How can we develop our people so that they can do the jobs that re-engineering will create, and use the IT appropriately?
    • 3. Are we prepared to adapt our HR policies to the needs of a reengineered environment?
    • 4. How may we have to adapt our organizational structure for the aftermath of re-engineering?
  • Will Re-engineering work in China?
    • Does anyone have experience of process improvement in China?
  • Changes to the Organisational Structure
    • The extension of organisational boundaries
      • Including customers, suppliers & partners
    • Not just process redesign, but structural redesign
      • X-engineering (BPR-II)(Champy, 2002)
    • Realisation that success involves managing dependencies (with IT), and perhaps changing our culture
  • WalMart
    • US$4B investment in IT to develop the “Retail Link” private exchange
    • All manufacturers/suppliers wishing to do business with WalMart must buy and use it
    • Top 100 suppliers must use RFID as well.
    • Huge cost advantage over competitors – because they integrate with IT.
  • But IT is not just for the big
    • Anyone can leverage IT to their advantage
    • IT is for both radical & incremental change
    • IT can be used to transform an industry
    • IT can be used to drive up the competitive advantage of the traditionally small and weak.
  • Case: TAL Group (talgroup.com)
    • Founded in 1947, HQ in Hong Kong
    • Turnover of US$590M in 02/03
    • 11 factories
    • 23,000 employees
    • 50M garments a year
    • 78% of sales in the US market
  • TAL’s IT Investments
    • Integrating ERP + SCM systems (US$10M)
    • End-to-end fully integrated system for
      • Capacity planning
      • Production scheduling
      • Inventory management
      • Raw material purchases
      • Finished garment sales
    • Extensive R&D > manufacturing patents
  • Vendor Managed Inventory
    • Persuade the customers (retailers) to let TAL control the Inventory Management.
    • TAL is the sole supplier for those goods
    • TAL has total control of inventory monitoring & replenishment; no more ‘purchase orders’
    • TAL’s systems constantly monitor inventories at the store level
      • Reduce stock levels (and wastage); On-demand production; Rapid stock replacement
  • From Linear and Sequential to Integrated and Synchronised
    • Traditional information flows are linear and sequential.
    • Information quality degrades down the value chain
    • Coordination problems are frequent
    • TAL have an integrated & synchronised hub arrangement
    • This connects all their suppliers, customers and partners seamlessly and enforces mutual dependence.
    • Collaboration & information exchange are routine.
  • Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Manufacturer's Value Chain (TAL) Retailer’s Value Chain (J.C. Penney) Purchase & receive raw materials (natural / synthetic fibre, yarn, etc.) Manufacture according to customer specs (cut fibre, sew, buttonhole, & iron) Package & ship to retailer’s warehouse Receive consumer feedback for product enhancement/ new product Marketing, merchandizing, and selling to end consumers Re-pack & distribute to retail outlets Perform inventory control, sales monitoring & forecast; place replenishment orders Purchase & receive garment from manufacturer at central warehouse A Sequential/Linear Value Chain for Apparel Manufacturing and Retailing Lee et al., 2004
  • Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Manufacturer's Value Chain (TAL) Retailer’s Value Chain (J.C. Penney) Select & order raw materials according to sales patterns & new design requirements Design product according to sales pattern; manufacture according to design specs Distribute orders directly to customer’s retail outlets Focus on after - sales service to end consumers Focus on marketing & sales service to end consumers Streamlined product delivery & vendor-managed inventory at the store level Perform test marketing of new products at retail stores An Integrated and Synchronized Value Network for Apparel Manufacturing and Retailin g Monitor retail sales, replenish inventory, and design new products Hub (shared data and processes) Lee et al., 2004
  • Impacts?
    • US$2M in annual savings for J.C. Penney
    • 35% increase in inventory turnover
    • 19% increase in sales
    • 5% increase in gross margin
    • Reduced ‘out of stock’ situations and zero local (warehouse) inventory
  • Implications?
    • Radically transformed industry structure & new rules of competition
    • Much higher switching costs for customers.
    • Access to real-time sales data at the store level
      • Useful for TAL as it seeks new customers.
  • Lessons
    • Innovation can be driven by a weak member
      • Strong networks, manufacturing expertise
      • Use IT to leverage strengths
    • IT changes the value chain
      • Develop an integrated and synchronised value network
      • Shared data, systems, processes and performance indicators
  • Lessons for IT Based Org Change
    • Top Management must be the change architects
    • IT cannot transform an organisation – IT enables transformation
    • Enterprise-wide business-IT Partnerships are needed
    • The pace of change must match the rate of acceptance
    • Individual transformation is as important as organisational transformation
    • Change champions must be diverse, yet work together
    • Offshoring IT development sounds attractive, but it is not just an IT project.
  • Consequences of Transformation
    • Organisational culture and identity
      • There will be pressure for change here too
      • People who support ‘the old way’ will feel left out, marginalised or discriminated against
    • A new, more flexible set of cultural norms may be necessary
      • Guided by new principles, new values, … and perhaps new managers?
      • A Culture of Blogging? The CEO’s blog-desk?
  • The Value of IT?
    • IT can enable transformation
    • But IT is not cost-free
      • The price is the price of change, the acceptability of change
    • If management doesn’t want change, then handle IT carefully
    • IT is only IT, but IT enables people to do things that were previously impossible
      • Even email can produce radical changes in organisations
  • Whiteboard Questions
    • What kinds of barriers would normally exist to hinder companies like TAL to leverage and re-engineer the supply chain?
    • What is the strategic advantage for TAL?
    • Why should JC Penney trust TAL?
    • Can TAL replicate its success in other industries?
    • Imagine you are an IT consultant. How would you try to persuade CEOs to make more of their IT investments?