Picture this scenario: the salesperson hadworked hard on the deal for over two months. The customer’s initial concern about thecompany’s ability to be flexible with order changes had been resolved. The quantities ofthe styles and colors (50 percent light green, 50 percent navy) and sizes had been agreed.The price was good, and the potential for large orders in the future looked great. Theorder was then passed to the Merchandising department for planning.
The next Monday – following the weeklyFriday run of the planning systems – a report was passed to the buying departmentcontaining a list of purchase requirements. The buyer selected the supplier, created thepurchase order and faxed it directly to the supplier. The supplier received the order andincluded it in their production plans.
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The customer reviewed the latest salesfigures per color and sent in a change to the original order. They now required 50 percentin light blue, and 25 percent in both light and dark green. The changes were made to theorder, and it was forwarded to the merchandising department for re-planning.
However, the supplier, not having receivedany change to the original order, continued with their planned production and had now bothknitted and dyed the yarn (50 percent light green, 50 percent navy). After followinganother weekly planning run the report showed the changes to the purchase order. Thesechanges were passed to the buying department. Unfortunately, the buyer responsible forthis supplier had gone on vacation for two weeks. The report therefore remained on hisdesk.
On his return, the buyer found the reportand faxed the changed purchase order onto the supplier. The supplier received the changesand checked on the production order. He found out that the cloth had already been dyed.This information was immediately faxed back to the buyer at the company. The buyer got thefax and passed it straight away to the sales department. Sales contacted the customer withbad news. The customer decided to cancel the order because it did not comply with colorchanges they required.
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Figure 1 represents the above scenario andthis clearly shows the problem is in the timing of the information flow.
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By GlobalDataFig.1 Cycle times
Is this a familiar scenario?It is not based on an actual case, but it does resemble countless occurrences in companiesall over the world. What went wrong in this hypothetical example? The major failures weresimply those of communication. The IT system did not mirror actual administrationpractice. There was unclear role definition and adoption of a departmental ‘silo’mentality by the administrative departments. Also there was a lack of business andcustomer focus.
Analyzing the process and seeking a solution
Our fictitious company’s planning systemhad a control routine, run weekly (on a Friday), in batch mode. It compared current salesorders against purchase orders. The buyer then printed an exception report showing’suggested changes to existing orders’. However, when this report was sent to the buyingdepartment the department administrator handed it out to the buyers ‘when time and otherpriorities allowed’. Failure number one: the IT system did not communicate the errordirectly to the right person. Failure number two: the person concerned did not understandthe potential criticality and ‘knock-on’ effect of the errors highlighted in the report,thus giving it a low priority.
Once the color change had come to theattention of buying, department time was taken in investigating the problem beforealerting the supplier, just to make sure it was not their fault. Failure number three: thedepartmental ‘silo’ mentality dictated that important information was not passed on untilthere could be no possible ‘blame’ attached to the department.
The order was passed to merchandisingwithout including any information regarding the customer’s request for a color change. Theorder was therefore sent to the supplier without this vital piece of information. Failurenumber four: the apparent ‘improvement’ from a paper based planning system did not caterfor additional sets of information to be passed on.
Once the customer’s color change had beenreceived this was immediately available to the planning system. However, it did not showup until the weekly planning run. Failure number five: the IT system was too rigid in itsneed to produce weekly planning runs and was not matched to normal business practice.
The latest planning exception reports weresent to the buying department but the absence of a key staff member and the lack ofknowledge and understanding by the next-in-line resulted in a further delay in processingthe change. Failure number six: lack of role understanding and no system based prompt toovercome this.
The failures discussed indicated a set ofprocedures with many inherent problems and weaknesses; these, however, are fairly typicalof many found in companies of all sizes. Today’s businesses need to ask: what can be doneto correct the situation and bring it in line with good business practice?
A solution
Obviously the matter of better functionalawareness through well defined position descriptions and training is part of the solution.In the example it would probably fall on both the sales and merchandising directors toinstitute such a coordinated program. This could possibly be done by Human Resources. Theproblem is that natural staff rotation occurs and such training can be lost. Despite time,the understanding of communication between the right functions at the right time can be’hard-coded’ into the company’s procedures. Furthermore these procedures can be aligned tomirror the company’s business practices or adopt best business practice and cut acrossfunctional boundaries. What is necessary is a pro-active and adaptable business system.
How can a system be pro-active? Howcan a system be adaptable?
Such a system actively takes control of theprocesses that it handles. Based on a best practice model it monitors events, routesinformation, and prompts action according to the status or circumstance of eachtransaction. It is also an agile system that is configurable to each individual business’procedures. It is capable of communicating with each individual person in the businessaccording to business needs. By focusing on critical actions or activities and not onfunctional areas, the system can break down departmental ‘silos’ and help to enable teamwork in a business and customer oriented manner.
The breaking down of softwareapplications into much smaller functional building blocks to mirror these businessprocesses and activities is now referred to as ‘componentization’ and its acceleratingmomentum, is called the ‘component revolution’. Software components are linked togetherusing a special framework generator in such a manner as to match an organization’s ownprocedures or a best practice model, or a combination of both. The links can be changed toreflect changing organization structures and workflow.
Fig.2 An active system
An active system, one constructed fromcomponents with the necessary communication links is shown in Figure 2. This illustrateshow this system solves the business problem in our example.
As most sales orders will be satisfied by asingle purchase order, there is no need to rely on the weekly planning run to identify newpurchasing requirements. In its place, a purchase requisition is automatically generatedfrom entry of the sales order by the sales department. A message is automatically sent tothe buyer responsible for the style or supplier. All messages are clearly marked with thelevel of priority to be given by the concerned member of staff. Problems such ascommunication failure (two departments are now aware the moment the event occurs) and lackof functional appreciation (priority is assigned to the event’s resolution, indicatingbusiness importance) are solved.
The clear visibility of the event and theproblem in both departments helps to break down the ‘silo’ mentality. A philosophy ofcommon ‘ownership’ of the issue and mutual interest in its speedy resolution isengendered. The problem with issues being ‘snagged’ by functional barriers is eradicated.
The request for color change is now sentelectronically to the responsible person in the buying department. Rules are set up thatcan also route the request to another person (the deputy in the example) on a temporarybasis. Timing errors i.e., the need to wait for the weekly run, are removed. Communicationfailure is avoided because the right person or their deputy receives the requestimmediately.
As the buying department is informedelectronically of the purchase request (along with the customer and sales order it islinked to) they are provided with all the additional sets of information (i.e. request forcolor change within two weeks of order). This information can then easily be forwarded tothe supplier. The communications failure is solved (information passed onto the rightpeople).
This article attempts to illustrate how thechoice and implementation of an integrated, active and agile business IT system can bringhuge business benefits to a company. Such a system changes and improves the way peoplework and interact. The system can also be configured to reflect real business processesand sequences and preserves this ‘knowledge’ independent of the people using the system.The business can change its processes in response to a changing market environment. Thesystem, possessing the necessary agility, is quickly and easily changed to reflect andsupport ‘the new way’ and can genuinely be called ‘active’.
