Achieving Operational Efficiency of Firms

Since the advent of information technology, its role in improving operational processes both at the individual and enterprise levels for firms has achieved indispensible significance in the business world. The improvement of processes has resulted in a host of benefits, including improved productivity, efficiency, effectiveness and visibility of the overall performance level of a firm. This, in turn, has helped the firms compete more effectively in their industries to the level of making technology a competitive advantage for themselves. The use and implementation of sophisticated information systems to help automate the business processes have enabled the organizations around the world gain significant edge over their competitors. In some industries, where competition is very stiff, as the competing firms are selling similar kinds of products to fulfill the similar needs of customers, technology is the only distinct aspect among a group of firms. As the need for business automation, increased by the traditional business firms, IT (Information Technology) blossomed into a full fledge industry. These information technology firms aimed at fulfilling the business and process automation needs of a diverse range of industries, including manufacturing, services and virtually every other category of industry. Since, automated processes promised immediate and short term benefits in terms of increased efficiency and long-term cost savings, information systems became the need for effective competition and survival for the industry players. Today, business firms are making huge investments in implementing information systems that promise an increased level of efficiency and better functionality.

Among different kinds of information systems offered by the technology firms, the following ones are the most prominent:

1-CRM (Customer Relationship Management),

2-SCM (Supply Chain Management)

3-ERP (Enterprise Resource Planning)

The CRM systems are used by the firms to better manage their relationships with their customers, ranging from better handling of complaints and ensuring the superior service level resulting in customer’s retention. The CRM software makes use of the sophisticated algorithms using different search techniques that help the companies identify customer’s needs at the right time and place. The CRM systems enabled organization to streamline operational processes, such as order booking, delivery and complaint resolution. The data gathered by CRM became an additional asset for the information service provider company, which can be used for analysis, employing the complex data mining techniques to unearth hidden trends and preferences of the customers. Therefore, besides the operational efficiency that the CRM brings, the data can be further used for other valuable addition purposes. Some information service provider organizations have been reported to sell these data to competitors, raising ethical and legal questions over such practices. However, CRM focused on the customer related issues, and did not touch upon other operational matters significant towards an enterprise’s success. Supply Chain Management (SCM) systems, on the other hand, integrate the supplier, manufacturer and distributer/retailer, so as to achieve the efficiency in terms of demand matching, optimal inventory levels, lowest lead times and operational efficiency. These systems help cement different kinds of relationships between the channel members. The nature of relationships could be alliance, partnership or strategic depending on the dynamics of business and the importance of the particular channel members. These SCM systems not only achieve automation of the processes replacing the manual processes, they would greatly increase visibility and efficiency resulting in profitable results. The most important aspect of automation of the operational processes is the real time information processing and updating that allows managers to make timely and informed decisions. This greatly reduces cost in terms of time, which is not possible through manual procedures. The ERP (Enterprise Resource Planning) is the information system that encapsulates all the other internal and external information systems spanning throughout different functions of a firm, including Finance, Sales and Manufacturing, as well as those deployed with the suppliers and distributors. The ERP has additional functionalities, like embedding industry best practices and integration across the different technology platforms.

The role played by Information Technology is vital in transforming the business processes by way of automation. Besides, IT has impacted the organizational cultures by promoting the efficient and effective business practices.

Tristen Inc, an Example of Business Process Automation

Tristen Corporation is the US based company which produced peripherals for desktop PC’s, servers and other computer devices. The company has a huge workforce of ten thousand people with more than twenty sales and manufacturing sites worldwide. Due to changes in the market dynamics, and changing demands and needs of customers, Tristen Inc in 1990 decided to change its strategy by focusing more on customer’s satisfaction and requirement fulfillment in an efficient manner by utilizing technology. The most important aspect for the customer retention and acquisition in the industry where Tristen Inc operated was believed to be the order fulfillment, according to customer’s specifications within a timely manner. Keeping this in view, the company had identified the order fulfillment with a value addition through technological advancement as the vital factor towards success of its goals.

The organization had segmented the global market into three broad regions, namely; the North America, Europe and Asia. Each of these regions had its manufacturing/distribution centers, which included a number of sales offices spread throughout the region. The orders were relayed through the sales office to the respective manufacturing /distribution centers. The flow of information between sales and manufacturing/distribution centers would ultimately confirm the order availability to the customer. Tristen Inc employed the demand estimation techniques, and kept the products in a semi-finished state for the final configuration and testing upon the order arrival.

The company was facing perennial problems in managing lead time, which was an important indicator of customer’s satisfaction. Since the processes were manual, exact determination of order delivery time was impossible, given the communication gap that existed between the Sales centers and the manufacturing/distribution centers. The problem was compounded by the fact that logic personnel had to track the inventory manually, which created the bottlenecks in information flow and lack of meeting committed delivery times with the customer. All this was having a very negative impression on the customer, resulting in dissatisfaction and possible attrition as well. The management of Tristen Inc sought to automate the processes, so as to be able to control and determine the lead time accurately.

The organization already had information systems in place in the three regions, but they were not integrated. This hindered the organization’s ability to provide the similar service level to customers at the enterprise level, who had operations in all three regions. Further, the information systems in place were not equipped to meet the operational or financial data visibility needs of the management, seriously hampering their ability to take timely and informed decisions. The management decided to implement ERP system that would allow Tristen Inc to accurately determine its lead time, while reducing it to significant levels at the same time. Besides, the new system was expected to help meet customer’s specifications, configurations and quality assurance requirements in an effective manner.  

ERP deployment is a technical and complex process in any organization. The stages through development to the initial deployment and final implementation are very critical. The organization centralized the ERP development process by calling all the participants of ERP implementation to the US. Important members of the implementation team were also stationed in the three respective regions. All the modalities, regarding the process inclusion in the new system, including the viable ones from the old system, were finalized and tested. The organization also made use of vicarious learning, which effectively meant to emulate the industry best practices, since Tristen Inc itself had not experienced those practices. The process of development and deployment was smooth, as the organizational workforce was committed to change, and the people understood the significance and need of implementing of such a system. It is important for the success of implementing such information systems to have the support from all the stakeholders which Tristen Inc possessed.

The organization benefited from direct, as well as indirect benefits of the enterprise wide implementation of the system. The order fulfillment became efficient and effective in terms of meeting the required configuration and quality standards. The indirect benefits included helping operational planners to make timely estimates and decisions, as they depended directly on information regarding inventory level, lead time etc. Since the system was integrated throughout the three regions, similar efficiency level could be desired and achieved, thereby providing the same level of service to businesses having operations in all the three regions. The implementation of ERP system helped Tristen Inc overcome one of the most crucial problems effecting customer’s satisfaction and operational efficiency of the firm. Whereas, other benefits including competitive edge and time and money savings were an added bonus.

The implementation of information systems, as demonstrated by Tristen Inc’s example to support operational processes, has become a need of every organization to survive and compete well in the market. In deploying such systems, the organizational culture is very important in the success or failure of introducing the new system. The deployment process for such a system and the accompanying complexities are equally important and rewarding at the same time.

Sarbanes Oxley Act‘s Implications for Corporate IT Departments

In the wake of Enron Corporations collapse, the Sarnanes Oxley act was introduced to implement the missing regulations, so as to avoid or hamper such an event from happening again in future. The purpose of the act generally is to highlight the importance of accounting disclosures and an emphasis on the principle based system to quell the evil or bad corporate practices. The major reason behind the Enron collapse was conflict of interest and following of the innovative accounting techniques that helped in window dressing of the corporation’s financial statements, while the real picture stayed different. These included off balance sheet financing by setting up the special purpose vehicles to transfer rick not in actuality, but only on paper. In short, the actions of Enron’s management were meant to fool the potential investors in falsely believing in the corporation’s financial strength, and in turn, lend it money.

The provisions and clauses of the Sarbanes Oxley act have far reaching implications for the corporate IT departments. Since, the modern day corporations have fully automated processes backed by sophisticated ERP systems, the burden for ensuring compliance falls on the IT systems in place. The IT or ERP systems in place have an indirect responsibility to ensure the transparency and compliance of the accepted standards and regulations. Since the automation of operational processes leaves little room for human maneuvering or modification, the actions of management personnel are largely dictated by the form and kind of IT processes in place. In other words, the IT department becomes equally responsible for having the right processes in place to enable the management personnel to comply with the rules and regulations.

In the face of growing importance of IT systems in corporations, the responsibilities and purview of the corporate IT department have also modified for better or worse. On the one hand, IT department has become more powerful, while, on the other hand, its responsibilities have increased significantly.