Online Procurement
Procurement is the act of obtaining goods at the best possible cost, in the correct quantity at the time they are needed. Traditionally, this is a time consuming process involving much negotiation by several sources. In recent years some companies have opted for a system of online procurement, which reduces the level of labour intensity required. One company which has followed suit is Mars Incorporated through their online purchasing auctions. Mars Incorporated was founded in Washington in 1911 when Frank and Ethel Mars began producing and selling candy. The company quickly gained popularity and developed several well known brands. Today, it is one of the largest privately owned businesses in the world. For Mars Incorporated, online purchasing has allowed them to increase supply chain management to a level which could not previously have been obtained.
Advantages and Disadvantages
Online procurement does have its advantages and disadvantages. One of its main benefits is that the use of the auction system ensures that market value is always paid for items and often one of the main reasons that a company may opt for a system of online procurement is the desire to reduce production costs. In the case of Mars, by buying things through auction this ensured that they were never likely to be overcharged for the items they were buying. For companies entering into online procurement for the first time, it can be difficult to judge the value of materials and therefore the expected value of the winning bid. Generally, the auction system should drive the cost down as it forces bidders to compete to provide materials but finding the market value can be tricky. For Mars, the difficulty in this situation was slightly lessened as they had a subsidiary already using an online system. Therefore the principal adopted by the subsidiary was simply extended throughout the whole of the group.
Unfortunately, this can also generate problems of it’s own. As the bidders are required to win orders to support their own businesses they are inclined to reduce their prices in order to beat the competition and be selected as supplier. A reduction in price can, at times, result in a reduction of quality. Mars may have experienced the effects of this - mainly due to the strategy they chose when selecting suppliers. The Mars auction process began with a Request For Quote (RFQ), which specified exactly what was required of the winning bidder. For large RFQ’s, Mars always selected the bidder guaranteeing the cheapest price. Even although large RFQ’s only contained standard materials such as sugar and cocoa, the quality of these could still be compromised if they were purchased at too low a price as the supplier would only be able to produce low quality goods. As Mars Incorporated is a company which holds its five core principals with such high regard, this could have a negative effect on its credibility. To combat this problem, Mars restricted entry to their auction process to a limited number of suppliers. The materials provided by these suppliers were known by Mars Incorporated to be of the high standard required.
Even using a system such as this, problems in the process could still occur. As Mars had deliberately limited the bidders they would accept tenders from, they were effectively cutting off a huge number of potential suppliers. In doing this they left the company more susceptible to material shortages from these preferred suppliers. To tackle this, Mars imposed a maximum number of auctions that each supplier was entitled to bid for. In doing this, Mars Incorporated effectively ensured that they would receive the high standard of product that they expected, while managing to cut material costs. Through continually using different suppliers Mars also avoided the issue of price fixing.
In terms of the man hours required to arrange the purchase and delivery of any one order, online auction systems are hugely advantageous. Traditional methods of procurement require a lot of negotiation to arrange factors such as quantity, quality and delivery date and costs. Online procurement completely removes these features from the purchasing process. Through the issue of a RFQ, Mars Incorporated specified their requirements clearly. It was then the responsibility of the bidder to meet them as necessary. This reduced the time required for the entire process considerably which in turn made the delivery time shorter. Overall, the process became far more efficient.
Although the long term benefits of online procurement are clear, it is also important to consider the time and cost involved in the initial application of such a system. Like any new software implemented into a business, costs are generated not only through integration into the existing system but also through training of staff in its use. It should also be remembered that the potential financial benefits of the online auction system will only be gained by companies which are fully competent in their system’s use. Therefore, a large set up cost must be incurred before any profit can be made.
Conclusion
Companies such as Mars Incorporated which choose to use a system of online procurement, experience both benefits and problems in relation to their decision. For many companies the most enticing factors of online procurement are the ability to gain greater control over the supply chain and to reduce the cost of materials. Nonetheless, it is important to consider the effect that this may have on the integrity of the company from the perspective of both suppliers and customers, not to mention the installation costs. These problems may in turn trigger a downturn in profit. Therefore, it can be said that for some countries online procurement certainly brings about an increased turnover, however, for many the increased risk in loss of profits is too high.
References
http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1075387398
http://en.wikipedia.org/wiki/Mars,_Incorporated
http://en.wikipedia.org/wiki/E-procurement
Wednesday 19 December 2007
Sunday 9 December 2007
The advantages and disadvantages of Open Source Software – MySQL
Introduction
In recent years, previously unchallenged closed source software providers such as Microsoft, IBM and Oracle have noticed an increasingly threatening competitor in the form of Open Source Software. Michael Bloch, who writes a long established and well informed internet blog, describes open source Software as “…free applications released under special licensing terms where the core coding is viewable and able to be edited to suit the needs of the user.” One example of this type of software is MySQL, the most popular open source database in the world and the greatest opponent to closed source suppliers. As with any business tool, open source software has a number of advantages and disadvantages for the businesses that use it.
Advantages
The most obvious advantage open source software has over its closed source rivals is that the core components of the software are completely free. For providers such as MySQL this makes the product relatively easy to distribute and market. MySQL have identified that the “lower cost advantages of open source” are one of the main forces in attracting customers. As the cost of software can be a major deciding factor, especially for smaller businesses or those that have been newly established, open source providers are more likely to determine a prominent market share through this process. More importantly for businesses, they are able to download and use MySQL and other open source databases without paying any fees.
Excluding the obvious financial gains of free software, one of the other major benefits is that companies do not become tied to one provider. As there is no required financial investment by user businesses in databases such as MySQL, if a software package is considered unsuitable, there is no monetary loss for users in switching to a more appropriate alternative. As a result, this forces MySQL and other providers to continue to develop and update their software to retain existing customers and expand to new users. In doing this, the services they provide to businesses become more proficient.
An approach other than changing database providers that can be taken by businesses is to modify their existing set-up. For MySQL, because the coding for the database is provided, users can create alterations and extensions that are beneficial to their needs. An advantage to this is instead of having to buy another programme for this purpose, companies can save money by altering MySQL. When companies have then modified the programme they are then entitled to redistribute their new version of it. Users are also able to operate all open source software in any way they like. In doing this, along with redistribution, there are advantages for all parties. For MySQL these aspects ensure that their database product is continually distributed on a wider scale eventually leading to more paying customers for other services. For businesses using MySQL, as more users become involved, a larger support network evolves which becomes immensely useful in suggesting further enhancements to improve the database and troubleshooting.
Closed source software usually has to be completed and on the market for a certain date in order to ensure profits are made and targets are reached. Alternately, open source software is generally not released until the development team believes it has been perfected and is ready for use. As the pressures of marketing are not inflicted nearly as heavily on open source software, the finished product is usually developed more slowly and as a result is more adept. This theory is well illustrated by the small amount of demands placed on MySQL in comparison to database competitors Oracle. It is inevitable that for all software, some problems will arise following its initial release. Nonetheless, these problems generally occur far less often with open source software as more time is available during the initial development process. Another effect of this is that programmes such as MySQL usually contain less ‘bugs’ than their closed source competitors.
Disadvantages
Although users of open source software often form large support networks, one important disadvantage is the omission by providers to give qualified technical support. For businesses, the main problem with this is that they will most likely be required to pay to have any errors in the software ironed out. In contrast, closed source operators are obligated to provide a technical support service. The difference between the two was noticed by MySQL Chief Executive Officer Marten Mickos following the launch of MySQL’s subscription service in 2005. He commented, “For the first time we have customers complaining…It’s a question of expectations”.
Another issue is that companies wishing to adapt open source software to meet their usage specifications often encounter problems and are forced to employ experts at an expense greater than closed source software would have been initially.
Finally, businesses using open source technology run the risk of the product they are using simply being terminated. Unless the product has been purchased, providers are under no obligation to continue to produce it and users could ultimately be left without any service at all.
Conclusion
Both open and closed source software have their advantages and disadvantages and are suitable for different business needs. For businesses in their early stages, open source software can provide the platform needed to start making profits. Without which often very expensive closed source alternatives would have to be purchased. Those with relevant experience are able to modify all types of open source software into very unique and useful tools. It is this degree of flexibility that so many companies find attractive. However, it is important to also consider the less appealing attributes of open source software. These include costs that may not initially be evident due to support issues and the need for business specifications to be met. There is also the possibility of further problems arising in the future. For these reasons and many others, for any company, the decision of whether to use open or closed source software is not one to be taken lightly.
References
http://eu.conecta.it/paper/Advantages_open_source_soft.html
http://www.tamingthebeast.net/articles5/open-source-software.htm
http://www.mysql.com/
Witting, C and Burgelman, R. (2006) MySQL Open Source Database in 2006 (B), Stanford Graduate School of Business, Case: SM-124(B)
In recent years, previously unchallenged closed source software providers such as Microsoft, IBM and Oracle have noticed an increasingly threatening competitor in the form of Open Source Software. Michael Bloch, who writes a long established and well informed internet blog, describes open source Software as “…free applications released under special licensing terms where the core coding is viewable and able to be edited to suit the needs of the user.” One example of this type of software is MySQL, the most popular open source database in the world and the greatest opponent to closed source suppliers. As with any business tool, open source software has a number of advantages and disadvantages for the businesses that use it.
Advantages
The most obvious advantage open source software has over its closed source rivals is that the core components of the software are completely free. For providers such as MySQL this makes the product relatively easy to distribute and market. MySQL have identified that the “lower cost advantages of open source” are one of the main forces in attracting customers. As the cost of software can be a major deciding factor, especially for smaller businesses or those that have been newly established, open source providers are more likely to determine a prominent market share through this process. More importantly for businesses, they are able to download and use MySQL and other open source databases without paying any fees.
Excluding the obvious financial gains of free software, one of the other major benefits is that companies do not become tied to one provider. As there is no required financial investment by user businesses in databases such as MySQL, if a software package is considered unsuitable, there is no monetary loss for users in switching to a more appropriate alternative. As a result, this forces MySQL and other providers to continue to develop and update their software to retain existing customers and expand to new users. In doing this, the services they provide to businesses become more proficient.
An approach other than changing database providers that can be taken by businesses is to modify their existing set-up. For MySQL, because the coding for the database is provided, users can create alterations and extensions that are beneficial to their needs. An advantage to this is instead of having to buy another programme for this purpose, companies can save money by altering MySQL. When companies have then modified the programme they are then entitled to redistribute their new version of it. Users are also able to operate all open source software in any way they like. In doing this, along with redistribution, there are advantages for all parties. For MySQL these aspects ensure that their database product is continually distributed on a wider scale eventually leading to more paying customers for other services. For businesses using MySQL, as more users become involved, a larger support network evolves which becomes immensely useful in suggesting further enhancements to improve the database and troubleshooting.
Closed source software usually has to be completed and on the market for a certain date in order to ensure profits are made and targets are reached. Alternately, open source software is generally not released until the development team believes it has been perfected and is ready for use. As the pressures of marketing are not inflicted nearly as heavily on open source software, the finished product is usually developed more slowly and as a result is more adept. This theory is well illustrated by the small amount of demands placed on MySQL in comparison to database competitors Oracle. It is inevitable that for all software, some problems will arise following its initial release. Nonetheless, these problems generally occur far less often with open source software as more time is available during the initial development process. Another effect of this is that programmes such as MySQL usually contain less ‘bugs’ than their closed source competitors.
Disadvantages
Although users of open source software often form large support networks, one important disadvantage is the omission by providers to give qualified technical support. For businesses, the main problem with this is that they will most likely be required to pay to have any errors in the software ironed out. In contrast, closed source operators are obligated to provide a technical support service. The difference between the two was noticed by MySQL Chief Executive Officer Marten Mickos following the launch of MySQL’s subscription service in 2005. He commented, “For the first time we have customers complaining…It’s a question of expectations”.
Another issue is that companies wishing to adapt open source software to meet their usage specifications often encounter problems and are forced to employ experts at an expense greater than closed source software would have been initially.
Finally, businesses using open source technology run the risk of the product they are using simply being terminated. Unless the product has been purchased, providers are under no obligation to continue to produce it and users could ultimately be left without any service at all.
Conclusion
Both open and closed source software have their advantages and disadvantages and are suitable for different business needs. For businesses in their early stages, open source software can provide the platform needed to start making profits. Without which often very expensive closed source alternatives would have to be purchased. Those with relevant experience are able to modify all types of open source software into very unique and useful tools. It is this degree of flexibility that so many companies find attractive. However, it is important to also consider the less appealing attributes of open source software. These include costs that may not initially be evident due to support issues and the need for business specifications to be met. There is also the possibility of further problems arising in the future. For these reasons and many others, for any company, the decision of whether to use open or closed source software is not one to be taken lightly.
References
http://eu.conecta.it/paper/Advantages_open_source_soft.html
http://www.tamingthebeast.net/articles5/open-source-software.htm
http://www.mysql.com/
Witting, C and Burgelman, R. (2006) MySQL Open Source Database in 2006 (B), Stanford Graduate School of Business, Case: SM-124(B)
Monday 3 December 2007
Outsourcing of BBCTL
Introduction
Beginning in 1922 as a radio transmission service, the British Broadcasting Corporation (BBC) is now the largest of its kind throughout the world. Following the introduction of television services in 1936, the BBC became well known and respected for its honest, accurate news reporting especially during the Second World War.
The purpose of the BBC is “to enrich people's lives with programmes and services that inform, educate and entertain”. As the British people effectively own the BBC, it also has to meet certain targets and standards fashioned by the UK Government in order to receive funding. In the year 2000, one of the targets was to increase revenues by £1 billion over a seven year period. Like many large organisations, the BBC chose to do this initially through innovation and eventually through outsourcing. On October 1st 2004, BBC Technology Limited (BBCTL) was outsourced to Siemens Business Services (SBS) over a ten year period for £1.9 billion.
BBC Technology
The BBC Technology group was created in San Francisco, US in March 2001 in order to help the BBC reach their pressing financial goals. In was split into two divisions, BBC Technology Direction and BBCTL. BBC Technology intended to raise revenue through the provision of technology services to the BBC and other third party sources in both Britain and the US. It employed 1400 people and provided services for television channels such as ESPN. The group was very successful in doing so, reporting a turnover of £230 million by 2004.
Effect of outsourcing
To this day, the BBC states that its vision is “to be the most creative organisation in the world”. When John Varney joined the BBC as Chief Technology Officer (CTO) in 2002 he soon identified that by outsourcing technology, more funds could be generated in order to do just that.
Varney calculated that through outsourcing BBCTL, a saving of £20 million to £50 million could be made. When the decision to outsource was relayed to the media, it was stressed that the resulting surplus would be used to develop content for television programmes, in turn providing a better service for the viewing public. To produce the same savings internally, 350 employees would had to have been made redundant. With increasing pressure to boost revenue, outsourcing seemed like the obvious answer. Through outsourcing to a company which concentrated specifically on technology, this would allow the BBC access to up coming digital technologies while freeing more resources to focus on creativity.
The BBC decided that the contract should span a ten year period which became an issue of much debate for the media and Broadcasting Entertainment Cinematograph and Theatre Union (BECTU). Employees and the BECTU were concerned that over a period of ten years, changes could be made which would result in the loss of their jobs. Worries were heightened when SBS refused to give job-related guarantees to staff. Critics also argued that Siemens could not be relied upon to produce a high quality service over such a long time period. On top of this, it was argued that the BBC may be limiting their access to new technologies, some of which BBCTL had created. The greatest concern however, arose from the fact that no clause for early termination of contract was included in the proposed terms.
Selecting a supplier
The process of selecting a technology supplier began in November 2003. In keeping with European law, the contract was to be advertised in the Official Journal of the European Communities which meant that it was open to any potential applicant. Although the BBC had no control over this aspect of the process, through stipulating the criteria of the contract carefully, they were effective in ensuring that no time was wasted on companies which would be unable to provide a suitable service. A team of twenty six employees looked after the contract. As this same team were to take charge of selecting a supplier, negotiation and initiation of changes, they were able to work closely with all concerned parties in efficiently beginning the process of change. This was important in ensuring that at all stages of the selection process requirements were met, as it was crucial that the deal received approval from the EU Commission and the UK Government. Thirty one companies completed a pre-qualifying questionnaire and the BBC were meticulous in analysing the financial position and technological awareness of each. A team of finance, procurement and technology specialists examined the standing of each company in relation to the contract resulting in nine suppliers including HP, Accenture, Fujitsu and SBS being short-listed. The selection process ended in SBS being declared as the preferred bidder before eventually securing the contract.
Long term results
Although many were sceptical, when the transaction with SBS was finally completed technology services ran smoothly and employees appeared satisfied. The worries that many had expressed over the initial handover and the subsequent months amounted to nothing as the process was handled both slowly and with care. The first big test of the new collaboration was the BBC coverage of the 2005 general election which silenced critics with its impressive reporting on polling results. It was recorded as the most advanced coverage of an election to date and ran without a flaw due to painstaking preparation and maximum effort on the part of SBS.
Conclusion
The BBC needed to outsource to a company that understood their strategy and long term goals but also had the capability to run BBCTL successfully and increase profitability. SBS have allowed the BBC to ensure digitalisation by 2012 and have continually set targets in keeping with the savings required in order to satisfy the UK Government. The estimated savings by the BBC of £20 million to £50 million per year have continually been reached. Nonetheless, as SBS have secured the contract for a further seven years great things are expected by the UK Government and the BBC alike in years to come.
References
http://www.bbc.co.uk
http://www.silicon.com/research/specialreports/enterprise/0,3800003425,39128184,00.htm
Information Technology Outsourcing at BBC by M Vinaya Kumar
Beginning in 1922 as a radio transmission service, the British Broadcasting Corporation (BBC) is now the largest of its kind throughout the world. Following the introduction of television services in 1936, the BBC became well known and respected for its honest, accurate news reporting especially during the Second World War.
The purpose of the BBC is “to enrich people's lives with programmes and services that inform, educate and entertain”. As the British people effectively own the BBC, it also has to meet certain targets and standards fashioned by the UK Government in order to receive funding. In the year 2000, one of the targets was to increase revenues by £1 billion over a seven year period. Like many large organisations, the BBC chose to do this initially through innovation and eventually through outsourcing. On October 1st 2004, BBC Technology Limited (BBCTL) was outsourced to Siemens Business Services (SBS) over a ten year period for £1.9 billion.
BBC Technology
The BBC Technology group was created in San Francisco, US in March 2001 in order to help the BBC reach their pressing financial goals. In was split into two divisions, BBC Technology Direction and BBCTL. BBC Technology intended to raise revenue through the provision of technology services to the BBC and other third party sources in both Britain and the US. It employed 1400 people and provided services for television channels such as ESPN. The group was very successful in doing so, reporting a turnover of £230 million by 2004.
Effect of outsourcing
To this day, the BBC states that its vision is “to be the most creative organisation in the world”. When John Varney joined the BBC as Chief Technology Officer (CTO) in 2002 he soon identified that by outsourcing technology, more funds could be generated in order to do just that.
Varney calculated that through outsourcing BBCTL, a saving of £20 million to £50 million could be made. When the decision to outsource was relayed to the media, it was stressed that the resulting surplus would be used to develop content for television programmes, in turn providing a better service for the viewing public. To produce the same savings internally, 350 employees would had to have been made redundant. With increasing pressure to boost revenue, outsourcing seemed like the obvious answer. Through outsourcing to a company which concentrated specifically on technology, this would allow the BBC access to up coming digital technologies while freeing more resources to focus on creativity.
The BBC decided that the contract should span a ten year period which became an issue of much debate for the media and Broadcasting Entertainment Cinematograph and Theatre Union (BECTU). Employees and the BECTU were concerned that over a period of ten years, changes could be made which would result in the loss of their jobs. Worries were heightened when SBS refused to give job-related guarantees to staff. Critics also argued that Siemens could not be relied upon to produce a high quality service over such a long time period. On top of this, it was argued that the BBC may be limiting their access to new technologies, some of which BBCTL had created. The greatest concern however, arose from the fact that no clause for early termination of contract was included in the proposed terms.
Selecting a supplier
The process of selecting a technology supplier began in November 2003. In keeping with European law, the contract was to be advertised in the Official Journal of the European Communities which meant that it was open to any potential applicant. Although the BBC had no control over this aspect of the process, through stipulating the criteria of the contract carefully, they were effective in ensuring that no time was wasted on companies which would be unable to provide a suitable service. A team of twenty six employees looked after the contract. As this same team were to take charge of selecting a supplier, negotiation and initiation of changes, they were able to work closely with all concerned parties in efficiently beginning the process of change. This was important in ensuring that at all stages of the selection process requirements were met, as it was crucial that the deal received approval from the EU Commission and the UK Government. Thirty one companies completed a pre-qualifying questionnaire and the BBC were meticulous in analysing the financial position and technological awareness of each. A team of finance, procurement and technology specialists examined the standing of each company in relation to the contract resulting in nine suppliers including HP, Accenture, Fujitsu and SBS being short-listed. The selection process ended in SBS being declared as the preferred bidder before eventually securing the contract.
Long term results
Although many were sceptical, when the transaction with SBS was finally completed technology services ran smoothly and employees appeared satisfied. The worries that many had expressed over the initial handover and the subsequent months amounted to nothing as the process was handled both slowly and with care. The first big test of the new collaboration was the BBC coverage of the 2005 general election which silenced critics with its impressive reporting on polling results. It was recorded as the most advanced coverage of an election to date and ran without a flaw due to painstaking preparation and maximum effort on the part of SBS.
Conclusion
The BBC needed to outsource to a company that understood their strategy and long term goals but also had the capability to run BBCTL successfully and increase profitability. SBS have allowed the BBC to ensure digitalisation by 2012 and have continually set targets in keeping with the savings required in order to satisfy the UK Government. The estimated savings by the BBC of £20 million to £50 million per year have continually been reached. Nonetheless, as SBS have secured the contract for a further seven years great things are expected by the UK Government and the BBC alike in years to come.
References
http://www.bbc.co.uk
http://www.silicon.com/research/specialreports/enterprise/0,3800003425,39128184,00.htm
Information Technology Outsourcing at BBC by M Vinaya Kumar
Thursday 22 November 2007
Geneva ERP implimentation
Introduction
Geneva Pharmaceuticals Inc., a subsidiary of the 'Novartis' life sciences company, is one of the leading generic drug manufacturers in the world. Geneva produces over 200 products in 500 package sizes resulting in a huge number of operating procedures. In the past, each of Geneva's business functions were carried out using separate systems many of which were incompatible with one another. By 1996 the company had begun to search for a solution in order to integrate each process, ultimately increasing accuracy, value and ease of use while reducing maintenance costs. Geneva's requirements were best covered by an Enterprise Resource Planning (ERP) system. It was decided that the R/3 system from SAP would be the most effective. Application of R/3 was designed in three phases, the first of which began by 1997.
Geneva Pharmaceuticals Inc., a subsidiary of the 'Novartis' life sciences company, is one of the leading generic drug manufacturers in the world. Geneva produces over 200 products in 500 package sizes resulting in a huge number of operating procedures. In the past, each of Geneva's business functions were carried out using separate systems many of which were incompatible with one another. By 1996 the company had begun to search for a solution in order to integrate each process, ultimately increasing accuracy, value and ease of use while reducing maintenance costs. Geneva's requirements were best covered by an Enterprise Resource Planning (ERP) system. It was decided that the R/3 system from SAP would be the most effective. Application of R/3 was designed in three phases, the first of which began by 1997.
Phase 1
The execution of phase 1 of R/3 began on November 1st 1997. The aim of the process was to incorporate all of Geneva’s supply functions onto the SAP system. Previously these functions had been carried out by individual systems and involved a high input of manual labour.
The purpose of phase 1 was to transfer the functions already computerised by the Macpac system onto R/3 and encompass all supply-side data into a specific, synchronized database. The implementation was also expected to reduce manufacturing costs and the expenses involved in cataloguing stock. ASAP, a methodology of accelerated SAP application was undertaken. The execution of R/3 required around ten information systems staff, ten full-time and ten part-time users all of whom had to be removed from their usual positions within Geneva.
Within four months it had become clear that installation had not progressed as planned, even although substantial investments in hardware, software and consultants had been made. The ASAP ideology, although rapid in installation, was not adept enough to take into account the more delicate programming issues. Supervision of the project was overtaken by Randy Weldon who was employed as Geneva's new CIO in February 1998. Weldon intended to make up for lost time and from his his previous R/3 management experience, understood the requirement of a strong project management team.
A team of R/3 experts were brought in to aid the progression of the project and a new management system was adopted. Although Weldon did not approve of ASAP, to take on a new approach at this stage would only have held the project back further. By February 1999, phase 1 was "up and running". The only remaining problem was, as of yet, it would not be compatible with phase 2.
The execution of phase 1 of R/3 began on November 1st 1997. The aim of the process was to incorporate all of Geneva’s supply functions onto the SAP system. Previously these functions had been carried out by individual systems and involved a high input of manual labour.
The purpose of phase 1 was to transfer the functions already computerised by the Macpac system onto R/3 and encompass all supply-side data into a specific, synchronized database. The implementation was also expected to reduce manufacturing costs and the expenses involved in cataloguing stock. ASAP, a methodology of accelerated SAP application was undertaken. The execution of R/3 required around ten information systems staff, ten full-time and ten part-time users all of whom had to be removed from their usual positions within Geneva.
Within four months it had become clear that installation had not progressed as planned, even although substantial investments in hardware, software and consultants had been made. The ASAP ideology, although rapid in installation, was not adept enough to take into account the more delicate programming issues. Supervision of the project was overtaken by Randy Weldon who was employed as Geneva's new CIO in February 1998. Weldon intended to make up for lost time and from his his previous R/3 management experience, understood the requirement of a strong project management team.
A team of R/3 experts were brought in to aid the progression of the project and a new management system was adopted. Although Weldon did not approve of ASAP, to take on a new approach at this stage would only have held the project back further. By February 1999, phase 1 was "up and running". The only remaining problem was, as of yet, it would not be compatible with phase 2.
Phase 2
Phase 2 was primarily concerned within improving "demand-side" functions as existing applications were unable to keep up with the transformations that the company was going through. Recognising that "Phase I was somewhat of a disaster" they put steps in place to ensure Phase 2 would not be a repeat. The system was designed “Top Down” so that it was refined into smaller modules. The design was mapped out on post it notes, open to critique and modification, and evolved into a better model that met its objective of providing more efficient technology. The process also identified existing problems which meant that process changes could be made to coincide and enhance effects of system changes.Many major company-wide projects fail due to staff being unaware of their own responsibilities and the complexities of a new system. However, Geneva managed the change very well; key measures where initiated to ensure staff was going to embrace the new systems, these included publicising the change, provided support to answer any queries and training - provided in advance. Trust in the system was important and influential members were selected to be “Super Users” which prevented any problems of staff revolting against the transformation. Resistance to change was handled by altering training approach, moving away from teaching staff to change their jobs to how to do their jobs on the R/3 system.
Phase 2 was primarily concerned within improving "demand-side" functions as existing applications were unable to keep up with the transformations that the company was going through. Recognising that "Phase I was somewhat of a disaster" they put steps in place to ensure Phase 2 would not be a repeat. The system was designed “Top Down” so that it was refined into smaller modules. The design was mapped out on post it notes, open to critique and modification, and evolved into a better model that met its objective of providing more efficient technology. The process also identified existing problems which meant that process changes could be made to coincide and enhance effects of system changes.Many major company-wide projects fail due to staff being unaware of their own responsibilities and the complexities of a new system. However, Geneva managed the change very well; key measures where initiated to ensure staff was going to embrace the new systems, these included publicising the change, provided support to answer any queries and training - provided in advance. Trust in the system was important and influential members were selected to be “Super Users” which prevented any problems of staff revolting against the transformation. Resistance to change was handled by altering training approach, moving away from teaching staff to change their jobs to how to do their jobs on the R/3 system.
Phase 3
Phase 3's main requirement was to deal with sales and production planning problems that the existing system had. Main areas that were tackled included data Entry, time taken to make up production schedules, ability to cope with orders placed less than a month in advance and dealing with both expected and unexpected orders. This ultimately aimed to satisfy main performance indicators such as customer service and reducing costs.
A 'Just in Time' approach was adopted reducing holding costs of raw materials and finished goods. Customer service improvements were managed by developing new software, ATP (Availability To Promise) had the "intelligence" to reduce time needed to generate an "optimal" production plan by 80%, giving a better estimate of delivery date and prevented customer dissatisfaction when orders were not fulfilled. ATP was developed by drawing data from many databases to ascertain volume available, volume required, and earliest possible fulfilment date considering many different influencing factors.
We can learn from this that in order to effectively make judgements it is important to consider all factors that may influence or have an effect on the outcome. Also, in this case production plan time was reduced and we can see that in order to be efficient, the planning process must be quick reliable and hence relevant.
Phase 3's main requirement was to deal with sales and production planning problems that the existing system had. Main areas that were tackled included data Entry, time taken to make up production schedules, ability to cope with orders placed less than a month in advance and dealing with both expected and unexpected orders. This ultimately aimed to satisfy main performance indicators such as customer service and reducing costs.
A 'Just in Time' approach was adopted reducing holding costs of raw materials and finished goods. Customer service improvements were managed by developing new software, ATP (Availability To Promise) had the "intelligence" to reduce time needed to generate an "optimal" production plan by 80%, giving a better estimate of delivery date and prevented customer dissatisfaction when orders were not fulfilled. ATP was developed by drawing data from many databases to ascertain volume available, volume required, and earliest possible fulfilment date considering many different influencing factors.
We can learn from this that in order to effectively make judgements it is important to consider all factors that may influence or have an effect on the outcome. Also, in this case production plan time was reduced and we can see that in order to be efficient, the planning process must be quick reliable and hence relevant.
Lessons
From the Geneva process of R/3 implementation there are a number of lessons to be learnt. Below, the most important points are highlighted:
From the Geneva process of R/3 implementation there are a number of lessons to be learnt. Below, the most important points are highlighted:
- A solid design reflecting system requirements is important. The more resources spent at this stage may reduce costs further into development.
- The design process should highlight existing problems within an organisation. Parallel improvements with policy changes will ultimately help the organisations efficiency beyond that of the system capability.
- Manage change effectively to avoid resistance.
- Establish predefined KPIs to test the system’s effectiveness.
Conclusion
The implementation of the R/3 SAP system by Geneva Pharmaceuticals Inc., although highly effective still indicated an explicit requirement for in-depth planning and maintenance of resources. Through the use of such management processes Geneva successfully improved the main business functions by incorporating a suitable, efficient ERP system.
Monday 19 November 2007
How will offshoring affect UK accountants?
With technology now so advanced that information can be transferred to the other side of the world within a matter of seconds, there are no longer any communication barriers between an accountant in Bangalore and his colleague in London or Glasgow. Offshoring of business functions from the UK to developing countries is becoming increasing common and growing at an exponential rate. With this in mind, what will the effect be on UK accountants?
“Offshoring describes the relocation of business processes from one country to another. This includes any business process such as production, manufacturing, or services.” http://en.wikipedia.org/wiki/Offshoring
Offshoring in the accounting industry is an example of the offshoring of services. Only recently has this begun to have a remarkable effect on UK accounting. During this short time it has become clear the rate at which firms are prepared to outsource so many of their business functions is greatly increasing.
There are a number of reasons for the sudden growth of this ‘white-collar’ offshoring. For several years, offshoring in the manufacturing industry has been well established and highly successful. Business processes have been transferred from factories in Europe to factories in China resulting in reduced costs and increased productivity. The accounting industry has taken note of the accomplishment of its neighbour, realising the same potential lies within its own realms.
In terms of accounting it is not offshoring to China, but to India, that is taking place. In the last 15 years, spending on education in India has more than quadrupled. As a result, India is producing some of the finest educated university graduates in the world. Even if the quality of education in India was not any better than that in the UK, due to an ever increasing birth rate, the quantity of Indian graduates is higher. As a result, professionals in India are forced to work for salaries far smaller than those in the UK. This is exploited by multinational firms who realise that offshoring can greatly reduce expenses, ultimately increasing profits.
The accounting industry has not been slow to consider the extent to which offshoring can take place. A large proportion of all accounting functions can and will be outsourced. To date, activities which have been effectively offshored are typically simple to conduct, labour intensive and time consuming. However there are some tasks which still require interaction with clients on a more personal level. Tasks requiring a greater level of skill or interaction with clients as yet remain based in the UK. For as long as client relationships are such an influential factor in accounting, these services will always be required and therefore a number of jobs in the UK will continue. However it is more likely that eventually most clients will favour a less personal service at a greatly reduced cost. In due course, the accountants who provided this service will be struck off and replaced by equally competent individuals in India. Then only a small number of jobs will remain, for tasks such as audit, which will always require a physical presence in the UK.
Distance is no longer the obstacle that it used to be. Using fairly simple computer systems, information can be transferred from one country to another cheaply, quickly and effortlessly. It is as easy for accountants at opposite sides of the world to transfer information to one another as it is to pass a sheet of paper to the desk opposite your own. The accounting profession has now become truly global. For companies with employees in London, Bangalore is merely a stone’s throw away. In effect, for larger companies, the world is now their office and is operational 24 hours a day.
Offshoring in itself has become an industry in the UK over the last few years. Companies who operate solely in the in advising clients of the potential benefits of offshoring and assisting them in restructuring are plentiful. The effect of offshoring on the IT and manufacturing industries has by now been well documented. The media already recognises a shift in the accounting job market as graduate jobs become increasingly more difficult to come by. In coming months and years, this trend will continue. PricewaterhouseCoopers recognised in 2005 that within 3 years, offshoring would double, the consequence of this has now begun to show.
The issue of offshoring in the accounting sector can no longer be ignored. In years to come, it is evident that accounting jobs will be greatly reduced. Employers simply favour the cheap, effective labour available in developing nations. In the short term, this shift will be welcomed. It will allow UK accountants more time to perform difficult business processes more effectively and possibly gain further contracts. In the long term however, those who initially embraced such change may find that it becomes a challenge to their livelihood.
References
http://en.wikipedia.org/wiki/Offshoring
PricewaterhouseCoopers - Offshoring in the financial servicies industry: Risks and Rewards.
http://www.academics-india.com/
http://www.offshorexperts.com/index.cfm/fa/buyer.outsourcing_category_directory/c/1400
“Offshoring describes the relocation of business processes from one country to another. This includes any business process such as production, manufacturing, or services.” http://en.wikipedia.org/wiki/Offshoring
Offshoring in the accounting industry is an example of the offshoring of services. Only recently has this begun to have a remarkable effect on UK accounting. During this short time it has become clear the rate at which firms are prepared to outsource so many of their business functions is greatly increasing.
There are a number of reasons for the sudden growth of this ‘white-collar’ offshoring. For several years, offshoring in the manufacturing industry has been well established and highly successful. Business processes have been transferred from factories in Europe to factories in China resulting in reduced costs and increased productivity. The accounting industry has taken note of the accomplishment of its neighbour, realising the same potential lies within its own realms.
In terms of accounting it is not offshoring to China, but to India, that is taking place. In the last 15 years, spending on education in India has more than quadrupled. As a result, India is producing some of the finest educated university graduates in the world. Even if the quality of education in India was not any better than that in the UK, due to an ever increasing birth rate, the quantity of Indian graduates is higher. As a result, professionals in India are forced to work for salaries far smaller than those in the UK. This is exploited by multinational firms who realise that offshoring can greatly reduce expenses, ultimately increasing profits.
The accounting industry has not been slow to consider the extent to which offshoring can take place. A large proportion of all accounting functions can and will be outsourced. To date, activities which have been effectively offshored are typically simple to conduct, labour intensive and time consuming. However there are some tasks which still require interaction with clients on a more personal level. Tasks requiring a greater level of skill or interaction with clients as yet remain based in the UK. For as long as client relationships are such an influential factor in accounting, these services will always be required and therefore a number of jobs in the UK will continue. However it is more likely that eventually most clients will favour a less personal service at a greatly reduced cost. In due course, the accountants who provided this service will be struck off and replaced by equally competent individuals in India. Then only a small number of jobs will remain, for tasks such as audit, which will always require a physical presence in the UK.
Distance is no longer the obstacle that it used to be. Using fairly simple computer systems, information can be transferred from one country to another cheaply, quickly and effortlessly. It is as easy for accountants at opposite sides of the world to transfer information to one another as it is to pass a sheet of paper to the desk opposite your own. The accounting profession has now become truly global. For companies with employees in London, Bangalore is merely a stone’s throw away. In effect, for larger companies, the world is now their office and is operational 24 hours a day.
Offshoring in itself has become an industry in the UK over the last few years. Companies who operate solely in the in advising clients of the potential benefits of offshoring and assisting them in restructuring are plentiful. The effect of offshoring on the IT and manufacturing industries has by now been well documented. The media already recognises a shift in the accounting job market as graduate jobs become increasingly more difficult to come by. In coming months and years, this trend will continue. PricewaterhouseCoopers recognised in 2005 that within 3 years, offshoring would double, the consequence of this has now begun to show.
The issue of offshoring in the accounting sector can no longer be ignored. In years to come, it is evident that accounting jobs will be greatly reduced. Employers simply favour the cheap, effective labour available in developing nations. In the short term, this shift will be welcomed. It will allow UK accountants more time to perform difficult business processes more effectively and possibly gain further contracts. In the long term however, those who initially embraced such change may find that it becomes a challenge to their livelihood.
References
http://en.wikipedia.org/wiki/Offshoring
PricewaterhouseCoopers - Offshoring in the financial servicies industry: Risks and Rewards.
http://www.academics-india.com/
http://www.offshorexperts.com/index.cfm/fa/buyer.outsourcing_category_directory/c/1400
Sunday 4 November 2007
TAURUS and CREST - The hazards of technology
A phenomenon called the “Big Bang” occurred when multinational corporations gained control of age-old investor businesses. For the London Stock Exchange (LSE), the main effect was a massive structural change to their trading methods. The open trading floor gave way to new electronic trading rooms. This lay the foundations for modern processes of exchange and the requirement for a complex, forward-looking computer system.
By 1989, the development of such a system was announced in the form of TAURUS - a program of automated transaction settlement which would accomplish dematerialisation of stock certificates. However, by March 1993 TAURUS had yet to be completed, and termination was announced by LSE chief executive Peter Rawlins.
There are many reasons for the failure of TAURUS which can ultimately be reduced to three - management, policy and accountability. As the TAURUS system was mandatory for all members of the LSE, those in charge felt that it was necessary to create a system which was both standardized for general use and individualized for each group concerned. As member groups had different interests and functions each demanded TAURUS managed their specific tasks. A problem arisen because these functions were extremely diverse and often complicated. Against better advice, the management team tried to please each party, some of which continually ‘moved the goalposts’ as far their needs were concerned. This continued into the developmental stage of the system meaning no progression could really be made as structural changes occurred so frequently.
Another problem in the management of the TAURUS system was that the LSE attempted to develop it, rather than employing another company to do so. As a result, TAURUS was part of the LSE, not just an investment and was ran in an inappropriate way, via a committee. Due to this, the press were very interested in the scale and size of the project, many already presumed that it would fail long before any evidence of this became available. Driven by fear of failure the TAURUS team continued the project for longer than it should have, spending more and more money on an impossible goal in an unworkable timescale. This further heightened press and public interest, while disrupting public relations and creating more pressure.
Policy resulted in a 150 page document of legislation to which TAURUS had to comply. As the Treasury had agreed to waive stamp duty following the implication of the system (estimated as £800million per year) more parties became involved. Stakeholders such as the Bank of England and the Department of Trade and Industry were concerned by the dematerialisation of stock certificates. This resulted in further set backs.
In accountability terms, there was an imbalance in the relationship of power and responsibility in the development of TAURUS. The LSE bore all the responsibility yet had no authority to stop other parties interfering with the design process. As a result, those who were least accountable had the greatest influence. Against the odds, the TAURUS team continued until 1993 when the system was put to rest at an estimated cost of £75million to the LSE and £400million to the City of London.
Within months, a new development process had begun. The proposed CREST system was controlled by a not for profit company CRESTCo through the Bank of England. CRESTCo had learnt from the mistakes of the TAURUS team and because the implication of the system was voluntary it ignored the demands of LSE members and initiated the development of a very simple system. CRESTCo recognised that a small number of features could cover the majority of the LSE’s transactions. It maintained good press relations through regular information updates end encountered very few design faults.
CREST’s main setback occurred through the assumption that the Treasury would not claim stamp duty (as with TAURUS) however as CREST was not an enforced system, this was not the case. After launching, CREST encountered two separate operational faults but these were quickly overcome through skilled supervision and the system was operational within nine months.
CREST was simple and well managed where TAURUS was complex and poorly handled. These are the main differences between the two systems and the reason one remains so successful while the other failed miserably.
By 1989, the development of such a system was announced in the form of TAURUS - a program of automated transaction settlement which would accomplish dematerialisation of stock certificates. However, by March 1993 TAURUS had yet to be completed, and termination was announced by LSE chief executive Peter Rawlins.
There are many reasons for the failure of TAURUS which can ultimately be reduced to three - management, policy and accountability. As the TAURUS system was mandatory for all members of the LSE, those in charge felt that it was necessary to create a system which was both standardized for general use and individualized for each group concerned. As member groups had different interests and functions each demanded TAURUS managed their specific tasks. A problem arisen because these functions were extremely diverse and often complicated. Against better advice, the management team tried to please each party, some of which continually ‘moved the goalposts’ as far their needs were concerned. This continued into the developmental stage of the system meaning no progression could really be made as structural changes occurred so frequently.
Another problem in the management of the TAURUS system was that the LSE attempted to develop it, rather than employing another company to do so. As a result, TAURUS was part of the LSE, not just an investment and was ran in an inappropriate way, via a committee. Due to this, the press were very interested in the scale and size of the project, many already presumed that it would fail long before any evidence of this became available. Driven by fear of failure the TAURUS team continued the project for longer than it should have, spending more and more money on an impossible goal in an unworkable timescale. This further heightened press and public interest, while disrupting public relations and creating more pressure.
Policy resulted in a 150 page document of legislation to which TAURUS had to comply. As the Treasury had agreed to waive stamp duty following the implication of the system (estimated as £800million per year) more parties became involved. Stakeholders such as the Bank of England and the Department of Trade and Industry were concerned by the dematerialisation of stock certificates. This resulted in further set backs.
In accountability terms, there was an imbalance in the relationship of power and responsibility in the development of TAURUS. The LSE bore all the responsibility yet had no authority to stop other parties interfering with the design process. As a result, those who were least accountable had the greatest influence. Against the odds, the TAURUS team continued until 1993 when the system was put to rest at an estimated cost of £75million to the LSE and £400million to the City of London.
Within months, a new development process had begun. The proposed CREST system was controlled by a not for profit company CRESTCo through the Bank of England. CRESTCo had learnt from the mistakes of the TAURUS team and because the implication of the system was voluntary it ignored the demands of LSE members and initiated the development of a very simple system. CRESTCo recognised that a small number of features could cover the majority of the LSE’s transactions. It maintained good press relations through regular information updates end encountered very few design faults.
CREST’s main setback occurred through the assumption that the Treasury would not claim stamp duty (as with TAURUS) however as CREST was not an enforced system, this was not the case. After launching, CREST encountered two separate operational faults but these were quickly overcome through skilled supervision and the system was operational within nine months.
CREST was simple and well managed where TAURUS was complex and poorly handled. These are the main differences between the two systems and the reason one remains so successful while the other failed miserably.
Tuesday 23 October 2007
40428 How to improve the ICAS website
The Institute of Chartered Accountants of Scotland (ICAS) website is one which undoubtedly contains a great wealth of knowledge. Its main purpose would appear to be the provision of information for members, students, and the general public. However, on presenting a stereotypically dull and disorganised homepage, ICAS falls at the first hurdle in doing so.
To be fair, the site does have some positive attributes. The volume of information it holds makes it a valuable source of knowledge for members and prospective members alike – the problem arises because this information is presented in such great disarray. The main issues with the site stem from the fact that it contains such a vast amount of detail. On comparison to the websites of similar professional bodies such as ACCA, CIMA, and ICAEW it is clear that the ICAS site lacks in style, structure and user appeal. Alas, its greatest quality may also be its greatest weakness.
For those prospective CA trainees who are lucky enough to find what little information ICAS is willing to provide for them, it is unlikely they will be enthralled by the prospect of joining an organisation which appears incapable of even successfully designing a website. To give graduates a better informed idea of why they may want to join ICAS, the site should develop a section dedicated solely to their interests. The CIMA website has taken this idea even further by directing the majority of their homepage towards graduates, while managing to maintain clear links to other sections of their site. A detailed description of the course structure and CA exam results can be accessed via the existing ICAS website however these facilities require upgrading for greater ease of use. The new enhanced site should also provide a list of potential employers and case studies of current ICAS students.
The ICAS site is neither well presented or aesthetically pleasing. There is no recurrent theme and layout differs greatly from one page to the next. The homepage should be easily identifiable as belonging to ICAS and in order to help the user understand the way in which the site works, ICAS would do well to follow the shining examples of uniformity presented by all of its counterparts. ICAEW in particular has a website which is not only pleasing to the eye but also exceptionally well ordered and user friendly. ICAS would benefit from a homepage which allows the user to navigate easily around the site. At present, the homepage does not take into account the fact that many all of its users may not be interested in the website’s entire content. An idea of how this may be done can be seen at the ACCA homepage which splits users into specific categories that contain subtopics more particular to each user. Such a provision would rid ICAS of its almost unusable toolbar. Also, in this way, the general public could be spared unnecessary use of accounting terminology which would be better limited to members only sections.
Finally, from a technological view, ICAS again falls short. In the last week, I have accessed the page each evening to find no updated content. It is possible to subscribe to RSS feeds (although users could be forgiven for being unaware of this fact), however this seems futile when the site is so rarely updated. ICAS must update the site more regularly and consider how technological advances can be advantageous to their users.
ICAS should now execute a series of changes which will improve their online service greatly for the benefit of all users, members and the general public alike.
To be fair, the site does have some positive attributes. The volume of information it holds makes it a valuable source of knowledge for members and prospective members alike – the problem arises because this information is presented in such great disarray. The main issues with the site stem from the fact that it contains such a vast amount of detail. On comparison to the websites of similar professional bodies such as ACCA, CIMA, and ICAEW it is clear that the ICAS site lacks in style, structure and user appeal. Alas, its greatest quality may also be its greatest weakness.
For those prospective CA trainees who are lucky enough to find what little information ICAS is willing to provide for them, it is unlikely they will be enthralled by the prospect of joining an organisation which appears incapable of even successfully designing a website. To give graduates a better informed idea of why they may want to join ICAS, the site should develop a section dedicated solely to their interests. The CIMA website has taken this idea even further by directing the majority of their homepage towards graduates, while managing to maintain clear links to other sections of their site. A detailed description of the course structure and CA exam results can be accessed via the existing ICAS website however these facilities require upgrading for greater ease of use. The new enhanced site should also provide a list of potential employers and case studies of current ICAS students.
The ICAS site is neither well presented or aesthetically pleasing. There is no recurrent theme and layout differs greatly from one page to the next. The homepage should be easily identifiable as belonging to ICAS and in order to help the user understand the way in which the site works, ICAS would do well to follow the shining examples of uniformity presented by all of its counterparts. ICAEW in particular has a website which is not only pleasing to the eye but also exceptionally well ordered and user friendly. ICAS would benefit from a homepage which allows the user to navigate easily around the site. At present, the homepage does not take into account the fact that many all of its users may not be interested in the website’s entire content. An idea of how this may be done can be seen at the ACCA homepage which splits users into specific categories that contain subtopics more particular to each user. Such a provision would rid ICAS of its almost unusable toolbar. Also, in this way, the general public could be spared unnecessary use of accounting terminology which would be better limited to members only sections.
Finally, from a technological view, ICAS again falls short. In the last week, I have accessed the page each evening to find no updated content. It is possible to subscribe to RSS feeds (although users could be forgiven for being unaware of this fact), however this seems futile when the site is so rarely updated. ICAS must update the site more regularly and consider how technological advances can be advantageous to their users.
ICAS should now execute a series of changes which will improve their online service greatly for the benefit of all users, members and the general public alike.
Monday 22 October 2007
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