Lecture 11: Redesign principles and tactics

Reference:

[1] Redesign principles & Tactics

http://higheredbcs.wiley.com/legacy/college/turban/0471229679/add_text/ch09/el_sawy.pdf
[2] Fedex – installation of ARIBA

http://www.slideshare.net/HarishkumarC/fdx1

[3] Fedex – CRM

http://www.slideshare.net/robinslides/fed-exppt-crm

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Recap of last lecture

Tactics are some corresponding actions that can fulfill a redesign principle

Reason for using principles and tactics - Improve redesign outcome, such as

• Promote value-add in a process (speed, cost, return on investment etc.)
• Betterment of non-value adding activities (A&F, internet audit etc.)
• Reduce resources spend in other things (obsolete activities, valueless complexities etc.)

Principle 1 – Lose wait

• Reduction in processes waiting time -> create value

Tactics:

• Concurrency (tasks to be done concurrently instead of sequentially)
• If processes have different duration -> pass processed resources/information to slower processes, then proceed to new tasks
• Closed-loop (team people together for quick interaction)
• Not gating main process (not to delay a core value adding process with support activity)
• Continuous flow (execute orders in real time, instead of batches)
• Upstream relieves downstream (prevent bottleneck from affecting lateron processes)

Principle 2 – Orchestrate

• Enterprises’ joint effort to produce better outcome

Tactics:

• Partnering, outsourcing (let expertise provider to help with support)
• In-sourcing (insource a process for fast/better coordination)
• Routing through an intermediary (middle agent that provide bridge between suppliers and consumers)

Principle 3 – Mass-customize

• FLEX the process any time, place and way

Tactics:

• Flexing time (expanding time window)
• Flexing space (create more options of doing a process)
• Modularity (reduce path processes to modular processes)
• Dynamic customization (e.g. BTO cars)

Principle 4 – Synchronize

• Synchronize the physical and virtual parts of the process

*other principles will be applied and used in the follow case study

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Topic: Revision of redesign principles - case study of FedEx corporation

Fedex Corporation consists of four main segments – FedEx Express, FedEx Ground, FedEx Freight and FedEx Office, plus a few divisions.  FedEx services more than 220 countries, it has 688 aircraft and over 75,000 vehicles as of February 2012.

Fedex.com handles 15 million unique visitors monthly, 3 million tracking requests daily, and 15 million packages shipped monthly.

However, before having BPR, FedEx faced some key issues, such as:

• Inefficient paper based processes for managing indirect purchase requisitions, ordering and delivery fulfillment
• Labour intensive and manual processes
• Need for an appropriate systems to keep all levels of operation in working order
• Need for implementation of ERP based web and e-commerce system (as the volumn of business grew)

Here, some redesign principles are highlighted here for the 2 BPR carried out

BPR1 - ERP

FedEx spent annually $7 billion on indirect purchases such as subscription, cell phone, pagers, parts etc.

Therefore the selection and implementation of ARIBA B2B e-commerce platform, ARIBA system enabled FedEx to automate transactions on the internet and facilitate ESM (enterprise spending management)

Process

• Invited its entire supplier circle and invited them to use ARIBA (e-procurement site)
• Reduced unauthorized spending and administrative costs, and helped them to track spending patterns, and boosted internal efficiency

Achievements

• Streamlining, some process reduced half of the total steps.  Overall purchasing cycle time reduced from 70% to 20% (purchase request time came down dramatically to 2-4 days, from earlier 17-19 days)
• Achieve more competitive pricing from suppliers and in turn provide good benefits to its employees (cost saving at around 40%).  Full ROI achieved within 3 months
• Facilitate spend analysis and purchasing pattern

Redesign principles and tactics

This complies with principle 2 – Orchestra, FedEx by utilizes an intermediary, procurement is done by middlemen between suppliers and FedEx, it saves costs and time, increase efficiency in procurement processes.

Linkages of ERP based system with ARIBA also helped FedEx saves 2 billion pieces of paper annually.  By synchronizing captured information between two systems, FedEx reduced the manual applications and processes, leading to reduction of human error in operations.  Both satisfied principle 5 – Digitize and Propagate, data automation and process paperless, allows shortening of cycle time in daily operation.

BPR2 - CRM

SAP R/3 is a client/server based application, it uilizes a 3-tiered model, by offers a complete development environment, developers can modify existing SAP code and develop their own functions, within the SAP framwork.

Process and achievement

Another redesign is the introduction of SAP to facilitate CRM processes of FedEx.

The SAP R/3 system helps FedEx to gain insights into key accounts, and actively helps monitor, store and track information of customers and prospects.

Moreover, it provided channels to track complaints and returns, customers are able to perform credit return request, product replacement etc., through CRM linkages by the SAP system.

Redesign principles and tactics

According to principle 10 – Personalize, keep track of personal process with personal profiles can increase customer intimacy.  Better returns management, and account management facilitates FedEx’s CRM.  As a result, customer satisfaction and retention are improved.  FedEx’s retain high revenue and performances among other competitors.

And for streamline in all common sales process (including quotations, order and contracts), it provides customers with service representatives with relevant information, thus able to perform effective decisions according to customer requests.  These approaches actually similar to the point concurrency under principle 1 – Lose wait.  The data retrieval, recommendations, quotations, and order etc can be readily prepared by having concurrency between these processes.  As a result efficiency in handling customers’ request is speeded up.