Warren Buffet once said, “Price is what you pay. Value is what you get. ” With a company that has over five hundred employees, four locations worldwide, and $50 million in annual sales, placing the value on the organization is simple; look at the bottom line and see the profit. This is the situation at Riordan Manufacturing where the price it paid to do business was less than what it made, defining a clear value in what Riordan provides.
Riordan’s Sales and Marketing department has a clear value; $50 million is sales to show of it. But how do we show the value for other departments within the organization such as Information Systems (IS) and Information Technology (IT) solutions? While the IS and IT costs and what Riordan pays for it are clear from looking at the financials, the value is not. This brings us to the question of what value does Riordan Manufacturing get out of its IS services and IT department. This question is the problem that Riordan Manufacturing has had for many years.
Recently, Riordan executive management hired a new Chief Information Officer (CIO) to improve its infrastructure and to answer this question. While management wants to use more IS and IT solutions throughout the organization, it has had trouble finding the perfect fit in all aspects of its operations. Even though IS and IT costs have risen, the puzzle pieces still have not come together; the value and benefit has not been clear to the company. As we will see throughout this review, it is time to focus and find the value that technology and information brings to the organization.
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It is time to find the efficiencies and savings that the company needs to clearly see the value. With Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), or Supply Chain Management (SCM) systems, there has got to be value in the way they are used. There has also got to be value in using outside services such as Application Service Providers (ASPs) than can help realize and utilize the value of these systems. Finding the best way to utilize technology will allow Riordan to find the best value in the IS and IT departments.
Business systems analysis and recommendations Riordan Manufacturing prides itself on its public reputation as the leading edge manufacturer of plastic injection moldings that is backed by a powerful and innovative research and development team. However, internally, the organization is suffering greatly from severely outdated, labor-intensive, pencil and paper processes in the sales and marketing departments. Additionally, the business processes that are automated are departmentalized suited for the use of a single job function or department.
Existing automated processes belong to the finance and accounting department as well as the inventory office of the manufacturing department. There is no connectivity between systems, and worse, attempts to establish communications between similar systems across the organization’s national and multinational locations have been fruitless. It is impossible for organization decision-makers to have a clear idea of the interworking of the organization and its financial health.
Chief Operating Officer (COO), Hugh McCauley, has developed a comprehensive strategic direction for the organization decomposed into individual strategic initiatives and further broken down into various programs that are the responsibility of relevant departmental leaders to accomplish. Riordan’s COO has done an excellent job of initiating a strategic direction and smaller goals to ensure the organization maintains industry leader status, but the missing link that will truly drive each program’s success, is an information technology linkage.
To remain ahead of competition and to transform into a more agile organization, it is recommended that Riordan’s management evaluate the benefits of enterprise-wide information systems. Enterprise-wide information systems Organizations commonly implement enterprise-wide systems to improve access to information and as a result experience growth, reduce costs, and improve efficiencies. The benefits of enterprise-wide systems such as enterprise resource management (ERP), customer relationship management (CRM), and supply chain management (SCM) directly align with Riordan’s strategic direction.
Proper implementation of these systems will add value to Riordan’s business model. However, enterprise-wide implementations are characterized by large investments and large time commitments. Therefore, the organization must evaluate which systems will help it achieve the majority of its goals, in a reasonable time frame. In doing so, decision-makers can determine if each system’s value is worth its costs and the order in which to invest in and implement each system. Enterprise Resource Management (ERP) Pros.
An ERP system is a necessary investment for Riordan because it integrates all departments and their respective functions across the organization into a single IT system (UMaine, 2009). There are three main benefits of ERP systems that directly address problems with Riordan’s operations. One benefit is a logical solution to a mess of incompatible applications currently in use by the organization. ERP also allows global access and sharing of organizational data as well. Additionally, implementing an ERP system will help the organization bypass the difficulties and expenses of replacing legacy systems (UMaine, 2009).
An analysis of Riordan’s current issues with its Finance and Accounting department reveal an immediate need for an ERP solution. Riordan’s current process to complete the general ledger, income statement, and balance sheet is so labor intensive that accountants cannot complete the task until two or three weeks after month’s end. Additionally, external audits are required monthly. Riordan’s process documentation is difficult to analyze, making this important task costly and labor intensive as well. Compliance with new, stricter government regulations is also extremely difficult for this department.
Riordan management finds these issues unacceptable and expects them to be addressed first (University of Phoenix, 2012). An ERP solution will correct these error-prone, labor-intensive processes through automation (Business-Software. com, 2010). This will help employees of the Finance and Accounting department complete Riordan’s financial statements in a timelier manner. Further, ERP will ensure that all workflows and procedures are formally documented, allowing external auditors to complete their job more effectively and produce timely and accurate feedback for Riordan management.
ERP systems also ensure there is only “one version of truth” by feeding data to one centralized, integrated database (Business-Software, 2012). Not only does ERP help the organization deliver timely, accurate information to its customers and suppliers but is also necessary for regulatory compliance. Cons. Although an ERP system will lay the foundation for modern, efficient enterprise-wide business systems, Riordan must weigh the risks of implementing the system. The first risk is cost. For a multinational company like Riordan, the cost of installation can range from $30,000 to $500 million (Demand Media Inc. , 2012).
Riordan will need to do an extensive financial analysis to determine if the organization has enough capital to expend on an ERP implementation as well as enough contingency funding to bail the organization out should the implementation fail. Another risk of ERP implementation is the level of complexity that and ERP system will add to Riordan’s processes. Riordan’s current staff may find the system to be too difficult to use and rebel against the system as a result. Riordan may also find that a portion of their existing staff may turnover as a result of the implementation and will need to hire a more specialized user base as a result.
These specialized employees may require higher salaries than those they replace. To avoid this, Riordan will want to provide comprehensive training to affected users, but it will be a time-consuming processefficiency benefits of the system will not be measurable until the organization adjusts to the changes that the ERP system will bring (Demand Media Inc. , 2012). An important risk of ERP implementation to consider is data integrity. Because the ERP system’s database will be the single source of Riordan’s data, it must be accurate and secure.
Integrating the ERP system with existing systems may require some software modifications. It will be important to ensure that the integration of system results in data that is single version of the truth as well as securing any new transactions between systems. It is also important to note that some ERP systems will be too inflexible to work with Riordan’s current business process and strategy (Demand Media Inc. , 2012). The organization must evaluate vendor and implementation options to ensure the ERP system help drive Riordan’s objectives, not hinder them.
Customer Relationship Management (CRM) Pros. Riordan’s strategic direction and initiatives are highly customer-centric. Riordan’s strategy is to compete in its market by serving the top 15 customer clusters, and driving this strategy by providing the highest level of customer satisfaction to its 20 most important account holders. Additionally, the COO wants the organization to transform the Riordan brand into a significant competitive advantage (University of Phoenix, 2012). A CRM system is an excellent way to drive the success of this customer-centric strategy.
CRM manages all aspects of an organization’s relationship with its customers to help increase customer loyalty, retention, and the organization’s profitability (UMaine, 2009). Additionally, CRM systems are synonymous with building brand awareness and loyalty. A modern definition of a brand is the summation of hundreds of small interactions between an organization and its customers (Yarmoff, 2001). A CRM system can capture the data that results from these actions for analysis by the marketing department. Marketing analysts can determine what is unique about the organization that draws customers to it, helping Riordan build its brand.
In the upcoming fiscal year, Riordan is launching an aggressive sales and marketing program to grow its revenue, expand its customer base, and retain its best customers. The sales and marketing department will find difficulty in successfully completing this program considering their outdated, pencil and paper processes within the department. It will be difficult for Riordan’s marketers to target customers effectively by sifting through hundreds of paper files of historical sales records to conduct market analysis.
It will be difficult for the sales department to document special customers’ needs, and ensure they are served throughout the organization’s order fulfillment processes by using the disparate sales systems currently in use. For back office analytical purposes, CRM can assist the marketing department in drawing upon data from a single data source to reveal trends, explain outcomes, predict results of campaigns, and identify the organization’s most profitable customers (UMaine, 2009).
Analytical CRM helps the marketing department understand what Riordan’s customers like, dislike, and what appeals to them and indicate if Riordan is meeting or is capable of meeting customer’s needs. Analytical CRM provides this deep understanding of an organization’s customer base through data analysis and business intelligence tools (UMaine, 2009). It sends pertinent information to the marketing department for campaigns and to the front-end part of the system to provide the sales force with the information it requires. On the front-end, operational CRM can assist the sales representatives.
Technology will include a contact management system, and opportunity management system. In this use-case, the CRM system will alert the sales representative regarding what the customer likes/dislikes to enhance cross-selling and up-selling opportunities. Front-end CRM will also help the sales representatives in resolving customer issues by providing web-based customer self-service tips and call scripting to better equip the representatives with handling the most common issues (UMaine, 2009). The CRM system can log recurring customer issues.
This will assist Riordan’s sales representatives in solving difficult problems that have been previously addresses as well as assist management in targeting recurring scenarios that require improvement, resulting in increased customer satisfaction and retention rates. Cons. Like other enterprise-wide systems, CRM systems are characterized by expensive and difficult implementations. Riordan management has to ensure that the CRM initiative is well planned, historical data is input accurately, and ensure workflow is properly defined to reduce the risk of project failure (Gartner Research, 2000).
Success will also be highly dependent on cooperation with the ERP and SCM initiatives, as they eventually will become integrated systems dependent on one another’s data inputs and outputs. Solutions must be chosen with compatibility and interconnectivity in mind. In CRM, over-automation is always a risk (Gartner Research, 2000). CRM is about bringing a company and its customers closer together, and some human-to-human interaction is necessary for customers to feel as if they are being heard. Finally, CRM systems are difficult systems to measure numeric outcomes and value (Gartner Research, 2000).
Riordan management must define what unique, possibly intangible outcomes they want to measure from the CRM system to ensure it is providing its intended value. Supply Chain Management (SCM) Pros. As a manufacturer, Riordan would experience many benefits from the implementation of a SCM system. As part of its business strategy, Riordan is currently striving for supply chain excellence. The organization will drive this strategy by streamlining time-to-market processes, achieving 90% of customer requested ship dates, and reducing inefficiencies associated with its current shipping methods (University of Phoenix, 2012).
A SCM system can help the organization achieve these goals as it manages the information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability (UMaine, 2009). A SCM system captures data from the five phases of the supply chain management process; planning, sourcing, making, delivering, and returning. This data translates into complete visibility and awareness of one’s supply chain, and in turn, competitive advantages. A SCM will be most effective in the planning phase if Riordan leverages information from an ERP and CRM system.
With that data, the SCM system uses metrics to forecast and accurately meet customer demand. Riordan will eliminate waste from its inventory by having the right amount of materials on hand to fulfill customers’ orders as they are placed, reducing costs stemming from holding onto excessive inventory. Developing insight across all inventory locations will also permit better sharing of resources on-hand to meet emergency customer needs. In the sourcing phase, the SCM system will provide vendor management capabilities. Riordan can input data about eliable suppliers it has partnered with in the past as well as suppliers that have provided inadequate services to document differences in quality among vendors. Riordan can also capture pricing data to determine which vendors provide the best value for their products. This will make sourcing easier and more effective. The deals Riordan obtains from strong vendor partnerships could translate in more discounts for customers farther down the line in the supply chain. In the “make” phase of SCM, a SCM system can ensure Riordan is manufacturing its products in accordance with the organization’s quality standards.
Managers can determine the desired quality levels, translate the quality levels into metrics, and have these performance metrics monitored with the SCM system. The system will indicate when manufacturing is in line with quality metrics, surpassing metrics, or below metrics. A good deal of Rirodan’s reputation is dependent on manufacturing high quality products, so performance metrics in this area are important. The deliver phase is important to monitor with the SCM system as Riordan is experiencing inefficiencies in its logistic processes.
The SCM system will help Riordan deal with processes and controls of logistic process to create efficient and effective transport and storage of its products as they are delivered to the customer (UMaine, 2009). A SCM system can analyze delivery times and help management determine where inefficiencies are occurring and why. The results may prompt management to create more conveniently located inventory facility locations to create more reliable transit times. The system will also help Riordan coordinate more effectively with its outsourced trucking company.
The ability to share information between both parties will allow Riordan to load its trucks to 100% capacity, resulting in cost savings for itself as well as less trucks and drivers for its partner. Finally, the return phase of SCM will be most effective when combined with data from the CRM system. The return phase of SCM pertains to the process allowing customers to return defective and excess products (UMaine, 2009). It is important to capture why customers are returning products to serve them better in the future and learn from errors. It is also important for
Riordan to be instantly aware that a return process has been initiated, so it can send out a replacement to a customer immediately. The customer may be dissatisfied as it is, so handling returns effectively can encourage the customer to continue using the company for future orders. This phase will help Riordan meet its goals of serving customers better as well as retaining them. Cons. Riordan must consider the many risks of supply chain management because this system is dependent on the cooperation of external business partners. The first roadblock is gaining trust from business partners.
Riordan and its suppliers must be willing to exchange some confidential information in exchange for increase supply chain efficiency. Next a supply chain is only as strong as its weakest link, so if Riordan’s suppliers cannot provide quality goods in proper time frames, Riordan cannot get the most out of its SCM system (Wailgum, 2008). Internally, there will be resistance to change as well. Employees will need to adjust to stricter data entry requirements as well as higher scrutiny of their performance. Training will be crucial, as mistakes with the system will be made initially.
A SCM system cannot absorb a company’s history and processes in the first few months (Wailgum, 2008) Management will have to be patient and continually feed the system clean data to reap visibility benefits. Recommendations The success of implementing enterprise-wide business tools is dependent on the creation of a single data source, populated by accurate and relevant information. To lay the foundation that will capture and integrate all information from Riordan’s unique workflows and processes, it is recommended that Riordan first invest in and implement an ERP system.
Once this implementation is complete, and the organization is accustomed to the changes this system will bring, a CRM implementation can be considered. The ERP system’s centralized database will serve as the data source for the CRM system, making this implementation an easier transition for the organization. Once the CRM system is successfully implemented, a SCM implementation can be considered as Riordan’s financial health and strategic initiatives permit. A SCM system is recommended as the final enterprise-wide system to implement as it is reliant on information captured by both ERP systems and CRM systems (Wailgum, 2008).
The success of these implementations will be dependent on a number of factors such as implementing the solutions in-house versus outsourcing the efforts, and implementing a performance metric system to ensure that the systems are continually providing the value intended. Outsourcing Models Riordan needs to consider outsourcing some of its business functions to reduce upfront cost and integration challenges faced while implementing enterprise applications ERP and CRM. There are many outsourcing models to consider and many benefits and advantages.
Therefore, a thorough analysis and understanding of outsourcing models is necessary for Riordan’s long-term strategic alliance with vendors. This section outlines outsourcing models and services provided by the application service provider or ASP and other outsourcing models. ASP Model Application service provider is one who has expertise in implementing and managing IT operations of the business applications over a secure Internet on behalf of its customer or client.
ASP also known as Managed Application provider (MAP), or managed services “combine hosted software, hardware and networking technologies to offer a service-based application, as opposed to a company-owned and operated application” (Sans Institute, 2006). ASP services include end-to-end solutions necessary for executing and operation of ERP, CRM, accounting, payroll, cloud computing, and customized applications. In the ASP model, the provider typically identifies the applications common to many organizations (for example, ERP) and hosts them in their data centers.
The access to applications provided via a browser-based or thin client software. According to Pearlson and Saunders (2010), “ASP not only provides access to software, but infrastructure, people, and maintenance to run it in a customized fashion for a client. ” Hence, the objective of ASP is to provide a secure, error-free environment of application systems and infrastructure round the clock. The ideal candidates for taking the advantage of ASP are Riordan’s non-core applications, which relaxes IT resources and make them available for core applications.
Another instance of ASP is Software as a Service (SaaS), which host multiple companies (multi-tenant) to use the same set of software and hardware, but still provide a user experience of single application. The application accessed via Internet, and provides rich web interface using technologies like AJAX and XML. The web applications delivered via SaaS is customizable and integrates into in-house application using web services and ETL tools. For example, Sales Force applications from SalesForce. com are multi-tenant web applications used by many organizations as their primary CRM application.
Engagement with ASP involves service level agreements (SLAs), which contains many clause and vendor expectations. SLAs consists of sections on “availability, accessibility, performance, maintenance, backup/recovery, upgrades, equipment ownership, software ownership, security, and confidentiality” (Pearlson & Saunders, 2010). ASP may provide cost-effective solution in their area of their expertise. However, for security professionals, the move to use the ASP model comes at an often-high cost. The ASP may be an expert in its domain, but its security function may be immature (Schoenfield, n. d. ).
Hence, one should consider risk assessment and analyze the end-to-end solution of ASPs and their security models. Many ASPs available in the market, Riordan should evaluate them once the outsourcing requirement finalized. The table below provides list of ASPs and their domain expertise. Table 1 List of ASPs Application Service Provider Domain expertise Appshop www. appshop. com Oracle 11i ebusiness suite Applications BlueStar Solutions www. bluestarsolutions. com Managing ERP solutions with a focus on SAP Corio www. corio. com Specializes in Oracle Applications Outtask www. outtask. com Integration of budgeting, customer service, sales anagement, and human resources applications Surebridge www. surebridge. com High-tech manufacturing, distribution, health care applications USi www. usinternetworking. com Ariba, Siebel, Microsoft, and Oracle customer base Note. Adapted from “Information Systems Sourcing,” by K. E. Pearlson and C. E. Saunders, 2010, Managing and Using Information Systems. A Strategic Approach. Copyright 2010 by John Wiley & Sons Inc. According to Subramanian and Williams (2007), a complex scenario of services provided by single or multiple vendors offer multiple benefits. The long term agreements are necessary to reap higher benefits.
This model provides competence needed in the initial stage and provides better quality, increases productivity, and reduces cost as time progress. Service provider takes full end-to-end responsibility by investing on new technologies, mitigating risks to maintain business continuity and building high-level of trust. Figure 1. Services offered by managed Services. Note. Reprinted from Infosys White Paper (p. 5), by Subramanian and Williams, 2007, Copyright 2011 Infosys Limited Crowdsourcing Crowdsourcing is a new outsourcing model introduced in 2006 by Jeff Howe in an article titled “The rise of crowdsourcing” in WIRED online magazine.
In the traditional outsourcing model, the work of an employee outsourced to external service provider. In this model, the available skilled resources and ideas limited to service provider and its industry and domain experience. Crowdsourcing reach out to a larger community over the Internet to complete a job or task. Thus, organizations gain access to a wide range of skills and resources available online. According to Jeff Howe the definition of Crowdsourcing is the act of taking a task traditionally performed by an employee or contractor and outsourcing it to an undefined, generally large group of people, in the form of an open call.
Companies and individual make an open call to perform a job for a small amount. Open call to an Internet community of collective intelligence can increase productivity. With the advancement of Internet and Web 2. 0, many websites like elance. com, odesk. com and guru. com provide abundant resources of freelancers available globally. Riordan can make use of this model where the projects need specialized skills and risk is very low. Resources picked on reviews and rewards obtained from past assignments.
For example, Riordan’s websites along with dynamic B2B and B2C pages using PHP and open source technologies is a good candidate of Crowdsourcing. Disadvantages of Crowdsourcing are low quality, communication issues, and researching for reliable resources with required skill set. Full Outsourcing Full outsourcing refers to outsourcing overall IT functions in an organization to an external service provider. This is similar to ASP model but the hardware and software remain on-site and vendor resources may collaborate with employee on-site or remotely, depending on the IT functions.
For example, an enterprise may outsource helpdesk and desktop support. In this case vendor’s resources remain on-site to provide support on hardware and software issues. Some of software issues rectified remotely. Software development and maintenance happen in the vendor’s location. Companies typically choose this model if their perspective of IT does not support organizations strategic initiative. Doing so managers, and employees can concentrate on other value-adding assignment. Companies outsource completely to accommodate growth and respond to their business environment (Pearlson & Saunders, 2010, p. 09) with SLA’s and multiple vendors. Riordan should not opt for full outsourcing because of risk in exposing copyrighted material, formulas, trade secrets, and unique manufacturing methods to competitors. Selective outsourcing fit well for Riordan. Selective Outsourcing Selective outsourcing allows IT executives with options of retaining few IT functions in-house for strategic reasons. Selective outsourcing gives greater flexibility and often better service because of competitive market (Pearlson & Saunders, 2010, p. 210). According to Subramanian and Williams (2007), another name for selective outsourcing is “Strategic out-tasking. IT executive will have total control, manage projects, and review deliverables in-house. Only few IT functions like new application development, enhancing application due business changes, fix non-critical issues outsourced and vendor take responsibility. Selective outsourcing is best suited for companies new to outsourcing. Riordan must outsource short-term assignments and small projects before venturing outsourcing in a bigger scale and when they cannot find resources with specific skills or to gain strategic advantage.
Outsourcing versus in-house implementations Rose India Technologies PVT. Ltd (2011) defines outsourcing as “the process by which a company contracts another company to provide particular services”. These services and functions would be otherwise carried out in-house by the company’s own employees. The main reason companies outsource supply chain management are to reduce cost, free up internal resources, save time, to gain better control of managing functions, not enough internal resources to handle the job and share the risk with a partner.
Some of disadvantages of outsourcing SCM include the underestimation of cost due to communication, inadequate governance meaning that an in-house overseeing committee needs to be set up, reduction of technical, key information and crucial knowledge control, dimensioning leadership with the business relations managed by supplier, increase in business continuity, increased cost due to salaries raises in other companies, and unethical suppliers. Outsourcing SCM will save the organization money in IT expenditures.
The system becomes is streamlined and use by all location, more energy and money is left for core business strategies. The vendor will handle the development and implementation of custom finance software along with an accounting package along with the establishment of a joint venture offshore back office operation of the company’s invoicing, revenue processing, and auditing services. Some IT functions should not be outsourced such as core business competencies, functions that are knowledge based, and are company proprietary information.
Multidisciplinary, Interdepartmental, factuality, and critical business function that may involve political risk should not be outsourced as well. Riordan should not outsource its core business function this part of the project should be done in-house so that Riordan maintain and controls these function to keep down all risk whether they are security risk or political risk. The reason most companies outsource ERP system is because they do not have the experience and the expertise to implement an ERP package.
When it comes to implementation the supplier has a perfected system for installation and implementation, and most organizations do not want to assign full time staff to implementation thereby taking away from the day-to-day work as well as ERP package can be confusing and frustrating to employees due to false starts and downtime. Outsourcing ERP tends to be a good decision when it comes to medium to lager companies because more than likely outside help will be need for consultation, references, credentials, implementation, and monitoring and check consultants.
Stress within the company is one disadvantage because employees must learn a new system, and process that may affect productivity and efficiency. The effect can be short and long term. Other cons such cost overruns during and implementation, converting, training and customized modules. The ERP system should be outsourced to a vendor can handle the testing and coding of the new system to insure it integrates with the existing or new MRP systems well verification and documentation leaving the IT Department free to oversee vendor and other IT functions ( Janstal,1999).
Many ERP vendors and consulting firms, who have professional implementation and customization skills for manufacturing ERP software less adjustments, are necessary because they will design software specifically for Riordan Manufacturing. The cost for the production of ERP software purchase depends on the size and functions of the software and the extent of the adjustment (Baihaki,2009).
The business of Customer Relationship Management (CRM) is evolving and changing in the market on a constant and constant base to meet the growing and demanding need for new strategies that increase business profit margin by having an application that create interactive analysis of the customers’ requirements and leading to the customers satisfaction. C. R. M s’ are all over the market place the need is to choose one, implement, install and train. Simple jobs no need to outsource. Value of Implementations and Outsourcing Recommendations
Supply Chain Management Implementation Studies show that the effective supply chain management (SCM) enables organizations to perform better and maximize profitability by aligning their supply chains with the market demand (Baltzan & Phillips, 2010). SCM implementation helps the organization to reduce inventory levels, minimize order-processing costs, improve responsiveness to customer needs, and compress order cycle time by streamlining and automating information flow among the different components of the supply chain process (Sumner, 2005).
SCM implementation enables an organization to gain competitive advantage by reducing operating costs and increasing process efficiencies to meet market demands and to ensure timely delivery of products or services. Customer Relationship Management Implementation Intense market competition is forcing organizations to change their business models from sales-focused to customer-focused making customer satisfaction a paramount for the organization’s success (Baltzan & Phillips, 2010).
Customer relationship management (CRM) implementation will enable organizations to gain insight into customer buying behavior and purchase patterns and develop business strategies to improve customer satisfaction and service quality (Baltzan & Phillips, 2010). Riordan can improve customer satisfaction, service quality, customer loyalty, profitability, and sales volume by implementing CRM systems to manage its interactions with the customers efficiently. Enterprise Resource Planning Implementation Business leaders require access to real-time business information to make business-related decisions in an efficient manner to improve performance.
Enterprise resource planning (ERP) implementation integrates organization’s business processes into an information technology (IT) system facilitating an integrated view of enterprise-wide business information (Baltzan & Phillips, 2010). ERP enables Riordan to streamline, automate, and integrate business processes to improve efficiency of business functions to reduce operating costs, improve customer service, increase revenues, eliminate redundancies, and improve decision-making (Baltzan & Phillips, 2010). Outsourcing Recommendations
Organizations have to find ways to improve performance of business operations to sustain in the global competition. Outsourcing enables an organization to increase productivity, reduce operating costs, and improve flexibility by taking advantage of low labor cost regions and difference in time zones (Morello, 2003). Riordan should consider full outsourcing model for the implementation of SCM, CRM, and ERP systems to another organization while ensuring appropriate knowledge transfer to its employees during the implementation process.
Service providers expertise in the implementation of SCM, CRM, and ERP systems will help the organization to streamline, automate, standardize, and fine tune business processes to increase efficiency of business operations. Knowledge transfer to Riordan’s employees during and after implementation process will enable the organization to gain and retain adequate knowledge to support business systems efficiently. Riordan can use the selective outsourcing model for ongoing maintenance of the SCM, CRM, and ERP systems.
Outsourcing only the IT support services to another organization will enable Riordan to keep critical business process knowledge in-house while ensuring round-the-clock IT support to its global business operations. Outsourcing redundant IT support services to another organization will help Riordan to concentrate more on business critical functions to increase productivity and improve operations performance. Providing Continued Value Once IT implementations are completed assessing the value of new systems is the next step.
When companies invest in IT initiatives they want to see the added value to the organizations IT and IS departments. Setting up a process to measure continued value is essential in achieving this. For Riordan is recommend using IT metrics and Key Performance Indicators (KPI) to measure value. KPIs also known as Key Success Indicators will help the organization define and also measure progress toward organizational IT goals. KPIs are quantifiable measurements that are agreed upon, reflecting the critical success factors of the organization.
If Key Performance Indicators are going to be of any value there must be a way for it to be accurately defined and measured. Equally important, KPIs once defined should be consistent year to year. The organization should also look to set targets for each Key Performance Indicator. Once KPIs are defined a way to measure it needs to be set up to collect information, a target, has to be established. Below are some KPIs for Riordan in assessing success of IT initiatives: IS and IT implementation adds tangible value to organization Implementation reduce IS and IT cost
Measuring Effectiveness Measuring the effectiveness of a system can show its value to the organization but also set a benchmark to continually assess the system year after year. Using Effectiveness IT metrics measures its effectiveness on IT systems from the standpoint of a business tool. The metric can measure how IT affects specific aspects of a business and the business process such as conversion rates, customer satisfaction, and sell-through increases. Specifically, the metrics goal is to show how well a company is doing in reaching its objectives.
In constantly questioning, it determines if the right decisions are being made to reach these objectives. One way we can measure effectiveness is through surveys to IT, finance and HR departments. The survey giving to employees can give insight as to if the system is helping make work more productive to Riordan employees or caused increased difficultly. The surveys should look to answer these questions: Is the system increasing daily productivity? Does system work seamlessly with critical IT systems? Are there any disadvantages to the new system?
Is the system easy to support? Easy to use? Is more staff training needed? Establishing benchmarks is a typical way of measuring performance of IT Effectiveness. Benchmarking puts IT in greater demand to align with the business and demonstrate the company economic value. IT benchmarks can show how competitive IS and IT services are, and if there are ways to improve the process or increase efficiency of delivery of services. There are different models that can be used for Riordan to asses IS values. These are recommended:
Peer/ industry comparisons Customer satisfaction IT effectiveness/value IT efficiency/cost Business IT process Cost benchmarking will address the problem of cost and quality of services. It can show what can be done to reduce cost and improve performance by showing best practices in the industry. Figure 2. Cost Benchmarking. Reprinted from IT Benchmarking: A Baseline for improving performance, by Ambuhl and Bitterman, 2004. A successful benchmark is valued by the actionable recommendation that yield immediate and long-term results.
Be sure to outlining specifics in improving efficiency and effectiveness or it will have no significant value. Measuring Efficiency Measuring IT effectiveness is only one aspect to determining IT value. Efficiency IT metrics while similar has differences. This metric will measure the performance of an IT system. It measures performance such as throughput, speed, and availability of a system. This will also determine how well the newly implemented system works with established systems. To measure performance organized documenting and reporting process must be in place.
Efficiency IT metrics can be used to measure the throughput, how fast information is travelling throughout Riordan’s intranet or the speed of transactions with its suppliers and customers. Additionally, it can measure traffic to a website. Traffic measures how many people come to a website in a given period of time. Additional benefits to the Efficiency IT metric, it not only measures the efficiency of a IT system for evaluating and improving its performance, but it makes sure the system is being used the right way, ensuring the effectiveness of the processes, and that they are in step with business objectives.
Utilizing methods such as KPIs, Effectiveness IT metrics, Efficiency IT metrics, and benchmarking will help Riordan establish a clear dashboard, adding value to its IS and IT departments with every successful IT implementation. It will also show continual value of its IT systems by performance, which systems continue to add value and which do not. Conclusion As we have seen, Riordan Manufacturing’s utilization of information systems and information technology leaves a lot to be desired. With so much potential, they continue to have manual processes for tasks and information that can and should be automated and interconnected.
Because of the lack of technology, executive management is not capable of seeing the big picture they need across the entire organization in order to make the best decisions. Because of this, it is hard for the company to see the value of the continued IS and IT investments. However, with the implementation of such systems as ERP, CRM, or SCM, value can be added, value can be see in the benefits they provide. While different systems may have a better fit within the organization, Riordan must determine what is best for them; they must determine how they will be used in the most beneficial way.
With any major infrastructure change, there are new risks and costs to the organization. The correct hardware must be purchased; the right software must be installed; the business rules and requirements must be met; the systems must be maintained over time. Putting these puzzle pieces together might not always go as well as planned. This is why Riordan must consider some of the outsourcing solutions discussed. Deciding on using an ASP, running in a SaaS model, or installing and maintaining the systems themselves, each require extremely detailed analysis.
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