A Modelling and Evaluation Methodology for E-Commerce enabled BPR a
Tatsiopoulos, I.P., bPanayiotou N.A., cPonis S.T.
a: Tatsiopoulos, I. P. Associate Professor National Technical University of Athens 15780 Zografos, Athens, Greece Tel:+301 7723572, Fax: +301 7723571 E-Mail:
[email protected] b: Panayiotou, N. A. Lecturer MBA, Lancaster University, UK National Technical University of Athens 15780 Zografos, Athens, Greece Tel:+301 7721195, Fax: +301 7723571 E-Mail:
[email protected] c: Ponis, S. T. Mechanical Engineer, NTUA, Greece Research Engineer National Technical University of Athens 15780 Zografos, Athens, Greece Tel:+301 7722384, Fax: +301 7723571 E-Mail:
[email protected] Abstract This paper proposes a structured methodology for the evaluation of alternative Electronic Commerce technologies to be introduced into SMEs’ (Small to Medium Enterprises) every-day business practices. The main tools used by the methodology are Discrete Event Simulation and Activity Based Costing/ Management (ABC/ABM). The enterprise strategy definition is supported by the GRAI methodology, whereas the business process modeling is carried out with the use of IDEF-0 and IDEF-3 activity modelling tools. The application of the methodology and the results produced are demonstrated for a Greek medium-sized enterprise operating in the Clothing Industry. Conclusions and further research efforts are presented in the end of the paper. Keywords: E-Commerce, BPR, Simulation, ABC, SME case study
1. Introduction Companies around the globe and across all industries are embracing E-Commerce to accelerate their business to new plateaus of efficiencies and customer care. Meanwhile, consumers worldwide are increasingly migrating to the web to shop and buy any number of goods and services from any number of places worldwide (e-Marketer Inc, 20016). By far the most visible aspect of E-Commerce, B2C applications have created opportunities to build new one-on-one relationships with consumers. Information can be personalised and services can be sold contextually. New business models are enabling consumers to more specifically define their needs. Electronic Commerce essentially includes the undertaking of normal commercial, government and personal activities by means of computers and telecommunication networks and constitutes of a wide variety of activities involving the exchange of information, data or value-based exchanges between two or more parties. Clarke1, 1999, Hoffman & Novak7, 1998, Poon13, 1998, Riggins & Rhee14, 1998, Swatman18, 1996, Wigand20, 1997 and Zwass21, 1996 have all provided definitions and approaches of Electronic Commerce. In an environment where the physical barriers of time and distance are minimized, there is a fundamental shift in the way business is conducted. New rules of engagement across all markets (e.g. electronic sales) have put the consumer in a powerful position. Conducting commerce on-line requires methods that leverage the Internet’s strengths, while supporting the limitations of the physical supply complex. (Kurt Salmon & Associates9, 2000). Although several direct selling models are still evolving, consumers’ on-line access enables companies to provide enhanced services, such as more detailed product specifications, feedback from other consumers, and almost unlimited merchandising capabilities that are not feasible in traditional shopping environments because of physical, space and time constraints. Moreover, ElectronicCommerce is expected to develop beyond the retail market model and to address more complex inter-organisational activities (Elliman, 20005). The successful implementation of E-Commerce solutions calls for a careful but rapid restructuring of traditional business processes in the organization. Methodologies such as Business Process Re-engineering, Activity Based Costing & Activity Based Management, Enterprise Modelling, Benchmarking and Best Practices are part of the toolsets used in order to analyse, design, improve and evaluate different business processes (Earl et al, 19953). A new trend is the use of Business Process Simulation in both the design and the evaluation phase of re-engineering projects. Simulation is a tool that characterises a system, and provides means for evaluating potential results depending on changes of environmental variables (Schriber, 198716). Virtually any performance criterion can be examined with simulation (Sadowski et al, 199015). Typical performance criteria are process cycle times, queue times, resource utilisation, activity costs or throughput (Shannon et al, 198117). Verified and validated simulation models are in the position to depict the system’s behavior in alternative process scenarios. The development of Simulation models is an important way of learning about complex systems evaluation (Paul, Kulgis, 199510), such as electronic markets. It could be argued that the failure of business change projects is sometimes due to a lack of simulation model development for evaluating the effects o design solutions before implementation (Tumay, 199519, Paul et al, 1999a11;1999b12). Mistakes brought about by business process change can only be realised once the redesigned processes are implemented, when it is too late, costly and probably impossible to correct wrong decisions. Once the simulation of the solution has been conducted and the outcomes evaluated, decisions can be made. These decisions involve selecting the future course of action that will have the highest probability of achieving the desired result. Finally, the simulation model should be used to continually monitor and evaluate the process for continuous improvement. Taking into account the particular conditions of the Greek market in the Clothing industry, the technological trends and the country-specific cultural aspects, this paper will try to present a set of analytical tools supporting a proposed methodology. A declaration of the desired objectives
and the methodology used is presented in Chapter 2. In Chapter 3 a realization of the proposed methodology in a Greek SME user is being carried out and findings are being presented. The conclusions from the applied methodology and the implications for further research are summarized in Chapter 4. 2. Objectives and Proposed Methodology A proposed methodology for the implementation of E-Commerce enabled BPR and the evaluation of its potential results can be seen in Figure 1.
Clear Strategy, Knowledge of Existing Processes
1
Envision
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Analyse
Introduction of new Technologies Monitor and fine-tune
Knowledge of New Processes
Design Design High Level Low Level
3
Im plem ent
Control & Improvement
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Build
Measure Enhance
People Processes Enabling Technology
Analysed Dim ensions
Figure 1: A Proposed Methodology The starting point for a BPR project is the formation of a well-defined corporate strategy. The introduction of advanced technologies such as E-commerce, which will affect the way the company operates, must be a strategic decision. In our proposed methodology, this envision phase is supported by the use of GRAI Grid (Doumeingts, et al, 19952). The GRAI Grid defines the most important decisions in selected business processes of the enterprise and the information exchanged among the different functional areas. The most important decision areas are characterised as critical decision centres. The main outcome of the GRAI analysis is the identification of improvement areas which are in line with the corporate strategic orientation. Nevertheless, the GRAI analysis cannot provide the necessary detail on an activity level. For this purpose, the decision centers identified in the GRAI Grid are decomposed into detailed IDEF-0 diagrams. IDEF-0 is a language for describing activities or processes and how they relate. Since understanding hierarchy is important in comprehending complex systems, IDEF-0 is particularly useful because it includes hierarchy as an element of its modelling capability. The outcome of the analysis phase is a clear view of the problematic areas and business process improvement opportunities. The determination of these areas is achieved by analysing activities’ inputs, outputs, controls and mechanisms. Every problematic area is connected with one or more improvement opportunities. The second step of the methodology includes the design of the new system and comprises of the high-level and low-level design phases. The objectives of this step are the knowledge of the new processes as well as the functional and technical specifications of the E-Commerce
solution to be introduced. The high-level design of the new system is supported by the IDEF-0 methodology. Decomposition of the generated IDEF-0 diagrams to lower levels provides part of the low-level design view. Although IDEF-0 is a helpful tool, it cannot take into account the temporal dimension of the system. IDEF-3 is ideal to perform alternative scenarios analyses, using its process schematics. IDEF-3 process schematics are the primary means for capturing, managing, and displaying process-centred knowledge. These schematics provide a graphical medium that helps domain experts and the analysis group communicate knowledge about processes. This includes knowledge about events and activities, the objects that participate in those occurrences, and the constraining relations that govern the behaviour of an occurrence. IDEF-3 combines the benefit of compatibility with the IDEF-0 methodology with this of being an ideal intermediate state for transition to the simulation process model. Discrete event simulation is used for the evaluation of the candidate E-Commerce solutions to be introduced in the organization. Discrete event simulations replicate processes as a sequence of events where each event has a beginning point and an ending point usually measured by time. Associated with these discrete points in time are state variables that measure the state of the process being simulated. Therefore, as a simulation proceeds through a series of events, the process under simulation will be viewed as a series of state changes. Analysis can focus either globally or locally as designed in any particular simulation. After the construction of an accurate model that presents reality in a satisfactory way, the simulation run takes place. The simulation run is repeated for a number of times that can guarantee statistically acceptable results. In these results, the analysis of the output data is based. The results of the simulation analysis are combined with Activity Based Costing techniques. The flexibility of the simulation approach permits the calculation of a variety of performance indicators related to time, cost or quality. Activity Based Costing uses the outputs of simulation runs and translates them into financials terms. The design phase through the Simulation and ABC results provides us with all the necessary information (functional, technical and financial specifications) for the selection of the E-Commerce solution and the most suitable IT supplier. Next, the new system is introduced. This is actually triggering the implementation and build sub-phases, which are closely monitored by a dedicated enterprise project management. A master timeline for all involved divisions is developed. The implementation phase is monitored by a detailed project plan, which includes all timelines, resources, costs, milestones and dependencies. After the E-Commerce solution is fully implemented the newly introduced process has to be controlled and points of potential improvement must be identified. This is a process, which applies to the system throughout its life cycle and is responsible for measuring its performance. The results of the monitoring system feed the Enhance sub-phase of the methodology, which is responsible for suggesting alternative scenarios for business process improvement. The tools of Simulation and Activity Based Management support the organisation thgroughout the Business Process Impronvement effort. Alternative simulation scenarios and their evaluation with ABM play a significant role in the organizational DSS (Decision Support System) empowerment and the selection of appropriate E-Commerce tactics. All the four steps and the eight phases of the proposed methodology are integrated into the three dimensions of the organization (depicted in Figure 1), these being people, processes and enabling technologies. These three dimensions are adequate for analyzing enterprise systems (EPET II- NEO EKVAN 1.3/64, 2000).
The set of tools used throughout the four steps of the methodology is presented in Figure 2. GRAI IDEF-0
Grids
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ABM & IDEF-3
Tools
Simulation 7
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Project
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ABC 5
1,2:Envision 1,2:Envision & &Analysis Analysis
3,4,5: 3,4,5: Design Design
6: 6:Implemention Implemention & &Building Building
7: 7: Measure Measure & & Enhance Enhance
Figure 2: Selection of the Solution The following chapter provides a step by step presentation of the proposed methodology’s application to a case company operating in the Greek apparel sector. 3. A Case Study The company under discussion was founded in 1976. Since then it is growing continuously and is at present one of the ten most successful garment manufacturers in Greece with sales of more than EURO 8.000.000 per annum. The company’s success is mainly due to its early adopting of the virtual enterprise structure benefits along with the implementation of technology–driven solutions throughout the organisations’ extended supply chain that led to a customer oriented business system. This case study demonstrates the integration of the methodology suggested in the previous chapter into the organisation’s business processes. 3.1
Strategy Definition and Analysis of the Existing Processes
Business Process Reengineering is an issue of strategic importance. As a result the existing strategy of the company must be clearly defined, thus increasing the possibilities for the BPR project success. To obtain a clear view of the strategy structure, focus groups were assembled with the participation of the company managers. This resulted to a review of the existing strategy and the identification of environmental trends and corporate strengths and weaknesses (envision phase). The next step was the representation of the existing situation on a high decisional level using the GRAI Grid methodology of the GIM architecture1 which provides both the decisional and informational view of an enterprise. The decision flow is a bottom-up process (the higher managerial levels decide and the lower execute), while the information flow can have both bottom-up and top-down direction (high levels provide information necessary for execution and lower levels report for the achieved results). The GRAI Grid is shown in Figure 3. The dotted lines indicate the new decisional and informational framework of the desired state.
The analysis of the GRAI Grid led to the identification of high importance areas, the definition of the future strategy and the decision of the BPR project initiation including identification of processes to be reengineered and the enabling information technologies. The new decision flows can be summarized as follows: The top management decided to change the Order Receiving Strategy in order to take advantage of the new e-business technologies. Two decisions were made. The first one had to do with the introduction of Web Sales while the other was the adoption of a new order receiving strategy. The decision flow from MCO 20 to MCO 50 (where MCO stands for the function “To Manage the Customer Order” and 50 is the temporal code for the activity level) represents the decision framework needed to support the Web Sales (positioning, segmentation, pricing strategy, IT strategy). The decision flow from MCO 20 to MCO 30 represents the decision framework needed to support the new customer order receiving processes. The decision flow from MCO 30 to MCO 50 provides us with the decision framework for the effective management of the new processes in a tactical level (selling season horizon). In the new situation an enrichment of the existing information infrastructure takes place due to the new decisional flows. FCTS
Η= 5 Years P= 5 Years 10 Η=1 Year P=1 Month 20 Η= 6 Months P= 1 Month
Forecasts, evaluation of trends and perspectives of the domestic and international market, assessment of new IT methods Forecasts, market research, data retrieval from certified national or other organisations.
Forecasts, data from received orders
30
Η=1 Μonth P= 1 Week
TO PLAN THE MANUFACTURING (PM)
TO MANAGE THE RAW MATERIALS (MRM)
TO MANAGE THE CUSTOMER ORDERS (MCO)
EXTERNAL INFORMATION (ΕΙ)
H/P
INTERNAL INFORMATION (II)
TO MANAGE RESOURCES (MR)
To elaborate the Business Plan
ORDER RECEIVING IT STRATEGY
To elaborate a rough cut material acquisition plan, to formate an approved vendors list.
Order receiving, To order the raw negotiations, final agreement, delivery materials based on forecasts and received date commitment. orders
Data from received orders
To Reorder
To elaborate the Annual Plan
To elaborate the Season Plan
To elaborate the Monthly Plan
Cost analysis, Competition Study, Competitive Strategy determination.
To elaborate the investment plan
To elaborate the Rough- cut capacity plan
Historical Data and statistics on sales,vendors and subcontractors, info on plant and subcontracting capacity, sampling data feedback
Historical Season data, received orders, excisting subcontracting capacity
To elaborate the monthly Load plan
Plant and subcontractor’s current machine and labor availability, finished or semi-finished incoming products reports
To elaborate the Weekly Load plan
Customers Finished or semi-finished incoming products reports, current load reports, raw material availability, weekly delivery plan.
40 To receive orders Through Web To receive orders
Η =1 Week P =1 Day
To Process Order Data
50 COMPANY
PHASE ANALYSIS
VERSION V.2.5
DATE 22/8/2000
To elaborate the Weekly Plan
ANALYST PONIS STAVROS
Decision Frame Information
Figure 3: GRAI Grid Diagram The GRAI Grid analysis revealed that the process of “Customer Order Management” (Cell MCO 50) was strategically critical for the enterprise and could be reengineered with the introduction of advanced electronic commerce technologies. For this purpose a set of detailed IDEF-0 diagrams was deployed representing the As-Is situation of the “Customer Order Management” process as shown in Figure 4. The analysis of this process led to the identification of the problematic areas and the opprtunities for improvement (analysis phase).
Author: Ponis Stavros-NTUA
Date: 15/10/2000
Project:
Revision:
Draft Proposal Publication
Comments:
Sales Strategy
Collection Book
Pre-Order
Customer Sampling
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Order Receipt
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Order Sheet
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Order DPD clerk
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Order File 5
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Clerk Order Data Processing Department
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Figure 4: As-Is IDEF-0 Diagram Problem analysis was performed with the use of IDEF-0 methodology. For every identified activity in all levels of detail, inputs, outputs, controls and mechanisms were analysed. The activity analysis coupled with the strategic decisions expressed in the GRAI Grid provided us with the following problematic areas: A lot of time spent for Customer Order Data Entry (for large customer orders the necessary time exceeded 15 working hours) (Activity 5) Delays due to the National Post Services for orders arriving by mail (Input of activity 2). Problems in the routing of sales persons which enforces them to return to the Sales department in order to deliver the customer orders after the completion of the sample process and to update their item availability data (Control of activity 1). Complicated and costly activities leading to high costs per customer order (labor, transportation, telecommunications, post and courier service costs) (cost of all activities identified in the IDEF-0 diagram). Difficulty to cover specific areas of the Greek Market due to lack of sufficient number of retail stores in small cities (GRAI Grid MCO 20). 3.2
Design of the New Processes
The strategic orientation of the company depicted in the GRAI Grid diagram of Figure 3 provided the envision of the future process and identified the opportunity for the introduction of E-commerce solutions. A thorough study of the As-Is IDEF-0 diagrams led us to the identification of the problematic areas and the definition of the specific IT solutions to support them. The low-level design phase including the new reengineered business process description introducing the E-Commerce solution resulted in the elaboration of both IDEF-0 and IDEF-3 diagrams.
As shown in Figure 5, two are the key elements of the BPR process. The first one is the introduction of Bar Code and e-mail technologies (presented as mechanisms in the IDEF-0 diagram), which enable us to partially automate the Customer Order Management process. Secondly, the already existing corporate Web site is upgraded to an E-Commerce application enabling the company to sell through Web (activities 7 and 8).
Author: Ponis Stavros-NTUA
Draft Proposal Publication
Date: 15/1/1999
Project: Business Process Reengineering Revision: Collection Book
Comments:
Sales Strategy Pre-Order
Customer Sampling
Sales Strategy
1 Samples
Order Receipt
Sales Person
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ASCII Stock file from UNIX Order ASCII files(checked)
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Figure 5: Τo-Βe IDEF-0 Diagram IDEF-3 captures the behavioral aspects of the proposed system as it was depicted in the IDEF-0 diagram of Figure 5. The IDEF-3 diagram provides us with the ability to represent aspects of the process such as concurrent activity executing and alternative routing, thus enabling us to build the simulation model much easier. In Figure 6 the IDEF-3 diagram of the process is represented.
To receive Orders To Sample Customers
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&
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To check availability
To receive Order file 4
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To Upload the Order to Server 9
To process Order Data 10
To Release Production Order 11
To order (through web) To Sample Through Web 5
To check availability in Real Time
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To Exit Order Procedure 8
Figure 6: Τo-Βe IDEF-3 Diagram Simulation has traditionally been used in the design phase of reengineering projects. The introduction of high technology Information Systems, which can bring improvements in process cost, and performance has to be justified and supported by strong arguments. The management needs a sufficient analysis of the expected benefits in order to justify the necessary capital investment. Moreover, it is of high importance to predict the performance of the new processes as far as throughput, lead-time, and utilization are concerned. These three indicators were selected by the top management as being the most appropriate for process monitoring. Business Process Simulation tries to rationalize the design process based on existing information and analyses the issues stated above. Activity Based Management complements Business Process Simulation by using its results in the analysis of processes to identify inefficiencies and non-value added activities, and thus allowing one to discern opportunities for cost reduction or profit enhancement. It deals with effectively managing activities to yield continuous improvement by answering “why” and “how well” activities are adding value to products and services. The fact that the introduction of sophisticated (and often very expensive) IT systems in an organization is perceived to be a very important decision in combination with the need for a process oriented projection of the expected benefits, makes the use of ABM and Simulation in the design phase a good choice. A simulation model was built in order to roughly estimate the effects of the new process on two predefined performance indicators, these being Customer Order Management lead time and the related cost. Short lead-time and low costs are identified by academics and practitioners as the two most important critical success factors in the Clothing Industry (King, and Hunter8, 1997). The developed simulation model (using ARENA/SIMAN modeling language) is depicted in Figure 7.
Figure 7: The Arena Simulation Model The activities of the IDEF-3 diagram correspond to specific modules of the Arena Simulation model (ARRIVE, DEPART, SERVER, ASSIGN modules) as shown in Figure 7. More analytically: Activity 4 corresponds to the ARRIVE module determining the arrival of the orders entering the system by e-mail. The outcome of activities 5 and 6 is represented by the ARRIVE module determining the arrival of the orders entering the system through the web. Activity 7 corresponds to the ASSIGN module, which determines the percentage of the site visitors who actually place a web order. Activity 9 corresponds to the first SERVER module, which carries out all the necessary activities for inserting the orders to the legacy system. Activity 10 corresponds to the second SERVER module, which is responsible for processing the customer orders. Activity 11 corresponds to all the DEPART modules and represents the outcome of Activity 10 which is the release of the production order for all the six types of customer orders. The most important assumptions made in the simulation model are the following: The time between two successive orders arriving by mail is exponentially distributed. The distribution parameters were estimated based on past observations (historical data).
Fifteen percent of potential customers who visit the web site daily will proceed onto the ordering process. This assumption was based on past researches regarding the consumer behavior when buying on-line. The arriving orders are divided into four main categories: Owned Stores Orders, Franchise Stores Orders, Retail Stores Orders and Web Orders. Each of the first three order categories described above is further divided into two different types depending on the way the order is entering the system (e-mail or Bar Code). As a result, seven different order types are analyzed in the simulation model. There is a one-to-one relationship between the system servers and the employees. The server process times are normally distributed. Routing time between servers is negligible. The users work eight hours a day. They stop working in the end of each working day or week and they continue their work the next day or Monday if there is a weekend in between from the exact point they have stopped. The Simulation Software used was ARENA 2.2 Enterprise Edition for MS-Windows. The model was ran for 60000 hours (fifty two selling seasons / twenty six calendar years) with a warm up period of 5000 hours. The actual running time was 18 minutes on a Pentium III, 500Mhz computer. The simulation results demonstrated substantial improvement in the lead-time from the customer order reception to the release of the processed order file. The decrease in the lead times ranges between 3.87 (Type 6) and 11.04 hours (Type 1). The results for the different order types are shown in Figure 8.
30,00 25,00 20,00 AS-IS
15,00
TO-BE
10,00 5,00 0,00 Type 1 Type 2 Type 3 Type 4 Type 5 Type 6 Type 7
Figure 8: Lead Time Simulation Results (As-Is/To-Be) The utilisation of the employee carrying out the reengineered order processing scaled up to ninety percent . This piece of information was important for the determination of the necessary number of employees in the new process. The simulation results combined with future cost estimations provided the necessary information for the development of an Activity Based Costing study. The results of this study (in EUR per year) are summarised in Table 1.
Activity Based Costing: TO-BE Collection Sampling Order Receiving Availability Check Customer Order Reception Customer Order Upload Customer Order Processing Total Category Costs
IT Maintenance Cost Cost Of Equipment Personel Cost Administrative Cost Activity Cost 0 35.000 4.300 5.250 44.550 500 15.000 0 2.250 17.750 670 0 0 0 670 1.250 1.700 1.000 188 4.138 5.000 6.800 2.400 750 14.950 25.000 8.150 1.200 3.750 38.100 120.158 81.250 20.950 5.770 12.188
Activity Based Costing: AS-IS Collection Sampling Order Receiving Availability Check Customer Order Reception Customer Order Data Entry Customer Order Processing Total Category Costs
30.000 37.500 7.500 5000 40000 30000 150.000
4.300 430 430 0 3850 8150 17.160
0 0 0 150 120 230 500
6.000 7.500 1.500 1.000 8.000 6.000 30.000
40.300 45.430 9.430 6.150 51.970 44.380 197.660
Table 1: Activity Based Costing Results The activities included in the calculations of Table 1 correspond to the activities depicted in the IDEF-0 diagrams of Figures 4 and 5. A short description of the reengineered activities is provided below: Collection Sampling: It includes the presentation of the actual collection to the potential customers. It can take place either in-house or in the customer’s premises. The outcome of this activity is the Order Collection Sheet Completion (pre-order). Order Receiving: It involves the collection of order data during the sampling phase either by hand or a hand held terminal. Availability Check: It is the available item in stock checking with the use of a software routine installed in the hand held terminal. Customer Order Reception: It involves the reception of customer orders by means of electronic mail, post or hand held terminal (bar code). Customer Order Data Entry: It includes the customer order data entry in the legacy system. Customer Order Processing: It is the most time consuming activity (consisting of a number of sub-activities). It has mainly to do with the determination of the appropriate quantities (for each color and size) of the ordered items. Four cost categories were used for the calculation of the process costs. The costs were identified in the six activities presented in the IDEF-3 diagram (activities 1,2,3,4,9,10) of Figure 6. The ABC study results showed that the implementation of the new system will induce a significant decrease into the cost of the process (EUR 77502). This cost reduction was mainly due to savings from personnel costs (three employees fewer in the new situation) and to the fact that the cost of equipment in the new process is estimated to be less than the one of the old process (fewer faxes, phones and photo copies). Based on the simulation results and the ABC calculations, it was possible to forecast the payback period of the investment. Taking into account the expected annual profit resulting from the improved process operation (EUR 77503) and the opportunity profit due to increased sales through the web (EUR 10000), the expected annual return is EUR 87503. With an investment cost of EUR 57700, the payback period is found to be 0.66, which means that the company will break even in less than a year’s time. The results presented above provided us with all the necessary arguments for justifying the investment required for the specific E-Commerce solution. The approval of the investment by the top management, initiated the new system’s functional specification generation based on
the new process. The next step of the methodology including the implementation of the selected solution is described in the next section. 3.3
Implementation of the E-Commerce Solution
Based on the findings of the design phases (high/ low level), the implementation plan of the solution was determined. The implementation roadmap, as depicted in Figure 9, followed a phased approach based on the strategic priorities set by the top management of the company. A detailed project plan was developed, including all the timelines, necessary resources, occurred costs, critical milestones and important dependencies. The duration of implementation and build of the first three phases was eight months, from an early concept pilot to a fully functional solution. After the first five months of implementation, the applications included in phase two of the implementation roadmap went live, while the web-based customer order and transaction management went live three months later. The next phase (Web based customer care) will be implemented in the context of a new project since the company decided to test the e-commerce solution for a selling season before proceeding with the next step of the implementation roadmap. The phased approach followed during the implementation phase maximized the learning curve with respect to process and organizational changes and technology investment.
Web-Based Customer Care Web-Based Transaction Management Customer Communication and Interaction Enterprise Extroversion
Customer Self -Service Continous Customer Support Problems Solution
Web Based Customer Order Reception Integrated Customer Order Management Transaction Management
Product Catalogue Search Engine Technical Documentation Corporate e-mail FAQ Area
Attractive Web Presence Easy Navigation Informative Content Links to other sites (partners, distributors) Links to other sites of interest
Figure 9: The Implementation Roadmap The E-Commerce solution cost amounted EUR 65000 (GRD22100000), not including the annual estimated maintenance cost of EUR 6500 (10% of the solution cost). 3.4
Evaluation and Continuous Improvement
By the time the company was running through the test pilot phase for the web-based customer order reception, a work overload of the employee responsible for the order processing was observed. This symptom was due to the increase of the customer order processing arrival rate
relatively to the rate predicted in the design phase. This led us to the initiation of another simulation run for the present state (without web sales) which confirmed our fears about the employee utilization, giving a result of 99.06%. Based on the above result we decided to run a new simulation to determine the effect that the introduction of another employee will have on the process’ cost and efficiency. An assumption was made that the extra employee will work for 20% of its capacity on the “Customer Order Processing” process, while the other 80% will be occupied in other company tasks. The simulation results demonstrated a substantial differentiation in the lead times predicted in the design phase for the process from the customer order reception to the release of the processed order file. An improvement of more than 400% in all types except Type 7 was realized at the cost of 0.2 additional man-years. The results for the different order types are shown in Figure 10. 14,00 12,00 10,00 8,00
TO-BE (design phase) TO-BE (evaluation)
6,00 4,00 2,00 0,00 Type Type Type Type Type Type Type 1 2 3 4 5 6 7
Figure 10: Lead Time Simulation Results (Additional Employee Scenario) Based on the new scenario which uses the actual demand data the cost of the reengineered process per order has fallen from EUR 73 (old process) to EUR 41,12. The synergetic use of Simulation and Activity Based Management after the first results of the implementation phase enabled the measurement of selected performance indicators (lead time, utilization of human resources, process cost) and the enhancement of the solution, in our case realized by the employment of one more person. 4. Conclusion and Further Research The proposed methodology for E-Commerce enabled BPR presented in this paper was successfully applied in an SME operating in the Clothing Industry. The research outcomes can be summarized as follows: The GRAI Grid methodology provided a high level view of the enterprise system and identified successfully, potential improvement areas with the introduction of E-Commerce technologies. It enabled the visualization of the future strategic orientation of the enterprise. The IDEF-0 tool efficiently analysed the identified improvement area providing us with the physical-informational view of both As-Is and To-Be models of the under study system. The IDEF-3 tool enabled us to transform the IDEF-0 models into a more analytical activity representation able to support process simulation. Simulation and ABC/ ABM were combined and their outcomes were used in the design and evaluation phase. The return of the investment was successfully calculated in the design
phase and justified the strategic selection of the solution. The on-going use of ABM and Simulation after the conclusion of implementation enabled fine-tuning, identification of further improvement areas and realization of Business Process Improvement (BPI). It is in our research team’s plans to introduce the proposed methodology in other companies of different sectors. The definition of a Performance Indicators System based on the use of Simulation and ABM in the evaluation phase is a further research area placed in the context of Enterprise Business Process Improvement.
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