Executive Summary
Information analysis forms the basis for making decisions in an organisation. A large amount of information compels organisations to employ many employees if they do not utilise information management systems (MIS).
From the perspective of Med-Lab Company, such an approach introduces ineffectiveness and inefficiencies in decision-making, especially where decisions from different departments are fed into a central platform to arrive at an overall decision to execute a given task.
The current paper proposes ERP as a working MIS solution to handle customer relationship, supply chain, and manufacturing function problems that lead to low profitability at Med-Lab Company.
Background
Every organisation seeks strategic plans for growth in terms of size and productivity levels. Growth leads to increased difficulties in handling customer and supply chain complaints due to the large amount of information that requires analysis and synthesis using the existing information systems.
Med-Lab Company currently experiences this situation. Based in New Jersey, Med-Lab manufactures medical equipments, which it sells within the US after sourcing manufacturing materials from a myriad of suppliers who are located across the US.
Apart from sales of the products, the company also gets revenue from the customer support services such as maintenance of the medical equipments. In 2010, its annual pre-tax profit was US$229 million.
After expanding by twice its production capacity and increasing employee by 20% between 2011 and 2012, it reported an annual profit of US$307 in the financial year that ended in December 2012.
Forecasts made in July 2011 indicated that the company’s profits would also double upon doubling the company’s production capacity. The failure to achieve these forecasts compelled management to look for answers.
Evaluation of the design and development organ of the company indicated immense consumer information that was unincorporated in the production to suit consumer needs. Med-Lab has a hierarchical management structure. Commands flow from the top to bottom.
Decision-making processes use information flowing from customers, suppliers, and other organisational stakeholders to and from Med-Lab. The strategic plan of the company targets to exploit the global market. To achieve this goal, Med-Lab values employees as the most important assets available to realise its strategic plan.
With the difficulties in incorporating all customers’ concerns in re-designing of its products, Med-Lab believed that it could deploy the sales-push approach through marketing to create demand for its products successfully in the global market.
As part of an organisational culture, employees are required to respond to both customers and suppliers’ concerns with immediate effect in terms of registration of complaints. Without customer satisfaction, Med-Lab would have run out of business due to intense competition from its rivals.
Operating in a competitive business environment compels Med-Lab to look constantly for solutions that facilitate both urgent and quick decision-making processes, especially in its efforts to engage in the global trade.
This problem became even more significant upon the speculation that the failure to incorporate the suggested improvements on the products made by customers could explain the malfunction to double the profitability of the company after doubling its production capacity.
The pre-analysis of this challenge suggested that the 20% increase in employees could not analyse and/or synthesise customer and supplier information in an effort to respond quickly to their complaints as stipulated in the organisational culture.
The management was caught up in the dilemma of whether to increase the number of employees or seek alternative solutions to speed up expedition of suppliers and customers’ information.
A major concern has been that increasing the number of employees will require committing organisational resources in reward, training and development, and motivational programmes to increase productivity. Med-Lab also had to hire more HRM personnel.
Therefore, such a move increased the cost of running a business both in the short and long-term in opposition to the company’s strategic plan of lowering its costs to capitalise on low-cost strategy to gain competitive advantage in the marketplace.
Setting the Stage
Med-Lab’s operations encountered a number of problems, even before the company’s expansion, in the continued effort to resolve urgently supply chain and customer problems and complaints.
Fui-Hoon and Lee-Shang (2001) contend that the urgency in the resolution of customer complaints presents a major problem that hinders the success efforts of a company operating in a highly competitive market.
Business strategy not only accounts for success or failure, but also determines its survival (Grant, Hall, Wailes & Wright 2006, p.5). Thus, Med-Lab should establish mechanisms of responding and ensuring ardent reaction to marketplace demands or risk losing its competitive advantage.
Increasing the number of customers who are attended by Med-Lab has created problems such as quick location of the customers and the determination of their frequency of purchase in the recent past.
Consequently, making decisions on market targeting proves problematic. This makes the company suffer from the inability to forecast its production accurately.
Making target marketing decisions in good time aids in determining the appropriate alterations to business practices to woe more customers (Grant, Hall, Wailes & Wright 2006, p.7).
Using the current information management systems, which are highly dependent on the interaction of human decision makers (department heads and general managers) with segregated information systems running on different computers, location of past records that involve customer communication is hard to access.
This challenge leads to slowed resolution of customer disputes.
In effecting the transactions between the suppliers and the organisation, the fact that information is held on different computers makes it difficult to prepare urgently all documents relating to specific transactions (Kraemmerand 2003, p.229). This situation hinders the attainment of the strategic plans of the Med-Lab.
Time spent in editing or paperwork generation increases the departure of the employee productivity from the ideal situation (Head 2005, p.71).
Therefore, the solution is necessary to enhance speedy preparation of documents ranging from invoices, shipping labels, purchase orders, receipts, and customer communication to preparation of manufacturing plans based on customer demands.
With excessive dependency on human decision makers and increased paperwork generation, 20% increase in the number of employees upon doubling of the production capacity cannot effectively address the issue of increased customer complaints without an additional mediation to enhance speed in both data collection and analysis.
Case Description
People Perspective
Incommensurate increase in profitability of Med-Lab with an increase in resource commitment in the expansion of its production capacity has attracted various concerns from organisational stakeholders.
Med-Lab’s people such as organisational stakeholders, who are influenced by the current state of information management systems, put management under pressure to look for a working solution to mitigate risking their investments.
Due to the challenge of efficient and effective management of the immense customer information, Med-Lab has learnt that customers are conceiving it as overlooking their orders.
Med-Lab is concerned that it may lose dissatisfied customers to its competitors in the industry. This move will hinder the achievement of its strategic focus on going global due to the decreasing competitive advantage.
In building good and working customer relationships as a way of retaining them amid the persistent challenges at least in the short-run before a solution is sought, customer communication sends individualised messages to explain the circumstances for order delivery delays together with other issues related to customer service.
Nevertheless, in this process, several clients introduce the challenge of sending messages sometimes to unintended customers. In some situations, messages are sent to the right customers, but with the wrong preferred option.
In the case of suppliers, staff members are incapable of making purchases for raw materials from suppliers who offer the best deal and quality. This challenge emanates from the incapacity of Med-Lab to maintain track of various suppliers who offer the best deals on various materials that are used in the production process.
A challenge also exists in situations where an urgent replenishment of suppliers is required to meet the urgent demand. This replenishment goes into costing the organisation more money, thus raising the production costs, which expose the strategy of pursuing low costs at risk.
Organisational Perspective
It is worrying the management that customer complaints and challenges in keeping track of the best suppliers will impair the success of Med-Lab.
With increasing customers following the expansion of the production capacity, the ability of employees to handle the entire customers efficiently and effectively with the current state of information management system is a major problem.
Board of directors together with the respective line managers meet to discuss the way forward. The meeting upheld the necessity of developing a working MIS intervention in an effort to ensure that the company developed the capability for handling even more quality and time cautious customers across the globe.
From an organisational perspective, the most preferred strategy is the one that results in low costs in the end while ensuring satisfaction of customers with both Med-Lab’s products and services.
Technology Perspective
Med-Lab currently deploys information management technology that is customised for each department. For instance, the manufacturing department makes decisions based on the inventory level of raw materials, materials in the process, and the finished products.
Med-Lab does not intend to hold large stocks of finished products. Therefore, information from the sales department is essential in determining manufacturing decisions. Unfortunately, the information technology systems are customised at departmental levels.
The manufacturing department depends on the analysed customer information from the sales department before consulting with consumers. This process translates to delayed order executions and delivery.
To raise the sales levels, Med-Lab has developed a web-based sales strategy. However, the strategy faces a challenge since web customers encounter challenges in choosing a product that profiles the one they are searching without information on its existence (Vilpola 2008, p.58).
From a technological perspective, MIS technology that integrates all functions of the Med-Lab’s departments may help to solve many of the encountered challenges.
Solution Design Options
Considering the problems faced by Med-Lab, integration of the information management systems is required to enhance rapid decision-making. In fact, organisations that have a large number of stakeholders whose concerns influence their activities require quick decision-making (Dehning & Stratopoulos 2003, p.213).
In the case of Med-Lab, this goal can be attained in three main ways.
- Design a decision support system
- Design and implement a transaction processing systems
- Designing and implementation of integrated MIS systems
Solution Selection
The choice of either system is based on its SWOT analysis. The decision support system has the strength of helping to make various decisions based on analysis of data and statistical projections.
Transaction processing system strength encompasses the provision of a means of collecting data, its storage, modification, or cancelation of transactions (Mureell 2001, p.9).
Decision support system creates an opportunity for improvement of quality of the decisions made by organisations’ managers as opposed to their replacement.
Through transaction processing system, an organisation gains an opportunity to permit multiple transactions to occur simultaneously (Davenport 2003, p. 124). Data collected by the system can be held in databases.
It can later be deployed in report production including billing, reports for scheduling manufacturing, wage reports, production and sales summaries, inventory reports, and check registers.
Decision support system and transaction processing system share common threats since their security constitutes a big issue. The major weakness of the transaction processing system is that the appropriateness of the transactions is overly dependent on the accurateness of the information maintained in the databases.
Comparably, the decision support system is slower in helping to arrive at a decision (Fryling 2010, p.395). It interacts with human decision makers. However, this process is a major challenge that leads to low speed of expedition of customers and suppliers’ information at Med-Lab Company.
Upon considering both decision support system and transaction processing system’s strengths and opportunities, Med-Lab needs to exploit strengths and opportunities of both system designs.
Therefore, an integrated information system is preferred for design and implementation. The specific preferred system is Enterprise Resource Planning (ERP).
Solution Implementation
Enterprise Resource Planning (ERP) needs to be implemented such that Med-Lab Company develops the capacity to integrate all its production and management functions to facilitate quick decision-making while responding to all the company’s stakeholder concerns in real time.
Figure 1 below schematically depicts the process of modelling ERP version that is planned for implementation at Med-Lab.
Fig. 1: Modelling an ERP System
Source: (Turban 2008, p.300)
Implementation Methodology
Solution implementation entails the construction of the ERP system to be introduced to Med-Lab. The construction involves physical development of both hardware and software applications. Hardware and software can be developed in-house following the modelling approach that is shown above.
It can also be sourced from a vendor who can customise it to suit Med-Lab Company’s requirements. This option is preferred to reduce the challenges associated with new MIS platforms such as system learning and high probabilities of occurrence of bugs that may lead to failure of the system soon or after its implementation.
The Bidding Process
Bidding is the first step in the process of sourcing ERP software. Selection of the successful bidder will follow the ‘low-price bidder’ basis. However, the supplied ERP software must support external and internal management information integration throughout Med-Lab Company.
It should have modules for management of manufacturing functions, service and sales, modules for management of customer relationships, inventory controls, production planning and forecasting, and procurement.
Another important consideration in the bid selection process is the capacity of the ERP system to allow and enhance information flow between various business functionalities within and outside Med-Lab boundaries while at the same time facilitating connectivity between Med-Lab and its external stakeholders.
ERP is an expensive MIS in the short-run. Hence, Med-Lab Company needs to cut on the costs of hardware. The supplied ERP software must have compatibility with the current Med-Lab Company’s hardware, which supports Windows NT, UNIX, and mainframe.
This eliminates the need to source hardware from external agents. No bidding for hardware is required. Successful bidder must also have the capability to customise his or her software to meet the needs of Med-Lab Company.
System Customisation
Med-Lab Company does not have a technical team to facilitate the implementation of the MIS. This claim underlines the necessity to hire a third vendor to evaluate its customisation needs. Fig. 2 shows Med-Lab Company’s customisation needs.
Fig 2: Med-Lab ERP Software Customisation Requirements
Upon considering the areas of customisation requirements, ERP scope involves significant alterations of staff work practices and working processes (Monk & Wagner 2009, p.56). Thus, a complete understanding of various processes before initiation of implementation may reduce probabilities of the system to failure.
Introducing the New MIS
After selection of the successful bidder for the software, introduction of the new system follows. This step requires change management. The new MIS system calls for alteration of the processes that employees were utilising to conduct Med-Lab Company’s business.
Since many operations that were previously executed by the employees manually, or with partial interventions of computers, will now be integrated and automated, employees will require retraining on how to use the new system.
Fui-Hoon and Lee-Shang (2001) confirm that upon the introduction of a new MIS, employees require training on how to share common practices and information throughout the enterprise in addition to how to access and produce reports in real time.
The implementation methodology follows Markus and Tanis’ ERP life cycle that includes, ‘chartering, project, and Shakedown’ phases (Markus & Tanis 2000, p.173). The chartering phase comprises the evaluation of various decisions that lead to ERP project funding.
The main players in this phase are vendors, organisations’ executives, and consultants together with Med-Lab Company’s IT specialists. The main activities include initiation of the ideas, making decisions to proceed with the project, and scheduling and planning of the project.
Project phase entails accomplishing tasks such as rollout and system configuration.
The main crucial stakeholders are “the team members of the project, internal information technology specialists, vendors, and managers from the functional areas and business units that are planned for integration through ERP” (Markus & Tanis 2000, p.175).
The activities of the phases include software configuration, testing, integration, training, rollout, and conversion of processes. ERP system monitoring conducted in this phase ensures complete elimination of bugs.
Conclusion
Faced with the problem of unequal increase in profitability with increase in production capacity, Med-Lab Company has to develop effective solutions to the problem.
When the volume of organisations’ clientele goes up, a large amount of data has to be processed to ensure a timely fulfilment of orders and/or improving products consistently with customer requirements.
This concern accounted for the reduced profitability for Med-Lab Company, thus prompting the necessity for designing and implementing an integrated information management system.
References
Davenport, T 2003, ‘Putting the enterprise into the enterprise system’, Harvard Business Review, vol. 5 no. 2, pp. 121-131.
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Kraemmerand, P 2003, ‘ERP implementation: an integrated process of radical change and continuous learning’, Production Planning & Control, vol. 14 no. 4, pp. 228–248.
Markus, L & Tanis, C 2000, The enterprise system experience from adoption to success, Pinnaflex Educational Resources, Inc., Cincinnati, OH.
Monk, E & Wagner, B 2009, Concepts in Enterprise Resource Planning, Course Technology Cengage Learning, Massachusetts, Boston.
Mureell, S 2001, E–Business and ERP: Rapid Implementation and Project Planning, John Wiley and Sons, Inc., New York, NY.
Turban, M 2008, Information Technology for Management, Transforming Organisations in the Digital Economy, John Wiley & Sons, Inc., Massachusetts.
Vilpola, I 2008, ‘A method for improving ERP implementation success by the principles and process of user-centred design’, Enterprise Information Systems, vol. 2 no.1, pp. 47–76.
Appendix: Definition of Terms
Bugs: Errors that may lead to failures or lower functionality of a software application
Chartering: A decision that entails the definition of business problems and constraints of the possible solutions
Customisation: Configuration of MIS systems to meet the clients’ business needs
Decision support systems: A type of MIS that enables managers to make decisions based on statistical projections and data analysis.
ERP: A software application that enables organisations to manage effectively and efficiently the utilisation of resources including human resource, financial resources, and material resources among others
Project phase: A phase in the implementations of MIS that entails the running of a system under implementation by the end users to determine its efficiency and effectiveness
Shakedown: Removal of bugs in the systems under implementation