The lead time to deliver stocks has been controlled, so that the external suppliers provide goods on time. This has led to losses due to shrinkage has been reduced to between 1% to 6% which is an acceptable level. This is especially true for fresh vegetables/ fruits, meat products and etc. The branch managers effectively liaise with the fresh meat and fresh vegetables warehouses in Mattakullia to get deliveries in time. External suppliers also provide milk products and other perishables.
Short comings:
The short comings to be discussed are twofold.
- Long delays at cashier counters – during peak times of business operations customers have to face long queues due to the inefficiency in entering product details to the POS. Cashiers have to manually key in the code for the product which takes time.
- Errors in calculating totals for each cashier always run the risk of entering the wrong product code for a product. This will cause overpricing / under pricing the sales. If over priced the customer will complain, and the Manager has to rectify the mistake and update the system, reducing customer confidence. If under priced the branch will loose revenue from the sale. When corrections have to be made the system has to be updated tracing back the sale. This extra effort adds additional costs.
As is process DESCRIPTION
Procurement
System generates order for the warehouse
Branch receives goods and sends acknowledgement to warehouse
Branch manager examines system generated order, authorizes it and sends it to supplier
Branch receives goods and sends acknowledgment to supplier
Products are labeled
Inter-branch transfer out
Accept request from branch
Check for surplus in the system
Dispatch (or release) goods to branch
Update system
INTER BRANCH TRANSFER IN
On goods not being available at the warehouse, the warehouse informs branch.
Branch manager requests goods from another branch.
Receives goods and sends acknowledgment to branch.
CUSTOMER COMPLAINTS
Customer presents product for return.
Manager assesses complaint and issues replacement or cash refund.
SALES PROCESS
Customer presents product to checkout counter
Product details are entered into system
Payment accepted and generates receipt
Obstacles and advantages of the BPR initiative
Obstacles
- Financial risk – The Automatic call Distribution System, the delivery system and workflow management system will incur a considerable upfront capital commitment. Other hardware would also be required like a phone switching system, PC LAN and file servers etc. Similarly setting up a delivery system means the acquisition of lorries/ vans for transport and product delivery. Staff handling customer delivery orders has to be trained and skilled. This means an additional human resource cost.
The time taken to break Even on this project may take longer than expected if the customer response it slow. This means Cargills will have to bear the Financial cost for a longer period of time reducing profitability.
- Customer response – customer views of the delivery system s important for the success of such an attempt. In Sri Lanka many customers still enjoy the shopping experience and the social aspects that it involves. They may prefer the traditional method of shopping rather than the “phone shopping” method.
- Lack of existing system to benchmark – Supermarkets have not implemented such systems, making it impossible to carry out benchmark tests for companies of the same industry. Also Cargills do not have a current system handling this process, so the new process efficiency cannot be measured.
Advantages
- Increase in market – Through the BPR initiative and the introduction of the phone ordering and delivery service, a different segment of the market is reached. This segment consists of busy house wives and executives who will take advantage of the hassle free shopping experience that Cargills offers. No other super market chain provides for such a service, thereby making Cargills a market leader in this aspect. The group financial controller estimated that this system will bring about a 5% - 10% increase in sales.
- Reduction in time – When using the barcode system, the time taken to process a customer sale will decrease by almost 50%. This increases the number of customers handled each hour. Cargills will become more efficient in handling sales. Also by using a delivery scheduling system and a workflow management system we significantly reduce the time taken to process a customer delivery. Paper work is only involved in printing the dispatch notes to the drivers and the signing of receipts by the customers. This increases efficiency of the process.
- Reduction in errors/ rework – Since barcode systems are 100% accurate the probability of human error is very minimal compared to the existing manual system. This reduces the work required to handle customer complaints from overcharged bills. The proposed workflow management system will make it easy to monitor the progress of the customer order, reducing errors and rework later.
- Errors due to manual entry of customer details are reduced. Since this is automated the customer details are entered only once to the system.
- Reduction of costs – with the delivery and scheduling process being automated, the number of employees required to work in the process can be kept to a minimum. (Clerical staff would be reduced) Also the delivery scheduling will be done by the system. This reduces costs in the transport and delivery of goods to customers. Deliveries can be optimized to reduce mileage and fuel costs.
Cost savings will occur due to the decrease in costs.
- Becoming more customer focused – With the new system customers are spared the headache of traveling to and from Cargills, giving them opportunity to shop from the comfort of their homes. Frustrating waits at the counters are reduced with the introduction of the barcode system. This will increase customer confidence in Cargills.
The ‘To Be’ Process
‘To Be’ Processes Overview
The information system in place monitors the inventory and auto-generates orders to the warehouse. The warehouse updates itself with the local (i.e. supermarket) inventory and dispatches goods for the order along with a Transfer Out note. The goods are received at the supermarket which acknowledges it by issuing a Transfer In note.
In the event that the goods are supplied by an external supplier, the order generated by the system is authorized and communicated to the supplier by the manager. The goods when received from the supplier are acknowledged.
Once the goods are received the system is updated and barcode labels are printed and affixed to the goods.
When a customer produces goods for purchase at the checkout counter, the information about the product is retrieved from the system simply by focusing the label at a barcode reader. The purchases totaled, the customer makes the payment and receives a receipt along with the goods.
The customer may register himself with the manager of the supermarket for the call center based delivery service. Once registered the customer may call the supermarket and order goods rather than having to visit. When a customer registers he is given an identification number and a password. On calling the call center, the customer will be requested to enter these numbers and they will be verified by an automated call management system. After verification of the customer’s identity a customer service representative will accept the customer’s order while helping him choose his purchases. Prior to confirmation of the order, the order will be read out to the customer and he will be required to re-enter his personal identification number to confirm the order. The customer service representative will then inform the customer of a projected time of delivery.
The customer sales representative will communicate the customer’s order to the dispatch division where it will be packaged and an invoice for its contents generated. The package is then scheduled and delivered along with the invoice. On delivery of the goods the invoice will be presented to the customer who would acknowledge the goods, make payment and be presented with a copy of the invoice which would bear a seal as a receipt of payment.
A copy of the invoice will be handed back to the dispatch and the transaction will end; confirmation of delivery and payment received.
‘To Be’ Process Description
Procurement
1A. Procurement of goods from a warehouse;
- System generates order for the warehouse
- Warehouse checks system orders and dispatches corresponding goods with Transfer Out note
- Branch receives goods and acknowledges with Transfer In note
1B. Procurement of goods from external supplier;
- System generates order for external supplier
- Manager authorizes order and communicates order to supplier.
- Branch receives goods and sends acknowledgment to supplier
2. Products are labeled
Sales
- Customer presents product to checkout counter
- Product details are entered into system using barcode
- Value is determined and customer is informed
- Customer makes payment and receives receipt
- Customer accepts goods
Call Center Registration
- Customer applies for call center service
- Manager approves customer application and registers customer
- Customer is provided with ID and personal identification number
Call Center Purchasing
- Customer calls ‘Call Center’
- Customer identifies and authenticates himself
- Customer informs ‘Call Center’ personnel of order
- Order is read back to customer
- Customer enters PIN and confirms order
- ‘Call Center’ personnel informs customer of projected delivery time
- ‘Call Center’ personnel communicates (electronically) order to dispatch
- Dispatch personnel gather goods and generate invoice.
- Dispatch personnel schedule delivery
- Goods and invoice a sent to delivery
- Goods and invoice are delivered to customer
- Customer makes payment and receives receipt via affixing of seal on customer invoice copy.
- Copy of invoice is returned to dispatch
- System is updated
See diagram.
Call Center Purchasing
‘To Be’ System Workflow
Procurement (from Warehouse)
Procurement (from Supplier)
Sales
Call Center Registration
Call Center Purchasing
‘To Be’ Working Environment
Organizational culture
- Require focus (or re-focus) on customer needs and satisfaction
- Adapt to change and constructively assess new systems to further their efficiency
- Understand benefits of Information Technology
Technological environment
- New input devices (e.g. barcode readers) have been installed and require a slight degree of training for familiarization
- New system(s) would be in place to support the following IS needs created by the new processes
- A system to support automated call distribution
- Support authentication using DTMF dialing tones on standard telephones
- Retrieve information from database corresponding to caller information
- Assist users in suggesting alternative products
- Interface with existing system to retrieve product information
- Support the creation of customer orders and maintenance of them
- Support the tracking of customer order status
- Identify the owner of the customers order based on current status
People involved in the BPR Initiative
The people are the most important aspect of any initiative, more so in BPR because of the radical changes it brings about. While everyone in the organization is affected by the BPR initiative, they are all not directly involved in the reengineering.
The following are the primary categories of people involved in the initiative while those corresponding to this study are stated alongside.
The Czar would have to be the manager / executive / consultant who will be overlooking the initiative. It is likely that it will be an executive with knowledge of the organization and knowledge of BPR practically.
The steering committee could be made up of executives related to the supermarket chain and consultants who would be involved in the BPR initiative.
The Leader of the BPR initiative would be Mr. Sanjay Niles, who acts as the Financial Controller for the chain.
The owner of the processes concerned would be the manager of the supermarket.
The Reengineering team should comprise of the process owner (i.e. the manager of the supermarket in question) and other managers from other stores in the chain, outside presence of specialized BPR consultants would also greatly aid the process of redesign.
Quantitative analysis of the BPR effort
The following quantitative criteria are given to show the increase in efficiency that could be expected by implementation of the new processes when compared to the existing processes. The time taken to complete major tasks of the important processes was recorded for this purpose. Cycle time and process inefficiency help to point out the broken processes within the company.
Sales process
As is process
The following quantitative values were observed for a sale. On average for a similar of type of transaction, it would take 3 minutes to complete a sale at normal time, 6 minutes during slight congestion and 8 minutes during peak times.
To be process
Due to the use of a barcode system the productivity will increase by 66%. Thus when compared with previous values, the time taken would be 1 minute for normal sales, 2 minutes for slight congestion and 5.3 minutes during peak times. Thus the saving of time would be 33%. Previously during peak times 7.5 customers could be handled, but now 11.32 customers can be handled.
Customer complaints
As is
As part of the BPR effort the reasons for customer complaints were analysed. It was found in that the percentage of complaints due to errors in product entry to POS system accounted for 75 percent.
Also the percentage of complaints for normal sales transactions was found to be 15% by observation.
To be
Once the barcode system has been implemented the errors due to product entry to POS system will be negligible. Therefore customer complaints will reduce by 75%. However the introduction of the caller purchase system may introduce new complaints such as non-acceptance of the customer login details, mistakes in noting the products in the order, delays in the scheduling of deliveries etc. These could increase the number of complaints by 50%.
Phone ordering/ Home delivery service
The cycle time was calculated for this process by adding the time taken for each task in the process. These are shown below.
Notes:
Deliveries are scheduled every 3 hours. Therefore the maximum time taken to deliver an order is approximately 3 hours. (170 minutes)
The delivery can take 15 – 30 minutes depending on the location of the order. This is similar to the return warehouse task, as the lorry has to return to the warehouse before the system can be updated.
Dispatching can be done in 15 minutes or 150 minutes. If the customer calls just in time before the next order is dispatched, it would be 15 minutes. If the customer just missed the latest dispatch the time would be 150 minutes. (Includes the 150 minutes wait time before the next dispatch)
SWOT Analysis of ‘To Be’ System
Reengineered processes need attention during implementation and improvement in order to maximize the benefits. This can be achieved by understanding comprehensively the reengineered processes and playing to its strengths, working on its weaknesses, exploiting the opportunities created by it and nullifying any threats.
Strengths
- The use of a barcode system greatly reduces employee error resulting in
- Higher levels of customer satisfaction
- Lower time taken for per transaction
- Reduction in need for checkout human resources
- Barcodes also lead to easy unique product identification which
- Cuts time required to identify product at checkout
- Allows easy and efficient intra organizational product transfers
- Reduces the difficulty in the procedure of taking physical inventory
- Makes efficient use of existing IT infrastructure
- Provides the organization with a solution for future demands
- Call Center delivery increases sales by
- Reaching out to new customers
- Providing customers with easier access to goods
- Provides value added services (delivery, personalized attention)
- Allowing focus to be given to profitable products
- Reduce or eliminate customer effort in making purchases
- Keeping customers aware of status of their purchases (through tracking)
- Significantly the call center will help reduce costs by
- Removing focus from supermarket beautification and spot marketing
- Providing personalized customer attention for a fraction of the cost of what physically present customer service representatives would cost
- Integrates into existing information system and makes optimum use of information available.
Weaknesses
- Requires some capital investment to setup communication infrastructure
- Requires skilled human resources for call center
- Distances customer from supermarket and creates the ‘voice on the phone’ atmosphere
- Reduces non-premeditated purchases (e.g. chocolates)
Opportunities
- Barcodes create a level of automation where customer is in total control of his purchase, payment etc.
- Call center serves as a platform for expansion of sales to newer media such as the Internet
- Satisfactory progress of call center would result in growth into new products and new markets
- Emergence as the benchmark organization in the industry, using Information Technology as a powerful tool.
Threats
- Investment would be lost if project was not practicable (both barcode and call center)
- Costs related to system maintenance etc. could be prohibitive
- Employees may be adverse to change
- Inefficiency due to non-streamlined workflow would create dissatisfaction
- A public failure and highlighting of inefficiencies could scare the organization’s goodwill and reputation.
Obstacles and advantages of the BPR initiative
Obstacles
- Financial risk – The Automatic call Distribution System, the delivery system and workflow management system will incur a considerable upfront capital commitment. Other hardware would also be required like a phone switching system, PC LAN and file servers etc. Similarly setting up a delivery system means the acquisition of lorries/ vans for transport and product delivery. Staff handling customer delivery orders has to be trained and skilled. This means an additional human resource cost.
The time taken to break Even on this project may take longer than expected if the customer response it slow. This means Cargills will have to bear the Financial cost for a longer period of time reducing profitability.
- Customer response – customer views of the delivery system s important for the success of such an attempt. In Sri Lanka many customers still enjoy the shopping experience and the social aspects that it involves. They may prefer the traditional method of shopping rather than the “phone shopping” method.
- Lack of existing system to benchmark – Supermarkets have not implemented such systems, making it impossible to carry out benchmark tests for companies of the same industry. Also Cargills do not have a current system handling this process, so the new process efficiency cannot be measured.
Advantages
-
Increase in market – Through the BPR initiative and the introduction of the phone ordering and delivery service, a different segment of the market is reached. This segment consists of busy house wives and executives who will take advantage of the hassle free shopping experience that Cargills offers. No other super market chain provides for such a service, thereby making Cargills a market leader in this aspect. This would significantly increase the market for Cargills.
- Reduction in time – When using the barcode system, the time taken to process a customer sale will decrease by almost 50%. This increases the number of customers handled each hour. Cargills will become more efficient in handling sales. Also by using a delivery scheduling system and a workflow management system we significantly reduce the time taken to process a customer delivery. Paper work is only involved in printing the dispatch notes to the drivers and the signing of receipts by the customers. This increases efficiency of the process.
- Reduction in errors/ rework – Since barcode systems are 100% accurate the probability of human error is very minimal compared to the existing manual system. This reduces the work required to handle customer complaints from overcharged bills. The proposed workflow management system will make it easy to monitor the progress of the customer order, reducing errors and rework later.
- Errors due to manual entry of customer details are reduced. Since this is automated the customer details are entered only once to the system.
- Reduction of costs – with the delivery and scheduling process being automated, the number of employees required to work in the process can be kept to a minimum. (Clerical staff would be reduced) Also the delivery scheduling will be done by the system. This reduces costs in the transport and delivery of goods to customers. Deliveries can be optimized to reduce mileage and fuel costs.
Cost savings will occur due to the decrease in costs.
- Becoming more customer focused – With the new system customers are spared the headache of traveling to and from Cargills, giving them opportunity to shop from the comfort of their homes. Frustrating waits at the counters are reduced with the introduction of the barcode system. This will increase customer confidence in Cargills.
Transition from ‘As Is’ to To Be’
Cargills Supermarkets are used to information technology, constant refinement of objectives and a culture which is extremely conducive to change. Over the years they have been continuously improving their processes and have been introducing new concepts and technologies, the results of which have been the development of a strong attitude.
The transition will have effect in two stages.
Implementation of barcode system.
The transition from input using keyboard to input using barcode recognition is rather simple. This is because the preceding process was much more complex in comparison. It is also because the new process is simple to learn (focusing a label at a sensory device can be done by a child).
Training for employees is negligible as is the familiarization.
Implementation of the ‘Call Center’ system
The call center process will be completely new to the existing system, with the addition of new infrastructure etc. Inventory management for example (the development of which is currently not focus) will need more attention if it is to place a strong supporting role to the call center.
The introduction of the call center as a new process rather than a morph or amalgamation of an existing process little affects existing processes. While support from existing processes is required, the introduction of the call system will not affect the fundamentals of the process.
Overall, owing to the fact that the organization has a culture of change acceptance in all strata of the organization, the transition from the current system would not be faced with many difficulties and would probably be smooth.
Conclusion
Cargills Food City, Staples Street, Colombo 2 is an efficient organization, constantly endeavoring to improve itself with the goals of supporting the customer.
Though the organization is efficient and can easily be considered as a benchmark for the industry in many aspects, certain processes need re-engineering to create optimal resource management and performance. With analysis it was evident that processes relating to the customer relationship and sales were being compromised and as a result of the efficiency reducing, customer dissatisfaction was rising.
Two main features of reengineering are the use of barcode stickers in place of traditional stickers and the implementation of Customer Relationship Management through the use of a ‘call center’ allowing customers to make purchases using a telephone rather than having to visit the supermarket.
Usage of the existing resources (especially the efficient IS that is in place) is the hallmark of the re-engineered efforts. The question of cost justification does not even occur when presented with the benefits of the system, both from a sales as well as customer satisfaction perspective.
Issues surrounding the implementation, though very few, should be addressed an the organization should ensure effective and smooth transition to new reengineered processes, changing not only the technological working environment but also the organizational culture.
References
- Re-Engineering Best Practices
http://www.prosci.com
- Customer Relationship Management Benchmarking Association
http://www.crmba.com
http://www.brint.com
- Cargills (Ceylon) Limited Annual Reports (2000, 2001)
-
Re-Engineering the Corporation 2nd Edition
Michael Hammer and James Champy
- The Essence of Business Process Engineering
Joseph Peppard and Philip Rowland
Edward Bowman, Bruce Kogut
