The company is a multi-line manufacturer of recreational gear, sportswear and equipment. When the company was started, it was a family owned and managed operation that manufactured fishing tackle and gear. Their product lines became recognized nationally as high quality equipment that utilized the latest in materials and technology to provide high performance. Within five years the company had grown to the $200 million annual revenue level, where it stayed for the next twenty-five years with little real dollar growth.
When the founders retired, the board named as CEO an established executive who had guided a number of start-up companies in the apparel industry through rapid growth, capturing significant market share in their specialty areas. The new CEO began acquiring companies in related leisure areas. These were generally companies that had been recent start-ups and had captured a respectable share in their own markets. The company then applied its standards for high quality, high performance, and its brand recognition and marketing skills to increase the rate of growth and generate improved profit margins.
The company is now a two billion-dollar company with new product lines in the leisure boat, water skiing, beachwear, and snow skiing markets. Many of these new lines have increased requirements to shorten the product development cycle and respond quickly to changing market conditions. They are now a global company with manufacturing plants or sales office in 20 countries. About 25% of products are sold through catalogs.
The company has been able to develop and maintain a team orientation, despite its rapid growth and numerous acquisitions. It is common for one business line to provide research and support to another line to help leverage a new development across the company.
Employees are very loyal and attached, resulting in very low turnover. This is due to a number of factors including full time childcare, a generous and wide spread profit sharing plan, and company family outings.
Each business unit is allowed to operate independently with a great deal of autonomy. Because of the large number of acquisitions, this has resulted in much diversity regarding systems, policies and procedures. Each Business Unit Head is held responsible for his/her bottom line and defends their autonomy and independence vigorously.
Business and Technology Needs Not Currently Being Met
Senior executives believe that the corporation’s growth is being inhibited by their Information Technology department’s difficulty in quickly assimilating new acquisitions into the enterprise. The IT department has also had difficulty responding to new business requirements, particularly when the solution requires the use of new technology that goes beyond the mainframe platform. While senior executive’s view Information Technology as an important tool, most of the business unit’s view corporate IT more as a hindrance and road block.
All attempts to date to develop enterprise-wide systems have been disastrous. Currently, with the number of different financial systems, it takes the company almost four weeks to consolidate their reporting and close their books. In the fast moving markets they are now in, this is not satisfactory. There is a desire at senior executive levels to install an Enterprise Resource Planning System (ERP) to help resolve these and other problems. However, given their record with enterprise-wide systems, and what they have heard about the complexity of implementing an ERP system, they are afraid to start this effort.
Leadership is not satisfied with the company’s current use of the e-commerce. Some efforts at EDI with key suppliers were initiated, but resulted in excessive delays and lost orders. A task force has been created to study the problem. There is a company web site, but it only provides information about the company and products. It is not interactive – it does not allow clients to place orders or contact people at the company. Leadership has commissioned an internal task force to study the situation and make recommendations. He has invited external consulting firms to advise the task force on how e-commerce could be implemented, including the possibility of using external service providers.
The Corporate IT organization totals 500 people. Each major Business Unit has its own IT organization. The total number of people in these organizations is unknown. There are an additional 150 staff for the Order Fulfillment centers, and approximately 125 people in the Call Centers.
There are roughly 25,000 IT users, with 15,000 located in the US. There is a mixture of Email systems currently in use, with varying degrees of difficulty communicating between different systems. E-mail is currently used to relay Call Center catalog orders to the Data/Order Fulfillment Centers. An estimated 5% of the catalog orders are lost, and another 10 – 15% are delayed.
Business Process Requirements
The financial and administrative processes vary between Business Units and sometimes within the same Business Unit. Although some common Human Resources information is fed into the corporate system, each Business Unit and some Divisions have their own payroll, Human Resources, budgeting and operational accounting systems and processes. Purchasing systems and processes vary from location to location. Senior Executive are aware that there are significant opportunities for standardization and consolidation.
Each location has its own internal Facilities Management Department that is responsible for building maintenance, space planning, grounds, cafeteria, mail delivery and other support services. The level of satisfaction and cost levels varies from location.
The company has to-date retained internal responsibility for all Call Center support. This includes all product hot lines, help desks, product warranty support and answer lines. Little automated support or computer telephony support has been added to improve the quality to responses or reduce the costs.
The company has also retained almost exclusive responsibility for marketing and sales of their product lines. This is another area that management wants to assess to determine the potential benefits of outsourcing.
The company has historically retained responsibility for the manufacturing, and assembly of all components that go into their products. With the broad product lines they now support this has become more of a burden. Senior management is now convinced that other companies can do as good or better a job of providing some of the components.
Assessment of Outsourcing Opportunities
The CEO has seen other companies successfully use outsourcing not only for E-Commerce support, but also manufacturing, operations and other administrative and support functions. He would like to assess the potential benefits of E-Commerce and Business Process outsourcing at the company. All areas and functions are open for consideration.
The company has had limited experience with outsourcing. Some of the international operations have outsourced local desktop, LAN and WAN support. A few of the Business Units have outsourced the manufacturing of some components of their products.
The company has invited a limited number of consulting firms in to describe how they would go about helping the company assess E-Commerce and Business Process outsourcing opportunities.
The company has identified the following Critical Success Factors for the outsourcing of functions:
- Ability to create and support an effective e-commerce solution
- Reducing the amount of lost/delayed orders
- Improved ability to respond quickly to changing business requirements
- Ability to support accelerated growth rates
- Improved communications and coordination with global operations
- Controlling the growing costs
- Improvement of the current e-mail system
- Implementation of EDI both for clients as well as suppliers