Major Retailing And Manufacturing Companies Information Technology Essay

Outsourcing offloads a burdensome technical responsibility and allows management to focus on core business. Outsourcing strips a company of an important core competence-IT know how. Which statement do you agree with? Why?

Of the two statements above, I would say that I agree with the statement that outsourcing strips a company of an important core competence– IT know how.

As companies depend more and more on information technology to help their business, it is easy to see how outsourcing would be the popular choice. In doing so you can shift a financial burden while maintaining focus on what your competitive advantage is. Most managers view the IT department as cost burdens rather than a strategic resource and would gladly be rid of the whole department. Nevertheless, there is no conclusive proof that outsourcing always will lead to more focused organizations, higher flexibility, lower costs and staffing levels and economies of scale or to the solution of all problems with internal IT departments. In fact, outsourcing is not for every company or client. As with outsourcing any company function, there are numerous issues with IT outsourcing.

Loss of Control- No outsourcing vendor can match the quality and responsiveness of an in house IT department. The ability to understand your business and its IT functions is priceless and unmatchable. This allows your IT department to look for improvements instead of companies having to ask for them.

Less Flexible- Once you choose a vendor, you are all but stuck with them for agreed upon services. Heaven forbid if you ask for something outside of the contract because they will be charging you. These costs immediately come out of your bottom profit margin.

Security- Sure your company runs background checks, but does your new IT company? Can you trust them with important confidential data even though they also work for your competitor? These are some of the questions that need to be asked before signing with anyone.

Risk- IT evolves quickly and hopefully your chosen company does too. If the outsourcing company isn’t up to par, you could be looking at a huge loss. Not only with finding another partner, but also the revenue lost while underperforming. These reasons make long term contracts on outsourcing difficult and risky.

In any situation, no matter how good the outsourcing company, you need to ask yourself, what would happen without them and most of the times the answer isn’t pretty. By keeping your IT department intact and in house, you can look forward instead of always looking over your back, worrying about one business instead of two.

What impact does outsourcing to foreign countries have on our country (economy)?

When outsourcing happens to foreign countries, it has many different effects. Foremost, it saves companies money, allowing for greater entrepreneurship in America, leading to higher level jobs for Americans. It also takes jobs away from semi-skilled laborers here in America that could be doing those jobs. This means our unemployment numbers rise, lowering spending. Lower spending means less profits for companies. Also depending on how the company is taxed on their outsourcing costs, it may decrease tax revenue from these companies. This could lead to higher government spending deficits, not having the income revenue from the employees or the company. Some people suggest that government tax companies that outsource and reward those that don’t, but we have to remember that other countries outsource to the United States such as defense systems. Regardless of your thoughts of outsourcing, it will not stop anytime in the near future if at all. People are going to have to get used to the fact that outsourcing is here to stay.

2. What is system integration and why is it important? Do ERP Systems solve the integration problem? Agree or Disagree? Find and summarize ERP failure (or success) and why it occurred.

System integration is the bringing together of various software programs and making them effectively work together. Having the ability to have specialized programs work together is a priceless capability for any company. This allows them to take programs designed for specific business functions (HR, Sales, Accounting etc.) and bring them together, essentially adding value to each program.

In some companies, Enterprise Resource Planning (ERP) systems are brought in to facilitate this integration and assist the flow of information throughout the business. These ERP systems can manage these specific programs and help deal with internal and external resources. When used effectively, taking in an ERP system at a company can all but take care of any system integration issues that a company might be facing.

In San Antonio Texas, a company called Lighthouse for the blind takes pride in offering jobs to the blind or visually impaired, and gives them an opportunity to lead independent lives. In 2007, Lighthouse was having issues with their inventory, manufacturing process, shipping times, and online services. Lighthouse knew that unless they could decrease their order to shipment times and compete online, they were looking at a 60% decrease in sales, essentially putting them out of business.1 The biggest issue resided in the fact that whichever ERP system that Lighthouse chose, the program had to not only integrate their numerous business functions but also their programs that safely allowed the blind to work with the different types of machinery. Lighthouse decided to partner up with Intuitive ERP systems to solve their issues.

Inventory and Manufacturing Process- Prior to implementation, managing inventory was a complicated task and resulted in stock outages and overages. Intuitive’s ERP provided Lighthouse with a disciplined material requirement planning process and shop floor scheduling that combined to reduce part shortages, increase inventory turns and automate operational activities. 1

Shipping Times- The organization as a whole dramatically shortened the order-to-ship cycle time, an advantage that has proved to be absolutely critical. Intuitive’s ERP technology saved carrying costs in inventory and provided a system that allowed Lighthouse to ship all products the very next day delivery without carrying excess inventory.

Online Services- With an improved production and shipping process, Lighthouse products began to seamlessly ship to their customers, making their online sales increase by 15% the first year. 1

Working Together- Intuitive ERP is developed with 100 percent Microsoft technology, which allowed Lighthouse to integrate seamlessly with other Microsoft applications such as Excel and Outlook.1 The great part lied in the fact that Lighthouse used Microsoft based programs for the visually impaired and flawlessly worked side by side with the new ERP system.

By efficiently implementing an ERP system, Lighthouse was able to integrate their numerous programs and processes into a streamline manufacturing plant. Prior to implementing Intuitive ERP, Lighthouse consisted of multiple applications on multiple platforms running redundant processes. Adoption of Intuitive’s ERP technology put San Antonio Lighthouse on the cutting edge and makes them more competitive than ever.

Consona Corporation, . “San Antonio Lighthouse for the Blind.” Intuitive. Consona Corporation, 09/10/2008. Web. 4 Dec 2010. <http://www.intuitivemfg.com/infokit/case-studies/sal0103.pdf>.

3. Why should general and functional managers be involved in IS planning decisions despite their lack of technical expertise?

Many times, companies decide to make IT decisions that affect functional and general managers the most, without including them in the selection process. The reasoning behind this is because their lack of technical experience will not help the selection process of an information system. The truth is that even though their knowledge of the actual system may not be much, having the knowledge of how it is going to affect every day processes is key in selecting the proper system. The acquisition of a software program can be hard enough already but by using the right planning and methodology, companies can dramatically increase the chance of success and lower the risk involved in such decisions just by including the right people.

Knowledge of Manufacturing Process- In most situations, a company’s IT department doesn’t fully know or understand the process of the manufacturing departments. Because of this, it is important to include representatives from all departments of an organization that will be affected by any new information software decisions. By doing this, companies can bring the knowledge of the production process to light, making it easier to select the correct system. This can save time and money down the road, lowering implementation costs and times.

Determining the Needs of the Application- Often, organizations find the information system they have purchased and installed at great expense does not necessarily meet their needs and expectations. Companies only gain marginal improvements in efficiency or scale. Poorly executed projects are expensive in terms of money, time and employee morale. Failure to select the proper system can lead to employees working around the system, using inefficient means to get the job done. Also, employees may change how they perform a job so it works with the given system. This is the same as the tail wagging the dog. Companies can avoid these situations by involving the functional managers that will be using the software daily in the selection process to help match the needs of the company with the abilities of information software.

Buy in From Employees- Often times, it isn’t the software that gives companies issues, it is the people using it. As an employee of a company, you want to make sure that the decisions that affect you have been well thought out. If you know that your boss was involved in the selection process of a new information system that is going to change your daily job functions, you will be more apt to go along with the change. If an employee wants to learn and buys in to the new process, implementation can be quick and easy, avoiding excessive costs and wasted time.

In any selection process that will affect personnel throughout a company, it is important to remember to include all those individuals affected. Even though their expertise in the given area may lack, their knowledge of their own departments will pay off in the selection process saving time, money, and avoiding unnecessary headaches in implementation.

4. (a) Supply Chain Management is less about managing physical movement of goods and more about managing information. Discuss the implications of this statement.

This statement is a loaded statement because supply chain management is all about managing the information efficiently so that you can better manage the physical movements of goods. To say that one is more important than the other is false, but together, manufacturers are seeing the returns on technology.

With the shifts in technology came the shifts in communication. For manufacturers, this meant that the flow of information became more important. Over the recent past, the transportation of good hasn’t changed very much. Planes, trains, and trucks are still moving items from point A to point B. The difference is that with today’s quick flow of information, we can tell those means of transportation when to load, ship, and deliver the goods so that there are no shortages or stock outs. Companies like Wal-Mart took this flow of information to the next level, sharing the sales information with their suppliers so that the goods can be replenished “just in time.” This saved Wal-Mart money lost in potential stock outs and from paying for too much inventory that would just sit on the shelves. On the other hand, suppliers were able to see how their products were selling, produce the necessary amount, and deliver the right amount of products at the right time.

Managing physical goods and managing information are two different things. By using today’s Supply Chain Management Software, we can take these two potential concerns and turn them into a positive asset for any business.

(b) Should all major retailing and manufacturing companies switch to RFID? Why or why not?

To say that ALL major retailing and manufacturing companies should switch to RFID is a bit of a stretch. True, RFID has come a long way, allowing suppliers to know exactly where their products are, receive the products faster, and keep an accurate inventory. As true as these benefits are, RFID tags are not the solution for all products.

Currently, RFID tags can be costly when you have to buy numerous amounts. If the cost is too great to tag enough of your products to see a return, whether tagging cases or individual products, companies will not use them. Also seeing how these tags need receivers at all locations, there are more costs than just the tags. The tags are receivers have to be wired in to companies supply chain management software meaning more IT costs. As in any IT investment you have to spend money but the more you spend, the greater the return needs to be. Until the costs involved with RFID decrease, it will not be the cure all that many people believe it to be.

Going forward, as technology improves and makes tags, receivers, and implementation costs lower, the benefits of RFID should improve as well. When this happens, you will see more companies shift over to RFID tags and see the benefits in their shipping times and order accuracy.

5. What opportunities and threats was Wyeth responding to when it decided to seek a globally integrated strategy?

When Wyeth decided to seek a globally integrated strategy, they knew that there would be many threats associated with the change but there were also numerous opportunities that they couldn’t pass up on. Some of these opportunities include using IT as an enabler, increased sales, cost savings, a global supply chain, and new product developments.

Using IT as an Enabler- Wyeth’s IT department consisted of 22 people and a budget of $3 million. With all of the changes and opportunities available by using new IT, Wyeth was left in the cold. New technology could help with not only a global strategy, but also on a site to site basis. IT could connect all of their assets together to better organize shipments, productions, finances, and other day to day activities.

Increased Sales- Currently, Wyeth sold over 40% of their products to countries other than the USA. Knowing this, Wyeth needed to integrate all of their assets locally and globally. They needed to be able to maximize their production capabilities and provide the necessary amounts of products to the appropriate vendors, gaining sales throughout in an organized fashion. In doing so, Wyeth could supply customers with the necessary products to new locations and the correct products, the ones that are best selling, to their current vendors.

Cost Savings- By maximizing their assets through IT, Wyeth not only would see increased sales, but lowered costs as well. Wyeth could eliminate surplus manufacturing and cut out unnecessary investment costs. For example, Wyeth saved $15 million by avoiding replacement costs, and another $24 million in global projects soon after their global strategy change.

Global Supply Chain- In order for Wyeth to have a global supply chain, they needed better systems in place to implement one. By using IT programs, Wyeth could take their current process and organize it in a way to get manufacturers and retailers the right products at just the right time. Doing this would save money on stock outs and surpluses.

New Product Developments- Since Wyeth was investing resources into research and development, they were going to need to be able to provide their newly developed drugs worldwide. Wyeth’s R & D department was already considered to have a global outlook but Wyeth needed to make sure that once the product was developed, they could distribute and produce the product worldwide.

By making the move to a global strategy, Wyeth will be trying to address certain threats as well. These threats include loss of potential customers, funding strains, and counterfeit or contaminated drugs.

Loss of Potential Customers- If Wyeth couldn’t change their current process, they were faced with the reality of being out performed by competitors that streamline the process, providing the same products at cheaper prices. The market size for pharmaceutical products in 1994 was approximately $265 billion and expected to rise to $335 billion in 1999. (“Standard and Poor’s”) If Wyeth wasn’t going to take advantage of the growth in the market, someone else would.

Funding Strains- In order to generate their future value and compete globally, Wyeth needed to transform itself in to a global pharmaceutical company. Wyeth knew that IT could provide this but their current department was strung over numerous countries and only had a budget of $3 million. Wyeth needed to figure out a way to fund their globalization movement without becoming too strapped for funds for daily business activities.

Counterfeit or Contaminated Drugs- According to a survey conducted by Axendia, 44% of pharmaceutical executives fear that counterfeit drugs and contaminated supplies are a top concern.(“Supply and Demand Chain Executive”) By going global, Wyeth needs to understand that the regulations and laws are going to widely vary among countries and they need to stay on top of their products to make sure they are not the victim of one of these potential downfalls.

Wyeth understood that to stay competitive, they needed to focus on a global integration strategy. In doing so, Wyeth took advantage of the opportunities available to them including enabling IT, increased sales, a global supply chain, cost savings, and developing new products. Wyeth also addressed potential threats including a potential loss of customers, strained funding, and counterfeit or contaminated drugs.

“Pharma Supply Chain Faces Challenges of Going Global.” Supply and Demand Chain Executive. Standard and Poor, 10/28/2010. Web. 6 Dec 2010. <http://www.sdcexec.com/online/printer.jsp?id=12915>.

“Standard & Poor Industry Surveys, Healthcare: Pharmaceuticals, .” Standard and Poors. Standard and Poor’s, 12/06/1998. Web. 6 Dec 2010. <http://sandp.ecnext.com/coms2/page_industry>.

I hereby certify that I neither solicited nor received any assistance in preparing the documents submitted here as my work for the take-home test of CIS 5318, Fall Semester Final Exam 2010. I have read course dishonesty policy in the syllabus on page 5. I understand that I may solicit from the course instructor clarifications as to the meaning, wording, and intent of the questions.

Name:__Leslie Adams___ Date:__December 8 2010_______