Solution To Hanjin Problems Information Technology Essay

Shipping by its nature is a very competitive and a very complex industry. Martin Stopford, 1997 Shipping companies have to operate on a global scale and manage offices all around the world and work with a diverse work force. Merchant shipping is one of the most highly regulated industries in the world. Hence information systems play a very important role in the management of the shipping company. In this essay we will analyse a case study of how Hanjin shipping used information systems grow as a leading shipping company. Hanjin is a global transportation and Logistics Company. (Hanjin shipping, 2010).The company operates around 200 ships, mainly container vessels, gas tankers and bulk carriers. Hanjin ships are trading worldwide. Hanjin transport cargo to more than 100million tons a year to 6000 destinations worldwide. (Hanjin shipping, 2010) Company’s sales network includes 200 international branch offices and 30 corporations. Over all the company is expanding rapidly on a global scale and is also venturing into new shipping related business.

Business problems

Hanjin was increasing its global operations by opening new container terminals, buying new large ships, going in alliance with container lines. Hanjin lacked the logistics required to be competent in the container industry. Its 10 year old ERP systems lacked functionality and flexibility required to operate such a complex and big organisation (Oracle 2008). Hanjin understood that without end to end logistics solutions they cannot compete in container business. Hanjin also faced problems controlling procurement costs and to meet the global regulatory requirements (Oracle 2008). The data collection system was done manually and hence it was time consuming and prone to errors. Hanjin have a work force of around 4000 which are employed all around the world. It was increasing difficult for Hanjin to manage such a large and diverse work force.

Solution to Hanjin problems

As a solution to the problems Hanjin was facing due to its global expansion it decided to launch Process innovation project. The process innovation purpose was to establish advanced management structure and strengthening its organisational capabilities. (Sustainability report, 2006). ‘The project applied to business process and organization structure as well as the corporate cultures based on adopting the advanced IT infrastructure’. (Sustainability report, 2006, p.27). Hanjin decided to re-engineer their business process using best practice models for their ERP systems so as to gain global competitiveness. This system was going to be a long term solution, it will not directly show on balance sheet but it will be platform for launching new business projects (Business report 2006). Hanjin also decided to shift to customer based business by ensuring good service and increased customer satisfaction.

Process Innovation Project

The process innovation project team was assembled in October 2004 and then they spent 5 months for mapping the new systems and the process. The project will be implemented gradually on a step by step basis. The process innovation project was to be implemented during a period of 3 years.

Source: (Hanjin Sustainability report, 2008, pg.27)

The main aim of process innovation was to be customer centred and a profitability oriented management company. The information system used to re-in force the organisational capabilities and will prepare the management to be more customers focused.

The information system development contracts were given to companies which were best in the business (Oracle, 2008). ERP was given to ORACLE while others were given to Siebel and Hyperion. During the process of project Oracle acquired Siebel and Hyperion which resulted in seamless integration and customer support. (Oracle, 2008).

Information Systems

(ERP) Enterprise Resource planning: Enterprise system integrates the key business processes into single system. In this system the flow of information is seamless throughout the organisation (Laudon & laudon, 2007).

Hanjin’s Enterprise Resource Planning (ERP)

Internal system

Internal system

Source: Author generated

Hanjin integrated business process such as finance and accounting, capital asset planning, human resource, procurement process. They used these for smooth flow of information in their internal system. The company’s senior management was involved in the projects implementation. The Managing director and CIO of Hanjin Shipping said that “To improve our global competitiveness, we needed an IT solution that supported extensive process reengineering” (Oracle, 2008, pg.1). Hanjin decided to invest about 57.7 million USD on this project. They standardised the management and data collections methods, restructured the flow of data between their business systems and prepared a dictionary so as to make it easier for the staff to follow new system. As the system was implemented on a step by step basis, gradually the staff could see the benefits of the system and they were not resilient to changes, but they were will to share information in between different divisions. Company also adopted other best practice guidelines such as training and educating the staff, use of software support and maintenance.

Benefits of Information system

Source: (Hanjin Sustainability report, 2008, pg.27)

The above diagram is explained using the generic model of 6C’s for explaining business benefits.

Lower Cost: The e-sourcing system assisted them to procure products from a list of suppliers and they were benefited from competitive pricing which resulted in procurement costs. Cost saving per customer was increased due to increased efficiency (Oracle, 2008).

Improved Communication: As the data was consolidated into a single system, hence staff gained an integrated view of operations (Oracle, 2008).

Improved Management Control: New ERP systems and re-engineering process helped in improved business management. This gave the managers a complete view of the company’s operations and also equipped the staff with detailed information they required to plan, execute and evaluate complex initiatives. The managers were also able to make decisions and ensure problems were addressed immediately.

Performance evaluation was easier and could be easily done on a global basis and medium and long term strategy planning could be done due to data availability. (Oracle, 2008)

New Capability: HR platform helped in improving the efficiency of the department. The new system helped the managers to view complete history of the staff and also discard applications. This resulted in increased efficiency of HR staff which could focus more on attracting and retaining skilled employees and also train them. (Oracle, 2008)

Improved Customer Service: Due to its service network it could respond faster to customers demands. Detailed sales and marketing plans could be developed. (Oracle, 2008)

Competitive Advantage: Hanjin got the recognition of a reliable logistics partner. (Sustainability report, 2008). In April 2008 Hanjin got the highest awards in logistics in Korea. (Sustainability report, 2008).

Future business plans

The project improved the overall performance of the company process. In future company aims to invest more in their IT systems which aims to complement their management systems as well as front office work. (Business report 2007). As the internal system implementation was completed the company now is ready to develop shipping/logistics related business which will become the company’s next driving forces. Banking on their internal system they are stepping closer to become a Global logistics company. They are also planning to expand its 3PL (3rd party logistics) business by extending its global network (Hanjin Shipping, 2008). In line with their Process Innovation project they have also launched another project ‘Knowledge management’. (Sustainability report, 2008)

Conclusion:

The project taken by Hanjin to rebuild its business process by the use of information systems was strategically very important. Hanjin is a global organisation with different functions, organisational levels and many business processes; hence ERP system was the correct choice of information system. This project became the base to implement advance business process which complement their information systems and also increase the efficiency of the company. It helped the company to be more customers focused which is a key strategy in current times. They could venture into new aspects of business such as logistics. The selection of Oracle and Siebel was also correct because they were the best in the business. Hanjin made correct decision by integrating all systems together. The acquisition of Siebel and Hyperion by Oracle ensured that the systems have seamless integration and continuous support. The information systems which they used were in line with their business strategies which resulted in success of the project.