Cummins Engine’s top management was fully committed to the project. It provided resources to the project team that enabled it to educate Cummins’ finance and operating persaorounnd nthee wlor ld about the project’s methods and objectives. Management also committed to no forced layoffs of personnel whose jobs would be affected by resulting process changes.

In the early part of the project (the “baseline” phase), the team recognized that accounts s payable, cash disbursement, and procurement processes should be integrated and located at a single site rather than at 50 sites within the United States alone, and that new software and hardware would be required.

The team began with ap ilot study, however, so that it could understantdh e complexitieso f the project before launching a worldwide implementation. The pilot study allowed the team to identify tangible objectives for the new system that included:

Electronic data interchange (EDI).

Linkage between procurement, accounts payable, and cash disbursement.

Use of client-server technology.

Outsourcing of non-value-added activities such as check printing.

Improvement of process quality measures involving statistical quality-control techniques.

Software compatible with Cummins’ data architecture at a competitive price and with a userfriendly graphical interface.

Project implementation was phased in over a three-year period with inflexible target dates for each phase and continuous communication with affected finance and operating personnel. The workforce in accounts payable was reduced by 80 percent, costs reached best-- practice levels, and errors were reduced ramatically. (The workforce reduction occurred through attrition, assigning employees to other areas, le and early retirement plans.)

Required Form small groups to prepare a report that answers the following questions:

a. What are the differences between the activity-based management approach and the benchmarking approach used by Cummins Engine to identify opportunities for process improvement? What are the relative advantages and disadvantages of the benchmarking approach to identifying opportunities?

b. What interests, skills, and knowledge would be required for members of a project team such as the one at Cummins to analyze accounts payable?

c. What are specific steps that Cummins Engine took to ensure the success of the accounts payable project?

d. Does the Cummins project appear to be perfect, or can you recommend improvement(s) and/or identify area(s) of concern if you were to copy this approach at another organization?