1.Explain the term 'Business process re-engineering' and how itsapplication might enable overall business performance to be improved.Briefly discuss potential problems which may be encountered in theimplementation of a business re-engineering programme.

The activity matrix below shows the budget for the sales orderdepartment of Cognet Inc. Relevant information with regard to theoperation of the sales order department is as follows:

iA team of staff deals with existingcustomers in respect of problems with orders or with prospectivecustomers enquiring about potential orders.

iiThe processing of orders requires communication with the production and despatch functions of the company.

iiiThe nature of the business is suchthat there is some despatching of part-orders to customers which helpsreduce stock holding costs and helps customers in their work flowmanagement.

ivSales literature is sent out to existing and prospective customers by means of a monthly mail shot.

Cognet Inc has decided to acquire additional computer software withinternet links in order to improve the effectiveness of the sales orderdepartment. The cost to the company of this initiative is estimated at$230,000 pa.

It is estimated that there will be the following cost and volume changes to activities in the sales order department:

(1)Reduction in overall salaries by 10% per annum, applied to the existing salary apportionments.

(2)Reduction of 60% in the stores/supplies cost in the sales literature activity only.

(3)$20,000 of the computer software cost willbe allocated to the sales literature activity. The balance will beshared by the other activities in proportion to their existing share ofIT costs.

(4)Sundry costs for customer negotiation,processing of orders and implementing despatches will vary in proportionto the number of units of each activity. Sundry costs for salesliterature and general administration will be unchanged.

(5)Amended volume of activity will be: totalcustomers 2,600; customer negotiations 6,000; home orders 5,500; exportorders 2,000; despatches to customers 18,750.

Recent industry average statistics for sales order departmentactivities in businesses of similar size, customer mix and product mixare as follows:

Required:

(a)Prepare summary of the amended activitycost matrix (per matrix above) for the sales order department afterimplementing the proposed changes.

(8 marks)

(b)Prepare analysis (both discursive andquantitative/monetary as appropriate) which examines the implications ofthe IT initiative. The analysis should include the following.

A benchmarking exercise on the effectiveness of the sales orderdepartment against both its current position and the industry standardsprovided.

You should incorporate comment on additional information likely to improve the relevance of the exercise.

Woodsy is a garden furniture manufacturing company, which employs30 people. It buys its timber in uncut form from a local timbermerchant, and stores the timber in a covered area to dry out and seasonbefore use. Often this takes up to two years, and the wood yard takes upso much space that the production area is restricted.

The product range offered by the company is limited to themanufacture of garden seats and tables because the owner-manager, BillThompson, has expanded the business by concentrating on the sale ofthese items and has given little thought to alternative products. Billis more of a craftsman than a manager, and the manufacturing area isanything but streamlined. Employees work on individual units at theirown pace, using little more than a circular saw and a mallet and woodenpegs to assemble the finished product. The quality of the finished itemsis generally good but relatively expensive because of the productionmethods employed.

Marketing has, to date, been felt to be unnecessary because thepremises stand on a busy road intersection and the company's productsare on permanent display to passing traffic. Also, satisfied customershave passed on their recommendations to new customers. But things havechanged. New competitors have entered the marketplace and Bill has foundthat orders are falling off. Competitors offer a much wider range ofgarden furniture and Bill is aware that he may need to increase hisproduct range, in order to compete. As the owner-manager, Bill is alwaysvery busy and, despite working long hours, finds that there is neverenough time in the day to attend to everything. His foreman is a worthyindividual but, like Bill, is a craftsman and not very good atman-management. The overall effect is that the workmen are left verymuch to their own devices. As they are paid by the hour rather than bythe piece, they have little incentive to drive themselves very hard.

Required:

(a)Explain what is meant by the terms 'value chain' and 'value chain analysis'?

(b)Use a diagram to give a brief explanation of the two different categories of activities that Porter describes.

(c)Analyse the activities in the value chain to identify the key problems facing Woodsy.

(d)Based on your analysis, prepare set ofrecommendations for Bill Thompson to assist in a more efficient andeffective operation of his business.