Ford buys in about two thirds of its car parts from outside suppliers. At one time, Ford employed 500 people to order components, receive the parts and pay suppliers. Ford believed that by rationalizing procedures and installing new computer systems, it could reduce staffing levels to about 400.

However, Mazda a Japanese car company, already did the same job using less than 100 staff. Even allowing for scale differences between the two organizations, the gap was enormous. The main difference was in business procedures. Mazda did not wait for invoices from its suppliers. In contrast, Fords purchasing department created a purchase order, a copy of which is sent to accounts payable. Subsequently, when the goods were received, goods inward sent a copy of the receiving documents to accounts payable; which also received an invoice from the supplier. It was accounts payables responsibility to match the purchase order against the receiving document and the invoice, then issue payment. In practice, the department spent most of its time investigating mismatches.

Fords original idea was to use computers to streamline the investigation procedure. However, Mazdas experience highlighted the need for a redesign of a complete business process. As a result, Ford has developed an invoiceless processing payment system. In this system, when purchasing department raises an order, it enters information into an online database. When parts arrive at goods inward department, it enters the information into an online database. When parts arrive at goods inward department, a warehouse man waves a barcode reader over the label, entering the parts inventory and sending electronic payment to the supplier. As a result, the clerical and data processing complexity is eliminated. Through these changes, ford has achieved a 75% reduction in headcount, rather than the 20% it would have achieved had the original plan gone ahead.

1. With reference to the Case Study above, identify and briefly explain any benefit (only one) that Ford enjoyed, or expected to have enjoyed, by adopting Mazdas Business Handling Style. Your responses to this question should be done using the following three separate components; and clearly numbering each component.

1. In one word, a phrase or at most one sentence, identify and state the benefit. (5 Marks)
2. Define and / or Explain the benefit identified in (i) above in general terms. (10 Marks)
3. Discuss the benefit identified in (i) above in relation to the case study; citing at least one related example from the case study. (10 Marks)