Mehta manufactures high-quality textile which employs 2,000 manufacturing staff and 250 other staff (supporting). Its products are used by both amateur and professional sports players in its home country. They follow high ethical standards on workers, suppliers, and the environment. they voluntarily published a corporate sustainability report for recent years. Currently, Company has its own unreliable Excel-based systems for planning and reporting. As a result, Mehta often fails to produce accurate, timely, and consistent data to monitor its own performance, which contributes to failures in achieving the performance targets set by its retail customers.

Market analysis:

Mehta wants lower prices and they also require suppliers to meet performance targets relating to lead times and quality. Mehta’s competitors have closed down all of their own manufacturing facilities and outsourced all production to overseas suppliers, who have much larger factories and lower costs. To mitigate the cost of shipping goods over long distances, Mehta’s competitors have invested in technology to consolidate orders so that each shipping container is completely full before dispatch from their suppliers including Purchase invoice processing by the integration of information systems into the suppliers’ systems.

Business process re-engineering proposal In order to reduce costs, it has been proposed to outsource the manufacture of the products, which is 40% of Mehta’s total output, to a supplier 18,000 km away. A comparison of the cost of manufacturing and the cost of outsourcing products is given in Appendix 1.

This will mean that staff from Mehta’s functional departments will reorganize into multi-disciplinary teams, each serving major customer accounts. Each team will perform all aspects of account management from taking sales orders and procurement to arranging shipping and after-sales service. Team members dealing with customers will work in Mehta’s home country, while those managing quality and supplier audits will work close to the manufacturing site. Teams will be given greater autonomy to set selling prices to reflect market conditions. Many support staff will work in unfamiliar roles or be offered new jobs overseas after the reorganization.

A consultant has advised Mehta that the outsourcing and reorganization proposal has characteristics of re-engineered processes, and could be described as business process re-engineering (BPR). He advised on how BPR will improve its business performance in meeting its customers’ demands and requirements, Mehta should take into account any development in information systems that may be required, as well as the ethical aspects of the proposed changes.

REQUIRED:

1. Explain how the BPR proposal could improve Mehta’s performance in relation to its retail customers’ two key demands.

2. Evaluate the development of its information systems which would be required for the BPR proposal to deliver performance improvements.

3. Assess the potential impact of Mehta’s high ethical standards on the BPR proposal and consequently on business performance.

Appendix 1

Comparison of the average cost of manufacturing and outsourcing swimwear production

Manufacturing	Outsourcing
Average cost per unit	$	$
Materials cost	1.95	-
Labor cost	1.90	-
Factory overhead	1.25
Purchase cost from the supplier	-	4.00
Total	5.1	4.00

Notes:

1. The purchase cost of outsourced products is translated into $ from the supplier’s home currency.
2. In addition to the purchase cost from the supplier, Metha must pay for shipping costs at the rate of $15,000 for each large, standard-sized shipping container, regardless of the number of units in it. Each container holds 20,000 units when fully loaded.
3. Due to changes in international trade tariffs expected in the near future, products imported into Metha’s home country will be subject to a 15% import duty on the cost of imports excluding shipping costs.