CASE STUDY 1

CASE STUDY 1Objective: This is a case intended to introduce to the class the concepts of IT Strategy.

The situation depicted here is that of a real life situation and the students are expected to understand the situation as mentioned here and come up with holistic solutions and not restricted to Information Technology alone.

Background

RPG is a leading player in audio industry. Over a period of 30 years, it has developed a strong partnership with music industry and has become a force to be reckoned with in India. The $25 million organization has presence in almost all the states in India. It sells cassettes and CDs in different packages and these packages are grouped in different categories, such as movie, artist and situation based collections. With so many different product lines, the company wants to simplify its manufacturing operations. It is also looking at improving and upgrading supply chain management systems. At present it uses its own home made warehouse management systems in different parts of the company. But the system is less than effective as is evident from the delay in decision making process. The delay is primarily in terms of forecasting the sales figure for the next month. The companys system is an integration of systems comprising manufacturing, warehousing, inventory control, planning, shipping and logistics. Apart from these internal systems, the company has to interact with suppliers, musicians and other partners while taking care of both at retail and wholesale customers.Increasingly the Managing Director Mr. Goenka finds it difficult to find the numbers related to monthly and annual sales. He wants to build a strong customer base with quality products while keeping his partners happy. He wants to use feedback mechanism to get information on quality of cassettes being sold while improving the research activities to keep the company abreast with manufacturing technology. Most of the times the partners provide information on technology and he needs to make judicious and timely investment to get that cutting edge. His idea is to be the leading music selling company in India at national and regional level and aspires to be a recognised player in international market in due course of time.

Current situationWhen Mr. Goenka passed out from his MBA School, he was beaming with ideas and wanted to introduce these ideas in form of initiatives into his fathers company. He felt that these initiatives would launch the company into a new level that would mark the entry of the company to international level. However he had no clues as to what is the present condition of the company.

He divided the company into four regional areas and in each region, sub divisions were made based on projected sales volume. But MD he was not able to give a correct projection of sales figures for each of these divisions and every month there was a wide fluctuation in the sales forecast vs. actual sales. He looked at the models that he had learnt in the MBA School for forecasting; each forecasting model used past data to arrive at the forecasting and he had used the past data to derive sales forecasting! He went back to actual sales figures again and he found that actual sales figure as recorded in the books are different than that he had used for forecasting. When contacted, the accounts department said this is the latest figure available from sales and these data are based on actual realization of money. His problem was compounded when within 2 hours a stock out situation in Coimbatore was reported where as Cuttack refused to take any more inventory saying that Cuttack warehouse was over stocked. One of the suppliers also informed that because of cold season, he will not be able to supply the magnetic tapes in November and December and so wanted to supply excess quantity now to tide over the manufacturing problems later on.

The sales department reported a reduction in sales to the tune of 5% in the quarter and net margin also showed erosion. The competitor T-series on the other hand had a good quarter and increased the volume of sales by 17% - most of the increase coming in at cost of RPG.

He called for a meeting with RMs (Regional Managers) and asked them to present their issues, sales figures and projections in the meet. Most of them were not prepared to share the information as they noticed that some suppliers were present in the meet. They sulked and said they would send them by courier as that was the preferred means of sending all information related to sales and inventory. That takes hardly 3 days and we can definitely wait for that period. The sales figures usually arrive from different stockists within 7 to 8 days after sales and then the RMs compile them for 2 days and courier them to head office.

Challenges

Mr. Goenka wanted to make RPG follow the model of Wal-Mart and become a true value supplier to customers. He wanted RPG products to be affordable with high quality music. He also wanted to increase sales figures with reduction in cost while at the sale time maintaining a healthy relationship with partners. In fact he wanted to blur the relationship between suppliers and the company to achieve the same end: to sell as many products as possible without both of us having to maintain too much inventory. I also want to be linked to each and every customer so that we can react to their needs at the earliest.Mr. Goenka decided to implement ERP and also implement CRM so that he can achieve his vision. He asked all the leading players in ERP and CRM to make presentations to the management team. During the presentation, he found that the team could not answer many of the questions raised by the ERP and CRM vendors. The questions were related to the requirements of the company and the process flow for information. However Mr. Goenka answered each and every question and a detailed comparative statement was prepared and sent to the board for approval. He was sure that if implemented, this Rs. 1.5 crores (including AMC and hardware cost) implementation will change the way the company works today and will lift the operational efficiency to manifold.In the next board meeting, his proposal was rejected; he was back to square one.

Discussion points

1. Is there something wrong in what he learnt in his MBA?

2. Did he make a correct assessment of the present situation?

3. Is there a culture shock?

4. Was he wrong in his recommendations?Notes that will help in discussion:

1. Past sales data are incomplete and inaccurate; model of forecasting is fine, but without correct data, trend forecast will e inaccurate.

2. Sales data take quite some time to reach the head office, that too in bunches. Since information arrives late, this delays in decision making process.

3. Lack of transparency as they are not willing to share data with suppliers.

4. Information flow is not defined.

5. ROI on ERP investment was not seen and hence can not be successful in long term implementation.

6. The management team including RMs were not with the MD for designing IT strategy and information flow.Cost advantage by making correct costingDifferentiation high quality of cassettes and CDs, controlling costs through PCBInnovation through partners

Growth through point of sales tracking

Alliance Online shoppingThis case study is developed by Sanjay Mohapatra for Xavier Institute of Management, Bhubaneswar