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Background
Healthlite Yogurt Company is a leader in the yogurt and related healthy products marketplace in the U.S. Healthlite has corporate headquarters in Danbury, Connecticut and has several production plants in different states in the U.S.A. Healthlite has grown rapidly and is looking toward improving its business by making its sales and ordering processes more efficient.
Identification of Major Information Systems Issues
· Inefficient communications and systems enterprise-wide
· Inefficient order process
· Inefficient reporting process between sales and corporate
· Accounting discrepancies between sales and headquarters
· Conservative nature of management and rapid growth of the company contribute to information systems inefficiencies
· Management wants to reduce headcount by implementing a more effective system
Analysis of Issues
The purpose of this analysis of issues is to provide an in-depth look at the major information systems issues and to provide ways in which Healthlite can resolve the problems identified above. The Organization Overview, Major Business Processes, and Analysis of Problems explain the inefficiencies in the systems. The Management Plan, Major Business Process Changes, Major New Technology Components, Steps to Handle Conversion, Quality Assurance Measures, and Organizational Impact sections address the ways to resolve these inefficiencies.
Organization Overview
In the following paragraphs, the overview of the Healthlite Yogurt Company will be discussed according to the listed categories organizational structure, products, and major business processes.
Organizational Structure
· Healthlite has corporate headquarters in Danbury, Connecticut and several production plants in New Jersey, Massachusetts, Tennessee, Illinois, Colorado, Washington, and California.
· At the corporate headquarters, Healthlite has a central mainframe computer system to maintain most of the major business processes. In each production plant, a minicomputer system connects to the mainframe and receives customer orders and related information from headquarters.
· Healthlite has experienced rapid growth for the past five years, and it also faces local competitors entering the market who offer faster delivery and lower price.
· Customer files are maintained at corporate headquarters, and credit verification is determined there as well. This information can be transferred to the minicomputers in the local production plants.
· Healthlite has 0 sales regions, each with approximately 0 sales representatives and a regional sales manager. Additionally, Healthlite has a 1-person marketing group at corporate headquarters.
· Salespeople can retrieve and view customer information in the regional office to get customer data. However, they must mail manual sales reports to the corporate headquarters.
Products
· The core products of Healthlite are yogurt and health-related products. Yogurt has a very short shelf life, and it must be moved very quickly.
· Because Healthlite has a series of yogurt-based products, such as frozen desserts and low-fat salad dressing, it needs to adjust its share of shelf space in the grocery store to have more shelf space to display its new products.
· Healthlite is also facing the pressures from local competitors, because local competitors are offering faster delivery from local production centers and are providing lower prices to capture the current market.
Major Business Processes
Order Processing
The current ordering process is described in the following
· The current system requires sales representative to generate customer orders and write hard-copy tickets to place orders manually through the mail or by fax to headquarters. Each ticket lists the amount and kind of product ordered by the customer account. Often, orders are delayed when the fax machines break down.
· Approximately 0 workers at corporate headquarters receive the order information and then open, sort, and enter the order tickets from regional office. Those workers handle 500,000 order tickets per week.
· The complete ordering information is transmitted every evening from the mainframe in corporate headquarters to minicomputer at each of Healthlite’s processing sites.
· The processing center produces the amount and type of yogurt ordered and then ships the orders. The shipping managers at the processing centers assign the shipments to various transportation carriers to deliver the products to regional receiving warehouses.
Sales
· Each salesperson is able to store and to retrieve data for assigned customer accounts using the minicomputer system in the regional office.
· Salespeople need to produce individual reports, including printouts of orders, rejection notices, and customer account inquiries. These reports are printed at the regional offices and then mailed to the marketing group at corporate headquarters.
· The sales and marketing data are manually maintained in the regional office while the corporate headquarters only stores the consolidated enterprise-wide files for customer accounts, orders, and billing data in the mainframe system.
· Because sales and marketing data are maintained manually in the regional office, managers sometimes need to make telephone calls to subordinates and piece the information together to get the up-to-date data.
· The present results from the current sales process follow.
o Salespeople are choking on paper by manually completing two forms per customer order and sales reports. Because salespeople often have almost 80 customers, they delay the ordering process by having to complete so much paperwork delays.
o Because of the delays in processing customer orders, Healthlite spends between 4 and 14 days to process and ship an order, depending on mail delivery rates.
o Accounting discrepancies of $1.5M annually exist between the sales force and headquarters.
Marketing
· The marketing group in the corporate headquarters needs sales and marketing information to do product planning, to make pricing decisions, to complete product advertising and promotional campaigns, and to forecast market potential for the new and existing products.
· Needed sales and marketing data, such as sales and advertising expenses, promotional campaigns, and customer shelf space devoted to Healthlite products, are maintained manually at the regional offices.
Analysis of Healthlite’s Problems
What are Heathlite’s problems?
· The order process is slow and inefficient. Inefficiency comes from writing customer orders manually and from the lack of reliability of the current fax transmissions. Also, duplicate data entry happens in both regional offices and corporate headquarters, which generates more errors.
· Accounting discrepancies between the sales and headquarters have reached $1.5 million.
· Inefficient systems
o Duplicate data entry and processing increase inefficiency and generate more manual errors.
o Information is fragmented in both the regional offices and the corporate headquarters. Healthlite does not have a central location to unify and to store useful information for management decision-making.
o Healthlite’s inefficient distribution system fails to send the right goods to the right places on time.
· Inefficient communications
o The current communication method is not efficient and reliable because communication between sales managers and sales representatives has been primarily through the mail or by telephone.
o Sales managers have to combine sales data manually by phone call to subordinates or by receiving information through the mail.
· Lack of important decision-related reports for managers
o Management has to generate information for planning and for monitoring the performance of the sales force. Additionally, the information on the performance of specific products, product lines, or brands is compiled manually.
o Management also needs to be able to monitor the efficiency of the distribution of Healthlite’s products and customer services.
How are these problems related to existing business processes and systems?
· Sales and marketing problems have resulted from current inefficient, duplicated, and slow ordering processes, from the lack of a centralized data collection facility, and from regional plants mailing materials to headquarters.
· Communication problems have resulted from Healthlite’s inability to utilize communication technology, such as Internet or Intranet, and from its inability to meet its enterprise-wide communication needs efficiently.
What management, organization, and technology factors contributed to these problems?
· Healthlite’s management is conservative and resistant to change, and they do not have a positive outlook on technology. The only technology on which they support is proven technology.
· Healthlite is experiencing rapid growth, and the current information system is incapable of dealing with increasing sales, marketing, and production tasks.
· The current telecommunication infrastructure in Healthlite cannot meet enterprise-wide communication needs.
· Communication between sales managers and salespeople has been primarily through the mail or by telephone. Because most of internal communications are achieved by mail and telephone, inefficiencies and communication lags are increased.
Management Plan
A project team will be formed to develop the overall management plan to address Healthlite’s existing problems as well as to provide solutions to the problems. Healthlite desires to redesign its order process and related sales and marketing processes to improve efficiency inside the company as well as to increase its competitive advantage in the market. During the system development life cycle, the company can use a joint application development approach, or JAD, to expedite the generation of information requirements and thus greatly help develop the initial systems design. A Gantt chart will be used to depict the overall management plan for improving Healthlite’s problems (see Appendix 1). The Gantt chart includes a list of objectives, a tentative time frame, and major milestones.1 The projected time frame depicted on the Gantt chart will likely change as the project team gets further involved in the development process and defines Healthlite’s system changes.
Assessment of the costs and benefits
Costs
· Investment in the new order processing system and relevant hardware.
· Investment in installing telecommunication infrastructure.
· Outsourcing fee for running a sales-oriented website and an Intranet.
· Personnel cost, such as hiring a systems director and other system specialists.
Benefits
· Increased productivity and lower operational costs from the new order processing system.
· Reduction in employees attributed to order processing system automation.
· More timely distribution of products and services.
· Higher client satisfaction from value-added customer service.
· Improved decision-making through the use of efficient information systems.
· Improved resource control and organizational planning.
· Increased job satisfaction for regional sales people.
Major Business Process Changes
The following major changes are required to achieve the plan.
· Eliminate the use of hard-copy tickets to place orders.
· Enter sales orders directly into enterprise-wide system instead of using workers to sort and to enter order tickets. Allow all systems users to have access to this data for analysis purposes.
· Eliminate the use of the mail and fax machines for taking orders. Orders can be placed directly through the web site.
· Stop mailing printed reports for individual salespeople and sales offices. Salespeople can access the system for needed information at anytime.
· Stop writing and mailing monthly reports from sales representatives to regional headquarters. Sales information will be generated automatically from the system.
· Allow managers to access up-to-date sales data in the new system anytime they want. This eliminates their need to call subordinates and the need to piece information together.
· Improve communication between sales managers and sales representatives. Announce promotional campaigns or pricing discounts by immediately spreading them throughout the enterprise-wide system.
· Deploy Customer Relationship Management tools to help with ordering, customer history management, complaints, and real-time tracking service.
· Reduce the time involved to process orders to deliver shipments more timely.
Major New Technology Components of the Plan
When analyzing Healthlite’s needs to implement technology supporting the new business processes, an enterprise system would best meet the requirements. An enterprise system would link enterprise-wide information processes, thus improving the overall business efficiency. When the entire company is able to use a single software system, all departments can share information freely. Enterprise systems provide companies with an all-encompassing information system technology platform. This technology platform results in a single data warehouse that can be used by different departments to input and to obtain enterprise-wide, standardized information. Further, the system allows for data storage in one data warehouse, which will avoid redundancy and inaccurate information issues. The data should be grouped by processing plants, but accessible to all users. This storage process will allow for differentiation among processing plants while allowing for enterprise-wide search capability. Thus, the enterprise system is key to the Healthlite’s success as it moves into the future.
By installing an enterprise system into the Healthlite business, managers will be supporting business processes that will make the company more efficient. It will allow for scalability and for encompassing all business areas within the system. The enterprise system will allow for centralized data collection and entry. A centralized entry system will result in the reduction of or the elimination of paper passing throughout the company. This system will also provide employees the option of viewing reports on-line that will result in the reduction of printing, which will only be done when necessary. This additional feature will aid managers and market analysts by providing them with the ability to collect more accurate information to assist them in accurate sales planning, decision-making, and marketing strategy development.
Healthlite must also improve the telecommunications infrastructure enterprise-wide. E-mail capabilities will be needed throughout the company in order to eliminate the ineffective communication within the company. Additionally, the company will add Intranet and Internet that will improve its day-to-day operations.
Steps Managers Must Take to Handle Conversion From Old to New
The following are the steps that managers need to take to ensure successful conversion.
· Make sure to get buy-in from senior management. Ensure that senior managers lead the change process.
· Inform employees of upcoming changes and solicit volunteers to form the development team. Ensure that the development team involves both IT and business personnel.
· Throughout the process, involve all employees to ensure their support in making changes, to complete the design of the new system and business processes, and to ensure user acceptance before implementation. Additionally, continuously document the new processes for training and scope change purposes.
· Establish milestone meetings that will address feedback and that will facilitate the conversion process throughout the steps of the development lifecycle.
· Encourage e-mail updates about development productivity from the development team to the users as well as to management.
· Provide training and documentation throughout the process. Also, prepare user manuals prior to implementation.
· Follow the implementation with trouble-shooting user support.
Quality Assurance Measures
Quality assurance is important to ensuring the success of any project. Specifically, Healthlite will need to make all people as well as all functions within the organization responsible for business quality. Some measures as discussed by Laudon and Laudon in Management Information Systems that are important to Healthlite’s business process as the company implements the new system are the following
· Simplify the ordering and sales processes by focusing on reducing the cycle time and by eliminating task redundancy.
· Benchmark changes desired with other companies that have similar processes.
· Use customer expectations and requirements as a guide to improve products and services. Design questionnaires to solicit feedback from customers in the design process.
· Increase the precision of production as the order and selling processes relate to the production process.
Organizational Impact of Solution
When evaluating the business impacts of the implementation of the enterprise system, a number of factors must be taken into account. It is important to keep business employees involved in order to ensure user acceptance throughout the design and implementation of the new system. In the Healthlite business, senior management has voiced the desire to reduce headcount modestly, and thus management must address morale issues when they are adjusting with changes. Management will therefore accomplish this by having open communication and by establishing support groups that will aid employees in the turnover process.
Senior management acceptance and understanding as well as strong management leadership are paramount to a successful implementation. If management does not support the process or if management fails to use the software successfully, they will perpetuate negative attitudes and incompetence. Likewise, the business personnel structure will change from a technology standpoint. Healthlite will need to hire technologically advanced employees to take a leadership role in managing the system. Lastly, the current organization is highly decentralized across various locations throughout the United States, which could create problems in the implementation of the new system and in the design of new processes. Thus, it will be vital to ensure that all of the company’s processing plants are involved throughout the entire systems development lifecycle.
Conclusions
Healthlite has developed a good foundation for developing the company into the future. The company has managed to show success with the business given its existing inefficiencies. The organization utilizes minimum technology to conduct daily activities. Throughout the highly decentralized organization, many people are doing redundant activities and writing much on paper that could be transmitted electronically. Because of the rapid growth of the company, Healthlite needs to implement systems changes quickly to improve its processes and to get the product to the customer in a timelier, efficient manner.
Healthlite’s management is very conservative and needs guidance in determining a proven system that will suit its needs. It is important to ensure management’s support in this process in order to lead the changes effectively and carry the company into the future as well as to guarantee its competitive advantage.
The company needs to understand the importance of using the systems development lifecycle. This process is paramount to developing a system that will be useful for the company. Furthermore, this process is an important tool to establish efficient procedures when developing programs that will best fit Healthlite’s needs.
An enterprise system will be important to leading Healthlite into the future. While the company is presently only focusing on the ordering, sales, and marketing processes, Healthlite management needs to realize that the CRM system is going to need to be scalable for this business. Healthlite’s recent business growth indicates that the company could enjoy growth in the future as well. Thus, Healthlite needs a big-picture perspective to resolve the information systems problems during this system development, acknowledging the potential for further growth.
The company needs to identify and eliminate the sources of the accounting discrepancies between headquarters and the sales force. Management is likely relying on this information to make decisions, and they are thus potentially making business decision on bad data. Prior to implementation, management needs to resolve these problems such that they do not perpetuate through the new system.
Management needs to realize that it will take some time to recognize the headcount reductions. In order to do a successful implementation, all employees will be needed to ensure a smooth cutover. Once the learning curve of the new system has been overcome, management can consider its headcount reduction.
Recommendations
· Healthlite should install an entire enterprise system and not limit itself to the CRM component. However, Healthlite could use a phased approach toward implementing the enterprise software, starting with the order and sales process.
· The systems development team needs to focus its development process on eliminating the existing business inefficiencies in manual reporting, hand order-tickets, and mail and fax order taking. Additionally, the development team needs to follow the systems development lifecycle to establish its new CRM system.
· Representatives of all users need to be involved in developing the system, and all users need to be informed of upcoming changes.
· Healthlite should implement e-mail and Intranet use to improve its internal communications and productivity throughout the entire business.
· The company needs to focus on providing value-added customer service by involving the customers in the design process as well as using questionnaires to solicit feedback from customers on a regular basis.
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