Reengineering the Selling Process in a Showroom

Reengineering the Selling Process in a Showroom

Jakov Crnkovic Goran Petkovic Nebojsa Janicijevic

IDEA GROUP PUBLISHING

Reengineering the Selling Process in a Showroom

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g n i h s i l b u P p u o r G a e Reengineering the Selling Process d I t h g i r Copy in a Showroom g n i h s i l b u P up o r G a e d I t h g i EXECUTIVE SUMMARY r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y BACKGROUND Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co Jakov Crnkovic State University of New York at Albany, USA Goran Petkovic and Nebojsa Janicijevic University of Belgrade, Yugoslavia

The case presented chronicles the reengineering efforts of a small Yugoslavian showroom wholesaler. Following an initial period of success, the company subsequently became unable to deliver the promised level of quality and service. A team of consultants was engaged who recommended business-process reengineering in order to help improve performance. The strategy they devised for the company involved replacing functional specialists with case managers. While the strategy was successfully implemented, it was not followed by appropriate changes in information technology, thus limiting the effectiveness of the entire process. The goals of this case are threefold. The authors seek: 1) to help the reader understand the current situation; 2) to develop a swift fix strategy; 3) to outline tactical and strategic plans for future development. Readers will be able to review several working prototypes1 of information subsystems designed to support the suggested reengineering process.

The background of this case is the rapidly changing business environment in Yugoslavia2 during the period of transition towards a (relatively) free market economy. Recent changes in the business environment have led to new opportunities for individual investment and real possibilities for entrepreneurship. We hope that this case will be of interest to a variety of readers, not only because of renewed interest in the region3 , but also because the company discussed in it is a small wholesaler operating in the showroom business setting. There are many similar organizations all over the world, particularly in Eastern Europe and the Far East. By increasing export-import revenues, these relatively small enterprises are helping the global economy become truly global. The case describes Wissol, a Yugoslavian company that has continued growing despite turbulence in both the economy and the geographical region. The case describes several aspects of Copyright © Idea Group Publishing. Copying without written permission of Idea Group Publishing is prohibited.

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the firm, ranging from organizational structure, human resources and information systems to warehousing, local (onsite) and situational logistics, transportation and distribution.

Yugoslavian Trade (1990-2001)

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The legacy of a planned, centralized economy, along with hyperinflation and a huge economic crisis during the 1990s help account for the obsolete structure of Yugoslavian trade. Small companies predominate and their number is exceedingly large in wholesaling. Thus, in 1994, there was a 3:1 ratio between the number of wholesalers and retailers. Yet, the total sales volume in wholesaling was only 1.6 times greater than in retailing. Small wholesalers do not have sufficient market power, adequate sales and warehousing capacities or satisfactory professional knowledge of trade. However, in the newly opened private sector, market laws have started to work and competition has greatly increased. New companies seek to become dominant in smaller geographical areas or in more specialized consumer goods markets (“niches”). The most interesting situation that can be observed is in the packaged food and consumer goods market. Companies in these markets base their business on showroom sales and are amongst the most important types of wholesalers. Globally, these companies are reminiscent of the catalogue and showroom retailers that, together with discount houses, hindered the development of traditional department stores over the last 50 years4 . However, there are several key characteristics that distinguish these merchants from wholesalers and showroom retailers in developed markets. The following characteristics should also be taken into account in order to more fully understand the context and the problems new wholesalers face during periods of abrupt growth: • New wholesalers have small capacities. They do not pursue the real cash and carry trade since they lack sufficient space for both supplies and the free traffic of buyers. • The showroom represents a breakthrough solution and involves a smaller facility for exhibited samples. Buyers select merchandise on the basis of exhibited samples while the logistics department collects the ordered goods and prepares them for delivery. • Unlike retailers, wholesalers do not go to the expense of printing catalogs. • A showroom usually contains a sales department. The salespersons provide information to customers, help them with their order forms or even fill out the order forms themselves. • Aside from the salespersons, there are two more types of functional specialists involved in order processing: administrative clerks who prepare the documentation and logistics clerks who prepare an order for delivery. • Unlike their Western European counterparts, showroom merchants in Yugoslavia may assume the additional basic functions of a distributor. In the beginning, this happens on an ad hoc basis; in time, however, constant transportation lines are established. There is only a rudimentary level of specialized delivery for local markets (expensive and often unreliable)5 . Government-owned post offices are traditionally inefficient and do not deliver bigger parcels door-to-door. Foreign companies like UPS, FEDEX and DHL charge high tariffs and will only take parcels designated for export. • A phone ordering system is being developed in order to better serve repeat customers. This happened spontaneously at first; it was later formalized when certain salespersons were appointed to receive telephone orders. The idea of phone ordering, however, is not well established amongst the general population; a good, inexpensive 800-number system is lacking. • The Yugoslavian market has also been characterized by shortages of selected merchandise due to economic sanctions. As a consequence, demand overheated when articles became available. Since the import/export business was so limited, there was ample room for the black market and “gray” economy. • The banking system has also had serious problems. All credits and even credit-card purchases were virtually eliminated during the early nineties, but started to resurface by the end of the decade.

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Diversification develops in the course of performing additional ancillary functions. Certain wholesalers finance production or retailing. Others offer to arrange merchandise in retailers’ facilities. Distributors for foreign companies enter into joint promotional activities or gather and distribute market information6 . The increasing number and strength of small, independent retailers and catering services primarily accounts for the increase in showroom wholesalers. Showroom wholesalers in Yugoslavia cater to buyers who would typically be served by cash-and-carry merchants in more developed economies. The share of small and independent retailers is likely to remain significant, at least for a time7 . Evidence from Western Europe suggests that small merchants and catering services will represent an important market for the emerging showroom merchants in Yugoslavia during the next stage of economic development.

g n i h s i l b u P p u o r G a e d I t h g i r y p o C SETTING THE STAGE Big Problems for Small Wholesalers g n i h s i l b u P up o r G a e d I t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co

Local merchants, organized by territories8 , dominate the distribution channels. The four most significant types of merchants are: • Wholesalers– mostly specialized in determined commodity groups. • Retailers—local supermarket chains which, in turn, supply local merchants. • General merchandise wholesalers – these mostly use showrooms as the point-of-sale; they frequently play the role of producers for tax motives, or of retailers in order to gather cash more promptly. Wissol belongs to this group. • Producers – those who sell their own goods and the goods they receive as a compensation9 for their products. The Wissol Company is privately owned and has been in business since 1993. It leases space for a showroom, offices and warehouses (a typical choice for showroom businesses around the globe). In 1997, Wissol had 51 regular employees and around 80 part-time employees, most of whom worked in the warehouse, performing simple, manipulative tasks. By the beginning of 2001, Wissol had more than 155 employees, making it one of the top competitors in the Yugoslav packaged food market. Table 1 (see Appendices) lists some of these competitors, a small number of which achieve higher sales volume than Wissol. When the firm was created, it was organized along the lines of a retail showroom company. There are many businesses in which the showroom model is very popular, including: jewelry showrooms, car salons (very popular overseas, gaining popularity in the U.S.) and specialized shops for home/ office remodeling (e.g., “plumbing showrooms”). The showroom model has also become increasingly popular in the wholesale sector and on the WWW. Some of the more widely known retail showroom chains like “Service Merchandise” or Luria’s, are currently going through a restructuring process. Luria’s, one of Florida’s leading catalog showroom retailers, is shifting its format from showrooms to special discount stores, specifically “superstores”. It is even discontinuing its annual catalog— a major symbol of the retail showroom business. Wissol adopted a functional means of unit grouping on the basis of work assignment and job similarity, resulting in the following business functions: purchasing; sales; warehousing; arranging; administration; finance and accounting. The functional model of unit grouping perfectly corresponds to Wissol’s age, size and business concept in the present stage of its lifecycle. Yet, its organizational structure, presented in Figure 1 (see Appendices), must be altered in order to eliminate a number of intractable problems. Wissol’s information systems operate at the transaction processing level and incorporate key elements of management information systems (more or less typical for small, new companies). The accounting system appears to be somewhat better developed than other systems, particularly in

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marketing and decision-making. Complete IS support is outsourced. Note that the IS functions are not mentioned in Figure 1 even though, with the current level of design, they should fit under the Finance and Accounting department heading. Wissol’s sales method is based on selecting goods and filling orders in the showroom. The typical buyer is either a caterer or a small retailer whose store area varies from 500 up to 5,000 sq. feet (known in the U.S. as “convenience stores”). Using bar codes and quantities, Wissol’s administrative personnel prepare and print invoices and delivery lists in the showroom. The documents are then transferred to the warehouse where the buyer must collect the goods. The collected merchandise is then loaded into the buyer’s vehicle (not always the same day) or shipped by a company truck when deliveries are scheduled in the buyer’s neighborhood. If clients can count on prompt delivery, they may also decide to use the added convenience of telephone ordering. Employees in the sales department receive buyers’ orders by phone, oversee the preparation of delivery lists and invoices by administrative personnel and transfer the documents to the warehouse. This procedure is identical to the one used in the showroom. The only difference is that the goods must be loaded in Wissol trucks and transported to buyers (transportation is partially outsourced). Aside from the showrooms, Wissol also sells its merchandise through sales representatives (outside or “field” sales). This especially applies to selected imported merchandise. Wissol sells on a much larger territory than showrooms’ gravitational area. Figure 2 presents Wissol’s fundamental business processes. Our research focuses on showroom sales (“inside sales” in Figure 2) yet, at this point it should be emphasized that, due to active growth in the first and in the third business processes, the pace of showroom sales is slowing down.

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During Wissol’s first few years in business, the growth of its sales volume was dramatic. The convenience of selling through showrooms (areas over 3,000 sq. feet), together with a well-balanced assortment of merchandise (around 6,000 SKUs), favorable prices, a delivery service and a phoneordering system garnered Wissol popularity among small merchants. After their initial success, however, the firm was not able to maintain the level of service promised at the start; it was not able to keep up with its own success. The owner (and general manager) decided to engage two consultants from Belgrade’s Business School Research Institute10 . Their initial diagnosis (problem assessment) was based on the vast difference between organizational models for retail and wholesale showroom businesses; other problems stemmed from the very rudimentary level of information technology support. The suggested cure was a general reengineering of the organization and of the information flow. Following a case presentation at the Institute, research began on a complete redesign of Wissol’s business and information systems.

Figure 2: Fundamental Processes in the Firm Fundamental processes

1.Stock and assortment providing 2. Showroom selling (inside sales) 3. Outside sales Support processes

Buying

Show-room

X

X

Sales representatives

Warehouse

Transport

X

X

X X X Human resource management Financial flows management Information flows management

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The increase in sales volume caused some additional organizational difficulties. The impact of these was most strongly felt in the showroom and the warehouses. The showroom receives documentation for both standard customer orders and phone orders simultaneously. The temporal concentration of orders in busy periods posed a special problem. Additionally, enhanced buying followed enhanced sales and the storage of goods became more complicated and time-consuming. The same warehouse workers, using the same in and out doors and corridors, filled invoices and stored goods; they were organized into two shifts whose hours overlapped substantially. The workers were assigned to designated warehouses. The goods are sorted by origin and content and are stored in the following warehouses: chemical goods; dry packaged goods; beverages; frozen goods. Each warehouse manager controls his own crew and is responsible for the supplies in his warehouse. The warehouses became incapable of processing the received orders. This was especially dangerous because clients in the showroom or in front of the warehouses waited longer than they had previously. The time needed for invoice printing and merchandise collection doubled. The basic operations (i.e., showroom and warehouse activities) are presented in Figure 3. Certain errors or problems with documents can be catastrophic; they can cause both clients and employees to wait nervously and needlessly. In fact, if an error occurs or the merchandise listed in the invoice is out of stock (for whatever reason), the buyer is forced to return to the showroom and repeat the same series of actions. These arrangements caused personnel to expend a maximum amount of effort11 . A great deal of work (e.g., shifting documents from one department to another) and a weak preventive in case of error caused jams in client processing12 . The most serious problems were: • Unorganized reception of customers in the showroom: customers enter the showroom by themselves and a salesperson “chases” after them. An accounts receivable clerk, meanwhile, “chases” debtors. On occasion, administrative personnel are in the process of printing out an invoice when the accounts receivable clerk intervenes. As a result, the salesperson is “blocked,” serving a debtor whose order cannot be processed. • Customers who come alone and order goods in a showroom generally stay there too long. They spend most of the time waiting to collect their invoices; they then proceed to the warehouse. • Telephone orders (customer should have previously ordered or be able to describe needs, since there are no catalogs) are very time-consuming for salespersons. Irritated customers are left waiting while salespersons walk from shelf to shelf, receiving orders from absentee buyers. • Problems connected with ordering out-of-stock merchandise are particularly bad. Customers frequently fill out orders for goods on display in the showroom but missing from the warehouse; this indicates bad coordination. A customer that receives a printed invoice for nonexistent merchandise must repeat the entire process; naturally, this provokes a great deal of dissatisfaction. • Sometimes, products are coded incorrectly – customers or sellers write down the erroneous product code in the showroom. The wrong goods are collected and, if the customer does not want them, the invoice must be destroyed and the transaction must start all over again. • There are no catalogs. Even customers who know exactly what they want have to complete order forms in the showroom, instead of completing forms in advance. • Problems occur when insolvent customers try to place an order. • There is neither organized collection nor delivery of goods. Delivery is held up while the customer waits needlessly in the warehouse. • There is neither centralized, uniform logistics management nor adequate transportation management. Since transport is not organized in the logistics department, logistics costs and transport duration are both greatly increased.

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The most serious problems stem from the fact that the selling process involves far too many specialized organizational components. In each business function there is a tendency to conclude a determined part of the job concerning one client, to perform it entirely and then to transfer the subject to the next functional specialist. Administrative clerks in the showroom tend to conclude the selling process and the preparation of documents, after which the client proceeds to the warehouse. The current sequence of steps can cause difficulties not only during the selection of goods but even after delivery. There is an inefficient division of labor between salespersons and those responsible for invoices in the showroom. The reverse arrows, labeled with the letter P (for Problem) shown in Figure 3, illustrate this problem: they indicate that a customer must start all over again if an error is found in the documents. To accelerate the traffic of clients through the showroom, customer solvency checks are performed simultaneously (indicated by the arrow and letter S in Figure 3). Ideally, however, these should be sequential rather than competitive actions. The consequences of the present system are lost time for salespersons and embarrassing public scenes in the showroom. An additional difficulty is caused by diversification, e.g., performing new functions in a distribution channel (transportation for customers). Such growth could overwhelm an already burdened logistics department and result in greater confusion and delay. Each organizational sector has attempted to solve these problems by itself. As Figure 3 indicates they are all active participants in a unique order preparation process. Yet, there is no one person clearly designated to oversee account processing from start to finish, which causes additional delays for irate customers.

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g n i h lis b u P p u o r G Suggested Steps Towards A Solution: Reengineering a e d I t h rig y p Co g n i h s i l b u P p u o r G a e d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co

Merely restructuring or reorganizing the showroom or warehouse could not have solved the problems beleaguering Wissol; broader functional changes were needed. Those changes could have been achieved either by rationalizing the order preparation and fulfillment process or by process reengineering. From the IS point of view, there were obvious basic problems in the area of inventory management and with the client database, HR and transportation system management. In order to survive, small Yugoslav wholesalers must learn how to achieve a tenable competitive advantage over rivals. Business process reengineering is a viable solution since it enables companies to achieve a competitive edge by working from a process organizational perspective. A majority of authors agree that, under turbulent conditions, a company achieves sustainable competitive advantage in the market by developing superior processes, not structures. A company can be understood as a network of processes. Each process, in turn, can be seen as a sequence of activities that transform input into output. By adopting this view, Wissol was able to change its organizational perspective from function–to process-oriented. This change was a part of a broader shift of the organizational paradigm from “strategy-structure-systems” to “purpose-processespeople.” This was not, however, the end of reengineering at Wissol. The radical redesign of business processes also implies changing the fundamental assumptions upon which these processes are based. Assumptions are made about the goal of the process, its users and the technology destined to be used in the process. The inefficiency of business processes frequently stems from the fact that they are based on obsolete assumptions, which must be identified and altered before meaningful changes can be made. Since organizational culture consists of many such assumptions, changing organizational culture becomes an integral part of the reengineering process. Alterations in the content and course of activities and operations may thus cause changes not only to individual jobs but to the whole organizational structure as well. The organizational structure is adapted by creating organizational units that comprehend the entire business process, not just selected steps. Although it often endangers the achieved level of specialization, the advantages of

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Figure 3: Showroom selling process (primary design as firm started). Note: Employee title in bold

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CUSTOMER ENTERS THE SHOWROOM

DELIVERY Controller and Driver

THE CUSTOMER CONTACTRS THE SALESPERSON Salesperson in the showroom

P

S

Showroom salesperson

TRANSFERING THE ORDER TO THE INVOICE DEPARTMENT Showroom salesperson

SOLVENCY CHECK Account receivable

SELECTING THE MERCHANDISE & WRITING ORDER

MISSING GOODS LISTING Controller

?

TRANSPORTATION Controller and Driver

LOADING THE INVOICED MERCHANDISE Collector / Store keeper / Controller

P

CONTROLLING THE MERCHANDISE Controller

WARE HOUSE 1

COLLECTING THE INVOICED MERCHANDISE

INVOICE AND DELIVERY LIST FULFILLING Administrative clerk

DOCUMENTS CARRYING TO THE WAREHOUSE Administrative clerk

Collector / Store keeper

WARE HOUSES 2 and 3

COLLECTING THE INVOICED MERCHANDISE

Collector / Store keeper

WARE HOUSE 4

COLLECTING THE INVOICED MERCHANDISE

Collector / Store keeper

RECEIPT AND DISTRIBUTION OF THE DELIVERY LISTS TO THE RESPECTIVE WAREHOUSE PARTS Warehouse manager

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structuring on the basis of processes are manifold. We might also add that motivation tends to improve when employees’ tasks become more varied, complex and, as a result, more satisfying. Changes in business processes will not be possible without changes in the planning and control system, in the performance measurement system and, most importantly, in information systems. Information systems play an enabling role in reengineering; they directly influence the assumptions upon which business processes are built. The reengineering process at Wissol followed the program of changes proposed by the authors 13 and based on existing literature in the field of reengineering. The process consists of eight steps and one additional proviso, viz., that the process must be closely managed from start to finish. Steps 1 and 2 are: Start from the top and Get the strategy right. Step 3 is: Identify core business processes. At Wissol, reengineering was initiated to help improve the ORDER PREPARATION AND FULFILLMENT PROCESS. It was designed on the basis of around 10 basic assumptions (defined in Step 3), a majority of which were proven to be false in Steps 4 and 5. The following are examples of these assumptions: • It is neither necessary nor possible to contact customers the moment they enter the showroom. • The customer solvency check is a “shameful thing” and should be performed without their knowledge. • A customer cannot select goods and prepare an order by himself/herself; a salesperson must do it for him/her.14 • The salesperson receiving an order by phone must first locate the merchandise, and then read its code. Step 4: Develop deep process knowledge. The basic assumptions noted in Step 3 led to serious problems in order preparation and fulfillment. Among the more severe were: • The customer solvency check is performed simultaneously rather than sequentially (after the sales process). The solvency check is not always performed very discreetly15 . • Salespersons are very busy because they must prepare the entire order for each customer; customers must try to “catch” a salesperson. • Salespersons walk around the showroom with headsets in order to read the code; they waste time and irritate customers waiting for their orders to be prepared.16 Step 5: Identify opportunities for improvement. Recommendations on how to do this are outlined below. Please compare these with the assumptions identified in Step 3 and the observations made in Step 4. • The process of recognizing customers upon entrance to the showroom can be very short. • The solvency check is a regular and legitimate act, which can be performed in an unobtrusive way. • A customer is capable of selecting merchandise and preparing an order form himself/herself (with the assistance of a salesperson only if necessary). • Salespersons can prepare a phone order simply by checking the stock list on the computer screen and without seeing the product on the shelf 17 . • Customers can prepare an order ahead of time and come to the showroom to have it processed and picked up. Otherwise, they can order over the phone. Based on these steps, a new process of order preparation and fulfillment is designed (Figure 4.) This leads us to Step 6: Identify world-class best-of-breed and customer requirements. Readers are invited to expand on these ideas, particularly from the IS/IT point of view. 1. Buyers’ reception and the solvency check. Upon entry, the showroom manager greets buyers and directs them towards an unoccupied sales representative in the showroom. In this way, the sales manager acts as a host in the Wissol showroom; he/she is the first point of contact for buyers. The showroom manager also performs solvency checks (in cooperation with an accounts receivable clerk) and intervenes when necessary18 . 2. Selecting the goods and order preparation. This activity is performed in three possible ways: by phone19 , using previously prepared catalogs20 and directly in the showroom.

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Figure 4: Reengineered Business 1. Buyers’ reception and the solvency check

3. Preparing an invoice and transferring it to the warehouse

4. Preparing the merchandise delivery lists in certain warehouses

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Showroom manager

5. Collecting the merchandise by specification Logistic crew Logistics crew

2.1

2. Selecting the goods and order preparation Salesperson

Salesperson

6. Printing the final invoice and solving the problems

Logistics manager Logistic manager

Logistics manager Logistic manager

7. Loading and transportation of the merchandise Logistics crew Logistic crew

Orders received by phone are taken by the “sitting” salesperson at whose disposal is a computer containing the stock price list and product codes; he/she does not walk around the showroom. He/she sends the prepared invoice by computer to the logistics manager in the warehouse. 2.2 Buyers who know exactly what they want can be offered previously prepared forms. Buyers complete the forms before they come to the Wissol showroom. When they arrive, they immediately give the forms to a “sitting” sales representative21 for processing. 2.3 Most orders involve a direct selection of merchandise in the showroom. For this type of ordering, automatic code scanning with a laser gun could be introduced. When a customer comes to Wissol, he or she receives a laser gun to decode the merchandise while walking around the showroom. By pressing a button on the device, the customer scans the code of the desired goods, writes down the quantity on a bar code device and, thus, prepares an order automatically. In an unobtrusive way, salespersons accompany buyers while they stroll around the showroom, offering help in handling the laser guns and providing information about the merchandise. If a buyer does not want or cannot manage the laser gun, a salesperson handles it for him/her. 3. Preparing an invoice and transferring it to the warehouse. Salespersons still prepare the initial invoices22 yet these are no longer printed in the showroom. They are sent electronically to the central warehouse – to the logistics manager’s terminal. The logistics manager phones (or sends an instant-message) to the showroom when the merchandise is ready for pick-up. 4. Preparing the merchandise delivery lists in certain warehouses. On the basis of invoices, delivery lists are prepared and printed in a specific warehouse. The logistics manager or his assistant performs this function. Warehouse workers (controllers, collectors and transportation workers) are organized into three-member teams and not into warehouses23 . 5. Collecting the merchandise by specification. The warehouse work teams go from one warehouse to another and collect the merchandise specified in the invoice. Once the client’s merchandise has been collected, the team leader reports to the logistics manager to discuss problems or necessary improvements, e.g., changes to the current invoice. 6. Printing the final invoice and resolving eventual disputes. When the merchandise has been collected, the logistics manager prints the final invoice and delivers it to the buyer. If any error has occurred, the logistics manager will proceed to the showroom to resolve the problem with the customer.

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Loading and transportation of the merchandise. The logistics manager entrusts the transportation manager with the loading and transportation of goods after the final invoice is delivered to the buyer. If the buyer transports his own merchandise, the transportation manager organizes the loading of goods into the buyer’s vehicle; otherwise, transportation will take place according to schedule. The next two steps of the reengineering process will be discussed together in the next section. They are Step 7: Create a new process design and Step 8: Implement the new process; they are currently being implemented (late 2000).

CURRENT CHALLENGES

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The redesign of order preparation and fulfillment was built upon completely new assumptions; this meant that changes in the: a) Organizational structure, and b) Improvements in company’s IS were also necessary. Reengineering the order preparation and fulfillment process at Wissol necessitated certain changes in the organizational structure of the company. The most significant changes in structure and job design were: • Creating the new position of showroom receptionist. • Drawing up separate job descriptions (and training requirements) for “sitting” (in front of a terminal or PC) and mobile salespersons. • Appointing logistics and transportation managers capable of overseeing the entire goods collection and transportation processes. • Changing the job description of warehouse workers: instead of being specialists (controllers, collectors, carriers) they become universal workers, organized by teams rather than warehouses and given more flexible hours. • Eliminating warehouse managers’ responsibility for the collection and delivery of merchandise; they are responsible only for organizing, receiving24 and keeping goods in the warehouse. • Architecturally restructuring warehouses in order to form three separate zones in each: reception, warehousing and delivery zones. As a result of these changes, Wissol’s organizational structure moved closer towards the process model; positions of authority and control in management were established. The showroom manager oversees the order preparation process in the showroom while the logistics manager controls the entire order fulfillment process. Furthermore, by creating logistics teams, the entire process of merchandise collection is streamlined and rationalized. Wissol management, with the help of the reengineering team, was able to help employees abandon those assumptions identified as a source of problems. The first step was to make employees aware of these assumptions; since most of them were subconscious or implicit, they could not be changed until they were first exposed and acknowledged to be problematic. In the meantime, alternative ideas consistent with envisioned changes in corporate culture were proffered. The corporation’s new vision of order preparation and fulfillment was successfully communicated to employees who accepted the new assumptions upon which the redesigned process was based. The most challenging step was in building IS support. It should have been established during the initial stages, but it was not. The complete IS sector is outsourced, including maintaining the existing applications and systems development. Currently, Wissol has more than 40 networked PCs (using Novel 4.1 Network Operating System); the majority of programs run the DOS database package Clipper (with very limited networking options). Maintenance and small improvements are added on a daily basis. The software company is aware that, given Wissol’s current technology, they cannot improve Wissol’s information system. They suggested that Wissol switch to Oracle (yet even the software company in charge is not quite ready for this step and they wanted to use this job as a test

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case). This would require a major overhaul of the company’s hardware but significant improvements in IS support would certainly result. Unfortunately, the owner has not given his blessing; he mistakenly believes that IS cannot be profitable. His assumption is based on a typical return on investment (ROI) perspective and an inability to understand intangible benefits. He further doubted the software company’s ability to install Oracle (for the first time ever) at Wissol. With this case, the authors are trying to help in solving this problem by building a prototype of a comprehensive IS (in Access, Java or VB) which, if properly designed, could help persuade the CEO. The system can be demonstrated in the local area network environment. The next logical step, after placing a good inventory and accounting system on the local area network, will be to add selected options for implementation on the Internet. Typically, it will start by building a Web page covering basic marketing ideas. Another approach would be to build a new IS system using the intranet, which would be useful if the company decided to go into e-commerce. Strategic decision-makers think this a likely possibility. Yet, based on the current level of infrastructure, they expect Wissol to enter into B2B endeavors with vendors and foreign partners, before getting into e-business with local customers. The wholesale firm provides a great model for developing e-commerce B2B applications.

g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u FURTHER READINGS P up o r G a e d I t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co Armistead C. & Rowland P. (1996). Managing Business Process. New York: John Wiley &Sons. Bowersox, D.J. &Cooper, M.B. (1992). Strategic Marketing Channel Management. New York: McGraw Hill. Crnkovic, J. & Holstein, W.K. (1995). Information Systems: Necessity or Luxury in changing economies. Journal of Information Systems, 5, 119-135. Crnkovic, J. & Petkovic, G. (1998). New trends in retailing: E-commerce. Nova Trgovina, 50 (1-2), 116. Crnkovic, J., Holstein, W. and Mohan, L. (1998). Designing EIS: Three cases from retailing. In Management and Marketing in the Global Environment, 391-406. Belgrade: NICEF Press. Crnkovic, J,(1999). EIS Building Blocks in E-Business. In Strategic Issues in Transformation of Big Companies in the Global Environment, 33-40. Belgrade: NICEF Press. De Looff, L. A.(1997). Information systems outsourcing decision making: a managerial approach. Hershey, PA: Idea Group Publishing. Gaston, S.J. (1997), Getting the Right Systems at the Right Price, New York: John Wiley &Sons. Holstein, W.K. & Crnkovic, J. (1999). EIS Design Issues: The Special case of E-Commerce. In IRMA, 10th International Conference Proceedings. Hershey, PA: Idea Group Publishing Johannessen, J., Olsen, B. & Olaisen, J. (1997). Organizing for Innovation. Long Range Planing, 30 (1) Kalakota, R. & Whinston, A.B. (Eds.) (1997). Readings in Electronic Commerce, Reading, Massachusetts: Addison Wesley. Knights D. and Willmott H (Eds.) (2000). The reengineering revolution? : Critical studies of corporate change. London: SAGE. Maddison R. and Darnton G. (1996). Information systems in organizations: Improving business processes. London; New York: Chapman & Hall. Mason, J.B., Mayer, M.L. & Ezell, H.F.(1991). Retailing, 4/E. Homewood, IL: Irwin. Pearlson, K.E. (2001) Managing and Using Information Systems. New York: John Willey & Sons. Tilanus B. (editor) (1997). Information systems in logistics and transportation. Oxford ; Tarrytown, NY: Pergamon. Whalen, T. & Wright, D. (1999). Business Process Reengineering for the Use of Distance Learning at Bell Canada. Annals of Cases on information technology: Applications and management in organizations 1. Hershey, PA: Idea Group Publishing.

12 Crnkovic, Petkovic & Janicijevic

ACKNOWLEDGMENTS After selecting several good IS prototypes designed by our students, there is a special thanks for putting extra efforts to improve their initial solutions to: Irena Khachatryan, Adam Rubin, Rachelle Freedman, Kim Goldberg, Inderjit Kaur and Mike Dixon. The authors would also like to thank Mehdi Khosrwopour (ACIT senior editor) and the review panel for their insight and helpful suggestions.

APPENDIX

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Table 1: The major competitors in the packaged food wholesaling in Yugoslavia Data for I-VI 1997

C-MARKET

The data are expressed in thousands of Yu-dinars Goods Index Total Profit Net worth Total Number of Type of activity turnover turnover assets employees 483,219 5.27 493,849 37 198,296 378,738 3,227.21 Retailing and wholesaling

g n i h lis b u P p u o r G a e d I t h g i r y p Co g n i h s i l b u P p u o r G a e d I t h g i r y Cop g n i h lis b u P p u o r G a e d I t h g i r y p Co

PEKABETA

310,107

3.38

311,047

RODIÆ M&B

257,903

2.81

259,541 1,895

148

274,779 342,654 26,235

146,659

1,727.76 Retailing and wholesaling

923.30 Wholesaling and production

DELTA

120,559

1.31

120,931 4,534

21,117

196,335

279.24 Wholesaling

IMPEX-PROMET

105,378

104,879

1.14

1626

15,435

42,032

66.00 Retailing and wholesaling

WISSOL

91,697

1.00

92,951 2,038

2,765

36,109

51.00 Wholesaling and production

JUGOŠEÆER

81,386

0.89

81,464

-822

27,044

100,030

DISKOMERC

74,298

0.81

74,487

1138

9,009

30,323

GRANEXPORT

63,197

0.69

91,015

800

98,339

164,786

458.79 Wholesaling

VRBAS

61,516

0.67

61,516

24

33,467

59,219

309.50 Wholesaling

35.39 Wholesaling

86.49 Retailing and wholesaling

Figure 1: Wissol’s Organizational Chart

W IS S O L G e n e ra l m a n a g e r

S u p p o rt s t u ff Man ag er

C o m m e rc ia l d e p a rtm e n t CEO

F in a n c e a n d a c c o u n tin g d e p a rtm e n t Man ag er

W h olesale Man ag er

S a l e s d e p a rtm e n t S ales m an ag er

P u rc h a s in g P u rc h a s in g m a n a g e r

W a re h o u s e W a re h o u s e m a n a g e r

W h o l e sa l e c l e rk

P u rc h a s in g c l e rk

As s is t a n t

Ac c o u n t re c e iva b l e c l e rk

Ac c o u n ta n t

Ad m in is tra tive c l e rk

D is c o u n t b o o k c l e rk

C o l l e c to r

In vo ic e c l e rk

C o n t ro l e r

S h o w ro o m o p e ra to r

S t o re k e e p e r

F o rk l if t d rive r

Figure 1: Wissol’s Organizational chart

T ra n s p o rt a tio n w o rke r D rive r

Reengineering the Selling Process in a Showroom

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ENDNOTES 1

Over 100 juniors at the School of Business, University at Albany New York (SUNY), working in groups, have developed 23 prototypes in Microsoft Access. Three of them are improved and are available to readers who adopt the Case. 2 According to the laws and business practices of the former socialist Yugoslavia, ownership of small retail shops, small job-shops, farms, restaurants, etc. was permitted only if the number of employees was five or fewer (not counting members of the immediate family). A true market economy first became possible in the mid-1980s and Yugoslavia was poised to become one of the leading new economies in the region. After a promising start, progress was halted because of erroneous political decisions, which resulted in war and the imposition of international sanctions. Though the economy has been devastated, there are still entrepreneurs with interesting ideas, modest investments and vision. The company discussed in this case was established in 1993. The consultancy team was formed in 1997 and worked well into 2000. After recent elections (October 2000), it was expected that Yugoslavia would be reintegrated into international (e.g., UN, MMF) and regional (European) organizations. 3 We are presenting this case in 2001, now that there is a chance for lasting peace along with renewed interest in investment and development in the region. 4 Berman B. & Evans J. R. (1995). Retail Management. Englewood Cliffs, NJ: Prentice Hall. 5 The authors suggested this type of business expansion plan to the Yugoslavian Railway system in 1998, but management declined. Yugoslavian Airlines has door-to-door service, but companies like Wissol do not need air transport to cover small geographical areas. 6 Sanctions are lifted and more import (and eventually export) activities are anticipated. 7 Dawson, J. (1998). Trade and competition orientated developments in the EEA. In B. Maricic & G. Petkovic (Eds.), Management and Marketing Challenges in Global Environment. Belgrade, Yu: NICEF Press. 8 We can estimate the area of gravity for Wissol to be around 5,000 square miles 9 A compensation business exists because of high inflation or when a firm’s financial assets are frozen; goods are traded between companies rather than sold on the market. This idea is based on barter arrangements in foreign exchange (made by mutual agreement), but on a domestic level, companies frequently end up with unwanted merchandise or even spare parts. The general premise is that it is better to get something rather than nothing, but the companies affected are not the ones making the decisions. Typically, compensation schemes are endorsed by politicians relying on justifications like: “the common good” or “ higher interests”. 10 In the same time, Wissol’s owner was the main source of information for the consultants. In addition, researchers visited the company many times, received documentation and conducted interviews with employees prior to and during the re-engineering process. Business cooperation between the owner and the Institute had two peak points. The first was in 1997-98, when researchers from the Institute performed systems analysis and designed the reengineering process, which was implemented in 1998. IS was not implemented at that time. After two years (beginning of 2000), Wissol called back the consultants and decided to focus on IS and information technology. This second call was the main reason why the authors wanted to share the case with readers of this Journal. 11 There is very high unemployment across Europe, particularly in Yugoslavia. There is a tendency to keep any job (to go the “extra mile” if needed) and to learn the business (to pick-up “tricks”) in order to be able to go into business for oneself (particularly in the service industry). 12 During one of the authors’ visits to the company, they spotted one very busy person making calls and working at a desk in the showroom for several hours. When asked who this efficient employee was, the manager answered that this person was not an employee, but an unhappy customer making business calls while waiting for his order to be straightened out.

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14 Crnkovic, Petkovic & Janicijevic 13

See Hammer, M. & Champy, J. (1993). Reengineering The Corporation. London: Nicholas Brealey and Hammer, M. & Stanton, S. (1995). The Reengineering Revolution. London: Harper Collins. 14 The existence of an IS/IT model (at the level of transaction processing) is assumed. 15 Ideally, this should be done prior to filling an order (good IS must exist) 16 Please compare this assumption to the current practice of any retail or wholesale showroom in your area. 17 If the firm’s IS has the MIS or DSS level. 18 Several other options are available. If there is a waiting line, operations management theory proves that using one line (users wait for the first available salesperson, with or without being issued “serving numbers”) instead of multiple lines is more efficient. If there is a good IS and the customer feels comfortable using it, he/she can make an initial invoice on the terminal provided (security issues must be resolved in advance). 19 Possible expansion to e-business. 20 There are various opinions about printing catalogs. They are expensive because they have a very limited life span. Wissol sells approximately 6,000 articles and has around 1,500 customers. They will need to print at least 2,000 catalogs and the cost of doing so will not be trivial. Making on-line catalogs is a better solution, but it is a serious programming and data entry task. In discussion with the consultants, Wissol’s owner made an interesting point; given the current market situation, it may not be advisable to advertise that you actually have “hard to find articles” in stock. 21 The showroom receptionist or manager should be able to help to expedite this process. 22 Customer data should be automatically added onto the invoice after retrieval from the Customer’s table (if a good database system is in place). 23 A similar retail practice is used at Sears (USA), making the waiting time for pick-up less than a minute. 24 If supported by good IS, it should not be a problem.

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Jakov (Yasha) Crnkovic is an Associate Professor of Management science and Information Systems at the Business School, State University of New York at Albany, New York. He received Ph.D., MS and BS degrees from the University of Belgrade, Yugoslavia, with additional studies in Switzerland and Great Britain. His major research interests are in Decision Support Systems, System Simulation and in IS/IT Education. He published more than dozen textbooks, over 60 journal and conference papers, and participated in many research and consulting projects in the area of IS/IT applications for various businesses and for governmental organizations in Yugoslavia and the U.S. E-mail: [email protected]

Goran Petkovic is an Associate Professor, Faculty of Economics, University in Belgrade, Yugoslavia. He received Ph.D., MS and BS degrees from the University of Belgrade, with post-doc studies in Great Britain and France. His research interests are in the areas of Decision-making, Marketing and Management the firms in the trade industry, Strategic Marketing and Human Resources Information Systems. He authored or co-authored seven books and over 20 journal and conference papers. His consulting activities include marketing, management and organization of retail, wholesale and production companies in Yugoslavia. E-mail: [email protected] Nebojsa Janicijevic is an Associate Professor, Department of Management, Faculty of Economics, University of Belgrade, Yugoslavia. He received Ph.D., MS and BS degrees from the University of Belgrade, with additional studies in Boston, USA. His research interests are in the areas of Organization and Management, Entrepreneurship and Human Resources. He authored or coauthored several books and many journal and conference papers. His consulting activities include organization, management and HRM for many companies in Yugoslavia.