Nerve Centre
In Goldenberg's upcoming book, Creating the Real-Time Enterprise, he notes that an RTE interconnects its entire operations via internal and Internet applications so that all information can be shared in real time. This allows the company to function like a 24-hour nerve centre, capable of instantly alerting individuals to changes in customer demand, inventory, availability of supplies, competitive analysis and profitability.
A company can commence its RTE initiative from the supply chain, the ERP, the CRM or the e-business angle. However, in his book, Goldenberg writes of CRM as the real driver behind the RTE. "Many companies have already implemented CRM systems that connect suppliers, internal customers, distribution channel partners and end users together," Goldenberg says. "Sales, marketing and customer service CRM applications interconnect. Data gets shared across company personnel that touch the customer.
"Also, the CRM industry has considerable integration experience under its belt. While not always done with excellence, the industry has successfully integrated disperse data sources and has learned many lessons along the way," he says.
"And many, if not most, CRM initiatives and supporting systems include the implementation of customer touching programs that cut across demand and supply chains, which is a critical success factor for realising RTEs. Perhaps most importantly, there is the emerging 'www' generation. These future leaders tend to be active e-customers, and when they come to an organisation's Web site, they expect to be able to get what they need from the organisation when and how they want it. They do not question the value of the RTE. Rather; they question why it is taking so long to get there."
Value Proposition
Goldenberg says the RTE value proposition comprises both execution efficiencies and structural efficiencies. On the execution efficiency side, according to Goldenberg RTEs can expect a number of benefits.
- Reduced costs: this includes significantly reduced IT infrastructure/integration costs, on average 20 per cent reduction in the cost per transaction, and on average 15 per cent reduction on inventory costs. For example, one customer of US Steel's Straightline Source subsidiary, which provides real-time, online information visibility to manage supply and to reduce inventory management costs aimed at optimising steel procurement, realised a 15 per cent decrease in inventory levels, 10 per cent decrease in procurement costs, and a 90 per cent cut in communications time.
- Operational excellence: this includes accepting orders in real time and ensuring product availability, optimising order management and fulfilment, and linking real-time activities with demand planning. For example, during the first year of DaimlerChrysler's Mopar Parts Group's RTE system it was able to increase its average four-day fill rate from 96.5 per cent to 98.5 per cent, resulting in $US20 million savings in reduced safety stock and $US10 million savings in excess transport charges.
- Enhanced productivity: an increase of 10 to 20 per cent per employee per annum (that is, four to eight hours per week for an average 40-hour work week) is the norm, since personnel no longer "run around like chickens with their heads cut off" tracking down needed information. With discipline and incentive, increased productivity leads to increased revenues. For example, within the first month of implementing its RTE system, Kentucky-based FranlinkTyco Adhesives realised greater than a 100 per cent productivity increase - from 2350 line items picked and shipped on a good day to today's average of 5800 line items. Inventory accuracy also increased from 98 per cent to greater than 99 per cent.
- Better decision-making: this results from having more timely information, and being able to act on this timely information to enhance decision-making. At PJM Interconnection, which manages the electric grid for the mid-Atlantic states in real time while coordinating supply from more than 650 power generation companies, customers purchasing electricity in Pennsylvania now pay prices 4.5 per cent below the national average. Moreover, there have been no rolling blackouts on the grid in the years since deregulation began.
- Customer delight/loyalty: Customers appreciate respon-siveness regarding order information, financial information, support issues and so on. Dell's real-time order and fulfilment system has resulted in customer satisfaction in excess of 97 per cent and has helped to propel Dell to the number one slot in their area of the computer industry.
With the average organisation having in excess of three dozen IT applications needing to be integrated, which together consume approximately one-third of the organisation's IT budget, anything that can help to bring costs down is desirable. Goldenberg says RTE investments directly address this issue with RTE infrastructure and integration costs having both come down significantly in the past years. In other words, part of "tightening their IT belts" means putting into place RTE integration and infrastructure costs that drive costs down today and help move the organisation towards the RTE value proposition.
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