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hotpotato |
03/10/07 |
Hi expert! can you provide asistance to me in deciding the benefits, risks, opportunities, residual values , constraints , external factors for each of the following alternatives below in deciding a new order fulfillment system? thank you!
Option 1
Basic data on Alpha Order Fulfillment Systems (AOFS)
AOFS E-Business application server software can process several times more orders per day that the existing system; it can process 1600 orders per day. At this rate order completion (from order entry to warehouse notification) is 200 an hour. This would allow Bike.Com to ship out 80% of its orders within 7 days. However, when the rate of orders is greater that 200 per hour, the system starts a batching process in which it batches randomly 2 in 3 orders for overnight processing. Half of the overnight orders can still make the 7 day shipping cycle, 50% of what is left makes a 9 day shipping schedule, and the rest is shipped within 8 days.
The cost of the application software is $4,532,000.00. Bike.Com is currently only using 10 order management personnel who they pay $20 an hour. AOFS also offers a CRM add-on application which Bike.Com could acquire at license $450 per year per seat. The CRM system is expected to enhance the customer experience and reduce customer complaints. Currently, the company has about 25 active CRM specialists. Since the system automates the entire order fulfillment process the company will only need 4 order management personnel.
The hardware and system software cost for AOFS is about $180,000. This includes the cost 6 desktop computers, 8 servers, 4 high volume printers, extensive data storage, the operating system and the Oracle relational database upon which AOFS runs. The cost of the hardware and software is only about 30% of the implementing and training. The IT manager who did the system estimate has allocated a portion of the implementation cost (about 35%) for re-engineering the business process and training the order management personnel. However, all excellently trained business analysts know that cost overruns on business process re-engineering and implementation projects are in the range of 18 to 36 percent. Further, the IT department has predicted that the cost of maintaining the system will be about $120,000 per year
The cost of the application software is $4,532,000.00. Bike.Com is currently only using 10 order management personnel who they pay $20 an hour. AOFS also offers a CRM add-on application which Bike.Com could acquire at license $450 per year per seat. The CRM system is expected to enhance the customer experience and reduce customer complaints. Currently, the company has about 25 active CRM specialists. Since the system automates the entire order fulfillment process the company will only need 4 order management personnel.
The hardware and system software cost for AOFS is about $180,000. This includes the cost 6 desktop computers, 8 servers, 4 high volume printers, extensive data storage, the operating system and the Oracle relational database upon which AOFS runs. The cost of the hardware and software is only about 30% of the implementing and training. The IT manager who did the system estimate has allocated a portion of the implementation cost (about 35%) for re-engineering the business process and training the order management personnel. However, all excellently trained business analysts know that cost overruns on business process re-engineering and implementation projects are in the range of 18 to 36 percent. Further, the IT department has predicted that the cost of maintaining the system will be about $120,000 per year
Option 2:
Basic data on Beta Order Fulfillment Systems (BOFS)
BOFS e-business application server can generally process 2400 orders per day, but when it reaches 300 orders per hour, processing time degrades. Since the system does not have a batching feature order processing time starts to increase rapidly. This could be problematic for the order processing as extended waiting could cause customers to give up from buying Bike.Com products. When orders come in at a rate 300 per hour or less the order completion rate (from order entry to warehouse notification) is 100%. Of the completed orders Bike.Com is able to ship out 70% of its orders within 48 hours, and the rest within 4 days. It normally takes at most 5 days from shipping to deliver the orders to customers.
BOFS sells full spectrum ERP systems that span the entire supply chain. The cost of the BOFS order fulfillment application software is $8,532,000.00. Bike.Com is currently only using 10 order management personnel who they pay $20 an hour. Since the system automates the entire order fulfillment business process no order management personnel are needed, but there is a need for two web-services technicians to manage system load during peak order periods. BOFS also offers a CRM add-on application which Bike.Com could acquire at license $380 per year per seat. Currently, Bike.Com has about 25 active CRM specialists. The BOFS hardware and system software cost for AOFS is about $250,000. This includes the cost 4 desktop computers, 10 servers, 3 high volume printers, extensive data storage, operating system and SQL-Server relational database. The IT manager has estimated that the cost of the hardware and software is only about 30% of the implementing and training. She has allocated a portion of the implementation cost (about 35%) for re-engineering the business process and training the order management personnel. However, all excellent business analysts know that cost overruns on implementation projects are in the range of 18 to 36 percent. Further, the IT department has predicted that the cost of maintaining the system will be about $180,000 per year. BOFS also offers other modules of its ERP system. For example, its supplier order management module could be used when a company wants to either online ordering of inventory or wishes to do drop shipment. Drop shipment is the business practice of having the supplier ship the product directly to the customer of the distribution (such as Bike.Com).
Option 3:
Business Process Outsourcing Option
Gemini Systems LLC provides business process management services from its Indian location. It offers order fulfillment management services at the following rates: $20 per for the first 500 orders per day; $18.50 per order for the next 500 orders per day; $15.00 per order for the next 500 per day and $10.00 per order for the next 1000 orders per day. Gemini also offers CRM services at a rate of 2.50 per call. Gemini claims that it can process up to 25,000 orders per day with a 48 hour turnaround, any orders in excess of 25,000 per day will require 72 hours for turnaround. To use this service Bike.Com would need to buy $14,000 worth of hardware and software for an Order Transfer Application for receiving the completed orders in the warehouse. Although Gemini claims that all payments will be transmitted electronically to Bike.Com’s bank, all transactions must be accounted for. Consequently, Bike.Com will need to spend an additional $80,000 for modifications to their existing accounting package to get the sales transactions completed by Gemini recorded in their own system. The implementation and training cost for the Order Transfer systems and accounting system modifications is predicted to be about $165,000. Maintenance on the order transfer system is $4,800 annually.
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