INFLUENCING MANAGEMENT LANDSCAPE
BY PROF. DR. KHAWAJA AMJAD SAEED*
May 22 - May 28, 2006
When computer appeared in the World they were originally conceived as enlarging channels amongst the four constituents of communication. However, the impact of computer through I.T. has become highly pronounced in its significance.
I.T. has now brought significant changes with tremendous influence on Management Landscape. Procurement through Supply Chain Management with support of I.T. has now enabled purchasing at an affordable and economic prices - thus contributing to the beefing up of bottom line. Saying goodbye to four Ps marketing has been accelerated through Internet and growth of I.T.
The game of finance has now changed in terms of financial reengineering. HR has undergone dramatic changes as permanent employees are no more needed to be kept on the pay roll of an enterprise for all jobs. Production and Operations Management has been a great beneficiary in terms of efficiency and productive use of resources. Creative and innovation through Knowledge Based Economy (KBE) is on the up-swing. Indeed I.T. has brought new life and now has changed the Management Landscape. The paper will present a detailed analysis in respect of above six functional aspects of Management with consequential impact of IT compared to earlier traditional approach.
Information Technology can be defined as collection of computer systems used by an organization. It represents the technological side of an information system. It includes hardware, software, database, networks and other electronic devices. It can be viewed as a sub-system of an information system. So far, computer have undergone through give generations - the 5th being the latest one known as "Blue Tooth Technology".
There have been three computer regimes as are stated in Box No. 1:
Box No. 1
2) Lotus 123
Every regime other than ERP will be as archaic as the bell bottom in today's world.
PC APPLICATION USING SOFTWARE
PC application using software are widespread. The benefits of PC application using software are many. The general applications include the following:
1) Research and decision making in organizations is facilitated.
2) Data can be accessed quickly.
3) Problems can be identified.
4) Theories can be developed and data can be processed quickly.
Five areas of interest in respect of specific terms are as under:
Network for teams is established. Areas may include accounting, finance, production and sales department.
2) NEURAL NETWORK
Sales Forecast, Stock Market Predictions, Detection of weather patterns are some specific areas in this respect.
3) CAM / CAD
CAM is applied for design manufacturing components. Through CAD one can create and display complex drawings with precision on computer screen. This can further enable experimentation with different designs.
ERP represents all in one integrated business application. This provides comprehensive solutions to all the need of an organization in its day to day work. There are many players to facilitate implementation of ERP including SAP from Germany.
5) DATA ANALYTICAL SOFTWARE PROGRAM
Software programs are available to obtain data, store it and analyze the same. Special statistical instruments which are used include SPSS, SAS and Excel. Benefits also accrue from use of computer graphics and interactive CDs for sophisticated Audit capabilities through the use of software can result in quicker completion of audit work.
I.T. INFLUENCING MANAGEMENT LANDSCAPE
Four major decisions are required to be made in procurement. These include the following:
1) Purchasing versus production
2) Procurement & Sales Coordination
3) Selection of Vendors
4) Selection of Process
I.T. has facilitated these functions in an efficient manner through supply chain management. The above functions are greatly facilitated through I.T. Supply chain is a concept describing the flow of material, information, money and services from raw material suppliers through factories and warehouses to the end customers. It also includes organizations and processes that create and deliver these productions, information and services to the end customers.
Calculated costs and other relevant material costs are available from the Internet thereby facilitating whether to buy or to produce. I.T. can enable sale forecasts to be co-related with purchases. This can enable an organization for determining procurement levels. Considerable information is available on the Internet regarding vendors. Consequently taking into consideration various variables, the selection of vendors has become easy with affordable cost. A lot of information is available on the Internet, which can enable the selection of a process also.
World wide websites now enable quick selection of vendors. The time of processing purchase orders has been significantly reduced due to use of email and active server pages. Due to receipt of advance orders through the use of Supply Chain Management, coordination with procurement is well facilitated. Accordingly the time of executing orders and production management has been substantially reduced. In nut shell, procurement is now possible at fair rates and on a faster scale. Therefore, procurement as a function of management has been nicely facilitated through I.T. For further details refer to Production Operation Management.
The initial study of marketing included the following:
a) Legal aspects of marketing
b) Cost of marketing
c) Functions of marketing
d) Institutional aspects of marketing
Later 4Ps approach developed namely place, product, promotion and price. However despite its popularity this was replaced by 3Cs namely, Company, Customer and Competitor. Currently relationship marketing continues to be dominating due to its use by Japanese.
Due to IT applications the 4Ps mentioned earlier have been replaced through IT as is shown in box No. 2.
Box No. 2
REPLACEMENT OF 4PS THROUGH INFORMATION TECHNOLOGY
Ps replaced by IT
Any place and any where.
B-Web (Business Web) customers now drive revenues. Customers are a part of B-Web as relationships and not as markets for products.
Commentary work and not promotion.
Discovery of prices on the web replaces fixed price.
The function of managing marketing and sales system with focus on Customer has been facilitated by IT on following dimensions:
a) Customer Relations
b) Distribution Channels
c) Instore innovations and marketing management
d) Telemarketing and online shopping
E-Commerce applications of financial transactions can be vividly seen. Examples include:
a) Global Stock Exchanges are moving towards global 24 hours. Distributed electronic stock exchanges are functioning with the use of internet for both transactions and multi-costing of real time stock pricing.
b) Multiple currencies are being handled through IT. Conversion rates of many currencies are changing every minute, if not after every second. A web page system from SAP has data from seven Asian Countries and convert the currencies into Dollars in seconds.
c) Factor is facilitating on-line. Factors are financing institutions that by account receivables, usually at a discount. Factoring on the web is becoming very popular.
d) Electronic Bill Presentation and payments: In its simples form, it is an electronic payment of bill. Third party companies provide a service in which they calculate, print and electronically present the bills to customers.
The overall financial management systems consist of three parts, namely:
a) Strategic Systems
b) Tactical System
c) Operational & Transaction Processing System
All the three systems are served in a magnificent manner by Information Technology. Major points covering the above are tabulated below:
Box No. 3
IT IMPACT ON FINANCIAL MANAGEMENT
COMPONENTS BENEFITED BY IT
Any place and any where.
=> Strategic Planning
=> Ratio & Financial health of the Enterprise
=> Mergers and Acquisitions (M&A) Analysis
=> Budget Preparation and Control
=> Investment Management
=> Capital Budgeting
=> Costing Analysis
=> Tax Management
=> Financial Planning
Operational Transactional Processing
=> General Ledger
=> Sales Order Processing
=> Accounts Payable & Receivable
=> Receiving & Shipping goods
=> Pay Rolls
=> Inventory Management
=> Periodic Reports / Statements
Preparation of quarterly financial statements is mandatory including Pakistan to meet regulatory requirements of listed companies. The ability to close books of accounts quickly may give the management and other stakeholders real time information on the financial health of the Company. With various advance IT programs, it is now possible to close the books of accounts in a matter of hours.
Investment Management is a difficult task. There are hundreds of companies on Stock Exchanges. Investment decisions are based on economic and financial forecast and various multiple and conflicting objectives e.g. high yield, safety, liquidity, etc. Investments are also made on world wide basis in several countries. These are subject to complex regulations and tax laws. Investment decisions are made frequently and quickly. Decision makers can be on different locations and need to cooperation and collaborate. Therefore, computerization is specially popular in financial institutions. IT facilitates investment management in the following directions:
=> Access to financial and economic reports
There are hundreds of web sources. Most of these are useful for professional investors, managers and for individual investors.
=> Financial Analysis
Financial Analysis can be executed with a spreadsheet program or with commonly available readymade decision support software e.g. www.tradeportal. com/trade-matrix.php.
Human Resource Management has undergone a spectacular change. Some of the aspects in this respect are as under:
a) Internet worked human capital is now available. Consequently there is no need to employ them as normal employees. Under self-controlled approach, the internet worked human capital is contributing productively.
b) Amazon.com draws most of its human capital from e-web. Countless authors and readers are available on internet. They can be consulted for commentaries for the web and online chats are also possible. Publishers are available. Networked associates facilitate extended sales. Fedex and UPS fulfill customer orders through delivery. Book reviewers are also available through internet worked human capital.
c) Instead of having traditional employees, global alliances are now available. The total number of jobs which CISCO system has is 32000. Out of which 17000 are traditional employees. The remaining 15000 have been associated through global alliances. The concept of work far beyond the corporate boundaries is currently being implemented.
d) The current trend now is away from Human Resources (HR) to Internet worked Human Resources (IHR).
PRODUCTION AND OPERATION
A) IN-HOUSE LOGISTICS AND MATERIAL MANAGEMENT
Inventory Management is streamlined. Decisions include cost, objective and major decisions to make. The cost of ordering is determined through it at an appropriate level and therefore substantial reduction is ensured through ordering, maintaining adequate and appropriate inventory and identifying cost of not having inventory when needed. The basic objective is to minimize the total of above cost for which IT is very helpful. IT also facilitates in making the following three basic decisions:
=> When to order?
=> How much to order?
=> Determination of economical order quantity
B) PLANNING PRODUCTION OPERATIONS
POM planning is supported by IT in many ways as is explained below:
=> Material Requisition Planning (MRP)
The software that facilitates the plan for acquiring or producing parts, sub-assemblies or materials in the case of inter-dependence items is called MRP. It follows a computer used approach due to complex inter-relationship among many products and their components and the need to change the plan each time a delivery date or the order quantity is changed. Several MRP packages are commercially available.
=> Manufacturing Resource Planning (MRP II)
MRP II adds functionalities to a regular MRP. It determines the cost parts and the cash flow needed to pay for the parts. It also estimates cost of labour, tools equipment, repair and energy and finally provides a detailed computerized benefit for the parts involved. Several MRP-II software packages are available commercially.
=> Just-In-Time (JIT)
Attempts to minimize wastage of all kinds e.g. space, labour, material, energy, etc and to continuously improved processing systems. Many JIT systems are supported by software from vendors e.g. IBM, HP, CA and ConCom Systems. At Toyota, production cycle time was reduced from 15 days to one day. Consequently, this resulted into saving costs upto 13-15% besides quality was also improved.
=> Project Management
Project is usually a one-time effort composed of many inter-related activities costing substantiated money and lasting for weeks and years. The management of project is enhanced by computerized project management tools e.g. PERT (Planning Evaluation Review Technique) and CPM (Critical Path Method). Developing web applications is a major project and several IT tools are available to support and help manage these activities (see citadon.com).
Traditional approach of finding out what is wrong in a factory can be a lengthy and expensive procedure. Bizworks (bizworks.co.nz) is an example of successful software product that tackles thorny POM projects.
C) COMPUTERIZED INTEGRATED MANUFACTURING (CIM)
CIM is a concept that provides the integration of various computerized factory systems. CIM is expected to achieve the following three goals:
=> Simplification of all manufacturing technologies and techniques.
=> Interaction and coordination of design, manufacturing and related functions via computer hardware and software. Technologies to be integrated are FMSs (Flexible Manufacturing Systems), JIT, MRT, CAD, GT (Group Technology).
D) PRODUCT LIFECYCLE MANAGEMENT (PLM)
PLM is a business strategy that enables manufacturers to control and share product related data as part of product design and development efforts and in support Supply Chain Operations.
Web based and other new technologies are applied to productive development to automate its collaborative aspects.
COMPUTER TECHNOLOGY AND BUSINESS
Computer technology helps in business in achieving efficiency and higher profitability through its application in several areas including the following:
1) Marketing strategies
2) Inventory Control
3) Staffing Patterns
4) Distribution Systems
6) Budgetary Controls
7) Production Operation Management
8) Other related business management areas
I.T. has changed management landscape. The challenge of I.T. specialists is to comprehend the application of I.T. in business. The challenge of managers is to comprehend the areas of application of I.T. in business. Both should accept the above challenge and ensure reaping benefits for promotion of business and increase efficiency to achieve the five internal objectives of an organization namely, increase in profitability, ensuring growth, facilitating market penetration, increasing productivity and providing leadership.
Indeed I.T. is changing management landscape ad this process will continue in future. We ought to strongly believe in the slogan: I.T. - A WAY OF LIFE
(*Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore, Pakistan
Member Governing Council, International Federation of Accountants (IFAC) (1997-2000)
President, South Asian Federation of Accountants (SAFA) (1997)
President, Institute of Cost and Management Accountants of Pakistan (1997-2000)
President, Association of Management Development institutions of South Asia (AMDISA) (1993-96)
Pro Vice-Chancellor, University of the Punjab, Lahore (1994-1996)
Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1993-96)) italics