Support a decentralised business with one system.

Discussions about the benefits of either centralised or decentralised IT systems often assume a business has a main focus, with performance measures structured to improve the focus. However,  what should be the approach to IT systems if your business has an overall reason for being, but is structured to be very decentralised, with business units having different objectives?

This could be the situation with logistics services companies that have business units aligned to particular clients. By default, there is not an ‘integrated’ ERP system that will meet the information requirements of head office and the various business units; so a hybrid approach must be designed to satisfy all parts of the business.

The business of a previous client was in reverse logistics, but not the more common handling of returned goods. This business recycled and refurbished disused and derelict industrial sites, that were then sold for use by new productive enterprises. There were four business units in the company, each with their own focus and specialist skills:

• Property development: to finance the purchase of derelict sites and sell the land after it had been reclaimed
• Contracts: to estimate the cost of reclamation for each selected site, then project plan, schedule and manage the reclamation activities
• Metals trading: to sell the scrap metal and industrial equipment generated by each site of the Contracts business unit
• Assets Management: to hire-out company owned and centrally hired-in demolition and clearing equipment to each reclamation site, as required

The distributed workforce operated through a small head office and the business units, with sites located around the country. Therefore, to have an effective workforce required people to access data and information across multiple data bases as part of query routines; have mobile access to applications, together with video conferencing and easy to move document workflows (preferably electronic documents) across business units, departments and sites.

Define the requirements

The distributed nature of the company and the few people at head office meant that system requirements needed to be defined by an outsider, looking into the business. To ensure that all facets of each business unit’s requirements were addressed, the assignment commenced with two steps:

1. A mapping exercise to identify the process flows of head office and the business units. This enabled the identification of opportunities for standardisation of processes and workflows across the business and the technology capabilities required, including where best located
2. Identify the applications that comprised the ‘system of record’ for the business – what I call the ‘backbone’ ERP system. Being engaged in reverse logistics, the applications had different levels of importance to an outbound logistics business

The application requirements were then divided into four groups:

Group 1 was called ‘Corporate Business’. This was the core set of applications for all parts of the business to access on a ‘need to know’ basis. It consisted of:

• Financial Management:
  • General Ledger, Accounts Receivable and Accounts Payable at both head office and each business unit;
  • Multiple Consolidations (by project, business unit and the company);
  • Fixed Assets accounting
  • Treasury (cash flow, finance sourcing and costing, currency exposure monitoring and management and capital structuring)
• People Resources (HRM); including payroll, travel and expenses reconciliation
• Procurement; including sourcing, purchasing and supply contracts management
• Sales Order Processing and customer relations management (CRM) for an industrial services business

Group 2 was called ‘Business Improvement’. This was the set of applications which enabled management and specialists to analyse and improve the business. It consisted of:

• Risk Management application which included:
  • Risk assessment
  • Risk analysis
  • Risk treatment
  • Integrate the cost of risk treatment into a cost-benefit analysis
  • Risks register, tracking the ownership process and status
  • A database of identified risks, their treatment and implementation tracking
  • Risk reviews and treatments due, with follow-up of over-due activities
  • Insurance compliance

• Document Workflow and Compliance:  The geographically dispersed nature of the business meant that management control based on visual checking or reporting of activities would not be effective. To ensure that workflows, processes and document storage were at a high standard required the new Business System to check all activities. The company expected to achieve considerable efficiencies from staff at head office and the business units being able to deposit and locate documents for multiple contracts (past, present and future) and activities. In addition there was the added requirement to show evidence of being compliant with country and international regulations.
• Business Intelligence capabilities to assist analysis of future business strategies

Group 3 was called ‘Operating Business Units’. This consisted of applications that were specific to the needs of each business unit. Examples of applications were:

• Contracts business unit: estimating; consolidated projects administration and accounting; site project administration; project planning and scheduling and CAD applications
• Assets Management business unit: equipment hire and maintenance of equipment, vehicles and facilities
• Metals business unit: scrap yard weighbridge, administration and export shipping

Group 4 was called ‘Operational Improvement’. These were the initial applications required to enhance the daily operational effectiveness of the business. The applications consisted of:

• mobile access to applications, including at remote locations
• video conferencing

And all the applications need to work together so that employees viewed whatever interactions they were having as being through one ‘integrated’ system. This required the core applications in Corporate Business (Group 1) to ‘seamlessly’ interface with applications in the Business Improvement (Group 2) and Operating Business Units (Group 3). The evaluation process for this selection activity took considerably longer than planned.

Although your business may not be the same as described, if there is a situation of a decentralised logistics services business with multiple business units that require an ‘integrated’ IT solution, the approach described may be of value.

Next week, Learn About Logistics moves to another office, so there will not be blog post. Our contact details remain the same and your comments about specific blog posts are welcome.