Stately Furniture And Décor:
Strategic Integration Through Information Technology
Prepared by Yvonne Lederer Antonucci and E. Jose Procenca
Introduction
In June of 1999, Rajesh Moham, president of Stately Furniture and Décor (SF&D), found himself grappling with a difficult problem. The competition was getting increasingly fierce and his company had to find an innovative way of staying ahead. Over the past month he had been contemplating the idea of installing an integrated information system. He had been informed that such a system would help streamline Stately’s business processes, enabling it to respond effectively to customers’ orders and to meet their needs more efficiently than the competition. To this end he had hired Lehi Pradas to fill a newly created position of Information Systems Manager. Together they determined that it was time to analyze the critical business processes at Stately and to implement an integrated information system.
In September 1999, Mr. Roya Balm, a recent MBA graduate and relative of Mr. Moham, was asked to help analyze SF&D’s business processes and outline a plan to improve its competitive position through information technology. Mr. Balm brought in Dr. Mason, a specialist in business process improvement and his professor in graduate school, as a consultant. They set about reviewing the mission, strategy, structure, and systems at SF&D.
The Organization
Stately Furniture and Decor is a small furniture company located in the city of Dubai in the United Arab Emirates. It manufactures handcrafted household furniture and sells it through a variety of retail outlets throughout the Middle East and Russia. Founded in 1988 by president and owner Rajesh Moham, SF&D grew rapidly from 15 employees to its present size of 49 employees. Its mission statement read: “To provide high quality furniture at a competitive price on a timely basis.”
SF&D operates in a very competitive market. Dubai alone has 47 furniture manufacturing companies. International companies such as Ikea have begun entering this market as well. Most international competitors offer low priced furniture targeted to low income households and apartment dwellers. SF&D differentiates itself through its stylish and high quality handcrafted designs that range from the traditional (Victorian, Early American, and Islamic designs) to the modern (Italian and other contemporary western designs). The company’s market segments include palaces, households, hotels, and government offices.
SF&D markets its products internationally, selling to 50 retail accounts located in Dubai, Russia, Saudi Arabia, Kuwait, Libya, Oman, Iran, and elsewhere in the Middle East. It also manufactures and sells custom-made furniture directly to individual customers. Most customers pay cash upon delivery although some take several weeks to pay. In return for brand loyalty, customers expect high quality, competitive pricing, and timely delivery. To maintain high quality standards, SF&D is highly selective when it comes to purchasing raw materials. For instance, it only purchases wood from the United States, Singapore, or Indonesia. Fabric is purchased from Germany, Spain, and Italy. The prices of raw materials from these countries are much higher then elsewhere.
The Structure
SF&D has a functional structure with three major departments; Production, Accounting and Finance, and Information Systems (see Exhibit 1). The production manager and the quality control manager manage manufacturing operations, and both of them report to a factory manager. The factory manager also oversees the sales and marketing department. The heads of all three major departments report to the company president. The president is mainly responsible for strategic planning, performance monitoring, and some human resource management functions such as recruitment.
The production department has seven sections: Upholster/Assemble, Foam, Carpentry-living room, Craft, Tailoring, Paints, and Carpentry-bedroom. The Upholstery and Assembly section has 7 workers who assemble and package the product. The Foam Cutting, Tailoring, and Craft sections have 5, 8 and 4 workers respectively. Workers in the Living Room Carpentry (7 workers) and Bedroom Carpentry (8 workers) sections work on the rough mill, which consists of power saws, planers, gluing machines, and other tools, to cut and form the parts. The Painting department has 7 workers who sand and paint the products.
Business Processes at SF&D
The Production Process
This process is best illustrated with an example such as a handcrafted bedroom. The process begins when the craftsmen in the Crafts section receive the blue print from the Sales and Marketing department. First they transfer the design onto the raw material (wood). Next it is sent to the bedroom carpenters for cutting. From the rough mill, an order is sent to the painting section where the rough-milled parts are bored, routed, sanded, and finally coated with stains and lacquers. The order is then moved to the assembly section, where the parts are assembled into the finished bedroom set and other items of furniture.
Turnaround time is variable based on the detail of the design and the quantity of the order. Stately’s track record for on time delivery is 99%. The other 1% is late usually due to suppliers’ delay in delivering raw materials. Each section in the production time determines its own raw material needs and orders for a month’s worth of inventory is placed monthly.
Customer Order Process:
Customers place orders with the Sales and Marketing department in person or by phone. Based on customer specifications, Ven Bala, the marketing manager, draws a blueprint of the product by hand (no computer available). This blue print is presented to the customer for approval and specification of fabric and color. An order agreement is then drawn up by Mr. Bala and signed by the customer. It contains information on the type of furniture ordered, the number of units ordered, unit price, and total price. One copy of the order agreement is sent to the accounting department, while one copy is filed in the sales department, a third copy is given to the customer, and a forth copy is sent to the Factory Manager.
Based on the order agreement, the factory manager initiates a production order that contains the model code, fabric name and color code, description, quantity, and requested delivery date. Both the marketing manager and the customer must agree on the delivery date before the production order can be processed. Seven copies of the production order are sent to the various sections of the production department. Additionally, one copy is sent to the warehouse to provide all sections with the necessary materials, another is filed in the production department itself, and a third is kept with the factory manager until the order is completed. The production and quality control managers monitor the entire process until it’s completed, and when finished they release a delivery note. Copies of this note are dispensed to the production department and the accounting department. The accounting department then prepares an invoice for items shipped to the customer.
The Steering Committee
Dr. Mason’s first recommendation was to form an organization-wide steering committee to perform the analysis of strategic business processes. The committee consisted of top representatives from each organizational department and function. It included Mr. Moham, President; Mr. Pradas, Manager of Information Systems; Mr. Raj Dumas, Manager of Accounting and Finance; Mr. Visul Drasal, Factory Manager; Mr. Jace Napel, Production Manager; Mr. Kaleel Kimmon, Quality Control Manager; and Mr. Ven Bala, Manager of Sales and Marketing. Mr. Balm and Dr. Mason would facilitate the analysis of organizational processes and their subsequent redesign and integration.
At the first meeting of the Steering Committee Dr. Mason outlined the importance of streamlining business processes and the potential benefit of an integrated information system in terms of SF&D’s survival and competitiveness in the market. She stated that the purpose of the committee was to (1) assess the major strategic issues facing SF&D, (2) examine the company vision, strategy, structure, and processes, and (3) develop a policy regarding the future role of information systems in implementing short term and long term strategy at SF&D.
In order to accomplish this agenda, each committee member was asked to formulate a response to the following queries:
(1) What is the key to remaining competitive in the current market?
(2) What are SF&D’s short and long-range objectives?
(3) Prioritize each objective as either mandatory or optional.
(4) What are the main business processes at SF&D? Do they support the mission and strategy of the organization?
(5) How does the current organization structure influence the business processes and information needs?
(6) What are the strengths/weaknesses of each functional area with respect to the implementation of business processes and satisfaction of information needs?
(7) What information systems needs must be met to remain competitive in the future?
Committee members were also asked to analyze their own functional areas with respect to key processes performed, current and future management information needs, information strategies and systems necessary to remain competitive in the future, structural changes that will be required to implement such strategies and systems, and any ethical issues that may arise as a result of these activities.
Dr. Mason ended the meeting by stating:
During the next two weeks, Mr. Balm and I would like to set up appointments with each of you to discuss the activities in your departments, to identify process-related problems, and to obtain your views about possible solutions. This will help us better understand the various operations at SF&D.
Discussions with Managers
Interview with Lehi Pradas, Manager of Information Systems
Given the importance of information systems to the redesign and integration of business processes at SF&D, Dr. Mason and Mr. Balm decided that their first interview would be with Lehi Pradas, Manager of Information Systems. Pradas began with his vision for Information Systems at Stately Furniture and Décor: “SF&D must be able to use Information Technology to automate and facilitate the production, distribution, and quality of its products as a way to enhance the effectiveness and efficiency of the customer ordering process.” He explained that an information systems architecture plan had been developed to fulfill this vision. The main goals of this architecture plan were:
1. Link all departments together through an information systems network; this will include wireless communications for sales and marketing people who are constantly ‘on the road.’
2. Maintain an integrated database and functional applications, enabled by workflow technologies that provide real-time information.
3. Create a system that is easy to use at all staff levels and that provides data that is relevant to each department and its staff.
Furthermore, the information system must meet the following criteria:
1. System must be flexible and expandable to meet SF&D’s changing needs.
2. System must be responsive to development of new applications.
3. System and data must be reliable and must maintain integrity.
4. System must be developed on an open platform.
5. System must be able to support multiple protocols.
6. Client/Server technology must be implemented.
7. System integrity must have a high priority, from backups to intruder protection.
8. Workstations and user interfaces must be standardized for each function.
9. Development must be transferred to users after proper training and experience.
Mr. Pradas went on to say:
Stately does not currently have any information systems. In some ways this makes the development of the new systems easier. Much of the integrated network infrastructure has been planned and approved by the organization. Systems currently under development include accounts receivable, accounts payable, payroll, and general ledger systems. An inventory control and ordering system, based on “just in time” principals, is also being discussed.
Mr. Pradas was very supportive of the steering committee’s initiative. He said he would like to see a complete analysis of all company processes as a prelude to the design and implementation of an integrated information system. He cited the customer order process as an important candidate for such an analysis.
Mr. Balm asked Mr. Pradas what specific areas he would like to change in Stately’s current customer order process. Mr. Pradas’ response was:
I would like to see customers involved in the ordering process instead of relying solely on the marketing staff for all design change and repeat customer orders. I also would like to reduce the amount of duplicate order and reports being generated and disseminated throughout the company. At the present time, there is very little data integrity!
Interview with Visul Drasal, Factory Manager
Next, Balm and Mason interviewed the factory manager, Visul Drasal. His duties included oversight, coordination and performance monitoring of all factory departments; price setting for all product lines; setting goals for sales staff based on historical information, competitor prices, and the state of the economy; and oversight of domestic and international marketing.
When an order agreement is entered into with the customer, the factory manager initiates a production order to start the manufacturing process and he monitors the order until completion. He also coordinates with the accounting department for the purchases of raw material.
Although Mr. Drasal has limited experience with computer software, he recognizes the importance of better data management for effective planning and control. He feels that the new information system or ERP system should be able to monitor the entire customer order process.
My department needs automated assistance to enable price/cost analysis as the order is being processed. Also, when design changes are received from a customer, I would like to respond to them more quickly. Currently, design changes must go through the same approval procedure as new orders. This means that sales and marketing must consult with the customer about changes before my approval. Then I have to give a new delivery date to the sales and marketing manager, who goes back to the customer for final approval and possible further design changes. The sales and marketing manager then sends copies of the new order agreement to the appropriate departments. At that time, I am finally allowed to initiate the production order.
Drasal complained about the duplication of effort and large amounts of paperwork in this process, stating that they were the cause of many problems related to customer satisfaction and timely delivery.
Interview with Jace Napel, Production Manager
Even though he reports to the factory manager, production manager Jace Napel has sole responsibility for ensuring the timely production of SF&D products. He works closely with the quality control manager Kaleel Kimmon to maintain the high product quality that customers have come to expect.