THE MANAGER'S MEMO
FROM: Brad Stroh, Chief Technical Officer
TO: Anngenette Gittleman, Procurement Manager Steve Tomez, Production Manager
CC: Bob Kahuna, CEO
Dave Woner, CEO
RE: New Technology
As you know, all our competitors have shifted to purchasing supplies and equipment via online services. This has resulted in some very impressive gains in efficiency. BIGCO Corporation has already slashed its prices, to which we must respond. However, as Bob and Dave have determined, because of our technological deficiencies, if we cut our prices in line with BIGCO's, we are certain to fall short of our financial projections. To allow us to compete more effectively, several new software packages are being installed. Revised cost projections are based on everyone in purchasing getting up to speed on use of this software over the next 6 months.
Introducing this software will result in reductions in two critical areas of production: direct material costs and overhead expenses. In addition, we will be able to reduce our workforce by 17%. The first software package we are installing was created for us by Ariba and will streamline our procurement process for indirect MRO (maintenance, repair, and other) goods. This will eliminate rogue purchases, give us buying power as an organization, and subsequently reduce the number of procurement staff. Starting next week, we are also using Free Markets to set up an e-exchange so that we will be able to purchase direct production materials online.
This will optimize our production efficiencies, lower direct costs, increase collaboration with our suppliers, and reduce headcount. Steve, the Free Markets package will interface with our SAP enterprise resource planning system. It appears that most of your organization has yet to integrate SAP into your management systems; implementing the new initiatives as quickly as possible is critical. The overall health of our company depends on it. Thanks, and good luck. Please begin informing your teams about the new systems and changes.
CASE DISCUSSION QUESTIONS
Assume that you are the production manager and respond to the vice president's memorandum. What sources of resistance must you prepare for? What actions can the company take to make the change to more technologically driven systems as beneficial as possible? What, if anything, should the company do for the workers whose positions will be eliminated?