Question

Hammaker Manufacturing II (Business Process Reengineering or Outsource) Implementation of a new AIS went smoothly, for the most part. It is 15 years later, and now HMC is interested in mapping a variety of their business processes to determine whether improvements can be made and whether business process reengineering should be considered. Hammaker asked Denise to work with the consulting firm analysts to determine the feasibility of these two options and also to consider the possibility of outsourcing. Denise does not know much about outsourcing and she is not sure which process (or processes) Richard might want to outsource. Denise discovers that a number of developing countries have the capacity and the labor to make the parts that HMC is currently producing, and at much cheaper prices. Further, Denise discovers that many companies are outsourcing and offshoring a number of processes that used to be accomplished by company employees. Denise makes a note to herself to check the number of employees in each of the following departments: HR, computer support, accounting, and janitorial services. She also decides to query the AIS to determine what performance measures are available to assess the efficiency and effectiveness of each of these departments. Denise places a call to Lloyd Rowland to discuss this issue with him.

HMC is not unionized, but Denise ponders the legal and social issues associated with outsourcing jobs, because many of the 365 employees at Hammaker Manufacturing have been with the company for well over a decade.

Requirements:

1. Identify tools that would help Denise and Rowland map HMC’s business processes.

Which processes do you think they should work on first? Why those processes?

2. Identify at least six reasons why companies choose to outsource or offshore a business process. Which of these reasons might Richard use to make his decision to outsource or to attempt BPR?

3. Is producing automotive parts a ‘‘core’’ business process for Hammaker manufacturing? Explain.

4. Do companies ever outsource ‘‘core’’ business processes? Search the Internet to see if you can find an example of a company or an industry that oursources core business processes. What are they? Why are they doing this?

5. What social or legal issues might Denise consider? Be specific and explain why these issues might be important to Hammaker manufacturing.

6. What would you recommend if you were one of the analysts at the consulting firm?

Answer 1

(1) The tools which Denise and Rowland can use to map HMC’s business processes could be to get the data of 15 years and to know how was that particular department performing, the reasons for the ineffeciency (if any) to be analyzed and accordingly methods could be set to get/increase the profit. They could also look into the order process and try to minimize the amount of people involved in the manufacturing process as well as decide the products to be outsourced

The processes that have to be worked on would be to see the production process to measure and analyze the cost of goods sold. They should also pay special attention to the HR process as human resource is the most important resource for any company.

(2) The reasons for outsourcing are mentioned below:

1) The Operational cost and the labour costs involved would be much less

2) To effectively use the Internal resources to other use.

3) The completion of the task is much faster as there are strict guidelines of performance while outsourcing

4) To reduce risk

5) To expand the market of the product.

6) To realize re-engineering.

In my view, Richard may use the first option that is, to outsource because the Operational cost and the labour costs involved would be much less so that he can gain profit.

(3) Yes, producing automotive parts is a ‘‘core’’ business process for Hammaker manufacturing as it is a manufacturing company.

(4) Yes, companies outsource "core" business processes to lower the operational cost and the labour costs, to effectively use the Internal resources to other use, to reduce risk, to expand the market of the product, to realize re-engineering.