Case Study: Honam Petrochemical's Quest for Better Management Reports

 

 

INTRODUCTION

Honam Petrochemical is a South Korean producer of petrochemicals and polymers with its business comprising of polyethylene, polypropylene functional resins and basic petrochemicals and chemicals. Honam is focusing on its main aim to become a "top tier chemical company in Asia" and to achieve sales of $10bn. It plans to do this by strengthening its existing businesses, extending its overseas business and developing new businesses. The company further states that it is willing to take risks and challenge new ground in order to advance itself. Honam will build a new growth base by aggressive development of new vision businesses and entering global markets. It will introduce a sales structure tailored to its products as well as management indexes for value creation.

The company was founded in 1976. In 1992 the company added a naphtha cracking plant and aromatic compound facilities to its plant site at the Yeosu Petrochemical complex. In 2001, it increased its production capacity of ethylene to 700,000 tonnes/year. In 2004 the company acquired KP Chemical it has a 52.5% share. Also in 2004, it acquired a 100% share of Lotte Daesan Petrochemical.

Question 1.List and describe the information requirements of HPC's new management system and what problems was the new system designed to solve?

Information requirements of new system involve identifying who needs what information, where, when and how. HRP needs reliable reports that are able to accurately measure management performance and provide useful, accurately measure management performance and provide useful, accurate information for increasing sales and reducing costs.
 

Executive wanted to see current data to get a real view of what was actually happening on the plant floor or in the sales office. Executive too need anytime access to the most timely data but they did not want to be overloaded with unnecessary data so they could focus on the "watch-up indicators" considered crucial to the business. U to the minute reports that they could see quickly on their desktops and the data can be access via the Web or their mobile devices. Enterprise wide data that could be accessed and shared easily across various business units and functions to support the company's expansion geographically and by product line.
 

HPC's existing systems provided managers with reports to guide their business decisions but in many cases the data in the reports were out of date and sanitized. Individual managers were processing and manipulating the data to make their departments "look better" to senior management. The report data were also somewhat stale and presented only on periodic basis.

Question 2 :To what extent were "people" problems affecting management decision making at HPC? What were some of the management, organization and technology issues that had to be addressed by the new system? How did the system's designers make the system more "people-friendly"?

In many cases, the existing HPC's systems provided out of date and "sanitized" data in the reports. Moreover the reports data are presented only a periodic basis. It really affecting the management decision making because the systems allow the individual managers to process and manipulate the data to make their departments "look better" to senior management. As a result the decision making are made based on the inaccurate, manipulated, inconsistent and untimely data (based on last quarter's number).
 

The issues from management, organization and technology that had to be addressed by the new system are

• Management - Develop new business process, monitoring the implementation of the new system, allocation of human and financial resources
• Organization - Conduct employees training, change of corporate culture
• Technology - Accessible of the data (via Web-based and mobile devices), determine the right set of reports and dashboards, extracting data from SAP NetWeaver Business Warehouse

In order to determined the right set of reports and dashboards for HPC's executives, the information system team started by asking the executives to list existing reports and assess the usefulness of each report. Then highly intuitive Web-based user interface was created to make the system very accessible and required little training for users to use the system. The information system team visited various manufacturing plants to encourage users to start working with the system as well as had in depth discussions with executives about the system's benefits and how to use it.

Question 3: What role did end users play in developing HPC's new system? How did the project team make sure users were involved? What would have happened to the project if they had not done this?

The role that the end users play in developing HPC's new system as as follows:-

• User information requirements drive the entire system-building efforts
• End user must have sufficient control over the design process to ensure that the system reflects their business priorities and information needs, not the biases of technical staff
• End user of HPS's played role to help the project information systems department by providing them the existing report that they already used 

In order to ensure the end users involved , The project team do the following:-

• Once HPC's project team determined the business intelligence tools for the solution, its focus turned to determined which data and reports were required by the company's 200 high-level users of the new system
• The team started by asking executives to list existing reports they were already receiving and to assess the usefulness of each
• The list was cut to more manageable size and the executives were asked if there were any additional reports or data from which their organization groups could benefit
• the project team make sure the users attended the training on how to use the new system or to access data and reports
• To encourage users to start working with the system, members of the information department conduct a discussion with the user about the benefits as well as how to use the new system
• Information system department also run campaigns to ensure that user are using the system with most effective way

What would have happened to the project if they had not done this?

Answer:

• The users involved are very important in developing new system to make sure the information requirements or user's needs that was determined were fulfilled
• If it does not happen, the new system developed might fail and not achieved the management objective
• The project might be a "white elephant" and the result will be wasting time and money

Question 4: What other steps did HPC take to make sure the system was successful?

• Phased approach - HPC used a phased approach in implementing the new system. HPC waited until the company was experiences with ERP software and confident in its data quality and its data collection and processing methods.
• Benchmarking - HPC CIO, Jong Pyo Kim also emphasized the important of benchmarking with other companies in the industry before designing and implementing an executive-facing system. Most manufacturing wi8II want to access to similar data and performance indicators

Question 5: What types of systems-building methods and tools did HPC use for building its system?

• SAP Business Objects Dashboards - Is a drag-and drop visualization tool designed to create interactive analytics for powerful, personalized dashboards based on SAP's Business Objects intelligence platform. This software can be used for performance management, planning, reporting, query and analysis, and enterprise information management and provide self-service access to data from database and Excel spreadsheets
• SAP Business Objects Web Intelligence - Is an ad hoc query, reporting and analysis tool that is used to create queries or use existing reports, format retrieved information and perform analysis to understand trends and root causes

Question 6: What were the benefits of the new system? How did it change the way Honam ran its business? How successful was this system solution?

• Timelier decisions - Reduces time needed to collect, process and track data for decision making, supports faster decisions with quicker and more thorough analyses, delivers timely information and various analysis to end users
• Personalized delivery of information - Provides option for Early Warning System of data alerts that allows differentiation and personalized delivery of information for executives, managers and front-line employees
• Measurable watch-up indicators across all business areas - Ensures consistency of information and establishes structure for global sharing of information. Increase business competitiveness through increased use of global information system
• Improved accessibility - Displays data via management cockpits, dashboards or widgets and provides unstructured details and analysis also leverages visual graphics to improve readability

How did it change the way Honam ran its business? How successful was this system solution?

• Executives no longer limited to sanitized, stale data in an outdated presentation format.
• Management discussions and each decisions are based on time, consistent and accurate company wide data
• The system is very successful and help to solve problems occur at HPC 
• The system reduces the time required to collect, process and track the data so executive decision making takes place more rapidly
• HPC's information system are now ready for global information-sharing as the company expands

Case Study : Austin’s Energy’s Billing System Can’t Light Up

INTRODUCTION

Austin Energy is the nation’s eighth largest publicly-owned electric utility and a department of the City of Austin. The mission is to deliver clean, affordable, reliable energy and excellent customer service. Our utility provides electricity to more than 420,000 customers and a population of almost one million in the City of Austin, several neighboring cities, unincorporated areas of Travis County, and a portion of Williamson County. The company operations are funded entirely through energy sales and services, and Austin Energy supports other City of Austin services with an annual transfer into the general fund of more than $100 million. The utility operates within the ERCOT market. The mission is to deliver clean, affordable, reliable energy and excellent customer service.

Austin Energy is recognized for achieving some of the highest performance standards in the industry. These standards include aggressive renewable and reliability goals and demonstrated efforts to promote new clean energy technologies and a sustainable environment. The City of Austin’s goals for use of renewable energy are some of the most aggressive in the United States. Austin Energy ranks first among Texas utilities for green power sales. Austin Energy also offers some of the most comprehensive energy efficiency programs in America. Austin Energy has long recognized the environmental and energy benefits of electric vehicles. The company leading the effort to study the impact of electric vehicles on the electric system while promoting increased market share in the automotive industry.

QUESTION 1 : Is Austin Business Project is a failure? Explain your answer

Yes, the Austin Business Project is failure because of the followings:-

Modernization billing project delays

•  Austin and IBM project late completion, delay schedule, software bugs

•  Complexity new billing system with 73 different interface

Software bugs

•  Error of thousand of bills

•  65000 never received bills

•  35000 in accurate bills, overcharging

Instability issues

•  Seriously impact business and customer

•  Persistent system error from billing department

•  Revenue loses

Customer services employee

•  Employee response one to one assistant for account accessing and correcting error.

•  Called them selves as alpha tester

Customer

•  Unable to access system online portal

•  System causes a lot of problem, not friendly and hard time for customer.

IBM failure

•  Billing software system failure

QUESTION 2 : Describe the business impact of the faltering Austin Energy project.

The following is the impacts of the flatering Austin Energy project:-

Operation

• Mostly affected is billing department.
• Difficulties of issuing bills because of billing software failure.
• Common error of customer not received bills, customer receive in accurate bills, account automaticallycancelled.
• Incurred more cots in utilities and operation. Since business function is interconnected, one function failure give impact of another function such as production.
• Business service is inaccurate, it give impact in revenue and profit even though they don’t have pressure of competitor.

Customer service

• The department mostly affected.
• Employee work in high level of stress.
• Extra effort need to solve customer problem. They still need to serve customer better even though customer angry to show their disappointment towards the company.
• Employee also treated in the same way as usual, do not receive any appreciation from the company.
• Give impact of public relationship disaster.

Sales and marketing

• Company also faced difficulties in determining the actual sales since the system leads more error.
• Sales and profit decreasing.
• Company might face law suit for this issues. If it is happening, more cost to handle legal costs. It is bad forcompany since give negative impact in their legacy.
• Company also incurred more cost in advertising to give explanation to the public about what happen.

Finance and accounting

• Inaccurate financial report since the actual value of revenue and profit inaccurate recorded.
• Give impact of financial planning and investment.
• The project is delayed, suppose fully operational in early 2011 but it still not fully operational and incurredmore cost.

Management

• Wrong decision making of having IBM to develop the software as the bad experience IBM performance ininventory management.
• The service give by IBM is bad and disappointment.
• Need to train all employees with new technology.

Customer

• Mostly affected.
• System also not user friendly, Austin portal also always have problem, customer cant access accountinformation.
• Company also doesn't think of their preference such as ability to choose time of the month that customerprefers to pay bills.

QUESTION 3 : To what degree was IBM responsible for the problem countered by the Austin Energy billing project? Was Austin Energy at fault for the problem? Explain your answer

ANSWER:

• IBM not really responsive to the problems.
• It made Austin Energy appealed so many times to IBM officials ranging from the managers of billing systemproject up to IBM CEO.
• IBM responsible in find the roof of problem, make system correction, test the latest system version andimplement the system.

Was Austin Energy at fault for the problem?

Yes, Austin Energy is at fault for the problem. It is because of the followings:-

• Austin Energy as a user had to be committed to the system.
• Probably, Austin Energy did not plan very properly in the project to develop the billing system.
• They must have clear and proper project management objective which should deal with five major variables: scope, time, cost, quality and risk.
• The agreement should clearly define the roles and responsibilities of both party

QUESTION 4 : What were the specific organizational or technical factors as well as management factors involve in this project failure?

Organizational

• Employee could not be committed enough and described as if they are alpha tester when they encountered bugs and issues that never have made it to a live version.
• Unable to meet customer satisfaction.
• No realignment internally and externally.
• Caused vastly on costs that exceed budgets.
• Fail to meet customer expectation.
• Lost trust draws customer away.

Technical

• No specific infrastructure.
• Unreliable system caused money loss.
• Did not work closely with third party vendors like oracle.
• Customers unable to access the system’s online portal.

Management

• No strategy which cause time slippage.
• No business solutions.
• Interrelated with manpower.
• Repeating mistakes and delays.
• Improper project management objective. 

QUESTION 5 : Describe the steps Austin Energy and IBM should have taken to better manage this project.

The step that Austin Energy and IBM need to take to better manage this project is to develop an information system plan which indicates :

1.    The direction of system development

• Overview of plant contents
• Current and future business organization
• Key biz process
• Management strategy

2.    The rationale

• Current situation and current business organization
• Changing environment
• Major goals of the biz plan
• Firm’s strategic plan

3.   The current systems / situation

• Major system supporting biz function and process
• Current infrastructure capabilities
• Difficulties meeting business requirement
• Anticipated future demand

4.    New developments to consider

• New system project
• New infrastructure capabilities required

5.    The management strategy

• Acquisition plan
• Milestone and timing
• Organizational realignment
• Management control

6.    The implementation plan

• Anticipated difficulties in implementation
• Progress report

7.    Budget requirement

• Requirement
• Potential saving
• Financing
• Acquisition cycle

CONCLUSION

Good project management is essential for ensuring that billing system are delivered on time, on budget and provide business benefit. Risk assessment are required in order to prevent any chances of failure encountered without deep consideration and deliberations. Strategies are vital to be implemented since it is useful for managing project risk and system implementation.