1.Ford achieved 75% reduction in head count in its accounts payable department by reengineering. What did Ford reengineer?
2.What are the features of this reengineering and how has IS contributed to it?
3.Besides the reduction in headcount, what are other benefits, if any, of this reengineering? Explain your answer.
1. These remarkable results were achieved not by applying automation to the existing process but by using shared data and database technology as an enabling tool to completely redesign the way vendor accounts are paid.
In the old system, when Ford's purchasing department wrote a purchase order, it sent a copy to its accounts payable department. Later, when material control received the goods, it sent a copy of the receiving documents to accounts payable. Meanwhile, the vendor sent an invoice to accounts payable. Everything is centralized around the accounts payable department and it was up to them to match the purchase order against the receiving document and the invoice.
Once they matched, the department issued payment.
However, the department spent most of its time on mismatches, instances where the purchase order, receiving document and invoice did not match. In these cases, an accounts payable clerk would investigate the discrepancy. This held up payment and other redundant documents had to be released - an example of non-value adding work.
A traditional approach to applying Information Technology would be to help the accounts payable clerk investigate more efficiently using the department's data. Ford expected this approach to result in a 20% head-count reduction.
In the new system, however, the intent is to pool the data from all the departments involved in order to prevent the mismatches in the first place. Ford instituted "invoice-less processing." Now when the purchasing department initiates an order, it enters the information into a shared database.