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					                               The CIO Game

                                                                                                     Textile Industry in Europe
                                                                                                            - An Industry Study

                                                                                                 Frank Bergmann, fraber@fraber.de
                                                                                                                        26.3.2003




1      Introduction ........................................................................................................................................... 3
2      The Confection Industry ....................................................................................................................... 4
    2.1      Overview ..................................................................................................................................... 4
    2.2      Market Segmentation and Purchase Criteria ............................................................................... 4
    2.3      End-User Analysis Spanish Fashion Apparel .............................................................................. 4
    2.4      The Value Chain .......................................................................................................................... 4
    2.5      Distribution.................................................................................................................................. 7
3      Company Description ........................................................................................................................... 9
    3.1      Corporate Configuration .............................................................................................................. 9
    3.2      Competitive Environment ..........................................................................................................11
4      “E-Business” Strategy ..........................................................................................................................12
    4.1      Verticalization of Multi-Brand Sales Outlets .............................................................................12
    4.2      Service Improvement .................................................................................................................14
    4.3      Difficulties with Internet Projects...............................................................................................14
5      Project Proposals ..................................................................................................................................15
    5.1      Intranet & Knowledge Management Mini-Project .....................................................................15
    5.2      Data Warehouse .........................................................................................................................16
    5.3      Production Tracking ...................................................................................................................16
    5.4      3rd Party Procurement .................................................................................................................17
    5.5      B2B Product Catalog ..................................................................................................................17
6      Bibliography ........................................................................................................................................18




Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                                                                         Date: 19-07-2011
Author: Frank Bergmann                                                                                                                          Page 1 of 18
                       The CIO Game




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                       The CIO Game
1 Introduction
Conclusion

The main conclusion of this paper is that
Internet based applications can have very
attractive financial returns, even when the term
“e-Business” has lost a lot of its attractiveness
after the Dot.Com crash. I have found the
“Project Priorization Matrix” to be a suitable
tool to provide a unified view to both Internet
and non-Internet related projects.

Tools and Methodologies

A number of tools and methodologies have
been used explicitly and implicitly during the
elaboration of this report. These tools include:
Porter 5 forces analysis, Supply Chain               A communication map for a typical textile company,
Management, B2B Marketplaces,                        showing time and cost inefficiencies in the
Communication Map, Project Priorization              communication processes with its business partners
Matrix, the Extended Company, NPV and ROI
calculation amongst others.




Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                           Date: 19-07-2011
Author: Frank Bergmann                                                                            Page 3 of 18
                       The CIO Game
2 The Confection Industry
2.1 Overview
The confection is currently the world's largest industry. Its development during the last century was the
driver of the industrialization of Europe.

2.2 Market Segmentation and Purchase Criteria
The apparel market decomposes in an innumerable set of segments that can be classified according to the
following broad categories (based on [4]).

The distinction between fashion and non-fashion segments is probably the most important factor. Fashion
apparel is not an article of primary necessity and thus depends strongly on the available free income. In this
segment, quality is the most important purchase criterion for the majority of female buyers (60%), while
only 10% of the buyers say that price is most important [2]. Another 30% feel that design is most
important. On the other hand, non-fashion
apparel is more price-sensitive.                     Market Segmentation Criteria
                                                        Fashion and non-Fashion
                                                             o Fashion Apparel with low price sensitivity
2.3 End-User Analysis                                        o Non-Fashion Apparel with price sensitivity
    Fashion Apparel                                     Age group (infants, children, teenagers, adult, …)
                                                        Product Type:
Women and label-conscious urban young                        o Female suit, coat, tailored jacket and skirt
people tend to be the prominent end-users in                 o Female lingerie, loungewear and nightwear
the Spanish apparel fashion market. They                     o Female blouse and Shirt
assign a great deal of importance to brand                   o Female dress
                                                             o Male Suit, Coat and Overcoat
names and prefer natural materials, dark
                                                             o Male Shirt
colors, comfortable styles and classic designs.              o Male underwear and nightwear
Women tend to prefer known brand names                       o Socks and hosiery
such as Xxx, Yyyy and Zzzz. However, these                   o Trouser, Slack and Jean
brands only reach those consumers with high                  o Accessories
purchasing power because of their high prices.          Occasion and Formality
Women's spring and summer fashions tend to                   o Sports outfit
be similar to the casual style of the Gap and                o Casual wear
Banana Republic and can be seen in Zzzz.                     o Business clothing
                                                             o Formal clothing
Linen, cotton, wool and synthetic fibers are the
                                                        Material (wool, cotton, linen, synthetic fiber, leather, …)
main materials used in this genre of apparel.           Production Type (Cut and Sew, Knitting, …)

2.4 The Industry Value
    Chain
@Todo: Translate the diagram into English




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                        The CIO Game




2.4.1     Fibers
 Fibers are the main component of textile products in general. Fibers are spun into yarn, which in turn is
 converted into fabric. The standard fabric used in cut and sew apparel typically can be classified into three
 different types:
        Natural fibers like cotton, wool or linen
        Artificial fibers like viscose, that have a natural origin but which go trough a transformation process and
        Synthetic fibers like nylon or polyester, which are produced by petrochemical processes.

2.4.2     Yarn Makers
 The yarn making activities in Europe have declined notably since the 70. Most production has moved to 3 rd
 world countries today. Only specialized yarn makers can be found in Europe and the United States.

2.4.3     Fabric Making
 Fabric making has developed in a similar way to yarn making with shift of production towards 3 rd world
 countries such as Pakistan and India, particularly in the area of standardized, uncolored, untreated fabrics.
 The remaining industry in Europe is focuses on niche markets determined by flexibility, speed or custom
 production, using mainly Jacquard machines.

2.4.4     Finish                                                           -5                       Reino Unido

 The finishing process uses a variety of production                                  - 1,90         Alema nia

 processes to adapt the characteristics of the fabric to the                          Portuga l 0,04
 needs of the end users, in particular to fashion trends.                                 Ita lia                            8,00
 These processes include:                                                               Fra ncia                             8,02
        Coloring                                                                       Espa ña                                      11,02
        Pattern Printing
                                                                                         UE- 15
        Frosting                                                                                                     5,08

                                                                                -5                  0             5             10

 Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                             Finish Demand EvolutionDate: 19-07-2011
                                                                                                        (1998-1999),
 Author: Frank Bergmann                                                                                     Page 5 of 18
                                                                                           Source: OETH
                        The CIO Game
2.4.5     Manufacturers
 The manufacturers in the confection industry differ in the number of integrated production steps
 (production depth).




 In general, all manufacturer exercise a tight control on design, product development, quality control and
 delivery (storage, picking, packaging and transport). Many manufacturers also include part or all of the
 distribution chain.

 The integration of production phases such as cutting, confection and ironing depends on the particular
 company and product.
        Design and Prototyping:
         The first step towards a product is the design phase. Here the company has to define: The materials to use, color,
         color patterns, textures, finish, fit and form. Usually a software program allows deriving the cutting plans and the
         BOM (Bill of Material).
        Cutting:
         Once the cutting plan has been derived from the design phase, the colored and finished fabric is cut using
         automated cutters or manual cutting forms.
        Sewing:
         The cut pieces are sewed together using an important amount of manual work. All attempts to automate this
         processing step have failed until now.
        Finish:
         Buttons, ornaments and zippers are added to the product. The result is ironed to give it the final form.
 The figure below summarizes the industry environment for the manufacturers according to Michael Porters
 5 forces framework.




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 Author: Frank Bergmann                                                                                        Page 6 of 18
                        The CIO Game




 2.5 Distribution
 For the most part, European consumers acquire their fashion goods in specialty stores, boutiques and large
 department stores. The large supermarket chains attract fewer buyers of apparel products. In Europe, 60
 percent of the space in shopping centers is occupied by apparel and fashion accessories boutiques. Variety
 and quality are the characteristics that the buyers seek in the boutiques located in the shopping centers,
 while higher prices are the main drawback. [3]

2.5.1     Tendencies in Distribution
 There is a growing trend among
 manufacturers to create their own chains                                                Quotes de mercat actuals, 1992

 of distribution. Franchise has become a
 very common system for brand names                                            57%
                                                                                                                          12%
 distribution of fashion products and
 wearing apparel The Spanish Franchise
                                                                                                                             5%
 Association states that there are over 78
 Spanish brand name franchises in the
                                                                                                                          10%
 fashion sector with almost 3,000
 boutiques.                                                                                             16%

 The independent outlets are still (1992)                 Altres           Grans
                                                                           superfícies
                                                                                              Cadenes i          Grans
                                                                                      Canvis en la penetració sobre vendes
                                                                                              franquícies        magatzems
                                                                                                                                  Detallistes
                                                                                                                                  independents
 the primary distribution channels in Spain,
 but they are loosing terrain mainly due to                                         Detallistes independents
                                                      Evolution of the distribution channels in Spain (1985
                                                           -14%
 two reasons:                                         – 1992), Source: Centro de Información Textil y de la
                                                                 Grans magatzems              +7%
        Disappearing: The consumers are                                    confección (CITYC)
                                                              Cadenes i franquícies                          +233%
         increasingly demanding with respect
                                                                     Grans superfícies                                                   +150%
         to product quality presentation at the
         point of sales (POS). The new chains              -15%                                Altres

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                                                                                                                             25   30    35
 Author: Frank Bergmann                                                                                                               Page 7 of 18

                                                        Evolution of the distribution channels in Spain (1985
                                                        – 1992), Source: Centro de Información Textil y de la
                                                                        confección (CITYC)
                        The CIO Game
         meet these demands while independent outlets seem to be slower to adapt.
        Transforming: Other independent outlets adapt the franchising model or become associated to a specific brand.
 The hypermarket format has experienced an important growth due to its low cost offerings achieved by
 means of their strong negotiation power. Typical products include:
        Standard (commodity) products in the low price segments and
        Products with a strong brand image.

2.5.2     Product Brands against Distribution Brands
 However, the most important change has occurred with associated boutiques, franchising and multi-
 franchising outlets. This type of outlets allows for a higher profitability due to standardization and
 economies of change.

 Traditional independent sales outlets buy their products from a number of brand-owning providers. The
 outlet owners decide for the product mix, the shop location and its design.

 In contrast, franchised outlets give up the design and product mix responsibilities to the chain, where more
 sophisticated personnel can leverage the distribution brand and deal with these marketing and product mix
 issues more efficiently.



                               ESQUEMA TRADICION AL                                MARCA DE CAN AL


                       FABRICAN TE               DETALLISTA              Fabricante     Marca canal     Puntos de
                                                                                                          venta


                                                                                         Gestión
                                                                        Fabricación      información
                           Diseño             Diseño tienda           Distribución    Diseño       Gestión
                           Fabricación        Selección gama                                          inmobiliaria
                           Distribución       Gestión inmobil .                        Publicidad   Venta al
                           Publicidad         Venta al cliente                         Diseño        cliente
                           Comerciali -                                                  tienda       Puesta en
                            zación                                                       Selección     práctica
                                                                                          de gama       políticas
                                                                                         Definición
                                                                                          políticas




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                        The CIO Game
 3 Company Description
 Xxxxx is a medium size textile
 company (“brick and mortar”)
 with about 50M€ revenues/year,
 managing a total of 4 brands. The
 company size and the pleasant
 gross margin of X% are due to the
 strong brand positions and due to a
 general growth of the market
 during the last 10 years.

 However, new entrants have
 appeared since 1999, attacking
 particularly the low cost and
 fashion oriented segments of the
 market.

 These entrants have been possible             Distribution of the company departments by country
 by using the vertical distribution                          @ToDo: change the slide
 format, consisting of tightly
 controlled franchising outlets as
 compared to the company’s traditional customer base of independent sales outlets. These new players have
 entered from neighbor markets, leveraging their already existing distribution brands. This situation,
 together with the general economic downturn since 2000 has lead to decrease in sales, pressure on the gross
 margins and a financial situation that requires active measures.

 Company Short Facts
        Worldwide sales with focus on Europe.
        Brand portfolio covering all major segments in its market, both fashion and non-fashion.
        Ca. 500 employees worldwide
        Produces about x million textile items per year
        Serving more then x customers in Europe and the rest of the world.

 3.1 Corporate Configuration
 The value chain configuration of Xxxx follows in general the typical industry scheme as presented in
 chapter 3.4.5:

3.1.1    Design and
        Prototyping
 Product development is
 located at the company
 headquarters with input from
 the local sales & distribution
 offices. New collections are
 developed twice a year.

3.1.2     Production
 All raw material is bought
 centralized at the
 headquarters and distributed
                                                               Production configuration
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                        The CIO Game
 to the local production plants and to contract manufacturers. The finished goods are collected in a
 centralized warehouse close to the headquarters where they are labeled and packaged for transport.

3.1.3     Distribution
 Distribution is organized according to the type of clients as described chapter 3.5. There are three main
 outlet formats:
        Hypermarkets
        Department Store
        Individual outlets: Traditional shops, typically located within residential neighborhoods or within city shopping
         areas. This channel is differentiated in computer-savvy outlets and outlets that are not able nor willing to use the
         Internet for order management.
        Franchised outlets: Same structure as the individual outlets, but limited to the company brands and owned by
         company.
        Other: This includes channels for scrap,
         returned or outfashioned products.

3.1.4     IT-Infrastructure
 The information systems at Xxxx are
 organized around the idea that ERP systems
 are too brittle to adapt to the specific and
 fast changing needs of the textile sector.
 Examples of such needs are:
        The color-size matrix structure that is
         used for all ordering and production
         processes in the textile industry.
        The outsourced production structure
         without a typical production floor but
         with the necessity of production tracking
         across organizational, country and time
         zone boundaries.                                Company configuration to be covered by              IT systems
        The frequently changing organizational                          ToDo: Change the slides
         structure due to market changes
        The relatively low technical sophistication of the information system users.
 In addition, there are negative reports about ERP installations at several other textile companies, talking
 about huge cost overruns and little productivity gains. These reports are difficult to verify, so that there is a
 lively discussion about the pros and cons of an ERP introduction.

 Instead of an ERP, COMPANY has
 developed an IT-Infrastructure based on
 several AS400-based applications with
 convenience applications being written in
 Visual Basic:
        The operational processes are supported
         by AS/400 finance, order management
         and warehouse control applications
        Product data are processed using a
         production management system in
         Clipper technology
        Other requirements such as reporting,
         planning, system integration etc. are
         covered by proprietary applications
         written using Visual Basic + Microsoft
         SQL Server
                                                               Current IT coverage of functional areas

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 Author: Frank Bergmann                                                                                       Page 10 of 18
                        The CIO Game
 This infrastructure has been working more or less satisfactory during several years. However, it is plagued
 by a set of problems typical to in-house developments:
        Disparate data: Data are held by several isolated systems, making it difficult to integrate processes and to generate
         company-wide reports
        A high number of in-house employees is necessary to maintain the infrastructure.
        The usual difficulties with the in-house development such as cost overruns and unreliable timing.

3.1.5     Corporate “Pressing Issues”
 COMPANY enjoys relatively high margins of X% on average on its products. However, sales is currently
 declining due to a series of strategic and operational efficiency issues.

 Strategic Issues:
        New Entrants: Several distribution chains have entered the market segments of low-cost and fashion oriented
         products, coming from neighbor markets. The new entrants have been possible because of a “vertical distribution”
         structure explained in chapter 3.5.2.
        Service Level: The service level of COMPANY has fallen back to industry average, while its superior service used
         to be a main factor for growth in the past.
 Operational Efficiency Issues
        Lack of efficiency monitoring: Key indicators (Balanced Scorecard) are difficult to evaluate (due to disperse IT
         systems), resulting in unmonitored performance of key processes.
        Independent Outlets: The distribution of the independent sales outlets is plagued by several inefficiencies,
         including low inventory turnaround (0.5 – 3 turnarounds/year), low service level of X% and credit defaults. Also,
         shop owners are typically not very computer-savvy, effectively rendering useless Internet order entry and –
         tracking applications.
        Service Level: The service level used to be one of the major growth factors and differentiator towards the
         competition (according to word-of-mouth). However, the service level today is within the industry average of X%,
         across all distribution channels.

 3.2 Competitive Environment
 Confidential




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 Author: Frank Bergmann                                                                                      Page 11 of 18
                       The CIO Game
4 “E-Business” Strategy
In this section I will take the inputs from general business strategy, operational efficiency analysis and IT
infrastructure to develop a roadmap of projects and applications for COMPANY. These projects include
both “classical” IT projects and Internet applications without distinction because of the strong
interrelationship amongst them.




Business priorities set by the general management have directed the e-Business strategy towards two
pressing issues (explained in chapter 3.1.5):
       Verticalization: The creation of a “vertical” distribution channel that can compete in terms of operational
        efficiencies with the new competitors and
       Service: Improvement of the service towards the traditional sales outlet to gain market share.
The necessary change processes to achieve the strategic reorientation are also initiated and executed by the
general management. This includes in particular the conversion of traditional outlet stores to franchised
outlets as member of the newly founded X chain as well as the policy changes in sales, product delivery
and replenishment.

4.1 Verticalization of Multi-Brand Sales Outlets
Verticalization refers to the conversion of independent multi-brand sales outlets to franchised “vertical”
shops with a single distribution brand (chapter 3.5.3). Important changes include:
       Change in outlet ownership
       Central management of chain image and marketing
       Tight control of inventories within the shops: The currently low inventory turnover is in part due to the current
        “push” sales strategy, trying to sell a maximum of products to the “client”, without taking into account the
        preferences and needs of the final clients.




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                                  The CIO Game
 This change affects the majority of business processes related to the operation of multi-brand outlets,
 including the role of the sales representatives, order processing, credit risk management, stock
 replenishment up to the product mix and the shop ownership.

 Most of these processes are out of the scope of this document. However, some of the new processes need to
 be supported by new IT applications, which in turn need to access corporate data in a new way.

 The following table summarizes the current and the future situation for each domain:


                   Area                      Current Situation                                     Future Situation
                              Selling (pushing) a maximum of goods to         Controlling the distribution chain to optimize the
  Strategy




                              the existing customer base                      value for the final clients and to minimize inefficiencies
                                                                              such stocks and obsolete material

                   Sales      Push a maximum of sales to sales outlets (the   Help (consulting) the outlets to improve the
  Processes




                              “clients”)                                      attractiveness of their shops

                   Orders     Telephone order entry and tracking with
                                                                              Internet based order entry and tracking worldwide
                              language specific call centers
                   Market     Country specific offerings                      Global offering
                                Control client credit risk                     Provide the products that the outlets need
  Applications




                                Call-center based order entry process          Internet based online catalog and order tracking
                   Order        Control the sales Sales force                  Provide reporting functionality for the call-center to
                   Man.                                                          improve incident resolution
                                                                                Provide business intelligence to the sales consultants.
                               IBM AS400 mainframe                           Sun Solaris Internet servers
                   Hard-
                               Internal network with no access from outside  Intranet infrastructure with managed access from
                   ware
  Infrastructure




                                the company                                    outside the company
                   Develop.    RPG based software development                TCL based software development
                               System administration and software              Administration and development handled by an external
                   Hosting      development handled mostly by an internal        company with a fallback option to internal handling
                                team

4.1.1                 Order Entry and Tracking
 The need for new applications is driven mainly from the new ordering and replenishment processes. In the
 past, order entry operation has been performed by a call center. Now order entry is done using an Internet
 application that also provides the updated product catalog, order tracking and delivery tracking. Please see
 chapter 5.3.8 for the details on this application.

 A positive side effect on the service level can be achieved by the order tracking part of the application, as
 all information on the delivery status can be made available online. This allows the client to better estimate
 arrival time of items and allows for the cancellation of goods that would be delivered too late.

 A second positive side effect is the global availability of the order management application and the possible
 regional extension of the markets.

4.1.2                 3rd Party Sourcing Application
 The necessity to deliver a complete product mix to the sales outlet requires the management of a number or
 new 3rd party supliers. This is the domain of a buyer-side marketplace that COMPANY may feasibly
 operate due to the volume of goods to be bought.

 Alternatively, the supply module of a standard ERP system may cover this functionality.


 Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                                               Date: 19-07-2011
 Author: Frank Bergmann                                                                                              Page 13 of 18
                        The CIO Game
4.1.3     Infrastructure
 A standard Internet infrastructure is required for the operation of the order management and 3 rd party
 sourcing applications, because both applications have to be globally available over the Internet (chapter
 5.3.9). This in turn requires the setup of an Internet maintenance and development team, either composed
 of internal employees or by means of outsourcing.

 4.2 Service Improvement
 The improvement of service towards all distribution channels is a very complex operational issue. Detailed
 analysis (not covered by this report) has shown that the service level is affected by a complex system of
 procedures and policies that are in place since several years. Improving the service is an ongoing issue
 since several years and is not likely to be resolved by developing a single project.

 However, two main areas of action have been identified as first steps as detailed in the following sections.

4.2.1     Production Tracking
 Until today, the process of tracking of the production in the outsourced sewing plants has been performed
 manually by sending back and forth faxes. The lack of digitalization of this process leads to deviations in
 the production and thus to delivery delays in the outlet stores.

 A production tracking application improves this process substantially, allowing the remote sewing plants to
 maintain the status of all production orders over the Internet. The application works on the base of the
 product “kit” barcodes that are scanned in and sent to the central production control application over the
 Internet. The simple and robust Internet infrastructure is of primordial to this application because the
 majority of the production plants of COMPANY are located in 3rd world countries.

 Please see the “Production Tracking” project in chapter 5.3 for details.

4.2.2     Business Intelligence
 A second factor that contributes to the poor service level is the lack of information about the process. This
 situation is caused by the existence of several disperse systems with non-integrated data. As a solution we
 suggest to integrate all data into a single Data Warehouse (chapter 5.2). We expect that the availability of
 more precise business information will help to identify of the causes of poor service and to take the
 appropriate action.

 4.3 Difficulties with Internet Projects
 The rest of this report assumes that Internet projects are to be handled just as ordinary IT projects.
 However, some differences remain according to my experience:
        Team Skills:
         Internet applications are based on a system architecture (operating systems, programming language, development
         methodology, …) that is different from the usual corporate architectures. The additional knowledge and skills
         have to be covered either internally (training, hiring of new resources) or by external resources.
        External Collaboration:
         Many “e-Business” projects are dealing with communication processes between a company and its business
         partners. Thus Internet projects tend to be more political then classical projects.
        Internet Infrastructure:
         A suitable infrastructure has to be available to allow for a high availability of the Internet application during
         business hours. Such infrastructure includes hosting facilities, networking and security infrastructure such as
         firewalls and routers.
 In the case of COMPANY, all three issues have been resolved by subcontracting an external consulting
 company.

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                       The CIO Game
5 Project Proposals
This chapter describes and analyzes a series of
projects that are derived from the “e-Business”
strategy of COMPANY plus some operational
efficiency issues.

All projects are classified with a cost estimate,
return of investment (ROI) and their net
present value (NPV).

Project cost estimates are taken from project
proposals made by the consulting company
YYY. ROI and NPV figures are based on my
personal estimates, taking into account only
measurable indicators. Non-measurable                          Project Prioritization Matrix
indicators are specified separately, not
influencing the ROI/Cost classification. Please see Appendix 1 for a detailed calculation of the Cost and
ROI figures.

The figure on the right shows the Cost/ROI classification of all following projects. Arrows indicate project
dependencies.

Typically, one should start with the projects in the lower left quadrant, because these projects allow for
high ROIs while consuming the least resources, effectively representing the “low hanging fruits”. Starting
with these projects will allow for trust building and to accommodate all members of the team to the new
processes.

5.1 Intranet & Knowledge Management Mini-Project
Project Objectives
        Provide convenient access and centralized storage for corporate documents that are currently distributed over a
         number of locations.
Document management in the IT department is currently deficient, with documents distributed over a series of systems and
locations. As a result, knowledge about systems, procedures and data is based on individual persons and transmitted mouth-
to-mouth. This situation leads to inefficiencies during the integration of new team members and to extended project
development times.
A second phase of the KM project could involve other departments, once the KM structure is working for the IT
department.
Implementation
       Setup an Intranet server and define how different departments can publish data
       Train the users in creating contents for the Intranet
       Start the first phase with the IT-Department, involving about 3 “editors” (=content providers) and 15 active users
       Start a company-wide rollout, possibly starting with the HR department to gain acceptance with the employees. A
        final stage (IT, HR, Production, Sales) could involve about 20 editors and 150 active users.
Risks
       Low involvement from department members, no involvement from senior management, generally low readiness
        for change.
       The corporate culture is very informal, knowledge is frequently held informally
       The corporate employees are relatively unsophisticated in terms of IT usage.
Costs & ROI
       Costs of the first phase are composed of the Infrastructure setup, training of the content editors, some initial
        content editing, the training of 15 users and the initial setup. Software and licenses are free because the software
        already exists. The benefit of the first phase is based on the assumption that the document system is saving 2 hours
Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                                      Date: 19-07-2011
Author: Frank Bergmann                                                                                     Page 15 of 18
                       The CIO Game
        per month for each of the 15 IT department users.
The second phase is calculated accordingly with 20 editors, 150 users and 60min/month saved
time per user.
                                                                               Benefit
Project                                                          Investment                       ROI
                                                                               /month
Intranet & KM                                                      23.025 €    3.400 €                6,8
Phase 1: IT-Department (3 editors, 15 users)                           3.775 €    650 €               5,8
Phase 2: Company wide (5 editors, 100 users)                         19.250 € 2.750 €                 7,0

5.2 Data Warehouse
Project Objectives (please see Appendix 1 for details)
       Allow for convenient access to corporate data, allowing for improved analysis of key performance indicators such
        as market share and service level
The project is a “standard” Data Warehouse, integrating data from different operational systems into a single database to
make the task of writing reports easier.
Implementation
       Phase 1 consists of a Data Mart for sales, consolidating data existing systems into a single database. Also, external
        data sources have to be integrated such as demographics and competitor information.
       Further phases include the setup of specific Data Marts for each department, customized to the specific department
        needs.
       Reports are extracted from the Data Warehouse in the first phases using Crystal Reports. More advance (and
        expensive) reporting tools may be introduced later if there is a business case or a business need for it.
       Please refer to Appendix 2 for a preliminary implementation plan.
Costs and ROI
       Costs are based on a particular project proposal, calculating with 60 consulting days, 50% dedication of an in-
        house employee and free software and licenses (already in place). Benefits are based on 50% time saving to two
        employees who are normally plus a fixed amount of €10.000 per month in improved sales due to better market
        intelligence. Phase 2 and 3 are calculated accordingly, calculated with the same amount of savings. However, we
        expect the savings to be much higher in reality.

                                                                           Benefit
Project                                                  Investment                         NPV
                                                                           /month
Data Warehouse 1                                              75.300 €         1.288.795 €
Phase 1: Sales Data Mart                                      39.300 € 13.100 € 442.361 €
Phase 2: Financial Data Integration                           18.000 € 10.000 € 349.681 €
Phase 3: Production Integration                               18.000 € 14.000 € 496.753 €

5.3 Production Tracking
Project Objectives (please see Appendix 3 for details)
       Improve the processes to track the production in the sewing plants in Africa and Asia by replacing fax/telephone
        workflows with Internet technology.
       Improve the precision of the production schedule
       Improve the resolution of production incidents such as lost or hidden goods
As explained in chapter 3.1.2, COMPANY is contracting several sewing plants in Africa and Asia
for the work intensive processes of the production chain. The tracking of this production process
and the resolution of production issues are currently done manually by fax or telephone. This
situation leads to several inefficiencies such as:
       The time required for the tracking process
       Frequent production delays due to the late detection of incidents
       Lacking information towards the clients about the status of an order

Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                                       Date: 19-07-2011
Author: Frank Bergmann                                                                                      Page 16 of 18
                       The CIO Game
Implementation
       Implement a production tracking application to track the barcodes of the production units and
       Integrate the application with the existing IT systems
Costs and ROI
       Costs are based on a particular project proposal, assuming that the Internet infrastructure is already in place.
        Benefits are based on saving 1-4 persons in the production-tracking department, which currently consists of 12
        persons. Benefits from improved service and saved priority transport service are not included in the calculation.
                                                                     Benefit
Project                                                 Investment               NPV
                                                                     /month
Production Tracking                                       91.300 € 54.300 € 1.258.386
Phase 1: Pilot                                              64.000 € -900 €    -84.814
Phase 2: Final Version                                      27.300 € 55.200 € 1.343.200

5.4 3rd Party Procurement
Objectives (please see Appendix 4 for details)
       Efficiently manage a number of providers worldwide using a purchasing marketplace.
This module is thought to extend an ERP negotiation module by negotiation capabilities over the
Internet (request for quotation, request for proposal and reverse auction).

Costs and ROI
       No formal calculation has been made yet, because it is not clear yet whether such a module would be preferable to
        a classical ERP solution.


5.5 B2B Product Catalog
Objectives (please see Appendix 5 for details)
       Save headcount in the order processing department
       Extend the sales outlet base by lowering the barriers to become a customer
       Improve the service to existing customers by proving more information about the delivery of goods
Dependencies
       Requires a working Data Warehouse database
Description

The B2B Product Catalog consists of a “classical” Internet-Shop application plus custom functionality to
allow for the tracking of orders and deliveries.

Cost and ROI
       The costs are based on a particular project proposal. The benefits are calculated based on the savings in the call
        center as a function of the number of connected sales outlet. Benefits from market growth and service
        improvement are not includes.

Project                                                  Investment           NPV

B2B Catalog & Order Tracking                              118.000 €   417.646
Phase 1: Pilot                                              78.000 € -116.876
Phase 2: Final Version                                      40.000 € 534.522




Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                                       Date: 19-07-2011
Author: Frank Bergmann                                                                                      Page 17 of 18
                       The CIO Game
6 Bibliography
[1] The Catalan industry: Textile and Confection. Generalitat de Catalunya
[2] Spain Apparel Industry, U.S. & Foreign Commercial Service,
http://www.tradeport.org/ts/countries/spain/isa/isar0012.html

[3] La confecció a Catalunya, Reforc Competitiu de les Manufactures de Disseny, Generalitat de
Catalunya, Departamente d’Insústria I Energia

[4] NAICS: North American Industry Classification System, http://www.census.gov/epcd/www/naics.html

[5] Impacto del Comercio Electrónico en el Sector Textil Español
Fundación Privada Cetemmsa, http://www.cetemmsa.es/

[6] Informe anual de l’empresa catalana
Generalitat de Catalunya, Departament d’Economia i Finances

[7] La ventaja competitiva del grupo Inditex-Zara, 1963-1999
Luis Alonso Álvarez, Universidad de A Coruña

[8] The Hard Path To Competitiveness:The Organizational Fittedness of Spanish Textile Leaders
Jordi López Sintas iemp9@cc.uab.es, Ercilia García Álvarez Ercilia.Garcia@uab.es, Dept. Economia de
l'Empresa, Universitat Autònoma de Barcelona




Document: 51e4c33a-11d8-40d2-98b7-99c90fc45976.doc                                        Date: 19-07-2011
Author: Frank Bergmann                                                                       Page 18 of 18

				
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Description: Proposal of Textile Industry in Pakistan document sample