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Re-engineering at

Contents

Introduction to Heatway

Introduction to Case

Re-engineering at HeatwayRe-engineering at Heatway

Designing & implication of new process

Concerns and Decision

Introduction to Heatway Heatway Electromechanical  Services Co LTD was

established in 1988 and has Registration Number E32200. 

The company  start working with Central Air-conditioning Installation in Big Buildings such as Hotels, Commercial Centers, Office Block buildings and small projects as dancing clubs, Restaurants and Houses.

Since 1994 Heatway is the Exclusive Product Distributor one of the bigger  Air-conditioning Equipment manufacturer in Italy, the RC GROUP SPA.

Introduction to Case Problem before Allan Firestone, president of

Heatway Cooperation’s Industrial Products Division and Bob Hemphill, a VP charged with designing and implementing a new process.

Design and implementation of a new process, named Proposal to payment (PTP) for selling and delivering Heatway products.

Change in organizational structure as well as IT architecture, and even a new philosophy of business.

Trouble between Hemphill and Firestone over the spending budget, where Hemphill demanded $35 million and Firestone was ready to spend only $15 million.

Introduction to Case cont’d..

Funding Considerations before Firestone:• How money could be arranged for PTP without sacrificing the

profit objectives?• Could corporate pay for the rest of amount?• Could some of the other international divisions that had

expressed interest contribute? Firestone himself believed that PTP was necessary and

design for the new process, organization, and technology environment were very exciting.

But, the VP had doubts about the urgency to implement PTP.

So, firestone resolved to take one more look at the numbers, in hope to find some source of additional savings had been overlooked.

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Background-Industrial Products

Industrial and consumer markets in 27 countries throughout the world.• Activities involved heating, ventilation, air

conditioning(HVAC) products and services.• business heavily dependent on New Construction.• IPD sold to medium % large sized businesses.• Systems configured to suit the size, location and

design of the businesses.• Had its own direct-sales & engineering groups.• Heatway engg worked with architects, contractors

and tenants to configure an HVAC solution.

Process

Reengineering at Heatway An early adopter of new approaches to business

improvements Quality based management approaches had been

accepted in Manufacturing & engineering but lacking in Sales & Service

In late 1980’s radical changes to improvement in contrast to incremental changes using IT.

Sought order-of-magnitude improvements in• Time• Cost• Quality

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Designing First phase

• Assess current state of order management• Create vision of new process

Work divided into two teams• Team A

• 8 members• Analyze current state of the processes• Understand the costs & time of doing business• Recommend short term improvements

• Team B• 10 internal managers& consultants• Create vision for future state of process.

Both teams were jointly responsible for managing the organizational changerequired for the initiative to succeed

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Implications of New Process Team created a large financial model to analyze the

costs, benefits, and financial risks of implementing the new PTP process.

The new process was very expensive (around $150million)• Cost for prototype process efforts• Cost of SAP Implementation• Cost of fully implementing and operating the new workstations,

networks, and SAP software• Cost for retaining, relocating, and removing employees• Return on the PTP investment appeared very high.

Prototypes and pilots was planned in the middle Atlantic states region.

Changes in Information technology• Mobile data network necessary• SAP installation• Sales force workstation

Implications for Employees Adoption of the new process. Management, evaluation and compensation of their day

to day work. Communicated the nature of these changes through

written communication. Mixed Reaction

• Performers loved the new process because of more freedom and less bureaucracy.

• Less capable performers were worried about how they would fare

Reorganization at Heatway Change in the management Salada remain as chairman Kacher would leave Heatway Information systems function would be outsourced

to an external firm with substantial SAP experience. Reorganization could have been problematic for PTP

• European groups would have less incentive to adopt the PTP design.

• Want of new system provider to implement SAP without concern of PTP process vision

Concerns Firestone concern

• Difficulty in assessing how rapidly the construction and rollout of PTP capabilities should take place.

• Other memebers of the operations committee were neither worried nor committed to PTP.

• Change in the commitment by the key managers after t• He reorganization.• These are those managers whose functional areas would

shrink with the adoption of PTP despite being offered important role at Heatway.

• Financing for PTP• If all the resources are devoted then both revenue and

profitability goals would not meet.

Decisions

Everyone understood that PTP implementation is a good investment.

Head of international said she wanted to wait to see how PTP worked in the U.S. before transferring resources from her budget.

Friestone tried unsucessfully at one one meeting to make PTP corporate initiative.

Its upto firestone and other executives to decide how quickly to roll out the new process and how to fund it

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