IT Corporate Integration (Part 1)

Case Study : Batesville Casket Company
Lecturer : DR. Ford Lumban Gaol

Pengantar :
Pada studi kasus kali ini, perusahaan peti mayat sudah memprioritaskan penggunaan/integrasi IT dalam bisnisnya pada tahun 1980. Walaupun IT bukanlah bisnis utamanya, tetapi perusahaan tersebut telah menilai komponen untuk meningkatkan keuntungannya melalui fungsi IT yang menekankan pada tujuan yaitu :
1.Service excellent
2.Revenue
3.Risk
4.Fraud
Profit oriented yang memberikan pelayanan yang terbaik kepada pelanggan (cepat,tepat,aman,selamat) menjadikan saat ini menjadi perusahaan peti mayat terbesar di Amerika dan dapat bertahan selama puluhan tahun. Dari pemesanan manual menjadi online order, bahkan kalau ANDA ingin memesan peti mayat untuk diri sendiri, sekarang sudah dapat memesan dengan menunjukkan identitas diri melalui website www.batesville.com.

Batesville Casket Company is a subsidiary of Hillenbrand Industries, Inc., a diversified holding company headquartered in the small southern Indiana town of Batesville. Other Hillenbrand subsidiaries include American Tourister, Inc., a
major U.S. luggage manufacturer; Medeco Security Locks, a leading producer of high security locks; Hill-Rom Company, the leading U.S. producer of electric hospital beds, patient roomfurniture, and patient handling equipment; SSI Medical Services, a leading provider of wound care and other therapy units and services; Block Medical, a leading producer of home infusion therapy products; and Forethought, an insurance company that offers specialized funeral planning products through funeral homes.
In its twenty years of operation as a publicly held company, Hillenbrand Industries has had exponential growth in revenues,cash flow, and profits. Revenues have grown from about $75 million in 1971 to almost $1.2 billion in 1991, and earnings per share have increased from about 10 cents to $1.22. Highlights of Hillenbrand Industries financial performance for 1989–1991 are presented in Exhibit 1.Headquartered in Batesville, Indiana, Batesville Casket Company, Inc., is the world’s largest producer of metal and hardwood burial caskets, having a significant percentage of
the U.S. market for its products. Batesville Casket serves more than 16,000 funeral homes in the continental United States, Canada, and Puerto Rico. It operates six manufacturing plants that are specialized by product line. To provide optimum customer service, it has 66 strategically located distribution warehouses (called Customer Service Centers)from which it delivers caskets to funeral homes using its own truck fleet.
Batesville Casket’s managers believe that long-term success will result from listening to their funeral director-customers and responding to their needs better than anyone else. Batesville is committed to listening to these customers in their plants, their offices, their Customer Service Centers, their sales organization—literally everywhere they do business. Another key element in Batesville Casket’s strategy for achieving total customer satisfaction is to continually improve all processes and methods so that the company can serve its customers more effectively.



The MIS Department
The MIS department is responsible for providing information systems and services to Batesville Casket. As shown in Exhibit 2, applications development is basically organized functionally, with teams serving logistics, sales and marketing, and manufacturing. The Computer-Aided Manufacturing group is responsible for interfacing manufacturing systems with the machines in the factories. The Data Center operates an IBM 4381 mainframe. Last year Batesville Casket spent only .73 percent of its revenue on MIS.
James J. Kuisel, who reports to the senior vice president and chief financial officer, has been director of MIS for 14 years.Until recently the MIS department has had most of the responsibility for systems projects, but it is now sharing more of this responsibility with the users. Another major thrust of the department is toward use of client/server networks rather than the mainframe. This is not just a matter of less costly processing on personal computers (PCs), but it also takes advantage of the competitive environment for a whole array of software products. “Software products for the mainframe are very expensive—$250,000 for a Human Resource System,” Kuisel explains. “There are only a few mainframe suppliers who have developed highly complex systems that cost an arm and a leg. But for the client/server environment there are hundreds of developers, all competing with aggressive pricing.”

With the help of an outside consultant, Batesville Casket is concentrating on reducing cycle time of business processes. The MIS department is heavily involved in process mapping the company and in analyzing each process to take “non-value added” time out of it. Kuisel is the head of the “Make to Market” team that is leading this process, and many others from MIS are involved in the other teams that are working on
this project.
Kuisel is proactive in the use of new technology. “We want to be leaders,” he asserts, “but not heat seekers. Where we can make a tremendous gain by getting on the bleeding edge, then we will go ahead and take the risk. But when the business is not going to benefit greatly, then we will let the technology mature so that we do not waste resources. We want the business need, not the technology, to drive us, and we try to minimize the risk.”



The Distribution System
Logistics is an important area at Batesville Casket. Caskets are bulky and heavy items, so transportation costs are significant when distributing them on a national basis. Furthermore, when a funeral director has a demand for a specific casket that he does not have in his relatively limited stock, he must have that casket in time for the family visitation and funeral, a matter of a day or two at most. So the ability to deliver a specific model quickly is essential to good customer service
As mentioned previously, Batesville Casket distributes its products through 66 Customer Service Centers. The typical Customer Service Center has a manager and a small staff of warehouse-worker/drivers, most of whom are out of the Customer Service Center much of the time delivering caskets. Although the Batesville Casket product line includes several hundred models, the typical Customer Service Center stocks
only a portion of these, depending upon the preferences of the funeral directors it serves.
In the early 1980s, Batesville Casket was a pioneer in the development of PC-based distributed systems. Working together, the MIS and logistics departments developed a PC-based system that was installed in each of the Customer Service Centers. This system served most of the operational needs of the Customer Service Center, including order entry from the customer, maintaining the Customer Service Center inventory by
model and serial number, and keeping track of where each casket was located in the warehouse. It included a routing model that accepted the delivery requirements for the day, determined the route that each truck should take in order to deliver the caskets most efficiently, and printed out the routing and the sequence in which the truck should be loaded so that the first casket to be delivered was the last casket on the truck.
Through a dial-up network, each night the Customer Service Center PC transmitted that day’s orders to the central computer in Batesville that handled customer billing, kept track of Customer Service Center inventory, and determined inventory replenishment schedules. The central computer then sent information on the next day’s shipments back to the PC so that the Customer Service Center manager would know what was en route.
This system replaced a lot of paperwork in the Customer Service Centers, but it was justified and paid for on the basis of reducing the time to get the billing out. With the previous manual system, the Customer Service Center managers would fill out the paperwork, batch it, and mail it to Batesville, and they would receive the billing information from three to ten days after the casket was delivered. With the computer system they could get the bills out the next day. Also, the system enabled the centers to respond more quickly to demand and, through centralized replenishment, reduced the probability that a desired item would not be available when needed.
This system was developed using a then-new PC development tool, called Knowledge-Man, that included a 4th-generation language and a database management system. Because some of the processing was done by the central mainframe system in Batesville and the rest was done by the PCs in the Customer Service Centers, with data transmitted back and forth at night, this was a distributed system.
When the system was installed, most of the Customer Service Center managers had never even seen a computer, did not know what a floppy disk was, and had no experience with
a computer keyboard, so they were initially reluctant to become hands-on computer users. But with a lot of help and training they converted to the new system, and soon they became enthusiastic users of the new computer system.