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Kell Rigby
Executive Summary
Kell & Rigby was established in 1910 by carpenters William Kell and Leslie Rigby. Today, the company specialises in the project management and construction of medium to large-scale projects for the industrial, commercial, government and residential sectors. Kell & Rigby have established offices in Sydney, Canberra and Shanghai. The company currently employs 135 full time staff.
Kell & Rigby found that both customers and suppliers, particularly government organisations, were increasingly demanding higher levels of system integration, to enhance the transparency of the construction and project management processes. To achieve this goal, the company's Information Technology (IT) Manager initiated the integration of cross-departmental systems and streamlining of procurement processes.
E-procurement refers to the business to business (B2B) purchase of supplies using the Internet. Kell & Rigby have invested in e-procurement software enabling the consolidation and automation of purchasing processes. The software also acts as a central repository for Kell & Rigby's list of suppliers including specific product and service details.
Kell & Rigby's system integration, online facilities and e-procurement system enabled the company to save costs of $442,000 in 2001 resulting in a net operating benefit of $41,225 after deducting ongoing costs. Establishment costs for the system represented an initial outlay of $185,500.
Furthermore, the company has recently developed an Intranet; a private internal network using Internet protocols, to allow the connection of geographically distributed networks and the integration of external consultants for streamlined document and information transmittal purposes.
The Business
Kell & Rigby is a construction company established in 1910 by carpenters, William Kell and Leslie Rigby. Today, the company specialises in project management and construction of medium to large-scale projects for the industrial, commercial, government and residential sectors.
As a family company, Kell & Rigby have established offices in Sydney, Canberra and Shanghai. The company currently employs 135 full time staff.
Getting Started
Kell & Rigby found that both customers and suppliers, particularly government organisations, were increasingly demanding higher levels of system integration, to enhance the transparency of the construction and project management processes. To achieve this goal, Kell & Rigby's Information Technology (IT) Manager initiated the integration of cross-departmental systems and the streamlining of procurement processes.
Leveraging technical assistance from the IT department, General Manager, Paul Gallimore along with Development Manager, Joshua Black, were involved in the development of the e-commerce initiative, which was completed in early 2001.
E-Procurement
E-procurement refers to the business to business (B2B) purchase of supplies using the Internet. Kell & Rigby have invested in e-procurement software to enable consolidation of purchasing processes and automation of inventory controls. The software also acts as a central repository for Kell & Rigby's list of current and potential future suppliers. This database includes contact details, product specifications and production lead times.
The software has enabled the company to negotiate prices for materials that apply across the firm's portfolio of construction projects. Site managers are able to log purchase orders online and submit them directly to the accounts payable department. In some instances, this information is also relayed electronically to the supplier who then fills the order and arranges delivery to the particular site. This enables the company to standardise purchasing rates company wide rather than on a site-by-site basis.
An online form is available whereby potential suppliers submit details for Kell & Rigby to assess materials suitable to the company's requirements. Suppliers enter specific details about their company, products and services, production lead times and credentials. This information is then sent electronically to Kell & Rigby staff for assessment and if suitable, added to a central supplier database. One of the favourable factors in assessing supplier suitability is the availability of online ordering functions.
Current e-commerce strategy
Whilst the automated procurement process forms an integral part of the online system, other business processes have also been transformed by Internet technology. Potential clients can now generate a design brief for a proposed building using a step-by-step questionnaire detailing building location, dimensions, layout, equipment, facilities, aesthetic design requirements and budget. Once completed, this information is sent electronically to Kell & Rigby staff where a quotation is prepared and sent to customers within 48 hours.
Other processes that have been web-enabled include banking and bill payments. In addition, the company has invested in several e-security measures including Anti Virus software, firewall technology and regular backing up of business data.
Revenue and Costs
|
E-commerce Establishment Costs |
|
|
|
|
|
|
|
|
|
($) |
|
Web development |
|
10,000 |
|
Staff training |
|
10,000 |
|
Database integration |
|
25,000 |
|
Enterprise Resource Planning |
|
20,000 |
|
Domain name registration |
|
500 |
|
Telecommunications |
|
100,000 |
|
Office equipment |
|
10,000 |
|
Software - E-procurement |
|
5,000 |
|
Hardware |
|
5,000 |
|
Total Establishment Costs |
|
185,500 |
|
|
|
|
|
|
|
|
|
Operating Benefit From E-commerce |
|
|
|
|
|
2001 |
|
|
|
($) |
|
Add: E-commerce Cost Savings |
|
|
|
Postage and freight |
30,000 |
|
|
Photocopying |
7,000 |
|
|
Printing |
15,000 |
|
|
Stationery |
2,000 |
|
|
Staff time: error reduction |
22,000 |
|
|
Staff time: banking |
10,000 |
|
|
Staff time: bill payments |
10,000 |
|
|
Staff time: payroll |
20,000 |
|
|
Bank charges |
1,000 |
|
|
Staff time: communication |
50,000 |
|
|
Education |
5,000 |
|
|
Travel |
30,000 |
|
|
Staff time: general administration |
200,000 |
|
|
Telecommunication |
40,000 |
|
|
Total E-commerce Cost Savings |
|
442,000 |
|
Gross Benefit From E-commerce |
|
442,000 |
|
Less: Ongoing E-commerce Costs |
|
|
|
Amortisation of capital expenditure* |
(46,375) |
|
|
Internet Service Provider |
(14,400) |
|
|
System maintenance |
(40,000) |
|
|
System administration |
(50,000) |
|
|
Software applications |
(5,000) |
|
|
Licence fees |
(5,000) |
|
|
Telephony - fixed |
(10,000) |
|
|
Telephony - variable |
(20,000) |
|
|
Administration - external helpdesk consultants |
(40,000) |
|
|
Training |
(10,000) |
|
|
Staff |
(150,000) |
|
|
Website updates |
(10,000) |
|
|
Total Ongoing E-commerce Costs |
|
(400,775) |
|
Operating Benefit From E-commerce |
|
41,225 |
|
|
|
|
* Note: Capital Expenditure was amortised over a four year period
Financial Analysis
In 2001 Kell & Rigby achieved a net benefit from e-commerce of $41,225 and anticipates benefits to increase following the full implementation of e-commerce initiatives. Most benefits were realised in the form of cost savings, which totalled $442,000 in 2001. The use of email as the main method of correspondence has improved staff efficiency in communications ($50,000), telecommunications expenses ($40,000) and reduced the need to travel to supplier and client premises ($30,000). Electronic communication has also reduced the need for brochures, purchase orders and invoices to be distributed in hardcopy. This has resulted in reducing postage ($30,000), photocopying ($7,000), printing ($15,000) and stationery expenses ($15,000).
By web-enabling finance processes, significant benefits have been realised in improved staff efficiency in administration of finance functions and in transaction fees. As a result, cost reductions have been achieved in the areas of banking ($10,000), Bill Pay ($10,000), payroll ($20,000) and bank charges ($1,000). General staff efficiency has improved, resulting in improved productivity in administrative tasks ($200,000). The e-procurement system has streamlined ordering processes, resulting in error reductions ($22,000).
Kell & Rigby invested a total of $185,500 in the online system. The single largest investment was in telecommunications infrastructure required to support the network ($100,000). Expenses related to setting up the integrated network include database integration ($25,000) and enterprise resource planning software ($20,000). To support the new infrastructure include e-procurement software ($5,000), hardware ($5,00) and office equipment ($10,000) were purchased. A further $20,000 was spent on web development and staff training.
Ongoing costs associated with the online procurement system amount to $400,775 annually. Additional staff required to manage system functionality incurred costs of $150,000, while system administration and maintenance costs amounted to $50,000 and $40,000 respectively. Expenses associated with supporting online operations include Internet Service Provider (ISP) fees ($14,400), subscription to an external helpdesk service ($40,000) and total telephony fees ($30,000). Capital expenditure is amortised over a four-year period ($46,375).
Non-financial Benefits
Kell & Rigby's new online system has significantly reduced time and paperwork required to perform purchasing, inventory control and banking tasks. By integrating the company system with supplier systems, the procurement process is streamlined and staff satisfaction is enhanced as the system has contributed to their improved productivity and efficiency.
By enabling access to online research, Kell and Rigby's site supervisors are now better positioned to locate competitive pricing opportunities, suitable suppliers and devise leading edge methods of construction.
Challenges
Kell & Rigby initially encountered internal resistance to the e-procurement solution due to staff being unfamiliar with Internet technology and the new processes. This issue is being overcome through gradual implementation of the new system together with extensive eduction and training.
Future
Future initiatives for the company include the development of an Intranet, a private internal network using Internet protocols, to allow the connection of geographically distributed networks.
Kell & Rigby's advice to other businesses considering an e-commerce implementation is to carefully research online solutions and ensure that the selected system can be easily modified. The company also believe it is important that e-commerce complement the existing business as opposed to becoming the business itself.