BPI Business Case – Examples

Below is an example of a Business Case developed for a large, enterprise wide Business Performance Improvement project. This is the final product delivered to the transportation services Customer. 

TRUCKCO Commercial Leasing and Service

Business Case Control and Implementation

TABLE OF CONTENTS

Executive Summary                                      Tab 1

Business Case Narrative                              Tab 2

Maintenance and Servicing Narrative         Tab 3

Sales and Marketing Narrative                    Tab 4

Finance and Administration Narrative       Tab 5

Technology Narrative                                   Tab6

COMMERCIAL LEASING & SERVICES

INTRODUCTION

Re-Engineering Purpose

To ensure the achievement of the established long-term financial goals and strategic objectives of Commercial Leasing & Services through increased customer focus, exceeding customer expectations and providing a structure to deliver our services and compete aggressively.

Re-Engineering Vision

TRUCKCO will increase its industry leadership position by redesigning its business processes and investing in advanced technology, coupled with empowerment of its employees and continuous improvement.

Re-Engineering Mission Statement

The fundamental rethinking and redesign of critical business processes within CL&S in order to achieve significant performance increases in the areas of customer service, quality and cost reduction.

CASE FOR CHANGE

• Company Focus Is Too Internal vs. External.
• Customer Satisfaction Index Is Not World Class.
• Competitors Have “Same or Better” Cost to Revenue Ratios.
• Extensive Manual Data Entry and Rework Exists.
• Current Systems and Technology Do Not Provide Adequate Data and Reporting to Support a Proactive Customer Service Function.

RE-ENGINEERING OBJECTIVES

• Accelerate revenue growth.
• Dramatically improve revenue retention by exceeding customer expectations.
• Dramatically improve maintenance service and cost performance standards.
• Reduce total finance and administration

BUSINESS CASE HIGHLIGHTS

• Strategic Initiatives Focused on Maintenance, Sales and Finance
• $33 million Approved for Automated Shop & Hand-Held Initiatives - October     1993
• $80 - 95 million Additional To Be Requested Over 4 Years
• $17 - 20 million of Annual On-Going Cost
• $75 - 85 million in Annual Benefits
• Self Funding 18 - 24 Months After Initiation
• Technology Investment Builds On Existing Infrastructure

COMMERCIAL LEASING & SERVICES

BUSINESS CASE COST, BENEFITS, & TIMING (000’s)

COMMERCIAL LEASING & SERVICES

BUSINESS CASE ONE TIME COST

COMMERCIAL LEASING & SERVICES

BUSINESS CASE ANNUAL BENEFITS

COMMERCIAL LEASING & SERVICES

BREAK-EVEN and COST COVERAGE

COMMERCIAL LEASING & SERVICES

RE-ENGINEERING INTEGRATED BUSINESS CASE

This Business Case represents the culmination of the re-engineering efforts by the TEAM which began last December, 2014.

Our mission that led us to the recommendations contained in the Business Case was to fundamentally re-think and redesign critical business processes within Commercial Leasing & Services in order to achieve significant performance increases in the areas of customer service, quality and cost reduction.

Our internal review analyzed business functions from source through the entire processing and control mechanism. The activity sources included sales, maintenance and related administrative functions in the field and headquarters.

The focus of the re-engineering effort has been on the "customer requirement." During the Business Case formulation, the TEAM developed a "gap analysis" which outlined the requirements that had to be addressed to meet the "To-Be" Vision developed for TRUCKIT. The gaps identified were the basis for defining the re-engineering projects that have been prioritised and are presented on the attached schedule and project plan.

TRUCKCO has faced the major decisions that will give character and shape to the on-going re-engineering process. The Business Case outlines a significant level of investment that is required to meet or exceed customer expectations.

The re-engineered environment creates a favoourable payback in terms of hard quantified benefits. The time frame for completing the Business Case has revolved around the level of risk and NBT impact in the years 2000-2004. The TEAM developed multiple scenarios before arriving at the Business Case.

The critical decision addressed by management is the desire and will to move from the current architecture and systems environment to the new processes and information delivery systems.

Key points to keep in mind as the re-engineering scenario is reviewed are:

1. The impact of new technology     infrastructure costs is carried primarily by Sales and Marketing applications; specifically, Simplified Asset Management ("SAM")     and Account Management System. By far, this represents the most significant component in determining the level of spending and development of new technology under re-engineering in 2004. Similarly, it carries significant returns, and introduces shared     data and Customer/server technology which are the key enablers for the ‘To-Be’ Vision to become a reality.
2. The Process Owners and Teams have reviewed the level of effort and risk associated with     undertaking the projects in the time frames presented, and believe that they can implement these programs successfully. Projects are planned using both internal and external resources. External resources have been capitalized.

In developing this Business Case, the TEAM has tried to balance the needs of TRUCKCO and TRUCKCO’s customers, as developed under re-engineering, and our strategic planning direction, with the pragmatic realities of the business financial results and risk assessment.

The re-engineering effort has defined 30 strategic initiatives that should be undertaken to achieve the ‘To-Be’ Vision. These initiatives drive a significant investment in technology and infrastructure to enable the re-engineered business processes. Benchmarks show that our competitors are already leveraging technology for competitive advantage.

In total the re-engineered environment is estimated to generate $75 - 85 Million in annual benefits, will cost nearly $117 Million to implement over the next four years and will require annual support costs in the order of $17 - 20 Million annually.

Clearly, TRUCKCO CL&S is at a crossroads where significant investment is required to attain the 'To-Be' Vision and position TRUCKCO to be the premier transportation company in the 2000's.

The Vision includes improving customer focus and the quality of the services delivered to our customers and the marketplace in order to generate and sustain profitable revenue growth.

In order to achieve this objective it is imperative that we create the necessary infrastructure (technology and organization) to harvest the proposed benefits in 2005 and beyond. This implies technology advancement and increasing the level of automation over and above the current environment benchmarks.

Towards this end, the Integrated Business Case for re-engineering accomplishes the objective of fast implementation and payback, and provides significant initiatives for each Process Owner. It is the best balance between reducing TRUCKIT's cost structure and enhancing revenue opportunities.

MAINTENANCE AND SERVICING

RE-ENGINEERING BUSINESS CASE

Value-added customer and vehicle services are provided at approximately 900 TRUCKCO locations. There is virtually no automation involved in the delivery of these services. This situation makes it difficult to compete in a market that demands high quality service at low costs. Manual, paper-intensive processes severely limit TRUCKIT's ability to provide world class ser­vices at competitive prices. Without automation and ensuing changes to business processes, it will be difficult to significantly increase the current 86.7 Customer Satisfaction Index for Maintenance Services.

SOLUTIONS AND BENEFITS

Management requested and received Board approval for the rollout of the Shop Management System - Automated Shop Floor and Hand-Held Data Capture System to all 900 Commercial Leasing & Services maintenance locations. Implementation of the automated maintenance envi­ronment will integrate automated vehicle maintenance scheduling, pro-active parts inventory man­agement, computer assisted diagnostics, on-line vehicle maintenance history and automated warranty technology. The Hand-Held Data Capture System uses hand-held computers to automate the collection, storage, and printing of information related to the receipt, disbursement and inventory of products, such as fuel and oil, which are handled by the TRUCKCO fuel island attendant.

Implementation of the Shop Management System and the Hand-Held Data Capture System enable business process changes which are estimated to produce mea­surable performance increases in customer service, quality, and cost reductions. Subsequent to total implementa­tion, it is estimated that a Customer Satisfaction Index of 95 for Maintenance categories is achievable.

The Shop Management System - Automated Shop Floor provides the maintenance capabilities required to maintain TRUCKIT's leadership position in the marketplace relative to the competition. These capabilities are critical to TRUCKIT's core competency in maintenance due to the increasing complexity of vehicle technology. A recent study conducted by External Consultant Peat Marwick, which benchmarked maintenance practices at fourteen companies in the transporta­tion industry, iden­tified the increasing role played by automation. Approximately 21% of the companies sur­veyed had automated planning and scheduling capabilities within the mainte­nance area. Almost 30% of the respondents utilized automated vehicle diagnostics, while the same percent had automated repair order capabilities. Finally, 36% are utilizing automated accounts payable pro­cessing at branch locations.

Primary benefits resulting from the re-engineering of TRUCKIT's maintenance processes include:

• Improvements in customer service and retention due to improved quality and time­liness of     vehicle maintenance and repairs.

• Increases in productivity of shop technicians.
• Reductions in paperwork requirements for technicians, shop and office clerks, and maintenance supervisors.
• Improvements in parts purchasing costs and inventory management     capabilities.

The automated scheduling and inventory applications of the Shop Management System - Automated Shop Floor have been successfully piloted in the Nashville, Grand Rapids, Washington, Chicago, and Atlanta South district locations. The pilots in these districts have resulted in the elimination of both shop and office clerical positions. Additional headcount reductions are anticipated in these districts as all applications of the system are rolled out. While the proposed system is financially justified on a stand-alone basis, it also establishes the nec­essary foundation to enable future re-engineering initiatives in the areas of Sales & Marketing and Finance & Administration business processes.

Automated Scheduling Function - The current manual process of scheduling vehicle maintenance is changed in the re-engineered vision. In the "To-Be" state, the system automatically identifies required maintenance activities for each vehicle, such as preventive maintenance and warranty repairs. Upon identification of a required maintenance task, the task is automatically scheduled and matched to the most quali­fied, available technician. Upon completion of the task, technician hours worked are stored and accumulated in the system, thus eliminating the need for payroll time card processing. In addition, the current repair and purchase order processes are streamlined by eliminating a major­ity of the paperwork as well as manual input and processing require­ments.

By automating the scheduling process, technician productivity will increase due to less unscheduled downtime and better matching of technicians' capabilities with task requirements. In addition, more efficient scheduling will result in a more pro-active preven­tive maintenance process. Finally, the on-line vehicle maintenance history, which will be available to all locations, will lead to increased maintenance service quality and an overall higher level of cus­tomer satisfaction.

Inventory Management Function - This function automatically tracks the inventory in stock at branch locations. Parts are electronically ordered based upon prede­termined reorder quantities and preferred vendors. Better tracking of inventory stock will result in lower overall levels of inventory, fewer inventory write-offs and less time taking physical inventories. By reducing stock-outs of inventory items, less time is spent waiting for parts, and overall usage of substitute vehicles will decline. In addition, parts will automatically be ordered from pre­ferred suppliers when available, which will reduce purchasing costs.

Computer-Assisted Diagnostics - Due to rapid increases in vehicle engine technol­ogy, original equipment manufacturers are equipping new vehicles with electronic control modules containing information that can reduce repair time. The computer-assisted diag­nostics application of the Shop Management System will enable shop technicians to more accurately diagnose vehicle mainte­nance problems by allowing technicians to gain access to critical electronic information already resident in the vehicles. Currently, technicians must largely rely on judgment and trial and error in the vehicle diagnostics process. This results in errors, rework and unnecessary parts purchases. Without enhanced diagnostic capabilities, TRUCKIT's core compe­tency in maintenance services would be threatened due to the in­creasing complexity of electronic engines, emissions controls, and braking systems currently available on highway transportation equipment.

Electronic Manuals & Publications Application - This feature computerizes the large quantity of technical information currently maintained in cumbersome, and often outdated, paper manuals located at each of TRUCKIT's maintenance facilities. The elec­tronic publications portion of the diagnostics program will ultimately allow equipment manufacturers to electronically transfer updated technical information to TRUCKCO which will subsequently be elec­tronically transmitted to TRUCKIT's branch maintenance facilities. As a result, a majority of the manual compilation, printing, and mailing of technical information will be eliminated. In addi­tion, branch locations will have technical information that is more current and easily accessible. The diagnostics application, in conjunction with the electronic documenta­tion application, will allow the technician to step through graphical representations of required vehicle repair procedures.

Automated Warranty Application - TRUCKCO will increase the amount and speed of vehicle warranty reimbursement from original equipment manufacturers and parts vendors through implementation of a simplified warranty process. Currently, TRUCKCO relies on technicians to identify parts that are under warranty and conse­quently, the company is not reimbursed for a significant number of warranty repairs. By automating and streamlining the warranty process, the technician will automatically be prompted for potential warranty repairs and the vendor will be billed directly for the repair and parts, eliminating the labor and processing delays present in the current manual process. It is estimated that the current warranty reimbursement cycle time can be reduced by seven weeks.

Integration With Hand-Held Computer - As part of a comprehensive and integrated maintenance process, the Shop Management System - Automated Shop Floor will be linked to the Hand-Held Data Capture System. Hand-Held computers will be used to collect vehicle and other information during the yard check, in-servicing and preventive maintenance processes. Problems identified during these processes will be transmitted to the automated scheduling application and integrated with all other maintenance work to be performed.

Hand-Held Data Capture System - The Hand-Held Data Capture System uses hand-held computers to automate the collection, storage, and printing of information related to the receipt, disbursement and inventory of fuel and oil at the TRUCKCO service island. A pilot of this auto­mated fuel application has been running successfully in the Louisville district as well as the Holt branch of the Grand Rapids district since March 1993.

Currently, TRUCKCO provides approximately 7.5 million fueling transactions per year at a total of 655 locations. All fuel activity is manually recorded on fuel tickets and paper logs by the fuel island attendant. These logs are then bundled and sent to the district administration office, where they are keyed into the Field Information System ("FIS"). On average, three business days elapse between fuelings and the entry of the related data into FIS. Also, the fueling transactions are not vali­dated until entered. Due to the manual activity required and delay in valida­tion, the cur­rent method of processing is time-consuming and error-prone. By capturing fuel­ing data at the point of service, labor expenses related to manual input and reconciliations are elimi­nated. Additionally, the resulting reduction in billing errors leads to reduced write-offs for unmatched or non-billable fuel tickets. Finally, the enhanced capabilities for collection and reporting of fuel usage information allow for easier and improved compliance with EPA regulations.

Pilot implementations have shown that the automated fuel application improves the timeliness of fuel data processing and eliminates the errors inherent in the current manual environment. The Louisville district pilot resulted in the elimination of the district's fuel clerk as well as an improvement in fuel billing accuracy as evi­denced by a reduction in the number of fuel credit memos written. Customer response to the new technology has been very favoourable.

In addition to providing a system for fuel data collection, the proposed system also includes a yard check application. This application gives the shop leadman a tool for quickly and accurately collecting vehicle inspection data. As the leadman performs the daily yard check, the hand-held computer is used to log inspection data. When used in conjunction with the Shop Management System - Automated Shop Floor, the yard check application will ensure that all required main­tenance tasks identified during yard checks are captured quickly, scheduled with other repair work and tracked until completed.

TIMING

The Shop Management System - Automated Shop Floor will be rolled out beginning in March 2004 with a targeted completion date of June 2005. The implementation schedule includes all Commercial Leasing & Services district locations throughout the country. The rollout will include different hardware configurations to be installed based upon each location's business requirements. Large shops will be equipped with three workstations, one to be used by the technicians in the bay, one for the leadman at the service desk, and one for the parts clerk. Small shops will be equipped with two workstations, one to be used by the technicians in the bay and the other to be shared by the leadman and the parts clerk.

Nationwide rollout of the Hand-Held Data Capture System will begin in March 2004, with a targeted completion date of October 2004. This requires rollout of hand-held computers to all fuel islands. Yard check, new truck quality measurements and EPA reporting are other appli­cations that will be included with the hand-held computer. The Hand-Held computers will also form the basis for automating the collection of additional data in future applications such as physical inventory of parts and rental check-in. However, the implementation of these addi­tional applications are not included in this initial re-engineering effort.

SHOP MANAGEMENT SYSTEM - AUTOMATED SHOP FLOOR

INVESTMENT
($000)	Capital Expenditures:
	PCs, Terminals, & Accessories		11,547
	S/400 and Storage Upgrades		3,446
	Communications Hardware		2,029
	AS/400 Operating System Upgrades		425
	PC Software		189
	Hand-Held Computers		112
	Warranty Hardware		65
	Outsourced Development		700
	Total Capital Expenditures		18,513
	Non-Recurring Expenses:		,
	Software Development - Shop Enhancements		1,609
	Implementation and Training		3,831
	Severance/Out Placement		1,642
	Installation		788
	Development - Warranty		555
	Total Non-Recurring Expenses	$	8,425
	Annual Operating Expenses:
	Telecom Communications Support		3,822
	Equipment Maintenance (after warranty period)		2,383
	Computer Systems and Support		545
	Total Annual Operating Expenses	$	6,750
QUANTITATIVE
JUSTIFICATION:
($000)	Annual Profitability Impact:

		2001	2002	2002	2003	2004	2005	2006
	NBT	(543)	(4,666)	4,613	18,529	20,924	22,072	23,397
	NAT	(332)	(2,855)	2,822	11,336	12,801	13,504	14,314

	Economic Evaluation
	Net Present Value of Cash Flows @ 7.5%		$38,776
	Internal Rate of Return		61.7%
	Payback Period (Discounted Cash Flow)		2.5 yrs
	Project ROE		499.3%
	*Excludes any benefits resulting from improvementsin customer retention.

HAND-HELD DATA CAPTURE SYSTEM

INVESTMENT:
($000)	Capital Expenditures:
	Hand-Held Computers	$	2,436
	Three Year Warranty		3,446
	Printers		388
	Memory Buttons		478
	Communication Hardware & Software		458
	New Truck Quality Analyst Systems		497
	Total Capital Expenditures		10
	Total Capital Expenditures	$	4,267
	Non-Recurring Expenses:
	Preparation/Installation/Severance		915
	Development		413
	Total Non-Recurring Expenses	$	1,328
	Annual Operating Expenses:
	Equipment Maintenance - Printers		129
	Telecommunications and Support		92
	Computer Systems and Support		67
	Total Annual Operating Expenses	$	288
QUANTITATIVE JUSTIFICATION:
($000)	Annual Profitability Impact:

		2003	2004	2005	2006	2007	2008	2009
	NBT	(207)	(551)	234	1,836	2,267	3,168	3,619
	NAT	(126)	(337)	143	1,123	1,387	1,938	2,214

	Economic Evaluation:
	Net Present Value of Cash Flow @ 7.5%		$5,162
	Internal Rate of Return		44.5%
	Payback Period (Discounted Cash Flow)		3 yrs
	Project ROE		412.1%

SALES AND MARKETING

RE-ENGINEERING PLAN

The proposed Sales & Marketing changes will provide the sales force with the tools and cus­tomer/market focused information to increase market awareness, customer service, productivity and professionalism-- leading to increased revenue and reduced costs. Initiatives include a laptop PC for each salesperson; a set of PC-based tools for sales, prospecting and account management; an automated Vehicle Purchasing system; centralized customer and vehicle databases; access to a single customer numbering system; and a Market Information and Planning system.

SOLUTIONS AND BENEFITS

Currently, we fall short of meeting our customers' requirements and expectations. Over the last three years, TRUCKCO has experienced an increasing rate of lost business, with an annual aver­age of $130 Million. Customers view TRUCKCO as "Hard to do Business With." They do not receive timely and accurate account information upon request, and those with multi-location accounts endure inconsistent treatment and inefficient handling. In addition, current Sales & Marketing processes are supported by systems which are difficult to use, cumbersome, not integrated, and require extensive manual effort. System deficiencies exacerbate existing prob­lems of redundant data collection/storage, duplication of effort, inconsistent service, and unclear communication across districts.

Sales Force Automation - Creates increased selling and account management time (an expected 23% increase) by reducing the time spent in administrative and other tasks. Currently, a small portion of the sales force effectively uses PC versions of the Automated Cost Sheet, Fleet Cost Analyst, and Proposal Preparation System (Lease Preparation System to be developed). Although a significant part of the sales force has access to PC laptops, sales automation efforts are fragmented and inconsistent across districts. Without centralized sup­port for this effort and standardization of "best practices", the individual districts waste sub­stantial effort and money developing their own tools. The Sales & Marketing initiatives pro­vide an easy to use graphics interface for these tools, integrate them and ensure that each sales­person has access to a laptop PC.

Account Management/Sales Support Tool - System provides a feedback mechanism to track and evaluate the quality of service and effectiveness of the prospecting, sales and account management processes. It also ensures consistent follow-up and responsiveness to meet customer needs and concerns. This is critical since two of the most important Customer Satisfaction Measurements for retaining business are Responsiveness of Account Manager and Meeting Commitments and Follow Through. Each salesperson will be responsible for and measured against established account management criteria-- today such accountability is diffi­cult to maintain. Benchmarking indicates over fifty percent of our competitors already use some form of automation in account management.

Another feature of this tool is a telemarketing system to support the prospecting and qualifying process. Currently, our salespeople spend non-value added time calling on "bad" leads. Through the telemarketing system, leads will be pre-qualified and classified according to their ability and need to purchase the services we provide. This will greatly enhance pro­ductivity by allowing our salespeople to focus their efforts on the "good" leads. In addition, through telemarketing, important information will be collected on a lead prior to a sales visit. Salespeople will be better informed and prepared on an initial sales call, thus requiring fewer visits to make a sale. The Account Management/Sales Support Tool/Prospecting system will also track and ensure that individual leads are followed to resolution. Tracking the source of leads will allow management to evaluate the effectiveness of our marketing efforts, including advertising and telemarketing, as well as the effectiveness of the sales force in con­verting leads to sales.

Vehicle Purchasing - Automated system replaces the current cumbersome and inefficient process. Customer dissatisfaction exists in Vehicle Delivery Cycle Time, as measured by the CSM rating. With the new system, all local and national salespeople can order equipment directly from the vendor through electronic links and provide customers with up-to-date status information on vehicle production. We expect to reduce the vehicle acquisition cycle by 30 days-- a 27% improvement in performance. The system also provides a vehicle specification tool to reduce rework caused by specification errors, which can delay significantly vehicle delivery. We project to eliminate SPO specing errors and reduce non-SPO specing errors by 80%. The graphic display allows customers to "view" in advance the vehicle they will be pur­chasing, an option already successfully provided by some of our competitors.

Simplified Asset Management - System ("SAM") replaces and significantly enhances the Asset Inventory Management System ("AIM"). It also introduces the initial infrastructure required for the Re-Engineering "To-Be" Vision. SAM provides all users with the capability to have easy access to critical data on a timely and reliable basis through a centralized vehicle database. This enhances TRUCKIT's ability to manage its fleet, improve rental margins and reduce surplus vehicles-- resulting in a substantial financial return. SAM also enhances customer ser­vice by locating vehicles to meet customer demand and providing account managers with easy access to detailed performance and financial data per customer vehicle.

Unique Customer Number - Initiative replaces our archaic system of multiple number assignments per customer. Currently, information about a single customer can reside in as many as ten different database locations, depending on how many customer numbers exist. Without a single customer number, National customers who visit a local district for service may not receive the terms and conditions already negotiated on a national basis. Customers who do business at multiple locations or with multiple lines of business may be treated as new customers each time. Consequently, TRUCKCO collects redundant customer information and loses access to valuable existing information, such as credit history. This outdated system con­tributes added credit risk to TRUCKCO by allowing customers to reach their credit limit at multiple locations. The current numbering structure was developed to satisfy internal billing and accounting needs and does not support Sales and Marketing account management needs.

Marketing Information and Planning - System resolves serious problems with the current marketing process. Each salesperson will be assigned a territory and held accountable to its market potential. Fragmented marketing efforts/information and inability to share market information over multiple business units lead to duplication of effort. Information comes from headquarters manually in a difficult to use format by the field. The proposed system provides a central data source for market and competitor information. Prior to making a sales call, a salesperson can research the prospective customer's industry and identify possible competitors-- thereby creating a well-informed and professional image. It also includes capabilities for market potential modeling and sales territory planning/analysis. These features give sales man­agers an easy to use method for segmenting the market and developing an effective market plan.

Other Sales and Marketing initiatives include systems to streamline support functions such as Qualifying, Safety and Insurance. These initiatives serve to further enhance customer service, productivity, effectiveness and achievement of the overall Re-Engineering vision.

In addition to substantial customer service benefits, the proposed total Sales & Marketing Re-engineering initiatives generate increased revenues and reduce the cost of doing business. Increases in productivity, sales effectiveness and customer retention provide $54 Million in added revenue annually, or approximately $13.5 Million NBT contribution annually (assuming 25% NBT contribution). Reductions in capital expenditures, purchasing cycle, and interest expense provide another $19.3 Million NBT contribution annually in cost avoidance.

TIMING

The re-engineered Sales and Marketing Environment is heavily dependent on additional tech­nology infrastructure that must be in place before our initiatives can be implemented. Incurring the full cost of the necessary infrastructure in 2004 is prohibitive and has forced us to limit our 2004 implementation plans. The proposed scenario allows for some initiatives in 2004: Account Management System/Sales Support Tool/Prospecting System, Vehicle Purchasing, Simplified Asset Management and Unique Customer Number. Although their overall impact will be substantially limited next year, they will demonstrate their benefits in two of our eight regions. We feel this is the best scenario to optimize our 2004 investment dollars. The remaining Sales and Marketing initiatives follow in 2005 and beyond when the re-engineering program will become self-funding.

Finance and Administration

Goals of Re-engineering

As a result of our efforts over the last several months, the Finance and Administration re-engineering project team has developed several goals and objectives that will provide significant benefits to the CL&S organization. These goals and objectives are to:

• Enhance customer focus and satisfaction
• Minimize the cost of administration
• Provide high quality reporting     and organizational flexibility

Enhance Customer Focus

Currently, each of TRUCKIT's 76 districts is burdened with the financial and administrative processing of multiple branches. As a result, the attention of district personnel is diffused and occupied with transaction processing rather than focused on the customer. This is especially true at month end when most CL&S district personnel are enmeshed in the task of recording the many financial transactions that affect the company's financial statements. In addition, TRUCKIT's current billing systems require manual workarounds to support the billing process. As a result of these manual workarounds, customers sometimes receive erroneous bills. This condition has been a cause for concern within TRUCKIT, as it is a recognized source of customer dissatisfaction. Our goal in re-engineering is to reduce these billing errors and to alleviate the administrative workload required of district personnel so that they (the district personnel) will have more time to devote to the customer.

Minimize the Cost of Finance and Administration Processing

Currently, significant effort is required throughout the TRUCKCO organization to capture and record the many financial transactions required for billing, accounts receivable, accounts payable, and financial and management reporting. Many of the processes required to record these transactions are manual, paper intensive and prone to error.

Our benchmarking analysis reinforced that CL&S' finance costs are much higher than those of other companies. Specifically, CL&S finance costs as a percent of revenue are approximately two percent higher than the mean for a group of Fortune 100 companies benchmarked, and three percent higher than 'best in class' companies. Potential cost savings of 42 to 63 million dollars could be achieved were CL&S to move closer to the mean or 'best in class' practices.

Provide High Quality Reporting and Operational Flexibility

Currently, TRUCKIT's financial/management reporting is very static and inflexible, as most financial reports are produced but once a month. In addition, the current environment lacks operational flexibility; significant time, effort and money are required to consolidate districts, split districts, and transfer branches from one district to another. As a result, CL&S is limited in its ability to respond to changing market conditions by dynamically expanding or contracting the number of districts it requires to properly manage and control its business. Our goal in re-engineering is to correct these deficiencies.

Current Environment

There are several attributes associated with the current environment that need to be addressed to achieve TRUCKIT's stated goals and objectives.

Decentralized Processing

Several recently published benchmarking studies have indicated that organizations that perform finance and administration processes in a decentralized environment incur significantly higher costs than those that perform these processes centrally. These higher costs are caused by the additional personnel, limited span-of-control and variability of work practice associated with a decentralized environment. Within CL&S, the finance and administration processes are highly decentralized, with each of the 76 districts performing finance and administration processing for multiple branches. In addition, our re-engineering studies indicate that the amount of administrative processing time per revenue earning vehicle is more than twice as high in TRUCKIT's least efficient district as compared to its most efficient district.

Inflexible Technology

Currently, each of TRUCKIT's districts requires its own AS/400 application to perform finance and administration processing. If CL&S wants to open a new district, an entire new AS/400 application must be installed. In addition, because TRUCKIT's financial application (i.e., the general ledger) is so old, it is very difficult to change the location database that is required to support TRUCKIT's financial reporting. These inflexibilities in the technology result in a significant level of effort required to open, close and/or merge districts, and to transfer branches from one district to another. This condition in turn leads to TRUCKIT's difficulties in maintaining the operational flexibility required to respond to changing market needs.

Lack of Automation

At this time, many of TRUCKIT's 900 branches are not yet automated. Only 63 branches currently utilize the SHOP system, 13 utilize the new hand held technology at the fuel island, and 410 of the 635 branches that have rental counters utilize the Automated Rental Counter. In addition, only one of TRUCKIT's 76 districts utilizes lockbox processing. As a result, district personnel are required to devote considerable time and effort to manually record, batch, and enter many branch and district financial transactions (e.g., repair orders, rental agreements, fuel transactions, vendor invoices, and cash receipts).

Limited Information Access

TRUCKIT's current general ledger is over 20 years old and was developed at a time when the cost of computer disk storage was extremely high. As a result, the system was designed to maximize the use of disk space by off-loading all detail general ledger transactions to tape each night. Because of this condition, users throughout the TRUCKCO organization have a very difficult, frustrating time retrieving and Analysing the financial transactions that affect their locations. In addition, much of TRUCKIT's key financial information is not available until month end. As a result, districts often cannot know what their financial status will be at month end, unless they maintain and monitor manual logs of certain accounts (e.g., running costs) throughout the month. Naturally, this is unproductive use of time.

Solution and Benefits

There are a number of business process, organizational and technology strategies that should be implemented for Finance and Administration to achieve its goals and objectives. These strategies are not only required to achieve the initial goals, but are also necessary to create a continuous improvement environment.

Branch Automation

As part of the Maintenance and Servicing re-engineering plan, all branches will be automated with the enhanced SHOP and Automated Fuel Island systems. The enhanced SHOP system will include the automatic generation and transmission of vendor invoices to the centralized accounts payable application upon receipt of goods. In addition, all branches that contain rental counters will be automated using TRUCKIT's Automated Rental Counter system. With the implementation of these automated systems, TRUCKIT's need for the extensive and labor intensive paper processing currently required to record financial transactions will be eliminated. The time delay resulting from mailing documents to the districts for processing will also be reduced, facilitating timely access for both district and branch personnel to the financial information that most affects their daily operations. Additionally, branch automation will facilitate more timely and efficient updating of the centralized financial applications (described below), allowing TRUCKCO to more easily monitor its financial position throughout the month.

New Financial Systems

Over the next year, we plan to implement a new suite of highly integrated financial software which will include centralized general ledger, accounts receivable, accounts payable, and fixed assets applications (for non-revenue producing assets). This new software will allow TRUCKCO personnel to make online inquiries into account activity so that they will not have to rummage through piles of paper to retrieve and analyze unusual account activity. The new financial systems will allow drill down to the subledger systems (accounts receivable, accounts payable, fixed assets) from the general ledger, will accommodate multiple organizational rollups and will allow changes to the organizational structure. With the implementation of the new financial systems, TRUCKCO will be equipped with both the information and the flexibility required to recognize and dynamically respond to changing market conditions in the field.

Bank Lockbox/Automated Cash Application

Once the new centralized financial systems (specifically accounts receivable) have been implemented, TRUCKCO can utilize central lockbox processing and automated cash application. In this environment, customers will send their checks to a bank lockbox address. The bank will record the check, customer number, invoice number(s) and check amount. This information will then be electronically transmitted to TRUCKIT's new accounts receivable system, where the cash will be automatically posted to the correct customer/invoice. Only mismatches (e.g., short pays and/or data entry errors) will require manual intervention. (RDL currently employs this process with a relatively high success rate.)

New Billing System

A new billing system will be required to facilitate central billing across multiple districts. The new system will automate many of the manual work-arounds required to support customers with today's systems (e.g., 4-4-5, 13-month billing, any customer-driven billing date different from TRUCKIT's monthly closing cycle, graduated/guaranteed miles, etc.). The system will also include automated mileage estimates for billing periods in which a recent mileage reading is not available. Daily revenue accrual as mileage readings become available throughout the month will also be programmed into the new system to provide more timely information on revenue levels throughout the month.

Consolidation of Finance and Administration Processing

Once all the appropriate technologies have been implemented, TRUCKCO will then have the option to centralize many of the back office functions currently performed at the district. Processes that could be centralized include billing and invoicing, accounts receivable and accounts payable. CL&S would then be able to implement 'best practice' processes, realize greater span-of-control, further reduce headcount and minimize administrative costs.

Role of District Controller

District controller participation and support will be a key factor in the implementation of the re-engineering process changes. As the migration progresses, we anticipate the DC's playing a major role in stabilizing the workforce, providing training and education to operations personnel on new processes, and maintaining a strong internal control environment throughout the change process. Subsequent to the re-engineering changes, we see the DC's role changing with less concentration on staff supervision and administrative processing and a corresponding increase in the amount of time spent on sales support and financial/asset management and analysis, thus more of a business manager role.

Migration Strategy

To accomplish our goals, we have developed an implementation plan which will allow us to develop and implement enabling technologies over the next eighteen months. As the technologies are implemented and the work is streamlined, we will recognize benefits. Upon successful implementation of these technologies, we will re-examine the incremental benefits to be gained from consolidating the finance and administrative processes.

Dependencies

To accomplish our goals, certain activities must be completed. These include the complete implementation of the enhanced SHOP, Automated Fuel Island, and Automated Rental Counter systems at the branches; the ability to access the central financial systems from each of TRUCKIT's 76 districts, a central customer billing rates database, and unique customer numbers for each customer throughout the TRUCKCO organization.

Risks

Certain risks are associated with the implementation of new financial systems and with the consolidation of financial processes into accounting centres. These risks include:

• Short-term negative impact on customers
• Inadequate responsiveness (from he accounting centres) to the field organization
• Slower than anticipated pace of development and implementation of enabling technology
• Inadequate buy-in and     cooperation from the organization
• Loss of quality employees during the migration period

Our planned strategy for mitigating these risks is to develop a controlled and phased roll-out approach for the new systems/processes. To ensure project success, we would utilize a conservative and practical approach to headcount reduction opportunities. Employees necessary to assist in the migration process would be retained through use of special compensation packages (e.g., stay-on bonuses).

Cost/Benefit

Our cost (in thousands) for implementing the re-engineered environment is:

                                     Capital          Expense    Total

Financial Systems    $8,409            1,600        10,009

New Billing System    7,172               950          8,122

Accounting Center

Consolidation              3,714           14,570       18,284

Infrastructure              1,742                534           2,276

    Total                 $    21,037            17,654       38,691

As stated earlier, our ultimate savings could be up to $60 million annually should we attain 'best practice' status. Our initial goal is more conservative: to reduce costs by $15 to $20 million annually by 1996, while creating a continuous improvement environment where additional savings can be realized over time.

TECHNOLOGY INFRASTRUCTURE

RE-ENGINEERING PLAN

TECHNOLOGY INFRASTRUCTURE REQUIREMENTS

The three re-engineering process teams have each identified technology requirements funda­mental to achieving their strategic initiatives. When taken in unison, a picture of a target tech­nology infrastructure begins to take shape. We defined the infrastructure to include the technology components to access data from anywhere in the enterprise in a transparent and seamless fashion, and present it to users as information to make business enhancing decisions. The infrastructure includes information repositories where data is stored, data highways by which users access information, desktop personal computers where information is presented, and software that ties all these elements together.

Several common technology requirements were identified by the re-engineering process teams as an integral part of their vision: global access to enterprise wide data, "real-time" access to data, and powerful presentation mechanisms to transform data into useful information that will impact decision making at all levels.

Global access to enterprise data is required for all re-engineering process teams. The Maintenance and Service team will use it to obtain vehicle history for out-of-district trucks that need servicing. The Sales and Marketing team will use it to access information about multiple location accounts to enhance the service to national customers. The Finance and Administration team will use it to provide access to customer data across districts to perform credit and billing management functions.

Not only do users require access to data anywhere, but they require it within a window of time where it is useful for decision making and meets customer expectations. A technician in a shop must know quickly if new methods are recommended for a repair. Management needs up-to-date vehicle status information to execute asset management strategies across all geographic boundaries. A clerk needs accurate billing and payment information when a customer calls with a question about an invoice. All of these are examples of how real-time access to infor­mation, enabled by technology, translates into value for the customer.

Powerful presentation mechanisms are provided by PC-based graphical user interfaces that have a common "look and feel," and thus become intuitive to the user. The user can then focus on the "value" of the information instead of the process to acquire it. This standardization reduces training costs and productivity lags so that new tools can be introduced and used quickly to take advantage of market opportunities. A technician will use a personal computer and a graphical user interface to quickly diagnose vehicle engines. Sales personnel will use integrated tools to specify a vehicle and produce a legal contract. Finance and Administration personnel will use a graphical user interface to "click" on an account receivable entry and "drill down" to the invoice detail from which the entry originated.

TECHNOLOGY INFRASTRUCTURE BUILDING BLOCKS

Making these requirements a reality poses two major challenges. The first is creating a tech­nology infrastructure that can provide the required "additional" functionality dictated by the process teams. The second is designing the infrastructure so that it will coexist and be inte­grated with TRUCKIT's existing application and technology investments. In addition, the infras­tructure must be flexible to respond quickly and cost effectively to changing business requirements.

The following building blocks satisfy the technology infrastructure requirements:

Shared Database Systems - Provide a "foundation" for all enterprise data so that it can be accessed and manipulated in a consistent fashion throughout the organization. This is a fun­damental element needed to satisfy the business requirement for global data access.

Customer/Server Applications - An applications architecture in which a user's personal com­puter (the Customer) requests a piece of data that exists in some data repository (the server). The data is typically retrieved and delivered to the Customer over a communications network. Personal computer applications can then be used to manipulate the data and present it to the user. Customer/server applications are required to access large blocks of data from one or more data servers and manipulate the data for presentation. For example, the Simplified Asset Management (SAM) application accesses large blocks of vehicle data and then processes the data locally.

Laptop Computers - Performance capabilities are indistinguishable from desktop personal computers while providing the additional benefits of portability. Laptop computers now include communication modems and fax capabilities making "seamless and transparent" infor­mation communication a reality. Laptops allow a mobile sales person to access data via Customer server applications and display the information on a graphical user interface.

Local Area Networks - A mechanism for connecting personal computers within a building and providing shared storage, printing, and file services. Local Area Networks also provide connectivity to high speed networks and other computing environments such as the headquar­ters mainframe and district AS/400s.

High Performance Networks - New technology that will support high speed data transfer between remote locations. This capability will be used to provide global data access in "real-time."

Middleware - Software components that are required to connect "Customers" to a variety of data "servers" in Customer/server applications.

Open Systems - Systems that adhere to industry standards and are therefore able to coexist and inter-operate with other systems. In addition, an infrastructure built upon the "open" con­cept can adopt new technologies relatively easily.

Many of the technology elements are tightly linked and inter-dependent. For example, Customer/server applications are of little value without access to data. Data access requires a com­munications medium (high speed network) and software to find the data being requested and deliver it (middleware) to the Customer. Without a graphical user interface, the user cannot easily manipulate the data or interact with the computer. The dependencies call for building the required infrastructure in phases so that once built for an initial application, other applications can take full advantage of the infrastructure. SAM and Account Management will carry the required Customer/server infrastructure for all other applications.

TECHNOLOGY MIGRATION

The majority of TRUCKIT's computer applications, as they exist today, are designed to work in an IBM mainframe or AS/400 environment. The new technology requirements are a quantum leap forward over the capabilities of the current computing environment. A migration must be made from today's infrastructure to a future infrastructure that can support the new applications. The migration must consider existing applications, as well as new ones, to ensure that all of TRUCKIT's applications and computers operate as one integrated system.

Three major options were considered for migration:

1. Migrate all existing applications to a new infrastructure. For example, eliminate the     AS/400s and rewrite FIS on new computers.
2. Use the existing infrastructure to support as many new applications as possible. Defer all other applications or limit their functionality to fit the existing infrastructure. For exam­ple, implement Automated     Shop; implement new financials, but without a graphical user     interface; and do not implement Account Management.
3. Use new infrastructure only when necessary to achieve the functionality dictated by busi­ness requirements. Implement other applications on the cheaper of the     old or new infras­tructures. For example, implement Automated Shop on old technology because the benefits are identical and the     cost is less.

Option 3 was selected because it has the most favourable cost/benefit characteristics, and intro­duces change at a realistic pace. In addition, the magnitude of the new technology infrastruc­ture is extensive, encompassing over 100 locations and 750 mobile users. The new infrastructure drives approximately $28 million in one-time cost for complete implementation.

The infrastructure implementation will be driven by and coincide with application roll-outs. Several strategies were used to balance benefits against NBT impact. For instance, hand held computers which facilitate the accrual of early benefits are accelerated. Elements of the tech­nology which were relatively inexpensive, but provided value, were phased in quickly, such as the deployment of laptop computers for the field without the expensive software required for Customer/server applications.

INFRASTRUCTURE COMPONENTS

The technology infrastructure is partitioned into four components, one component for each business process team and a fourth for shared technology elements. Maintenance and Servicing applications were developed for and can be supported by the old infrastructure. The ultimate Finance and Administration application infrastructure will be dictated by financial package selection, however, there will be some element of new infrastructure required. Sales and Marketing applications will require all new infrastructure because of their Customer/server requirements. The unallocatable infrastructure costs include headquarters infrastructure, training & support, security & control, electronic software distribution, and electronic mail.

TECHNOLOGY CHALLENGES

Implementing such change is not undertaken without challenges. A major challenge faced by TRUCKCO is identifying and attaining the proper resources and skills required to create the new technology infrastructure required to provide a high level of service to a distributed user community.

The new architecture and migration strategies are based on an "open systems" design that will help mitigate the shortfalls we are experiencing with the current proprietary architecture. An "open" design provides the flexibility required to take advantage of emerging technologies, the scalability to grow with the business, and the adaptability to change with evolving customer requirements. For example, an "open systems" design will permit TRUCKCO to choose the best software packages from the market place regardless of platform. Such flexibility can be crucial in meeting rapidly changing business and customer needs by eliminating development lags.

The cost breakdown for the four infrastructure components is as follows:

Infrastructure Component Cost (in $000s)

                             Capitalized    Expensed    Recurring*

Maintenance & Service    $     5,989                       498                  4,379

Sales & Marketing               10,029                    2,122                   2,991

Finance & Administration       2,381                       557                     413

Unallocated                          6,514                       107                   1,533

    Total    $                         24,914                    3,285                    9,317

*Recurring costs are annualized and do not include depreciation.