Inventory Management

Xerox's efforts to improve inventory management practices drew inspiration from the innovative spare parts management practices of its European operations. Traditionally, technical representatives decided the level of spare parts inventory to be carried; little information was available on the actual usage pattern of the spare parts. Xerox's European operations developed a sophisticated information system to get around this problem. Actual usage, rather than mere withdrawal from the stocking point, was used to determine inventory levels. In the late 1980s, Xerox replicated the system in the US and saved tens of millions of dollars in the process.

The stocking policy followed by Xerox branch managers was to hold fully finished, fully configured products near to the customer. Because of this policy, they carried vast amounts of inventory, some of which was not even sold during a given period. The company changed the above setup by asking branch managers to match the stocking policy to the customer's installation orders, which considerably reduced the inventory holding time. As a result, working capital cycle time was cut by 70% leading to savings of about $200 million.

The process of benchmarking helped Xerox revamp its manufacturing techniques. Each 'family unit' (a manager and his direct subordinates) was encouraged to identify its internal as well as external customers and to meet their needs. For instance, the group that built paper trays identified its external customer as the end user who would load the paper. Its internal customers were the assembly-line workers, who would combine the paper tray with hundreds of other components to assemble the copiers. This process significantly improved the operational efficiency of the work groups.

Marketing

Xerox introduced a Customer Satisfaction Measurement System that integrated customer research and benchmarking activities. The company sent out over 55,000 questionnaires monthly to its customers to measure customer satisfaction and record competitors' performance. It then benchmarked against those competitors that had scored high marks on specific measures of customer satisfaction. Xerox also used the vast amount of information gathered by the system to develop business plans for improving quality and meeting customer needs.

Quality

As a part of its "Leadership Through Quality" program, Xerox reformulated its quality policy. The new policy supplemented the company's benchmarking efforts. Xerox's new quality policy stated, "Xerox is a quality company. Quality is the basic principle for Xerox. Quality means providing our external and internal customers with the innovative products and services that duly satisfy their requirements. Quality improvement is the job of every Xerox employee". Following this, the company embarked on a complete organizational restructuring exercise that focused on research and development, employee involvement and customer orientation.

Xerox also formed a transition team consisting of 24 senior managers and consultants from McKinsey & Co to help make Total Quality Management (TQM) a part of its organizational culture. The transition team took action at two levels. Firstly, it conveyed the message clearly to the world that Xerox was pursuing more widespread use of TQM, and secondly, it identified and addressed the obstacles that were likely to slow down the spread of TQM. These ranged from the corporation's function-dominated matrix structure to the need for new training programs. Consequently, the transition team also replaced the existing complex matrix by three Strategic Business Units (SBUs) - Enterprise Service Business, Office Copiers and Home Copiers. Each of these SBUs was given considerable autonomy in engineering, marketing and pricing.

By the late 1980s, benchmarking had become a day-to-day activity in every division of the company. According to company sources, Xerox's guiding principle was, 'anything anyone can do better, we should aim to do at least equally well." In 1991, Xerox developed Business Excellence Certification (BEC) to integrate benchmarking with the company's overall strategies. This was also done to ensure continuous self-appraisal of the overall quality performance of the company. The key performance factors measured by BEC were management leadership, human resource management, customer focus, quality support and tools, process management and business priorities/results.

These factors, which were further divided into forty sub-factors, had their specific measuring targets. Each unit's self-appraisal was validated by representatives from sister divisions. BEC helped Xerox determine the causes for the success or failure of a specific quality process and identify the key success factors or obstacles for achieving a specific quality goal. It also helped the company establish key functions for removing obstacles that prevented it from reaching the set quality goals.

By the mid-1990s, benchmarking was extended to over 240 key areas of product, service and business performance at Xerox. The initiatives were also adopted, at varying levels, at Xerox units across the world. The benchmarking process encouraged Xerox's employees to learn from every situation. This new philosophy was dubbed 'steal shamelessly,' though the company used only those ideas that the best practice companies willingly gave away. The salient rule at Xerox for benchmarking was to 'ask no question of another firm that you would be unwilling to answer about your own.' This change in attitude was just the beginning of the payoffs of the benchmarking moves.

Date: 2016-03-03; view: 781