ArchiMetal Transformation Challenges

ArchiMetal is a mid-sized European company that produces steel products used in building construction and other industries, such as beams, wire, and pipes. The company has recently developed the capability to produce high-quality flat steel products and plans to sell them to manufacturers of automotive parts. To succeed in this highly competitive market, ArchiMetal needs to improve its CRM capability and develop new customer services. To this end, company leaders have launched a business transformation program to improve overall business performance by changing the way ArchiMetal interacts with its customers.

To be competitive in the automotive supply market, ArchiMetal needs to reduce the time it takes to fulfill orders and, in general, to increase the quality, efficiency, and flexibility of its order-handling activities. ArchiMetal has lost customers because it took longer than promised to fulfill their orders, and did not keep them up to date about the status of their orders. Customers are increasingly complaining about the quality of ArchiMetal’s services, and have been downgrading the company in customer satisfaction surveys conducted regularly by industry analysts.

ArchiMetal management intends to reverse this trend and retain all existing, win back former, and acquire new customers. Therefore, the transformation program must improve sales and order fulfillment to reduce the time it takes to fulfill orders, consistently deliver on the date promised, and immediately warn customers of any circumstances that could delay their orders. The program must also improve customer satisfaction and launch new services that delight customers.

ArchiMetal has one Production Center (PC) and several Distribution Centers (DCs) as shown in Figure 1. However, a real-life manufacturing enterprise, complex enough to require ERP and MES, would likely have multiple PCs. ArchiMetal’s fictional operating model allows autonomous DCs in Spain, Belgium, and Romania to focus on customer needs while concentrating manufacturing at its PC in Poland. DC Benelux in Belgium and DC Spain serve the company’s construction sector customers, while DC East Europe in Romania covers other sectors, located mainly in eastern and southeastern Europe. The ArchiMetal Headquarters (HQ) in Luxembourg houses top management, as well as the Finance, Quality Management, Product Development, and Human Resources (HR) departments.

The Finance department defines policies and procedures and rules that the DCs must follow when they set prices and assess the credit risk associated with individual customers.

Figure 1: ArchiMetal Business Units include its Headquarters (HQ), Production Center (PC), and a Network of Distribution Centers (DCs) Responsible for Sales and Customer Service

The Customer Relations function in each DC assesses credit risk, works with sales representatives to negotiate contracts, leads responses to customer complaints, ensures collection of accounts payable, and manages customer master data. The sales function is responsible for sales activities, including handling customer orders from their registration in the system until the invoicing, which is the responsibility of the Finance function. The Distribution function is in charge of transporting the finished goods to the customer.

The PC procures raw materials and uses them to manufacture products, which it stores in warehouses and distributes to DCs. The PC Sales function forecasts sales, takes consolidated orders from DCs, and shares them with the Manufacturing and Logistics functions. The PC Procurement function selects suppliers and negotiates contracts with them. The function also forecasts demand for raw materials, orders them, and manages inventory levels, relying heavily on information from the Sales and Production functions. The Logistics function transports and stores both raw materials and finished goods. The PC Production function plans, executes, and monitors manufacturing, and also plans, designs, constructs, and maintains manufacturing facilities.

The value stream of ArchiMetal is that of any typical manufacturing company. Raw materials are procured, products are manufactured from these, and those products are stored, sold to customers, and distributed there. This value stream is shown in Figure 2. The stages in this value stream are realized by business functions and technology processes, outlined in the next sections.

Figure 2: Value Stream of ArchiMetal

To provide you with some context of the primary processes of ArchiMetal, Figure 3 provides a high-level overview of its production and logistics. Figure 4 provides a more detailed view of the physical production, using the physical elements of the ArchiMate 3.2 Specification. Raw materials are processed, these are turned into liquid iron by a blast furnace, which in turn is cast and rolled to create finished steel products, which are stored in a warehouse. Rail transport is used to move the intermediate and finished products across the plant site, and also for distribution to the customer (not shown in the figure).

Figure 3: Production and Logistics of ArchiMetal

Figure 4 Steel Production

You can also zoom in on the individual facilities, as exhibited in Figure 5. This shows that the computer-controlled Hot strip mill contains a Roll line, which in turn consists of a computer Roll, with Process control software. This shows how you can use the ArchiMate 3.2 language to model the interplay between physical and information technology.

Figure 5: Hot Strip Mill in More Detail

The leaders of the ArchiMetal transformation effort have analyzed the challenges that their program must address: business performance, and customer satisfaction and service quality.^[1] Figure 6 and Figure 7 depict, using ArchiMate Motivation views, the drivers that most concern ArchiMetal management and the assessments regarding those drivers.

ArchiMetal’s business performance suffers from defects in its Business Architecture …

ArchiMetal’s business performance suffers from flaws in its Business Architecture resulting in a disjointed approach to customer service and CRM. These flaws are also reflected in the inadequate architecture of its applications and information. In particular, ArchiMetal’s staff has disparate views of the customer base across various departments. The customer databases and applications of the different DCs do not work together. In addition, the formats of customer master data vary across the company. These two factors make it difficult to maintain consistent and accurate data. This decreases the quality of the customer experience, expends resources for redundant data collection and cleanup, and exposes ArchiMetal to a variety of risks. In several cases, a DC had extended credit to customers who were missing payments on credit already extended by other DCs. In addition to inaccurately assessing customer creditworthiness, DCs have extended credit in violation of policies set by the HQ Finance Department. The HQ Finance Department has had limited control over the credit operations of DCs, intervening only in cases where the DCs themselves have escalated exceptionally high-risk situations.

The PC also suffers from a lack of customer visibility. Its planners cannot observe and assess the pipeline of contacts, leads, opportunities, and deals that ultimately drives demand for manufactured products. This lack of advanced planning often leads to delays in fulfilling customer orders due to unanticipated shortages of raw materials and limited production capacity, and increased costs due to excess of raw materials or expensive purchases on the spot market rather than through planned procurement. From a customer satisfaction perspective, the main pain points are long lead-times to fulfill orders, poor customer service, and lack of flexibility in dealing with orders (i.e., enquiries, changes, etc.). Order management across the DCs to the PC is also problematic. Once each day, DCs aggregate customer orders and then relay them to the PC. These aggregate orders do not include any information on the customers that have placed the original orders. Therefore, individual customer orders are not visible in PC systems, and customer order data is partially duplicated in different DC and PC order management applications. This lack of complete and timely customer order information further hinders production planning. In addition there is no standard for unique order identification across ArchiMetal, which further complicates order management as well as the tracking and analyzing of customer behavior.

Therefore, ArchiMetal cannot develop accurate customer profiles and engagement journeys. Nor can it make strategic predictions and preparations for future demand. Similarly, it is difficult for ArchiMetal product managers to use the available data to perform product lifecycle management; i.e., to determine whether to alter or retire existing products, or to introduce new ones. This lack of data also inhibits marketing as well as the management of customer relationships to maximize profitable sales and avoid money-losing situations.

Another impact of these various customer information problems is an inferior customer experience relative to that of its competitors. Not only is ArchiMetal losing customers, but its reputation has suffered to the point that it must often discount its prices more deeply than its competitors to win new or repeat orders.

Figure 6 and Figure 7 depict, using ArchiMate Motivation views, the drivers that most concern ArchiMetal management and the assessments regarding those drivers.

Figure 6: ArchiMate Motivation View Describing the Overall Challenges Facing ArchiMetal

Figure 7: ArchiMate Motivation View Describing the Customer Satisfaction and Service Quality Challenges Facing ArchiMetal