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Business
Realising enhanced value due to network redesign
business network redesign
through extended ERP systems
171
Case study of HLLNet
M.P. Jaiswal and Anjali Kaushik
Management Development Institute, Gurgaon, India
Abstract
Purpose – To examine and measure the effectiveness of enterprise systems at business network
level. The paper presents the best practice case highlighting how business network systems (BNS) can
be redesigned using enterprise systems to strengthen relationships with business partners and to
enhance value to consumers.
Design/methodology/approach – The paper examines the business potential of BNS redesign at
the relationship level through a case study of one of the largest fast-moving consumer goods (FMCG)
networks, HLLNet.
Findings – HLLNet has uniquely extended its ERP system to establish transactional and
relationship-oriented BNS and has achieved significant improvement in business performance for all
partners in the network. It has achieved significant reductions in inventory, improvements in cash
management and a negative working capital due to improved information flows across the network
and the implementation of policies such as vendor-managed inventory (VMI). Simultaneously it has
improved its telecoms infrastructure and redesigned its inter-organizational processes to support these
information flows. This paper examines how the adoption of enterprise systems across the network,
along with a redesign of BNS, can improve and contribute significantly to value to end consumers.
Originality/value – The findings are quite useful to enterprises in terms of deploying enterprise
systems across their value chain. They need not only to re-engineer business processes, but also to
innovate new business policies while deploying enterprise systems in order to create value out of IT
investment.
Keywords Manufacturing resource planning, Supply chain management, Consumer goods, India
Paper type Case study
Introduction
The emergence of information and communication technology (ICT) is not only
reshaping business models but is also intensely interlining enterprises across their
internal and external value chains. In other words, business enterprises are in the
process of major transformation in order to meet the challenges of the network
economy (Porter and Millar, 1985; Rayport and Sviokla, 1995). It has been well
established that as the number of nodes in the network increases arithmetically, the
value of the network increases exponentially (Kelly, 1998; Shapiro and Varian, 1999). In
the past, much of thinking about and research on IT applications has focused on how
individual companies can manage their information system assets. However, extensive Business Process Management
work is now being done to develop inter-organizational information system (IOS) links Journal
Vol. 11 No. 2, 2005
between companies and their customers and suppliers. Through an information pp. 171-184
q Emerald Group Publishing Limited
partnership, diverse companies can offer novel incentives and services or participate in 1463-7154
joint business development programs (Konsynski and McFarlan, 1990). IOSs are DOI 10.1108/14637150510591165

2. BPMJ systems based on ICT linking different organizations to facilitate the exchange of
products and services. IOSs can create economic value as well as being used as
11,2 strategic weapons in industrial competition (Bakos, 1991). The role of ICT is redefined
as a fundamental enabler in creating and maintaining a flexible business network of
inter-organizational arrangements – joint ventures, alliances and partnerships,
long-term contracts, technology licensing, and marketing agreements (Venkatraman,
172 1994). A business network is defined as a structure of interdependent relationships
between the activities of a given firm and those of other firms in its competitive
environment that influence each other’s strategies (Kambil and Short, 1994).
Competitive success, to a large extent, now depends on how well the entire business
network delivers value to its ultimate consumers, relative to its competing business
networks (Christiaanse and Kumar, 2000).
Business network systems are backpack inter-organizational information systems
with the potential of data sharing, forecasting and transaction processing capabilities.
Traditionally EDI has been used to enhance business networking, and now extended
enterprise resource planning (ERP) systems, supply chain management systems,
customer relationship management systems (CRM) and e-business portals are being
used to establish BNSs (Alt and Fleisch, 2001). BNSs are usually closely linked to ERP
systems, are owned and managed by a focal company and perform more complex
transactions than classical inter-organizational information systems. Their
development path starts with internal integration via ERP systems. However, it
invariably involves more than one organisational unit and often integrates business
partners such as customers, suppliers, and service providers with a company’s
information infrastructure (Alt and Fleisch, 2001). A BNS is further defined as a system
supporting the relationships between multiple organizational units that can be either
internal or external. BNSs have been described as transaction-oriented and
knowledge-oriented (Venkatraman, 1994; Alt and Fleisch, 2001). However, they may
be classified into three categories (Table I):
(1) transaction-oriented;
(2) relationship-oriented; and
(3) knowledge-oriented.
Scope of business
exchange amongst
BNS types partners in the network Enterprise systems Business impact
Transaction-oriented Exchange of structured Extended ERP, EDI, Enhancing coordination
BNS data on transactions supply chain amongst business
management partners in the network
Relationship-oriented Exchange and sharing Customer relationship Enhancing collaboration
BNS of enterprise resources management and amongst business
and analytical data partner relationship partners in the network
management
Knowledge-oriented Exchange of Knowledge management Enhancing knowledge
BNS unstructured data on systems management amongst
business intelligence the business partners in
Table I. and sharing of expertise the network
BNS classification and skills

3. Transaction-oriented BNSs Business
Transaction-oriented BNSs are concerned with the exchange of structured data on network redesign
transactions such as purchase orders, sales orders, invoices, billing, delivery schedules,
payments, etc., among business partners, resulting in improved administrative and
operational efficiency in the network (Venkatraman, 1994; Alt and Fleisch, 2001).
Enterprise resource planning (ERP) systems are fast emerging as the information
systems backbone of organizations across the globe (Nah et al., 2001). ERP systems 173
promise benefits that range from increased efficiency to the transformation of quality,
productivity, and profitability. However, their implementation poses some unexpected
organizational challenges and changes that can be structural as well as cultural in
nature. ERP helps to establish world-class best business practices and brings
transparency to an organization, but also demands empowerment and flexibility in the
decision-making process (Davenport, 1998). Norris et al. (2000) state that an ERP
system can easily be enhanced as a business network system by combining it with web
technology using standards such as XML. The most promising argument is that to
thrive in the e-commerce world, companies need to transform their internal business
processes with the deployment of ERP systems (Norris et al., 2000). Slooten and Yap
(1999) define ERP as an integrated, multi-dimensional system for all functions based on
a business model for planning, control, and global resource optimization of the entire
supply chain by using state of the art IS/IT technology that supplies value-added
services to all internal and external parties. Buxman and Konig (2000) elaborate that
ERP can be extended as an inter-organizational system across supply chain
management. Baxter’s business network for managing hospital supply in the USA,
TradeNet in Singapore and SABRE in the airline industry are some of the best known
transaction-oriented business network systems (Short and Venkatraman, 1992; Teo
et al., 1997; Hopper, 1990).
Relationship-oriented BNSs
A relationship-oriented BNS is an ICT-enabled business strategy to select and manage
business partners to optimise long-term value to an enterprise. It means picking the
right partners, working with them to help them be successful in dealing with mutual
customers and ensuring that partners and the ultimate end-customers are satisfied and
successful. Relationship-oriented BNS enables companies to make better collaborative
efforts with partners by way of sharing business processes and resources. Previously,
to increase sales, most companies focused on optimizing the efforts of their direct sales
forces, primarily through customer relationship management (CRM) and sales force
automation (SFA) applications. With the advent of the internet, communications
opportunities expanded and became cost-effective. As a result, companies started to
communicate outside their organizations and are now directing more of their efforts
toward managing their indirect sales relationships as well. A large number of
companies such as Unilever, P&G, Nestle, Pepsi, IBM, etc., conduct their business with
indirect sales channels to serve their customers.
Knowledge-oriented BNSs
Knowledge oriented BNSs focus on the exchange of expertise such as product design,
R&D, market research, etc., within the business network through ICT. In contrast to
structured documents and transactional data exchanged in transactional BNSs,

4. BPMJ knowledge-oriented BNSs are capable of exchanging unstructured documents and
11,2 analytical business intelligence data within a network that cuts across physical,
organizational, and geographical boundaries (Venkatraman, 1994).
Knowledge-oriented BNSs are still an evolving concept and not many examples
exist in practice. However, community service models through knowledge portals such
as www.mySAP.com provide a platform for the exchange of knowledge and expertise
174 among SAP users and consultants.
The objective of this paper is to analyse the needs of business network redesign in
order to achieve enhanced business value while implementing a BNS in a large
business network such as HLL. The concepts of business network redesign and
business process re-engineering are largely the same, except that the former
encompasses changes in business policy and relationships in addition to changes in
business processes.
Research methodology
BNS is a new concept and not much work has so far been done on this. In such situation
case study research method is often employed (Eisenhardt, 1989; Lee, 1989; Benbasat
et al., 1987). We intend to examine the BNS potential of enterprise systems using a case
study research methodology. We have selected HLLNet for the study mainly due to its
size and uniqueness in terms of having established transaction-oriented as well as
relationship-oriented BNSs. In this study the first set of data about the case company’s
structure and business performance was collected from its published documents and
web site (www.hll.com). The second set of data about its ERP and BNS initiative was
collected through interviews and discussions with its CIO and senior executives from
its finance, marketing and operation functions. The third set of data on the post-ERP
scenario was collected from various published documents and industry analysis
reports (see www.indiainfoline.com).
A case study of HLLNet
HLL, a 51.6 percent subsidiary of Unilever, is the largest fast-moving consumer goods
(FMCG) company in India, with a turnover of US$23 billion. The company’s business
ranges from personal and household care products to foods, beverages, specialty
chemicals and animal feeds. The company has a dominant market share in most
categories that it operates in, such as toilet soaps, detergents, skin care, hair care, color
cosmetics, etc. It is also the leading player in food products such as branded packaged
tea, coffee, ice cream, and other culinary products. The fast-moving consumer goods
business requires strong brand equity and a wide distribution network. Brand equities
are built over a period of time by technological innovations, consistent high quality,
and aggressive advertising and marketing. Availability near the consumer through a
wide distribution network is another crucial success factor, as products are of small
value and are frequently purchased items. HLL is the market leader in the detergent
and soap industry. HLL has about 130 brands and over 1,200 SKUs in its portfolio, over
1,000 suppliers and 7,000 stockists filling up shelves in over one million retail outlets.
HLL has 100 factories, 13 sales branches and 121 warehouse depots, along with 93
third-party manufacturing sites, all of which provide HLL with data that is used in the
company’s planning systems. The existing supply chain of HLL is shown in Figure 1.

5. Business
network redesign
175
Figure 1.
The existing distribution
network
Presently, HLL has 23 central offices, two research centers and other locations. It has
five tea-buying units and two of its major offices are in Mumbai and Bangalore. Procter
& Gamble, despite being the global leader in this segment, has been unable to achieve a
critical mass in India. In the oral care segment, HLL has emerged as a strong no. 2
player, giving stiff competition to the market leader Colgate. In the skin care market,
where several leading global players have entered, HLL has strengthened its position
with the acquisition of the Ponds’ and Lakme brands. It has also been launching
international cosmetics and perfumes in the domestic market. Tata Tea in packed tea
and Nestle in coffee and culinary products are its main competitors in the foods
business. Nirma and AMUL have eaten away its major market share in the detergent
and ice cream segments, respectively.
FMCG is a low-technology market and product differentiation is not easy. Imitators
move swiftly to negate any product advantage. Association with the parent company
Unilever helps HLL in launching new products through technological innovation. For a
company like HLL the challenge is obviously to manage the differing supply chain
needs of its often vastly different businesses. It needs to have strong distribution
channels to achieve a high level of penetration. On the other hand, there are many
manufacturing compulsions: while some products can be manufactured daily, others
like detergents are only be manufactured periodically because of bulk processing
requirements. In the case of HLL, increases in the prices of raw materials (oil, soda ash,
LAB, etc.) cannot be immediately passed on, due to the branded nature of the products.
On the other hand, savings from falls in the prices of raw materials can be retained.
Traditionally, HLL used to plan its production and distribution based on feedback
from C&F agents. C&F agents used to plan distribution based on demand raised by
stockists. C&F agents as well as stockists were given 60-90 days credit for the goods
stocked by them. With a time lag, they ended up pushing stock until they realized that
they were dumping. HLL’s supply chain had chronic inventory problems. In 1995,
HLL’s net current assets as a percentage of capital employed was 44 percent, and
inventory was 20 percent of divisional turnover for detergent and 24 percent of
divisional turnover for personal products[1].

6. BPMJ Business-driven enterprise systems at HLL
11,2 Most business enterprises in developing countries such as India are in the process of
implementing enterprise systems, particularly ERP, in alignment with organizational
transformation and process re-engineering initiatives. A very few of these enterprises
have been able to use the BNS capability of its ERP information systems. HLLNet is a
unique case of how far an ERP package can help in optimizing the resource across the
176 supply chain of an organization. In case of HLL, the selection and implementation of
ERP systems itself was driven by the strategic requirements of integrating the supply
chain with the clean-slate re-engineering approach. HLL was amongst the pioneers in
realizing the importance of optimizing its entire supply chain functions along with
functions internal to the organization. Based on the categorization of ERP products on
BNS capability, HLL selected MFG/PRO from QAD. MFG/PRO belongs to the low-end
of the market and yet was selected by a top-tier company in India. In case of HLL, the
entire effect of the change in information technology coupled with the changes in the
business processes and policy was transformational and yielded magnificent results
for the company as well for its business network partners.
In 1997, HLL implemented the MFG/PRO ERP package across its 234 sites (100
manufacturing sites, 13 sales branches and 121 warehouse depots). The objective was
to integrate manufacturing, financial and distribution processes to improve working
capital management and reduce channel inventory across its business network. Also, it
standardizes business processes across different business units and establishes BNS.
MFG/PRO was not a market leader in ERP, but was preferred by HLL as the package
has good supply-chain management tools, and hence can provide a BNS capability. It
can be implemented at multiple sites and it easily scales to meet changing business
requirements. It optimizes the enterprise functions by increasing the speed of internal
processes and by synchronizing distributed operations. It is appropriate for continuous
process, batch process, made-to-stock, configure-to-order and repetitive manufacturing
environments. HLL’s vision is “Connect, Attract and Fulfil” on a massive scale. In the
supply chain, for example, the vision is to link in Phase I with some 3,000 stockists,
30,000 retailers and 100 suppliers spread over some 1,000 locations. The size of the
ambition is based on HLL’s unique ability to leverage on scale and technology and
development in its telecoms infrastructure.
Transportation and telecommunications infrastructures are really not up to the
mark in India. This deficiency interferes with the smooth transfer of information and
goods to and from the company’s far-flung manufacturing sites and distribution
centers, all of which tend to be in rural areas, and many of which are owned by third
parties. Without good communication facilities, there is no point in having ERP. So
HLL had to install a VSAT system for reliable communication system. HLL has 128
VSATs installed in this network. A network of manufacturing facilities in remote
corners of India, with little or no communication facilities, forced HLL to look towards
VSATs. Satellite networks provide connections for a wide range of applications such
as databases, ERP, messaging, intranet, voice and video. It also provides intranet
applications like information warehousing, database connectivity, training, etc. VSAT
systems were initially developed to provide cost-effective networking solutions
bypassing terrestrial systems, but they have found greater applications for HLL in
reaching the rural consumer. The company has identified the rural market as a future
growth engine. When the company moves to an online environment, it will derive other

7. benefits like enterprise-wide finite capacity scheduling and online optimization of stock Business
levels, costs and manufacturing schedules. The one drawback with the VSAT system network redesign
is that it supports only batch data transfer (via FTP). The delays on the line can be
significant, up to one and a half seconds per keystroke. This is not acceptable for online
transactions.
ERP extended as a transactional BNS 177
HLL’s e-commerce initiative uses the ERP infrastructure to extend the company
through the web, to its partners, suppliers, vendors, and customers. This system spans
240 supply-chain related sites at HLL to begin with. The system handles order
processing, planning, purchasing, invoicing, and financial tasks throughout the
enterprise. Distribution resource planning (DRP) is accomplished through a
rules-based, finite-availability plan that takes Lever’s many manufacturing and
transportation constraints into account. ERP integrates manufacturing and
distribution operations through the DRP module. Distribution centers give the
demand to the factories. The DRP module helps Lever to compute demand dynamically
based on daily sales orders. Forward sales orders likewise provide the basis for a
dynamic calculation of inventory norms at the company’s regional and local
distribution centers. For the factories, both those owned by Lever and by third parties,
the new system represents a strategic shift. The factories are responsible for
maintaining the stock level at the distribution centers.
The system has helped HLL take its initial steps toward workflow automation of the
supply chain. It handles exceptions involving dispatching, wildly variable truck
capacities, lead-time variances, and changes in both demand and sourcing. Meanwhile,
there are other improvements in supply chain management that have minimized
inventory levels. HLL’s supply chain is off-take driven rather than forecasting driven.
This means that stocks are replenished as soon as they move off the shelves. This is
not to discount forecasting completely, however, because this is essential at the
procurement end of the supply chain, especially when it comes to importing raw
materials like oils.
Transaction-oriented enterprise systems using an EDI network were used as a tool
to link 40-odd raw material suppliers, 60-odd finished goods suppliers and 500-600
larger stockists. HLL also implemented vendor managed inventory (VMI) systems at
750 of its larger stockists (50 percent of sales) and many of its major suppliers of raw
materials to improve visibility and information flow, and to integrate the entire the
supply chain. At the end of each day, HLL’s factories and four buffer depots know
exactly what needs to be dispatched based on the sales that evening. The company has
categorized its products into A, B and C, based on the frequency of replenishment.
While the factories despatch category A products directly, category B and C items are
stocked in buffer depots. So each depot gets stocks from either a factory or a buffer
depot on a daily basis. Apart from linking all these points with its ERP software, HLL
has also connected some of its large third-party manufacturers through VSAT.
Redesigning BNS
In HLLNet, suppliers are able to know the company’s production plans and plan
delivery action. For instance, a packaging vendor will stock material at his factory. The
vendor must keep tabs of what has been consumed. The company will share its

8. BPMJ production plans with the vendor but the onus is on the vendor to maintain enough
11,2 stocks to keep the factory going. That means dealing with variables like demand
surges or even rejections. This is one step ahead of “just-in-time”, and it will be done
through collaborative software. Now, instead of having a man on hand, the vendor now
only needs to have a virtual presence on the factory floor, courtesy of the network. The
concept of vendor management was always present but could not be given this thrust
178 previously because of poor communication links. Post-ERP, the company has greater
information at every point, which allows it to look at data warehousing. ERP
implementation was accompanied with initiatives on the VMI concept. It took HLL
approximately one year to implement the concept and to realize benefits. The starting
point of VMI implementation was the collection of daily sales data from the retailer and
feeding it to HLL’s distribution centers for the area. The data collected from all the
retailers through stockists, fed to respective distributor centers, was aggregated for the
week. The data is sent back to 60-odd factories and they in turn inform their suppliers
of the requirements. With the forecasting process in place, HLL was in a position to
aggregate daily demand. The factories interact with the suppliers directly for delivery,
scheduling and quality issues. The stockists’ sales for the day would be replenished at
the distribution center next day and at the same time, the packing material supplier
would have to keep equivalent packing material ready for delivery to the factory.
Information integration across the supply chain is the most effective way to counter the
problem of demand distortion in the supply chain – the well-known “bullwhip effect”.
Improved information sharing among business partners reduces the potential of the
harmful bullwhip effect. Better information sharing was followed by co-ordination
across the supply chain to pursue programs like VMI, which further dampened the
bullwhip effect and improved forecasting and replenishment decisions. Apart from
major business processes and policies such as sales and distribution, payment and
stock replenishments were revamped across the supply chain. The results were evident
in terms of significant reductions in inventory levels, reduced stock levels and lower
working capital requirements while improving the response time and customer service
levels. The redesigned network is based on a collaborative business model, as shown in
Figure 2.
HLLNet uses an extranet covering its key stockists and retailers to optimize the
supply chain right up to the front end. Similarly, an extranet has also been created
covering the suppliers, factories and purchases, with the aim of achieving real-time
vendor managed inventory. The gains for the company have been tremendous, with
close to US$280 million in receivables at any given point, and if we add the receivables
down the chain to this, the figure could well exceed US$1,200 million. Analysts opine
that even if the company manages to free 10 percent of this, the saving could be
tremendous.
The web may give any corporate reach, but what is also important is the capability
to deliver the product to the customer. Here HLL has a tremendous advantage because
of its huge network. The company could also archive consumer behavior and get a
better fix on its product profile and consumer behavior, which can be used for its
marketing initiatives. HLLNet has a formidable network connecting all its suppliers
and has now started a project to wire up its 7,500 stockists. The next step would be to
connect its top retailers and use the internet as a platform for transactions. Among the
first growth engines already under implementation is a unique rural business system.

9. Business
network redesign
179
Figure 2.
The future networked
distribution chain
Its rural business system is unique in not only developing specific product for the
Indian rural market, but also in embarking on exclusive rural communication and
infotech to take products right to the doors of consumers. The information systems
architecture of HLLNet is shown in Figure 3.
Business impact of redesigned BNS
The performance indicator variables of HLL, such as net current assets, net sales to
inventory ratio, credit days as sales days, response time and customer services index,
are examined based on the data from its published balance sheets for a period of five
years (1995-2000). HLL previously had a stock replenishment cycle time of two weeks.
After ERP implementation, it came down by three and half days, which translates into
substantial savings in inventory costs. HLL’s supply chain had chronic inventory
problems before the implementation of ERP. In 1995, HLL’s net current assets as a
Figure 3.
Systems schematics of
HLLNet

10. BPMJ percentage of capital employed was 44 percent, inventory was 20 percent of divisional
turnover for detergent, and 24 percent of divisional turnover for personal products. In
11,2 1996/7, net current assets as a percentage of capital employed was down to 8 percent,
and inventory in key divisions was down to 5-6 percent of turnover[1]. These results
are depicted in Figures 4 and 5.
180 BNS and enterprise systems
Enterprise systems, particularly ERP, play a critical role in establishing BNSs. ERP
enables the standardization and streamlining of business processes. ERP systems have
been widely implemented by a large number of organizations worldwide to create
value-oriented internal BNSs. However, many of these organizations are enhancing
their ERP systems with inter-organizational modules known as external BNSs (Alt and
Fleisch, 2001; Mashari and Zairi, 2000). HLL has extended its ERP systems over an
extranet covering its suppliers, factories, and key stockists to optimize the supply
chain right up to the front end with the aim of achieving real-time, vendor-managed
inventory. The fast transfer of funds across its business partners is achieved through
relationship networks. HLL collects 25-30 blank and signed cheques from its stockists
at the beginning of each month and fills in the amount after the respective stocks have
been delivered. Based on the above discussion we propose:
P1. ERP systems can be extended as a transaction-oriented BNS across the
supply chain.
BNS and coordination
The information distortion known as the bullwhip effect adversely impacts
coordination among various members in the business network. The bullwhip
Figure 4.
Trends in net current
assets as a percentage of
capital employed
Figure 5.
Trends in net sales to
inventory ratios,
1996-2000

11. phenomenon is well recognized across industry, and has been widely researched (e.g. Business
Lee et al., 1997; Chen et al., 2000). IT enhances the coordination of economic activities
by reducing coordination costs, and can therefore improve firm performance and
network redesign
productivity (Shin, 1999). The redesign of inter-organizational processes with the use of
ICT plays a leading role in improving coordination among the various partners in the
business network (Christiaanse and Kumar, 2000). HLL introduced the concept of VMI
to overcome the inventory problem in addition to the implementation of ERP. The 181
planning cycle of HLL used to be monthly, and this has now become daily. The
improved planning has paid off, mostly in stock reduction. For example, the stock
levels in the detergent business alone dropped from 105,000 tons to less than
55,000 tons. Measured in days, stock levels fell from six weeks of sales to less than
three weeks. The volume of finished goods languishing in distribution centers fell from
three weeks to less than one week. In the factories, HLL now keeps a one-day
inventory, while at the buffer depot it is four to five days. Supplier inventory levels are
at three days, down from the previous seven days. Analysts say that HLL’s inventory
management is among the best in the world, and is on a par with the likes of Wal-Mart
or Campbell. This enables us to propose:
P2. The BNS improves the coordination among the business partners in the
business network.
Improving consumer value through BNS redesign
The various research and case studies show that adoption of enterprise systems across
the network, along with channel transformation, leads to improving the value to end
consumers (Clark and Mckenney, 1995). In the case of Procter & Gamble, redesign of
the BNS resulted in dramatic improvements in its retailers’ effectiveness in delivering
value to the end consumer (Clark and McKenney, 1995). Historically, HLL used to
finance its business with its supplier’s money and provide 60-90 days credit to its
distributors. This used to result in high channel inventory and low value to consumers.
HLL changed the policy of credit sales to its stockists. HLL stockists who used to get
60-90 days of credit from HLL are now offered a special discount if they pay in
advance. As a result, stockists place orders only for stocks that can be replenished
quickly. This has drastically reduced the channel inventory in the entire network. HLL
also reversed the policy of buying on credit from its suppliers. It now prefers to pay
suppliers in cash rather than ask for credit, and hence negotiates price discounts from
them. As a result, in 1997 HLL’s net current assets as a percentage of sales was 2 4.9
percent. In the same year, its parent company Unilever’s net current assets as
percentage of sales was 11.5 percent[1]. Also in the case of HLLNet it has been possible
to improve consumer value through improved flow of demand and supply information
by redesigning the business relationship across the channel by exploiting the power of
business network systems.
Interest costs continue to decline, with repayment of debt and effective working
capital management. Despite the reduction in inventory, HLL simultaneously
improved its customer service. Before, 25 percent of SKUs were not available on any
given day. Now this figure is less than 5 percent and still improving. Response times
have also improved dramatically. HLL’s response time was cut from 14 days to two
days, which means that if there is an out of stock problem, it responds within 24 hours.
On the basis of the above we propose:

12. BPMJ P3. In order to improve consumer value, the business network may need to be
11,2 redesigned while exploiting the power of enterprise systems.
Conclusion
The previous research reveals that the deployment of IT aligns with the radical
182 redesign of business processes dramatically improve a firm’s performance in terms of
productivity (Barua et al., 1995; Hitt and Brynjolfsson, 1996; Ragowsky et al., 1996). It
has also been established that IT improves intra- as well as inter-organisational
coordination, resulting in improved business performance (Shin, 1999; Christiaanse
and Kumar, 2000). Earlier research also shows that the implementation of ERP systems
across the supply chain in alignment with process reengineering may result in
improved business performance across the business network (Mashari and Zairi, 2000;
Hicks, 1997). However, there is less research demonstrating the impact of redesigning
business policy or relationships while establishing enterprise systems across the
network. Most of the earlier research mainly focused on the need for business process
reengineering across networks. Through an empirical case study, this research has
presented evidence that if an extended enterprise system is accompanied by redesign
of the business policy and relationship apart from process reengineering across the
business network, it further enhances the business value of network.
The case study of HLLNet demonstrates the successful use of enterprise systems to
enhance business value across the business network. HLL has linked its suppliers,
stockists and retailers through an extended enterprise system to form a BNS called
HLLNet, which has resulted in tremendous cost savings for the company. HLLNet has
shifted its strategic decision-making powers to those points in the network that are
closest to the customer while using the corporate center to generate the resources and
create the infrastructure that frontline people need through policies like VMI, advance
payment from sales and cash payment to suppliers, etc. It now discourages credit and
maintains a regimented cash management system. The normal practice in the
company is to collect 25-30 blank cheques at the beginning of the month from stockists
and fill in the amounts after the respective stocks have been delivered. Historically,
HLL had the reputation of financing its working capital with suppliers’ money and
pumping its stock to distributors on credit. However, with implementation of an
extended enterprise system across its network, it has revised its strategy. HLL’s
stockists, who used to get 60-90 days of credit from HLL, are now offered special
discounts if they pay in advance. As a result, stockists place orders only for the stocks
that can be replenished quickly. This has drastically reduced the channel inventory in
the entire network. Suppliers are paid in advance, and in return they pass on the cash
discount to HLL, resulting in reduced costs of raw materials. All this has been made
possible due to the smooth flow of information across the network.
Note
1. Source: HLL Annual Reports (1996-2002), available at: www.hll.com
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