An on-line minicomputer system has been the key behind Hillcrest General Leasing's greatly reduced operating cost and improved management control. The system was installed only six months ago but it has already proven successful beyond the most optimistic hopes.
Hillcrest General Leasing is one of the oldest and most respected automobile leasing companies in Canada. With over 5,000 cars leased through its seven offices across Canada, the company prides itself in being able to meet the most demanding requirements of its customers through its service and flexibility. The company offers open and closed-end leasing plans and four types of maintenance plans: no maintenance, all inclusive, budget, and management.
The flexibility in offering so many plans has brought about an increasingly complex paper flow and almost inevitable control problems. To improve efficiency, Hillcrest started using an IBM "batch processing system" in 1964 to produce its invoices. Documents were batched together and at the end of the month they were delivered to the IBM Data Centre in Toronto for processing.
By 1970, however, the company found itself in a situation where the volumes were increasing dramatically. However, most of the work was still being done manually.
Following an evaluation of the various alternatives available, Hillcrest decided to switch to a more modern system. Under this system, the documents were batched as before but they were keyed throughout the month onto punched paper tape using an Olivetti machine.
PROBLEMS DISAPPEARED
At the end of the month, the tapes would be transmitted via telephone lines to a Data Centre for processing and reports would be received a few days later. Some of the old problems disappeared but new ones were introduced. Unexplained losses of data, inability to balance some of the accounting records, and a general lack of control over the quality of the work performed by the Data Centre were some of the new problems encountered.
Following an auditor's report at the end of 1974, Hillcrest finally decided that the only course of action that could solve the old and new problems was to install an in-house interactive minicomputer system. After numerous visits to various installations, and aid by their auditors, Hillcrest decided to install a Datapoint minicomputer system.
Fortrex Consulting Limited of Toronto, a well-known firm specializing in developing minicomputer systems, was hired to develop the system and the project was started in August, 1975.
Six months later, the system was completed and a series of "parallel" runs was carried out in order to ensure the accuracy of the reports produced. At the same time, all the files stored at the Data Centre were converted to the new system. Finally, in May 1976, the system was deemed to be problem-free and all processing started to be done on the new minicomputer system.
How does the new system work?
The data is entered into the minicomputer via "CRT" terminals which are TV-like devices with keyboards attached to them. (Similar devices are used by the airline reservation clear in order to record new reservations or modify existing ones). Usually, up-to 32 such devices can be connected to one minicomputer.
Hillcrest uses six CRT terminals. Two of them are used for Car Control, one CRT terminal is used for Accounts Payable, two for Accounts Receivable and one is used by management in order to obtain reports and statistics on the total operation.
PERMANENT RECORDS
Every time a new automobile is ordered, an entry is made by a Car Control clerk on the CRT terminal. This entry automatically creates a permanent record on the minicomputer's files. These files of data are stored on magnetic disks, not unlike the records used for home entertainment.
A "unit number" is assigned to the new automobile and throughout its "life" this number is used to identify it. When the automobile arrives from the dealer, the Car Control clerk calls back onto the screen the previously stored unit information, by simply keying in the unit number.
At any time prior to delivery of the automobile to the lessee, all leasing information can be added to the permanent record, including length of lease, type of lease, type of maintenance plan, financial factors, and name of driver. Once the automobile is delivered, the minicomputer automatically issues an invoice for the options to be paid for by the driver and another invoice for options to be paid by the lessee.
Every month during the term of the lease, an invoice is automatically generated by the minicomputer without any further human intervention for each customer. Customer statements and reminder notices are also produced whenever required.
Cash receipts and miscellaneous charges are keyed in by the Accounts Receivable clerks as part of their normal daily routines. Automatic balancing of totals by the minicomputer ensures that the cash keyed in adds up to the daily deposits. As soon as an entry is made, it is posted to the customer's account so that up-to-date information is always available to answer customer queries. This information can be displayed on a CRT terminal by simply keying in the customer number.
Supplier invoices are keyed in by the Accounts Payable clerk in a fashion similar to Accounts Receivable. An extra check is automatically made by the minicomputer to ensure that duplicate invoices from the same supplier cannot be posted. Everyday, the check processing program is run which automatically prints checks for those invoices to be paid on that day. Part of keying in Maintenance invoices involves the recording of the type of maintenance performed on the appropriate automobile. This information is later tabulated automatically into various maintenance statistics reports.
At the end of the lease, the system calculates the settlement charges for extra mileage, tires, and other costs and a final invoice is automatically issued. When the used automobile is sold, the capital cost information is adjusted and the charge to the buyer is posted to his Accounts Receivable record. Three months later, the permanent record for the unit is automatically dropped from the disk files in order to make room for new entries.
As a by-product of processing invoices and checks, postings are automatically made to the General Ledger by printing the journals. The book depreciation of each unit is automatically maintained by the system.
The new system has brought about significant benefits to Hillcrest. The operating cost of this system is nearly half that of the old Data Centre system.
Furthermore, the clerical staff required to handle the Car Control, Accounts Receivable, Accounts Payable, and Maintenance Control functions has been reduced from 11 people to six. Management now has up-to-date accounting and control information and new marketing reports heretofore impossible to get. Due to the speed of producing statements and invoices, and because of the improved accuracy, the outstanding Accounts Receivables have been reduced by over 25-percent. Based on the savings generated by the new system, the entire development cost and the cost of the equipment will be totally recovered within the first year of its operation.
LOOKING AHEAD
What are the plans for the future?
An insurance program will be developed to handle the growing number of units that are insured by Hillcrest. Claims processing and underwriter reporting will also be put on the minicomputer.
Another program will allow CRT terminals to be installed in each one of the branch offices across the country. These terminals will be connected via telephone lines to the minicomputer in Toronto. Data entry and retrievals will then be possible from the branches without using the mail with its associated delays.
Ray Sadowski, president of Hillcrest, feels that the new system will enable his company to increase its fleet by as much as 50-percent without incurring significant additional costs. Based on his many years of experience in the automotive industry, he feels that similar systems can equally successful for smaller leasing companies as well as for companies who manage their own fleets.
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