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615-260 Enterprise Systems

615-260 2004. Subject announcements. Project 1 handback this week (in labs)1/2 way through subjectProject 2 less than two weeks away! (Friday 17th Sept ie end of week 8)Next week change of schedule: RMIT case not a guest lecture. 615-260 2004. NIBCO project. SAP/R3 into 10 plants

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615-260 Enterprise Systems

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    1. 615-260 2004 615-260 Enterprise Systems NIBCO ERP Implementation Case Study Week 7

    2. 615-260 2004 Subject announcements Project 1 handback this week (in labs) 1/2 way through subject Project 2 – less than two weeks away! (Friday 17th Sept ie end of week 8) Next week – change of schedule: RMIT case not a guest lecture

    3. 615-260 2004 NIBCO project SAP/R3 into 10 plants & 4 distribution centres 15 month project US$17 million (1996) Consulting Technical infrastructure Teams & change management Ľ senior managers full-time (7 of 28)

    4. 615-260 2004 Why ‘big bang’? ‘big bang’ very high risk but high possible rewards Great degree of change needed; if incremental then ‘change fatigue’ may occur before all changes achieved Business initiatives required new IT/data High consulting costs but less than over 3-5 years “pull the people out of the business to work on it, focus, and get it done”

    5. 615-260 2004 Timeline (see paper) 1995: need to address IT, CVIO hired, strategic IT plan 1996: organisational change, SAP and ‘big bang’ implementation selected, project started 1997: organisational change, training, go live

    6. 615-260 2004 NIBCO ERP implementation project success Benefits gained from use of ERP Ongoing successful use of IT Knowledge transfer

    7. 615-260 2004 NIBCO Epilogue (Project success) NIBCO experienced a major dip in productivity in the first months after Go Live, as its project leaders had warned. As Beutler was quoted as saying in a ComputerWorld article, “The business jogged; it didn’t run” (Stedman 1998a). However, the ERP implementation was within the 12-month window given, slightly under budget, and essentially a success. It released its project team members even sooner than originally planned.

    8. 615-260 2004 NIBCO Epilogue (Project success) NIBCO experienced a major dip in productivity in the first months after Go Live, as its project leaders had warned. As Beutler was quoted as saying in a ComputerWorld article, “The business jogged; it didn’t run” (Stedman 1998a). However, the ERP implementation was within the 12-month window given, slightly under budget, and essentially a success. It released its project team members even sooner than originally planned.

    9. 615-260 2004 NIBCO Epilogue (benefits gained) As of October 1999 (nearly 2 years after go live) not only had the company avoided Y2K remediation costs, but it was closing its books in 2-3 days (instead of the 2-3 weeks typical under the old systems) had lowered its inventory levels by 25%, and had increased its fulfillment rate from 80% to 95% (http://www.cio.com/archive/enterprise/101599_new.html) According to NIBCO management inventory had been lowered by 35% and service had improved to 98% by mid-2000

    10. 615-260 2004 NIBCO Epilogue (successful use of IT) Since its Big Bang implementation, the company has continued to be proactive in its ERP initiatives: an upgrade from R/3 version 3.0F to 4.5B (4-month project completed in April 1999), an archiving project (9-10-month project), and the HR module implementation. The SAP infrastructure has also enabled the company to make significant progress with e-business initiatives, including an R/3 e-commerce project to implement vendor-managed inventory.

    11. 615-260 2004 NIBCO Epilogue (knowledge transfer) In addition, the knowledge transfer that was so important during the project itself has resulted in a strong core of expertise within the IS organization that continues to pay dividends. An April 2000 business intelligence report for NIBCO management benchmarked the firm as an IT leader within its industry.

    12. 615-260 2004 Lessons from the NIBCO Case Unusual in some respects: Vanilla implementation: NIBCO adapt to R3 Leadership – team of three Big Bang speed of implementation degree of business ownership of the project strength of change management Analysis of effects of new processes and systems at the individual level Communication & training

    13. 615-260 2004 Change management “We were convinced we could configure a system. We were convinced we could build a technical infrastructure that would support it. We were NOT convinced that we could change people’s attitudes and behaviors in a way that we could successfully use what we came up with.”

    14. 615-260 2004 Typical in many others value of top management support (Martin) software selection team formation: core team (3 business process teams, 1 technical team, 1 change management team) use of consultants (to bring in knowledge) motivation Lessons from the NIBCO Case

    15. 615-260 2004 Typical in many others learning how this strange new piece of software worked need for strong change management data conversion difficulties difficulties after “go live” claimed benefits Lessons from the NIBCO Case

    16. 615-260 2004 Comments from NIBCO CEO “The CEO of this worldwide plumbing supplier says the pain of a major IT implementation is worth it.” Glasser, Perry, NIBCO’s Rex Martin, CEO NIBCO, CIO Enterprise Magazine, Oct. 15, 1999 http://www.cio.com/archive/enterprise/101599_new.html

    17. 615-260 2004 Comments from NIBCO CEO How important is IT to NIBCO's strategy? We revise our long-range strategy every year or so. In late 1995 we realized that our systems were fragmented. … We knew we wanted to go to an ERP system, so in mid-1996 we commissioned a team that looked at various vendors—Baan, PeopleSoft, Oracle and some others. After six months, we settled on SAP. People hadn't heard the horror stories about SAP yet, but we've had no troubles. SAP has been well-suited to our needs. We rolled it out on Jan. 1, 1998, but getting there nearly killed us. We had at least 150 people assigned full-time to the project, and we brought it in on time and on budget. Our cost was $18 million, including training time, consultant time and our time. Our service to customers diminished during that time, but the pain was worth it. We're upgrading every 18 months or so, but that's easier.

    18. 615-260 2004 And the benefits? We took care of our Y2K problem, but that's only incidental. Our inventory from the beginning of 1998 to now has dropped 25 percent, and our fulfillment rate has risen from 80 percent to 95 percent. It used to take two or three weeks to get our monthly financials; now we are disappointed if we don't have them in two or three days. The system has been wonderful for us Comments from NIBCO CEO

    19. 615-260 2004 What are NIBCO's future IT plans? We're putting radio frequency bar-coding on our products to better track our inventory, and we're pushing to expand our Web site. By year's end we'll be able to conduct transactions. This is unusual in our business. We've done EDI with our retailers, such as The Home Depot, because they said, "You do EDI or you will not do business with us," but 85 percent of our sales are to plumbing wholesalers that are not technologically advanced. With technology costs getting lower, we think wholesalers will catch up. When they do, they'll be able to check for stock on our Web site. Comments from NIBCO CEO

    20. 615-260 2004 What's your advice to less IT-savvy CEOs? Invest a lot of money in hiring a good CIO. We did that in 1995 when we hired Gary Wilson [as director of IT], who came to us with a lot of experience. Staffing IT is extremely competitive—you can retain top-notch people if you have cutting-edge projects. Comments from NIBCO CEO

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