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Group VI Stephen Azar Paulette Turner Sarah Whitehead Paiching Yen

University of Missouri at St. Louis IS:6800 Management Information Systems Enterprise Resource Planning Presented to Dr. Mary C. Lacity Fall 2003. Group VI Stephen Azar Paulette Turner Sarah Whitehead Paiching Yen. ERP Project Team. Paulette Turner – Introduction

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Group VI Stephen Azar Paulette Turner Sarah Whitehead Paiching Yen

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  1. University of Missouri at St. LouisIS:6800 Management Information SystemsEnterprise Resource PlanningPresented to Dr. Mary C. LacityFall 2003 Group VI Stephen Azar Paulette Turner Sarah Whitehead Paiching Yen

  2. ERP Project Team • Paulette Turner – Introduction • Paiching Yen – Digital China • Stephen Azar – Tektronix • Sarah Whitehead - Conclusion

  3. What is ERP? • Enterprise Resource Planning is the process of streamlining and integrating a business operation process. • Financials • Human Resources • Operations and Logistics • Sales and Marketing Source: Reference 1

  4. Purpose of ERP • The Enterprise Resource Planning system combines all business departments information into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. Source: Reference 2

  5. Anatomy of An Enterprise SystemThomas Davenport Source: Reference 1

  6. Benefits of ERP • Single system to support several smaller systems • Access to management information unavailable across a mix of applications • Access to best practice systems and procedures • More integration hence lower costs • More automation of tasks Source: Reference 3

  7. Negatives of ERP • High investment cost • Less flexibility due to more automation • Users will need to become more computer literate • Fewer in house skilled staff maintained • Implementation timeframe and hidden costs Source: Reference 3

  8. Major Companies Providing ERP System Products BAAN

  9. Annual Sales in Millions Source: Reference 4

  10. Annual Net Income in Millions Source: Reference 4

  11. Implementation Costs • A survey of 63 companies by the Meta Group found the average cost of ownership was $15 million • The same survey found that the average return on invest was $1.6 million. Timeframe 31 months. Source: Reference 2 and 5

  12. Important Role of Management • Provide focus, vision and strategic direction • Play a key role throughout the ERP implementation • Remain the project champion

  13. ERP Implementation • DISCOVERY PHASE • DESIGN AND DEVELOPMENT PHASE • TESTING AND TRAINING PHASE • IMPLEMENTATION PHASE Source: Reference 5

  14. ERP Implementation DISCOVERY PHASE Business processes and practices are evaluated to decided what is needed DESIGN AND DEVELOPMENT PHASE Applications are chosen and configured for the company Source: Reference 5

  15. ERP Implementation TESTING AND TRAINING PHASE The ERP is loaded in a test environment to detect errors and flaws Employees are trained on the system IMPLEMENTATION PHASE The system is rolled out by department, region or globally Source: Reference 5

  16. Best Practices • Invest in adequate personnel and technological resources • Establish and maintain operations procedures to administer network resources • Conduct bottleneck analysis to determine limitations • Use enterprise systems tools to monitor an maintain network integrity • Develop a contingency plan • Identify IT staff core competencies and ensure continued knowledge and improvement Source: Reference 6

  17. Case Study Digital China

  18. Digital China • Origin: Legend Company • Established in 1984 by the Institute of Computing Technology, a department of the Chinese Academy of Science • Legend Computer--- Distribute foreign brand-name IT products and manufacture self-branded computers • Split: May, 2000 • Spun off from the Hong Kong-listed Legend Group Limited. • Separately listed on the Hong Kong Stock Exchange on 1 June 2001. • Digital China becomes an affiliate to Beijing’s Legend Holdings Limited. • The largest IT products distributor in China Source: Reference 7

  19. Company Background • Headquarter: Beijing • Number of Employees: 3,800 full-time • Turnover :HK$12.51 billion or increase of 18.91% compared to last year • Profit: HK$ 181 million • Earning per share: HK$ 21.2 cents Year ended 31 March (HK$) Source: Reference 10

  20. Stock History Nov, 2001~Nov, 2003 Source: Reference 9 and 11

  21. Organization Chart Chairman: Li Quin CEO: Guo Wei Source: Reference 8

  22. Digital China • Three distinct business: • 1.Distribution of IT Products (86.1%) • 2.Providing IT Services (12.4%) • 3.Manufacturing and distribution of networking products (1.5%) • Honors: • Ranked 4th among “China’s 100 Leading Software Enterprises” －the Ministry of Information Industry, PRC • Ranked 20th among “China’s 100 Largest Public Traded Enterprise”—July 2003 issue, Fortune Chinese edition Source: Reference 10

  23. Digital China • Characteristic of Supplier: • Suppliers are mainly foreign companies • The largest supplier accounted for 29% of the group’s purchase Dec31, 2000 • The five largest suppliers accounted for 62% • Characteristics of Customers: • Broadly distributed－5 largest customers account for less than 20% of the turnover. • 3,000 “core” resellers/retailer plus 2,000 minor channels Source: Reference 7

  24. IT Products • Notebook: Toshiba, IBM • Printer: Epson, Canon, HP • Server and storage Products: IBM, HP, Sun Microsystems • Enterprise Networking and application products: Cisco, Brocade, NetScreen, and Netscout • Enterprise Software: Oracle, Microsoft, BEA and Symantec • Mobile phone and PDA • Digital Camera: Kodak, Canon, Sony, Olympus

  25. Key Statistics Related to IT • Budget of the IT department • Employee: 97 • Payroll expense of IT dept: 18-20 million RMB • Depreciation expense and maintenance/rental fees of IT dept: 14 million RMB • Expected budget: New software, equipment and service:28 million RMB (September 2001 to August 2002) • Investment in the ERP system (before split) • Market value of Hardware:35m RMB • Software license fee: 1.2m USD • External consulting Services: 2,400 person days (RMB: Chinese dollar) Source: Reference 7

  26. ERP implementation: • Original ERP consisted of 3 phases • After splitting, 2 phases from the perspective of Digital China • 1st phase: Nov 9, 1998 ~Oct 1, 1999 (Expected) , Actually finished January 5, 2000 (3 months late) • 2nd Phase: Digital China splitting from Legend (Feb, 2000) Feb,2000 ~May 8, 2000 (finished) • Oct 1, the ERP systems of Digital China’s ten platforms went live at the same time Source: Reference 7

  27. ERP Project Organization Source: Reference 7

  28. Timeline for ERP implementation • 1993-1997 The “Old MIS” system based on FoxBase, mainly used for finance, inventory management and sales. • Mar-Apr, 1998 SAP and external consultancy product project evaluation for Leg end. • Nov. 9, 1998 Legend singed official agreement with SAP and external consultancy to implement ERP. Legend chooses the SAP system and planed to go live on October 1, 1999. • April, 1999 Reorganization of project team. • Jan 5, 2000 ERP system went live (1st Phase; 14 months) • February, 2000 Under the direction of the steering committee, Legend began to split its ERP system into two. • May 8, 2000 The split of the old ERP system of Legend was finished. • May 27, 2000 Digital China ERP system started up officially. • Oct 1, 2000 The ERP systems of Digital China’s 10 platforms went live at the same time Source: Reference 7

  29. E-bridge Project • e-Bridge–An e-commerce B2B platform, online transaction system • Built by April 2000 and integrated with the ERP system between April and September • Purpose: established to improve operational efficiency and reduce costs • Began to operate on March 21, 2001 • Now, agents in over 30 cities in China and over 800 agents use the system for online ordering, accounting for 36% of total distribution sales • Investments in e-Bridge in 2001: 20 million RMB • On average: recorded over 20,000 online visits per day, received a new order every 2 minutes Source: Reference 7

  30. Implementation Problems • First 9 months: no real progress was made • Business departments: considered the ERP as the usual kind of information system and only as a tool • External project manager resigned because of the prevailing attitude within Legend • Project supervisor requested change in the project team Source: Reference 7

  31. Operational benefits: • The order-to-delivery process has been shorten from four to two hours • The time for financial closure for all subsidiaries, including all platforms, has been reduced from fifteen to three days • Inventory and sales data are available in real time rather than with a one-day lag in the previous systems • Accounts receivables for comparable product categories and payment conditions have been reduced • Significant productivity gains, especially in the finance and the sales departments, have been realized Source: Reference 7

  32. ERP and Organizational Change • Management frequently rearranged organizational units by a process of splitting and merging units • ERP system adapted to organizational changes • Issues/problems of ERP • ERP system can only provide basic information • Integrated information could not be easily analyzed • ERP developments become complicated and difficult when a department is taken apart and integrated with another Source: Reference 7

  33. Digital China • Lesson learned: • People from business departments in the project team should be chosen carefully • People participating in implementing ERP project have to be fully dedicated • Top management actively involved in the project • Cooperation and coordination of project manager and project supervisor • The continued organizational changes will hinder the optimal performance of ERP system.

  34. Digital China • Conclusions: • Overall ERP implementation is successful • The way Digital China uses its ERP system is more important than just implemented it • How to balance ERP development and Organization Changes • Strengthen the vertically and horizontally integrated capabilities of ERP Systems

  35. 6. Industry: Lose no time; be always employ'd in something useful; cut off all unnecessary actions.Benjamin Franklin’s Thirteen Virtues Case Study

  36. Tektronix • Origin: Founded in January 1946 • Located in Wilsonville, Oregon • One Measurement Business Division • United States (52%) • Americas (6%) • Japan (7%) • Pacific (13%) • Europe (22%) Source: Reference 12

  37. Tektronix • 4200 Employees down from 7900 in 1996 • Invented the world’s first triggered oscilloscope • One of the largest test and measurement firms in the world with Market Cap of $1.5 Billion Source: Reference 12

  38. Tektronix Strategy • Corporate strategy is to focus product development on three core markets: computing, communications, and semi-conductors • Large and fast growing markets • Mission statement: “Tektronix enables our customers to design, build, deploy, and manage next-generation global communications networks and advanced technologies.” Source: Reference 12

  39. Communications Signal Analyser Handheld oscilloscope Handheld oscilloscope Video signal generator Sampling Oscilloscope Oscilloscope Probes and Accessories MBD Products Today Optical-to-Electrical Converter Source: Reference 12

  40. Tektronix Trading Source: Reference 14

  41. Tektronix History • Company business in 1993 was split into three autonomous divisions • Measurement Business Division (53%) • Color Printing and Imaging Division (26%) • Video and Networking Division (21%) • Carl Neun became CFO in 1993 • Company was facing increasing global competition Source: Reference 13

  42. Tektronix Executive Tree 1993 Source: Reference 12

  43. Tektronix ERP Background • 50 year legacy hampered operations Gary Allen IT Director called it a “spaghetti factory” • Many different applications and technologies in over 20 countries • Holdover from the old days where there were 26 divisions in the company created need for orders to be input many times in different systems through the order cycle – no Saturday delivery • Opportunity cost high for entry error • “Five calls does it” to expedite an order Source: Reference 13

  44. Tektronix ERP Background • “Other weaknesses in the information architecture resulted in inaccurate information on performance, no capacity to effectively manage customer accounts and credit on a global basis, and no potential for customer to get his order calculated at order creation.” • Lack of financial systems integration Source: Reference 13

  45. Tektronix ERP Vision • Neun provided vision with “Frankfurt is Orlando” as his model knowing that the world for IT was to get much smaller. • Neun needed a common template for what he described as his sales and distribution businesses and saw no difference in doing business in Germany or Florida beyond language and local laws. Source: Reference 13

  46. Tektronix ERP Vision • President of Computer Printing and Imaging Division Roy Barker provided Neun ERP business justification –citing growth and legacy systems outdated reasoning. • Barker goal was to double CPID size with taking “a volume game” in a mass marketing approach to pc-based corporate customers. • Once Barker called for the IT upgrade in his division the others came on board. Source: Reference 13

  47. Tektronix ERP Vision • Color Printing and Imaging Division to receive new IT upgrade first and the others would follow in waves. • Neun vision for ERP had three components: • Separability of the Businesses • 3 divisions had different distribution and selling methods • Neun demanded standardization – order execution in a common system and database – Frankfurt=Orlando • Leveraging shared services • One worldwide financial and accounts receivable system • Staying as “plain vanilla” as possible • Minimize changes to software purchased Source: Reference 13

  48. Tektronix ERP Planning • Neun and Vance had experience with Oracle • Manufacturing had its own newly implemented package and was kept separate • Small team spent two months in Oracle capability • Steering committee formed to refine company’s vision and develop “global business model” • “Business Practices and Guiding Principles” written for ERP direction Source: Reference 13

  49. Tektronix ERP Planning • Division presidents and Neun acted to resolve major project management problems • Set up coordinating teams with personal input • One change program with many “waves” • Waves were scheduled to deliver a specific functionality with feedback expected • Schedules strictly adhered to that gave “handles” to the project momentum Source: Reference 13

  50. Tektronix ERP System Architecture Source: Reference 13

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