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					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
   Paiching Yen – Digital China
   Stephen Azar – Tektronix
   Sarah Whitehead - Conclusion




                                     2
           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                                   3
             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                                   4
     Anatomy of An Enterprise System
     Thomas Davenport




Source: Reference 1                    5
          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                                  6
             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                                    7
Major Companies Providing ERP
System Products




BAAN

                                8
             Annual Sales in Millions
                      2002    2001      2000      1999

          SAP         7,785.7 6,534.0   5,881.2   5,146.0

          Oracle      9,673.0 10,859.7 10,130.1    -------

          Peoplesoft 1,948.9 2,073.3    1,736.5   1,429.1


Source: Reference 4                                      9
             Annual Net Income in Millions
                      2002     2001     2000      1999

            SAP       534.2    517.0    595.5     5,146.0

            Oracle    2,224.0 2,561.1   6,296.8    ------

            Peoplesoft 182.6   191.6    145.7     (177.8)


Source: Reference 4                                      10
             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                            11
Important Role of Management
   Provide focus, vision and strategic
    direction
   Play a key role throughout the ERP
    implementation
   Remain the project champion




                                          12
         ERP Implementation
             DISCOVERY PHASE
             DESIGN AND DEVELOPMENT PHASE
             TESTING AND TRAINING PHASE
             IMPLEMENTATION PHASE




Source: Reference 5
                                             13
            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                                  14
          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                             15
             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                                                16
Case Study

   Digital China




                   17
         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
                                                                            18
        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$)
                       2003           2002           2001           2000

      Annual           12.5 billion   10.5 billion   8.56 billion   6.51 billion
      Sales            (18.91%)       (22.66%)       (31.49%)

      Net Profit       181.1          171.3          141.7          115.66
                       million        million        million        million
                       (5.72%)        (20.89%)       (22.51%)
Source: Reference 10                                                               19
          Stock History
                             Nov, 2001~Nov, 2003




        Issue price: HK$4.00              52 week High/Low:
        (June 1,2001)                     3.05/1.8
        P/E ratio:12.32                   Close: HK$2.60
                                          (Nov 7,2003)
Source: Reference 9 and 11
                                                              20
         Organization Chart
                         Chairman: Li Quin
                         CEO: Guo Wei




Source: Reference 8
                                             21
            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
                                                                       22
         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
                                                                  23
     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




                                                                      24
          Key Statistics Related to IT
         Budget of the IT department              (RMB: Chinese dollar)
              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


Source: Reference 7
                                                                           25
         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
                                                                          26
             ERP Project Organization
                                ERP Project Organization (after Project Reorganiztion)

                             Steering Committe                                           Module name in SAP R/3
                                                                                         SD:Sales and Distribution
                                                                                         FI/CO: Financial and mangerial accounting
                                                                                         MM: Materials Management (procurement)
                             Project Supervisor


       Supervisor's Office      BPR Team           Project Manger


      SD Team           FI/CO Team          MM Team         Promotion Team        Basic Team     Database Team




                       Team Leader are VPs from business departments



Source: Reference 7
                                                                                                                               27
       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
                                                                           28
  Source: Reference 7  at the same time
         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                                                      29
         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
                                                    30
         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
                                                                      31
         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
                                                                         32
        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.




                                                                33
     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



                                                       34
Case Study




6. Industry: Lose no time; be always employ'd in
something useful; cut off all unnecessary actions.
Benjamin Franklin’s Thirteen Virtues
                                                     35
        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
                                                  36
        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
                                                  37
            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
                                                        38
Communications Signal                            Handheld oscilloscope
    Analyser            Handheld oscilloscope



                        Video signal generator



Sampling Oscilloscope

  MBD Products Today                              Oscilloscope Probes and
                        Optical-to-Electrical            Accessories
 Source: Reference 12        Converter
                                                                    39
        Tektronix Trading




Source: Reference 14
                            40
         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
                                                     41
          Tektronix Executive Tree 1993
                                         Jerome J. Meyers
                                          Tektronix CEO

      Daniel Terpack          Roy Barker                   Carl Neun       Lucie J. Fjeldstad
      President MBD         President CPID               Tektronix CFO      President VND


    Rob Nichols - MBD        Kathy Goeddel                Bob Vance      Rob Blaskowsky - VND
  Senior Program Manager   IT Director - CPID            Tektronix CIO        IT Director

   Larry Bunyard - MBD
        IT Manager

                                         Daniel R. Brophy
                                  President Americas Operations

                                       Timothy Thorsteinson
                                    President Pacific Operations

                                          John W. Vold
                                  President European Operations

Source: Reference 12                                                                        42
         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
                                                                43
        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
                                                   44
        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
                                                       45
         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
                                                        46
        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                                                        47
         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                                   48
         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
                                                     49
        Tektronix ERP System Architecture




Source: Reference 13
                                      50
        Tektronix ERP
        Project Team and Roles




Source: Reference 13
                                 51
       Tektronix ERP
       Global Rollout Schedule




Source: Reference 13
                                 52
        Tektronix ERP Implementation
           Split into five major sub-projects
           First wave: Financials implemented at Color
            Printing and Imaging Division in parallel with
            Order Management/Accounts Receivable
                Standardization and Simplification – standardized
                 charts-of-accounts and eliminated complex xfer
                 pricing
                Implementation and Support – Aris Consulting for
                 each of major modules initially on a fixed-price
                 contract than to time and materials. Low cost
                 technical consultants for minor roles. Small firm
                 for manufacturing interface to Oracle - contractor
                 granted right to resell interface.
Source: Reference 13                                             53
        Tektronix ERP Implementation
         Second wave: Order Management/Accounts
          Receivable at Color Printing and Imaging
          Division – Roy Barker, President
              First because highest business velocity and most
               commodity-type with most need to deal with
               growth
              Color Printing and Imaging Division made small
               number of built-to-stock products
              More difficult than Financials and Oracle
               customization
              “Multilingual engine” built to ride on Oracle to
               specific country language and practices
              Rest of system read it in English
              Months spent debugging “Beta” version of Oracle
Source: Reference 13                                              54
         Tektronix ERP Implementation
         Order Management/Accounts Receivable
         at Color Printing and Imaging Division –
         Roy Barker, President
            Initially a large consulting firm contracted -
             unsatisfied
            Turned to Aris, Oracle and other consultants based
             on good Financials
            Color Printing and Imaging Division implementation
             successful and took longer than expected
Source: Reference 13
                                                              55
         Tektronix ERP Implementation
        Order Management/Accounts
         Receivable at Measurement Business
         Division – Larry Bunyard, IT Manager
             Leveraged Color Printing and Imaging Division
              experience to save costs
             Met a lot of resistance
             MBD made built-to-order products – order
              processing more complex and much more
              code work
Source: Reference 13
                                                              56
         Tektronix ERP Implementation
              Order Management/Accounts
               Receivable at Measurement Business
               Division – Larry Bunyard, IT Manager
                   Oracle consultant reliance for their technical
                    support
                   Four independent test conversions and six
                    systems tests
                   MBD shutdown entire $190M OMAR for week to
                    reconcile open line items
                   OMAR at MBD took twice expected time

Source: Reference 13
                                                                57
         Tektronix ERP Implementation
        Third wave: Order
         Management/Accounts Receivable at
         Video and Networking Division – Rob
         Blaskowsky, IT Manager
            Division was smallest division and benefited from
             prior work
            No aggressive resistance
            Division made most complex built-to-order
             products – more complex order processing and
             special Bills of Materials
            Rapid implementation achieved
Source: Reference 13                                             58
        Tektronix ERP Global Rollout
           Fourth wave: Europe EU and Non-EU
            nations
                Many meetings on how to rollout
                Distribution center (DC) in Holland – everyone
                 uses it
                Success showed quicker shipments
                Oracle implemented in EU and Non-EU pilot
                 countries
                 “Big Bang” approach to rest of European
                 countries in all three divisions at once
                Similarly for Americas and Asia/Pacific
                Australia required special consideration due to
                 older systems
                EU pilot to Australia took 500 days
Source: Reference 13                                               59
        Tektronix ERP Realized Benefits
            Improved Days Sales Outstanding and
             Reduced Inventory Levels
            Worldwide Finished Goods Visibility
            Same day shipments increased from 15% to
             75% in at least one division
            Credit approval cycle time over 24 hrs
             eliminated
            Time freed up for analysis
            Book closing at end of financial period
             accelerated

Source: Reference 13                               60
                                     Tektronix ERP Contributed
                                     Benefits in Thousand US$
                                                  Total Sales                                                                             Domestic vs International Net Sales
Net Sales (1,000 US$)




                                                                                                   Net Sales (1,000 US$)
                        2500000                                                                                                1200000
                        2000000                                                                                                1000000
                                                                                                                                800000
                        1500000
                                                                                                                                600000
                        1000000
                                                                                                                                400000
                        500000                                                                                                  200000
                             0                                                                                                       0
                                  1999    1998    1997    1996     1995       1994   1993   1992                                           1999         1998        1997   1996    1995
                                                                Year                                                                United States   International   Year




                                             Division Net Sales                                                                                         Net Earnings
Net Sales (1,000 US$)




                        1200000                                                                                                125000
                        1000000                                                                     Net Earnings (1,000 US$)
                         800000                                                                                                 75000
                         600000
                         400000                                                                                                 25000
                         200000
                              0
                                                                                                                               -25000
                                   1999      1998        1997          1996      1995       1994

                                   MBD     CPID     VND         Year                                                           -75000     1999         1998         1997   1996    1995
                                                                                                                                                                    Year


                    Source: Reference 12                                                                                                                                          61
Tektronix Lessons Learned
   What reasoning do you think Tektronix used
    in deciding not to do a cost/benefit analysis
    before deciding to do ERP?
   Oracle was chosen without much comparison
    do you agree or disagree with their decision?
   Did you learn anything else from this case?
   Should a firm care about social responsibility
    when implementing ERP?

                                                62
ERP Conclusion




                 63
        Successful ERP Implementation
            Organizational Commitment
            Change Management
            Clear Communication of Strategic Goals
            View ERP as a Company-wide Venture
            Select a Compatible ERP System
            Ensure Data Accuracy


Source: Reference 16                             64
                       Outsourcing ERP
         Advantages
            Gives the company time to focus on mission
             instead of software
            Charges a monthly fee (usually between $300
             and $1000 per user)
            Helps with IT talent shortage
            Increases in sales, acquisitions, and proposed
             buyouts between big ERP companies

Source: Reference 16                                    65
                       Outsourcing ERP
         Disadvantages
            Gray areas in contracts
            Loss of internal control




Source: Reference 16                     66
                    References
1. Davenport, T., “Putting the Enterprise into the Enterprise System”
         Harvard Business Review, July-August 1998, pp. 121-131.
2. Koch, C., “The ABC’s of ERP”, Enterprise Resource Planning
         Research Center, URL:
         http://www.cio.com/research/erp/edit/erpbasics.html. viewed
         September 14, 2003
3. Turbit, N. “ERP Implementation: The Trials and Tribulations” World
         Trade, Vol. 16, Iss. 7, 2003, pg. 39
4. URL: http://fundamentals.nasdaq.com
5. URL: http://www.du.edu/~atanner/whatiserp.htm
6. Savin, J., Silberg, D., and Schoumaker, D., “Best Practices in
     Enterprise Network Systems”, Manufacturing Systems, Vol. 17, 9,
     1999, Iss. 9, Pg 63-67
7.   F. Warren Mcfarlan, Guoqing Chen, and Kai Reimers, “Digital China Holdings
     Limited: ERP as a Platform for Building New Capabilities”, Harvard Business
     Review, May 21, 2002
8.   http://www.digitalchina.com.hk/servlet/template?series=54, viewed Oct 10,
     2003
                                                                             67
References:
9.    http://hk.finance.yahoo.com, viewed Nov 7, 2003
10.   http://www.digitalchina.com.hk/servlet/template?series=63&article=
      3812002/2003, Digital China Annual Report , viewed Oct 10, 2003
11.   http://www.hkex.com.hk/index.htm, Stock Exchange of Hong Kong,
      viewed Nov 7, 2003
12.   www.tek.com, viewed 10/23/03
13.   Cottelier, Mark J. and Westerman, George, “Tektronix, Inc.: Global
      ERP Implementation” Harvard Business School, Vol. 9-699-043, 1999
14.   www.ameritrade.com, viewed 10/24/03
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