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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

           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
              Access to management information
               unavailable across a mix of applications
              Access to best practice systems and
              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

Source: Reference 3                                    7
Major Companies Providing ERP
System Products


             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
   Play a key role throughout the ERP
   Remain the project champion

         ERP Implementation
             DISCOVERY PHASE

Source: Reference 5
            ERP Implementation
             DISCOVERY PHASE
              Business processes and practices are
              evaluated to decided what is needed

              Applications are chosen and configured
              for the company

Source: Reference 5                                  14
          ERP Implementation
           The ERP is loaded in a test environment
           to detect errors and flaws
           Employees are trained on the system

            The system is rolled out by department,
            region or globally
Source: Reference 5                             15
             Best Practices
                Invest in adequate personnel and technological
                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

         Digital China
            Origin: Legend Company
                   Established in 1984 by the Institute of Computing
                   Technology, a department of the Chinese Academy of
                  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
                  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
        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
         Organization Chart
                         Chairman: Li Quin
                         CEO: Guo Wei

Source: Reference 8
            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
     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
         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
     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

          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
         ERP implementation:
        Original ERP consisted of 3 phases
             After splitting, 2 phases from the perspective of Digital
        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
             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
       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
   May 27, 2000 Digital China ERP system started up officially.
   Oct 1, 2000        The ERP systems of Digital China’s 10 platforms went live
  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
         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
         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
        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.

     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

Case Study

6. Industry: Lose no time; be always employ'd in
something useful; cut off all unnecessary actions.
Benjamin Franklin’s Thirteen Virtues
            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
              4200 Employees down from 7900 in
              Invented the world’s first triggered
              One of the largest test and
               measurement firms in the world with
               Market Cap of $1.5 Billion

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

Source: Reference 14
         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

Source: Reference 13
          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
        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
        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
         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
        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
        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
        Tektronix ERP System Architecture

Source: Reference 13
        Tektronix ERP
        Project Team and Roles

Source: Reference 13
       Tektronix ERP
       Global Rollout Schedule

Source: Reference 13
        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
                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
              Color Printing and Imaging Division made small
               number of built-to-stock products
              More difficult than Financials and Oracle
              “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 -
            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
         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
         Tektronix ERP Implementation
              Order Management/Accounts
               Receivable at Measurement Business
               Division – Larry Bunyard, IT Manager
                   Oracle consultant reliance for their technical
                   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
         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
                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
                 “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
            Time freed up for analysis
            Book closing at end of financial period

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
                        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
                         400000                                                                                                 25000
                                   1999      1998        1997          1996      1995       1994

                                   MBD     CPID     VND         Year                                                           -75000     1999         1998         1997   1996    1995

                    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?

ERP Conclusion

        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
            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
            Gray areas in contracts
            Loss of internal control

Source: Reference 16                     66
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: viewed
         September 14, 2003
3. Turbit, N. “ERP Implementation: The Trials and Tribulations” World
         Trade, Vol. 16, Iss. 7, 2003, pg. 39
4. URL:
5. URL:
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., viewed Oct 10,
9., viewed Nov 7, 2003
      3812002/2003, Digital China Annual Report , viewed Oct 10, 2003
11., Stock Exchange of Hong Kong,
      viewed Nov 7, 2003
12., 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., viewed 10/24/03
15.   Umble, Elisabeth J and Umble, M Michael, “Avoiding ERP
      Implementation Failure” Industrial Management, Jan/Feb 2002
16.   DePompa, Barbara, “Time to Outsource ERP?” Computerworld,
      August 4, 2003 Vol 37, Iss 31;Pg. 33


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