border states industries fuel rapid growth with erp pg 299 1.what problems was b
ID: 3639413 • Letter: B
Question
border states industries fuel rapid growth with erp pg 2991.what problems was border states industries encountering as it expanded ?
What people ,organization, and technology factors were responsible for
These problems?
2.how easy was it to develop a solution using sap erp software? explain your answer .
3.list and describe the benefits from the sap software.
4. how much did the new system solution transform the business? explain your answer.
5.how successful was this solution for bse? identify and describe the metrics used
to measure the success of the solution.
6. if you had been in charge of sap’s erp implementations, what would you have done differently?
Explanation / Answer
1) Border States Industries had used its own legacy enterprise resource planning system since 1988 to support its core business processes. The system though had been designed exclusively for electrical wholesalers. The system could no longer support BSE’s new lines of business and extensive growth. BSE chose enterprise software from SAP AG as its new information system. Management: Even though senior management worked closely with IBM and SAP during the system implementation, day-to-day operations suffered while managers were working on the project. The first group of “expert users” were trained too early in the project and had to be retrained when the new system finally went live. Organization: Prior to the implementation, BSE had no experience with SAP software and only had a few consultants familiar with the version of the SAP software that BSE was using. Instead of adopting the best-practice business processes embedded in the SAP software, BSE hired consultants to further customize the SAP software to make its new system look like its old one in certain areas. Because of the extensive customization, the launch date was pushed back four months and the cost of implementation increased by $3 million. Technology: The company chose to customize the system extensively, writing its own software to enable the ERP system to interface automatically with systems from other vendors. Converting and cleansing data from BSE’s legacy system took far longer than management anticipated. BSE never fully tested the system as it would be used in a working production environment before the system actually went live. When the Internet brought about the need for additional changes, the existing SAP software did not support these changes. BSE was forced to manually process thousands of transactions outside the SAP system. 2) When BSE upgraded its ERP system to a newer version of SAP software in 2004, it kept customization to a minimum and used the SAP best practices for wholesale distribution. It also replaced other software components with SAP software that provided more integration throughout the company’s business processes. Because the company did not customize as much the second time around, the implementation went smoother. The new system went live on its target date and costs were 14 percent below budget. When BSE acquired a large company that added 19 new branches, the new users were able to run BSE’s SAP software within a day after the acquisition had been completed 3)to- date financial results are available within a day after closing the books. Manual work for handling incoming mail, preparing bank deposits, and taking checks physically to the bank is significantly reduced. Over 60 percent of vendor invoices arrive electronically, which has reduced staff size in accounts payable and the number of transaction errors. Transaction costs are lower. Even though the IT staff used to support the SAP system increased significantly and IT costs rose by approximately $3 million per year after the first SAP implementation, sales expanded during the same period. The increased system overhead produced a cost increase of only .5 percent of total sales. Much of the work that was automated by the ERP systems has been in the accounting department and involved activities that were purely transactional. This has freed up resources for adding more employees who work directly with customers trying to reduce costs and increase sales Prior to the ERP implementation, management lacked a single company-wide version of corporate data because data were fragmented into many different systems. Now the company is standardized on one common platform and the information is always current and available to management. Management can obtain a picture of how the entire business is performing at any moment in time. Since the SAP system makes all of BSE’s planning and budgeting data available online, management is able to make better and quicker decisions. 4) BSE processes over 360,000 special pricing agreements with designated customers each year. The new software enabled BSE to reduce rebate fulfillment time to 72 hours and transaction processing time by 63 percent. In the past it took 15 to 30 days for BSE to receive rebates from vendors. Since BSE first deployed SAP software in 1998, sales have increased 300 percent, profits have climbed more than 500 percent, and 60 percent of accounts payable transactions take place electronically using EDI. The company turns over its inventory more than four times per year. Instead of waiting 15 to 20 days for monthly financial statements, monthly and year-todate financial results are available within a day after closing the books. 5) In 2006, Gartner Group Consultants performed an independent evaluation of BSE’s ERP implementation. Gartner analyzed BSE data on the impact of the ERP system on BSE’s business process costs, using costs as a percentage of sales as its final metric for assessing the financial impact of SAP software. Costs categories analyzed included costs of goods sold, overhead and administration, warehousing costs, IT support, and delivery. The first implementation, 1998 to 2001, cost $9 million and the investment was returned within 2.5 years. Between 1998 and 2006 (when the second implementation occurred) BSE produced total savings of $30 million, approximately one-third of BSE’s cumulative earnings. As a percentage of sales, warehouse costs went down 1 percent, delivery costs decreased by .5 percent, and total overhead costs declined by 1.5 percent. Gartner calculated the total return on investment for the project between 1998 and 2006 was $3.3 million per year, or 37% of the original investment. 6) ERP software is not designed for extensive customization like BSE did during the initial implementation in 1999. Rather than adopting the bestpractice business processes embedded in the SAP software, BSE decided to customize the SAP software to make its new system look like its old system. BSE’s second implementation went much smoother and cost less because it did not try to customize the system as much and it adopted the built-in best practices. The initial implementation involved too many peripheral systems rather than having everything consolidated into one system. The initial training for “expert users” was not handled well. The system was not tested as it would be used in a working production environment before the system actually went live. All of these were serious, costly errors that the company corrected the second time around.
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