Kelda’s SAP Implementation Case Study

The SAP vendor provider was the ERP provider of Keda Company as will be seen in the case study. ERP projects are proofed to be expensive and risky considering that they need a lot of money to purchase and to maintain. Keda embarked on an ERP implementation project to solve the short – term and the long – term problems that were likely to occur when expanding to the foreign market.

The major processes of implementing an off-the-shelf ERP system were calling out for the potential vendors, interviewing, short listing and then selecting the highest rated presentation. SAP emerged the winner of implementing the Keda ERP system. Leadership plays a pivotal role in the success of ERP projects.

The Keda Company essential case facts

• The 5 month implemented SAP as its Enterprise Resource Planning had good returns through the management of inventory perfectness.
• Success was excellent considering the ERP implantation efforts did not work in china.
• Had a number of projects that had been successful in a mysterious way.
• It started as a small ceramics machinery producer with a capital of US$ (13, 500).
• The Europeans companies dominated the ceramics industry those times as Keda established itself.
• It established and developed fast in China in the 1990’s. With less than ten years down the line, the company had become top 500 machinery manufacturers in China and the world 10 top manufacturers of building materials.
• In the early 2000, it overrode the other competitors to be the 2^nd leading building materials manufacturer following the SAMCHI Company of Italy.
• In the year 2009, it had total revenue of about U.S$209, which was double the revenues of U.S $ 119 in 2006.
• By the year 2010, it had employed 2000 employees and a wide variety of products, resources, facilities and human resource.
• In the year 1999, it had phased out the use of 32000 ton pressing machine and in 2005 had introduced 10 of the most innovative machinery world products.
• It also had a provision of its technical design and consultancy services to its industrial client.
• The sales were customized in small volumes and had big gains.
• Its business had relied on the key operations like research and development, the raw material purchase, inventory management and production, which consist of assembly, workshop processes, logistics and sales and marketing.
• It incorporated a high level of autonomy and compromising environment that integrated innovation in the world market for its success.
• In 2003, the company established national research enterprise for the post doctoral scholars to do research work on chain supply management and human resource management.
• Keda spent almost U.S $ 5.4 million dollar investing in ceramic engineering research and developing a test center.

Problems faced by Keda in its operations

• It incorporated a high level of autonomy and compromising environment that integrated innovation in the world market for the success.
• This resulted to connectionless business units that duplicated the manufacturing processes in these business units.
• The manufacturing processes duplication meant the funds were inefficiently used, incurring the company loses.
• The manufacturing processes resulted to poor communication between the business departments and poor coordination between the leaders.
• This lack of coordination between the leaders, resulted to poor strategic planning aimed at meeting the company’s goals of achieving high profits
• This lack of coordination was also taxed, as experienced by the company, given that it was in a tight competition within the local and international market.
• Keda’s low volumes and high standard of its customization made it hard to record the individual and unique sales of its products.
• It was struggling to meet the demand given that it manufactured only 6 machine presses on a monthly basis, which is below the customer demand.
• There were frequent manufacturing delays as the customers were kept waiting for the machines.
• This means that the resources were not utilized maximally, and losses were incurred.
• Recycling the scrap materials and parts wasted the much needed machine production time, thus reducing the production number volume.

Alternative solutions to the problems

Pros

• In 2004, the company expanded its branches internationally to reach the new market.
• There was need to meet the needs of the established local market and also the new market in the international environment.
• The company director came up with the strategy of halting all the ongoing IT projects, to focus on the computerization plan. This would help in tackling both the short and long-term problems.
• The objectives were accomplished through prioritizing the set goals according to their urgency and the set strategic goals of the company.
• The first priority of the Keda Company was an integrated structure of the organization that would replace the departmental interconnections with a synchronized flow of data and interconnected business processes.
• This new system was expected to possess better management control and quality information through giving of the required processes and procedures.
• This 6 month planning led to the integration of the IT into the enterprise resources planning for the future, for example, product data management, office automation, manufacturing execution systems, customer relationship management, and Supply chain management solutions.
• The main characteristics of the project were to come up with a centralized, unifying and common base for running all the business applications.
• This plan contained a well – defined project analyzes, inclusive of the objectives, the investment expected, the benefits, staff, technology, the risks involved in this endeavor, and finally the possible remedies to these risks.
• To make it easier for the decision making, was the factor of time and lack of IT experts to design the ERP system product.
• This way, it was possible to get the right product that would meet the requirements of the company.

Cons

• The problem was that the manufacturing rate could not meet the new branch outlets already open in the different parts of the world.
• The problem with diverting all the resources to the new found international market was a trade-off in the local market, which was to be a short-term problem.
• On the other hand, diverting the resources to the already found local market might not have helped in the long-term solution of a reliable, diverse foreign market.
• This computerization plan was complicated in its operation. First, Keda was prompted to study its state of running. The study required to know the challenges and the needs of the company from different departments and from common objective.
• As a matter of fact, the Enterprise Research Planning was to be given the first priority, but the problem was of course, time which was crucial.
• The problem Keda faced was deciding on whether to get the ERP system designed by the company or from an outside provider. The company was not skilled enough to design its own ERP product.
• In the process of finding the right ERP system, the company managers visited the clients of the vendors, which were the best as selected by the vendors. Through these visits, they learned about the product complications, which was likely to occur with its use. The problem arising from this is that the company managers would avoid the same problem that the other clients faced, rather than solving it.
• The IT departments were given the task of analyzing the reports and the workflows rather than applying the product concept to check for any complication.

Recommendations

• Keda realized that producing existing products is cheaper, faster, and of a higher standard than customizing a new product.
• Keda did not worry about the lack of IT expertise, but realized that the product innovation and price competition were vital in the competition as it gave the company an added advantage.
• Keda realized a global ERP vendor provider is more knowledgeable than a local one.
• The local vendor is more informed in terms of the cultural needs of the company. This might be a more vital consideration factor than the Know-how of the global vendor who ignores the cultural needs of different customer needs.
• In order to identify the right vendor, Keda Director interviewed 20 global and local vendors. In the interview, the director discussed the company’s needs and how the vendor’s product would meet the needs. The vendors were requested to share any experiences and difficulties in dealing with the product.
• The next process was short –listing the possible 9 vendors who presented their proposals and then rating their presentations according to the strategic in achieving a goal score.
• SAP was the winner as vendor provider as it would provide complicated functional processes in various manufacturing industries established in different marketplaces.

The three essential concepts of ERP

The first essential concept that needed consideration is the newest legacy system that waived ERP system products licensed in the year 2009.

This meant that 2010 marked the vendors scramble for a possible buyer by all means as the profit was assured to be high. These vendors proofed to Keda to have the right ERP system product that would meet its needs. The provider may not have had the best client as most might have faced issues with the product. The vendor hired a pretender client to express product satisfaction.

The client’s mistakes may not have been similar to the Keda company ERP system mistakes, and so avoiding them was complicating the problem rather than solving it. Some of the vendors would probably have been hackers. Exposing the company through airing its needs might have given the vendor its private information.

In accessing the information, Keda stated its ideal software necessitated the provider to hack from another business and sell to it. Keda Company was supposed to provide detailed project before outsourcing its ideal program to these providers.

This way, the provider would have given the program right away from the detailed project. Keda should have updated the software as the provider might be on the hacking mission, thus paralyzing the newly installed program. Through updating, the technology is also upgraded to keep up with the current times.

The second concept that Keda Company needed to consider is additional maintenance as the new ERP system was not able to update with the upgrading technologies. This means that the company is never a maintenance fee beneficially, paid in large amounts for the upgrades.

This result in wastage of valuable resources. The SAP ERP provider tackles the problem at hand by postponing the price increase and spreading the period of product contract in a span of 7 years. In this way, Keda is made ignorant of the SAP plan of incurring more than the expected amount of money.

In case Keda stopped paying the maintenance fee, it would have been risking as it had already signed a contract which could not be broken till the end of the 7 years. Keda could explore other channels to discover the support they could get from the ERP system.

For example, Keda could inquire of the alternative solutions from online user forums, from reading of informative books, and from getting consultations to help the company to cope with the situation at hand.

The third concept that Keda should have consideration is a new technology trick that is deceiving to vendor buyers. The ERP system software is not updated as it seems. The only updated part is the concept of new technology. This is a trick played on Keda Company. The vendor hides the outdated technology to show that the product met the need stated to make Keda buy their product.

The fact that the IT department ceased to do any IT work as they focused on businesses means that the Company is ignorant to notice old technology on the ERP system. Moreover, the Company looked at the presentation of the vendors rather than practically testing the product. In this way, it might have been possible to note the weaknesses of the product in terms of technology, and lack of maintenance provision.

The vendor might have offered the product at a low price and so the company bought the product in the name of cutting the cost and maximizing the profits. Soon, it will become clear that the vendor’s aim was to sell the outdated invaluable product. Keda is stuck in a contract that is not providing up to date technology.

In conclusion, a case study of the Keda machinery manufacturer has been done extensively, and a lot has been learnt. The leadership best practiced by the Keda managers is dictatorship as there is no consulting of the second person.

Keda embarked on an ERP implementation project to solve the short – term and the long – term problems that were likely to occur when expanding to the foreign market.

The director and I.T manager decided to do the implementations on their own and even took the role of doing the business field without consulting the business experts. There are three essential concepts of ERP as observed. Keda should have considered making an informed decision before embarking on the business deal with the vendor provider.