Gst5083 mis w4 a2 summit electric lights up

Team Members:
§ Cherry Linda Keripin (P14D393P)
§ Elina Tiu Chai Hui (P13D160P)
§ Alexander Mathew Kana (P14D384P)
§ Gesna Michael Jepus (P14D400P)
§ Teo Chiat Huat (P14D395P)
GST5083 : INFORMATION SYSTEMMS AND E-COMMERCE
Week 4 (Assignment 2 – Summit Electric Lights Up with a
New ERP System)
Lecturer : Prof. Dr. Rusli Abdullah

GST5083 : INFORMATION SYSTEMMS AND E-
COMMERCE
Week 4 (Assignment 2 – Summit Electric Lights Up with a New ERP System)
INRODUCTION:
General company background:
• Established in 1977 in Albuquerque, New Mexico, Summit Electric has grown very quickly to be one
of the top wholesale distributors of industrial electrical equipment and supplies in US
Ø Operating In 4 states
Ø Has a global export division based-in Houston
Ø Has a marine division based-in New Orleans
Ø Has a sales office in Dubai
• Employed 500 employees
• Achieved revenue of $358 million in 2011
Products/ Services provided:
Products:
• Distributes products such as motor controls, wire and cable, cords, lighting, conduit and fittings,
wiring devices
• Support systems and fasteners, outlet boxes and enclosures
• Transformers and power protection equipment
(Summit Electric obtains finished goods from manufacturers and sells them to electrical contractors
working on projects ranging from small construction to sophisticated industrial projects.
Services:
Summit Electric acts as distributor on the supply chain, and have the ability to rapidly handle a high
volume of transactions and swift inventory turnover.

COMMERCE
NRODUCTION:
In-line with it’s rapid business growth, their legacy information systems built-in 1980s could not handle
the increased business volume.
Issues that was faced by the 1980s developed legacy information systems are:
• Independent systems for sales entries, purchase orders and back-end reporting.
o Integration have to be done manually in batches for the sales entries & purchase orders
• Systems could only handle a fixed number of locations which limited the range of numbers that could
be used on documents – creating inconveniences as the same range of document numbers are reused
over & over again every few months.
• Problem in processing nightly inventory and financial updates within the timeframe available
With rapid growth of it’s business and increased business
transactions, Summit Electric had to make the decision to
change the legacy information systems for a new enterprise
resource planning (ERP) system. To change to a new ERP
system, Summit Electric was facing a fair bit of challenges as
many of the business processes was built around the legacy
system.

COMMERCE
INRODUCTION:
Most of the proven-ready ERP software are designed for
manufacturing or retailing businesses and did not cater for
some of Summit Electric unique processes and priorities of
the distribution industry.Summit Electric System Requirements for the new ERP system:
• To handle a very large number of SKUs (stock-keeping units, which
are numbers or codes for identifying each unique product for
sales) and transactions
• To handle very short lead times for order processing, inventory
distributed in various models – as customer might call to place an
order while driving to pick-up the order immediately and Summit
Electric needs to know immediately what product is available at
what location
• To handle products sold in one quantity that could be sold in
another

COMMERCE
INRODUCTION:
After extensive reviewing of various ERP vendors and review of
electrical distributors using SAP, Summit Electric finally select
ERP software from SAP because of:
• Functionality in sales and distribution,
• Materials management (inventory),
• Financials, and
• SAP knowledge of Summit Electric distribution business nature
In Janaury 2007, Summit Electric goes live with it’s new ERP system
across 19 locations which are fully-integrated.
Through customization to handle Summit Electric’s unique business
requirements, the new SAP ERP system delivers the following:
• Overnight processing (this period have longer lead time for order
fulfillment)
• Instead of overnight inventory updates which could delay their
sales processes, system was customize to handle smaller, more

COMMERCE
INRODUCTION:
To summarize, Summit Electric’s old legacy system used separate
systems for orders and financials and facing difficulty in
combining data for business intelligence reporting and
analysis. This is resolved with implementation of SAP’s
NetWeaver BW data warehouse and business intelligence
solution to make better use of the data in it’s ERP system.

COMMERCE
Q1. Which business processes are the most important at Summit Electric Supply?
Why?
SAP’s NetWeaver BW
This data warehouse and business intelligence solution provides
the tools to enable Summit Electric to make use of the
data in it’s ERP system to evaluate profitability of it’s
sales channels,, using what-if scenarios eg analysis of
profitability by sales person, manufacturer, customer or
branch.
The findings encouraged Summit Electric to focus more attention
to areas such as sales order quotations and to supplier
performance and delivery times.
This gives management greater visibility into how the

COMMERCE
Q1. Which business processes are the most important at Summit Electric Supply?
Why?
PAYBACKS AND CHARGE BACKS
Summit Electric’s SAP produced a significant return on investment
(ROI) from automating sales tax processing and chargebacks
and this affects their profit on all dealings.
Chargebacks occurs when a supplier sells a product at a higher
wholesale price to the distributor than the price the
distributor has set with a retail customer. A chargeback
agreement allows the distributor to bill the manufacturer an
additional contracted amount in order to make some profit on
the deal.
Processing chargebacks requires very close comparison of sales to
contracts and Summit Electric have hundreds or thousands of

COMMERCE
2. What problems did Summit have with its old systems?
What was the business impact of those problems?
Summit Electric is one of the top wholesale distributors in US and in the 1980s, it had developed it’s
own legacy information systems to handle their main business processes. But due to the rapid
growth of their business which quickly made there is inefficient and not been able to handle
the incremental huge business transactions.
One of the key issue of it’s old system is a non-integration between the different business functions and
data needs to be re-entered at different stages and no business intelligence tools built into
the IS to assist in providing helpful business statistics or reports to make better decision
makings. Each module of the old legacy system operates on it’s own and some functions such
as document numbering are fixed to a range resulting in having to re-use the numbering at
different months.
Due to the non-integration of various functions of the information system, data have to be
manually integrated and a lot of non-productive processing time are created, making the
process inefficient. The old system only had a limited number range for documents and
numbers needs to be reused from time to time. This creates not only confusion but gives
constraints to financial updates and inventory couldn’t be updated on timely manners
gives discrepancies to it’s inventory management and sales order as latest snapshots of
available products stocks are not accurate.

COMMERCE
2. What problems did Summit have with its old systems?
What was the business impact of those problems?
With inaccurate data, constraints of the way the old IS is built would affect their customer services as
sales order would not be able to be efficiently processed with inaccurate inventory data,
financial updates would be hard to managed with re-usage of unique order numbering as it’s
hard to differentiate the business transactions and the great amount of time needed for re-
entry of data as there’s no integration between different IS functions. Besides great amount
of time wasted, inaccuracy could arises due to data entry error, etc.
Certain processes are built around the old IS system which makes process re-engineering difficult as
changes to improve business processes would required re-coding of IS system, causing
downtime – affecting customer supports, which might result in loss of sales as Summit Electric
is not the only wholesale distributor of electrical products. There’re competitors ready to
win-over their customers.

COMMERCE
Q3. How did Summit’s ERP system improve operational efficiency and decision
making?
Give several examples.
Summit Electric’s ERP system improve operational efficiency and
decision making through:
• Running smaller and frequent inventory update throughout the day
instead of night provide accurate inventory and shipping orders
information which allows Summit Electric to ship customers’ orders
at a faster pace
• To enable a more accurate replenishment of wire and cable, the
ERP batch material management system identified the customer,
purchase amount, length of wire and product manufacturer. This
enable better tracking of the volume of wire and cable sold and
stock replenishment order to manufacturer would be more
accurate

COMMERCE
Q3. How did Summit’s ERP system improve operational efficiency and decision
making?
Give several examples.
Summit Electric’s ERP system improve operational efficiency and
decision making through:
• To create a more efficient finances and order system, Summit
Electric implement the SAPNET Weaaver BW data warehouse and
business intelligence solution to make use of the ERP data to
enable them to analyze:
o The profit of each sales person, manufacturer, customer and branch (using the
analysis produce to improve it’s ROI)
o Automating sales tax and charge backs – ability to identify the billing activity, if
there’s any charge back, the system will automatically submit the information to bill
the charge back. This system allows Summit Electric to increase its charge back
claims of up to 118%, increasing it’s revenue as a percentage of sales.
• The new ERP system enables Summit Electric to focus on sales

COMMERCE
Q4. Describe two ways in which Summit’s customers benefit from the new ERP
system.
1. Improved customer supports – customers can do business
with Summit Electric in a more effective and efficient way
through giving customers more flexibility such as customers
could make sales orders to any of Summit Electric outlets
and could get their orders from the nearest outlet besides
been able to get their order(s) at a shorter time period.
2. Summit Electric is able to accommodate large customers
with long-term job sites, this is through setting-up of
temporary warehouse on site to supply these customers;
creating “parent-child” warehouse relationship to be able
to work with customers for their consigned products
availability.

COMMERCE
Q5. Diagram Summit’s old and new process for handling chargebacks.
OLD PROCESS:
Handling chargebacks had flaws and the company was losing money.
• Processing chargebacks has to compare the sale to contract.
• A distributor can have up to hundreds to thousands of contracts.
• Summit Electric need to identify the chargeback and which manufacturer with enough
documentation of the contract or a lot of manual work and time consuming process
subjected to missed-out & human errors.
• Summit Electric need to go through the customers invoice with detailed manufactuers
identified and put the chargeback in Microsoft Excel to tabulate.
NEW PROCESS:
With the new ERP system, handling chargebacks are more efficient as it’s automated.
• System automatically review Summit Electric’s billing activity for the day
• All chargebacks agreements are loaded in the SAP system by the end of each day.
• Matching will be done by the system and chargeback claim computed.
• Separate chargebacks document outside the customer invoice is created and able to
process more quickly with review in the same day.
• With this, Summit Electric increased its claim of chargebacks by 118% over the old system.

Q5. Diagram Summit’s old and new process for handling chargebacks.
COMMERCE

Gst5083 mis w4 a2 summit electric lights up

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