Review of Why ERP?

1. Case Analysis Project – Why ERP?
Read the book Why ERP? By Jacobs and Whybark and prepare written answers to the following
ten questions.
1. What is the objective Dan Bragg has in mind for the implementation of SAP R/3 at
McDougle's Furniture in North Carolina?
Dan Bragg is the IT person in the Ohio plant and likemost IT people believe SAP is an IT
solution, not a management solution. His expectation is the system in Ohio can just be
“transplanted” to the North Carolina system. But the plants are not the same. The business in
Ohio is considerably less complicated than the North Carolina plant. See the Figure below for a
comparison between the two plants.
Topic North Carolina Ohio
Products Custom Furniture Standardized Models
Time to Completion Up to 8 Months Less than 8 hours
Current System MRP + Tweaked Add-ons ERP
Flexibility Required Immense None
Processes Immature-Not documented Mature-Well documented
Employees Stable High Turnover
Salaries Above Market Below Market
Talent Artisans Minimum Training
Wood Custom Hardwoods Plywood, Composition
Type of Customer Upscale, Custom Wal-Mart; Kmart
Type of Plant Creative Assembly
Forecasts Multiple by Department Tied to Vendors
Time of Forecasts Nothing Concrete Several Months in Advance
2. What is Mr. McDougle's objective for the implementation of SAP R/3 in his furniture factory
in North Carolina?
Initially, Billy thought Mr. McDougle only wanted to integrate the financial portion of the two
plants but now his objective is to be able to have consolidated systems for both plants.
Financially this would be much more economical from a cost standpoint. He believes it is easy
and simple to implement SAP for both plants.
3. Does Billy want to implement SAP R/3 at the North Carolina furniture plant?
Not really! Billy does not believe the SAP R/3 is the correct system for the North Caroline plant.
The North Carolina plant has been in the McDougle family for several generations and
produces a line of very fine handcrafted furniture for residences and offices. Located in the
Smoky Mountains, they were able to take advantage of the local hard woods from the area
but they also have to order materials from overseas. Those items have a much longer lead-
time. Their customers are both residential and commercial with high quality and custom
designs. The company has grown slowly but they have managed their growth to keep a
constant work force. Their employees are local labor, very experienced and highly skilled.

2. They treat their employees well and pay better than market wages to their people. They use
the “apprentice” system, hiring local students from shop classes to see if they will work into
permanent employees. The atmosphere of the plant is one of informality with everyone
helping each other out when needed. The system is flexible to match their way of doing
business.
The SAP system has a huge number of details just to handle the day-to-day transactions, it is not
very flexible, and the installation is also difficult. He is overwhelmed by the amount of
decisions required just to “program” the system with all the options. It would require
changing how they do business. His concern centers on starting the implementation only to
discover the system does not fit their circumstances. The Ohio plant set up is very different
from the North Carolina plant. The system “integration” is the reason for the complexity.
Data is only entered once but used by many people so everyone has to agree on what data is
entered, how it is entered, and how it is used. The North Carolina plant has added “tweaks”
to their current program to allow for customization and changes during the production
sequence. These changes would be difficult with and ERP system and Billy does not see how
the ERP software will fit with their way of doing business. For an ERP implementation to be
successful, a business must change their way of doing business, recognizing the new business
processes using a cross functional approach.
The consultant Billy spoke with described plants where R/3 implementation would not be
recommended. Companies with very little experience with formal information systems,
lacking discipline and training to develop people to use R/3, had changing information
system requirements, and/or were dependent on a great deal of flexibility for success would
not be good candidates for a successful implementation. The North Carolina plant is “0 for
4” for success.
4. What would his objectives be if he did want to do so?
Flexibility was his top concern. His objective would be to start small, with just one module to
begin with. Consolidating the accounting programs would force the North Carolina plant to
clean up their data, get good processes in place, and have good definitions to work with. Also,
keep the current MRP system so business is not adversely affected.
5. Why was the implementation of SAP R/3 successful in Ohio?
From the wording of the question, it seems the consensus is the ERP implementation in Ohio was a
success and from a monetary standpoint, this would appear to be true. However, there are other factors
to consider when labeling an implementation “successful”. Based on an article “The 12 Cardinal Sins of
ERP Implementation”http://rockfordconsulting.com/the-12-cardinal-sins-of-erp-implementation.htm there
are issues, sins, and time-proven approaches for implementations. First is High Employee Involvement,
workers know their jobs and should be involved in the implementation phase as much as possible, this
fosters ownership and buy-in. Second is a Comprehensive and Systematic Approach, which addresses all
parts of the ERP system. This includes the development of an IT strategy, requirements, definitions,
proper research of software and hardware, education and training of all employees, and resistance to
change to name a few. Third is Adequate Resources in terms of technical and administrative resources to
allow employees breathing room. Be sure to understand the entire cost of implementation. Fourth is
Extensive Education and Training at all Levels. This includes all employees involved with the new system,
including upper and middle management.

3. The first approach of employee involvement was a miss.Few of the Ohio employees knew the system
inside and out. It was an “IT” and management implementation. This can be seen from the high turnover,
the employees were “told” what to do, and with the high turnover, there were few employees left from the
“old” way of doing business. It was a comprehensive system but it was an IT implementation with little
education and less training, along with no effort to eliminate any resistance to the new system. On
adequate resources, the company did make sure to choose the right system and so far, the company has
benefited monetarily with improved production and shorter cycle times. The fourth approach of extensive
education and training only happened for high-level management. Additionally, once the Accounting
Manager left, their “success” began to falter.Employees were not included in the training except for their
specific tasks. Given these results, I am not sure I would conclude the Ohio plant was a success.
However, from a business standpoint, it might be considered successful because of shorter cycle times
and increased business.
From this standpoint, in order to see why the implementation of SAP R/3 was successful in Ohio,
a review of the operation of the Ohio plant helps. The Ohio plant operates on a “just-in-time”
basis. Trucks unload raw material almost all day long at one end of the plant and trucks are
taking away completed orders at the other end of the plant by close of business. Most of the
orders go through the plant in hours. Their goal is to use the same truck that delivered the raw
materials to pick up the finished goods at the other end of the plant.
Their plant uses mostly plywood, composition board, some solid wood, hardware, and a little bit
of finishing material. Almost all material comes in pre-finished, cut to standard lengths and
widths. This makes assembly fast, with little custom work required. They have approximately 30
vendors and ship between 450 – 500 standard desk models a day. The same goes for the shelving
units. The vendors do all the cutting and finishing. Packaging is done with cardboard, strapping,
and boxing for shipment. Also included are assembly instructions. Only a couple of days’ worth
of inventory are kept on hand. Ohio McDougle uses computer controlled machines and
automated conveyors in production. Billy also noticed there were few workers on the floor, since
most of the work was programed by the back office.
Customers provide forecasts several months into the future, broken down by model. They are
even tied into some of the vendors systems. The product lines only change by about 15 to 20% a
year. Their biggest accounts are with Wal-Mart, Kmart, and Office Depot. However, they have a
very high turnover in personnel, there are no master artisans. They learn the job quickly and
work for lower wages but once they get some training, other companies hire them. This accounts
for the high turnover. Additionally they have mature processes in place, with documentation
available throughout the plant. Larry McDougle does not use the system except on rare
occasions and all questions are referred to senior management, not to any of the line workers.
However, the plant moves like a well-oiled machine, on schedule, using materials just in time,
and shipping products as quickly as they are made. The company had mature, static processes
that lent themselves well to automation.
6. Identify specific examples of other companies where SAP was successful and explain
why. Alternatively, give some general characteristics of firms where SAP might be successful.

4. One example where SAP was successful is Staples Office Supply. They wanted to install an
online kiosk, installed in all 1400 stores. This required connecting the company’s e-commerce
website,, Staples.com with its point of sale (POS) system, order management system, distribution
system and supply chain. This new process came from their strategic plan, using IT to advance
the companies mission. They have mature processes and want to implement additional
capabilities to keep their customers coming back by providing a full range of online services.
Another characteristic, according to Staples is standardization. This makes implementation cost
less. Part of this standardization for Staples is development one common platform.
Another example is Dow Chemical where the SAP implementation was ultimately successful.
They were willing to change, focused on small wins and adjusted their scope when project
difficulties occurred. Additionally they had strong, internal leadership who was vested in making
the project successful. They relied on internal people to design the processes and configure the
system rather than turning this crucial step over to an outside consultant. Use of consultants is
beneficial in explaining what, when, how, and where to install the system but they are not a
replacement for employees who will use this system everyday.
General characteristics where SAP might be successful arefirms with mature processes,
everythingis documented, and everyone knows what to do. Another characteristic is a firm with
substantial computer experience. In addition, when management believes the SAP is a “not a
silver bullet” that will magically fix all their problems but will help them improve their
processes, making them more competitive. They understand training is important and are willing
to do it “right”.
7. What are some specific examples of companies where SAP R/3 was not successful and
explain why?Alternatively, give some general characteristics of firms where SAP might not be
successful.
One example where SAP was not successful is FoxMeyer, a wholesale drug distribution
business. They did not have sufficient management support, inadequate planning by
management, and used an external consultant. Management had unrealistic expectations
concerning the return on the SAP implementation and the culture was not open to change.
Additionally, employees did not express their concerns to management. In reviewing all the
issues the main characteristic they lacked was complete and realistic management support. It
also does not appear there were any strategic goals for this implementation. At the same time,
FoxMeyer tried to install an automated warehouse system, which was an extremely poor
decision by management. Taking on one major implementation is difficult, but two at once is
suicidal. Ultimately not only was the implementation not successful, but FoxMeyer went
bankrupt.
Another example where SAP was unsuccessful was Nike. From all indications, it appears the
major characteristic missing for Nike is management’s buy-in. Nike tried to implement a risky
and difficult strategy by creating a single, giant, integrated database within its SAP ERP system
for every employee in North American and EMEA. This meant getting everyone to agree on
business practices and common data definitions before the software went in. This is an extremely
difficult integration and has contributed to more failures than not. (Koch, 2004) The
characteristic lacking in this example is management understanding and realistic expectations.

5. They did provide support but their expectations were so unrealistic the chance of successful
implementation was very slim. They did not allow sufficient time for the implementation and the
internal training was low. Lack of training leads to individuals who are ill-prepared to
successfully implement and use the system.Even though Nike touts the system as a success, their
production time did not decrease (according to their vendors) and gross margins have only
increased slightly, not significantly for the six year, $500 million dollar implementation.
General characteristics where SAP might not be successful are firms with immature processes,
and little is documentedandonly one person knows the entire system. Another characteristic is a
firm with little or no computer experience. In addition, when management believes the SAP is a
“silver bullet” that will magically fix all their problems but they want it “now” and do not want
to spend the money to do it “right”.
8. What would you have done differently if you had been Billy in this situation?
I am not sure I would have done anything differently in the research portion of the problem. He
tried to gather all pertinent information. However, I do not believe Billy understood the real
question Mr. McDougle was asking in the beginning. Billy thought he was on a fact finding
mission when in fact he was really only doing lip service. Mr. McDougle’s mind was already
made up; he was going to implement the system regardless of what Billy found out. Given this,
Billy was in a no win situation.
The first thing I would have done differently would have been to determine Mr. McDougle’s true
objective before starting on the project. Billy did not ask nearly enough questions, plus he was a
little jaded with regards to the system before he began his research. Another thing I would have
done differently would have been to put together a presentation with all the information gathered
and bring in a consultant to help “sell” the right answer. Since Billy had preconceived notions
about the SAP system, his data was probably viewed as “suspect”; where data from a
disinterested third party might have carried more weight.
9. Is it possible to install a commercial ERP system and still get a competitive advantage from
your information system? Why or why not?
It is possible to install a commercial ERP system and have an operational competitive
advantage. The reason is companies are made of people. The machines assist but they cannot
take the place of individuals who make the final decisions. Even though the systems are the same
when they leave the vendor, a company can choose different modules, different options (there are
8,000 to choose from), and still apply their own business knowledge which is unique to each
business. A firm cannot get a competitive advantage from and ERP system but they can get some
operational efficiencies. Eventually they may be the “norm”, like having email. It is like two
people opening a restaurant, both are excellent chefs, both have a good location, but one is
successful and the other is not. Somehow, one maintained a competitive advantage, while the
other did not. People make the difference!
Companies must define a business strategy that will give them a competitive advantage or, at the
very least, make them competitively equal. Then, analyze their current business processes and
develop their objectives. This will make them successful, not the software itself.

6. 10. What were the three best and three worst things about the implementation of SAP at the
North Carolina plant?
Actually, the three worst things happened more than once,first before the implementation and
second after it. Before the implementation the three worse things were they tried to do the
implementation in a hurry; they did not hire any outside help with the technical decisions;
lastly it was an IT implementation not a business implementation.
The three worst things that happened after the implementation was, the worst thing was what
happened to the people. They were all demoralized and many left the company.
Manufacturing is going crazy; they no longer have the flexibility to make changes like in the
past so costs are going up. Customer service is down because they cannot get any
information from the system.
The three best things about the implementation were Billy got a new job, came to realize there
are situations when ERP will work and he was called back as a consultant to try and get the
implementation back on track. In reality, there were no “three best”, the implementation was
a disaster and the company may not survive.