Homework answers / question archive / BROADBAND-X: ENTERPRISE RESOURCE PLANNING IMPLEMENTATION Fatih Yegul wrote this exercise solely to provide material for class discussion

BROADBAND-X: ENTERPRISE RESOURCE PLANNING IMPLEMENTATION Fatih Yegul wrote this exercise solely to provide material for class discussion

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BROADBAND-X: ENTERPRISE RESOURCE PLANNING

IMPLEMENTATION

Fatih Yegul wrote this exercise solely to provide material for class discussion. The author does not intend to illustrate either effective

or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to publishcases@ivey.ca.

It was a July afternoon in a major North American metropolis when Brian Tumbler, president of Broadband- X, dialed the number of Preet Zayan, the top candidate among those who applied for the new enterprise resource planning (ERP) implementation lead position.

Broadband-X was an electronic contract manufacturing (ECM) company that had outgrown its current tracking processes and needed to find a solution that could incorporate the various departments’ needs while improving cross-departmental and customer communication. After conducting research into several options, Tumbler decided that the company’s needs could be met with an ERP system that would standardize, streamline, and integrate business processes. Tumbler acquired an ERP package with the intention of handling the implementation project himself, just as he had done with the QuickBooks accounting software package a few years prior. After a couple of failed deployment attempts, Tumbler decided that he could not lead the ERP implementation, and unless he chose another course of action, he would end up with an unused ERP package into which he had already invested a considerable amount of funds. He needed help from an experienced professional, and instead of working with a consultant, he decided to hire someone in-house who would lead the project.

As he waited for Zayan to pick up the phone, he questioned whether Zayan was up for the challenge of analyzing the current systems, conducting employee interviews to figure out the issues and the priorities, and begin working on an implementation strategy and project plan.

BROADBAND-X

After a successful engineering career in the electronics industry, Tumbler decided to take ownership of his own career and founded his own company, Broadband-X, over a decade ago. It was a risky endeavour to invest in expensive equipment and enter the market as a new ECM company. He already knew that ECM companies operated on a small profit margin in a volatile market that was never short of bankrupt businesses.

However, having a Master of Business Administration degree on top of his engineering credentials helped him to build a smart sales strategy and allowed him to balance the risks with proper financial planning.

Broadband-X began its journey in the suburbs of a metropolitan area with a single surface-mount technology

(SMT) line and a few employees, to meet the demands of a small number of customers. Over the next decade,

to serve several dozen companies, Broadband-X added 4 more SMT lines to its assets, which was supported

by a workforce of 40 to 60 employees, depending on the demand fluctuations. To scale up its operations,

Broadband-X purchased a property in one of the industrial zones of the main urban area.

As part of its corporate strategy of offering high-quality products to its customers, Broadband-X successfully implemented the International Organization for Standardization (ISO) 9001:2015 and ISO

13485:2016 (medical) standards and secured the certifications. Broadband-X wanted to further its growth

and acquired an ERP software package to efficiently plan, control, and execute its manufacturing operations

in harmony with its sales, accounting, and logistics functions.

ECM

ECM was an industry that produced printed circuit boards (PCBs) for brand-name companies, who used

the PCBs in their merchandise, varying from mobile phones to home appliances. The services offered by

ECM companies included designing the PCBs, building and testing prototypes, and manufacturing PCBs

in low or high volumes.

PCBs could be found in electronic products. If you disassembled a mobile phone, a light-emitting diode

(LED) light bulb, or a television remote control, you would find a PCB inside of it.

The technology for building PCBs had dramatically changed over several decades. In the early years, workers had to assemble and solder all parts (transistors, resistors, capacitors, etc.) manually on the boards.

As the electronics industry advanced, the parts became smaller and smaller, making manual assembly infeasible and expensive. Consequently, SMT emerged, thus automating the assembly and soldering of most electronics parts on PCBs, which were called the “SMT components” (see Exhibit 2).

Some bigger components that could not be handled by SMT lines were required to be assembled and

soldered manually by experienced workers. These were called “thru-hole components” (see Exhibit 2), and various expensive machinery could automate the assembly of certain thru-hole parts, which might have been feasible for large-volume production.

A generic product assembled by an ECM company comprised a blank PCB as well as SMT and thru-hole components that needed to be assembled based on the design provided by the customer.

The ECM industry could be safely characterized as a high-mix low-volume (HMLV) production business, especially in countries where the labour cost was higher, such as in this case. ECM companies could receive orders from different companies for distinctive PCB designs in quantities ranging from a few to possibly millions.

PCB products were usually subject to typical demand patterns throughout their lifecycle. ECM customers initially ordered a few prototypes for new products, mainly for testing purposes. After several back-and- forth adjustments—and once the company was content with the prototype—it would likely order a small number of products for the initial market launch. If the product was successful, the order sizes would

eventually increase based on the market demand up to a volume size, which made it feasible for the ECM customers either to build their own dedicated lines for the specific product or transfer the orders to bigger

ECM companies in Asia for economies of scale. The production may have returned to smaller ECM companies in high-labour-cost countries toward the end of the product market lifecycle, as demand fell.

ERP SYSTEMS

Starting in the 1960s, as production companies discovered the power of computers, the use of material requirement planning (MRP) software became widespread to improve productivity by estimating material quantities and scheduling deliveries. At the same time, companies started using software to perform their bookkeeping, accounting, and finance functions. As network and database technologies became more advanced and accessible in the 1990s, major software companies introduced enterprise-wide software

solutions that came with a central database that could record all business transactions from receiving to inventory management, from production scheduling to shipment, or from human resources (HR) to finance.

As these systems had the power to centralize data from almost all the departments and locations of an

enterprise, the term “enterprise resource planning” was coined to define them. Initially, ERP had been

widely adopted by major manufacturing companies. After about three decades, the ERP market, comprised

of hundreds of software/service providers, was still a growing trend globally as organizations from all industries continued to invest in new implementations or upgrades.

Successful ERP implementations helped organizations to overcome the drawbacks of the silo effect caused

by the lack of information flowing between the departments. It also enabled them to develop efficient real- time data-sharing mechanisms. Additionally, ERP systems established the transactional foundations necessary

to harness data warehouses that offered valuable data analysis opportunities for effective decision making.

ERP packages came with different modules that companies could choose to implement depending on what

kinds of business processes they had in place. Broadband-X’s contract with the ERP provider covered the

following modules: estimation and quoting, sales, shop floor control, bill of materials (BOM), engineering, scheduling, MRP, inventory management, shipping, purchasing, receiving, accounting, finance, HR, customer relationship management (CRM), and quality management.

BROADBAND-X BEFORE THE ERP

Broadband-X used the QuickBooks accounting software to manage the quoting, sales, payroll, purchasing, accounts payable, and accounts receivable processes. The software worked well, except for

an important detail: QuickBooks was not designed to manage and control production processes. As a result, spreadsheets were used for the planning, scheduling, and execution of the production operations

as well as the quality management system.

Any necessary communication between the spreadsheet-managed production processes and QuickBooks- managed support processes required time-consuming manual interventions. For example, each shop floor employee completed a daily activity sheet, which was then entered manually into QuickBooks by the bookkeeper for cost accounting. In contrast, the ERP system had a module that allowed the workers to

easily enter their activities into the system using a barcode reader and few keyboard strokes as they moved from one work order task to another. All that was needed were a few computer stations on the shop floor located in proximity to their workbenches.

Furthermore, the manual intervention was so time-consuming that sometimes it was abandoned altogether.

For instance, some electronic components were bought in reels (batch quantities) for specific customer

orders (jobs), and once the job was completed and the products were shipped to the customer, several

unused components were recorded on a separate spreadsheet that was dedicated to that specific job. Because

the number of distinct components on a PCB could be quite large, employees did not deplete the used parts in the QuickBooks database manually, which is why the inventory balances in QuickBooks were not always reliable. Occasionally, the staff needed to search through thousands of spreadsheets to figure out where a specific component could be found. Zayan was optimistic that the inventory control, BOM, and MRP modules of the ERP would help them to sort out the problems mentioned above.

About one year before hiring Zayan, Tumbler evaluated approximately 10 ERP software packages.

Statistically, many ERP deployments were not successful, as the system either got cancelled or the company switched to a different ERP package, so Tumbler was worried that the time and funds might be wasted.

Tumbler determined that all the ERP systems he was considering appeared to be good, based on their advertising or conversations with a salesperson. During his evaluation, he attended several ERP demonstrations; in some cases, he attended multiple demonstrations for the same ERP package. He even installed a couple of them on the company server for test runs, which was how he realized that most of them were not designed in a way that could handle various processes specific to Broadband-X.

Following extensive market research, Tumbler settled on an ERP system produced by a company based in another country. The selected package was a good fit, as it was based on a design-to-order business model, was affordable, came with an open database for customizations, and offered strong customer support.

Broadband-X purchased the ERP with an annual maintenance agreement.

Years back, and thanks to a well-managed effort by Tumbler at the time, the company had successfully implemented the QuickBooks accounting software, which was why Tumbler was confident the company would be able to implement the ERP system using the existing personnel under his leadership.

Once Tumbler began working with the ERP system, it did not take long for him to understand that it was much more comprehensive compared to the QuickBooks accounting software. It required a dedicated employee accompanied by a company-wide project management effort to implement it effectively. At the same time, the business was thriving, with strong market demand keeping the company busy with new customers and new products. This diverted Tumbler’s focus to other initiatives that needed his attention.

As such, he decided to put the ERP project on hold until a better time.

After about a year, when business with newer customers began to stabilize, Tumbler thought it was time to recruit someone to champion the ERP project, as he had already invested a considerable amount of money

in purchasing the software along with an annual maintenance fee.

Zayan had worked in several different business sectors and had a solid understanding of how ERP systems functioned, especially from a manufacturing point of view. He had experience in project management, implementing and managing MRP systems, and handling databases. Zayan was in search of a new job, ideally an ERP-related position, when Tumbler invited him for an interview.

The interview commenced, and shortly after, formalities were underway. Zayan and Tumbler immediately began discussing the challenges of ERP implementations. It was a quick decision for both Tumbler and

Zayan. Zayan started in his new position at Broadband-X three weeks after the interview, and he was immediately tasked with managing the ERP implementation project for the company.