CIE ASSIGNMENT I - IT Consulting

Name: Divyata Prajapati Date: 13-09-2023

Enrollment No: 2207070000303 E-Sign: Divyata Prajapati

Discuss the case study with answers to the following questions. (Any 2) 05 Marks each

Case Study: 01

You have recently joined as Technology Consultant in a leading Tokio based automobile firm
that manufactures various models of passenger Cars and three wheelers right from 2007. This
profit making firm plans to streamline its main business process, i.e., its manufacturing process
through ERP adoption. Now, your GM instructs you to prepare and present a ‘Manufacturing
Process cum Data Model’ for your firm, which will be treated as a Blueprint for streamlining
your firm. Your ‘Process cum Data Model’ should provide the following :

(I) Representative List of Core Processes and Their Brief Descriptions in an Ideal Automobile
Manufacturing Company:

1. Product Design and Development: This process involves conceptualizing, designing, and
developing new car models or improving existing ones to meet market demands.

2. Supply Chain Management: Managing the flow of materials, components, and parts from
suppliers to production facilities, ensuring timely availability while minimizing costs.

3. Production Planning and Scheduling: Creating production schedules, allocating resources,

and optimizing production processes to meet demand and reduce lead times.

4. Manufacturing and Assembly: The actual assembly of vehicles, which includes welding,
painting, and final assembly, ensuring quality and safety standards are met.

5. Quality Control and Assurance: Implementing quality control checks throughout the
manufacturing process to identify defects and ensure product quality.

6. Inventory Management: Managing raw materials, work-in-progress, and finished goods

inventory to balance supply and demand efficiently.

7. Procurement and Vendor Management: Acquiring raw materials, components, and parts
from suppliers while maintaining strong vendor relationships and negotiating favorable terms.

8. Sales and Order Processing: Handling customer orders, order entry, pricing, and order
fulfillment to ensure timely delivery to customers.

9. Distribution and Logistics: Managing the distribution network, including warehousing,

transportation, and delivery of vehicles to dealerships and customers.

10. Customer Service and Warranty Management: Providing post-sales support, addressing
customer inquiries, and managing warranty claims to enhance customer satisfaction.

(ii) Representative List of Various Entities and Their Brief Descriptions for Forming a Data
Model:

1. Product: Represents the various car models and their specifications, including features,
dimensions, and technical details.

2. Bill of Materials (BOM): A structured list of components and parts required for the assembly
of each car model, specifying quantities and dependencies.

3. Supplier: Contains information about the suppliers providing raw materials, components, and
parts, including contact details and pricing agreements.

4. Inventory: Tracks the inventory levels of raw materials, work-in-progress, and finished goods
in real-time.

5. Production Schedule: Contains details of the production schedule, including planned start
and end dates, quantities, and resource allocations.

6. Quality Control Records: Stores data related to quality inspections, defects, and corrective
actions taken during the manufacturing process.

7. Customer: Contains information about customers, including contact details, purchase history,
and preferences.

8. Sales Order: Records customer orders, including order details, quantities, pricing, and
delivery information.

9. Warranty Claims: Tracks warranty claims, including claim details, resolutions, and warranty
expiration dates.

10. Production Equipment: Contains data on the machinery and equipment used in the
manufacturing process, including maintenance schedules and performance history.

Justification:
The processes and entities listed above are crucial for an ideal automobile manufacturing
company. They encompass key aspects of the manufacturing and business operations, from
product design to customer service. Establishing a data model based on these processes and
entities will enable efficient data management, process automation, and data-driven decision-
making, all of which are essential for streamlining the manufacturing process through ERP
adoption.

Case Study: 02
Nestle SA is the parent company of the candy-making giant and is headquartered in
Switzerland. In 2000 Nestle SA decided that it wanted to leverage its size and begin acting like
the giant it is. To do so, it signed a $200 million contract with SAP to roll out an ERP system to
its 230,000 employees in 80 countries around the world (Olson, pg. 53). In addition to this sum,
Nestle SA also committed to an additional $80 million to be spent on consulting, maintenance,
and upgrades. Executives at Nestle SA realized that the company needed to standardize its
business processes if it wanted to be competitive. The rollout was scheduled to take three years
for Nestle SA’s largest sites with the others to follow. Included in the implementation were the
mySAP.com financials, accounts payable, accounts receivable, planning, production
management, procurement, direct procurement, supply-chain, demand planning, fulfillment,
and business-intelligence modules.

Prior to the Nestle SA ERP decision, Nestle UK had already implemented an ERP system. The
British subsidiary of Nestle SA implemented SAP R/3 over a period of five years in 18 UK
manufacturing sites. This implementation wrapped up in 1999 and was the one of the UK’s
largest ERP systems with over 6,000 users . As with the Nestle SA deployment, the goals of the
Nestle UK implementation were centred on leveraging the size of the organization as well as
tightening up the supply chain and re-engineering work practices and processes.

The third Nestle ERP implementation story involves Nestle USA. Nestle USA is the $8.1 billion
U.S. subsidiary of Nestle SA. In 1997, Nestle USA began its own ERP project known as Best
(Business Excellence through Systems Technology). Scheduled to run over the course of six
years ending in the first quarter of 2003, this project was budgeted at well over $200 million
and would implement five SAP modules: purchasing, financials, sales and distribution, accounts
payable, and accounts receivable. Similar to the other two Nestle divisions, the goal behind this
ERP implementation was unification. Additionally, the project would solve Nestle USA’s Y2K
woes. In the case of Nestle USA, the ERP was part of the vision Nestle USA Chairman and CEO
Joe Weller referred to as “One Nestle” that would be responsible for “transforming the
separate brands into one highly integrated company”. Prior to the implementation, Nestle USA
had nine different general ledgers and 28 points of customer entry. The goal of the ERP project
was to bring these numbers down to one. One of the most interesting views on the Nestle USA
problem is the story of vanilla. Prior to the ERP implementation, Nestle USA did not act as one
company. Instead, each location acted on its own behalf and was free to make its own business
decisions. “In 1997, a team examining the various systems across the company found, among
many other troubling redundancies, that Nestle USA’s brands were paying 29 different prices
for vanilla – to the same vendor”. This situation arose from the fact that each factory
negotiated their own deals with the vendor and the vendor adjusted the price per factory
based on what they thought the factory would pay. The situation was only worsened by the fact
that each factory referred to vanilla in a different way. While one factory might have referred to
vanilla as 1234, another factory referred to it as 7890. This made it nearly impossible for
individuals at the corporate headquarters to do comparisons across plants to see
manufacturing costs. Regardless which Nestle case is examined, the goals behind all three ERP
implementations were similar for all the divisions. That is, in each instance, there was a driving
goal to consolidate the operations of the different locations so that Nestle could truly leverage
their size and buying power. Additionally, there was a need to centralize and control data so
that the financial, reporting, and forecasting numbers were more consistent and accurate. As
each factory acted as an autonomous unit, Nestle was at a severe competitive disadvantage
and realized that it needed one system used by all in order to be more efficient and survive in
the global economy.

The term ‘ERP implementation’ has become synonymous with ‘nightmare’ in recent years. High
profile failures dot the headlines and companies are often intimidated not only by the high
price but also the negative effect implementations can have on their business. Vendors such as
SAP are working diligently on shaking this reputation and have made great strides in meeting
their goals. “In 1996, a user could expect to pay six to 10 times the license cost in consulting
charges. These days the external consulting cost has dropped to typically one to two-and-a-half
times the software costs, depending on how much process re-engineering the user does” .
Fortunately for companies considering an ERP implementation there have been enough done in
the past that there are opportunities to learn from the successes and failures of others. One of
the key factors of a successful implementation is “don’t try to make the product fit exactly the
way you would ideally like to work or on the other hand assume that people will completely
change their processes to meet the package. The first takes many years and costs loads, the
second meets big resistance” . For most businesses there needs to be a middle-of-the-road
approach where individuals realize that the software will not solve every organizational
problem and not every process in the company can be reengineered to fit the software.
Regardless, savvy project leaders with prior ERP implementation experience will tell you that
there are several pitfalls to avoid during ERP projects. The first is not to select an ERP package
based on a demo. Choose your package wisely, ask questions, get references, and do your
homework. An ERP package is a costly investment and you need to be sure you are choosing
the package that best fits the needs of your organization. The second is get management
commitment. Not securing top management buy-in results in an automatic project failure.
Management commitment is often high at the beginning of a project but begins to wane as the
project wears on. It is vital to keep management interested, involved, and positioned squarely
behind the project. The third is to avoid heavy customization. It is both easy and tempting to
customize ERP packages to fit your exact needs. Unfortunately excessive customization will
haunt you by lengthening the project timeline and by driving up maintenance costs in the
future. The final pitfall to avoid in ERP implementations is not to underestimate the importance
of training. It is not uncommon that users receive several days of training on the new system
and then do not see the system again for months. Users need in-depth and on-going training
and should even be involved with system testing if at all possible.

Unfortunately for Nestle USA, they did not heed the failures of others. Throughout the
implementation, Nestle USA made several large mistakes that almost doomed the project.
When the project began a team of 50 top executives and 10 senior IT professionals was
assembled to develop a set of best practices for all Nestle USA divisions. The goal was to
develop these best practices for all functions of the organization. Each function from
manufacturing to sales would eventually be forced to retire their old approaches and adopt the
new best practice that had been Page 4 of 5 developed. Concurrently, a technical team was
charged with the task of implementing a common data structure across the company. By the
time the implementation began in 1999 Nestle already had problems with its employees’
acceptance of the system. Most of the resistance met by the project team was traced back to
the fact that “none of the groups that were going to be directly affected by the new processes
and systems were represented on the key stakeholders team”. This was only the start of Nestle
USA’s problems. By early 2000, the implementation had turned into a disaster. Employees did
not understand how to use the new system and did not understand the new work processes
they were being forced to adopt. Divisional executives were just as confused as their employees
as they had been left out of the planning and development of the new system and were less
than willing to assist in straightening out the mess that had developed. The result of this was
that morale plummeted and turnover skyrocketed. In fact, “turnover among the employees
who forecast demand for Nestle products reached 77 percent”.

Nestle USA’s implementation problems did not stop with employee issues. Technical difficulties
began to emerge as well during the rollout. In the rush to beat the Y2K deadline the project
team had overlooked the integration points between the modules. This meant that the
different modules could not talk to each other. So if a salesperson gave a discount to a
customer and entered it in the system, the accounts receivable portion of the system did not
know of the discount. The result was that the customer would pay their bill but invoice
appeared as though it were only partially paid.

By June 2000, Nestle USA was forced to halt the rollout and the project manager was removed
from the project and reassigned to Switzerland. Nestle USA gathered 19 key stakeholders and
executives went on a three-day offsite retreat to discuss the future of the project. Out of this
meeting came the revelation that they would need to redefine the business requirements of
the project and then shape the project timeline around the requirements rather than to shape
the timeline around a predetermined end date. This process took until April 2001 and resulted
in a detailed blueprint for the project team to follow. A director of process change was hired to
act as a liaison between the project team and the different functional divisions . With all of
these items finally resolved, the project was able to continue. The last rollouts were scheduled
to be completed in the first quarter of 2003.

Although there were bumps in the road for Nestle USA’s ERP implementation, it certainly seems
to be paying for itself. As of 2002, Nestle USA claimed they had already realized a savings of
over $325 million. Most of these savings came in the area of supply chain improvements,
specifically demand forecasting. “The old process involved a sales guy giving a number to the
demand planner, who says, ‘Those guys don’t know what the hell they are talking about; I’m
going to give them this number’. The demand planner turns [that number] over to factory, and
the factory says the demand planner doesn’t know what the hell he’s talking about. Then the
factory changes the number again. With SAP in place, common databases and business
processes lead to more trustworthy demand forecasts for the various Nestle products.
Furthermore, because all of Nestle USA is using the same data, Nestle can forecast down to the
distribution center level.

In addition to saving money, Nestle USA has also been able to come together as one
organization. The problem of 29 different brands of vanilla has been solved and now with
common databases each factory refers to vanilla in the same manner. They also use common
processes that simplify operating procedures and allow for the centralization of functions such
as developing training procedures. Training no longer needs to be customized for each factory.
Since each location follows the same procedures, training materials only need to be developed
once. Additionally, any Nestle USA employee could relocate to another factory and not have to
adjust to local processes.

Nestle UK experienced similar successes with their ERP implementation. They were able to
recoup the money spent on the system in only two years. Further, like their American
counterpart, Nestle UK has experienced reduced inventory levels, tighter control on inventory,
and a more disciplined attitude toward business processes. Most importantly, the ERP
implementation at Nestle UK helped to foster a “culture of continuous improvement”.
“Improvement priorities are clear: first, the internal opportunities; second, business-to-
business; and third, business to consumer” (Glick, Enterprise, pg. 24). This attitude is embodied
by the fact that following the ERP rollout they hired a process development manager. This
person’s sole responsibility is to act as a bridge between business and the Information
Technology department and to make sure that employees stay focused on continuous
improvement rather than simply trying to maintain existing systems (Glick, Enterprise.

(a) The Need for Implementing ERP at Nestle:

Implementing an ERP system at Nestle was driven by several crucial needs:

1. Process Standardization: Nestle, as a global company, had diverse business processes across
its divisions and regions. ERP implementation aimed to standardize these processes for
consistency and efficiency.

2. Competitive Edge: To stay competitive globally, Nestle needed to leverage its size. ERP would
help streamline operations, reduce costs, and enhance competitiveness.

3. Data Centralization: Centralized data management was a priority. ERP would centralize
financial, operational, and supply chain data, improving accuracy and decision-making.

4. Supply Chain Optimization: Nestle sought to improve its supply chain, enhance demand
forecasting, and reduce inventory levels. ERP systems are known for effective supply chain
management.

5. Y2K Compliance: For Nestle USA, the ERP implementation also addressed Y2K concerns while
modernizing systems.
6. Integration and Unification: Nestle aimed to unify its divisions into one integrated company.
ERP would provide a common platform for data and processes.

(b) Hurdles Faced During ERP Implementation:

Nestle and other companies often encounter challenges during ERP implementation, including:

1. Resistance to Change: Employees and management may resist altering established processes,
impacting morale, turnover, and project timelines.

2. Integration Complexity: Integrating different ERP modules and ensuring smooth

communication can be complex, leading to data inconsistencies and operational challenges.

3. Limited Stakeholder Involvement: Insufficient involvement of key stakeholders, including

end-users, can hinder understanding and project support.

4. Budget and Time Constraints: Unrealistic budgets and timelines may rush implementations,
compromising quality and effectiveness.

5. Customization Issues: Excessive ERP customization can extend timelines, increase costs, and
complicate future maintenance.

6. Training Gaps: Inadequate training for end-users can impede their adaptation to the new
system, requiring ongoing training and support.

7. Data Migration Challenges: Transferring data from legacy systems can be error-prone,
disrupting operations and accuracy.

8. Change Management: Effective organizational change management is crucial for employees

to embrace new processes and systems.

9. Leadership: Skilled project management is essential, as inadequate leadership can lead to

scope creep, budget overruns, and missed deadlines.

Case Study: 03
INTUITIVE AT LARCIMEDICS
The Company: Lacrimedics, Washington, USA.

Founded in 1984, medical device manufacturer Lacrimedics is a provider of Lacrimal Occlusion

Therapies to physicians, hospitals and distributors around the world. Lacrimal Occlusion is a,
treatment for dry eye syndrome and related ocular surface diseases.
The Problem/ Situation
When Lacrimedics decided to replace their accounting and manufacturing systems, they
wanted an integrated enterprise resource planning (ERP) solution that would support the
growth and address a number of operational problems. After 15 years in business, inventory
was growing faster than revenue, on-time delivery was slipping and general lack of information
was negatively impacting financial and operational performance. Very little IT resources were
available.

The Solution and Implementation

Lacrimedics looked at several ERP systems targeted to small and mid – sized manufacturers and
systems from the industry giants SAP, Baan and J.D. Edwards. The systems were judged based
on overall functionality, ease of use, scalability and underlying technology and Intuitive ERP was
chosen. The goals of the implementation were:
➢ Integrate and standardize business processes.
➢ Increase customer responsiveness.
➢ Deliver greater access of information to employees
➢ Improve scheduling and inventory control
➢ Streamline accounting

The Benefits
The main benefits of the ERP implementation were as follows:
➢ The ERP system was implemented in 45 days
➢ Return on investment of over 200%
➢ Reduced total inventory from 90 days on – hand to 15 days on – hand
➢ Improved on – time supplier delivery from 30% to over 80%
➢ Faster month – end closing
➢ Reduced overdue accounts from 12% to 2%
➢ 10% revenue growth year – to – year

1. Main Challenges Prompting ERP Implementation:

Lacrimedics faced several challenges that led to their decision to implement an ERP system:
- Growing Inventory: Inventory was growing faster than revenue, tying up capital and
storage space.
- On-Time Delivery: On-time delivery performance was slipping, affecting customer
satisfaction.
- Lack of Information: The company lacked adequate access to real-time information,
hindering decision-making.
- Limited IT Resources: Lacrimedics had limited IT resources available to address these
issues effectively.

2. Objectives of ERP Implementation:

Lacrimedics set specific objectives for their ERP implementation, including:
- Integrating and Standardizing Business Processes: To streamline operations and ensure
 consistency.
- Increasing Customer Responsiveness: Enhancing the ability to meet customer demands
promptly.
- Improving Information Access: Providing employees with better access to critical
information.
- Enhancing Scheduling and Inventory Control: Optimizing production scheduling and
reducing excessive inventory.
- Streamlining Accounting: Simplifying financial processes for improved accuracy and
efficiency.

Additional objectives of ERP implementation may include:

- Reducing operating costs.
- Enhancing data security.
- Improving data accuracy.
- Enhancing compliance with industry regulations.
- Supporting business growth and scalability.

3. Creating and Using Integrated Systems for Operational Efficiency:

Lacrimedics successfully used the integrated ERP system to improve operational efficiency
through the following means:
- Faster Implementation: The ERP system was implemented in just 45 days, allowing for a
rapid transition.
- Inventory Reduction: Total inventory was reduced from 90 days on hand to 15 days,
freeing up capital.
- Supplier Delivery Improvement: On-time supplier delivery improved from 30% to over
80%, ensuring materials availability.
- On-Time Delivery Enhancement: On-time delivery to customers improved from 75% to
99%, enhancing customer satisfaction.
- Streamlined Accounting: Month-end closing processes were streamlined, resulting in
faster financial reporting.
- Reduced Overdue Accounts: Overdue accounts were reduced from 12% to 2%, improving
cash flow.
- Revenue Growth: Lacrimedics achieved a 10% year-to-year revenue growth, indicating
improved overall business performance.

4. Pre-Evaluation Screening Stage:

Lacrimedics adopted a thorough pre-evaluation screening stage to select the appropriate ERP
system. This likely involved:
- Identifying key requirements and functionalities needed.
- Assessing scalability to support future growth.
- Evaluating ease of use to ensure user adoption.
- Reviewing the underlying technology to ensure compatibility with existing infrastructure.
- Considering factors such as cost, implementation timeline, and support.