The Company Information System - Case Study Example

INTREGRATED INFORMATION SYSTEM PROPOSAL Name: Instructor: Date: : TABLE OF CONTENTS INTRODUCTION 2 BUSINESS PROCESS 3 EXPECTED BENEFIT 5 FACTORS TO CONSIDER DURING IMPLEMENTATION 8 IMPLEMENTATION STRATEGY 11 Big bang versus phased approach 11 SAP MODULES 13 KEY PROJECT ACTIVITIES AND TIMEFRAMES 14 PROJECT KEY ROLES AND RESPONSIBILITIES 16 HOSTING APPROACH 18 IN-HOUSE VERSUS HOSTED (SaaS) APPROACH 18 PART B – 23 SAP HANA 23 OLTP VERSUS OLAP 23 Intra-operator parallelism 24 Columnar structures 24 Minimal projections 25 Dynamic partitioning 26 REFERENCES 27 INTRODUCTION BACKGROUND INFORMATION: BRAINFREEZE EXISTING “LEGACY” INFORMATION SYSTEMS. The company Information System comprises of at least four sub-systems. Solution 7 is an integrated financial accounting system that is used to handle Vendor payments, internal accounting, billing and invoicing of customers. A small shipping system is used to track the distribution by the different transportation types. RockyRoad module is used to track raw material inventory while warehouse inventories are tracked using Excel spreadsheets. Clipboards available throughout the facility are used to track data needed for production. The system lacks a manufacturing module, does not support marketing and sales, and is unable to handle international sales. In addition, production and packaging operations are not automated. BUSINESS PROCESS The customer places the order either through a phone call or by visiting the facility. The order is then processed by the sales department in conjunction with the accounts department. In the processing stage the following activities are carried out: The nature of the order is determined which involves determining whether the order is normal, or it is a rush order. The intended mode of payment - whether cash, credit card or through customer account - is determined. If the payment is by use of credit card or through the 30-day customer account, then the credit worth of the customer is determined using Solution 7. If credit is not approved, the customer is contacted either through a visit by the sales agents or through a phone call from the headquarters at Adelaide and the order is canceled. If credit is approved by the accounting department, the sales department uses Excel spreadsheets to establish whether the ice cream type ordered is in stock. If it is out of stock, the new stock delivery time is established, and the customer contacted by the customer service desk (part of sales department) with the dispatch date. If the ice cream is in stock, then the order is forwarded to the warehouse. Upon receipt of the order, the warehousing department simultaneous requests for a shipping order and invoice from the shipping department and the accounting department, respectively. On one side, the shipping order is processed and confirmed by use of a small shipping system. On the other side, the invoice is processed. In the case of wrong data, either on credit worth of the customer or order placed, then the correct data is retrieved by the accounting department which then raises the invoice. With both the shipping order and invoice prepared, the ice cream ordered is packaged manually together with the invoice. The human resources department does this. The package is now handed over to the shipping department for delivery. Company owned freezer trucks are used to transport an ice cream from the distribution centres to the customers in the surrounding of each of the centres in Adelaide, Sydney, Brisbane, Darwin, Melbourne, San Francisco, Portland, Calgary, and Tokyo.Rail is used to transport an ice cream from Adelaide to Sydney, Brisbane, Darwin and Melbourne and from San Francisco to Portland, and Calgary. Cargo ship transports product to the Pacific Rim ports. The distribution system is managed using the shipping system.(Scheer, 2009) NOTES: 1. Production is done manually and monitored using data on clipboards all over the facility. Raw materials inventory is tracked through the RockyRoad Module. 2. The company comprises of four divisions each divided into departments. The Finance Division houses the accounting, and the internal audit departments. The Marketing and Sales Division houses the marketing department, the shipping department and the sales department. The Production and Human Resources Division houses the production department, the warehousing department and the Human Resources department. The Information Systems (IS) Division maintains the systems used by the other divisions. EXPECTED BENEFIT Implementation of an ERP system will assist in the creation of an integrated organization that is effective, receptive to changes in the market and delivers value for money. Once implemented it will provide easy-to-use tools, automated workflows, productivity improvements and the opportunity for BFZ staff to execute value added work, such as analysis and reporting, and will allow the IS division to support an entirely integrated cohesive strategic and modern administrative infrastructure.(Williams, 2008) In particular the following benefits are expected for each of the four divisions: FINANCE DIVISION The system will provide accurate currency conversion and meet external tax and reporting requirements unique to the manufacturing industry. The integrated system will contain a module for international trade that will provide real time currency conversion rates and international tax and reporting standards. MARKETING AND SALES DIVISION The ERP system will provide consolidated customer data potentially to increase profits through a better understanding of customer needs. In addition, the new integrated system will provide access to a worldwide system through all distribution centres using a range of devices such as desktops and portable devices. It will also provide data about customers available to all centres throughout the world at a given time. PRODUCTION AND HUMAN RESOURCE DIVISION The implementation of an ERP system will serve as an excellent platform for training and professionalization of staff as users adjust to best practice based processes. The integrated system will improve HR practices. In particular, it will enable targeted recruitment activities based on needs and will reduce the time taken to fill vacancies and to bring new people on board. The automation of production and packaging will reduce both time and human resource requirements. The installation of a manufacturing module that integrates raw material acquisition, production and warehousing will cut the operational costs. INFORMATION SYSTEM (IS) DIVISION Implementation of the ERP will see the retirement of a mess of complicated and expensive to maintain legacy and departmental systems, and the institution of a standard, integrated IT platform for the key managerial and resource management applications. The new business process after the implementation of the ERP will look as follows After the customer has placed an order, a credit worth has been determined, and the order has been confirmed to be in stock, the shipping order and the invoice are requested immediately (a on the diagram). This is made possible by the amalgamation of the departmental subsystems. In addition, due to the efficiency and accuracy of the passage of information through an integrated system and eradication of manual and paperwork, errors arising in the processing of the order are completely eradicated (b on the diagram). Once an order is forwarded to the warehouse, packaging is initiated simultaneously with processing of the shipping order and the invoice (c on the diagram). This is made possible by the automation of production and packaging and the integration of the shipping, warehousing and sales departmental subsystems. FACTORS TO CONSIDER DURING IMPLEMENTATION The following aspects need to be put into account during implementation of the ERP to ensure its success: Involvement and participation of the users: All the users of BFZ integrated system must be involved in implementation phases. This will ensure that the system is customized to BFZ’s needs. In particular their support is necessary for defining business requirements, analyzing the ERP configuration, conversion of the data and when the system is being tested. Formal project plan: The management board of BFZ in conjunction with the project implementation team must draw a comprehensive project plan that will guide the activities throughout the implementation. However, this plan must be amenable to reviewing and modification to achieve the expected results. Adequate knowledge of the legacy systems: The project implementation team must be furnished with sufficient knowledge about the existing legacy systems. This knowledge will help to minimize the effort during configuration, creation of interfaces and in the conversion of data. Sufficiency of the data migration process: The process of moving data from the legacy systems to an integrated system must be adequate and effective to ensure no data is lost or distorted. This process will be carried out both manually and automatically. The data on production will be keyed-in to the system manually while other data in Solution 7, the shipping system, data on Excel spreadsheets and RockyRoad Module will be migrated automatically. Adequacy of the composition of the project team: The management board of BFZ must see to it that the project implementation team is well composed. All stakeholders including customers should be well represented in order to ensure that each player’s interests are put into consideration. This is relevant for all stages of the implementation process. Adequate ERP version: The management board of BFZ must ensure that an integrated system to be installed suits all the requirements of the organization. To this end, the project implementation team must gather all the relevant information on SAP releases upgrade and consider adopting the new ones. All the modules must suit the organization’s requirements. Preventive troubleshooting: Before the real system is adopted for use, simulation must be done in order to identify and solve the concerns that arise during the testing of the production system and conversion of data. Strong inward and outward communication: The management board of BFZ and the project team must be in constant and real time communication throughout the implementation process. Communication is an indispensable ingredient of the project especially in the drawing of the project plan and in the go & live phase of the SAP system which is the last phase. Adequate training program: The success of an ERP system is highly dependent on the effectiveness of its use. The end users of the system must, therefore, be thoroughly trained. In addition, the IS human resource must undergo extensive training to equip them with necessary skills to maintain the system. Customer awareness must also be carried out to bring to speed on the system upgrade all stakeholders of the organization. Effective business process redesign and organizational change management: During the second of the implementation of an ERP system business processes will be analyzed, and some redesigned. The redesign underscores the necessity to know how BFZ intends to carry out its business within the SAP system and the changes in the organization. IMPLEMENTATION STRATEGY Big bang versus phased approach A ‘big bang’ ERP implementation approach describes a go-live or cutover situation where a business switches from the old (legacy) system to the new system at a single point in time. On the other hand, a ‘phased’ approach is a scenario whereby elements or modules of the ERP system are introduced in chronological order, replacing the legacy systems progressively. Fig 3: ‘Big Bang’ implementation approach Legacy system Go-live date New ERP system Fig 4: Phased implementation approach Legacy system New ERP system Go-live The ‘big bang’ approach is carried out in a single phase and, therefore, does not require a bridging system between BFZ legacy system and the ERP system. It reduces data management costs since all legacy systems are migrated to the ERP system at a go. However, it may require more time before go live than phased approach and is riskier. It involves a broad scope and team and, therefore, requires extensive training, change management and post-implementation support. On the other hand, the phased approach is chronological that necessitates the installation of a bridging system. The bridging system increases the cost due to the throw-away interfaces required. It is, however, more manageable and has a narrower range. It allows for cumulative training with the possibility of leveraging later training from earlier training. Based on the above observations and from the fact that BFZ operates at 80% capacity in October, ‘big bang’ approach will be adopted with October being the go live date. SAP MODULES SAP Module FI (Finance Accounting) SAP Module CO (Controlling) SAP Module SD (Sales and Distribution)  SAP Module HR SAP Module PP (Production Planning) SAP Module MM (Materials Management) SAP Module QM (Quality Management) General Ledger(GL) Accounts Payable(AP) Accounts Receivable(AR) Bank and Cash Management Budgeting and Monitoring Withholding Tax (TDS) Asset Accounting(AA) Product Costing(CO-PC) Periodic Allocations Profitability Analysis(CO-PA) Cost Center Accounting(CCA) Profit Center Accounting(PCA) Sales Order Processing and Monitoring Shipping Bill / Invoice Generation Credit Management Bill of Material Pricing and Discounts Statutory Requirements Organizational Management Personnel Administration Recruitment Time Management Management Personnel Cost Planning Budget Payroll Benefits Compensation Management Personnel Development Training & Event Management Travel Management Production Planning Production Order Processing Demand Management (DM) Materials Requirements Planning (MRP) Shop Floor Control Capacity Requirements Planning (CRP) Information System Purchasing Inventory Management Inventory Valuation Vendor Evaluation and Rating Invoice Verification Statutory Requirements Incoming Inspection Process Inspection Final/Delivery Inspections Quality Reports / Certificates Quality Notifications KEY PROJECT ACTIVITIES AND TIMEFRAMES PHASE ACIVITIES Jan Feb March April May June July Aug Sept Oct Nov Dec Project preparation Project plan Project scope Project team organization Business Blueprint As-is process document To-be process document Realization Configuration Business process procedures Unit testing & documentation Development programs Training material Final preparation Stress & volume tests Cut over plan Conduct end user training Go live and support Go live Support PROJECT KEY ROLES AND RESPONSIBILITIES The project team will include the following groups of individuals who will perform the outlined roles during the ERP implementation. Chairperson He will be the overall overseer of the project implementation Steering committee It will comprise of all the five directors and departmental managers, one representative from each division. The committee will Prioritize requirements Set the objectives of the project Establish the scope of the project Approve methodology of system selection Select manager(s) of the project and structure of project Approve vendor finalists Approve subject matter experts Define critical success factors/key requirements Approve potential vendors Approve vendor shortlist Select the vendor/solution Monitor implementation and resolve any scope issues Project manager The steering committee will selected the project manager and he/she must be a member of staff in the IS division. He/she will Manage the scope of the project Manage the budget and timing Support in gathering requirements and documenting business process Direct and motivate the project team Report project progress to the steering committee Be the point of contact for resolving all issues from employees and the vendors Optionally become the product expert Subject matter experts Subject matter experts will be outsourced and will Conduct interviews to document requirements and business process Review the documentation of the business process Appraise the script to be given to vendors for the complete demonstration Attend some sessions of complete demonstration Evaluate the systems HOSTING APPROACH IN-HOUSE VERSUS HOSTED (SaaS) APPROACH IN-HOUSE It will include the following integral parts; 1. Communication/ connectivity service: this includes VANs, internet for AS1/2 and ftp 2. EDI translator: server hardware, server software, translator software, license, maintenance fees 3. Mapping: server hardware, server software, mapping tool software, license, maintenance fees 4. EDI integration software: ERP integration development adapters 5. IT technical staff 6. EDI coordinator (Narayanan, 2009) SaaS APPROACH It includes the following essential parts: 1. Communication/ connectivity service: provided by the hosting service 2. EDI translator: will be provided by the hosting service 3. EDI integration software: single standard document interface to integrate BFZ transactions with the ERP 4. IT technical staff: provided by the hosting service 5. Mapping: will be developed and maintained by the hosting service 6. EDI coordinator General overview of Hosted approach Comparison of in-house and SaaS approach costs In-house SaaS Server hardware and OS $80,000 Host provides Translator software $25,000 Host provides EDI mapping tool $25,000 Host provides Communication services $400,000 license for 5 years and $20,000 VAN charges $20,000 per month license fee Transaction data backup $50,000 Host provides Install and integrate $80,000 Host provides Operation monitoring $25,000 per year Host provides Support and help desk $15,000 per year Host provides Staffing salaries $250,000 per year $100,000 per year Miscellaneous $30,000 per year $30,000 per year NPV for in-house hosting approach Year Expected Shipment(litres per month) Revenue per year Hosting expenses per year Net income per year NPV 2014 600,000 $7,200,000 $1,000,000 $6,200,000 $6,200,000.00 2015 960,000 $11,520,000 $320,000 $11,200,000 $10,666,666.70 2016 1,320,000 $15,840,000 $320,000 $15,520,000 $14,077,097.50 2017 1,680,000 $20,160,000 $320,000 $19,840,000 $17,138,538.00 2018 2,040,000 $24,480,000 $320,000 $24,160,000 $19,876,491.80 2019 2,400,000 $28,800,000 $320,000 $28,480,000 $22,314,825.20 2020 2,500,000 $30,000,000 $320,000 $29,680,000 $22,147,673.00 2021 2,600,000 $31,200,000 $320,000 $30,880,000 $21,945,839.50 2022 2,700,000 $32,400,000 $320,000 $32,080,000 $21,713,006.70 2023 2,800,000 $33,600,000 $320,000 $33,280,000 $21,452,584.70 Total NPV $177,532,723.10 NPV for SaaS hosting approach Year Expected Shipment(litres per month) Revenue($ per year) Hosting expenses per year Net income per year NPV 2014 600,000 $7,200,000 $370,000 $6,830,000 $6,830,000.00 2015 960,000 $11,520,000 $370,000 $11,150,000 $10,619,047.60 2016 1,320,000 $15,840,000 $370,000 $15,470,000 $14,031,746.00 2017 1,680,000 $20,160,000 $370,000 $19,790,000 $17,095,346.10 2018 2,040,000 $24,480,000 $370,000 $24,110,000 $19,835,356.70 2019 2,400,000 $28,800,000 $370,000 $28,430,000 $22,275,648.90 2020 2,500,000 $30,000,000 $370,000 $29,630,000 $22,110,362.20 2021 2,600,000 $31,200,000 $370,000 $30,830,000 $21,910,305.40 2022 2,700,000 $32,400,000 $370,000 $32,030,000 $21,679,164.80 2023 2,800,000 $33,600,000 $370,000 $33,230,000 $21,420,354.30 Total NPV $177,807,332.00 Notes NPV (Net Present Value) is the value of all expected future flows of income discounted at the present rate of interest It is calculated using the following formula Where C – net cash flow in year n (revenues less expenses) r – discount rate (5% in the above case) n – no of years (N= 10) Conclusion Based on the net present value for in-house hosting and SaaS hosting, the latter is recommended. SaaS hosting saves BFZ the high installation cost of hardware and software associated with in-house hosting. It also outsources the maintenance of the ERP to the hosting service and hence it is less risky. PART B – SAP HANA SAP is the short form of Systems, Applications and Products and is a German software company that provides businesses with platforms to track customer and business interactions. HANA stands for high-performance analytic appliance. SAP HANA is an application that makes use of in-memory database technology that permits the processing of huge amounts of real-time data very fast. The in-memory computing engine allows the application to process data stored in Random Access Memory as opposed to reading the data from disk. This makes it possible for the application to deliver instantaneous results from customer transactions and data analysis. It can use three styles of data replication dependent on the source of the data whether log-based, ETL-based or trigger-based.(Walker, 2012) The use of HANA platform helps the business to unlock new revenue opportunities from vast amounts of sales related data, drive sales with real-time information accelerate decisions along the sales cycle and reduce customer churn. OLTP VERSUS OLAP OLTP is the short form for Online Transaction Processing and is a class of information systems that facilitates and manages transaction oriented applications, typical data entry and retrieval transaction processing, for example, the banking system. OLAP is the short form for Online Analytical processing, and it is computer processing that empowers the user to simply and selectively extract and view data from diverse points of view. It allows the user to have access to a very large online data warehouse, request and receive reports and analyses in any desired format. On one hand, OLTP has a large number of short online transactions and puts its main emphasis on very fast query processing, maintaining data integrity in multi-access environments. The degree of its efficiency is the number of transactions per second. On the other hand, OLAP contains low volume of transactions and very complex queries that involve aggregations. Its effectiveness is measured by the response time. (Thomsen, 2002) Intra-operator parallelism It is also referred to as a single instruction multiple data (SIMD) parallelism. It enables the operator that obtains some data to be executed by multiple nodes with each node working on a different partition of the data. The same operator is used on many partitions. By so doing the response timeis divided by the number of nodes. Intra-operator parallelism, using explicit algorithms for the different relational operators, makes use of the several categories of data placement and dynamic partitioning. It gets all machines working to compute a given operation (scan, sort, join). It allows the input data to be partitioned among multiple processors and memories, which enable the database operator to be fragmented into many autonomous operators each working on a section of the data.(Inselberg, 2009) Columnar structures In column-order, table data entries of a column are stored in contiguous memory locations. Column-store supports parallel processing in HANA with its multi-core processors. A particular column may be managed by multiple cores or each core can handle a column. Data stored in the column allows high compression of data and is much faster in computing.(sap hana,2014). It is useful for Read operations and a table with huge volumes of data that should be aggregated and analyzed. HANA mainly uses a columnar table type that supports the delete of rows as rows, insert and update. This provides vastly architectural advantages of an in-memory row store for OLTP workloads. The hybrid notion according to (Hana sap,2013), means that after a row is transacted into the temporary queue, it changes to a columnar format in the background where it is can be analysed and once moved the temporary row is removed. Running an analytic query against a table will process against a snapshot using MVCC that reveals most of the data as columns and then takes up whatever records were still in the transient queue when the query started.(Mankala and V, 2013) Minimal projections SAP HANA is an in-memory column store database. This means that for each selected table, access to each of the projected characteristics will touch a different memory location acquiring a small penalty. Thus, to increase the total performance, it is required to select only the minimal set of attributes that should be projected for each query. This has two significant benefits: First, it dramatically lessens the amount of accessed data that is transmitted between client and server. Second, it decreases the number of accesses to random memory locations and thus upsurges the overall performance. (Krutov et al., 2014) Dynamic partitioning SAP HANA can reassign memory processors and I/O to specific applications on the fly without shutting down the system. The reassignment is done automatically from a script that monitors conditions such as when traffic to one processor becomes excess or by the operator.(Walker, 2013) re REFERENCES Inselberg, A., (2009). Parallel coordinates. Springer. Krutov, I., Vey, G., Bachmaier, M., (2014). In-memory Computing with SAP HANA on IBM eX5 Systems. IBM Redbooks. Mankala, C., V, G.M., ( 2013). SAP HANA Cookbook. Packt Publishing Ltd. Narayanan, V., (2009). Implementing Sap Erp Financials. Tata McGraw-Hill Education. Scheer, A.W., (2009). Business process engineering: reference models for industrial enterprises. Thomsen, E., (2002). I John Wiley & Sons. Walker, M., (2012). SAP HANA Starter. Packt Publishing Ltd. Walker, M., (2013). Software Development on the SAP HANA Platform. Packt Publishing Ltd. Wallace, T.F., Kremzar, M.H., (2002). ERP: Making It Happen: The Implementers’ Guide to Success with Enterprise Resource Planning. John Wiley & Sons. Williams, G., (2008). Implementing SAP ERP Sales & Distribution. McGraw Hill Professional. Read More