Why Omar A Balubaid Co Ltd Should Be Equipped with the Latest Information Technologies - Case Study Example

Proposal report for ERP strategic to Omar A. Balubaid Company Limited Executive Summary Omar A. Balubaid is one of the most renowned automobile companies in Saudi Arabia. Three IT initiatives were proposed for the company in the research proposal. One of those initiatives has been chosen to be explained in detail in this proposal report. Oracle e-business Suite has been proposed as the system that should be implemented in the company. The report starts with the background of the company and their objectives. Their existing systems are also mentioned and the limitations that initiated the need for a new system. Later in the report, few benefits of ERP solutions have been explained and real life experiences of different organizations have also been included. This section concludes with the benefits that will be brought about in Omar A. Balubaid after the implementation of ERP system. ERP systems tend to save time for any organization- this aspect has been discussed, along with the cost of implementation for other companies and Omar A. Balubaid. Risks of implementation have been discussed in the report. Several ways have been identified that can be adapted to handle the risks. Choosing a suitable vendor is an important step in the process of ERP implementation, therefore several vendors have been mentioned and then benefits of the chosen one have been discussed. Lastly, the implementation process of ERP systems has been discussed to give an overview to the reader about the factors that are needed to be considered during the implementation. 1. Introduction The modern world has become a test for survival for companies around the world. Consumers have become more aware about their choices and tend to switch brands frequently. This creates the need for current information about the market trends, consumer behaviours and effective strategic planning. Companies need to be equipped with up-to-date systems so that they are not left behind in the race for revenues and market share. While keeping these things in mind, three new strategies were proposed for Omar Abu Bakar Balubaid. Co. Ltd. 2. Background Omar A. Balubaid Co. Ltd. holds the status of being one of the first car companies in Saudi Arabia. It was founded in 1952 in Jeddah with the capital of SR 300,000 [1]. Over the years, the company has flourished and has established 50 branches to manage their operations and sales. It proudly owns the agencies of General Motors (GM) and Peugeot [2]. The company’s systems and procedures were being handled in the conventional manner of papers and files. Better IT infrastructure came about in the company in 1997 and MS Office got introduced. Then later in 2000 the need for another system was felt, which led to the deployment of another system- Expenditure Management Information Service (EMIS system) [2]. The objective of the introduction of this system was to enhance performance in a cost effective manner and reduce manual work to a significant degree. The existing IT infrastructure is based on the following systems: Microsoft Office (Excel, Access) Local Intranet Network EMIS (Expenditure Management Information Service) These systems provide a limited range of functions. These systems are no longer used by companies to manage their processes and keep them connected [4]. While keeping these objectives in mind, three IT initiatives had been proposed for the company; Software Package of Oracle (ERP) Enterprise Resource Planning (ERP) can be considered as a software application to improve the performance of organizations’ resource planning, management control and operation control [5]. Voice over IP (VoIP) VoIP services are used to convert voice into a digital signal through the Internet [6]. Online advertising To attract customer’s attention, online advertising is delivering marketing messages to people around the world [7]. The first strategy of ERP solutions has been chosen to design a detailed report and to highlight the best possible implementation plan for it. 3. Components of ERP The diverse range of areas of ERP solutions can be categorized in the following manner [8], [9]; Sales and Marketing Supply Chain Management Raw Material Planning Capacity Requirement Planning Purchasing Shop Floor Control Accounts Payable/ Receivable Logistics Asset Management Financial Accounting When there is no ERP system deployed in a company, every department might have a customized system for their processes. Such an instance is apparent in the following figure: Fig.1: [21] Fig.2: [21] Lack of one centralized system might bring about many problems such as delays in processing, orders being lost etc. 4. Benefits ERP implementation growth rate around the world is currently 35-40 % and it will continue in the same manner for years to come [23]. ERP systems provide a centralized system which can be accessed at the enterprise level. It provides a platform where updated and accurate information can be available to the employees in the organization [10]. One department may enter some information which can be utilized by another department. Every department tends to use only some of the modules of ERP solutions, some of them are explained below; 4.1 Sales and Marketing Department Sales and marketing department deals with the customer relationship management module of ERP systems. Sales executives benefit from this module in terms of accommodating requests of the customers, maintain centralized data of their customers and provide the customers what they really need. Marketing department benefits from the CRM component for promotion of their products. 4.2 Distribution Department Distribution department uses the logistic module of ERP systems. This module or component provides aid to companies to execute logistic operations conveniently and at lower costs [13]. 4.3 Inventory management Inventory Management is an important part of any business related to production. ERP solutions help in raw material management and keep track of products that are increased or reduced from the inventory. ERP systems reduce communication between purchasing and suppliers [14]. 4.4 Finance department Financial accounting plays an important role in the performance of a finance department. ERP systems manage the finances of the whole company and interconnect different financial processes for example accounting [12], management of payments and revenue, management of investments etc [11]. 4.5 HR department The usage of ERP systems in HR departments reduces manual work to a great extent, provides a centralized approach to the employees data. One operation can be performed on lists of data without any error due to the elimination of human error [15]. 4.6 Organizational implementation of ERP: Boeing The operations of Boeing were based on 400 systems that were developed in the sixties. They were not integrated and all performed in isolation of each other. This lack of a centralized system brought about many issues; late arrival of aircraft parts which halted the projects in the middle etc. In 1997, these instances aggravated and Boeing suffered great losses- they had to shut down two of its important assembly lines and was given a charge of $1.6 billion. It is after that point that the company realized the need for an integrated ERP and successfully implemented it [16]. 4.7 Expected Benefits for Omar A. Balubaid Co. Ltd The company under discussion can improve their business processes by bringing about an improved pace and accuracy in them. The deployment of an ERP system will result in the integration of their data due to which everyone will be able to view a consistent and accurate form of data [18]. Implementing an ERP system will save the data from any duplication information that can improve their sales and customer service [48]. The following figure shows some factors that contribute in the achievement of goals that denote success of an organization [18]. Let us consider some of the factors that are mentioned here; if roles and responsibilities are properly defined then there is no overlapping of work and no employee will have ambiguous job description. ERP systems are also used to assign responsibilities in the organization and structure the hierarchies in a formal manner. Clearly defined roles will enable good project management in Omar A. Balubaid Co. Ltd and help develop good teamwork and collaboration. ERP systems induce accuracy in information, formalized data structures, proper documentation of the processes in the organization. All of these factors will help in monitoring and evaluation of performances of the employees [18]. Fig.3: [19] 5. Benefits of ERP in terms of Timescale Time is money [20]. The world of today is very competitive and fast paced. Only those can survive who are able to outperform the rest in terms of quality, time and cost. During a survey, a designated firm carried out an extensive mapping of the HR and financial activities of different universities units. The sample of this survey contained around 360 university units. These flowcharts revealed that around 50% of the tasks that are completed in a transaction can be performed by automating the tasks, simplification or elimination. This survey was meant to address the incompetency of different units that waste company’s resources by executing tasks in an unnecessarily longer period of time. The deployment of ERP solutions in such case will save company’s time (man-hours and resources) [22]. Microsoft implemented ERP systems for an organization under a budget of $25 million. They replaced 33 existing systems in 26 sites in a matter of 10 months. One would think that $25 million is a huge investment but in return the company saved $ 18 million annually. This saving also meant reduction in manual work and thus reduction in man-hours for the employees to do a specific task [24]. 5.1 Benefit for Omar A. Balubaid in terms of Timescale Omar A. Balubaid is a renowned name for sale of automobiles. It is very important to have consistent and accurate data about the customer and thus the sale deals. ERP will provide the company with a single form of centralized data that can save them time in terms of customer relation and avoid any situations where an order is processed twice due to duplication of records. Consistent data also saves time in generating reports for analysis and decision making therefore ERP will also be responsible for efficient reporting. 6. Cost of Implementation Mabert [26] gave out a rough estimate regarding the % of cost that are incurred in the implementation of an ERP System; Fig.4: [26] The following figure constitutes the costs that were incurred in the implementation of ERP system. The ERP solution that was deployed in this organization was Oracle e-Business suite (which has also been proposed by us in the project proposal). Fig .5 [27] 6.1 Cost of Oracle e-business Suite for Omar A. Balubaid License price of few modules of Oracle E-business Suite that are proposed to be implemented in the company [47]: Name of Module License Price Software update license and support Financial Management Integration 7000 15400 Oracle E-Business Suite UPK Human Resources 17500 3850 Application Change Management 1540 7000 Total Cost $ 26040 26250 Total Cost £ 17360 17500 Cumulative cost: Hardware cost £ 183,540 License Price £ 17,360 Software update license and support £ 17,500 Consultancy £ 113,150 Training £ 26,320. Total Expected Cost £ 357,870 The price for three modules of Oracle E-business Suite for Omar A. Balubaid will be £ 357,870. 6.2 Return on Investment and TTPB ChangAn Auto also deals wit automobiles and is a company with an annual revenue of $18.8 billion. They gained profits of $17 million from the implementation of the ERP in their organization and recovered the amount of investment in only 4.5 months. This ROI was investigated by IDC (a research firm) [28]. Due to this implementation the profits of this company raised to 173% in 2006. Since our selected company also deals with automobiles therefore it can be predicted that ROI will be very encouraging. It can also be predicted that TTPB will only be in a matter of months and not years. 7. Risks of ERP implementation There are mainly three elements that play their role as the implementation risk environment; Fig.6: [29] Here are some risks that can be identified for a particular ERP implementation; Risks Ways to reduce the risks There might be a lack of commitment and support towards the transition to ERP from the top management executives [31]. The project manager should ensure that the project has a sponsor who participates in providing the vision for the system. He should be involved in the process of transition and be accountable for its outcome like the others [3]. The project does not have the necessary technical resources to deliver a good quality project on time [30]. The project manager should ensure that the technical resources are formally available and assigned to the project and are not assigned to any other projects. The employees of the organization are not ready for such a transition and do not have a good attitude towards the new system [32]. It should be communicated to the employees that the new system will help in reducing their long man-hours and make work faster for them. ERP are usually considered very difficult to implement and made to adapt the company’s processes. Details pre-study should be done regarding the implementation of the ERP. 7.2 Risks at Omar A. Balubaid Risks Ways to reduce the risk The end-users have been used to the conventional mode of operation. It is a risk that they will not be able to get maximum work done by the system. They need to be effectively trained to work on the new system so that they make the investment worthwhile and reduce manual work [33]. End users need to be trained effectively by the external sources or manuals so that they are able to get work done by ERP. Another major risk in the ERP implementation is that there might not be a good mix of internal and external resources to work on the implementation project [34]. It is necessary for the internal resources to be included in the project team so that they can technically grow with the skills required for ERPs. Therefore the project manager should ensure that internal resources are also involved in all the steps of the implementation [35]. 8. Suppliers for ERP The market for providing ERPs has become very competitive. Due to this reason, there are many companies that are in the constant race of offering better features and services to their clients: Fig.7: [49] It is apparent from the above list that Oracle offers the best price among the other vendors with the greater number of users. Fig.8: [49] From the above figure, we can conclude that QAD and Oracle have the highest rate of improving operations in an organization. QAD is known for its simplicity due to which there are many functional gaps founds in the softrware. QAD has a lack of strongly integrated global modules of financials and HR, that prevents it from being one of the top vendors in the market [50]. Oracle and SAP have the greatest share in the market and their products are deployed all over the world. SAP is an expensive system and also requires expensive maintenance. Oracle is also a market leader and offers cheaper implementation of system [38], [39]. Oracle has made a global presence for the past 30 years by providing their customers reliable, secure and integrated technologies to manage their information and processes. Oracle offers software which are internet-enabled; these kind of products are incorporated with database, enterprise business applications and application development [36]. One of such ideas that has been maturing at the offices of Oracle is “Cloud Computing”. Oracle e-Business Suite seems to be the most reliable ERP system in the market that caters to a diverse range of industries. Oracle [36] states that this ERP system offers the maximum number of features and functions as compared to SAP. It offers the email manager, operations support system and workflow manager; which are not available in most of SAP ERPs. IT Software Vendors [37] stated in a comparison between E-business Suite and mySAP ERP; this system offers the most comprehensive, integrated and global applications that makes it very adaptable to other systems. 9. Implementation The implementation phase of an ERP system has been categorized in the following steps by [17]: Fig. 9: [17] Harwood [41] categorized the implementation in 8 steps, which are explained below with reference to the implementation at Omar A. Balubaid: Phase Time Period Actions Pre-Study 1st August 2010 to 30st September 2010 Identify the main objectives of the system. Ensure that the sponsor is involved in stating the vision of the system so that the outcome is not a surprise to them [43]. Purchasing 1st October to 31st October 2010 Choose the most appropriate vendor from the ones available in the market. Analyze the vendor with respect to the availability of the required features, quality and reliability of the system [44]. Implementation 1st November 2010 to 30th April 2011 The team that takes care of the implementation will constitute of internal as well as external resources. The actual implementation will be done in accordance with the needs of the organization. It will be aimed to minimize the implementation time as much as possible so that the implementation does not exceed budget [43]. Education 1st May 2011 to 31st May 2011 The end-users of the system will be educated regarding the operations and functions of the system [45]. Training sessions can be held in groups or individually. They should become well-equipped with the knowledge about the system so that they change their attitude towards the new system and start accepting it [45]. See figure 7 for more training details. Maintenance and Support 1st June 2011 to 30th June 2011 In the process of making the agreement with the vendor, maintenance and support aspect of the system should be discussed [44]. It will be communicated to the vendor that all defects of the system will be reported to them and expected to be removed in a timely fashion. Upgrade Cannot specify a time period for this. This will occur after the implementation of ERP. The company’s requirements will be analyzed and thus judged if any upgrade is needed [46]. If the upgrade is needed then it may be an opportunity for the company to improvise its operations and processes [42]. Profitable systems Same as above The ERP system will be equipped with the latest information so that the systems provide its end-users with useful information about the organization’s processes, customers, inventory etc. In-Practice 1st July 2011 to 31st July 2011 After the ERP has been successfully implemented, it will be analyzed and judged if all the needs of the organization are being met and if the ERP has fulfilled the organization’s expectations [43]. Fig 7: [25] Conclusion Omar A. Balubaid Co. Ltd should be equipped with the latest technologies in the market so that they can compete with their competitors and maintain a good market share. The IT initiative that has been proposed for the organization is a very beneficial one and will prove to earn good profits for the respective company. ERP that has been chosen for the organization is Oracle e-business Suite, which is a very stable and reliable ERP solution. Appendices Appendix A The background of the company is discussed in [1], [2], [4]. The existing systems in the company have been mentioned and the new system have been described briefly [5], [6]. This section also enlists the objective of the organization. Appendix B The components of ERP are mentioned and how they provide a centralized approach to the infrastructure to the organization [8], [9]. There are many benefits of the implementation of ERP systems, however only some of them could be included in the report [10], [11], [13], [14], [23]. Then later in that section, those benefits are discussed that are predicted for the respective company [18], [19]. The benefits with respect to time are also discussed in the report [20], [22], [24]. Appendix C The cost of implementation of an ERP system is very important. Cost analysis has been done with the help of experiences of other organizations [26], [27], [28] and the Oracle global price list [47]. Appendix D Every implementation process has some degree of risks involved with it. ERP implementation is no different. Risks that were faced by other organizations are discussed in the report [29], [31], [30], [32], [34], [35]. The risks that can be faced by Omar A. Balubaid are also analyzed. Appendix E Choosing the appropriate supplier is very important for an ERP implementation. SAP and Oracle are the market leader therefore they are analyzed for the company under discussion [38], [39], [36], [37]. A comparative analysis is carried out that leads to the choice of Oracle e-Business Suite. Appendix F The implementation phase is discussed in detail with the help of literature containing the experiences of implementing ERP by other organizations [25], [17], [41], [43], [44], [46]. 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