Implementation of R/2 System in China - Case Study Example

GEARBOX CASE STUDY- IMPLEMENTATION OF ERP INTRODUCTION Enterprise Resources Planning (ERP) system is the technological solution to the informationconfiguration. ERP enables the best practices system across the process of the organizations mainly, but not exclusively, for the manufacturing concerns. SAP and Oracle are among the leading suppliers of the system. The ERP system requires considerable cost in setting up infrastructure. However, its implementation is often faced with a range of issues which in turn hinders the promised benefits (Avison, & Malaurent, 2007). GEARBOX (China) Ltd headquartered in Germany expanded to China for maintaining its global leadership position in the industry of gear boxes for driving the set of machinery. In alignment with the Germany, SAP’s mainframe version, the R/2 system was implemented in China. This report is aimed at assessing the issues that hurdled promised as well as experienced benefits of R/2 system in China. 2. CONTRIBUTION OF CURRENT LEVEL USE IN ENABLE CONTINUED GROWTH AT 100% PER YEAR The implementation of SAP’s mainframe version the R/2 system’s lacked on certain aspects that in turn resulted in the insufficient contribution in the continued growth of 100% per year (Reimers, 2004). The central reason behind this deficiency is the cultural difference between the two countries. Cultural differences have often resulted in the failure of the ERP system such as Avison and Malaurent (2007) have studied the failure of French firm’s ERP project in China language, governance, political and legal issues. Cultural differences mainly in the professional perspectives create conflicts. This issue was evident in GEARBOX (China). The ERP in GEARBOX China was not the localized version which is considered as the basic requirement in accordance to the Zaglago, Apulu, Chapman, & Shah, (2013). For example, format of the printed invoices issue required one month to resolve the problem. This was just one case to report and greater tolerance of Chinese to information that is not clear must have certain number of issues that are not reported to be adapted to the Chinese environment (Zhang, et al.,2005) Limited training was another factor to affect the performance. The implementation of services from the local consultants were not acquired instead the two members of the corporate IT department visited China for the implementation systems and training the local users. Further, the key users were called in Germany for the training. This not only resulted in the cost addition but also the country differences between behavioural factors remained into play. For example, central purchasing department’s key user (current manager) only used the system for creating the purchase order and the matters such as follow-ups and payment procedures were still conducted manually. Additionally, the purchasing department pointed the issue of limited training affecting their adaptability to the system. Connected to the above factor to have an influence is the lack of knowledge and aspiration about the system by the Chinese players. The case reports that three of the initial users left the organization considering it a difficult system. Further, Srivastava and Gips, (2009) considered the lack of strategic benefit from the ERP adoption such as sales directors stated system does not contribute in shortening the delivery time. Finally, the entire system was not integrated as a whole instead there were islands of knowledge. The third factor to have negative affect is the parallel manual system was being run in different departments. For example, the production department have to recheck the system generated order. The focus of the company remained in keeping employees engaged with the ERP in fear of blunder for doing or rechecking the job for which the system in installed. Engaging employees with the system instead of the removing the issues would have negative impact on 100% efficiency. The forth factor creating hurdle in the 100% efficiency of the system is the reliance of bottleneck decisions on human factors. Zhang, et al. (2005) in a study referred Chinese people prefer relying more on their experience which is unlike the western counter parts. Example, the lot size in the manufacturing department was determined not by system but by the production manager on the basis of experience. This inefficiency could create a bottleneck in the absence of the referred person. Also it results in wastage of ERP resource implemented for the purpose. Also, the requirement of General Manager for all the information for approval is another bottleneck which results in delay of process. This combination of human and ERP system resulted in the misleading information about the time required for each production process. Hence, all these processes result in negatively affecting the generation of 100% efficiency in system. Hence, there is a need to use and employ a local project manager as it would help in proper implementation of techniques in order to overcome the problems and generate 100% efficiency. The local project managers with the cultural affiliation would have been able to define the real bottlenecks. Also, the system implementation would have tailored functions suitable for the environment and doing business behaviours in China. This would have also controlled the cost as well as contributed effectively in unified one of the entire workforce mainly the direct users of the system. Chien, et al., (2007) recommended a model entitled Centripetal and Centrifugal Forces’’ (CCF) for keeping the push and pull forces between the people involved and its effectiveness in the successful implementation of ERP. Hence, this would result in the interconnection of the entire departments on the same page while also developing and maintaining the learning interest in the user of ERP in GEARBOX (China). 3. EXTENSION OF THE SYSTEM USE AS MANAGING DIRECTOR As a successor of the managing director, I would take certain steps to eliminate the loopholes from the system implementation. For the purpose, measures to increase the confidence of reporting and all departments to rely more on ERP than manual work, hiring local consultants to evaluate the issues in compatibility of the system with the environment and close integration of all the departments further tie up the system closely. The main issue in generating the promised benefit lies in the cultural differences as discussed above. For the purpose, I shall hire the team of local consultant after discussion of its need with the direct users of the system as well as with the Germany headquarter. It will also play an effective role in closely integration the entire system which currently appears to perform as individual knowledge islands. Additionally, in line with the impact of top management to affect the implementation of ERP as discussed in the paper of Zhang et al. (2005), I would also rely more on the ERP system. For the purpose would only require performance reports and the exceptional information as being done currently. This behavioral will have reflection on all the departments for greater reliance. Development of Capacity Planning Module will be another main priority as it is affecting the performance of other departments. Most importantly, there will be measures set for the successful implementation of ERP system not only in terms of growth of the company but also about the adoption of the system to increase efficiency. Hence, all these were expected to positively contribute in the achieving the objectives of flexibility, accuracy and reduced delivery time. Also, the integrated system will play an effective role in reducing the overall dealing with potential bottlenecks in the future growth. 4. EXTENSION OF THE SYSTEM USE AS FINANCE MANAGER As a successor of the finance departments, the integration and usage of the ERP for the increased activities will be my first priority. Currently, the finance department apparently uses the system for four purposes and accounts payable and receivable uses majority of the capacity of the finance department. However, the usage of the account payable is only limited to the data entry after most of the work is done manually such as a double check of the documents from other departments. This highlights an important opportunity for the efficiency exploitation in order to relief the capacity of the finance department from account payable. Once all the departments are integrated, then efforts and time required to double check the system will be saved. Hence, paper based systems will be reduced to a minimum in the finance department. Second most important thing to imply in the finance department is related to the maintenance of the data. In this regard, I would prefer that data shall be maintained by the departments collecting them; therefore, it should be maintained by sales and purchasing departments. However, each department shall be given an access with respect to their requirements. Therefore, the finance department shall also have access to the master data for making the required report for presenting it to the managing directors. Also, the highlighted reason for the purpose in case about the issue of discrepancy in the final account reporting will be resolved by adding the categories as required in coordination with the department maintaining it. This will have a positive contribution in improving the efficiency of the finance department as well as the other departments. Further, data availability to each department will increase the chance of intelligence generation by exploring the data. Also, it will positively contribute in informing the benefit of the ERP system to the different departments. 5. CONCLUSION GEARBOX (China) Ltd is a global company and order to expand its position in more countries it has established the assembling and manufacturing plant in the China. In the similar course, the implementation of ERP was conducted. Fortunately, unlike many other example of ERP failure in China Avison and Malaurent (2007), implementation by GEARBOX (China) only lacked in generating desired benefits. However, the case assessment has identified the role of typical in hampering the performance. Among the dominant factors to play role included the Socio-psychological factors which includes the adaptation, and training. Also, the role of management style that negatively affected the implementation approach was identified as main issues Sheu, Chae, & Yang (2004). All these recommendations are made on the basis of critical success factors’ identified in the ERP literature. The recommended solution requires using the local consultancy in order to bring all relevant employees and ERP system on same page. Also, the role of top management to influence the use of the system at a wider scale is concluded to be a valuable solution. It is considered crucial in order to deal with the efficiency requirement and proactively dealing with the future potential bottlenecks. From the assessment, it has been concluded that such measures are critical. References Avison, D., & Malaurent, J. (2007). Impact of cultural differences: A case study of ERP introduction in China. International Journal of Information Management, vol. 27, no. 5, pp. 368-374. Chien, S. W., Hu, C., Reimers, K., & Lin, J. S. (2007). The influence of centrifugal and centripetal forces on ERP project success in small and medium-sized enterprises in China and Taiwan. International Journal of Production Economics, vol. 107, no. 2, pp. 380-396. Reimers, K. (2004). GEARBOX (China) Ltd.: will the companys ERP system support its ambitious growth strategy?. Journal of information technology, vol. 19, no. 2, pp. 140-148. Sheu, C., Chae, B., & Yang, C. L. (2004). National differences and ERP implementation: issues and challenges. Omega, vol. 32, no. 5, pp. 361-371. Srivastava, M. and Gips, B.J. (2009) Chinese cultural implications for ERP implementation. Journal of technology management & innovation, vol. 4, no. 1, pp.105-113. Zaglago, L., Apulu, I., Chapman, C., & Shah, H. (2013). The Impact of Culture in Enterprise Resource Planning System Implementation. In Proceedings of the World Congress on Engineering (Vol. 1). Zhang, Z., Lee, M. K., Huang, P., Zhang, L., & Huang, X. (2005). A framework of ERP systems implementation success in China: An empirical study.International Journal of Production Economics, vol. 98, no. 1, pp. 56-80. Read More