Processes for ERP Integration in Nike - Case Study Example

Table of Contents ERP Strategy Assessment: Nike 3 Introduction 3 Functions and Processes for ERP Integration 3 Data Infrastructure Tools and Techniques for ERP Implementation 6 Evaluation of Alternate Strategies of Implementation 8 Basic Implementation Strategy 9 Alternative Implementation Strategies 10 Proposed Monitoring and Evaluation Techniques for Effectiveness 11 Modern ERP Components Suited to Nike 13 Management of Information System 13 Supply Chain Management 14 Financial Management 15 ERP Strategy for Nike for Cloud Based Enterprise Technology 16 Assumptions 16 Implementation Strategy 17 Conclusion 17 References 19 ERP Strategy Assessment: Nike Introduction The Nike case depicts how despite being a resourceful organization, the company was unsuccessful in implementing and effecting enterprise system for its operations. There were many reasons that led to the failure of the implemented enterprise system, and a majority of them were resident in the approach taken towards the management of the development and implementation of the enterprise system in the company. The lack of time and consideration spent on how the enterprise system was to be implemented at Nike resulted in the significant discrepancies in its operations which led to the $400 million loss experienced by the company as well as other reported inefficiencies. The following sections provide a comprehensive strategy that can be applied to the Nike case for an effective implementation of an enterprise system that can provide significant competitive advantage to the company Functions and Processes for ERP Integration Through analysis of the case, it has been observed that Nike is a manufacturing based company, with operations in multiple locations and international markets as well. Despite being a manufacturing firm, the company is significantly involved in retail as well as outsourcing of manufacturing divisions as well. The company extensively interacts with its suppliers (Jain, 2012) who provide raw material, work in progress material and finished products to the company as well as with its customers that include both the end consumers and other retailers and wholesalers like Wal-Mart and Target. The company’s interactions with the end consumers are through the network of flagship stores and retail outlets that the company has in its markets of operation. This highlights the nature of the business as well as the importance of effective and efficient Financial Management, CRM, supply chain management and the business intelligence for the organization. The respective functions that have been identified for the ERP integration holistically include Supply Chain Management, and Financial Management and the Management of Business Intelligence. The supporting functions of Human Resource Management will also be addressed in the ERP integration Respective to the Supply Chain Management function, the processes pertaining to management of inventory from those coming in from the outsource production houses, the work in progress inventory transactions and the management of the finished goods inventory distributed to the retailers will be targeted with ERP integration. The processes associated with the management of production, planning for production, demand and supply forecasting, as well as interactions between entities in the supply chain model of Nike can be targeted for integration. When it comes to business intelligence, the operations of Nike involve dissemination, exchange and utilization of significant data and information. In order to support integration of business operations for business the business intelligence at Nike also needs to be targeted for integration through the enterprise systems. Business intelligence is employed across the organization, however in the case if Nike, the most effective use of business intelligence is with regard to the CRM function. The management of consumer and retail customer data is important for the company and this can be done using ERP integration technique where the data can be stored in repositories for analytics and data modeling to predict future trends based of past performances and consumer behavior in the market. The specific processes for business reporting and development of performance heuristics are covered in this. Having a business intelligence function which integrates the business while providing significant resources to the company is a great asset for a company like Nike with diversified markets and operations spread across geographical borders. The finance function of business is the backbone of any organization and shares a two way relationship with the other functions of the business. This is why this should also be targeted for ERP integration as well. The processes involved with internal managerial accounting employed for the purpose of decision making along with the more formal financial account for the stakeholders of the company can be targeted in the enterprise integration systems. The specific costing process for inventories, manufacturing, management of cash in the business and other business expenses can be supported in the integration. Data Infrastructure Tools and Techniques for ERP Implementation One of the main problems identified in the case was lack of analysis on the current system and the limited requirements analysis which resulted in an ambitious project to be drawn for the implementation of the ERP system at the company. In order to rectify this, Nike should utilize an organized and planned structure for the management and flow of data in the enterprise system (Alaskari, 2012). The data infrastructure should use a large data repository in which the data generated through operations across the company is stored along with supportive data coming in from the customers (retailers) and the supply partners of Nike. The data will need to be first extracted from the sources, then transformed into compatible data warehouse format through data translation and management tools and then finally loaded on to the data warehouse. The data warehouse would store the historical raw data in the metadata format. This data can then be utilized by the company through the ERP system to develop heuristics, perform business reporting, OLAP and predictive modeling as well as to make external reports. The respective modules of ERP from the different vendors used by Nike will need to be integrated for their data through this process. The following depicts the data infrastructure that can be employed by Nike for ERP implementation The implementation of an ERP system requires significant tools to support the process. These can take the form for tools for managing data, tools for management of the project as well as risk assessment and budgeting and forecasting tools. Some of the specific tools that can be used by Nike for ERP implementation include central system administration tool (Eisbart, n.d), data conversion tool, VersionOne, Microsoft Project, and ASAP for SAP ERP implementation. Corresponding to implementation techniques, there are many available techniques that can be employed however the one most suited to Nike is the parallel implementation technique. The reason for this are the diverse operations of the company which are expansive and difficult centralize. The ERP implementation can be made in a modular fashion through a parallel technique of implementation using ASAP methodology. Through this the specific business sections of Nike can be made to run on the developed enterprise system, while retaining operations on the legacy model till a set date when the operations are entirely handled by the enterprise system. This is significantly useful for the company as it reduces the risks involved while making transition smoother than was previously the case with Nike. The modular format of the enterprise system also deviates pressure of the entire business getting integrated in a over haul at the same time which can result in complexities for a business the size of Nike having multinational operations in distributed locations. Moreover the previous problems with the supply and demand management during the enterprise system implementation phase which resulted in significant losses for the company can be avoided through the parallel running legacy systems which are mainly employed in this technique to ensure a smooth transition for the operations as well as the people in the company. Evaluation of Alternate Strategies of Implementation There are many ways in which enterprise wise systems can be implemented, and the selection of the appropriate implementation strategy is based on the requirements of the company, the business model in place and the goals and objectives sought from the implementation of the technology. Basic Implementation Strategy This comprises of tasks and techniques that should be implemented, regardless of what actual implementation technique is employed for the implantation of the enterprise system. One of the main reasons for the issues in the Nike was the lack of use of these strategies which resulted in significant problems in the implementation process, and even in the period post implementation. Nike should first of all consider determining the exact requirements in detail for the enterprise system. This would make the ERP implementation more satisfying the needs and requirements of the company. The lack of the clear requirements and functionality breeds confusion and generates wastage of effort and time spent on unnecessary issues (Holland et al., 1999). Similarly the company should also under go a change management process for the management as well as the people, where the employees are provided ownership in implementation through their respective roles in the project. This helps dissolve the resistance to change, while aiding in the transition of adopting the changed system and processes much easier (Aladwani, 2001). In support training on the new system should be extensively provided while a testing of the different modules performed in order to reduce problems and issues carried forward in the post implementation stage. Previously Nike did not conduct extensive training as it was hurrying into declaring an ERP launch. This should be avoided with extensive master trainer, and subordinate trainer training provided who can further train the employees of Nike in using the new system to its full useful capacity. The basic strategy which has been depicted above is to be employed to reduce the business risk for Nike, which the company had to face due to lack of its home work and planning with the previous implementation. Alternative Implementation Strategies There are five basic types of implementation strategies which include the big bang, phased, parallel, process line and hybrid (Khanna and Arneja, 2012). The big bang strategy involves the implementation of the enterprise system as a single big change at once through out the organization. This has a huge impact on the organization which faced a significant amount of change in a sudden fashion. Due to problems of change management, inefficient implementation and gaps in plans and execution, this strategy has been least popular lately with its extensive employment of resources making the strategy risky. This strategy has also contributed significantly to the early failures of ERP implementation. To be noted is the fact, that Nike initially went with strategy of implementation which caused major problems to be realized by the company in the following years. Phased transition strategy uses different modules and elements of the enterprise systems to be implemented in chronological fashion (Leon, 2009). This is increasingly employed by businesses as its low risk and has a reduced scope of implantation for the modules as opposed to the aggregated scope for the entire system. Process line implementation strategy involves transitioning one product line or process line of the company at a time. This also breaks the transition and implementation process into smaller parts therefore reducing the scope of the process (Leon, 2009). However as Nike has diverse range of products and process lines this would be an extensive and expensive strategy to implement. The parallel transition strategy is the one which is proposed for Nike and it involves a modular implementation of the enterprise system which is launched to go live while the legacy system is still in operation (Leon, 2009). With concurrent operation a date is set when the legacy system is shut down and the business transitions to the new enterprise system The risks associated with compatibility, lost data, delays, incorrect process flows, incompatibility, lack of testing, lack of congruence with the new system, and lack of proper working system when needed are avoided using this strategy. The hybrid strategy is the one where more than one of the above strategies can be employed in combination as per the needs of the business (Leon, 2009). Often phased transition strategy is combined with pilot testing to make way for a more risk ensured implementation of the enterprise system which is tested prior to implementation as well. Proposed Monitoring and Evaluation Techniques for Effectiveness The business processes that are being targeted for implementation like those of supply chain management, management of information system, financial management, human resource management and CRM identified for Nike need to be reviewed for their respective process flows. The processes need to be managed in order to reduce the problems associated with overruns, obsolesce, wastage and incompatibility (Luo and Strong, 2004). Similarly the change management required at Nike and the respective training needs need to be identified prior to implementation. The evaluation of the implementation strategy for Nike should be assessed according to these identified issues, and heuristics, with the strategy which best fits the requirements with reduced risks (Burns) addressing the complex business processes of Nike selected. In order to effectively implement the enterprise system, a planned project management approach needs to be employed (Al-Mashari, 2010). This can be done by following some of the most popular project management guidelines as provided by either Prince2 or PMBOK. The enterprise system implementation should be assessed using a scientific approach with monitoring of the processes and testing of the results at each stage of the implementation process. For this the entire implementation process needs to be mapped out and the requirements of the users and the business processes that need to be addressed by the system need to be identified in detail. The proposed enterprise solution then needs to be aligned with the requirements and the business process needs, with benchmarks and milestones set at the different stages of implementation. These can be used to assess the performance level of the implementation project as well as the enterprise solution at each stage and level. A monitoring plan for the system needs to be in place which assessed the system performance after implementation for any issues and discrepancies. This was not undertaken by Nike as depicted in the case. Modern ERP Components Suited to Nike The following depict some of the modules of an enterprise system that are most suitable for Nike with respect to what they offer and how they help in integrated business processes while increasing process and function efficiencies, which is much required as depicted by the case. Management of Information System The management information modules in the market are highly versatile and dynamic, made to suit the needs of any business customer (Bradford, 2010). Utilizing different data management practices, they aim to provide efficient flow of data throughout the organization that is adjusted and formatted in order to support decision making in the organization. Data in the MIS can be managed through data repositories like data warehouses or data marts specific to the operations. With the implementation of the Management of Information Systems module Nike can effectively manage forecasting of operations and financials, while using the data resource coming in from its own as well as external network of retail operations to better understand the end consumer, their respective changing patterns in demand and perceptions about products. These can then be used to adjust product lines, or launch new products using decision support systems that employ ETL, analytics and data mining through the information management module. Simulation and modeling through the MIS can provide real time effective predictive modeling for consumer demand which can be used for adjustments in the product management, marketing functions as well as those related to management of relationship with customers (CRM). Supply Chain Management This module is of most significance to manufacturing companies like Nike. The modules available in the market specific to this field can enable Nike to integrate its manufacturing and sales operations with production planning and forecasting to better predict the future demand for the products in the market. Using this module, the company will be able to accurately plan for future demand of the respective types of products which as presented by the customers while producing and supplying enough which meet the demand without exceeding. This results in optimized operations where wastage is minimal resulting in lean operations. The sub functions of supply chain management are catered to by the supply chain modules available with individual modules devoted to them. These include manufacturing resource planning, quality management, lean manufacturing, shipment tracking as well as materials management (Bradford, 2010). Additional technologies can be added to these modules to make them customized as well as scaleable. The use of RFID for the management of inventory is in the supply chain is particularly useful where through wireless networks the inventory is tracked using wireless chips embedded in either the product tags or on the shipment. This makes it possible to track the inventory with regards to where a specific inventory lot is in the supply chain, while also aiding in managing problems and bottlenecks. The use of EDI based transactions supported by the modules can aid Nike in management of the respective transactions across the supply chain on a local scale as well as for its international operations that deal with outsourced production associates. Using the internet the trading partners and business associates of Nike can exchange electronic documents in a much faster manner which is integrated with their systems. Using these technologies can help reduce the discrepancies of information between the customers and Nike, as well as with the respective suppliers of Nike. The distribution processes supply chain administration as well as the management inventory can be supported through this module. Financial Management Traditionally the financial management modules of the integrative systems provided only computerization and integration of the accounting process and that related to finance management in the organization. However the modern modules that are offered in enterprise systems are more integrative with the entire business. The modules in the market support financial accounting, asset management, investment management, management of treasury options, as well as the more decision making finance components. The main results that are provided by the financial accounting systems pertain to the financial reports that are made specifically for reporting business performance to the business stakeholders employing applications like general ledger, accounts payable and accounts receivable. The management accounting systems however can enable Nike to be effective in terms budgeting and forecasting and implementing internal controls that work therefore supporting risk management and contributing towards the business strategy of the company. More specifically ABC costing methods, along with product costing, and profitability analysis supported by the component can help Nike be more efficiently. The key benefits that can be realized by Nike through the modern financial management modules in enterprise system pertain to better management of accounts and cash in the company, improved performance, faster financial management processes, decreased days outstanding, reduced risks and greater transparency of accounts (Bradford, 2010). ERP Strategy for Nike for Cloud Based Enterprise Technology Assumptions If Nike selects cloud ERP technology as the choice for its enterprise solution a few assumptions will need to be taken. These correspond with. Involvement of the Top/ Senior Management in the implementation process Commitment by the employees The desire of the company to use multiple ERP interfaces and modules provided by different vendors using the best of the breed methodology A less manufacturing centric focus and a more management focus is employed by Nike with manufacturing outsourced The Supply Chain, CRM, Business Intelligence and financial management modules are targeted through this approach Nike if it seeks to reap the benefits of Cloud enterprise systems through SaaS, will need to give up management and demand the application, data, runtime, middleware, Operating Systems, visualization, servers, storage and networking from the SaaS vendors only. Implementation Strategy Cloud ERP deployment is undertaken in a number of manners, however when as a suggestion a private external cloud based implementation strategy is most beneficial for Nike. The reason for this is that the company will be able to retain benefits associated with competitive advantage with businesses centric resources being made available to Nike. The company will be able to experience low costs, and flexibility of operations and implementation with paying for only the amounts of resources and modules being used by the company (Kimberling, 2012). Moreover the need for extensive hardware compatibility with software and the enterprise system will be eliminated with a less hardware centric approach. Conclusion Using a more planned out strategy Nike can effectively realize the competitive advantage that integrative enterprise systems provide businesses. The implementation of enterprise systems is a systematic approach which should be undertaken while addressing the issues associated with change management and business process management concurrent with the systems strategy. Nike being more planned, organized and proactive can realize the benefits presented by the enterprise systems, however as the operations of Nike are manufacturing based and cloud enterprise systems are more suitable for non manufacturing businesses (Barker, 2012), the application of cloud ERP at Nike is while possible, but has its limitations. 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