Enterprise Resource Planning

Tamizhvanan -1421330
Shiny Philip 1421355
Padma Saundharya -1421359
REGISTER NO- 1421446
SECTION- M

KEDA SAP IMPLEMENTATION

Table of Contents
Executive summary: .............................................................................................................................
Situational analysis .............................................................................................................................
Introduction: .....................................................................................................................................
Problem Statement: .............................................................................................................................
Scope of the problem: .......................................................................................................................
Objectives: ...........................................................................................................................................
Alternative courses of action: ..............................................................................................................
Evaluation of Options: .........................................................................................................................
1)Developing In-House ......................................................................................................................
Pros: ..............................................................................................................................................
Cons: .............................................................................................................................................
2)Outsourcing to a 3rd Party Provider ...............................................................................................
Pros: ..............................................................................................................................................
Cons: .............................................................................................................................................
Decision: ..............................................................................................................................................
Action Plan: .........................................................................................................................................
Future of ERP .......................................................................................................................................
EXHIBIT I ..............................................................................................................................................
Keda's history timeline ......................................................................................................................

Page 1 of 8

Executive summary:
While Enterprise Resource Planning (ERP) system demand in China has been steadily increasing,
many of such implementation projects failed. Keda Industrial Co. Ltd (600986: Shanghai Stock
Exchange), a manufacturer of large scale machinery in China, however, was one of the few that
successfully deployed its ERP solution in 2005. In this case study, we document the ERP initiative
of Keda from its conception to its deployment, study the factors that contributed to its success, and
summarize Kedas practices that substantiated the identified success factors.

Page 2 of 8

CASE FACTS
Business Context/Key Business Drivers
Keda began as a small capacity manufacturer of ceramic machinery in 1992. Keda began by
imitating business model of European ceramic machinery manufacturers, who were leading the
market space at that time.
By early 2000s, Keda became the second biggest manufacturer of building machinery, second
to SACMI of Italy (who had implemented SAP system for ERP)
Keda set up a post-doctoral workstation for research in 2003. Company also made an additional
investment of $5.4M in ceramic engineering R&D facility. R&D, product and business
innovation were of prominent importance. With these initiatives, Keda established itself as
product and management innovation leader.
By 2010, with more than 2000 employees, Keda was a force to reckon with; offering a broad
spectrum of services like stone processing, energy resource management, plant design &
technical consulting etc.
Owing to the nature of its business, Keda received orders which were highly customized, had
low volumes and hence had higher margins. This, coupled with de-centralized inventory, made
it difficult for the company to keep track of and plan for its resources. Utilization of these was
extremely poor compared to competitors.
Keda had a silo based model, which did not really work well for the company. The business
units were not well connected with each other and did not share enough information, which
led to duplicity, redundancy and thus higher costs. This resulted in company not having a clear
idea about its costs and decisions were taken on a hunch rather than based on data and its
analysis.
Main drivers for Keda to switch to a new and comprehensive ERP system increasing pressure
faced from local and international competitors, Chinese governments policies to incentivize
computerization and existing MRP-II systems vendors discontinuation of support.

Drivers for ERP

Silo-based model taking a toll on Kedas business performance

Disconnected business units equals duplicate tasks, redundancy and heightened costs
Little information flow and lack of integration prevented timely strategic decisions
To remain a leader Keda needed to continue innovating, but needed to provide
information to all departments along the way
Also the Chinese governments call computerization in corporations
Inventory management difficult because of the diverse product line
Low usage and production made it difficult to meet demand
The expended product offering caused Keda to build more factories, causing Keda to
outgrow it MRP II system.
Keda needed to rethink its IT.

Situational analysis
The company first began its computerization in the year 2000. Dr. Zhu, Head of the IT department
developed a major 5 year plan leading to conducting a wide status quo analysis and also to have an
integrated organisation structure with streamlined data flows. After enquiring about several local and
global vendors, KEDA shortlisted nine such companies out of which SAP emerged as a winner. The
implementation team were formed that included key users, the consultants and the IT officers. With
some clashes between the suggestions and interests of the key users and the module owners, the
implementation went smoothly and speedily with the help of the senior management. The SAP was
successfully installed in the company in the August of 2005. To expedite the entire process, an
aggressive big bang approach and forced compliance by the users were adopted. It helped in
increasing the data accuracy from 85% to 98%. Within months ERP implementation effort was a great
success resulting in decrease in operation and management cost, and improved efficiency.

Introduction:

KEDA Industrial Company Ltd. (KEDA) founded in the year of 1992 is a Chinese ceramic machinery
manufacturer company. Due to the nature of the primary products, all the departments of the company
functioned independently and the problems were solved in ad-hoc manner. This helped the company to
achieve efficiency in its operations. But things were not all rosy for KEDA as the disconnected business
units often duplicated resulting in redundancy and heightened costs. This lack of integration also
resulted in increased competition. Some of the other challenges that forced KEDA to go for ERP were
governmental pressure and the issues related to inventory management.

ERP Implementation Process

5 Stages1. Identify Need for System- Drivers for ERP system were identified so that Keda could define
clear goals that were in line with its overall business strategies

2. Vendor Selection- A suitable provider of an off-the-shelf solution was selected on the

basis of the needs identified above. This selection process involved receiving responses
to the request for proposal (RFP), short-listing vendors for presentation and visiting

vendors existing client

3. Process Redesign- Existing business processes and operations needed to be modified to fit the
chosen system. Responsibility for this stage was placed on key users.
4. System Implementation- The ERP modules were configured and customized for Kedas
business processes and data needs. This process involved converting and loading data and
making changes to process flows
5. System testing & User training- The system was tested to see whether it was ready for
deployment. Users of the system familiarized themselves with system operations
6. System Rollout- The system went online

Problem Statement:
The problem is that disconnected business units were leading to redundancy and
heightened costs (very little information flow between departments). Current MRPII
system does not support multi-plant mode. Because of this there was lack of
knowledge thus unable to assess costs and pricing policies.

Initiative challenges
Key Challenges
Resistance from personnel to
use the new system, fearing
that it would lessen their
authority.
Changes demanded by users
Delays in production
Training
of
malfunction

users/system

Issue Resolution
Senior management lent its support to the implementation process, as it
would set a strong example of support for the new system. Those who still
wouldnt comply, were promptly replaced, i.e. forced-compliance
Users involved in setting process parameters during implementation. This
ensured their compliance.
Implementation took place during non-peak period. Director was informed
in advance and supported the project by allowing ERP related delays in
first year.
Training of key users and identification of potential issues with system was
carried out simultaneously and early on. Key users then trained others.

Scope of the problem:

There were challenges related to managing a large inventory. It was struggling through to meet
demand due to production delays and resources and facilities not optimally utilized. There was
Pressures from Chinese government agencies to catch up with foreign firms.

Objectives:
Improvement management control
Improvement in Information quality

Initiative Objectives/Benefits
Key Business Objectives
Efficient data flow and integrated
business processes

Improved inventory management

Appropriate costing and pricing

Improved production efficiency,

reduced product lead time
Support multi-plant operations

Planned Benefits Of The Initiative

Decrease in redundancy and duplication of efforts better information
sharing among different business units. Improved control and
information quality (availability, accuracy of cost and qty. etc.)
Optimized inventory due to centralization and better coordination
between different entities.
Clearer idea of cost, enabling company to identify and get rid of nonprofitable orders. Accuracy of data improved from 85% to 98%.
With same manufacturing capacity monthly output increased from 6
presses to 30 presses.
Older MRP-II system did not support multi-plant operations which were
critical in achieving operational efficiency.

SOLUTION
Alternative courses of action:
Developing In-House or
Outsourcing to a 3rd Party Provider

Evaluation of Options:
1)Developing In-House system
Pros:
1) System developed would most likely take into account cultural contexts and practices

and would potentially be easier for the key-users to adopt.

2) System would be developed according to the needs and functions of the company.
3) System would fit the business processes.

Cons:
1) Likely to be too time consuming
2) Not feasible considering the pressing need for a better system
3) Would be expensive and difficult as Keda does not have a strong IT team proficient in
developing systems.

2)Outsourcing to a 3rd Party Provider

Pros:
1) A vendor would have more experience and expertise in developing and deploying ERP systems.

2) System bought could be more effective and bug-free.

3) Off-the-shelf system would be customized and deployed quicker than developing one
from scratch.
4) System could be deployed in shorter time to address the pressing issue of lack of
integration and maintenance support.
5) The ERP system (SAP) is precisely what Keda's strongest competitor, SACMI, is using.
So, Switching over to the same system erodes an edge that SACMI had over Kedaand
better information management

Cons:
1) Vendor long-range support was questionable.
2) The vendor may not provide as comprehensive as support as purported since the vendor
was located in another country.
3) As the customization of an off-the-shelf system is limited, certain business processes would
have to be tweaked to "fit" the system

Decision:
The decision comes out to be implementing SAP rather than inhouse system. The reason being that the
SAP itself is a reknowned name in the industry and the products are of optimum quality. Due to this

reason the company need not have to worry about the type of system and concentrate on its
core competency rather than developing new system that might not work as well as SAP.

Moreover as the SAP corporation is consistently working towards improvement of the system ,
the firm can take advantage of it, on other hand the company would have to consistently devlope
its inhouse system in order to compete with its competior who is using SAP.

Action Plan:
The action plan is to implement the SAP as soon as possible so that the company can take
advantage of it in properly managing the inventory and competitions with the competitor.

Results
The initiative was successful. This can be seen from the results achieved after implementing
these strategies:
Data accuracy improved from 85% to 98%. Better pricing and costing as decisions were taken
on the basis of analysis of the real data that was now available.
Capacity of press manufacturing increased from 6 a month to 30 a month, within same
manufacturing facility.
Reduced costs.
Optimized inventory also reduced inventory holding costs.
Improved response to fluctuating market conditions and market demands.
Improved decisions non-profitable orders avoided, better control over pricing.
SAP ERP implemented across organization.

Future of ERP
Despite the success of the ERP implementation project, the initiative is part of a bigger
computerization plan that would continue to satisfy the companys information needs and
improve thecompanys productivity through better information management and dissemination
for decision making. To fully capitalize on the centralized data and processes made possible by
ERP, Keda remained committed to the computerization plan originally set out. Values were
continuously created via disciplined new system additions and extensions. For instance, the
Manufacturing Execution System, seamlessly integrated with ERP, tracked all manufacturing
activities and provided real-time access to production progress and information.
ERP is an enabling technology. With ERP, Keda is strategically positioned to reap the benefits of
computerization. ERP serves as the core on which systems, such as Customer Relationship
Management, Business Intelligence, and Supply Chain Management, are built to enhance customer
management, optimize decision making, and coordinate vendors respectively. To Keda, ERP is a

beginning, rather than an end.

Relevance and analysis

Even though Keda had achieved great success and had an exponential growth, its margins were
hurt by inefficient and decentralized inventory management, improper pricing due to inadequate
information about costs and underutilized resources. MRP-II did not support multi-plant
operations and having a streamlined, organization wide flow of information was impossible.

Hence Keda was in dire need of a comprehensive ERP system to put up with the pressure exerted
by local and global competitors and living up to the expectations of the market.
Taking the Chinese business culture into consideration, it wasnt expected that the ERP
implementation would occur smoothly, as personnel would have looked at it as a challenge to
their authority. But management was firm about their decision of implementing this system and
top management supported the vision with a great commitment. Management also chose to
exercise local tools such as forced compliance to make sure that everyone complied with the
change and those who didnt were promptly replaced. (Case specific question 1)
I believe that Keda had a stroke of luck with their big-bang approach of implementation working
out fine. A cascaded approach during implementation would have made more sense, since, had
the system not worked out, Kedas losses would have been minimized. Another different
approach that Kedas management could have taken is clearly communicating the benefits of the
new ERP system down the hierarchy and ensuring that users authority will not be compromised
by implementation of ERP, which was concern for some of the personnel, who had to be
replaced. (Case specific question 2)
The implementation was successful, although roughly 80% of such efforts fail in China. I believe
this happened because:
Support and commitment of higher management towards the project.
Key employees worked along with external consultants to ensure data accuracy.
Business processes such as inventory management were completely overhauled and
reengineered to fit perfectly in the new ERP system.
Third party vendor was chosen instead of developing the system internally. This ensured
faster implementation as this vendor was better versed with implementing such complex
system.
Training to key personnel was given early on to ensure their compatibility with the new
system and early detection of malfunction.
Takeaways
Involvement of key users right from initial stages, commitment of higher management,
seamless communication between different participants, efficient selection of proper option,
defining and sticking to a timeline are some of the key factors which ensure success of
implementation of an IT project.
Cultural context can be used to ensure success of a project.
Keeping senior management informed proactively can avoid bigger problems and also their
involvement can be used to drive success of a project without facing resistance from key
stakeholders.
Decision of whether to go with a third party vendor or develop system internally should be
taken carefully considering the time at hand and speed with which system is required to be
implemented.

EXHIBIT I
Keda's history timeline