Braun Industrial Technology Gesellschaft mit beschrnkter Haftung - Case Study Example

Running Head: ERP case study Name: University: Course: Date: Introduction BIT GmbH, a German engineering firm acquired the Australian subsidiary BIT Australasia (BITA) which has three divisions; BIT Imports (BITI), BIT Engineering (BITE) and BIT Sales and Marketing (BITS). Upon the acquisition, the decentralized business operations and administrative staff was merged at the BITA’s Sydney office; positively impacting on the annual sales and divestiture of the parent company into New Zealand and Australian state. In its operation, the Group uses a highly customized version of Micro Extensions Pty Ltd (MXP) software for basic sales, inventory management and financial reporting. However, recent software upgrades have proved incompatible with MXP and therefore BITA management’s desire for better coordination of sales, design, manufacturing and procurement processes. The plan to overcome some reporting difficulties has forced the Group to replace MXP with ERP system, available from three potential vendors, i.e. Vantage from Epicore, Ax from Microsoft and Nav from Microsoft. Therefore, this report aims at evaluating the three vendors in light of BITA’s requirements; selecting the most suitable product from the evaluation and writing a case for the CEO of BITA in justification of the direction, so taken. According to the above changes in the operations of the Group, certain important requirements are useful in the evaluation to decide which vendor is awarded the opportunity to replace the current MXP system with a new ERP system. Cutting across the three vendors are the applications and areas of which specific functions are to be considered, some of which include analysis and reporting, customer relationship management, e-commerce, financials, human resource management, inventory and sales order processing and materials planning and manufacturing. Fundamentally, the initial costs of the software change will be important in the decision making process. Evaluation of the products Nav from Microsoft Among the services that BITE anticipates from the new software implementation includes the analysis and reporting function providing financial reporting and multi-company financial consolidations from the vendors’ products. The corresponding features in the applications of the Nav present an opportunity for one of the three software versions to be adopted. However, the lack of multi-company financial consolidations means that BITE would have to incur additional cost in the computational processes of branch accounts in New Zealand and Australia. Primarily, the application aspects as provided by Nav are positively correlated with BITE’s requirements. In an effort to match the available applications to BITE’s demands, Nav provides for all the required financial services including, multiple currencies, intercompany transactions, National accounts payable and invoicing, Fixed asset management, Accounting and financial management, Budgeting and forecasting, Cost control, Basic financial consolidations, Cash Management, Budgeting and forecasting, Collection management, Treasury management, and Electronic funds transfers. The distribution categories provide Warehouse management, Order processing, Purchase order and inventory services. Analysis and reporting requires guarantee financial reporting and analysis and Multi-company financial consolidations services included in the software change. Customer relationship management through the human resources promise Contact management, Customer or account management, Human resource management, Inventory control and stock levels, Sales order processing, Lead management and customer service automation. Finally, Materials Planning and manufacturing ensures remote access to financials from external locations, routings, CAD interface, production scheduling, manufacturing WIP tracking, marketing campaign management and customer segmentation. As a result of the similarity in the offers from Nav in order to meet BITE’s demands few variations put Nav second to Ax’s provision of most of the services demanded thereof (Microsoft Dynamics NAV, March 2008). Considering the budgetary requirements necessary for the software implementation, the infrastructural costs, licensing, users and consultancy costs for Nav translate to AUD 681,500 slightly below the approximated budgeted AUD 700,000 for the ERP software implementation. With such an affordable budget, the management of \bi indicated by Vantage compared to Vintage and Ax allows for the management to consider tendering the software change to Nav. Ax from Microsoft Because the Vendor’s product will be evaluated on the basis of best fit with BITA’s requirements and value for money based on their prices, the Microsoft Dynamics AX 4.0 software suits BITE’s requirements up to a certain level. Fundamentally, the application aspects as provided by Ax are positively correlated with BITE’s requirements. In an effort to match the available applications to BITE’s demands, Ax provides for all the required financial services including, multiple currencies, intercompany transactions, National accounts payable and invoicing, Fixed asset management, Accounting and financial management, Budgeting and forecasting, Cost control, Basic financial consolidations, Cash Management, Budgeting and forecasting, Collection management, Treasury management, and Electronic funds transfers. The distribution categories provide Warehouse management, Order processing, Purchase order and inventory services. Analysis and reporting requires guarantee financial reporting and analysis and Multi-company financial consolidations services included in the software change. Customer relationship management through the human resources promise Contact management, customer or account management, human resource management, inventory control and stock levels, Sales order processing, lead management and customer service automation. finally, materials planning and manufacturing ensures remote access to financials from external locations, Routings, CAD interface, Production scheduling, Manufacturing WIP tracking, Marketing campaign management and customer segmentation. As a result of the similarity in the Ax’s offers to BITE’s demands except for few variations put Ax second to Epicor’s provision of almost all the services demanded thereof (Microsoft Dynamics AX, June 2007). Considering the budgetary requirements necessary for the software implementation, the infrastructural costs, licensing, users and consultancy costs translate to AUD 708,525 slightly overbearing the budgeted AUD 700,000 for the implementation. Therefore, considering the average budget indicated by Ax compared to Nav and Epicor allows for the management to consider tendering the software change to Ax. Vantage from Epicore Vantage on the other hand, provides all the required financial services including, basic financial consolidations, cash management, budgeting and forecasting, collection management, treasury management, multiple currencies, inter-company transactions, national accounts payable and invoicing, fixed asset management, accounting and financial management, budgeting and forecasting, cost control and electronic funds transfers. The distribution categories provide warehouse management, order processing, purchase order and inventory services. Analysis and reporting requires guarantee financial reporting and analysis and multi-company financial consolidations services included in the software change. Customer relationship management through the human resources promise Contact management, customer or account management, human resource management, inventory control and stock levels, sales order processing, lead management and customer service automation. Finally, materials planning and manufacturing ensures remote access to financials from external locations, Routings, CAD interface, Production scheduling, manufacturing WIP tracking, marketing campaign management and customer segmentation. From the comparison tabled between the three products, Vantage’s offers to meet BITE’s demands supersedes the available offers by Ax and Nav, proving that BITE’s management ought to consider Vantage for the system change. Unlike Ax and Nav, vantage provides all the necessary features and applications even beyond the demands of BITE but at a very high cost of implementation. As a result the management in considering its options would have to decide whether to choose quality over cost especially with the opportunity costs involved for such venture at a restructuring point in the life of the business (Microsoft Dynamics AX, June 2007). However, the budgetary computations for the software implementation, licensing, users, infrastructure and consultancy costs translate to AUD 758,450 slightly overbearing the budgeted AUD 700,000; a figure much higher than other products in the market. Therefore, with if the budget was the only factor to determine the product to be adopted, it would place Vantage third. As such in considering the rather high budget by Vantage compared to Nav and Ax allows for the management to consider tendering the software change to either Nav or Ax. Generally, the implementation of the ERP system irrespective of the type of product to be chosen out of Nav, Ax and Vantage certain capabilities that match BITA’s requirements can be in form of manufacturing and support sections. For instance, E-commerce requirements for BITA can either be business to business or marketing oriented; which according to the evaluation is only available in Vantage, though based on a third party policy for Ax. On the other hand, manufacturing requirements for BITA include requisition procurement and rescheduling GANTT, discrete batch processing, manufacturing job costing, graphical presentation and rescheduling, materials requirements planning and finite/infinite capacity planning. Therefore on the basis of manufacturing requirements, Nav and Vintage presents applications in finite scheduling absent in Ax, hence the most likely product for BITA would be Nav and Vintage. Similarly on the basis of marketing, business to business applications are common with Vintage and Ax though on third party basis. As a result, the likely candidate for the ERP tender is likely to be Vintage and partly Ax, as the features are absent in Nav. Selecting the most suitable product The Group’s decision to adopt a new ERP system was reached based on a number of factors that negatively impacted on the performance of BITA. Fundamentally, there was need for timely and accurate access to reports especially with the expanded company’s operations overseas and interstate. Similarly, the company executives were concerned with the time zone difference between Germany, Sydney, New Zealand and Perth. The time difference not only impacted on the data exchange and report preparation but also affected customer handling procedures of the branches and their enquiries. In the process, the response time to the company clients had been affected to between 3 to 4 hours a day. Among the three products, Ax would ensure that BITE meets the customer needs of availing information promptly while taking into consideration the operational costs of the company. While the management would desire to adequately minimize operation costs, the agency contract requires them to uphold the agreement terms between the shareholders and the company management. Therefore, the very low cost of implementation for Nav would indicate that the attached package, would most likely under-provide the company with the required system change anticipated from the new ERP system. But on the higher side, Vintage’s highly priced offer guarantees provision of all the system requirements for the ERP system. According to the selection criteria, the Vendor’s product will be evaluated on the basis of best fit with BITA’s requirements and value for money based on their prices. In the above analysis, Ax’s limited features based on the fixed assets, warehouse management, make to order, HR, Australian payroll, points of sale applications allows Nav and Vintage to be tendered with the provision of the product. However, the second selection criteria considers the product’s value for money based on their prices, which in the above scenario was inclusive of infrastructural costs, licensing, training users and consultancy charges. The cumulative figures placed Nav as the least expensive while Vintage as the most expensive venture (Microsoft Dynamics NAV, March 2008). Therefore considering the effectiveness of the two evaluation criteria, while Ax is the appropriate product considering the budget, it fails to meet most of the system requirements expected by BITA’s management. On the other extreme, Vintage’s ability to avail BITA’s requirements is challenged by the fact that its serviced are far much expensive than the anticipated budget. As such only Nav qualifies as the appropriate match for the requirements set forth by BITA and offers an affordable cost of implementation. Business case for the CEO of BITA to justify the decision BIT Australasia’s (BITA) plan to change to a new ERP system. Upon the acquisition of BITA by BIT GmbH, a German engineering firm, there was instant decentralization of business operations and administrative staff, positively impacting on annual sales, financial reporting and inventory management. The acquisition brought with BITA its three divisions; BIT for exports, Bit Engineering and BIT Sales and Marketing. Currently, the MXP system though performing better was slow due to increased number of employee and clients. The system change is intended to allow new applications to be used in the system specifically with the worldwide software upgrades available in the market. Being a parent company with branches in the interstate and regional cities, BITA has the manpower to monopolize on the imports, engineering products and marketing. The plan therefore believes in first setting up structures that take care of the consumer’s demands in order to support the other operations of the company. In terms of value preposition, the acquisition by BIT GmbH, BITA has expanded with branches in New Zealand and Australian State. The current MXP does not have the capacity to produce exception reports on time. Therefore BITA management expects to see better coordination of design, manufacturing, procurement and sales processes. Additionally, the management is planning on going to electronic invoicing and payments systems, on line reporting. Due to the interstate and worldwide branches, time zone differences the executives are worried because of the trouble of ease of access to information. Therefore the anticipated change from XMP to ERP would allow for 50 concurrent users in the system. However, the new system would need particular capabilities in finance, CRM, inventory management, manufacturing and e-commerce support. As for the budget (Figure 1), AUD 700,000 had been estimated to be necessary for the architecture consultancy, implementation and training during the hardware, software and implementation. Despite the decision to invest, BITA are aware that the parent company expected a 12% ROI on any investment; while BITA’s cost of capital is 8%. Therefore the choice for Nav instead of Ax or Vintage was in consideration of both the affordability of the costs while ensuring that the system requirements were adhered to the latter. Figure 1: implementation and infrastructural costs     Nav Ax EP           Infrastructure   20000 20000 20000 Lic   $4,900 $4,830 $5,100 Users   50 50 50 Impl factor   1.60 1.75 1.80 Annual user   $90 $88 $89                               Infrastructure   20000 20000 20000 Lic   245000 241500 255000 Impl factor   392000 422625 459000 Annual user   4500 4400 4450 Consultants   20000 20000 20000                         681500 708525 758450 The focus by BITA to adopt a new ERP system would serve in solving the problems affecting the customers, clients and executives equally. However, the venture assumed the fact that their entry into the new markets would be easy and free from challenges in form of legal action or even financial setbacks. The venture outcomes as anticipated by the management included better coordination in the design, manufacture, procurement and sale of its products. Similarly, the training of employees would help lower the slope of the learning curve; hence ensuring that the customers receive value for their purchases. The non-financial resources that were necessary for the system change included consultancy for the design and structuring purposes. Additionally, training of employees on the use of the new system was needed in order to lower the costs of switching to the new system. In general the software upgrade resulting into better performance would better customer satisfaction, reducing the response time for customers; and thus minimizing system maintenance costs as least time will be spent running the system. References Epicor Software Corporation. EPICOR Vantage. Introducing the Next Generation Global Enterprise Resource Planning Software Microsoft Dynamics AX. (June 2007). Solutions: Microsoft Dynamics AX 4.0 Quick Reference Guide. Microsoft Dynamics NAV. (March 2008). Insight: Microsoft Dynamics NAV 5.0 Quick Reference Guide. Read More