Rationale for ERP Implementation

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The Tektronix, Inc.: Global ERP Implementation Analysis
ERP Batch 15 -A
Renita Ferreira (35)

15 December 2010

Tektronix Tektronix was founded in 1946 as a maker of electronic test equipment. By 1993, the company had become a $1.3 billion manufacturer of electronic tools. The company was split into 3 divisions: Measurement Business Division (MBD), Color Printing and Imaging Division (CPID), and Video and Networking Division (VND), and had presence in 60 countries. In 1993, Carl Neun was hired as their new CFO. Neun felt that future success of the company would depend on a strong restructuring. He decided to sell off several businesses , change the business processes and felt that improvement of the IT infrastructure was crucial to TI¶s success. Currently Tektronix, Inc. is best known for its test and measurement equipment such as oscilloscopes, logic analyzers, and video and mobile test protocol equipment. As of November 2007, Tektronix is a subsidiary of Danaher Corporation . Rationale for ERP implementation 1. Increased competition - Tektronix was facing stiff global competition which affected the financial performance of the company. It was hampered by its archaic system that lacked global integration . The company was in the middle of a five year recovery program and needed a system that enabled it. 2. Legacy systems - Despite occupying a strong and stable position in its markets, Tektronix was hampered due to 50 year old legacy system that limited its flexibility and growth opportunities . In U.S. alone it had 460 legacy systems. 3. Different Application Systems and Technology - Lack of global standardization. Business processes were not common anywhere in the World. Lack of visibility of inventory once products were shipped out to the World. Very difficult to identify useful data. Thus hampering flexibility. 4. Slow order processing - Impossible for the company to ship ³up to the minute´ or on a Saturday. Need for a sales order to be entered multiple times in different systems as it made its way through the order cycle. Due to manual coordina tion, the system was prone to errors. 5. Managing customers - Lack of accurate performance information to manage customer account and credit on global basis. Slow order processing and lack of visibility of inventory made it difficult to process orders and delivery properly. System did not have the capacity to effectively calculate an invoice total for a customer at order creation. Vulnerability to order errors due to slow processing through customer service. 6. Financial Systems ± The entire financial system lacked integration with multiple charts of accounts that lead to closing the books took two weeks each month and difficulties in determining which products and division were profitable . 7. Information ± Was a need for information across product divisions and global centres. Too much time was spent on getting information rather than analyzing it. Clear information was needed to help sell off unprofitable businesses and integrate new acquisitions. Seven different data centers that existed were decentralized and segregated by divisions. The communication infra structure had to be reworked to standardize the communication protocol. The inability to access real time and reliable data of the status of assets such as work in progress, finished goods and the location of the inventories all spoke of a complex and paralyzing business infrastructure. 8. Growth of business ± The Color Printing and Imaging Division had been growing quickly but the legacy systems weren¶t able to support its projected growth. There existed plans of doubling the size of the division and drive growth with increased volumes, this would require better equipped systems.

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Leadership and Management Strong Leadership and Ownership from Business not IT Throughout the project Neun exhibited strong leadership traits in terms of sharing a clear achievable vision and objectives. In executing his vision, he implemented strong governance coupled with effective communication to help ensure that things go according to plan and implementation principles are observed. To do this, he established a steering committee whose job was solely to develop and ensure that overarching implementation guidelines and principles are being adhered to. These disciplines helped addressed the risk of a long project drifting in scope and losing focus. Strong Management Support and Building a Coalition Strong management support was exhibited at different levels. With the mandate that Neun obtained from the CEO, he was able to execute the project with unlimited authority and cut through the politics, allowing him to make quicker and more effective decisions which in turn, further strengthened his leadership position. Neun also received strong support from the presidents of each divi sion as well as from IT. The role of the presidents of the business divisions was key in insuring stakeholders access and removing political obstacles. The division presidents also played the role of evangelist ± supporting implementation teams throughout each wave of the project. Various IT managers in each division also played strong supporting roles in providing key reso urces and insights into various challenges. Overall, this strong management support helped lower resistance to change and sustained momentum for the project. This was a key success factor as it quickly established a strong coalition of the willing to guide and support the change. Combining the Right Skills It was clear at the start of the project that Tektronix was ill skilled for a successful implementation. Several steps were key in building the right team to do the job: Neun immediately hired a CIO with the right experience to help guide the project. The role of CIO was critical in ensuring strong technical support and ability for IT to learn how to support the new system. Next he clearly defined the project team structure with roles that focused on project management and communication. The cross-functional teams helped bridged functional and geographic boundaries in implementing change. They also acted as negotiators to help resolve issues and offered domain knowledge of the geography or function that they came from. They clearly understood that the successful implementation would be the result of a happy marriage of technical and business savvy. Consultants were leveraged extensively for their knowledge of Oracle and industry best practices. Project Management
y Clear definition of the project¶s scope and guidelines needs to be established. The steering committee created the ³Global Business Model´ and ³Business Practice Changes and Guiding Principles.´ Having a defined scope and guidelines allows project leaders to properly make decisions that were uniformly followed in other areas. This prevents conflicts and keeps the project flowing in the right directions.

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y The project must be properly organized. The management and communication infrastructures were built upon a n umber of key roles. These roles were absorbed by key players in areas who ran interference and acted as negotiators when business changes were needed. y The project plan must be properly organized in Major sub -projects and their lesser tasks. By dividing the project up in manageable tasks (waves), the project team was able to control the execution of the implementation of project¶s components. The results lead to ability to resolve conflicts and smoother implementation. y The adoption of the ³plain vanilla´ implementation and deal with issues one by one should be performed to determine the best business process for area. Thus the project team was able to deal with issues 1 by 1 and was able to carefully analyze the true requirements for a process. y Project should use consultant expertise with managing the scope of the project. Also, allow consults and contractors to right to resell components of the project to reduce the project¶s costs. y Leverage the knowledge that is learned from one part of a project to anot her. When moving from the OMAR at CPID to the OMAR at VND, the knowledge of the system was refined and passed along. Also, the experience learned in the Global rollout in Europe was adopted in the rest of the World.

Salient Features ± Benefits
y Made it possible to execute its 5-year recovery program ± To which the system served as an enabler for change as well as a supporting IT infrastructure. y Improved its ability to manage its existing business. Thereby, increasing its capacity to grow. y Improved abili ty to adapt to change and become more flexible ± instead of an architecture composed of many different application systems and technologies, a single ERP system simplified the system and made changes feasible. This would also lead to lower maintenance cost. In addition, with better reparability, it made it possible to divest and acquire parts of the company. y More efficient business processes and operations ± this include speedier closing of books, more same day shipments and the ability to ship up to the minute. y Increased visibility into operations ± Examples include visibility of worldwide inventory levels, ability to drill down into accounts for better visibility of trends and performance, visibility on profitability of products or divisions and worldwid e overall company performance. y More accurate and timely information leading to a better and speedier decision making process and reaction to business and customer needs. In addition, the elimination of multiple data entry points that slowed processing and customer service, led to reduced errors. y Served as a workforce multiplier ± employees spend more time on value added tasks and less on mundane work. In addition overall employee morale was improved, as they feel more effective in their jobs.

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y Standardization of business processes leading to better management and control of its business. The implementation process also served as an opportunity to simplify and restructure its operations to industry best practices built into the ERP system.

y

Avoided the Year 2000 and Euro problems

Risks Involved . y Lack of expertise and experience in implementing and guiding a global IT project effort. Also, the company needs to find a strong IT savvy leader to help champion the project from a technology perspective. y Previous difficulty in implementing other IT projects that may lead to sceptical employees. y Employee change fatigue (Resistance of employees to change) y Risk of not being able to re -engineer processes to fit those already built into ERP system (the so called ³best practices´). Losing competitive advantages through re engineering and standardization efforts. y Insufficient skilled resources to develop and maintain the system. Related to this risk is the ability to find the right company to help put everything together . y Losing track of schedule ± project taking too long such that it loses momentum and risk of not being on time to meet Y2K as well as Euro requirements. y The cost of implementation would be high. Hence, possible risk of wasting money if the system fails to deliver what it promises. y Risk significant downtime that could affect business operations due to the challenge of a worldwide implementation .

Verdict and Recommendations Overall, the implementation of the ERP system at Tektronix appears successful and well managed. The simplification of business process es was achieved while preserving the integrity of each division¶s unique business driven processes. The overall time line was satisfactory. The breadth of accomplishment and the substantial gains in perfo rmance monitoring and service delivery can be seen. For future recommendations w ith the backbone ERP system already established, they could venture into CRM to help take their business to another level or they could further streamline and improve the effi ciency of their supply chain with SCM systems and eProcurement systems that could enhance the upstream and downstream performance. References 1. 2. 3. 4. 5. 6. www.tek.com/ en.wikipedia.org/wiki/ Tektronix http://investing.businessweek.com/research/stocks/private/snapshot.a sp?privcapId education.feedfury.com/.../43738428 -the-tektronix-inc-global-erp-implementation .html people.emich.edu/rschwartz/portfolio/samples/CaseStudy5.pdf www.erpandmore.com/.../Tektronix-Inc.-ERP-Global-Implementation-Solution.htm

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