Supply Chain Re Engineering

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International Journal of PhysicalDistribution & LogisticsManagement,Vol. 30 No. 3/4, 2000, pp. 296-313.# MCB University Press, 0960-0035

Supply-chain re-engineeringusing enterprise resource

planning (ERP) systems: ananalysis of a SAP R/3implementation caseMajed Al-Mashari and Mohamed Zairi

University of Bradford Management Centre, Bradford, UK

Keywords Supply chain, Resource planning, Supply-chain management, BPR,Information systems

Abstract The development of enterprise resource planning (ERP) packages has created anopportunity to re-engineer supply chains within and beyond the organizational scope. Mostnotably, SAP R/3 has been widely implemented to create value-oriented supply chains that enablea high level of integration, improve communication within internal and external businessnetworks, and enhance the decision-making process. Though many organizations have reporteddramatic improvements from SAP R/3 implementation, others have experienced difficulties ingetting the R/3 modules aligned with other business components and systems. Describes a casestudy of a failed implementation of SAP R/3 to re-engineer the supply-chain and businessprocesses of a major manufacturer. Lessons, in terms of factors that led to failure and theirfuture implications, are discussed in the light of the contrasting experiences of several bestpractice companies. Based on the overall analysis, a framework for effective implementation ofSAP R/3 is proposed.

IntroductionSupply chain management (SCM) is an increasingly growing businessimprovement field. A recent survey of more than 300 supply chain-relatedexecutives found that 92 per cent of those questioned were planning toimplement one or more supply chain initiatives in 1999 (Bradley, 1999). SCMaims to integrate all key business activities through improved relationships atall levels of the supply chain (internal operations, upstream supplier networksand downstream distribution channels), to achieve a competitive advantage(Handfield and Nichols, 1999). IT-enabled re-engineering is an importantapproach used to achieve dramatic improvement in supply chain (Supply ChainCouncil, 1997). At the heart of both SCM and re-engineering is the concept of`` process'' (Berry et al., 1999; Davenport and Short, 1990; Oakland, 1998). Theenterprise resource planning (ERP) systems represent an optimum technologyinfrastructure that, when integrated properly with a process-oriented businessdesign, can support the supply chain management systems effectively (Hicks,1997; Mullin, 1997).

The development of ERP systems was a result of the increasing demand forre-engineering, combined with the advent of client/server technologies (Earl,

The current issue and full text archive of this journal is available athttp://www.emerald-library.com

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1997). There was also a desire to replace MRP systems which fell short ofsupporting multiple plants, multiple suppliers and multiple currencies, and didnot include functions such as inventory control, plan management and orderprocessing (Kalakota and Whinston, 1997). ERP systems can be considered asan IT infrastructure able to facilitate the flow of information between all supplychain processes in an organization (Martin, 1998). In particular, SAP R/3 hasemerged as the dominant leader in ERP systems, and is now one of the mostused tools to optimize and re-engineer supply chain processes (Cooke andPeterson, 1998; Keller and Teufel, 1998). Siemens and Lucent, for instance, haveimplemented SAP R/3 to improve the integrity of their supply chain (Elliott,1997).

SAP R/3 is an integrated suite of financial, manufacturing, distribution,logistics, quality control and human resources application systems (Bancroftet al., 1998). Its architecture consists of three main layers of software (seeFigure 1):

(1) the SAP graphical user interface (GUI), representing the presentationlayer;

(2) the SAP application layer; and

(3) the SAP database layer (Bancroft et al., 1998).

SAP R/3 brings together several core business functions into one integrateddata model to provide for one-time data entry and the sharing of a fast,seamless access to one single facet of information (Martin, 1998; Rick, 1997).However, not all organizations embarking on SAP R/3 implementation realizeits benefits (Bancroft et al., 1998). The reason is that SAP R/3 implementation isa difficult undertaking, in that its success necessitates managing adequately acomplex context, which involves organizational changes across various keyareas related to strategy, technology, culture, management systems, humanresources, and structure. The exclusive focus on technical aspects, at the cost ofchange management elements, has proved to be a major source of failure.

This paper describes a failed implementation of SAP R/3, in conjunctionwith re-engineering efforts, at a major manufacturer (Manco Group), whichrepresents a network of complementary companies (Manco1, Manco2, Manco3,and Manco4). The reported case in this paper represents a complementarystudy to a major research project on the implementation of re-engineering to

Figure 1.SAP software

architecture

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improve business performance. The objective of this case study is to explorethe implementation process of SAP R/3-enabled supply chain re-engineering.This involves a study of change drivers, strategies, approaches, humanaspects, structural change, cultural change, IT enabling role and factors offailure. Based on this case and other best-practice case studies, a framework foreffective implementation of SAP R/3 is proposed.

Research methodologyAs ERP-enabled supply chain re-engineering is a new field, empirical researchin this particular area is still slight. This calls for the use of a grounded theoryresearch approach based on the research-then-theory strategy (Strauss andCorbin, 1990). This study adopts this approach, and seeks to explore the SAPR/3-enabled supply chain re-engineering context (Wong, 1992), and thus buildstheory for further research (Benbasat et al., 1987; Merton, 1968; Strauss andCorbin, 1990). As supported by Benbasat et al. (1987) and Kaplan and Duchon(1988), a qualitative case study technique was used for data collection to gaininsights into the topic being investigated. To expand the scope of the study andminimize any data bias, a triangulation approach was adopted (Bryman, 1995;Chadwick et al., 1984; Jick, 1979; Patton, 1990). Semi-structured interviews,observations and documents related to change efforts were the main sourcesused for data collection. Following the contact with key informants in thecompany, interview schedules were agreed upon. All interviews were taped toensure accuracy of written data, and to enable a better collection and use ofevidence. More than one appointment was needed to finish interviewing allsubjects. Follow-up phone calls were also made to seek clarifications or furtherinformation. All data taken from the main sources were consolidated andlinked together to create a full picture of the entire process of change. Contentanalysis was used to discover important patterns from the data. The analysisfocused on distilling factors of failure, and to describe the approach followed, aswell as tactics and techniques used to operationalize the change plans. In anattempt to analyze the data further and facilitate explanations andcomparisons, several secondary case studies of leading organizations werechosen from the literature and analyzed for the success elements in their SAPR/3 efforts.

Drivers for changeIn 1993, Manco Group faced new challenges in the form of:

. The growth of intensifying competition.

. Changes in the world of business and the threats and opportunities ofglobalization.

. The increasing need for Manco to become a customer-focused business,and the huge impact that this would place upon the currentorganizational structure.


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. The need to improve quality in order to provide cost-effective, flexible,reliable and timely products and services to clients.

. The long time the company had been conducting business (for more than17 years). This resulted in many of the procedures and functions in useduring that period becoming outmoded.

. The need for Manco to look at ways of reducing costs through theelimination of overlapping activities, inefficiencies and handoffs(Table I).

. Manco's desire to increase empowerment, accountability and ownershipby decentralizing its activity to points where they can most effectivelybe carried out. A study of the current organizational structure of Manco2showed that, with the current organization chart supporting between 55and 60 positions of manager and above, there was an opportunity toremove 10-20 per cent of these positions. The managerial positionsidentified as unneeded were found to be responsible only for mediatingthe flow of information between the top and the bottom echelons of theorganization, and thus affecting negatively both business productivityand quality.

. The outdated IT infrastructure. Since the early years of itsestablishment, some of the company's major operations, such asproduction, sales, shipment, and inventory, had been supported by oneapplication system written in a third-generation language, COBOL, andrunning on a super-mini NCR operating system. There was also anumber of loosely coupled departmental and application-specificpiecemeal systems. Accumulating alterations to these systems hadresulted in problems such as complex code, data redundancies and poordocumentation, and hence in enormous maintenance costs. In 1991,Manco began to migrate some applications systems (Table II) to anOracle Database environment, and expanded them to handle morebusiness functionalities. However, this process resulted in littleflexibility within the internal architecture of the system.

At that time, there was a strong case for changing the Manco Group's business.Management realized that the key to achieving the change would be to revampthe current outdated IT infrastructure and migrate to a new, flexibleapplications system that would create an effective supply chain that is moreresponsive to customers' needs.

Number ofhandoffs Shipping Invoicing

Customercomplaints

Sales orderprocessing

Sales orderprioritization

Current 18 6 13 47 6Desired 10 2 9 30 0

Table I.Current and desirednumber of handoffs

within processes

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Initial activitiesIn 1993, Manco conducted a survey to determine which were the mostexperienced companies that would be able to assess the group's situation anddevelop a complete solution package. Six consulting companies were selectedand invited to study the case. One of the proposals put forward was to embarkon re-engineering. The Manco Group management recognized that merelychanging the current application system would not greatly benefit thecompany. Thus, a decision was made to implement a new system inconjunction with a re-engineering effort. Early in 1994, a leading business andIT company (Bitco) was selected by top management to provide support ontechnical and methodological aspects of re-engineering. In March 1994, Bitcoreviewed the current systems and operations and identified the major problemsto be tackled in the re-engineering initiative (Table III).

As changing the IT infrastructure was seen by Bitco as a key determinant ofthe amount and scope of the efforts needed to carry out the entire re-engineering initiative, a particular focus was initially placed on assessing thecurrent IT infrastructure. Bitco identified shortcomings with the current ITinfrastructure in four main areas (Table IV).

As a result of this assessment exercise, Bitco proposed two main alternativeIT infrastructure sourcing approaches to improve the company's operations,namely upgrading current systems, or selecting a world-class package. Basedon a comparison carried out by Bitco on the possible risks and benefits of thetwo alternatives (Table V), the company chose to go to the global softwaremarket to select a world-class package that best suited its current needs, andwould serve future visions and trends. Bitco suggested that the companyneeded an enterprise-wide information system (EIS), which would fit the needs

System Description

Material management system (MMS) Consisted of two main modules: inventorycontrol and purchasing

Material requirements planning (MRP) Processed requirements based on due dates oforders

Customer order processing system (COPS) Consisted of technical costing, manufacturing,order processing, warehousing and shipping

Financial applications Mix of packaged and custom developed code

Table II.Main applicationssystems at Mancobefore SAP R/3implementation

Table III.Sample of problemsidentified forre-engineering

Inquiries are not formally linkedNo consolidated sales forecast dataProduction delays not identified and reported in timely mannerManufactured goods not immediately assigned to customerAuthority levels do not reflect responsibilitiesDelay in shippingCustomer technical and delivery requirements change after order processedHigh level of finished goods inventory


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of the company, and would gain value from the re-engineering effort. It alsodeveloped a high-level architecture of how such a system would be organisedacross the Manco Group's major business units. The aim of this architecturewas to help the Manco Group evolve from a separated set of business units intoa single integrated supply-chain which is linked with common businessprocesses. It also aimed to simplify and improve the flow of information acrossvarious departments, providing a business-wide, seamless, and real-timeaccess to information.

Change approachThe Manco Group realized the need to improve dramatically its IS and businessfunctions. Therefore, it launched the Manco Operations Re-engineering

Upgrading current systems Selecting world-class package

RisksLong-term operational costsReliance on skills and knowledge of

individualsResulting systems will remain inflexiblePotential technical limitations and

performance issuesNeed to continually upgrade and

maintain systemInterim support for usersScale of estimates may be

underestimated

Initial expenditure on application softwarelicence

Ongoing application software maintenancecharges

Need to rework some business processes orperform minor software modifications

Potentially long lead-time before benefitscan be realised from new system

Need to retrain users and systemsdepartment

BenefitsLeveraging of IT investment to date in

application softwareDirect costs limited to salaries of

development team

Classical approach to software selectionBest functional fit for group software

Table V.Pros and cons of ITinfrastructure's two

main sourcingapproaches

Table IV.Key findings of current

status assessmentexercise

Network Multiple brands of network components in useSelection process not proceduralizedSizing and benchmarking never performedPreventive maintenance not exercised

Organization Systems department skills not aligned with current technologyLimited specialized training in key technology areasLimited training on functionality and industry best practices

Platforms Several platforms of servers, PCs and operating systems

Applications and data Lack of flexibility in current applicationsLack of support to some required business functionalitiesLack of parameterization, standardization, and documentationServer selection not based on data storage requirement analysisLimited integration of applications and systems

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(MORE) project. To pilot the project, the Manco Group decided to narrowthe scope of the MORE project to cover only its operations at Manco2.Therefore, it subscribed to a high-level business model for Manco2, whenan overall IT strategy had been recommended for the entire Manco Group.The business model was considered a tool by which Manco2 coulddescribe how it wished to conduct its business, and identify the interfacesbetween various business entities' internal processes, its customers, andsuppliers.

Figure 2 presents a diagrammatic view representing Manco2 process groupsthat conceptualize how the business was planned to work. The user groupdeveloped a full listing of the business processes needed to carry out Manco2business transactions. Material, production and customer service processeswere planned to follow an organizational rationale similar to the processesshown in Figure 2. All the processes in these groups map into an organizationalunit and were given the same name. Managerial and resource-providingprocesses were assigned across the units. This allowed their assignment to the

[3]

[2]

[1]

Material&

Services

[4]

[5]

Resource-Providing Processes

Product &

Services

Information, technology, and people

MaterialProcess

ProductionProcess

Customer ServiceProcess

MaterialUnit

ProductionUnit

Customer ServiceUnit

- Supportproduction &CustomerService Units.- Supplies tomeet demand.- Responsiblefor incomingmaterialinventories.

- Manufacturesto meetdemand.- Focus onimprovingefficiency anddeliveringqualityproducts.

- Responding tocustomer requirements- Pulling from otherUnits.Interfacing betweenCustomer & Manco1.- Being responsible forfinished goodsinventories.

Information, technology, and people

Managerial Process

Impact

Information on actual process

Figure 2.Diagram of Manco2business processes


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point where they could be most effectively carried out. Figure 2 also describesmajor steps that were viewed as necessary to achieve a higher level ofintegration among those processes:

(1) identifying processes that are needed to produce and deliver products orservices;

(2) determining infrastructural resources;

(3) identifying resource-providing processes, which in turn determineprocesses to build and maintain infrastructure;

(4) feeding management processes with information on actual performance;and

(5) management processes are to plan, assess, evaluate and initiate actionson resource providing.

The Manco Group IT strategies (see Table VI) were recommended based on thecurrent status assessment of the existing systems, applications, and datastructures, along with the analysis of the business model developed by the re-engineering team.

The MORE project activities were planned in three major phases:

(1) Visioning and alignment: involved delivering two high-level strategiesfor both future business operations and their supporting ITinfrastructure.

(2) Conceptual detailed design: aimed at delivering detailed plans for bothBPR in Manco2 and the new IT infrastructure.

(3) Implementation: planned to cover several aspects of installing the newsystem, developing its documentation, and training.

ImplementationWhen Bitco was first hired in March 1994, they only committed to Phases 1 and2. Phase 3 was kept open to be considered later. Bitco subsequently proposedthat Phases 2 and 3 should be combined to make the re-engineering effortsmore efficient. After Phase 1 was completed, and a high level strategydeveloped (including the Manco2 business model and IT strategies), the re-engineering team felt that using a tool to begin mapping the business processeswould save time and make possible early adjustments based on the way thepackage proceeded. Thus, it decided to cease scheduled efforts, and to select anEIS software package which would satisfy the needs identified early on by thecurrent assessment exercise, and one which would align with the developedstrategies. As a result of this decision, a delay occurred in selecting the packagewhile the company waited for Bitco to present their findings on the availablepackages in the market.

Bitco had undertaken a three-phase software selection exercise to identifythe application package which best met the business requirements. Of morethan 30 packages initially identified (e.g. Oracle Financials, SAP R/3, Triton

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(BAAN) and EMIS), a short-list of four packages was created. Two areas ofselection criteria were identified to evaluate the short-list packages, namelyfunctional and strategic. Functional criteria represent the extent to which aselected package covered sales, production, purchasing, and inventoryoperations. Strategic criteria were related to the technical, system, andcompany dimensions (Table VII).

Only SAP R/3 and Triton (BAAN) were found to be the ones most qualifiedto fit the business requirements of Manco Group. Therefore, the vendors of thetwo packages were asked to provide an initial high-level overview of theirsoftware to the Manco Group management. Two further detailed functionaldemonstrations were given by each of the vendors to key Manco Groupfunctional users from the following areas:

(1) Manco1:. inventory; and. purchasing.

Strategy Anticipated benefits

Implement packagedsoftware solution(application softwarestrategy)

Avoiding reinventing wheelFull integration, and reduction of data entryUpgradability, portability, and adaptabilityApplying best practicesMinimizing development and installation timeProperly documented for ease of portability, implementationand maintenance

Use open, applicationsoftware-driven,Unix-based system(technology strategy)

VersatileScalableSupport business's current and future needsIncreasing numbers of vendors and support in marketLeveraging investment to date

Continue with use ofORACLE DatabaseManagement System(DBMS)

Already being usedEase of portabilityAllowing for standardization

Capture and store data atsource (data strategy)

Minimizing errorsApproach to real timeMinimizing access timeReducing communication costAllowing working independently in case of common failure

Integrate shared data Electronic integration to reduce data entry and errorsEliminating duplication of effortReducing time to perform transactionsDecision making with `` full picture''

Use enterprise system(group strategy)

Standardization to one application softwareSharing of group-wide dataExecutive reporting and decision making

Table VI.IT strategies for MancoGroup


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(2) Manco2:

. sales;

. customer service;

. production;

. planning; and

. technical.

(3) Manco3:

. sales; and

. production.

(4) Manco4:

. production.

The results of the final evaluation revealed that, tactically, Triton offered ashorter implementation time, lower cost, and potentially less risk involved inthe implementation. Strategically, SAP R/3 was found to be more likely tosupport Manco's medium- and longer-term requirements. SAP's size andmarket positioning would ensure that the R/3 software package would stay atthe leading edge of incorporating world class business process functionalityand future technologies. For this reason, the Manco Group recommended SAPR/3 as the platform for their EIS of the future.

The company, therefore, resumed its efforts in February 1995, and continueduntil the early months of 1996. The initial focus of the efforts was on the logisticcycle (complete auto-processing cycle). The logistic cycle focused onencompassing all elements from the enquiry through to the auto-processingand high-level manufacture, including the material management involvement,as well as the finance aspects. In other words, re-engineering efforts focusedinitially on four core processes that were supported by SAP R/3, namely salesand distribution (S&D), material management (MM), finance (FI) andproduction and planning (PP).

Technical System Company

Support current hardwareUNIX architectureClient serverCASE

SecurityRecovery/restartModularityIntegrationImplementableUser interfaceParameterizationConversionReport writerDocumentation

Strategic directionFinancial statusInternational client baseLocal client baseSpecific clientsInternational vendor supportLocal vendor supportTraining facilities Table VII.

Strategic areas forshortlist evaluation

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Based on Bitco's scope, re-engineering implementation with SAP wasplanned to take 18 months, beginning in April 1995. However, Bitco'sinvolvement ended in January 1996, when just the FI and MM modules of SAPhad been implemented, with completion percentages of 90 per cent and 80 percent, respectively. Since then, both FI and MM modules have been subjected tocontinuous improvement efforts.

In early 1998, the Manco Group began implementing the S&D module usingthe online support services (OSS) linked directly to the SAP company inGermany. At the same time, the legacy system ran in parallel, due tounresolvable problems in sending out invoices to customers. Currently, morethan 50 per cent of the S&D module has been implemented and, oncecompleted, it will be handed over to the end-users. Recently, the Manco Grouphas begun implementing the PP module, and part of it is currently being tested.The company plans to continue implementing the remaining group ofapplications, and switching-off the old legacy systems.

Configuration and customization of the SAP modules were undertaken bythe IT department. Configuration was mainly focused on process mapping, andsetting-up supporting tables. Migration of legacy systems was doneautomatically, since SAP had interfacing facilities which recognize databasescreated with Oracle. This process was beneficial, in that it offered anopportunity for data cleaning by eliminating unused and repetitive data fromthe system.

Evaluation and discussionAt Manco, few people considered the change efforts to be successful. Forexample, the day-to-day managers who worked on the MORE projectsuggested that, with the aid of SAP R/3, they were able to change someoutdated functional operations in four business areas to modern processes,notwithstanding the fact that the results did not fully satisfy the expectations.However, other people, including the president himself, regarded the BPRefforts as a failure case because of budget excess, long delays, and lowerbenefits than previously expected. Overall, the Manco BPR efforts can only beregarded as a failure, since the efforts could not bring about dramaticimprovement and fundamental changes in the Manco Group businessprocesses, despite the high investment amounting to $2.8 million.

As a consequence of this failed experience, employees have a negativeperception of re-engineering, and an increased sensitivity towards any changeeffort in the future. This failure also cost a great deal of time and money, andaffected negatively the trustworthiness of some managers. However, the MancoGroup's management decided to start the whole effort all over again, and toface the tough challenges created by this experience. Their current vision is toinstitutionalize a process-orientation thinking and structure throughout thegroup business units, by making more effective use of SAP R/3 applications.


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An analysis of the case indicates that it was not so long after the MancoGroup had commenced its BPR efforts that failure began to take root. Therewere several main reasons for the failure of the MORE project, each discussedin the following sections.

Anxiety resulting from massive reduction in manpowerIn the case of the MORE project, a list of savings resulting from manpowerreduction was presented to justify change and convince top management of theneed to reengineer. This, nonetheless, led management to look at those savingsbefore implementation took place to take the decision to make personnelredundancies. The Manco management failed to give sufficient credence to itsemployees' distress that was generated by massive change. Although SAPimplementation inevitably involves some annoyance, there were steps whichcould have been taken to manage change hurdles. For example, Amoco(Industry News, 1997; Jesitus, 1997), a leading US oil company, developed aseries of `` job impact analysis'' documents which were reviewed by theimplementation teams and then by middle managers to `` force'' them to becomeinvolved, and thus minimized their resistance.

Scope and focus creepThe case description demonstrates the MORE project's shift in focus from BPRto functional optimization efforts. The strong resistance engendered by themanpower reductions resulted in BPR-related change principles beingcompromised. In fact, the MORE project management got carried away by theimmediate organizational problems and the daily business demands and, as aresult, concentrated on less important optimization and automation aims. Thisapproach can by no means fall under Hammer and Champy's (1993, p. 32)definition of BPR. Based on a global survey of SAP R/3 implementation in 186companies, Cooke and Peterson (1998) identify that managing against well-defined milestones and making rapid and empowered decisions at the properlevels both help avoid scope creep and keep implementation efforts on track.

Underestimating role of communicationThe importance of communication stems from the fact that it could build thecompetence of the whole organization in re-engineering efforts, and gaineveryone's commitment, support and response. In their SAP R/3implementation initiatives, GTE (Caldwell, 1998), Lucent (Francesconi, 1998)and Owens Corning (Antia, 1996; Bancroft et al., 1998; Romei, 1996) establishedextensive internal communications channels, including focus groups,newsletters, e-mail and Web-based archives, to help keep employees informedabout new developments, and answer questions about the SAPimplementation. However, at Manco, there was no formal communicationstrategy that identified effective mechanisms to ensure cascading of changerationales and plans to everyone affected by the efforts. Although consideredby the MORE project management to be the most difficult part of BPR,

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communication to, and involvement of, people was simply and solelyapproached through newsletters and ad hoc social events. However, the MOREproject management believed that more communication should have takenplace, but the reason for not doing so was a lack of support from the humanresources (HR) department.

Poor progress and performance measurementHaving a comprehensive measurement system provides a feedback mechanismto track implementation efforts, identify gaps and deficiencies in performance,and recommend the necessary actions to fine-tune the situation in hand in orderto achieve the desired business-centred outcomes. Examples of the supplychain improvement measures are delivery performance, inventory reduction,fulfilment cycle time, forecast accuracy and overall productivity (Supply ChainCouncil, 1997). Kodak (Stevens, 1997), for instance, uses a well-disciplined`` phases-and-gates'' approach that moves projects through a series of steps ofassessment and planning, design and prototyping, and delivery andabsorption. However, although Manco developed some measures to estimatethe anticipated impact of their BPR efforts, these measures fell by the waysideas efforts proceeded further. The MORE project manager offered thisexplanation:

The progress of the MORE project and its resulting benefits were not measured. Althoughsome parameters were developed, such as turnover, manpower, collection (cost reduction),inventory, cycle time, they were not followed up.

Lack of ownership and transference of knowledgeThe Manco Group marginalized its participation in the SAP R/3 project, andretained a minor managerial responsibility for its employees in the efforts.Consequently, and with the absence of progress and performance measures,this situation led the consultants to making decisions that, transparently andnegatively, influenced other major roles in the company. This clearlydemonstrates how BPR's potential can be compromised in the early stages,when ownership of the effort lies in the wrong hands. However, best practiceorganizations, like Kodak and Owens Corning, have all taken a clear approachto emphasizing their ownership of their SAP projects, and to ensuring aneffective transfer of knowledge and expertise. At Owens Corning (Anita, 1996;Bancroft et al., 1998; Romei, 1996), the consultants were used for two specifictasks:

(1) facilitating early process design; and

(2) training on technical aspects, especially in the SAP components and theclient/server.

To maximize the technical expertise of the consultants, and build newcapabilities internally, Owens Corning adopted the concept of knowledgetransfer, by which transference of all necessary skills to Owens Corning'semployees at the end of the project was ensured.


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Tendency to isolate IT from business affairs technical mind-setIt is obvious from the case description that the MORE project management hadadopted a technical perspective, viewing IT as a force affecting, and leading to,a certain organizational form. This situation indicates a lack of alignmentbetween business strategy and IT strategy. This might be put down to a lack ofdeveloping, and thereby cascading, a solid and well-defined business-centredcase for the entire change initiative. Experiences reported by best practicecompanies show how the business case for SAP implementation can bedeveloped to address both organizational vision and operationalmeasurements. To secure a leading position in the global marketplace, OwensCorning launched a two-year initiative (Anita, 1996; Bancroft et al., 1998;Stevens, 1998; Romei, 1996). Among the aggressive goals the company hasdefined are the following: the target of $5 billion in sales by the year 2000, solidbrand recognition, continued productivity improvement, and expansion intonew products, applications and markets. Other goals are a 6 per centproductivity improvement per year and a 1 per cent improvement in the cost ofraw material acquisition.

Lack of preparedness in IT functionAs explained by the IT manager, the IT function was not sufficiently equippedto carry out the SAP implementation. Scarcity of experienced staff, lack oftraining and education, and increasing overload have all contributed to thefailure of the efforts. SAP R/3 is a complex application, which places on IT staffthe responsibility of supporting end-users on a daily basis. This requirementwas underestimated at the beginning, and end-users resisted the new systembecause they were not given enough skills to work with it. Besides empoweringthe IT function with the necessary training and resources, it should also beprepared to meet the IT management challenges that SAP brings about, suchas:

(1) reduced need for development programmers;

(2) reliance on complex architectures;

(3) higher user involvement; and

(4) user ownership of systems and data (Bancroft et al., 1998).

Proposed framework for effective SAP R/3 implementationTaylor (1998) believes that the sociotechnical systems (STS) design is a suitableapproach for SAP R/3 implementation. On the other hand, Gattorna andWalters (1996) argue that the whole purpose of a value-based supply chain is toproduce a balanced perspective. They also suggest that the development ofsuch a supply chain needs to be considered from three perspectives, namelystrategic, tactical and operational. Both balanced proposals are supported bythe lessons drawn from this case study and other reported experiences ofseveral best-practice organizations related specifically to the implementation of

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SAP R/3 to re-engineer the supply chain. On that basis, a framework for theeffective deployment of SAP R/3 based on an integrative view can be proposed(Figure 3).

The framework proposed is based upon the premises that effectivedeployment of SAP R/3 is greatly determined by the extent to which certainkey elements are comprehensively considered and fully integrated. The majorroles of these elements can be summarized in the following points:

(1) Business case: provides qualitative and quantitative statements on bothstrategic and tangible benefits in order to justify change, and buildsconsensus on objectives (Cooke and Peterson, 1998; Stevens, 1998).

(2) Benchmarking: captures best practices and enables transference ofknowledge related to all aspects of SAP R/3 implementation(Francesconi, 1998; Stevens, 1997).

(3) Implementation strategy: describes plan for change that ensuresalignment with overall corporate strategy, and determines

2. Benchmarking Best Practices 1. Business Case

3. Implementation Strategy

STRATEGICLEVEL

Best Practices Goals

SAP Installation Teams

Changes

BPR-Induc

edBPR

TeamsSAP-Induced

Changes

4. ProjectManagementInfrastructure

5. ChangeManagement

6. BPR 7. SAP R/3Installation

Change Management Teams

MANAGERIALLEVEL

Business Model

OPERATIONALLEVEL

Optimum Outcomes

Achieves

Directs

Figure 3.Proposed integrativeframework for SAP R/3implementation


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organizational principles and approach of implementation (Cooke andPeterson, 1998; Simon and Fisher, 1998).

(4) Project management infrastructure: defines various roles andresponsibilities of both internal and external entities in theimplementation efforts, and determines forms of co-ordination, and co-operation among them (Romei, 1996; Stevens, 1997).

(5) Change management: facilitates the insertion of newly implementedsystems, processes and structure into the working practice, and dealswith resistance (Jesitus, 1997; Stevens, 1997).

(6) BPR: redesigns business procedures to accommodate SAP softwaremodules within the entire business operation (Bancroft et al., 1998).

(7) SAP R/3 installation: involves all technical activities, such as sourcingSAP applications, legacy systems migration, customization andconfiguration (Bancroft et al., 1998; Francesconi, 1998; Keller and Teufel,1998).

ConclusionIn its future attempts to re-engineer its supply chain processes, Manco willhave a difficult task ahead in convincing employees that this time it can besuccessful, and in regaining their trust. In order to succeed, Manco will have tolearn from best practice companies. They will have to identify, amongst othervaluable lessons, how the successful companies avoided implementationpitfalls. Reported experiences in SAP-enabled supply chain re-engineeringimplementation have shown that effective implementation requiresestablishing the following five core competencies:

(1) change strategy development and deployment;

(2) enterprise-wide project management;

(3) change management techniques and tools;

(4) BPR integration with IT; and

(5) strategical, architectural and technical aspects of SAP installation.

In today's global market, organizations aiming to attain a competitiveadvantage would require to have a robust, integrated and seamless approach toSCM supported by a powerful IT infrastructure. What seems to have arisenfrom this study is that all of the benefits that could occur from re-engineering asupply chain are only possible if there are total commitment, leadership andpersistence within an organization.

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Documents

Supply Chain Re Engineering