Keda's SAP implementation

1. KEDA’S SAP IMPLEMENTATION
CASE ANALYSIS
ICT FOR ORGANIZATIONAL EFFECTIVENESS
AKSHAY BORHADE, 4007/20

2. AKSHAY BORHADE, 4007/20 KEDA’S SAP IMPLEMENTATION
ICT FOR ORGANIZATIONAL EFFECTIVENESS
EXECUTIVE SUMMARY
KEDA industrial Company Ltd. has surpassed many of its competitors to become a world leader in
building materials machinery. The key success factor of KEDA has been the level of innovation
being done in the organization (as shown in figure 1.1). To sustain the level of success achieved and
keep innovating the way they have been doing has made ERP necessary.
The case is an example of all the considerations taken while implementing the ERP system in an
organization. Transition to an ERP system is a cumbersome task and needs reshuffling and shaking
every process occurring in an organization. While the obvious benefits of an ERP is clearly seen,
there are hidden disadvantages as well.
KEDA managers had to take various strategic decisions at different phase of ERP implementation
which are mentioned below:
1. Are existing problems identified can be eliminated using the ERP system?
2. Whether to develop a customized ERP system in-house or to outsource it?
3. Who would be the vendor and what software will be used?
4. What would be the composition of the ERP formulation team? What role does each
department play? And who will act as a negotiator in case of conflicts?
5. What would be the type of implementation, Big-bang or phased?
6. What would be the break-even period for the ERP project? Is integration to other DSS
possible and feasible? Is core efficiency increasing?
7. Is the same ERP system being used by any other organization in the same industry?
Fig 1.1 types of innovations at KEDA
INNOVATION @
KEDA
PRODUCT
In 1999, rolled out first 3200-ton pressing
machine in China
In 2005, introduced 3 out of 10 most
innovative machinery in the world
BUSINESS
Invested more than CNY 45 million to set up
state-of-art ceramic engg. R&D center
Set up a Chinese national enterprise post-
doctoral workstation
OPERATIONS Setting up ERP system developed by SAP

3. AKSHAY BORHADE, 4007/20 KEDA’S SAP IMPLEMENTATION
ICT FOR ORGANIZATIONAL EFFECTIVENESS
ERP IMPLEMENTATION-PROCESS PHASE MAP
Fig 1.2 ERP Implementation process phases
First step is to identify the purpose of such an investment for ERP. This is to recognize if the
problems of the organization is solved by implementing the ERP. Next is to build the ERP team
which includes making choices for vendor (after appropriate verification and proven track records),
ERP software, versions and extensions to be used, managers of different departments, regular users
(to understand the daily needs and problems), IT department and CXOs.
Meetings, discussions are scheduled around the requirements and aspirations from the ERP to be
installed. Here, all the possible contingencies are covered. Integration of various departments and
conflict-of-interest is taken care of at this stage. The entire designing of the ERP is completed at this
stage. Next, the ERP is tested by the regular user groups to check its feasibility. On the other hand,
the training for the system is given to the employees following the “training is testing” objective.
Further, the implementation planned is rolled out to minimize the business disruption and mitigating
risk. It can either be big-bang or phased kind of implementation. Any changes or errors felt is
incorporated in this phase. Post-implementation, the benefits are reaped and increase in efficiency is
linked to better the revenues. The possible integration of the ERP system with other systems such as
CRM, SCM, BI, etc. can be studied to make further improvements in the business model.
IDENTIFY THE
PURPOSE OF ERP
IMPLEMENTATION
BUILD THE ERP
TEAM
MAKE CHOICES
(VENDORS,
SOFTWARE,
VERSIONS)
ASSEMBLE THE
IMPLEMENTATION
TEAM
TESTING AND
TRAINING
PLAN THE
IMPLEMENTATION
GOING LIVE AND
MAKE NECESSARY
CHANGES TO FIT IN
CULTURALLY
REAP THE BENEFITS
MAKE FURTHER
INTEGRATION (with
CRM, SCM, BI, etc.)

4. AKSHAY BORHADE, 4007/20 KEDA’S SAP IMPLEMENTATION
ICT FOR ORGANIZATIONAL EFFECTIVENESS
CHALLENGES KEDA FACED
KEDA had silo-based business model and flexible culture enabling decentralized decision making,
high degree of autonomy and a free-wheeling entrepreneurial culture. However, it had its negatives
as well.
BUSINESS CHALLENGES
1. Disconnected business units often duplicated identical processing tasks resulting in the
redundancy and heightened costs.
2. Very little information flowed between departments affecting the efficiency of the managers.
3. Logical and strategic decision making was replaced by decision by hunch indicating the
inability of KEDA to manage global competition.
4. Conflict-of-interest among departments while designing and implementing the ERP.
5. Ensuring participation of departmental managers by designing an incentive and penalty
system for the employees.
6.
OPERATIONAL CHALLENGES
1. Messy material management, unclear cost structure and margins clearly reflect how irregular
KEDA was in operations.
2. Inventory management was very poor owing to low volumes and high customization in
diverse product line.
3. Production lines were under-utilized (around 24.6%) as compared to 90% for Japanese
competitors. Hence, low efficiency before ERP implementation.
4. Suspension of production and delays soon after cutover during ERP implementation.
5. Some redundant activities were made compulsory to comply with the ERP system.
IT CHALLENGES
1. MRP-II system’s vendor Beijing Riamb Software IT Co. Ltd., had ceased maintenance
support for the system due to internal corporate restructuring
2. There was no roadmap or direction for computerization which began in 2000 (No strategic
goal). Problems were incorporated in the system as the need aroused.
3. Trade-off between having to direct resources to current and future needs and to the
development and execution of the computerization plan.
4. Data in an organization is huge. Transferring the data to the ERP system is very tedious and
easily prone to error.