Vandelay Industries implemented an SAP ERP system with the help of consultants from Deloitte & Touche to integrate its fragmented IT systems across multiple manufacturing plants and address issues arising from increased competition, as the new system would standardize business processes, integrate data across the company, and help lower costs. However, managing change during the large-scale ERP implementation at Vandelay presented challenges around balancing centralized control with local autonomy, gaining employee acceptance of the inevitable new system, and ensuring a fit between standardized SAP capabilities and unique business requirements.

1. CASE STUDY
Vandelay Industries, Inc
Group:9
Submitted By
Prince Soni
Sampreet
Kirandeep
Randeep

2. Vandelay Industries Inc.
Why and how they went for ERP
implementation

3. •Vandelay Industries, a global, multi-billion dollar corporation that
manufactured industrial rubber and latex process equipment, was being ran
on out-dated, fragmented, manufacturing and order fulfillment systems.
• Each manufacturing facility had purchased its own manufacturing
resource planning (MRP) software and customized both their software
programs and business processes specifically to their own plant’s needs.
• The diverse MRP solutions being used throughout the company were then
integrated as best as they could be into the corporate financial systems but
that was the extent of information systems compatibility throughout
Vandelay.
Problem Statement

4. •As market conditions changed drastically in the 1980’s new, cheaper
competitors emerged in the industry and forced Vandelay executive
management to realize that they had to seek more efficient, streamlined,
manufacturing systems and processes to be able to drive down costs and price
their products more competitively to survive
•The company decided to purchase SAP R/3 Enterprise Resource System
(ERP) and contract with Deloitte to implement the new system.
• The new software implementation would be a failure if executive
management and Deloitte did not make the right decisions about the level of
configurations allowed by the various user groups as well as identify what
level of business process re-engineering, if any, would be needed to support
the new solution
Problem Statement

5. Company Background
• About Us
– Past: Founded in Minnesota during World War II.
– Manufactured and distributed industrial process equipment used in production of
rubber and latex.
– Quality: Known for design quality, innovative engineering and feature rich
products
– At best: US $8 billion in terms of revenues and had 30000 employees at its peak.

6. Market Shift
• Mid 1980’s (Loss era)
– Severe competition from 3 strong foreign competitor
• Cheaper machines
• Machines with lesser quality and lesser features
– Vandelay took series of steps:
• lean production
• rationalization of product line,
• introduction of simpler and cheap machines
• closed 3 plants
• layoff reduced strength to 20,000
• Mid 1990’s (back to profit)
– Important learning regarding further driving down cost, from this exercise were:
• Give higher priority to manufacturing process
• Give higher priority to order fulfillment

7. Information systems status
• Fragmented
– Each plant (currently 8), had its own
• MRP
• Specialized software for
– Forecasting
– Capacity planning
– Human resource management at some of these sites.
– Though company had central corporate financial info system with connectivity to each
site (it shows the need for integration of systems).
– Fragmented systems added time and cost to production cycle:
• Scheduling: Because of no connectivity between different MRP across plants, the
manufacturing plant production plan had to be manually entered into the
assembly plant systems. It had be done manually each week such that no other
inputs were allowed during the week. (lesser responsive)

8. Information systems status Cont..
• Fragmented systems added time and cost to production cycle:
• Forecasting & planning: Forecasting was done in form of monthly buckets while the
customer orders requested delivery within a week. If request do not line up with months
production plan, late shipments resulted. (not aligned with actual customer demands)
• Order management: Orders taken manually and sent through fax and hence keyed into
site’s order entry system (prone to lose orders, errors, time delays in fax etc)
• Human resource: When employee transferred from one location to other, whole data need
to be manually entered at new location (confidentiality, redundant, time consuming)
• Financial and accounting: manufacturing S/W used were not linked to financial package,
hence info. like labor hours charged per job etc had to be entered manually in both systems.
(redundant, time consuming, potential for error, periodic reconciliation)

9. Action-Solution
• 1995
– Decided to implement SAP R/3 to end the existing fragmentation through process
standardization and integration.
– Enormous efforts in terms of:
• Technical details for H/W and S/W
• Business practices changes
– Experts involved:
• Deloitte & Touche Consulting Group
• ICS
– Project Leader – Kramer
– George Hall, plant manager excited about getting R/3 implemented . He assumed that
kramer would be free to modify the system at will.
– Kramer is confused about:
• How to respond to his request for training
• How to let him and other plant managers know that all decision about R/3 were not
under their control.

10. Business Practices at Vandelay
• Varied Operations Practices
– No uniform Invoicing
– No Defined process
• raw material quantity verification
• Quality inspection
• Prioritization of work-orders
• Tracking of backlogs
– Enormous efforts in terms of:
• Technical details for H/W and S/W
• Business practices changes

11. Business Practices at Vandelay
• Varied Operations Practices
– No uniform Invoicing
– No Defined process
• raw material quantity verification
• Quality inspection
• Prioritization of work-orders
• Tracking of backlogs
– Enormous efforts in terms of:
• Technical details for H/W and S/W
• Business practices changes

12. Business Practices at Vandelay cont..
– Experts involved:
• Deloitte & Touche Consulting Group
• ICS
– Project Leader – Kramer
– George Hall, plant manager excited about getting R/3
implemented . He assumed that kramer would be free to
modify the system at will.
– Kramer is confused about:
• How to respond to his request for training
• How to let him and other plant managers know that all
decision about R/3 were not under their control.

13. The Software Vendor - SAP
• Company Background
– One of first ERP vendors (Est. 1972)
– 3rd
Largest software company in the world
– Successful predecessor R/2 for mainframe systems
– $710 M sales in 1995 in N. America
• SAP R/3 capitalized on Client-Server architecture
• World’s largest provider of Integrated Business Solutions
software
• Company stock trades on the Frankfurt and New York
exchanges

14. The Software Vendor - SAP
R/3 Capitalized on many of the advantages of
client server computing including.
• Powerful and flexible computing technology
• Better GUI
• Ease of Use
• Ease of Integration
• Scalability
• More – Open standards

15. SAP R/3 Architecture
• SAP R/3 is one of the main product of SAP where R stands for Real Time and the
number 3 relates to three tier application architecture(Data base ,Application
Server and Client).
• Most of the business in today world runs on SAP R/3 system .About 80% of the
companies implemented this software.
– The SAP R/3 System consists of application modules that support all
of a company’s business transactions and are integrated interactively.
• Because of the integration, a change in one application module will
result in an automatic update of the data in the other application modules
involved.
– Application Modules
• Financials
– Financial Accounting (FI)
– Controlling (CO)
– Asset Management (AM)
– Project System (PS)

16. SAP R/3 Application Modules
R/3R/3
Client / ServerClient / Server
ABAP/4ABAP/4
FIFI
COCO
AMAM
PSPS
WFWF
ISIS
MMMM
HRHR
SDSD
PPPP
QMQM
PMPM

17. SAP R/3 Application Modules
Financial Accounting (FI)Financial Accounting (FI)

18. SAP R/3 Application Modules
ss

19. SAP R/3 Application Modules

20. Success factors of SAP R/3
• Client – Server technology
– Large firms moved from Mainframe to Client-Server architecture – R/3
was made for Client Server architecture
• Modularity, Functionality and Integration
– Included financials, order management, manufacturing, logistics, and HR
– Integrated all the modules
– Centralized database accessible by all the modules
• Marketing Strategy
– Partnership with most large consulting firms
– Marketed as broader business strategy

21. SAP Growth

22. R/3 Usage: System configuration
Configuration Tables:
– To meet company’s specific requirement, settings of R/3 configuration tables were
changed.
– 8000 tables of R/3 define the looks and working of transaction screen.
– Table configuration activity had to be replicated for all relevant processes which needed
time and expertise, which created dependency on a few people who were experts in it.
Added functionality:
– R/3 system could only satisfy 80-95% of a large company’s specific business
requirements.
– Remaining functionalities can be obtained in four ways:
1. Interfacing R/3 to existing legacy system.
2. Interfacing R/3 to other packaged software serving as ‘point solution’ for specific tasks.
3. Developing custom software that extends R/3’s functionalities and was accessed through
standard application program interface.
4. Modifying the R/3 source code directly.

23. The Consultants: Deloitte & Touche consulting group /
ICS
Company Backgroung:
– The consulting group has been into consulting since 1950’s
and accounted for over 15% of Deloitte & Touche revenue by
mid 1990’s.
– It became $1Billion in 1995 and employed 8000 professionals
in more than 100 countries.
– Deloitte & Touche group/ ICS was subsidiary of group which
specialized in SAP implementation offering complementary
software, Education & training and consulting in BPR and
change management.
– ICS has won SAP’s award of excellence and had most of
employees over two years experience. .

24. The Consultants: Deloitte & Touche consulting group /
ICS
SAP had named ICS as an R/3 Global logo partner.
– To maintain the partnership, SAP offers the following
to ICS:
• R/3 system for internal training.
• Regular R/3 logo partner forums and workshop.
• Access to SAP infoline.
• Second level support from SAP consulting
(consultant hotline).

25. Technology enabled change
According to Kramer there are two approaches to handle changes at
strategy, process, people and technology level:
– 1) Clean sheet – all 4 dimensions of change are explored
without constraints.
– 2) technology enabled change – primary technology is
selected early and more strongly influences other three
dimensions and still enables overall business change.
As the Vandelay is going with SAP implementation , ICS used a
structured approach as per the client’s situation. The approach
is shown in figure below:

26. Cont…

27. THE VANDELAY PROJECT
• Time Estimate
– The Vandelay Project’s implementation would require 18 months.
• R/3 software to be implemented at Vandelay 's 8 mfg sites, 4 order entry
locations and at corporate headquarters in Minnesota.
• Plant installations would require a lengthy preparation period to align ops with
the new business practices.
• Two-thirds of employees would need training on how to use new system

28. THE VANDELAY PROJECT cont…
• Effort Estimate
– Full time effort of 50 people including consultants( process re-designers
and SAP specialists) and employees
– Part time involvement of many employee at each site.
• Initially, the project team would focus about 80% of its effort on designing the
“to be” process model of the organization, and 20% on issues related to
system implementation.
• In the later phases, during the activities of system configuration, testing, and
delivery, the emphasis would be reversed: 80% concentration on SAP
implementation and 20% on process design.
• Budget Estimate
– $20 million, including hardware, software, consulting fees, and salaries.

29. Team Structure
• Two team for managing the project
– Steering committee
– Project team
• Steering Committee, 8 member team, consisting of Division
VPs. The team would meet monthly. This team would address
issues related to Business Strategy like sequence of site
installations, planned change in mfg. strategy.
• Project team, 20 member team, consisting of operations
employees, e.g. planner/buyers, financial accountants. This
team would address implementation specifics.

30. Team structure contd…
According to Kramer, participants for the project team
could be selected on any of the following basis:
• Present a list of required skills and characteristics for
team members to the senior-level management and
ask them to nominate people.
• Or, mandate that the team contain at least one
representative from each of Vandelay’s
implementation sites around the world.

31. Managing Change
Kramer placed the challenges, involved in assisting a
large organization as it attempted to change and
standardize its practices, into following categories:
• Centralization vs. Autonomy
Challenges
– Strong tradition of encouraging innovation and
autonomy.
– So should tinkering be encouraged or should
systems and processes be locked down as much as
possible?

32. Managing Change
– The implementation team would ve to ensure that
any universal processes did not run a foul of local
ones.
– Standardization on externally defined best
practices be incorporated into the project as a
starting point or final word.
– R/3 required each item to have a single, unique
part number across all sites. Each plant however
had developed its own internal part numbering
system over time. Replacing them would be major
task

33. Managing Change Cont..
• Change agents and Organizational inertia
– Early leaders: People who are enthusiastic about the work of change
and are respected within the company.
– Inevitability: Even with committed change agents in place, most people
did not completely accept a new system until they really believed that it
was inevitable.
• Companies committed substantial resources upfront and stated clearly that
the new system was a given; but most employees remained skeptical for a
long time.
• Kramer had to tackle this and decide on what she and early movers could
do about it.

34. Managing Change Cont..
• Software
Although R/3 had broad capability, there would be situations
where it would not exactly fit the desired Vandelay process
design.
Three primary alternatives to addressing this situation:
1. Change the business process to match the capabilities of
the software.
2. Interfere R/3 to another package or custom solution.
3. Extend the R/3 system to precisely match the business
requirements.