Geneva ERP Implementation

Introduction

Geneva Pharmaceuticals are one of the world's largest generic drug manufacturers with revenues in excess of $300 million in 1998. Until 1996 Geneva's information systems were incompatible across business areas; for example, the accounts department could not be made available to manufacturing without re-keying the data manually. This was a major problem for Geneva because it meant that time was being wasted reproducing data and there was a high incidence of 'dirty data' - factors which lead to inefficiency and inevitably the loss of profits. Management at Geneva realised that such problems existed in their company which led to their belief that they needed a "common, integrated company-wide solution to improve data and reduce costs". Their solution? Deploy SAP's R/3 system.

Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organisation into a unified system (www.wikipedia.org). Due to the desire within Geneva for applications to be compatible across business units it is possible to see the attraction of SAP R/3.

Phase One

The main aim of this phase was to reduce the cost of operations. The SAP R/3 system would require data to be entered only once - thus saving time and money, with efficiency greatly increased.

However, despite such suitable objectives many key problems occurred. There was little communication or co-ordination amongst the team implementing the system which is clearly a recipe for disaster and it was actually necessary to bring in a new CIO in order to provide the project with better leadership. As witnessed in the London Stock Exchange it is very difficult to implement changes if you fail to consider organisational feasibility and fail to communicate effectively (Taurus v Crest) and it is likely that this contributed to these problems.

Another major decision and, ultimately, a problem at this stage is the fact that Accelerated SAP (ASAP) was chosen due to its promise of a short implementation cycle of only 6 months. This appears to be a valid decision because any company would want their systems to be running as quickly as possible in order to reap the maximum benefits however, 4 months down the line very little progress had been made; Geneva was therefore well behind schedule and this could have knock-on effects for future stages. The following quote appears to embody the thought process at Geneva: "some people want to do everything in one or two months and underestimate the time it takes for proper development and employee comprehension"(McCabe, R., 2007). By considering such an attitude it is easy to see why problems occurred because by trying to do things too quickly one can fail to notice areas which are actually struggling.

Finally, at this stage it emerged that the new system provided Geneva with problems that had not existed within the original system. This was a major blow because the system was designed to be better and more efficient than its predecessor, not worse and after so much time and money had been spent on the system it is reasonable to expect it to carry out its function properly.

Phase Two

A key point to note at this phase is the fact that it was far more challenging than the previous phase due to the complex nature that Geneva used in dealing with customer orders, rebates and chargebacks. Due to this, a decision was made to change those managing the project as the first phase had suffered from so many set backs. Whitman-Hart was replaced by Arthur Andersen and Oliver White, consulting firms, due to Arthur Andersen’s knowledge in the technical configuration aspects of SAP implementation and Oliver Whites’ reputation.

On top of this, Anna Bourgeois was assigned the overall responsibility for this phase due to her extensive knowledge in this field.

Another point that was raised at this stage was the conceptual design of the system in which thirteen areas for improvement were highlighted with four emerging repeatedly. This stage was carried out by the key users who were most knowledgeable with the existing processes with help from Oliver White. The use of expertise here was important to ensure that the best design possible was established. To further this point, prototypes were used to test these emerging areas of conceptual design against any emerging problems.

Also, in this phase a lot of attention was paid to the management of change in relation to the staff and training. This process was taken extremely seriously with posters, surveys and even a telephone line implemented for staff to call in relation to their worries. Further, three full weeks were devoted to training. This point of the project was undertaken meticulously possibly, with a little too much emphasis.

Phase Three

A key decision of this phase was the fact that they reinstated the project manager from phase one. This could be seen as a problem as in phase one there were problems relating to communication, co-ordination and time scale.

A key benefit of ERP systems highlighted in this phase is they can save a lot of time. It was estimated that using the R/3 model for sales and operational planning (SOP) would cut this process from 20 to 10 days - an important selling point of these systems. Further, at the time of this case SAP brought out a new module - Advanced Purchase Optimiser which combined with SOP would answer the unique business needs of the company. This will then go on to help meet Geneva's targeted business improvement of having their orders 'ready to promise' which will help improve its customer service levels.

Conclusion

In conclusion, there are a number of things we can learn from this ERP implementation. Firstly, it is necessary to have the correct people on board from the start as Geneva had to implement personnel changes during the project and ERP is as much about people as it is about systems. It is also necessary to have a realistic view of the time frame required as phase 1 ran over schedule which had knock-on effects for the other stages and staff are likely to be demotivated if they are continually told different finishing dates. However, we can also learn from Geneva's successes such as spending a large amount of time and effort making staff receptive to change and training staff to ensure that they are confident in using the system, as one of the main reasons for failure is that staff often feel scared of the technology and fail to make the best use of it in their day-to-day work.

REFERENCES

McCabe, R., How to recover from a failed ERP implementation, http://www.microsoft.com/canada/midsizebusiness/businessvalue/local/failederp.mspx, accessed 14 November 2007

SAP R/3 implementation at Geneva Pharmaceuticals, Case Study

Taurus v Crest, Case Study

This assignment was prepared in collaboration with Linzi Barr.

How will offshoring affect UK accountants?

Offshoring refers to the transfer of a business process to another country regardless of whether the work stays within the same corporation or not. (OECD, 2006) This has become a popular topic in recent years with a number of jobs being offshored to countries such as India, particularly call centre jobs. However, it is the IT boom in India which has led to a fear that even relatively high-skilled, well-paid jobs are now also under threat (OECD, 2006) and so as a fourth year accounting student it is necessary to consider how offshoring will affect UK accountants, if at all.

It has been claimed that “anything which does not involve customer face-to-face relations can and will be offshored.” (Gupta, A., 2007) This would imply that UK accountants could be greatly affected by offshoring because sectors such as taxation and accounts preparation do not require personal contact with the customer and so could easily be offshored. However, given this opinion it is likely that not all accountants would be affected equally because auditing, for example, requires not only interaction with the client but it is also necessary to visit their premises and so it is difficult to see how such a job could be offshored successfully. The fact that cultural issues are also now less important (Friedman, T.L., 2005) would appear to strengthen the argument that anything which does not require close contact could be offshored because it suggests that companies now place less significance on their accounting and financial work being carried out locally; with global accounting standards in the place the work can be carried out to the same standard elsewhere whilst saving money.

Furthermore, the fact that accountants make use of software packages such as SAGE for basic accountancy work means that this type of work is eminently suitable for offshoring (O’Donnell, A., 2007) as the work is mainly computer based and can therefore be standardised. This is further supported by the view that the jobs most at risk are financial, insurance or computer based work (OECD, 2006) because basic accounts preparation falls into two of these categories and so it is possible that offshoring could have a major affect on UK accountants.

By considering the current position of offshoring within the accountancy profession it is again possible to reach the conclusion that this could affect, and already is affecting, UK accountants. There is now an onus on UK accountants to compete with lower cost professionals across the world which is a relatively new concept for accountants to comprehend because they are accustomed to being in the fortunate position of being protected from competition in many areas due to the need for professional qualifications to carry out certain tasks i.e audits. The fact that India, for example, has a generous supply of Chartered Accountants means that work can be carried out to the same high standard but for a much lower price and in modern society that is a major bonus for businesses. UK accountants must give this issue great consideration because Prudential already have 200 staff in Bombay delivering financial accounting and it is predicted that all accounts and actuarial work will be offshored (Accountancy Age, 2007), the NHS is planning to move 2/3 of accounting and finance jobs to India (Industry Focus, 2007) and many SMEs have also decided to offshore. (Sharma, K., 2007)

It is therefore clear that UK accountants cannot be complacent because offshoring will undoubtedly affect them as many accounts and finance jobs have already been offshored and it is likely that this trend will continue due to the high skills levels and low costs available abroad. However, not all affects will necessarily be negative and it is necessary to consider the opportunities which offshoring will provide to UK accountants.

The UK accountancy firms can act as the ‘front office’ that interacts with clients whilst the work can be carried out by cost efficient Indian CAs. This allows costs to be reduced so UK firms can offer competitive services to their clients therefore discouraging companies from independently offshoring accountancy work. (O’Donnell, A., 2007) The time difference is another factor which provides opportunities because it allows work to be completed overnight (O’Donnell, A., 2007) and this will add to efficiency and customer satisfaction and therefore provide the opportunity for more work to be won. Furthermore, the fact that the work can be carried out more efficiently and for a lower cost will lead to a higher profit margin (O’Donnell, A., 2007) within UK accounting firms and this will allow UK accountants to fund additional services to their clients. It is therefore apparent that UK accountants can reap benefits from offshoring if they are willing to think outside the box and consider the opportunities it presents.

In conclusion, offshoring will undoubtedly affect UK accountants but it is up to them to make the most of this situation. It is highly likely that jobs will be transferred abroad but not all of the affects need be negative. UK accountants can use this to their advantage by allowing certain work to be carried out abroad at a much lower cost allowing them to focus on providing additional support and services to their clients.



REFERENCES
Accountancy Age, April 2007
Gupta, A., 2007
Industry Focus, February 2007
O’Donnell, A., ‘A Challenging Environment for UK Accountancy Firms’, 2007
OECD, ‘The share of employment potentially affected by offshoring’, 2006
Sharma, K., SME Outsourcing, 2007

TAURUS & CREST - Why did TAURUS fail and CREST succeed?

The London Stock Exchange is one of the oldest exchanges in the world and currently supplies real-time prices to 90,000 installed terminals in over 100 countries worldwide. (http://www.londonstockexchange.com/en-gb/about/cooverview/whatwedo/marketinfo.htm) One of the most important roles of the LSE is to ensure that share certificates and cash change hands between the parties who have traded and it is this process which TAURUS aimed to computerise in order to reduce transaction time and eliminate the need for ‘paper’ transactions. TAURUS, however, was nothing short of a disaster and it was the failure of this system which led to the successful birth of CREST. It is astounding that two systems implemented by the same company could have such different results and so it is necessary to consider why CREST succeeded where TAURUS failed.

Perhaps one of the main reasons for the failure of TAURUS was that it tried to be “all things to all men”. (Case Study, p.4) By making TAURUS compulsory for all member firms the project team dug itself into a very deep hole because this allowed companies to argue that if they were being forced to use the system they should be entitled to have their businesses processes included in the design. As a result, the system became extremely complex with 21 “Events” such as takeovers being included and even the designers struggled to understand the business requirement. (Case Study, p.4) It is therefore clear to see how the failure of TAURUS came about as if the designers cannot understand the system the program is likely to be written incorrectly and this will clearly cause problems. Furthermore, by attempting to please everyone and do everything the system was destined to become the proverbial “jack of all trades, master of none”. This can be further highlighted due to the fact that CREST took the exact opposite approach and made usage optional. This meant that companies had no leverage over the designers and so could not force changes to the system; thus the system contained only 2 “Events” – substantially less than its predecessor. This meant the system focussed on a small number of processes which were integral to the LSE and carried them out to a high standard – it would appear the design team learnt the lessons taught by TAURUS.

A further reason for the failure of TAURUS is organisational feasibility. Organisational feasibility is important because it includes how responsive people are to change (http://www.wikipedia.org/) and according to Chris Rees the people involved only wanted to maintain the “status quo”. By ignoring this very important fact TAURUS was doomed to failure whereas the CREST team took the time to ask questions which could gauge what needed to be done rather than what had always been done. (Case Study, p.6)

TAURUS again ignored the rules of software development by involving such a large team as the bigger the project, the higher the chances of failure as can be illustrated by failures such as the Fox Meyer’s ERP system. (www.slideshare.net/vinaya.hs/erp-implementation-is-the-challenge/) TAURUS included hundreds of staff and this is clearly a logistical nightmare as there is a huge potential for conflict and for too many adjustments to be made which is what appears to have happened. In stark contrast to this, CREST employed only a team of only 20 to design the programme and 4 or 5 people oversaw the whole project. This allowed for continuity, stability and ultimately a much more successful programme.

In conclusion, TAURUS failed for a number of reasons including its sheer size, the adjustments which were made to the standard package which had been bought from an outside source, the amount of bad publicity it received and its failure to consider organisational feasibility. However, perhaps the most important reason for failure was its attempt to please everybody by doing everything rather than observing the ’90-10’ rule or Pareto principle. (http://www.wikipedia.org/) The system could have been just as effective and come in on time and on budget had this principle been applied as the designers would have realised that there was no need to put so much additional effort into adding only 10% to the program. CREST was a success due the fact that its designers learnt the lessons taught by TAURUS. They focussed only on what was actually required, kept the project minimal and kept morale high. All of these factors led to this project being finished on time and within budget. In other words it was a success.



REFERENCES

Case Study (TAURUS & CREST) pp.4&6

London Stock Exchange, http://www.londonstockexchange.com/en-gb/about/cooverview/whatwedo/marketinfo.htm, accessed 31 October 2007

Slideshare, “ERP – Implementation is the Challenge”, www.slideshare.net/vinaya.hs/erp-implementation-is-the-challenge/, accessed 2 November 2007

Wikipedia, http://en.wikipedia.org/wiki/Pareto_principle, accessed 1 November 2007

Wikipedia, http://en.wikipedia.org/wiki/Feasibility_study#Organizational_Feasibility_study, accessed 1 November 2007