2. Read your chosen case study from the above list. Read it thoroughly

3. Describe why you have chosen the above case and how it fits within the context of this course: Management of Technology and Innovation

4.. The proposal should be within two page limit

CASE STUDY IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico Baxter Manufacturing Company (BMC), located in a small midwestern town, is a leading manufacturer of metal stamp- ings, particularly deep-drawn electric motor housings. The company was founded in 1978 by its chairman, Walter R. Baxter, as a supplier of tools and dies, but it soon expanded into the stamping business. BMC is a closely held corpora- tion, with the Baxter family holding most of the stock. BMC's major customers include Ford, General Motors, Honda of America, General Electric, Whirlpool, Amana, and Maytag. BMC has two markets. It makes brackets and other components sold directly to appliance and automotive assemblers to go straight into the end prod- uct. But BMC also makes motor casings and the like that go to intermediate suppliers that make components (such as motors) that then go to the appliance and automotive assem- blers of the finished products. For example, BMC ships a motor housing to a motor manufacturer who makes the motor, and BMC also makes the bracket that holds the motor onto the frame and ships it directly to the manufacturer who assembles the motor and bracket into the finished product. BMC's 170,000-square-foot manufacturing facility is one of the best in the country, with 43 presses that range from 50-to 800-ton capacity. Every press is equipped with acces- sory items such as feeds, reels, and electronic detection sys- tems. In addition to the presses, BMC has recently added the capacity to weld, drill, tap, and assemble stampings into more complex parts to suit the needs and desires of its customers. BMC employs about 420 people and is nonunion. Over its 22 year history, BMC has had steady growth. The most recent 6 years of sales were: Before joining BMC in 1994, MIS manager Don Collins had 20 years of experience as a lead systems ana- lyst with a large manufacturer and broad experience with manufacturing systems. In 1997 the MIS department had five people, but there was some turnover and Collins was unable to hire replacements because of the high salaries commanded by people with the necessary skills. Therefore, the MIS department was down to three people, including Collins, and in a maintenance mode for the past 3 years. BMC management has recognized that improved systems are a high priority, and Collins has recently been authorized to hire two more people at competitive salaries. BMC managers have generated so many requests for new systems that an MIS steering committee has been established to approve projects and set systems develop- ment priorities. The members of the MIS steering commit- tee are President Kyle Baxter, Vice President for Customer Service Sue Barkley, Controller Lou Wilcox, and Don Collins. Sue Barkley is a sister of Kyle Baxter and has been a champion of information technology within BMC. 1994 1995 1996 $49,900,000 $61,976,000 $74,130,000 Recent Developments In May 1999, a major appliance manufacturer customer contacted BMC President Kyle Baxter and encouraged BMC to consider building a plant in Mexico to serve the needs of the customer's Mexican operations. This customer had carefully studied its suppliers and selected a small num- ber to invite to become favored parts suppliers in Mexico. In January 2000, the BMC board approved the deci- sion to build a plant in Mexico. BMC management had been thinking about building a plant in Mexico for some time, for about 20 percent of BMC's production was being shipped to factories located in Mexico. Although Mexican wage rates are much lower than those in the United States, BMC management was not primarily motivated by the prospect of low Mexican wages. Stamping is very capital intensive and semiautomated, so labor costs are not a big part of the total cost of production, and there will be addi- tional costs that will make up for any wage savings. But 1997 1998 1999 $85,785,000 $97,550,000 $112,337,000 Copyright 2000 by E.W. Martin. This case study was prepared to be the basis for class discussion, rather than to illustrate either effective or ineffective handling of an administrative situation. It is a continuation of Case Study III-2, entitled "A Make-or-Buy Decision at Baxter Manufacturing Company," which appears earlier in this book; one can find further informa- tion about the history of the company and its use of the computer there. 642 Case Study IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico 643 the cost of shipping, the problems in getting products across the border, and the difficulty in predicting exactly when a shipment will be delivered all make customers pre- fer to have their parts produced locally for their Mexican factories. BMC management decided that in order to be an important factor in the growing Mexican market, BMC must have a factory in Mexico. BMC has assured its U.S. workers and the community in which its current plant is located that no present production will be moved to Mexico everything produced there will be new business. The U.S. plant has been expanded 18 times since the first unit was built, and there is little room for fur- ther expansion on the site. If BMC's sales are to continue to grow, new plants will have to be built, and those in the United States will probably be built closer to major customers. BMC decided to build the new plant in Queretaro, a thriving metropolis located about a 3-hour drive northwest of Mexico City. The city of Queretaro has a population of about 500,000, and its metropolitan area has a population of about a million. It has excellent infrastructure for Mexico, with progressive city leadership and a university. This university is paperless. All course work and homework is completed on computers-no paper at all! There is a lot of technology education available, including tool and die training programs. Also, some major U.S. consulting firms have offices there. This environment is why BMC's cus- tomer and other manufacturers are locating in Queretaro. The new factory will be located reasonably close to the customer plant that it will serve. However, Kyle Baxter intends to expand BMC's business in Mexico, so in the long run this plant will supply parts to other customers. The new plant will start out small, but BMC has plenty of land and the plant has been designed so that it can be easily expanded as the need arises. The plant's initial planned dimensions are about 200 by 200 feet, providing 0,000 square feet of space. It will start with six presses (two 125-ton, two 200-ton, and two 300-ton presses) but with none of the huge 600-to 800-ton presses that BMC has in the main plant. It will have some welders, a tool room, and a tooling facility where dies can be maintained. There will be offices in the plant for quality control, plant engineering, and a shift supervisor, and office space along the front for the plant manager, accounting manager, human resources manager, clerical workers, and a computer room. In addition it will have a break room, a training room, and shower and locker facilitiesmost plants pro- vide shower facilities in that part of Mexico. And there will be a small kitchen where the workers can cook meals. Don Collins designed the computer room for the Mexican plant. It is located in a secure area next to a permanent wall and will have adequate power, air condi- tioning, emergency lighting, and everything that is needed for a computer room. The plant will be wired with category-5 copper wiring throughout. There are plans for fiber-optic cable as the plant expands, so internal commu- nications will not be a problem. They may or may not install a central computer at the start. An Ethernet LAN will connect the PCs in the plant. Initially this plant will employ about 35 people in a single shift operation. As of May 1, 2000, the plant man- ager, Jesus Salazar, and the financial and human resources manager, Maria Alvarez, had been hired. Both were from the locality and speak some English. It is expected that the other managers will speak some English, although they may not be completely fluent. But the rest of the workers will not be English-speaking. Initially two experienced BMC managers, one from the tool room facility and the other from plant engineering, will be sent to Queretaro to help with the start-up and These two expatriate managers have no international experience and neither speaks Spanish. They are scheduled to return to the United States within 2 years, after which the staff in Mexico should be entirely local. For the foreseeable future BMC will do all engineer- ing, designing, and building of the dies in its U.S. facility and ship them to the Mexican plant. They will have to do some final tuning down there. Die maintenance will be done locally, so BMC will have to develop some skilled people there. That is one reason BMC is sending the two managers from the United States to help them get started. The Mexican plant was designed, the land was acquired, and ground was broken for construction in January 2000. The Mexican plant was scheduled to begin to deliver parts to its major customer in December 2000. For tax and legal reasons, BMC has established a wholly owned subsidiary corporation to own and operate the Mexican plant. BMC will treat the Mexican plant just like an outside contractorcustomers will place orders with the BMC home office and pay the home office for the parts. Then the home office will pay the Mexican sub- sidiary for the work it performs and the service it provides. The Mexican plant will ship the parts it produces directly to the customer, and will work directly with the customer on operational issues such as quality. IS Issues When BMC management decided to build a plant in Mexico, Don Collins' first concern was how to deal with the systems needs of a plant in Mexico. When this question arose BMC President Kyle Baxter's first reaction was: We want to have good systems down there, and we ought to use this opportunity to consider the 644 Part IV . The Information Management System Alternatives Considered After the decision to abandon consideration of an ERP, Collins and Mease defined the following three approaches to supporting the Mexican plant: long-range systems needs of the entire company. It would be nice if we could get something in Mexico that we can use for the entire company. In January 2000, Kyle Baxter established a small task force to develop a plan for systems support of the Mexican plant and report to the BMC executive committee. The des- ignated task force leaders were Collins and Virginia (Ginnie) Mease, BMC's controller. The task force also included Sue Barkley, Jesus Salazar, and Maria Alvarez. The stated mission of the task force was: To implement the desired business processes and to select, implement, and support the appropriate busi- ness system that will exceed the needs of BMC Mexico. 1. Connect the Mexican plant to BMC's existing sys- tems through a high-speed communications line. 2. Contract through an application service provider (ASP) to provide systems support to the Mexican plant. 3. Employ a piecemeal solution where they would acquire a number of software packages that could run on the networked PCs in Mexico that would serve the basic needs of the Mexican plant. The goals of the task force included the following: 1. Business processes will be defined to facilitate opti- mum effectiveness. 2. Software will match the business processes. 3. Software will enable integrated processes. 4. The business system selected can also be implemented throughout BMC. 5. Language and currency needs will be met. 6. The business system investment will provide the best cost/benefit. 7. Support of the system will be available in Mexico. For some time BMC managers had been thinking about the possibility of acquiring an enterprise resource planning (ERP) system to replace and expand the opera- tional systems of the company, and an ERP would meet most of the previously stated goals, so the initial focus of the task force was to investigate the possibility of acquiring an ERP. Collins was nem an IS management group sponsored by a local university, and through this contact he was able to get access to three nearby companies who had experience with an ERP. Collins and Mease devel- oped an interview guide covering the questions they thought were important, interviewed managers at the three companies, and summarized the results of the interviews. Two things stood out from the interviews: First, there was not enough time to implement an ERP package properly by the end of the year, and, second, BMC management could not simultaneously cope with the disruption of starting a new plant and the disruption of installing an ERP. Therefore, on May 25, 2000, the BMC executive committee decided to eliminate the goal of considering the long-term needs of BMC from the task force charter and to concentrate exclusively on developing systems support for the Mexican plant. Initially the Mexican plant would be a relatively small operation, and transaction volumes would be quite small. Collins and Mease felt that at the start they would only need to handle basic things-control inventory, ship, print reports, handle EDI to and from the major cus- tomerthe things necessary for the operation to run. On the other hand, they expected the Mexican operation to grow rapidly, so transaction volumes and the complexity of managing production would grow over time. The first alternative-using the existing BMC sys- tems in Mexico through a high-speed communications linewas quickly eliminated. In the first place, there was the language problem. BMC's existing systems were in English and would have to be translated into Spanish for use in Mexico, and that was deemed impractical. Second, because of the language problem, they could not support these systems in Mexico. The availability of local support was a crucial factor in determining how to serve the sys- tems needs of the Mexican plant. There must be people who can help install the applications software, handle any problems that arise, and train people in using the software. And there must be support for the hardware platform that the applications run on. An application service provider (ASP) is a company that has one or more large data centers and furnishes a portion of that processing and file storage capacity to each of its clients via communications facilities. For years it has been anticipated that, sometime in the future, information processing power would be available through a wall plug just like electrical power. An ASP is the current embodiment of that dream. Thus, the customer of an ASP does not have to invest in computer hardware and systems software or manage a data center. Rather, the customer pays a monthly fee to the ASP based on the amount of file storage, RAM, and computer processing cycles used. The customer also pays for the use of the communications facilities used. The ASP may also provide some applications soft- ware, but the customer usually buys applications software Case Study IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico 645 4. Mind-Set. Their mind-set has been on getting up and running and producing parts, not on any support- ing activities. We just cannot get their attention, and you can't communicate without attention! Collins, Mease, and Barkley have also begun to reconsider the task force's role in providing systems sup- port to the Mexican plant. Barkley explains their dilemma: from software vendors that work with the ASP. The ASP provides help desk support and deals with hardware prob- lems, but applications software problems are handed off to the individual software vendors. Collins had difficulty exploring the ASP option. He contacted his local IBM representative, but it took a long time to get in touch with a person who represented IBM's ASP business. It was early August before Collins could get definite information on what ASP services IBM could pro- vide to the Mexican plant. IBM would be able to serve the Mexican plant through communications facilities linking the Mexican plant to IBM's Rochester, N.Y., data center. Applications software would be obtained from a number of software vendors with whom IBM has partnership arrange- ments. Many of these vendors provide Spanish language versions of some of their software. IBM provides a Spanish language help desk that hands off applications software problems to the appropriate vendor's Spanish language help desk. The cost of IBM's ASP service would be $60,000 per year. There would, of course, be additional charges for the applications software, training, data conversion, and start-up. These costs seemed excessive in comparison to the third alternative and the ASP solution seemed overly complicated for the startup operation, so BMC abandoned consideration of the ASP option and concluded that the piecemeal solution was the only viable option for support- ing the Mexican operation at the start. However, after the Mexican plant is in operation and things have settled down, BMC intends to reconsider both the ERP and the ASP options for the entire company. We feel that we are responsible for helping them get started right, but it is clear that they would like to do it on their own. We don't want their local pride to result in them falling on their faces, but if they have the capability they definitely need to have a major role in making the decisions. But we can't tell whether they have the capability. Right now they are concentrating on getting the plant operational so that they can get parts out the door. We are ready to help, but they don't seem to have the time or the urgency. We are afraid that once they get past the hurdle of getting into production, then they are going to expect to get the systems installed and running in the next week. The broader question is: How much should we dictate to them in all areas down there? Do we want to let them reinvent the wheel because of the cultural gap between us and them? Or should we insist on providing some guidance from our functional areas (human resources, quality, materials control, produc- tion planning, etc.) to assist them with getting the basics up and going? On the other hand, do we really want to pass on any of our "bad habits to them? Nagging Difficulties Collins, Mease, and Barkley had encountered major commu- nications difficulties in dealing with the BMC people in Mexico. Salazar and Alvarez had not been active participants in the task force, and there had been little effective communi- cation with either of them. According to Collins, there were four things contributing to these communications problems: 1. Language. When we talk to each other we don't always understand the true meaning of what the other guy is saying. We nod our heads, but we may not be on the same page 2. Cultural. They give the distinct impression of want- ing to be self-sufficient, and therefore any help we give may be considered paternalistic. This may be the result of sensitivities relating to America's domi- nant position ever since the Mexican War 3. Distance. It would be different if we could drive there in a couple of hours. But it is a major disrup- tion for them to come up here or us to go down there Status on September 12, 2000 Construction of the Mexican plant is on schedule, and it will be ready to begin production no later than December 1. As of September 12, Collins and Mease felt that they had made little progress in providing systems support for the Mexican operation. They had decided to pursue a piecemeal approach, so they needed to find vendors who could provide and support the basic Spanish language soft- ware packages that would be needed to support the small start-up operation. Maria Alvarez, the human resources/financial man- ager, had experience with a small financial software pack- age from Contpaq and she would like very much to use that package at the Mexican plant. Contpaq has a Web site, but it is in Spanish, so Collins has not been able to find out much about the software from that source. Grant Thornton, BMC's U.S. consultant for establishing a Mexican opera- tion, has an office in Queretaro. This firm will be the 646 Part IV The Information Management System Mexican plant's auditor, and it recommends the Contpaq financial software, so it appears that local support for that package would be available. Unfortunately, Collins has been unable to find out if this package will run on the peer- to-peer PC network planned for the Mexican plant. Collins has contacted Grant Thornton's Mexican office, but has not been able to get this information from its people. Collins is also trying to determine if Grant Thornton can provide local support for the Mexican plant's PCs. The Mexican plant now has two customers. Collins and Mease have contacted both of them to determine what kind of interaction they will require at the start. Fortunately, neither of them is using EDI in Mexico, so they will fax shipping orders and schedules to the plant. They are both using standard labels, so it should be possible to find a sim- ple barcode package to produce the labels. They also do not have any special requirements for packing slips and bills of lading, so BMC should be able to find a simple package to produce this paperwork. If not, this paperwork could be created manually on a typewriter at the start. Collins and Mease are confident that Spanish language software to do these things is available in Mexico, and that support for it will also be available locally, Collins believes that the task force has responsibility for three things: through a dedicated connection. The third area is applications. We have the first two under control except for local support. We sent Jim Walters from my staff down there and he tested their wiring and it is fine. We also sent Paul Adams from my staff down to set up all the desktop PCs and the peer-to-peer network, and he also gave them Internet access. We still do not have the dedicated digital line, but the phone company will provide that in its own due time. The weak link right now is support down there. When things don't work on a PC or the network, it is very hardwhether it is English Spanishto solve those kinds of problems over the phone. We must have support down there for the desktop, and so far we don't have it. They also are a long way from obtaining the needed applications software. Collins assesses this problem as follows: One is to make sure that we have the infrastructure in place-plant wiring that is tested and secure, a secure computer room for a server if it is needed, desktop PCs set up and working on the LAN-and make sure that we have support for those. Next is communications Internet access and a digital line so that they can route their network into ours so that we can share files and communicate I think that we can get a simple package to produce the barcode labels for the parts, and a package to pro- duce the shipping documents. But the people down there have not been concerned with some fundamen- tal questions such as: How do you schedule produc- tion? How do you order materials? What is needed on the factory floor? How are you going to provide in- structions to the operators on how to run the parts? Ginnie and I are struggling with whether to go down there, pull some people aside, take them to a hotel for a couple of days, and try to settle some those questions. Time is growing short! CASE STUDY IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico Baxter Manufacturing Company (BMC), located in a small midwestern town, is a leading manufacturer of metal stamp- ings, particularly deep-drawn electric motor housings. The company was founded in 1978 by its chairman, Walter R. Baxter, as a supplier of tools and dies, but it soon expanded into the stamping business. BMC is a closely held corpora- tion, with the Baxter family holding most of the stock. BMC's major customers include Ford, General Motors, Honda of America, General Electric, Whirlpool, Amana, and Maytag. BMC has two markets. It makes brackets and other components sold directly to appliance and automotive assemblers to go straight into the end prod- uct. But BMC also makes motor casings and the like that go to intermediate suppliers that make components (such as motors) that then go to the appliance and automotive assem- blers of the finished products. For example, BMC ships a motor housing to a motor manufacturer who makes the motor, and BMC also makes the bracket that holds the motor onto the frame and ships it directly to the manufacturer who assembles the motor and bracket into the finished product. BMC's 170,000-square-foot manufacturing facility is one of the best in the country, with 43 presses that range from 50-to 800-ton capacity. Every press is equipped with acces- sory items such as feeds, reels, and electronic detection sys- tems. In addition to the presses, BMC has recently added the capacity to weld, drill, tap, and assemble stampings into more complex parts to suit the needs and desires of its customers. BMC employs about 420 people and is nonunion. Over its 22 year history, BMC has had steady growth. The most recent 6 years of sales were: Before joining BMC in 1994, MIS manager Don Collins had 20 years of experience as a lead systems ana- lyst with a large manufacturer and broad experience with manufacturing systems. In 1997 the MIS department had five people, but there was some turnover and Collins was unable to hire replacements because of the high salaries commanded by people with the necessary skills. Therefore, the MIS department was down to three people, including Collins, and in a maintenance mode for the past 3 years. BMC management has recognized that improved systems are a high priority, and Collins has recently been authorized to hire two more people at competitive salaries. BMC managers have generated so many requests for new systems that an MIS steering committee has been established to approve projects and set systems develop- ment priorities. The members of the MIS steering commit- tee are President Kyle Baxter, Vice President for Customer Service Sue Barkley, Controller Lou Wilcox, and Don Collins. Sue Barkley is a sister of Kyle Baxter and has been a champion of information technology within BMC. 1994 1995 1996 $49,900,000 $61,976,000 $74,130,000 Recent Developments In May 1999, a major appliance manufacturer customer contacted BMC President Kyle Baxter and encouraged BMC to consider building a plant in Mexico to serve the needs of the customer's Mexican operations. This customer had carefully studied its suppliers and selected a small num- ber to invite to become favored parts suppliers in Mexico. In January 2000, the BMC board approved the deci- sion to build a plant in Mexico. BMC management had been thinking about building a plant in Mexico for some time, for about 20 percent of BMC's production was being shipped to factories located in Mexico. Although Mexican wage rates are much lower than those in the United States, BMC management was not primarily motivated by the prospect of low Mexican wages. Stamping is very capital intensive and semiautomated, so labor costs are not a big part of the total cost of production, and there will be addi- tional costs that will make up for any wage savings. But 1997 1998 1999 $85,785,000 $97,550,000 $112,337,000 Copyright 2000 by E.W. Martin. This case study was prepared to be the basis for class discussion, rather than to illustrate either effective or ineffective handling of an administrative situation. It is a continuation of Case Study III-2, entitled "A Make-or-Buy Decision at Baxter Manufacturing Company," which appears earlier in this book; one can find further informa- tion about the history of the company and its use of the computer there. 642 Case Study IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico 643 the cost of shipping, the problems in getting products across the border, and the difficulty in predicting exactly when a shipment will be delivered all make customers pre- fer to have their parts produced locally for their Mexican factories. BMC management decided that in order to be an important factor in the growing Mexican market, BMC must have a factory in Mexico. BMC has assured its U.S. workers and the community in which its current plant is located that no present production will be moved to Mexico everything produced there will be new business. The U.S. plant has been expanded 18 times since the first unit was built, and there is little room for fur- ther expansion on the site. If BMC's sales are to continue to grow, new plants will have to be built, and those in the United States will probably be built closer to major customers. BMC decided to build the new plant in Queretaro, a thriving metropolis located about a 3-hour drive northwest of Mexico City. The city of Queretaro has a population of about 500,000, and its metropolitan area has a population of about a million. It has excellent infrastructure for Mexico, with progressive city leadership and a university. This university is paperless. All course work and homework is completed on computers-no paper at all! There is a lot of technology education available, including tool and die training programs. Also, some major U.S. consulting firms have offices there. This environment is why BMC's cus- tomer and other manufacturers are locating in Queretaro. The new factory will be located reasonably close to the customer plant that it will serve. However, Kyle Baxter intends to expand BMC's business in Mexico, so in the long run this plant will supply parts to other customers. The new plant will start out small, but BMC has plenty of land and the plant has been designed so that it can be easily expanded as the need arises. The plant's initial planned dimensions are about 200 by 200 feet, providing 0,000 square feet of space. It will start with six presses (two 125-ton, two 200-ton, and two 300-ton presses) but with none of the huge 600-to 800-ton presses that BMC has in the main plant. It will have some welders, a tool room, and a tooling facility where dies can be maintained. There will be offices in the plant for quality control, plant engineering, and a shift supervisor, and office space along the front for the plant manager, accounting manager, human resources manager, clerical workers, and a computer room. In addition it will have a break room, a training room, and shower and locker facilitiesmost plants pro- vide shower facilities in that part of Mexico. And there will be a small kitchen where the workers can cook meals. Don Collins designed the computer room for the Mexican plant. It is located in a secure area next to a permanent wall and will have adequate power, air condi- tioning, emergency lighting, and everything that is needed for a computer room. The plant will be wired with category-5 copper wiring throughout. There are plans for fiber-optic cable as the plant expands, so internal commu- nications will not be a problem. They may or may not install a central computer at the start. An Ethernet LAN will connect the PCs in the plant. Initially this plant will employ about 35 people in a single shift operation. As of May 1, 2000, the plant man- ager, Jesus Salazar, and the financial and human resources manager, Maria Alvarez, had been hired. Both were from the locality and speak some English. It is expected that the other managers will speak some English, although they may not be completely fluent. But the rest of the workers will not be English-speaking. Initially two experienced BMC managers, one from the tool room facility and the other from plant engineering, will be sent to Queretaro to help with the start-up and These two expatriate managers have no international experience and neither speaks Spanish. They are scheduled to return to the United States within 2 years, after which the staff in Mexico should be entirely local. For the foreseeable future BMC will do all engineer- ing, designing, and building of the dies in its U.S. facility and ship them to the Mexican plant. They will have to do some final tuning down there. Die maintenance will be done locally, so BMC will have to develop some skilled people there. That is one reason BMC is sending the two managers from the United States to help them get started. The Mexican plant was designed, the land was acquired, and ground was broken for construction in January 2000. The Mexican plant was scheduled to begin to deliver parts to its major customer in December 2000. For tax and legal reasons, BMC has established a wholly owned subsidiary corporation to own and operate the Mexican plant. BMC will treat the Mexican plant just like an outside contractorcustomers will place orders with the BMC home office and pay the home office for the parts. Then the home office will pay the Mexican sub- sidiary for the work it performs and the service it provides. The Mexican plant will ship the parts it produces directly to the customer, and will work directly with the customer on operational issues such as quality. IS Issues When BMC management decided to build a plant in Mexico, Don Collins' first concern was how to deal with the systems needs of a plant in Mexico. When this question arose BMC President Kyle Baxter's first reaction was: We want to have good systems down there, and we ought to use this opportunity to consider the 644 Part IV . The Information Management System Alternatives Considered After the decision to abandon consideration of an ERP, Collins and Mease defined the following three approaches to supporting the Mexican plant: long-range systems needs of the entire company. It would be nice if we could get something in Mexico that we can use for the entire company. In January 2000, Kyle Baxter established a small task force to develop a plan for systems support of the Mexican plant and report to the BMC executive committee. The des- ignated task force leaders were Collins and Virginia (Ginnie) Mease, BMC's controller. The task force also included Sue Barkley, Jesus Salazar, and Maria Alvarez. The stated mission of the task force was: To implement the desired business processes and to select, implement, and support the appropriate busi- ness system that will exceed the needs of BMC Mexico. 1. Connect the Mexican plant to BMC's existing sys- tems through a high-speed communications line. 2. Contract through an application service provider (ASP) to provide systems support to the Mexican plant. 3. Employ a piecemeal solution where they would acquire a number of software packages that could run on the networked PCs in Mexico that would serve the basic needs of the Mexican plant. The goals of the task force included the following: 1. Business processes will be defined to facilitate opti- mum effectiveness. 2. Software will match the business processes. 3. Software will enable integrated processes. 4. The business system selected can also be implemented throughout BMC. 5. Language and currency needs will be met. 6. The business system investment will provide the best cost/benefit. 7. Support of the system will be available in Mexico. For some time BMC managers had been thinking about the possibility of acquiring an enterprise resource planning (ERP) system to replace and expand the opera- tional systems of the company, and an ERP would meet most of the previously stated goals, so the initial focus of the task force was to investigate the possibility of acquiring an ERP. Collins was nem an IS management group sponsored by a local university, and through this contact he was able to get access to three nearby companies who had experience with an ERP. Collins and Mease devel- oped an interview guide covering the questions they thought were important, interviewed managers at the three companies, and summarized the results of the interviews. Two things stood out from the interviews: First, there was not enough time to implement an ERP package properly by the end of the year, and, second, BMC management could not simultaneously cope with the disruption of starting a new plant and the disruption of installing an ERP. Therefore, on May 25, 2000, the BMC executive committee decided to eliminate the goal of considering the long-term needs of BMC from the task force charter and to concentrate exclusively on developing systems support for the Mexican plant. Initially the Mexican plant would be a relatively small operation, and transaction volumes would be quite small. Collins and Mease felt that at the start they would only need to handle basic things-control inventory, ship, print reports, handle EDI to and from the major cus- tomerthe things necessary for the operation to run. On the other hand, they expected the Mexican operation to grow rapidly, so transaction volumes and the complexity of managing production would grow over time. The first alternative-using the existing BMC sys- tems in Mexico through a high-speed communications linewas quickly eliminated. In the first place, there was the language problem. BMC's existing systems were in English and would have to be translated into Spanish for use in Mexico, and that was deemed impractical. Second, because of the language problem, they could not support these systems in Mexico. The availability of local support was a crucial factor in determining how to serve the sys- tems needs of the Mexican plant. There must be people who can help install the applications software, handle any problems that arise, and train people in using the software. And there must be support for the hardware platform that the applications run on. An application service provider (ASP) is a company that has one or more large data centers and furnishes a portion of that processing and file storage capacity to each of its clients via communications facilities. For years it has been anticipated that, sometime in the future, information processing power would be available through a wall plug just like electrical power. An ASP is the current embodiment of that dream. Thus, the customer of an ASP does not have to invest in computer hardware and systems software or manage a data center. Rather, the customer pays a monthly fee to the ASP based on the amount of file storage, RAM, and computer processing cycles used. The customer also pays for the use of the communications facilities used. The ASP may also provide some applications soft- ware, but the customer usually buys applications software Case Study IV-5 Systems Support for a New Baxter Manufacturing Company Plant in Mexico 645 4. Mind-Set. Their mind-set has been on getting up and running and producing parts, not on any support- ing activities. We just cannot get their attention, and you can't communicate without attention! Collins, Mease, and Barkley have also begun to reconsider the task force's role in providing systems sup- port to the Mexican plant. Barkley explains their dilemma: from software vendors that work with the ASP. The ASP provides help desk support and deals with hardware prob- lems, but applications software problems are handed off to the individual software vendors. Collins had difficulty exploring the ASP option. He contacted his local IBM representative, but it took a long time to get in touch with a person who represented IBM's ASP business. It was early August before Collins could get definite information on what ASP services IBM could pro- vide to the Mexican plant. IBM would be able to serve the Mexican plant through communications facilities linking the Mexican plant to IBM's Rochester, N.Y., data center. Applications software would be obtained from a number of software vendors with whom IBM has partnership arrange- ments. Many of these vendors provide Spanish language versions of some of their software. IBM provides a Spanish language help desk that hands off applications software problems to the appropriate vendor's Spanish language help desk. The cost of IBM's ASP service would be $60,000 per year. There would, of course, be additional charges for the applications software, training, data conversion, and start-up. These costs seemed excessive in comparison to the third alternative and the ASP solution seemed overly complicated for the startup operation, so BMC abandoned consideration of the ASP option and concluded that the piecemeal solution was the only viable option for support- ing the Mexican operation at the start. However, after the Mexican plant is in operation and things have settled down, BMC intends to reconsider both the ERP and the ASP options for the entire company. We feel that we are responsible for helping them get started right, but it is clear that they would like to do it on their own. We don't want their local pride to result in them falling on their faces, but if they have the capability they definitely need to have a major role in making the decisions. But we can't tell whether they have the capability. Right now they are concentrating on getting the plant operational so that they can get parts out the door. We are ready to help, but they don't seem to have the time or the urgency. We are afraid that once they get past the hurdle of getting into production, then they are going to expect to get the systems installed and running in the next week. The broader question is: How much should we dictate to them in all areas down there? Do we want to let them reinvent the wheel because of the cultural gap between us and them? Or should we insist on providing some guidance from our functional areas (human resources, quality, materials control, produc- tion planning, etc.) to assist them with getting the basics up and going? On the other hand, do we really want to pass on any of our "bad habits to them? Nagging Difficulties Collins, Mease, and Barkley had encountered major commu- nications difficulties in dealing with the BMC people in Mexico. Salazar and Alvarez had not been active participants in the task force, and there had been little effective communi- cation with either of them. According to Collins, there were four things contributing to these communications problems: 1. Language. When we talk to each other we don't always understand the true meaning of what the other guy is saying. We nod our heads, but we may not be on the same page 2. Cultural. They give the distinct impression of want- ing to be self-sufficient, and therefore any help we give may be considered paternalistic. This may be the result of sensitivities relating to America's domi- nant position ever since the Mexican War 3. Distance. It would be different if we could drive there in a couple of hours. But it is a major disrup- tion for them to come up here or us to go down there Status on September 12, 2000 Construction of the Mexican plant is on schedule, and it will be ready to begin production no later than December 1. As of September 12, Collins and Mease felt that they had made little progress in providing systems support for the Mexican operation. They had decided to pursue a piecemeal approach, so they needed to find vendors who could provide and support the basic Spanish language soft- ware packages that would be needed to support the small start-up operation. Maria Alvarez, the human resources/financial man- ager, had experience with a small financial software pack- age from Contpaq and she would like very much to use that package at the Mexican plant. Contpaq has a Web site, but it is in Spanish, so Collins has not been able to find out much about the software from that source. Grant Thornton, BMC's U.S. consultant for establishing a Mexican opera- tion, has an office in Queretaro. This firm will be the 646 Part IV The Information Management System Mexican plant's auditor, and it recommends the Contpaq financial software, so it appears that local support for that package would be available. Unfortunately, Collins has been unable to find out if this package will run on the peer- to-peer PC network planned for the Mexican plant. Collins has contacted Grant Thornton's Mexican office, but has not been able to get this information from its people. Collins is also trying to determine if Grant Thornton can provide local support for the Mexican plant's PCs. The Mexican plant now has two customers. Collins and Mease have contacted both of them to determine what kind of interaction they will require at the start. Fortunately, neither of them is using EDI in Mexico, so they will fax shipping orders and schedules to the plant. They are both using standard labels, so it should be possible to find a sim- ple barcode package to produce the labels. They also do not have any special requirements for packing slips and bills of lading, so BMC should be able to find a simple package to produce this paperwork. If not, this paperwork could be created manually on a typewriter at the start. Collins and Mease are confident that Spanish language software to do these things is available in Mexico, and that support for it will also be available locally, Collins believes that the task force has responsibility for three things: through a dedicated connection. The third area is applications. We have the first two under control except for local support. We sent Jim Walters from my staff down there and he tested their wiring and it is fine. We also sent Paul Adams from my staff down to set up all the desktop PCs and the peer-to-peer network, and he also gave them Internet access. We still do not have the dedicated digital line, but the phone company will provide that in its own due time. The weak link right now is support down there. When things don't work on a PC or the network, it is very hardwhether it is English Spanishto solve those kinds of problems over the phone. We must have support down there for the desktop, and so far we don't have it. They also are a long way from obtaining the needed applications software. Collins assesses this problem as follows: One is to make sure that we have the infrastructure in place-plant wiring that is tested and secure, a secure computer room for a server if it is needed, desktop PCs set up and working on the LAN-and make sure that we have support for those. Next is communications Internet access and a digital line so that they can route their network into ours so that we can share files and communicate I think that we can get a simple package to produce the barcode labels for the parts, and a package to pro- duce the shipping documents. But the people down there have not been concerned with some fundamen- tal questions such as: How do you schedule produc- tion? How do you order materials? What is needed on the factory floor? How are you going to provide in- structions to the operators on how to run the parts? Ginnie and I are struggling with whether to go down there, pull some people aside, take them to a hotel for a couple of days, and try to settle some those questions. Time is growing short