AIS AT WORK An ERP Success Story at Mar-Bal

Mar-Bal is a private company that makes composite plastic products and employs 350 people in four locations in North America. The company had all the classic earmarks of an outdated data-management system, including (1) the absence of convenient Electronic data Interchange (EDI) portals for B2B uses, (2) the Inability to create advanced shipping notices for customers, (3) the inability to scan parts production from its shop floors, (4) poor inventory control over vendor-sourced products, (5) manual data entry of inventory data which introduced data-transcription errors into the system, (6) the inability to meet growing data processing volumes, and (7) limited forecasting and reporting capabilities. In addition, the company took manual counts of its inventory every month. Partially as a result, it took nearly 2 weeks to complete month-end reports, delaying vital information to managers and sometimes responses to customer inquiries.

To address these problems, Mar-Bal managers performed a systems analysis of its processes in order to better understand its system problems and to draft a list of requirements for a new system. Given that the company was not in the software business and did not want to develop a customized system, its managers concluded that acquiring a new ERP system was its best course of action. After generating, and then narrowing, an extensive list of software vendors, the company eventually chose EnterpriseIQ from IQMS, which it first installed at the company's headquarters in Chagrin Falls, Ohio, and then later implemented companywide.

The new system is a comprehensive solution to Mar-Bal's many problems. For example, the system now provides full EDI capabilities for both customers and suppliers and allows employees to process hundreds of electronic invoices per hour if necessary. Because the production facilities now use a compatible bar-coding system, managers can scan and track every single box or part in its four inventory locations, whether from manufacturing or from external vendorsan improvement that has eliminated its earlier, error-prone data entry system as well as the need to take manual monthly inventories. Internal communication among employees has also improved with real-time monitoring of inventory even from remote locations. Floor-level employees now use computer tablets to enter manufacturing data immediately into the system as they complete jobs. Similarly, sales representatives can view available inventory on an up-to-the-minute basis.

In addition to these benefits, the company saves time and money. In total, the company estimates that it saves $270,000 per year across its four plants. This includes $62,000 annually with its real-time production monitoring system, $30,000 in improved inventory control, and $23,000 in a month-end reporting costs. The company also estimates that it saves $53,000 each year by eliminating the 2,750 hours of labor it once needed to take monthly physical inventory counts (which it now only performs once a year) and 5,000 hours of machine time (which it lost when making those count s).

When Is a New AIS need some small businesses still keep their accounting records in a shoebox, filing cabinet, or similar manual storage, and their "accounting system" is really their tax preparer. But manual accounting systems do not allow business owners to analyze their data very much, guard against input or clerical errors, automatically generate financial statements or operating reports, or identify trends or opportunities to reduce costs or increase sales. For many businesses, a computerized system has much promise. For those already using computerized AISs, there are many signals that a new accounting software package, or an upgrade in software, might be a good idea. One example might be new regulations or legislation that requires new reporting documents. Another reason might be the need to comply with new rules or laws. A third reason might be pressures from competitors. Figure 5-10 lists several such signals.

FIGURE 5-10 Indicators that a company might need a new (or upgraded) AIS.

1. Late payment of vendor invoices, which means late fees and lost cash discounts.

2. Late deliveries to customers.

3. Growth in inventories, accompanied by an increase in stock outs.

4.Slowdown in inventory turnover.

5.Increased time in collecting receivables.

6.Late periodic reports.

7.Increasing length of time to close out books at the end of a period.

8.Managers concerned about cash flows and financial picture of organization.

9.Manager complaints about lack of information needed for decision-making.

10.Owner worries about cash flows, taxes, and profitability.

11.Preparing reports requires too many time-consuming manual tasks.

12.Current system cannot keep up with data-processing volumes.

13.Data is not secure or is otherwise at risk.

14.Remote access to accounting data is not currently available.

The past decade will be remembered for large investments in IT and ERP systems. However, many IT departments have been unable to justify the business value of these huge expenditures, and managers often disagree on how the value of technology is best measured. Trish Saunders, a contributing author to Customer Insights (a Microsoft newsletter for mid-size businesses in the United States), claims that whatever methodology a company uses to measure, the value of an ERP should be applied consistently across the organization at specific times after its implementation. Figure 5-9 includes the steps she recommends and suggests that a company that does not establish specific performance metrics will have difficulty gauging how well the ERP meets organizational objectives or how to correct any performance gaps.

FIGURE 5-9 Methodology for measuring the value of an ERP.

1. Determine how you will measure success.

2. Set up specific metrics based on your industry.

3. Perform regular post implementation audits.

4. Analyze your performance numbers.

5. Set up universal processes.

6. Draft a continuous learning loop.

7. Prepare for inevitable security failures.

Questions

1. Review the items in Figure 5-10, which lists indicators that a company may need a new or upgraded processing system. For each item, provide a specific example from the case description. If the case does not address a particular item or it does not seem to apply, simply state "NA."

2. Review the items listed in Figure, which lists possible measures of the value of an ERP. For each item, provide a specific example from the case description. If the case does not address a particular item or it does not seem to apply, simply state "NA."

3. What are some of the intangible benefits Mar-Bal appears to enjoy from its new ERP system? draft a list with beef explanations.

4. Mal-Bar's case does not explicitly address the issue of BPR that often happens when organizations install new ERP systems. Would you guess that none Wok place, or would you argue the opposite? Defend your answer.