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 The company had all the classic earmarks of an outdated data-management system, including (1) the absence of convenient Electronic Data Interchange (EDI) portals for B2B uses, (2) the inability to create advanced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 create 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 companys headquarters in Chagrin Falls, Ohio, and then later implemented companywide.

The new system is a comprehensive solution to Mar-Bals 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 inventoryeven 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 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 counts).

Requirements

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

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

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 postimplementation audits.
4. Analyze your performance numbers.
5. Set up universal processes.
6. Create a continuous learning loop.
7. Prepare for inevitable security failures.

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 stockouts.
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.