Case Report Pak Electronic Limited: Converting Systems to ERP Executive Summary Pak Elektron Limited (PEL), a large manufacturer of consumer home appliances and power transformers, initiated an information system conversion to a Tier 1 enterprise resource planning (ERP) system in 2007. After the Phase I of implementation by 2011, Pak Elektron was facing a liquidity crisis that hindered implementation of further modules. Legacy systems were still being widely used, and staff had grown uncomfortable and resistant to change.
The contents of this case report include problem identification, decision criteria evaluation, alternative analysis, and recommendation. Those aforementioned sections will address Pak Elektron’s problems in their project management, their budget forecasting and planning, their financial support, and their human resources and information system implementation. Based on those problems and our analysis, four alternatives were identified, and the option of a Phased Module ERP implementation was recommended.
Pak Elektron Limited (PEL) had over a hundred different systems being used internally, mostly in-house developed stand-alone applications, with some multi-user applications interspersed. Independent operations and systems promoted the lack of integration and standardized reporting, as well as poor quality and timeliness of data. Beginning in 2007, PEL had started converting its information systems to Oracle’s EBS Tier 1 ERP system. Problem Identification Project Management: Since the resignation of Atif Ameen, PEL has lacked a project champion with extensive experience in IT operation and system implementation.
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In addition, the estimated implementation period had extended beyond the proposed 2 years, which has increased cost and economic uncertainty for the company. Budget Forecasting and Planning: PEL had poor budget forecasting and analysis, which resulted in insufficient short-term assets to support the purchasing of necessary equipment, training costs, and consultancy costs. Financial issues: PEL faced a short-term liquidity crisis, and did not have the financial means for full system implementation. To mitigate this, some bank loan repayments were restructured in 2010 to conserve cash flow in response to the liquidity crisis
Human Resources: Staff were resistant to a systems change. New skills were required, which meant that staff’s expertise with the legacy systems were inconsequential. Morale was low, which resulted in experienced staff leaving the company. Likewise, the IT department encountered a mismatch between current and needed skill set, resulting in new hires and increased project duration due to this transition. Salary discrepancies with old staff and new hires also resulted in high turnover within the IT department Information Systems Implementation: The implementation process was ineffective and inefficient.
PEL needed to spend extra resources to run parallel implementation, as numerous system functions were not supported. Evaluative/Decision Criteria: Cost: infrastructure, systems, implementation, maintenance: (40%) Cost is the most important decision criterion for PEL. Due to the numerous financial problems that the company has experienced, including a liquidity crisis, it is important that the proposed solution is cost-efficient with regards to infrastructure support, purchasing new systems, implementing systems, and supporting system maintenance.
Integration among business silos and processes: (35%) PEL has 25 branches in Pakistan, therefore, communication between the branches and with the central database is necessary. The solution needs to support or improve the integration of as to allow PEL to shorten the time required to obtain useful information for timely decision-making. In addition, the solution needs to link up all the branches with the central database in a better network structure as to reduce the internal e-mail traffic. Quality and accuracy of data: (10%)
The proposed solution needs to address PEL’s earlier problems of double-entry, frequent reconciliations, and other issues concerning the quality and accuracy of data. Ideally, the solution will either mitigate the systems that impede quality and accuracy, remove them, or improve them. Effective and timely implementation: (10%) Unexpected changes in business operations lead to disruptive structural changes during systems implementation. Such changes can add complexity and deferred the progress, which means longer the time of implementation and higher risk of failure.
The proposed system will need to be effective and timely with regards to implementation to mitigate this risk. Real-time and useful financial reporting: (5%) This criteria addresses PEL’s need for the system to create a more real-time and useful financial reporting system that is standardized across the organization in order to fulfill reporting standards, and promote greater financial decision making. Alternatives: 1. Phased Module ERP implementation PEL is being stretched thin many areas due to external factors, and their broad-based systems implementation plan, which was demonstrated in Phase I.
Within Phase I, they took a look at 18 different systems, and only managed the implementation of five. PEL needs an immediate action phase-it-in strategy as to focus all of its implementation into the financial reporting Oracle suite. The organization has 5 systems implemented; further implementation in this area will be more cost-effective and time-efficient. Furthermore, following this implementation, all legacy systems with regards to financial reporting will be removed, and the rest of the project will be re-assessed until implementation of other business suites is feasible. 2.
Recall Oracle system, and take a look at other module and ERP options General ERPs, like Oracle’s EBS system, share a similar weakness; they are made for general organizations, and therefore may not accommodate a specialized fit. PEL has other options with regards to systems implementation and selection, such as developing custom ERP software based on the current legacy system that disrupts the business model as little as possible. PEL can also purchase and implement separate, more specialized suites such as Salesforce for CRM, a cloud based accounting system for financial reporting (Wave), amongst others.
It terms of cost, this is an expensive option as customized ERP software is extremely expensive and requires development time. Purchasing individual modules for certain business functions will also be more expensive than a general system due to reduced bundle savings. A customized ERP system will help the silos reintegrate more efficiently due to more in-line processes supported within the system. Customizable modules would ideally improve efficiency of each individual silo. 3. Full rollout of ERP modules - Implementation of Phase II and III Budget is the biggest constraint in this option.
However, this will ensure full migration away from legacy systems, and will address the concern of generating standardized reports and ensuring data quality. Although data integration may be achieved, PEL should expect high resistance from staff. With full rollout, PEL has the options of: a. Hiring/developing in-house expertise to lead implementation of Phase II and III b. Re-hiring AFF Recommendation Systems conversion risks could have been mitigated had PEL properly planned the ERP migration. Project management was poor and did not assess the full needs and requirements of the company as a whole.
Alternative 1, Phased Module ERP implementation, is the best option for PEL. Once the financial systems have been properly implemented (whether in-house or through consultants), PEL can then take a regroup strategy and reassess their situation. If the long-term implementation of the finance suite is successful, then they can move forward with reduced employee resistance. If the changes in productivity are minor, PEL can choose to avoid implementing systems in other business functions, and avoid disruption the silos. The goals of integration and timeliness of data will be achieved.
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