Question A1
Explain what is wrong with the two curves shown below for the forecasting results in SAP, and explain what the cause to the problem is (10 marks).
Your Answer (in 300 words or less):
Question A2
Your company uses an SAP ERP system to manage a sales order fulfilment process for a customer’s order. If your customer would like to know the status of the process, what will you do in the SAP ERP system to help her? (10 marks)
Your Answer (in 300 words or less):
Question A3
Describe how data of purchasing orders are used and managed in an SAP ERP system. (10 marks)
Your Answer (in 300 words or less):
Question A4
Consider a manufacturer, named Company ABC. To produce finished products, Company ABC needs to purchase raw materials from suppliers. The company is going to adopt an ERP system to enhance its production, purchasing and sales processes. Explain how an ERP system can support the coordination of the production process and the purchasing process in Company ABC. (15 marks)
Your Answer (in 300 words or less):
Question A5
It is said that companies shall always adopt the phase strategy to implement ERP systems, because it is less risky than the big-bang strategy. Do you agree with this statement? Explain your reasoning. (15 marks)
Your Answer (in 300 words or less):
Section B: Answer both TWO questions, including B1 and B2, at the end of the following case.
ERP for TAE
Managing in a Global Economy: SeverStal
Unlike some traditional U.S. firms that have fled the capital-intensive steel production market, Russia’s SeverStal is an emerging giant that’s out to redefine global steelmaking. And it’s doing it in the heartland of American manufacturing. Over the next three years, SeverStal North America (SNA) expects to invest US$1 billion in modernizing its steel facilities in Dearborn, Michigan, which were originally part of Henry Ford’s massive River Rouge manufacturing complex. It’s an integral part of an investment and globalization strategy that is catapulting SeverStal, with more than 100,000 employees worldwide and more than US$12 billion in revenues in 2006, to the forefront of best-in-class steel producers.
“Our strategy is to create a global production platform that can supply high-quality steel to customers, wherever they are located,” says Sergei Kuznetsov, CFO of SNA. “Most of our customers have operations in various parts of the world,” he adds. “They want us to supply them with the same quality steel in Europe, North America, and Russia.”
Steel production is a capital-intensive business, and SNA takes a strategic approach to managing its global assets, balancing long-term investment opportunities over a 10-year window while constantly updating its plans and assets to respond to changing market needs.
“As the world becomes more global and dynamic, our investments in production assets in the U.S. and other developed markets will eventually pay off, especially after we see the full impact of our investments in plant modernization,” says Kuznetsov.
A key focus for SNA is to leverage best practices and technologies across its global operations and improve efficiencies by locating mills closer to key automotive customers.
“Our acquisition of Rouge Steel Company marked the global positioning of SNA as an automotive supplier and put us right in the center of the automotive industry in Detroit, where we can get access to the latest industry products and technologies,” says Kuznetsov. “Once these customers come to Russia with steel stamping facilities, we can supply them with the same high-quality steel they use in the U.S.”
Setting a Goal of Integration
Meeting the needs of key automotive customers requires a top-flight IT infrastructure that’s agile enough to address changing global business requirements and flexible enough to enable efficient growth. Like that of many companies, SNA’s existing IT infrastructure is a conglomeration of different systems: Oracle’s PeopleSoft Enterprise, for financials; Indus Enterprise MPAC, for purchasing and maintenance; and a variety of custom systems.
“Our existing systems are all silos and are typically focused on individual functional areas,” says Kevin Myers, CIO of SNA. “There’s no integration, and it creates a real challenge in getting the appropriate information to the business so it can make the right decisions.”
After SNA considered the option of upgrading its existing applications, many of which were several releases behind current versions, it quickly became apparent that it would be faster, cheaper, and more effective for the company to select an integrated suite of applications. As a result, in 2007, the company standardized on a new ERP system, Oracle E-Business Suite 12. Working with BearingPoint and Perot Systems, SNA expects to have several Oracle E-Business Suite applications—Oracle Financials, Oracle Purchasing, Oracle Enterprise Asset Management, and Oracle Manufacturing—deployed by July 2008, followed by Oracle Order Management.
“The biggest benefit of moving to Oracle E-Business Suite is that it’s an integrated suite—we’ll be able to have better access to data, more-efficient workflows, and greater productivity,” says Myers. “Instead of optimizing individual processes in functional areas, we’re now able to look at optimizing whole, end-to-end processes. For example, in our procure-to-pay processes today, there’s very little or no integration with our purchasing system. But with the integrated application suite, the workflows will greatly streamline our operations.”
Another key benefit for SNA will be in the significant reduction in the time it takes the company to close its books. Whereas it currently takes 8 to 10 days to close the books, SNA will be able to close them in 5 days or less when Oracle E-Business Suite is deployed. Those types of results will only help fuel SNA’s future growth, especially when the company is constantly making decisions about strategic direction.
“Technology plays a key role in our expansion strategy. We’re always looking for opportunities, and we need to have the right tools and technologies in place to run various investment scenarios,” says Kuznetsov. “Speed in reporting is also critical. The faster we can consolidate and report financial information, the better equipped we are to update our business plans and determine where to invest our money.”
In addition, the new system will support much better communication and collaboration with SNA’s partners and suppliers. “To gain better control over the supply base, we’re implementing Oracle iSupplier Portal, Oracle iProcurement, and Oracle Sourcing,” says Myers. “It will enable us to collaborate more effectively and provide capabilities such as electronic quoting and self-service applications. We see these systems as enabling us to set new standards in the steel industry. In the future, we want our competitors to be benchmarking their systems against ours.”
Simplify, Standardize, and Globalize
Future growth is especially important to SNA and its parent company. “It’s important for us to be able to grow effectively—the better we can manage our data here, the better reporting we can provide to our parent company in Russia and the better decisions it can make on a global scale,” says Myers. “We see a lot of benefits of moving to Oracle E-Business Suite. It’s a platform we can expand and grow with, because of its scalability and flexibility.”
Being part of a global giant requires good coordination between corporate goals and individual business unit needs. For SNA the solution to that coordination problem is part of its guiding philosophy, succinctly summed up by the phrase “think globally, act locally.”
“With our deployment of Oracle E-Business Suite, we’re doing our part to meet that objective,” says Myers. “Oracle will help us grow organically or through acquisition. We can roll out new units on the same platform, centralize operations, and leverage the capabilities we already have. As we grow, our goal is to simplify, standardize, and globalize.”
Question B1
Why did SNA adopt a new ERP system in 2007? Explain you reasoning. (20 marks)
Your Answer (in 300 words or less):
Question B2
If you were in charge of the evaluation of ERP systems for SNA, what are the top three criteria would you adopt for the evaluation? Explain your reasoning. (20 marks)
Your Answer (in 300 words or less):
