WIM’s transition to ERP
Welding Industries Malaysia (WIM) is the only local Malaysian company that manufactures welding machines for commercial use. WIM’s remarkable success story, which includes surviving the 1997/8 financial crisis and the rise of competition from China, is attributable to the very effective enterprise resource planning (ERP) system it has adopted. In the past, WIM was using a materials resource planning (MRP) system, but this system, while a large advance over paper-based management techniques, nevertheless created many problems as the company’s operations expanded. MRP systems do not integrated information from various divisions within a company, but instead automate processes and information within departments. For WIM this meant there was no platform with which to integrate data from different departments, there was a prevalence of data duplication and redundancy, and inconsistent data were supplied to managers. In addition to this, the departments within the company were acting as separate entities and information was not being shared. The growing size of the firm and the corresponding increase in the sizes of departments also bogged down the flow of information. There were no predefined standards for data communications and information was often lost. In the absence of an enterprise-wide approach to information, WIM had a difficult time meeting production schedules. The lack of communication of vital information resulted in a loss of crucial resources; that is, people, material, and machinery. Senior management could not obtain a complete view of the company as a whole, but instead had to rely on piecemeal reports from each division. As Keng Foon Leong, General Manager, WIM, explained, “The local MRP system had the manufacturing modules, but it couldn’t manage huge data. We could not see our material movement on our previous system”. Overall productivity of the manufacturing process was falling, employees were disengaged and customers did not return. This set alarm bells ringing.
Based on the problems in their existing system, the management at WIM developed a set of objectives to guide the development of a new system. The objectives included an increase in the visibility and sharing of all reports on manufacturing; improved coordination across functional departments to increase efficiency; better management of procurement and inventory processes; the facilitation of day-to-day management; and the 24×7 availability of financial information of the entire firm. Management also demanded standardization of data formats across the company, and greater accuracy, along with remote access and improved security. They also decided that the inclusion of best practices and other vital information could lead to an increase in productivity and greater ownership.
After careful assessment, WIM decided to hire the services of Epicor Software Corporation for their ERP needs. Epicor is a software solutions provider to various enterprises in the manufacturing, distribution, retail, and service industries. Epicor has over 40 years of experience and has more than 20,000 customers in over 150 countries. “We reviewed a number of ERP vendors. We looked at each system and its functionality. Epicor stood out with its ability to link to our operations and provide the data we needed” said Leong. The first step was to put together a functional team comprising project management, IT systems managers, and executive management. The project management team defined the scope of the ERP system, assessed available resources at WIM, and budgeted the cost of implementation. The executive team ensured that the resulting system achieved business objectives and strategies, while technical expertise and support was provided by the IT team. A communication plan was designed to keep each individual member informed about current progress and the next steps in the plan. This was an essential part of change management at WIM. The system was implemented using a phased approach, since Epicor believes that key functionalities of the system need to be implemented in the first phase, followed by less major processes in the second phase, and so on.
ERP at WIM has changed the way the firm functions. The role of ERP in managing manufacturing processes now extends from procurement all the way to consumption. Holistic information on material, machinery, and labor, such as the cost structure of all raw materials, can now be accurately assessed. WIM is now able to utilize its resources to reap maximum profits. ERP has also integrated different departments at WIM, resulting in increased efficiency in operations at the firm. The manufacturing process can now be effectively and minutely planned using ERP, through the identification of the tasks and activities underlying each process, and the time required to complete them. The start and end times of sequences are estimated, and this enables the manufacturing process to be carried out smoothly, with any delays being immediately flagged up for further action, thus minimizing downtime. Better planning also facilitates effective monitoring of the process. In addition to these positive outcomes, the complexity of risk management and issue management is reduced thanks to the increased visibility of process information.
The implementation of Epicor’s ERP software has helped WIM to scale up its operations. As Leong explains, “Epicor provides us with greater visibility over our material movement and having an advanced MRP system within a comprehensive solution like Epicor is very important to the business.” The success of any manufacturing company also lies in how inventory is utilized. The software tracks and controls all procurement activities, schedules production processes, manages costs, and generates information that helps WIM to manage its inventory. It accurately forecasts the demand for materials and provides clear visibility into the lead time of ordered material. WIM purchases materials near the time of consumption, which leads to a reduction in maintenance of inventory levels in the organization. For instance, when quantities of a particular raw material exceed the minimum level or the maximum level respectively, an email alert is generated by the system to notify users, who can then decide whether to procure further quantities.
Furthermore, accurate information from all departments is recorded on the system, and this allows WIM to measure performance against key indicators in order to improve the quality of its business. As Leong notes, “Epicor has helped us to save money because we can make business decisions more clearly. We know that the data is accurate and the reports are correct. We can call on the Epicor system to support our decision-making process and let us make decisions faster and justify our spending.
Instructions: Read the above case and answer all following questions. Your answers must be clear, well-organized, and more importantly display in-depth analysis of the case.
1. What problems led WIM to implement an ERP system?
2. What strategic business objectives (refer to chapter 1) WIM was trying to achieve through the implementation of the ERP system? Thoroughly analyze these strategic objectives by providing details.