international divider walls

8/18/2019 International Divider Walls

1/20

EPPA4716 INTEGRATED CASE STUDY

SEMESTER 2 SESSION 2015/2016

SET 1

PROPOSAL OF CASE STUDY 5:

A PROPOSAL FOR INTERNATIONAL DIVIDER WALLS TO DECIDE

THE IMPLEMENTATION OF ERP SYSTEM

PREPARED FOR:

DR. KHAIRUL AZMAN BIN AZIZ

GROUP MEMBERS:

WAH JUN YEW A142341

LAU KAR LING A139789

KOO YUH JYE A139477

TAN BEE KUN A140209

NUR HALIZA AMIRAH BINTI HALEMI A140099

NUR SHABIRAH BINTI SALIMAN A136723


2/20

1

TABLE OF CONTENT

Content Page

1.0

Introduction 2

2.0

Description Of Company’s Strategy, Organisational StructureAnd Culture

3-5

3.0 Current Financial Situation Of The Company3.0.1 Liquidity Ratio3.0.2 Asset Management Ratio3.0.3 Debt Management Ratio3.0.4 Profitability Ratio

3.1 The Implications For The ERP Implementation

6-9

10-12

4.0

Analysis Of The Need For And Use Of IT By Each Division

4.1

Efficiency On Usage Of IT By Each Division

13-14

15-16

5.0 Suggestion 17-19


3/20

2

1.0 INTRODUCTION

International Divider Walls is the world market leader in design, production, and sales

of divider walls.ID Walls was founded in 1968 in Atlanta, GA (USA) as a manufacturer of

room dividers. In 1993, the owners decided to raise additional capital for a worldwide

expansion. Ever since, the company has been listed on the NASDAQ. Many room divider

manufacturers were acquired in the 1990s, and the company diversified in related businesses

like indoor and outdoor sun screens and installation services. On December 31, 2003, ID Walls

employed approximately 5000 employees worldwide. The company marketed products in over

100 countries. Its principal geographic markets were the Americas, Europe, and Asia Pacific

with sales of respectively 71%, 24%, and 5% of total net sales for fiscal year 2003.

This proposal is about Enterprise Resource Planning (ERP) system implementation at

International Divider Walls. The implementation in one of the divisions of this multinational

company had been successful, and we were asked to advise the board of directors on the next

step in the worldwide roll out of the ERP system.

A choice had to be made between centralized or decentralized ERP implementation

that will benefit for operational of company. We are combine our theoretical knowledge of the

fields of strategic managements, management accounting and control, and IT alignment. We

are also carry out a qualitative and quantitative analysis of public and internal financial and

non-financial data to critically evaluate how these data affect the ERP implementation.

This proposal will show an analysis of whether decentralized ERP system or

centralized ERP system suitable for the ID Wall to implement it. The analysis will be done

from the aspect of organization strategy, structure and culture, aspect of financial and aspect

of IT.


4/20

3

2.0 DESCRIPTION OF COMPANY’S STRATEGY, ORGANISATIONAL

STRUCTURE AND CULTURE

This is the analysis of the company’s strategy, organisational structure and culture to have

better understanding in order to give a suitable suggestion on the implementation of ERP

system.

Company’s Strategy

During the many years of operation, ID Walls has used different strategies in order to make

profit and to save its business where it started to make substantial net losses. The strategies

that are used by ID Walls are as the following:

i. Merger and Acquisition

In the 1990s, many room divider manufacturers were acquired and the company

diversified in related business like indoor and outdoor sun screens and installation

services. However, due to the many mergers and acquisitions, ID Walls had a

fragmented IT infrastructure and application landscape. Besides, these acquisitions had

left the company with a large debt as well where ID Walls’ substantial indebtedness

could have important negative consequences which restricted additional financing.

ii.

Global Business Strategy

ID Walls was the worldwide leader in design, production and sales of divider walls. ID

Walls marketed its products in over 100 countries. Its principal geographic markets

were the Americas, Europe and Asia Pacific with sales of respectively 71%, 24% and

5%. ID Walls manufactured wall dividers at two locations in the US and at facilities in

Germany, the UK, Canada, Australia, and Thailand. However, the international

operations were subjects to various political and economic uncertainties including risks

of changing political conditions, governmental regulations or taxation policies. In

addition, the company received a substantial portion of its revenues in currencies other

than US dollars where this created risks inherent in foreign currency transactions.

iii. Consolidation


5/20

4

ID Walls had implemented the strategic of consolidation of manufacturing facilities it

the Indoor Sun Screens and Divider Walls Europe divisions. This is because this

strategy can help the company to improve its cash position.

iv. Retrenchment

On 31 December 2003, ID Walls employed approximately 5000 employees worldwide.

In order to improve its cash position, ID Walls had implemented several strategic

restructuring initiatives in the years 2001 to 2003. One of it was the reduction in force

of over 750 employees in the corporate research and development operation, and back-

office operations.

v.

Divestiture

Divestiture of non-core activities such as the service division and the exterior sun

screen business was also one of the several strategic restructuring initiatives

implemented by ID Walls.

vi. Restructuring and the way ahead

ID Walls sought to increase revenues and profitability and free cash flow by

capitalizing on its competitive strengths for example product design and global make-

to-order capabilities as well as the expansion of the international business worldwide.

On the other hand, the company was increasing its presence in other business-to-

business and institutional segments such as government, hospitality, and education. It

had also begun to develop its business in the huge customer market segment. Besides,

ID Walls also improved the capital structure by extending the maturity of substantially

all of its debt and establishing a new asset-based revolving credit facility with less

restrictive terms than the previous one. Advised by CFO Larissa Jones, the company

had sold, rationalized and divested many of the acquisitions of the 1990s over the past

3 years. Moreover, Larissa had renegotiated credit agreements with the company’s

banks in order to keep the interest expenses within acceptable ranges. Consequently,

the restructuring initiatives enhanced the company’s ability to generate free cash flow.

Capital expenditures were low maintenance and the strategic investments for global

manufacturing capabilities and make-to-order techniques had been made. As a result,

in 2004 the company had the capacity to increase production levels and handle

significantly higher demand for its products.


6/20

5

Due to there are few issues occurred during the implementation of the strategies, Chad had

developed a strategic IT plan for ID Walls in which he proposed to select and implement a

global Enterprise Resource Planning (ERP) system. In addition, Larissa believed that better IT

support from an integrated ERP system was indispensable for improving the financial control

and for the preparation of higher-quality consolidated financial statements. With an ERP

system, data in ID Walls would be integrated, meaning that they had to be entered once and

could then be used and shared throughout the company.

Organisational Structure

Josh Steward fostered the entrepreneurial spirit in the company and stimulated the international

expansion. He designed the organisation in such way that it reflected the autonomy of the

various divisions and the divisions could operate freely in their respective businesses as long

as they achieved the agreed upon profit and loss objectives. He divided the division into three

division which are divider walls Americas, divider walls Europe and Asia Pacific, and indoor

sun screens. Each of this division will have President, SVP Finance, IT Director, SVP

Marketing & Product Development, SVP Sales and SVP Manufacturing. Each of them will

report to president and then president will report to CEO whereas the IT Director for each

division will report to CIO, Chad Wolford.

Culture

The culture of the ID Walls us directly influenced by its organization strategy and structure.

The more the power distribute from higher management level to lower management level, the

higher the flexibilities of the organization. Josh Steward fostered the entrepreneurial spirit in

the company and stimulated the international expansion. He designed the organisation in such

way that it reflected the autonomy of the various divisions and the divisions could operate

freely in their respective businesses as long as they achieved the agreed upon profit and loss

objectives. This shows that the culture of the ID Walls is more flexible working style with a

fixed target goal set. The culture for the three main division will be different due to the

different strategies implemented. For example, Americas Division the employee is with high

redundancy of changing where they still using manual spreadsheet for management

customers’ order rather than the Advanced Planning Module even ERP system have been

implemented for two years in the division and causing the capacity planning issue.


7/20

6

Quick Ratio = Current Assets - Inventories

Current Liabilities

3.0 CURRENT FINANCIAL SITUATION OF THE COMPANY

The analysis of the financial position of the company to have a clear view the current financial

position of the company and have an estimation of the effect of ERP system to the company.

3.0.1 Liquidity Ratios

Liquidity ratios analyse the ability of a company to pay off both its current liabilities as they

become due as well as their long-term liabilities as they become current.

i. Current Ratio

The current ratio helps investors and creditors understand the liquidity of a company

and how easily that company will be able to pay off its current liabilities. A higher

current ratio is always more favourable than a lower current ratio because it shows the

company can more easily make current debt payments.

Current Ratio = Current Asset

Current Liability

Current ratio for ID Walls in year 2002 and 2003 are 2.17 and 1.88 times respectively.

It shows that there was a declination around 0.29 times within these 2 years.

Inefficiency will be arisen where all the current liabilities would be less covered by

the current assets in year 2003. However, they had current ratio more than 1 times, it

means the company can more easily make current debt payments.

ii. Quick Ratio

The quick ratio measures the liquidity of a company by showing its ability to pay off

its current liabilities with current assets. Higher quick ratios are more favourable for

companies because it shows there are more quick assets than current liabilities.

Year 2003 2002

Current Ratio = 337,409179,029

= 1.88 times

= 344,718158,777

= 2.17 times


8/20

7

Inventory Turnover Ratio = Net Sales

Inventor

Year 2003 2002

Quick Ratio = 337,409 – 135,252179,029

= 1.13 times

= 344,718 – 126,577158,777

= 1.37 times

Quick ratio of ID Walls in year 2002 and 2003 are 1.37 and 1.13 times respectively. It

shows that quick ratio had decrease around 0.24 times from year 2002 to 2003.

Therefore, it is hard for ID Walls in paying their current liabilities by using their

current assets without including their inventory (capital assets) in short period of time.

3.0.2 Asset Management Ratio

Asset Management Ratios attempt to measure the firm's success in managing its assets to

generate sales. These ratios are also known as Activity or Turnover Ratios.

i. Inventory Turnover Ratio

Inventory turnover is a measure of how efficiently a company can control its

merchandise, so it is important to have a high turn. This shows the company does not

overspend by buying too much inventory and wastes resources by storing non-saleable

inventory.

Year 2003 2002

Inventory TurnoverRatio

= 868,098135,252

= 6.41 times

= 868,639126,577

= 6.86 times

The company’s inventory turnover ratio in year 2002 as compare to 2003 which is

dropped from 6.86 to 6.41 times. Even though the ratio was decreased 0.45 times, the

company still have high turnover rate. High inventory turnover rate means ID Walls

did not store their inventory for long period of times but ID Walls had often buy new

inventory to gain high profit for their company.

ii.

Total Assets Turnover Ratio


9/20

8

Total Assets Turnover Ratio = Net Sales

Total Assets

Debt Ratio = Total Debt

Total Assets

Total asset turnover is a financial efficiency ratio that measures the ability of a company

to use its total assets to generate sales. Management uses the total asset turnover to

judge how efficiently the company is using its assets to generate income.

Year 2003 2002

Total Asset TurnoverRatio

= 868,098840,618

= 1.03 times

= 868,639811,699

= 1.07 times

The total asset turnover ratio is 1.07 times and 1.03 times in year 2002 and 2003 respectively.

It shows that there was 0.04 times declination in this ratio. Although this ratio decline, ID

Walls still can use their total assets to generate their income for the company.

3.0.3 Debt Management Ratios

Debt Ratio

The ratio measures the financial leverage of a company. Companies with higher level of

liabilities compared with assets are considered highly leverage and riskier for lenders.

Based on the calculation, it shows that the debt ratio was slightly increase 2% where it increased

from 73% to 75% in year 2002 to 2003. It shows that debtors have poor capability in paying

the debts and high risk will be faced by the company.

3.0.4 Profi tabil ity Ratio

Profitability ratios is a measure of profitability, which is a way to measure a company’s

performance. These ratios basically show how well companies can achieve profits from theiroperations. Profitability ratios can be used to judge whether companies are making enough

Year 2003 2002

Debt Ratio (%) = 631,758840,618

= 0.75 @ 75%

= 596,366811,699

= 0.73 @ 73%


10/20

9

Profit Margin Ratio = Net Income

Net Sales

Return On Total Assets Ratio = Net Income

Total Assets

operational profit from their assets. In this sense, profitability ratios relate to efficiency ratios

because they show how well companies are using their assets to generate profits.

i. Profit Margin Ratio

The profit margin ratio directly measures what percentage of sales is made up of net

income. In other words, it measures how much profits are produced at a certain level of

sales. This ratio also indirectly measures how well a company manages its expenses

relative to its net sales. That is why companies strive to achieve higher ratios.

Year 2003 2002

Profit Margin Ratio(%)

= -31,262868,098

= -0.036 @ -3.6%

= -82,404868,639

= -0.095 @ -9.5%

Based on the calculation above, profit margin ratio had negative percentage which are

-9.5% and -3.6% in 2002 and 2003 respectively due to their major expenses in

restructuring charges and in selling, general and administrative expenses. It reflected

that the slightly declination in net sales cannot covered back the net income as the

expenses of company too high.

ii. Return On Total Assets (Roa)

The return on assets ratio measures how effectively a company can earn a return on its

investment in assets. In other words, ROA shows how efficiently a company can

convert the money used to purchase assets into net income or profits

Year 2003 2002

Return On TotalAssets Ratio (%)

= -31,262840,618

= -0.037 @ -3.7%

= -82,404811,699

= -0.102 @ -1。0.2%

The ROA of ID Walls in year 2003 and 2002 declined from -10.2% to -3.7% due to

increasing in both total asset and net income. This shows that ID Walls managements


11/20

10

Return On Common Equity Ratio = Net Income

Common Equity

are not well manage their asset properly such as cash, inventories, prepaid expenses

and deferred income taxes even though the receivable is increasing by year. The

higher the ROA ratios, the greater the total asset to generate income of company.

iii. Return Of Common Equity (Roe)

Return on equity measures how efficiently a firm can use the money from shareholders

to generate profits and grow the company. Unlike other return on investment ratios,

ROE is a profitability ratio from the investor's point of view. Investors want to see a

high return on equity ratio because this indicates that the company is using its investors'

funds effectively. Higher ratios are almost always better than lower ratios.

Year 2003 2002

Return On CommonEquity Ratio (%)

= -31,262205,609

= -0.152 @-15.21%

= -82,404210,721

= -0.391 @ -39.11%

In the year 2002, the ROE is -39.11% and the ratio dropped to -15.21% in year 2003.

This ratio indicates that ID Walls did not use the investors funds effectively due to

decreasing in total equity which affected by retained earnings and foreign currency

adjustment.

3.1 THE IMPLICATIONS FOR THE ERP IMPLEMENTATION

ERP Implementation in Americas

Management & Financial Impact

The efficiency of the division will be improve. The IT workforce used and IT cost have been

reduced from 2001 to 2002. The IT workforce reduced from 72 person to 61 person while IT

cost was reduced about 0.2 million. The ERP is reducing the management costs such as direct

cost, service cost, employees’ salaries and general and administrative cost (G&A).


12/20

11

Customer Order Management

The ERP system with the advanced planning module will solve the capacity planning issue of

the division. Issue of cancelled order due to late or no delivery will be resolve. The c ustomers’

order will be well planned and managed which will contribute to the cost saving where division

do not need to outsource the orders and the sales are expected to be increase.

ERP Implementation in Europe and Asia Pacif ic

Management and IT application Issue

After the implementation of ERP system, the division can improve management of the financialdepartment especially in the management of exchange rate, complex tax and import duty rules

of the emerging markets. The financial and tax risk that been exposed can be manage and

reduced through the application of the ERP system. The demand will be increase and utilize

the factory capacity. Besides, the three old IT application landscape with be replace by ERP

system which will integrate all management functions to be more efficiency.

Financial Impact

The management cost, development, HR and production cost of division are increased in year

2003 even the sales of the division is decrease. The IT cost and back-office management will

be expected to be decrease after the implementation of ERP system.

ERP Implementation i n I ndoor Sun Screen

Warehouse Management

The warehouse management application of all 20 branches can be integrated. The management

of inventory will be more efficiency compare before implementation of ERP. The value of the

inventory can be identify by the division for further decision to be make.

Financial Impact

The cost like salary, benefits, hardware, communication, software, external service providers

are increase in year 2003. The ERP system will be increased the efficiency of whole division


13/20

12

where IT workforce and back-office staff can be further reduce. The cost like salary, benefits,

hardware, communication, software, external service providers will be decrease.

ERP Implementation I n whole Company

Fragmented IT infrastructure and application landscape

IT application of the company can be improve after the implementation of ERP system.

Advanced planning and scheduling and finance from the many international tax and other rules

and regulation in ERP system will be benefit for the operation of company.

Management Issue

The management efficiency of the company toward all the divisions will be improved. The

company can manage all divisions through the integrated ERP system. All the operation

process of the divisions can be observe and control through the ERP system and increase the

efficiency of the company.

Financial Issue

Finance function in ERP can improve financial management especially the management of

debt and interest payment. Global management cost will be reducing due to the improvement

of efficiency of every divisions. For one-instance option, company will need 2 years to be

completely implemented and 4 more years to breakeven the cost being invested on ERP system.

It means that there will be cost saving in company management especially for the global IT

cost. In short, the management issue, financial issue, sales decreased and IT application of the

company can be resolve and improve after the efficiency of all division being improved.


14/20

13

4.0 ANALYSIS OF THE NEED FOR AND USE OF IT BY EACH DIVISION

This is the analysis about current IT application and the effectiveness in the whole company

by divisions and identify the needs of IT of each division.

Americas

Americas Division need the IT to resolve their current capacity planning in order can fulfill the

market demands. Although ERP have been implemented in Americas Division in year 2001,

but the complicated planning of order was still done manually in spreadsheet. In year 2004, the

Division expected that there will have an increase in demand of high-priced, made-to-order

divider walls which are complex manufacture in. However, the factories had experienced

difficulties in planning the large number of small orders. To resolve this issue, the factories

have outsourced some of the work and causing the cost been increased. Therefore, the Division

need the IT to improve their current capacity planning by making use of the advance planning

module of ERP system. By making use of this advance planning module, they can improve

real-time operation, optimization of production planning and adjustable planning horizons.The

advance planning module is simple and convenient tools for interactive planning. It will

automate the relevant subsequent steps like materials resource planning and generating order

proposals. There will be an information platform which will consist of all data of orders,

material, inventory and so on. Overdue work steps, missed deadlines and production time will

also be prepare and displays. In short, the capacity planning can be improve.

Europe and Asia Pacifi c

The production capacity of Europe and Asia Pacific Division have been underutilized. The

Division aim to increase the market demand through the emerging market, like India, Eastern

Europe, and China. The Division is strong in production of standardized divider walls.

However, expanding to emerging market will let the Division exposes to the risk of currency

exchange rate, complex tax and the import duty. The Division know that the financial

department are playing important role especially in financial and tax risk management. The

Division currently have the main IT application which are goods flow application, outdated

financial application and a warehouse management application. The three application is lack

of integration which is vital for Division management. Therefore, the Division need an

integrated ERP system which will improve the efficiency of whole Division especially in

financial management and stock management. The ERP system offer advanced and dynamic


15/20

14

financial management functionality which can improve the Division management. Information

about inventory, compliance, capital and so on can be access easily. Normally, ERP system

will be in multi-language and multi-currency platforms which will facilitate timely

management of exchange rate exposure and help to reduce the impact of currency fluctuation.

I ndoor Sun Screens

Indoor sun screens Division is consist of 20 branches in worldwide. The purpose of grouping

the all branched in one Division is to bring back the business to net profitability. The Division

will be either be milk or sell. The president of the Division is intended to sell the Division as

part or as whole. However, it is vital for him to identify the value of the Division before selling

it. The large portion of book value of the Division was in stocks of raw materials and finished

goods that might be obsolete. The 20 branches have their own warehouse management

application before being consolidated. The records of the warehouse management application

might be unreliable. The president is not able to identify the value of the stock due to the

different warehouse management application are used. Therefore, the Division need the

implementation of ERP system that can help in improving warehouse management of the 20

branches. ERP system have a fully integrated digital platform which will provide a view of

inventory for all 20 branches andeasy for inventory tacking. The quantity and the quality of the

stock of the Division can be easily to identify and manage. The ERP system that been

implemented in Americas Division will be more prefer due to the Division currently has little

room for investment.


16/20

15

4.1 EFFICIENCY ON USAGE OF IT BY EACH DIVISION

i. IT Cost Over Total Revenue

The industry benchmark for total IT cost over total revenue is 2.5%. This benchmark

will be used as a measurement for the effectiveness of all the divisions. Based on our

calculation, the total IT cost over total revenue of Americas division, Europe & Asia

Pacific division and Indoor Sun Screen in year 2002 are 2.77%, 1.97% and 2.5%

respectively. This means that Europe & Asia Pacific division is effective in using the

IT where the benchmark is lower than the industry benchmark. Indoor Sun Screen

division has the same benchmark as industry benchmark which is 2.5% while Americas

Division is less effective where the benchmark is 2.77% higher than 2.5%. Based on

this benchmark, Europe & Asia Pacific is the most effectively in using IT application

as compared to Americas which is the least effectively.

ii. IT User Among Employees

The higher the number of IT user in a division, the more effectively of the IT application

being used. We are comparing the number of the IT user to the number of total

employees in a division as a benchmark to measure the effectiveness of IT application

being used in the division. Based on the information given and our calculation, the

percentage of IT user over total employees are 38.97% for Americas division, 76.11%

for Europe & Asia Pacific division and 32.13% for Indoor Sun Screen division. This

means that Europe & Asia Pacific division is the most effectively in using the IT

application among the three division while Indoor Sun Screen is the least effectively.


17/20

16

iii. Revenue Over IT Workforce

Total IT Workforce of each division is calculated by the sum of centralized and

decentralized IT workforce used by each division. Due to the different scale of revenueof each division, total revenue is taken as a measure in this calculation to be able to give

a better indication of efficiency of IT workforce. For Americas, the revenue over IT

workforce is $6,593,197 and Indoor Sun Screen division is $6,459,276. As for Europe

division, they have the highest revenue over IT workforce which is $9,625,345. In other

words, if the business were to expand $9.6millions in measurement of revenue, one IT

workforce will be needed to hire in the division.

iv. IT Data Support

The used of hours per week in IT data support will be as a benchmark to measure the

effectiveness of each division. The number of hours per week for IT data support being

used for each division should be reasonable to ensure the IT application is well

functioning. Based on the information given, the hours per week for IT data support in

Americas division is 45 hours, in Europe & Asia Pacific is 163 hours while in Indoor

Sun Screen division is 0 hour per week. This shows that Europe & Asia Pacific is using

too many hours in IT data support while Indoor Sun Screen had 0 hour in IT support.

The two divisions is less effectively in using IT application. Meanwhile, the Americas

division spends only 45 hours per week which can be reasonable and be more

effectively.


18/20

17

5.0 SUGGESTION

Centralisation and decentralisation both have their advantages and disadvantages. After our

consideration, we would like to suggest ID Walls to implement centralised ERP system in all

divisions due to few aspects. A centralized organization is structured by a strict hierarchy of

authority where most decisions are made at the top by one or a few individuals. Information

from lower levels flows up to the decision-maker where the information is analyzed in order to

aid in decision-making.

From the aspect of organisational structur e

The CEO of ID Walls, Josh Steward fostered the entrepreneurial spirit in the company

and stimulated the international expansion where he designed the organization in such a way

that it reflected the autonomy of the various divisions. This shows that ID Walls had been

implemented decentralized system to its division as autonomy or decision making power is

delegated to each division where each division could operate freely in their respective business

as long as they achieved the agreed upon profit and loss objectives. However, the

entrepreneurial spirit of the company and its drive towards expansion did not always bring

success.

Thus, we suggest that ID Walls should implement centralised ERP system where

management will have full visibility of all the processes, across various departments of the

divisions and hence enables better collaboration across all the departments in each division. By

implementing the centralised ERP system, integration and information flow from one

department to another, to ensure a better transition and faster completion of processes. This

also ensures that all the inter-departmental activities are properly tracked. Through centralised

ERP system, the communication between upper management and lower management can be

improved where management will get the information of work done of each departments and

their performance can be evaluated. Therefore, in order to achieve goals, centralised ERP

system could help the company to save a lot of time and money and it is easier to coordinate

and control from the center.

From the aspect of I T

Americas division over utilized capacity and there are times they outsource it to other

manufactures. Europe and Asia division has always been strong in producing large batches of

standardized divider walls for export. When Centralized ERP is applied, order of large batches

of standardized divider walls at Americas division can be transfer to Europe and Asia division


19/20

18

to be produce. Therefore, Americas division can have a better focus on making high priced,

made to order divider wall that were complex to manufacture. Centralized ERP infrastructure

would be hosted and managed centrally. This will include a standardization of customer,

vendor, product and finance naming conventions and processes.

Indoor Sun Screen been having deteriorated market and a negative operating income in

2013. CEO Josh Steward targeted to bring the business back to net profitability by

consolidation of factories, cost reduction and minimal investment. He also plan to milk it or

sell it once the division is profitable again. Therefore, there is little room for investment and

Centralized ERP. Adrian Campbell, IT Director has the same opinion which is to use the ERP

system already implemented in Americas Divider Walls in his division.

Central ised versus Decentralised

As mentioned in the case, decentralised will be more challenging in term of technical

and a manage sence as compare to centralised. Different type of configuration are needed for

decentralised while there is only one type needed for centralized. From the view of

management, there is more or less same for both alternative. However, centralised might facing

some difficulties on changing the authority of business manager. Whereas, there will be deter

possibilities for intergration of data and processes for decentralized. Besides, from the meeting

with Chris Bell (Administrator of C) and Terry Higgins (IT director of V), downtime due to

maintenance window for centralized is longer and more frequently than decentralized.

For the goods of ID Wall, centralized will be more suitable for them to meet the

corporate needs. In term of debt management, sales generation, and reduce the management

cost, centralized will be more suitable for ID Walls. As Chad mentioned, a global ERP system,

data in ID Walls would be integrated. Data only need to enter once and can be used and shares

throughout the company.

From the aspect of time & cost

Decentralized need one year time to complete implementation in another two divisions

while centralized need two year time to complete. Decentralized will be more benefit from the

view of short period time as compared to the centralized. While comparing the cost to be

involve, where 4 million needed for centralized and only 2.5 million for decentralized.

Comparing the both timing and cost, seen like decentralized is more beneficial to the company.


20/20

19

However, a business is an entity that aim for long lasting. Although centralized need more time

and high cost to develop, it will be more suitable for the ID Wall management needs where

wish to integrate the management of all divisions and cost saving and reducing. There will have

an annual saving of 1 million on global IT cost after the implementation of centralized ERP.

Besides, from the meeting with Terry Higgins (company V) which has experiences of using

decentralized ERP system for more than 12 years believes that sooner or later centralized ERP

system will implement for the company. It shows that centralized ERP system will be more

beneficial from the view of long term.

international divider walls

Documents