SAP for ATLAM MAF 680INTEGRATED CASE STUDY

Prepared by:NUR ATIQAH PUSPA BT SARI2011272756AC 220 8KPrepared for:ASSOC. PROF. DR. MOHD ISMAIL RAMLI

EXECUTIVE SUMMARYATLAM is the maritime industry's diverse workforces establish on 15TH August 1981 and become private on 1st January 1997. ATLAM is a subsidiary of Petra Group Companies. Before 2001, ATLAM relied on a customised single-user system which only for recording accounting entries purposes and facing deficit cash flow. End of year 2001, Zulkifli Osman, Finance Manager of ATLAM has been responsible to organize new project on accounting system. He has to choose whether he want to implement SAP or ACCPAC system. Key Performance Index (KPI) setting is one of the most important aspects that private company will focus on to improve and make huge changes to their company. We can clearly see that EnZul is trying to make changes by implementing the SAP system which is parallel to the parents (PETRA) system. However, argument arises between the project team. Lim, User Representative did not agree with decision of EncikZul. Lim resist changing and making an argument in term of cost and users acceptance.Senior Manager of PETRA had been mentioned that the cost of implementing the SAP in ATLAM was not the main concern. This is because we have the project sponsor which is Faris. The reason he sponsored the project is because he want to promote the SAP system to the ATLAM. It is good for ATLAM to accept the sponsor since they cannot afford the expenses of implementing SAP system. There might be no sponsor in the future if ATLAM did not implement the system now. In order to ensure the decision of implementing SAP system is feasible, we need to evaluate and analyse the SAP system first. In order to implement the SAP without wasting more time, encikZul terminate Lim in this project. He should terminate Lim in this project because Lim might be whistleblower. Lim might influence the staffs not to accept the new system if we not terminate him. In real world, staffs have no power to reject what the upper level management asked to do. En.Zul has acted bona fide in performing his jobs. He has the same objective with the company which is to reduce the deficit of the company. EncikZul decision to terminate Lim is right to ensure SAP could be implemented. Lim should accept the work since his position is below than EncikZul. PROBLEM STATEMENT Implementation of accounting system whether encikZul want to implement SAP or ACCPAC system in ATLAM Company. Termination of Lim from being part of project team members in SAP project.

ALTERNATIVE SOLUTIONIn order to ensure that implementation of SAP system is a good decision, EncikZul are advised to conduct feasibility study. There are three feasibility analyses that need to be considered in implementing SAP system which are economic, operational and technical feasibility studies. I think termination of Lim is needed. Lim is one of the senior staff in the company. He is quite good and very critical thinker. The sad thing is that he is negative minded. He always sees the negative side effect of the project. I assume that people who are negative minded is very narrow and scared to make changes. Lim know that sooner or later, SAP system will be implemented too. He is just the user, he has to accept the changes that the upper level implemented. I found that there are several ways to overcome staff resistance to change. First way is education and communication. Top management should communicate early and often to the staffs. So that they can mentally prepared and motivated to accept the changes. Second way is facilitation and support. The management should provide good facilities and give full support to the staffs. So that they are more encourage to do the job efficiently. CONCLUSIONATLAM has to perform capital budgeting analysis to ensure the implementation of SAP can bring a greater benefit to ATLAM. This includes Net Present Value (NPV), After-tax Cash Flows as well as Internal Rate of Return. After taken into consideration of all the assumption and calculation, I noticed that the result of NPV shows a positive value. After-tax cash flow shows an increment result year by year. The IRR of 28.86% also shows positive result which is higher than required rate of return, 25%. Thus, the calculation is quite strong and acceptable for the company to implement the SAP system. (Further calculation is on appendix). I dont think ACCPAC is a relevant to implement in ATLAM since it is lack in performing financial reporting.IMPLEMENTATIONGantt chart is developed to ensure successful implementation of SAP. Planning is the most important element. This is because fail to plan lead to the plan to fail. Analyse the system by conduct feasibility analysis and cost benefit analysis. Implementing involves review, testing and training. The system need to be reviewed by the experts and test first before they train the staffs. Final preparation required review staff performance in using the SAP system. Give feedback and motivate them to be more efficient in using this system.

APPENDIX

CALCULATIONS:-NET PRESENT VALUE (NPV)YearCash FlowPVIF 10 %Present Value

1802,385.940.9091729,449.05

21,273,766.710.82641,052,640.81

31,908,158.030.75131,433,599.13

42,044,904.30.68301,396,669.64

52,468,876.840.62091,532,925.63

62,866,994.710.56451,618,418.52

Total Present Value7,763,702.77

Net present value (NPV) = RM 7,763,702.77 RM 4,344,390.00 =RM 3,419,312.77*The present value is RM 7,763,702.77 and the initial outlay is only RM 4,344,390.00, hence the net present value is RM 3,419,312.77. Based on the calculation above, the value of NPV is positive. This illustrate that SAP is strongly enough to implement in the company.

CASH FLOW FROM YEAR 1 TO 6 CASH INFLOWYear 1Year 2Year 3Year 4Year 5Year 6

Accountants time efficiency400,000800,0001,200,0001,600,0002,000,000

Technical cost savings600,0001,200,0001,400,0001,600,0001,800,0002,000,00

Process & procedures500,000900,0001,200,0001,500,0001,800,000

Working capital savings900,0001,200,0001,500,0001,500,0001,500,0001,500,000

TOTAL COST SAVINGS1,500,0003,300,0004,600,0005,500,0006,400,0007,300,000

CASH OUTFLOWYear 1Year 2Year 3Year 4Year 5Year 6

Average SAP license cost150,000200,000225,000250,000250,000

Cost to convert old data to new data100,000160,000180,000560,000600,000640,000

Cost of overhead300,000420,000490,000560,000600,000640,000

Cost of system Maintenance and firewalls60,000120,000130,000140,000150,000160,000

Cost of hardware Expansion260,000300,000340,000380,000400,000

Cost of training500,000800,000900,0001,000,0001,100,0001,300,000

TOTAL COST960,0001,910,0002,200,0002,825,0003,080,0003,390,000

Year 1Year 2Year 3Year 4Year 5Year 6

Earnings before tax and depreciation540,0001,390,0002,400,0002,675,0003,320,0003,910,000

Depreciation cost (34%)1,477,092.60974,881.12643,421.54424,658.21280,274.42184,981.12

Net Book Value after depreciation2,867,297.41,892,416.281,248,994.75824,336.53544,062.11359,080.99

Earnings Before tax(937,092.60)415,118.881,756,578.462,250,341.793,039,725.583,725,018.88

Tax rate (28%)(262,385.93)116,233.29491,841.97630,095.7851,123.161,043,005.29

Earnings after tax(674,706.67)298,885.61,264,736.491,620,246.092,188,602.422,682,013.59

Depreciation reversal1,477,092.60974,881.12643,421.54424,658.21280,274.42184,981.12

After tax cash flows802,385.931,273,766.711,908,158.032,044,904.32,468,876.842,866,994.71

The after-tax cash flows for the implementation of SAP is increase year by year.

INTERNAL RATE OF RETURN (IRR)Rate 1-IRR = NPV 1-0Rate 1-Rate 2 NPV 1 NPV 227 IRR = 225,319.67 027 29 225,319.67 (- 16367.56)

27 IRR = 225,319.67-2 241687.2327 IRR =0.9323-227 IRR =-1.8646IRR=27 + 1.8646IRR = 28.86 %IRR is higher than required rate of return.

GANTT CHART