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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

TABLE OF CONTENT
Content

Page

1.0

Introduction

2.0

Description Of Companys Strategy, Organisational Structure


And Culture

3-5

3.0

Current Financial Situation Of The Company


3.0.1 Liquidity Ratio
3.0.2 Asset Management Ratio
3.0.3 Debt Management Ratio
3.0.4 Profitability Ratio

6-9

3.1

The Implications For The ERP Implementation

10-12

4.0

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

13-14

4.1

Efficiency On Usage Of IT By Each Division

15-16

5.0

Suggestion

17-19

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.

2.0

DESCRIPTION

OF

COMPANYS

STRATEGY,

ORGANISATIONAL

STRUCTURE AND CULTURE

This is the analysis of the companys strategy, organisational structure and culture to have
better understanding in order to give a suitable suggestion on the implementation of ERP
system.
Companys 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

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 backoffice 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 maketo-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-tobusiness 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 companys
banks in order to keep the interest expenses within acceptable ranges. Consequently,
the restructuring initiatives enhanced the companys 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.
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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.

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
Year
Current Ratio

2003
= 337,409
179,029
= 1.88 times

2002
= 344,718
158,777
= 2.17 times

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.
Quick Ratio = Current Assets - Inventories
Current Liabilities

Year
Quick Ratio

2003
= 337,409 135,252
179,029
= 1.13 times

2002
= 344,718 126,577
158,777
= 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.
Inventory Turnover Ratio = Net Sales
Inventory
Year
Inventory Turnover
Ratio

2003
= 868,098
135,252
= 6.41 times

2002
= 868,639
126,577
= 6.86 times

The companys 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

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.
Total Assets Turnover Ratio =

Net Sales
Total Assets

Year
Total Asset Turnover
Ratio

2003
= 868,098
840,618
= 1.03 times

2002
= 868,639
811,699
= 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.
Debt Ratio = Total Debt
Total Assets
Year
Debt Ratio (%)

2003
= 631,758
840,618
= 0.75 @ 75%

2002
= 596,366
811,699
= 0.73 @ 73%

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 Profitability Ratio


Profitability ratios is a measure of profitability, which is a way to measure a companys
performance. These ratios basically show how well companies can achieve profits from their
operations. Profitability ratios can be used to judge whether companies are making enough
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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.
Profit Margin Ratio = Net Income
Net Sales
Year
Profit Margin Ratio
(%)

2003
= -31,262
868,098
= -0.036 @ -3.6%

2002
= -82,404
868,639
= -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
Return On Total Assets Ratio = Net Income
Total Assets
Year
Return On Total
Assets Ratio (%)

2003
= -31,262
840,618
= -0.037 @ -3.7%

2002
= -82,404
811,699
= -0.102 @ -10.2%

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
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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.
Return On Common Equity Ratio =

Net Income
Common Equity

Year
Return On Common
Equity Ratio (%)

2003
= -31,262
205,609
= -0.152 @-15.21%

2002
= -82,404
210,721
= -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).

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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 customers
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 Pacific


Management and IT application Issue
After the implementation of ERP system, the division can improve management of the financial
department 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 in Indoor 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
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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 In 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.

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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 Pacific


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
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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.

Indoor 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.

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4.1

i.

EFFICIENCY ON USAGE OF IT BY EACH DIVISION

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.

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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 revenue
of 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.

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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 structure


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 IT


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
17

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.

Centralised 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.
18

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.

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