INTRODUCTION
The integration of enterprise systems and the supply chain to an organization is becoming more critical in an ever-changing, globally competitive environment. Quick response will require close relationships, especially communications and information sharing among integrated internal functional groups as well as the suppliers and customers of an organization. Texas Instruments (TI), headquartered in Dallas, Texas, has come to realize this requirement for building and maintaining its competitive edge. Thus, it sought to implement an enterprise resource planning (ERP) system with a focus on linking it with a global electronic commerce (e-commerce) setting, an innovative and current issue (Weston, 2003).
There were a number of major players, including project management direction from Andersen Consulting Services, software vendors such as SAP and i2 Technologies, hardware vendors such as Sun Microsystems, and various suppliers and customers of TI.
The purpose of this case is to provide some aspects of implementation of strategic systems that provide valuable lessons for success. We begin and rely on the foundation of a strategic systems implementation model, which is initially described. A description of the case follows, with the various stages as related to strategic systems implementation described. We complete our discussion with implications and conclusions.
BACKGROUND
A process-oriented framework for ERP management is presented to help guide the discussion of this case (see Cliffe, 1998; Davenport, 1999; Miranda, 2002; Sarkis & Sundarraj, 2000).
The elements include the following:
• Strategy formulation and integration—One of the results of this step in the process is determination of an organization’s core competencies that need specific technology support.
• Process planning and systems design—Also known as the reengineering phase, three studies are usually undertaken at this stage, and they are named AS-IS, SHOULD-BE, and TO-BE.
• System evaluation and justification—Here, analysis focuses on the economic, technical, and operational feasibility and justification of the system.
• System configuration—As a packaged software system, there are likely to be discrepancies (at the detailed level) between the needs of an organization and the features of the software. Hence, a significant amount of effort can be expected to configure the system or the organizational processes in order to produce an alignment between them.
• System implementation—The implementation stage can be classified into startup, project management, and a migration handing the switch over from the old to the new system.
• Postimplementation audit—This last “feedback” stage, although very important from a continuous-improvement perspective, is one of the more neglected steps.
As can be seen, the process suggested above can be arduous, but this necessary effort must be anticipated for the successful integration of complex and strategic systems into an organization.
IMPLEMENTING A GLOBAL ERP SYSTEM AT TI Company Background
Texas Instruments Incorporated (TI) is a global semiconductor company and the world’s leading designer and supplier of digital signal processing (DSP) solutions and analog technologies (semiconductors represent 84% of TI’s revenue base). The company has manufacturing or sales operations in more than 25 countries and, in 1999, derived in excess of 67% of its revenues from sales to locations outside the United States. Prior to the implementation of ERP, TI had a complex suite of stand-alone nonintegrated marketing, sales, logistics, and planning systems consisting of thousands of programs that were based on many independent databases and were running on proprietary mainframe systems.
OVERVIEW
Since the 1980s, TI had used a highly centralized infrastructure utilizing proprietary mainframe computers for meeting its IT requirement. As the first step toward global business processes, certain planning processes and systems were standardized in 1989. Starting in 1996, TI underwent a company-wide reengineering effort that led to the implementation of a 4-year, $250 million ERP system using Sun Microsystems’ hardware platform, SAP AG’s ERP software, i2′s advanced planning tools, and Andersen Consulting’s implementation process. In 1998, Texas Instruments implemented the first release of the ERP system, which primarily consisted of a prototype implementation of the i2 system running on a Sun E10000 platform. In early 1999, TI began rolling out the second release. In the middle of 1999, TI completed the i2 Technologies software implementation as part of the third release. Finally, TI turned on the remaining financials, and new field sales, sales, and distribution modules. A high-level architecture of TI’s pioneering ERP implementation consists of SAP and the i2 system for advanced planning and optimization. The system is a pioneering large-scale global single-instance implementation of seven modules (finance, procurement and materials management, logistics, planning, field sales, sales, and marketing) for all of TI’s divisions, and it is in use by 10,000 TI employees to handle 45,000 semiconductor devices and 120,000 orders per month. This solution also enabled global Web access to information for TI’s 3,000 external users at customer, distributor, and supplier sites.
STAGES IN MANAGING THE GLOBAL ERP SYSTEM IMPLEMENTATION
Strategy Formulation
Traditionally, TI was primarily running what was called a “commodity” business, wherein orders were received, manufactured, and shipped as a batch. Mass customization combined with the maturity of TI’s business caused it to reexamine its goals and strategies. TI started its shift toward a more customized product environment.
Within this new customized product environment, TI had a number of customer needs that could not be met easily. Thus, the goal was to determine the appropriate processes and information systems that must be put in place in order to support such agile design and manufacturing strategies. Another goal was a move toward supplier-managed inventory and customer-managed orders. Finally, standardizing systems was another integrative corporate goal. TI made extensive use of metrics. Strategic goals are translated into tactical and operational quantifiable objectives.
Process Planning and Systems Design
TI conducted a massive reengineering effort for the whole organization, with the goal of setting standard processes globally. The major result of this effort was to declare that all inventory and manufacturing management be done globally.
TI decided to implement a single-instance ERP system so as to fully leverage the system’s capabilities to support the flexibility and standardization demanded by global processes. After site visits by major ERP vendors, TI selected SAP mostly because of its scalability to handle voluminous amounts of data.
System Justification
A budget of approximately $250 million was set for the implementation. The justification of the system was done using a combination of tangible and intangible factors at both the enterprise and business-unit levels. Standard hard-justification measures such as ROI and IRR were used to ensure the financial viability of the project.
Through this business casejustification, acceptable financial returns, along with strategic factors such as competing effectively within a given niche market, and operational factors, such as global inventory management, all played roles in ERP’s justification at TI.
System Configuration
The goals and processes entailed numerous and significant changes to all aspects of the business process design of the system.
Implementation
In this phase, concepts and goals were translated into tangible action, and as a result, it is perhaps one of most difficult phases of the project. General principles such as global processes and standard systems need to be backed up by convincing and deploying the right people to implement the processes.
Startup
A number of key personnel, along with their families, were expatriated to the United States and stationed in Dallas, Texas, for a few years. About 250 people were transitioned from TI to Andersen Consulting that became the main provisioner of services with respect to the ERP system. IT outsourcing in this case involved Andersen Consulting taking over the employment and management of former TI people.
Project Management
Change management played a large role in this stage. The roles of training, planning, and communicating were of equal importance. All management levels were involved in this process as well as various vendors and suppliers. Some of the practices included the following:
• On-site experts were made available to new users of the system.
• A help desk was set up to handle problems that could not be addressed by these experts.
• A ticketing system for managing and prioritizing problems was also established (e.g., a system stop was a high-priority ticket that would get round-the-clock attention).
Handling Go-Live
To get prepared for “go-live,” the key managers who were stationed in Dallas were sent back to their territories for educating the next level of users. Using selected experts, user-acceptance scripts were defined and tested, with problems, if any, being resolved as per one of the schemes outlined above. Daily conference calls were set up for 30 days prior to go-live to obtain status checks on progress and on the tickets.
Based on the results of these checks, a risk analysis was conducted weekly to determine the effects of various potential failures. The implementation plan was to have a few go-live dates one after another, but in relatively quick succession. Except for the planning system, in all the other stages, in this case, a direct conversion was employed. That is, with a downtime of about 2 to 3 hours during a weekend, the old system was turned off and the new one turned on.
Post implementation Status
The system met most of its goals 9 months after the complete implementation. There are around 13,000 users on the system, with concurrent users ranging from 300 to 1,700. Some of the key performance measures and parameters evaluated were as follows:
• Productivity dip
• Ontime delivery
• Single-instance, global system
• Better response
• Inventory reduction
future trends—managerial implications
The following lessons are summarized:
• Conduct a thorough strategic plan—The case illustrated how market forces had compelled the company to make radical shifts in its organizational environment and culture.
• Align IT plans with business plans—Conduct reen-gineering studies and develop strategic IT plans to align key IT needs with those of the business (Barker & Frolick, 2003).
• Get top management support—The prescription of top management support has been made ever since early IT implementations to the present (Mabert et al., 2001).
• Change management—Set realistic user expectations, such as the initial productivity dips. User involvement is critical. Andersen Consulting’s process helped to ensure that such was the case. Make sure that the user was supported to help improve user satisfaction (Lee et al., 2003; Legare, 2002).
• Strong champion characteristics (Dean, 1987)—In TI’s situation, the manager of the ERP project had over two decades of experience in various levels of the organization. This manager had broad knowledge of corporate operations. Previously, he was a vice president of one of TI’s divisions.
• Rationalize business models and processes—Make sure the business models and processes fit within the strategic direction and goals of the organization. Time, mass customization, and flexibility concerns led to a global model (Gardiner et al., 2002). Global cultural issues were also a concern and needed to be managed (Davison, 2002).
• Manage external enterprises—Appropriate and well-planned involvement of consultants is important for keeping the project on a tight schedule. Further, with the advent of e-commerce, companies are more likely to ship and order goods on the basis of Web-based inputs.
• Manage using metrics (Skok et al., 2001; Hitt et al., 2002)—TI and Andersen Consulting have a corporate culture and policy that require the stringent and formal use of metrics in the management and evaluation of projects. They attribute this policy adherence as one of the key reasons for success of the ERP implementation. Key performance indicators included such issues as reduction in inventory, percentage of suppliers linked, and productivity of outputs.
conclusion
TI’s ERP implementation with an e-commerce perspective required a significant amount of features that added issues to its management:
• It is a single-instance system, providing access to the same data, irrespective of the geographic location of the user.
• It provides access to 3,000 external users (customers and suppliers), thereby enabling 70% of the transactions to be conducted electronically.
Management saw some problems in this implementation process and tried to address the issues. Some of the major problems included the following:
1. The software for supply chain management (Red Pepper) that was initially chosen did not meet expectations of TI. This system had to be scrapped, and this resulted in a multimillion dollar cost.
2. A productivity dip occurred, and the implementation had to address this issue for all managers throughout the organization who had some stake in the performance of the system. The expectations that this would occur were communicated through newsletters and messages. Consistent and continuous communication helped to mitigate a situation that could have caused a major project failure.
3. Getting buy-in from internal functions not directly associated with the implementation process was difficult. This occurred with the marketing function.
Future extension of developing appropriate infrastructure is another issue that needs to be faced (Kovacs & Paganelli, 2003). Lessons learned here may be appropriate for small or large organizations, but some differences appear in the practices of what is successful and not for ERP implementations in different size organizations. One of the major issues is that small companies get greater operational benefits from ERP, while larger companies get more financial benefits (Mabert et al., 2003).
KEY TERMS
Audit: Reviewing and monitoring the performance of a system.
Enterprise Resource Planning (ERP) System: An information system that spans organizational boundaries with various organizational functional modules and systems integrated and managed by one system application.
Go-Live: The actual operation of an information system.
Mass Customization: Producing basically standardized goods but incorporating some degree of differentiation and customization.
Reengineering: Activities that seek to radically change business processes and support systems in an organization.
Single Instance: A one-time full-fledged company-wide initial operation of a system, as opposed to incremental (functionally or organizationally) or modular implementations.
Strategic Justification: The process of evaluating and selecting systems based on tangible (financial) and intangible factors that have implications for long-term and broad management of the organization.
