They are Public Website, Manufacturing Support System (MSS), Human Resources System (HRS), and Sales and Marketing System (SMS). Public Website provides information about each of the products, locations where someone can purchase them, and information about how to get warranty support. Details of warranty support and defect rates are not tracked, but the staff has anecdotal stories. The Manufacturing Support System (MSS) maintains the supply chain information necessary for manufacturing the company’s products, such as raw materials, vendors, and prices.
The Human Resources System (HRS) maintains and tracks personnel and benefits information. And the Sales and Marketing System (SMS) track the sales and marketing efforts of the company’s sales force. Orders from this system are printed and sent daily to the MSS to be filled. As a senior member of the IT Management Team for SAI Toys, I agree with the Board of Directors and the CEO decision to stay on the forefront of geekness, and therefore the company should integrate all of its IT systems.
In addition, they want to develop a more robust Web presence and sell their products directly to individual customers in addition to selling through traditional retailers, as they currently are doing. My recommendation is that we need to hire more staff if SAI Toys want to stay on the forefront. The company needs to hire professional computer specialist. The integration of new the software into a newly expanded IT system which utilizes in some cases first generation coding on legacy hardware can create operational problems which in-house IT staff may be nable to solve. SAI Toys is not in the computer business. While computers are essential to the design, manufacture and marketing of their products, SAI Toys would be well served by having their IT systems vertically integrated and maintained in a cloud computing environment, eliminating most of their IT department employees in the process (Butcher, 2011). In this report, I will show how the company should go about implementing this executive directive. The report should include the following sections.
The report will also outline the situation, weighs various alternatives, and I will presents a final recommendation for the company. The report will also include the current IT system, overview of the recommended system, the difference between In House and Outsourcing development, the stakeholders’ buy-in, the ERP project failed with lessons learned, and the company’s ROL & TCO. Current IT Situation To evaluate SAI Toys, using the basic analysis techniques will help us to have an overview of the company and its environment.
SWOT is a tool that identifies the strengths, weaknesses, opportunities and threats of an organization. SAI Toys SWOT Analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). The Strengths of SAI Toys are: Experienced and successful marketing team, High brand recognition for their unique products, Substantial 25 member IT team, and Quality control ensuring positive consumer feedback.
The Weaknesses of SAI Toys are: Highly competitive marketplace, Extensive and continuing R&D investment, Cost containment, and Personnel costs for IT staff (Butcher, 2011). The Opportunities of SAI Toys are: Direct marketing and sales to consumers through company operated websites, Emerging international markets immediately accessible through the internet, and Substantial IT cost reduction through use of cloud computing. The Threats of SAI Toys are: Loss of market share, Major competitors integrating vertically and selling direct, and Changing technology requiring escalating engineering costs (Butcher, 2011).
The Competitive Strategy Analysis is the second basis analysis technique to help us to have an overview of the company and its environment. SAI cannot afford the possibility of IT system failure given the highly competitive market in which they operate. New product design, manufacture, and marketing require that their IT system be fully functional 24/7 with no downtime. To sustain growth and revenue and stay ahead of potential competition SAI Toys will need to invest heavily in Research and Development (R&D) on an ongoing basis (Butcher, 2011).
This will include further investment in hiring skilled engineering personnel. Because SAI Toys creates unique products which may exclusively dominate a small segment of the market from which all of its revenue is derived, the introduction into the market of a competitor’s similar product with enhanced features and lower retail pricing may severely impact SAI Toys ability to generate sales and revenue (Butcher, 2011). Swimlanes Diagram: AS-IS Diagram Overview of Recommended System
The various systems currently in place will be replaced or integrated into the new system. Assuming that SAI Toys has elected to develop an integrated IT system in-house utilizing its current IT structure but expanding operability to allow all four (4) distinct IT systems to communicate with each other, an Organizational Process Performance system evaluation is necessary which will derive quantitative objectives for quality and process performance from the organization’s business objectives (Butcher, 2011). The new system will be the ERP Implementation.
There is a Process of ERP Implementation. While ERP is clearly a software solution for SAI, its implementation must be done on an incremental basis to limit interruptions to the existing business structure at SAI. Like all IT changes, problems can and will develop. To minimize the impact on SAI’s ongoing business operation the implementation of ERP should occur during the lapses between product launches or product design and development stages and implementation should be accomplished on a step-by-step basis, one application at a time.
Limiting IT installations and disruptions to non-critical time periods will permit the least stressful adoption of the IT structure and allow SAI to maintain its revenue stream without incurring a loss (Butcher, 2011). There are numerous vendors who offer ERP software which would be easily configurable for SAI’s specific requirements. Microsoft, Oracle, Sage, Exact, SAP, and Intuitive each offer ERP software solutions which can manage companies like SAI with up to 1,000 users.
Each of these can incorporate e-commerce platforms into the production and supply chain and provide SAI Toys management with instantaneous information reports including warranty claims, product claims, and defective product losses to together with consumer feedback in real-time (Butcher, 2011). Some new features in this system will include: 1) Improved customer satisfaction 2) Increased profitability 3) Reduced costs ) Improved quality and processing times 5) Improved business culture by bridging the gap between the production line and management 6) Improved business performance by focusing team members on eliminating waste across key business processes and workflows (Butcher, 2011). There are many companies out there that have successfully made the transition from a brick and mortar business to an E-Commerce. The E-Commerce can help the company grow and expand.
An e-commerce platform can be used for advertising, production, supplier enquiries, negotiations, contracts, orders, billing, payments, and after sales service and other business activities in the process of interactive program management that can simplify the transaction process (Butcher, 2011). SOA would be of benefit to this project. A Service Oriented Architecture (SOA) design principle can be utilized during the phases of systems development and integration. A system based on SOA will package functionality as suite of interoperable services that can be used within multiple separate systems from the four separate systems.
SOA also generally provides a way for consumers of services such as web-based applications to be aware of available SOA based services. For example, several disparate departments within a company may develop and deploy SOA services in different implementation languages and their respective clients will benefit from a well understood, well defined interface to access them. SOA defines integration for widely disparate applications for a web-based environment and uses multiple implementation platforms (Butcher, 2011). Rather than defining an API, SOA defines the interface in terms of protocols and functionality.
An endpoint is the entry point for such a SOA implementation. Service-orientation requires loose coupling of services with operating systems and other technologies that underlies applications. SOA separates functions into distinct units, or services, which developers make accessible over a network in order to allow users to combine and reuse them in the production of applications. These services and their corresponding consumers communicate with each other by passing data in a well-defined, shared format, or by corresponding an activity between two or more services.
SOA is therefore a continuum as opposed to distributed computing or modular programming (Butcher, 2011). Swimlanes diagrams- TO-BE diagram In-House versus Outsourcing Development The benefits and costs of developing this system in-house versus outsourcing the development or purchasing off-the-shelf are very important to consider. Off-the-shelf ERP packages are tested and proven performers which are an essential requirement for a company like SAI Toys which cannot afford the inevitable downtime associated with fragmented software design and installation.
On a cost benefit analysis basis the investment in purchasing an off-the-shelf ERP software package is substantially less than the cost of downtime and system inoperability where an in-house software design fails (Butcher, 2011). The ability of the software vendor to de-bug an off-the-shelf system can be measured in minutes or hours versus the possibility and probability of several days of downtime with in-house developed software.
The purchase price of an ERP software package can be amortized over a useful lifespan of five years or more and when compared to the prospective recurring downtime of in-house developed software the advantages of an ERP off-the-shelf solution cannot be ignored (Butcher, 2011). To avoid as many pitfalls as possible in the overhaul of SAI’s IT system it is recommended that SAI avoid in-house software development of this magnitude. While some of SAI’s IT staff may be proficient in software development there are the issues of minimum and exacting standards employed in the industry which may not be a consideration for in-house development.
CCMI and ISO certifications should also impact the decision here. CMMI and ISO certification are an inherent part of these off-the-shelf software solutions which eliminates the uncertain standards that may be employed in in-house software development (Butcher, 2011). We should develop the system by Some best practices for managing the project type to having a better chance of success are Stakeholder Buy-in and Internal Politics The stakeholders of this system are essential. Once stakeholders are on board with the system development, they are likely to remain involved, supporting the program over its lifetime.
We can get them to buy-in and support the system development by keeping them informed throughout the process of the system, including during the evaluation planning, implementation, and reporting phases (Innovation Network, 2002-2012). Stakeholders are valuable assets in evaluation planning, offering: * Assistance in decision-making about continued and prospective funding; * Perspective that helps the program learn, grow, and improve, and * Experience that informs program replication at other sites or organizations.
The Stakeholders fall into three levels of program participation or involvement. There are: * Primary stakeholders are typically major decision makers within a program, and are often the motivators behind an evaluation effort. They are often program staff, supervisors, senior managers, and funders. * Secondary stakeholders have less contact with the administrative side of the program, but are still important to the evaluation effort. They include program participants and their families; direct service staff; and possibly other professionals providing subsequent services to program participants. Tertiary stakeholders are more distant but are likely to be interested in evaluation findings — for example, potential program participants, the general public, or members of the same profession (Innovation Network, 2002-2012). There are other issues that may arise as a result of the internal politics in our company that could have a negative impact on the project. The best thing to do is to reduce the risk of project failure due to internal issues. Many systems development problems are in practice caused by a failure to perceive that specific stakeholders’ viewpoints were relevant.
That failure causes whole groups of requirements, typically those related to scenarios involving the missing stakeholders to be missed. A similar result is obtained when one stakeholder assumes one scope for a product while another stakeholder assumes another. This occurs when a developer assumes that it will be sufficient to design, code, and test software but the purchaser hopes to have everything set-up and operators trained (Butcher, 2011). Stakeholder composition is a good predictor of project risk and therefore it should be cost-effective to characterize projects at their initiation according to their stakeholder impact.
SAI can minimize internal politics by fully evaluating each stakeholder and assuring them that their input is critical to the overall success of the project. Each stakeholder then becomes part of the project team and has a vested interest in ensuring the ultimate success of the project. Team meetings bring all of the stakeholders together to discuss differences and eliminate issues which would delay or derail the project. Each team member realizes that their participation is equally important within their area of specialization or expertise fully under their direct control and unchallenged by direct confrontation.
In this manner, each team member must demonstrate how their participation and overall cooperation contributes to the overall success of the project (Butcher, 2011). ERP Project Failures and Lessons Learned Studying ERP project failures is an essential part of project success. By identifying the same or similar issues that lead to failure in one company, SAI can take steps to avoid or eliminate those problems as they arise. Case studies also provide a precursor to the foreseeable problems that occur in ERP implementation allowing SAI management an opportunity to prepare for these problems by formulating a contingency plan.
ERP project failures are common but this not unique to ERP. Every system has glitches regardless of the quality of design or the expertise of design personnel (Butcher, 2011). In the Case Study for Implementation Failure at Hershey’s Chocolate it was established that Hershey’s failed to use an incremental method of implementation, instead installing full software during periods of peak business. The resulting disaster from inoperability due to bugs and glitches resulted in a loss of peak season revenue for Hershey’s. Both corporate management and IT staff developed an immediate dislike for the ERP implementation.
This could easily have been avoided had Hershey’s implemented the new software on a step-by-step basis during the off season when sales and revenue would have been less dramatically affected (Butcher, 2011). Hershey’s also tried to implement a variety of enterprise applications simultaneously which added to the stress of a seemingly failed project. In fact, there was nothing wrong with the ERP software but its implementation was a complete failure as the company tried to modify their business processes to suit the enterprise application which created further problems.
The lesson learned is that implementation should be conducted one step at a time, each successful Installation reinforcing management’s initial decision to purchase. The ERP problems at Hershey’s are commonly repeated where management fails to realize the complexity of implementation and the necessity to proceed cautiously and maintain focus (Butcher, 2011). Return on Investment and Total Cost of Ownership Some metrics that we can use to determine if the system was a success is a disciplined methodology has been developed called total cost of ownership (TCO).
It is designed to properly analyze the full cost of an IT investment. In order to calculate TCO properly, all related costs must be identified and captured. TCO models organize costs into two broad categories: 1. Direct costs: Costs in this category are usually for activities and investments that are related to IT or support. They can usually be calculated by examining the actual or projected costs of hardware, software, people, and facilities. 2. Indirect costs: These costs are not always visible and can be very difficult to measure and quantify.
This type of cost crosses the entire organization’s business operations. Some examples of these indirect costs are Administration, Downtime, and End-user operations (Devry, unknown). In order to measure the metrics and figure out when baselines should be determined, we should developed methodologies for determining TCO. The first methodology is the Project initiation. This can be one of the most critical phases of a project. The reason why is because the following are determined: the expectations of the client, the type of relationship the organization will ave with the client (This can influence the management costs. ), and the project’s scope. Ideally, the objectives of the project should be defined at this stage, and the categories for TCO can be aligned with these project objectives. To determine the impact of any deviations from initial projections, an up-to-date TCO should be maintained at all times (Devry, unknown). The second methodology is the Cost Modeling. Through the entire TCO process a major activity is the TCO cost analysis. This continues to be refined as new information becomes available during the project.
This activity includes classifying the costs according to the financial policies of an organization as well as defining the financial model for the project. The third methodology is the Cost Collection. Once the financial and cost model has been determined, all available cost estimates are collected. Once these are entered into the financial model, a baseline is determined. The total cost of ownership that is presented in this deliverable should be considered a snapshot in time. It is important that all stakeholders understand this and that the TCO may or may not change substantially from this point forward (Devry, unknown).
The fourth methodology is Evaluation/Final Report. This is the development of a TCO project deliverable that goes to the organization’s stakeholders and decision makers. It typically includes the final project evaluation and a correlation of all finding recommendations and results. The last methodology is Ongoing Refinement of the TCO Model. It is very rare for all costs and contract negotiations in a large project to be finalized at the same time. Additionally, an implementation plan usually cannot be determined at the same time as, or even immediately after, delivery of the final report.
As a result, the TCO is an estimate of project costs based on the data and decisions available when the report was researched and written. As key decisions regarding rollout and implementation strategy are reached, the TCO model should be refined to include the most current project cost estimates (Devry, unknown). Another metrics that we can use to determine if the system was a success is Return on Investment (ROI). The ROI (return on investment) is how much profit or cost savings is gained. An ROI calculation is sometimes used along with other business practices to develop a business case for an IT proposal.
The overall ROI for an enterprise is sometimes used to determine how well a company is managed. The work performed to determine the TCO can be used to calculate the ROI. Even though many TCO costs are long term, they can be applied solely to the initial investment or divided between the initial investment and serve as an adjustment to the final value. While both methods are valid, they can give different results; it is important that the organization establish a policy for ROI computations across all projects (Devry, unknown).
One of the more difficult aspects of an ROI calculation is determining the soft, or “people” benefits. Three considerations that impact these soft benefits follow: * Speed of adoption: This benefit considers how quickly employees come up to speed using the new process, system, technology, or tools provided by the implementation. It indicates how quickly employees demonstrate the new skills or behaviors and adapt to the new roles that are required by a change. * Ultimate utilization or participation rate: This evaluates the percentage of employees that are engaged and practicing the new way of doing things.
Surprisingly, in many implementations, employees can avoid actively participating in workflows and procedures, and this can undermine the project in subtle ways. * Proficiency: As the change is implemented, this examines how proficient and effective the employees have become. Many times, this proficiency, or ability to better perform their job function, is a significant part of the change’s original motivation. It measures not just the status after the change, but the ongoing improvement to the organization with the new systems, tools, and processes in place and the organizational and job changes fully implemented.
Some examples include the time saved in performing a particular operation while using the new system, the improved close rate for sales and contracts brought by the use of a competitive information database, and the amount of waste reduced by new streamlined activities or processes (Devry, unknown). Conclusion In conclusion, my recommendation to SAI Toys is that they need to hire more staff if they want to implement this executive directive.
If they can’t afford it or can cope with integrating all of their IT systems, then I would suggest they stick to manufacturing the toys in-house and shipped to brick-and-mortar retailers, such as Best Buy and Target, as well as e-Commerce only sites, such as ThinkGeek. com and Buy. com.