615260 Enterprise Systems

1
615-260Enterprise Systems

• NIBCO ERP Implementation
• Case Study
• Week 7

Brown, C. and Vessey, I. (2000) NIBCOS BIG
BANG A Teaching Case Study, International
Conference on Information Systems, December
2
Subject announcements

• Project 1 handback this week (in labs)
• 1/2 way through subject
• Project 2 less than two weeks away! (Friday
  17th Sept ie end of week 8)
• Next week change of schedule RMIT case not a
  guest lecture

3
NIBCO project

• SAP/R3 into 10 plants 4 distribution centres
• 15 month project
• US17 million (1996)
• Consulting
• Technical infrastructure
• Teams change management
• ¼ senior managers full-time (7 of 28)

4
Why big bang?

• big bang very high risk but high possible
  rewards
• Great degree of change needed if incremental
  then change fatigue may occur before all
  changes achieved
• Business initiatives required new IT/data
• High consulting costs but less than over 3-5
  years
• pull the people out of the business to work on
  it, focus, and get it done

5
Timeline (see paper)
14 months

• 1995 need to address IT, CVIO hired, strategic
  IT plan
• 1996 organisational change, SAP and big bang
  implementation selected, project started
• 1997 organisational change, training, go live

15 months
6
NIBCO

• ERP implementation project success
• Benefits gained from use of ERP
• Ongoing successful use of IT
• Knowledge transfer

7
NIBCO Epilogue(Project success)

• NIBCO experienced a major dip in productivity in
  the first months after Go Live, as its project
  leaders had warned. As Beutler was quoted as
  saying in a ComputerWorld article, The business
  jogged it didnt run (Stedman 1998a). However,
  the ERP implementation was within the 12-month
  window given, slightly under budget, and
  essentially a success. It released its project
  team members even sooner than originally planned.

8
NIBCO Epilogue(Project success)

• NIBCO experienced a major dip in productivity in
  the first months after Go Live, as its project
  leaders had warned. As Beutler was quoted as
  saying in a ComputerWorld article, The business
  jogged it didnt run (Stedman 1998a). However,
  the ERP implementation was within the 12-month
  window given, slightly under budget, and
  essentially a success. It released its project
  team members even sooner than originally planned.

Key strategy the business planned and prepared
for a drop in productivity in the short-term ie
on Day 1 prepared to operate at 50 capacity
9
NIBCO Epilogue(benefits gained)

• As of October 1999 (nearly 2 years after go live)
  not only had the company avoided Y2K remediation
  costs, but
• it was closing its books in 2-3 days (instead of
  the 2-3 weeks typical under the old systems)
• had lowered its inventory levels by 25, and
• had increased its fulfillment rate from 80 to
  95
• (http//www.cio.com/archive/enterprise/101599_new.
  html)
• According to NIBCO management
• inventory had been lowered by 35 and
• service had improved to 98 by mid-2000

10
NIBCO Epilogue(successful use of IT)

• Since its Big Bang implementation, the company
  has continued to be proactive in its ERP
  initiatives an upgrade from R/3 version 3.0F to
  4.5B (4-month project completed in April 1999),
  an archiving project (9-10-month project), and
  the HR module implementation. The SAP
  infrastructure has also enabled the company to
  make significant progress with e-business
  initiatives, including an R/3 e-commerce project
  to implement vendor-managed inventory.

11
NIBCO Epilogue(knowledge transfer)

• In addition, the knowledge transfer that was so
  important during the project itself has resulted
  in a strong core of expertise within the IS
  organization that continues to pay dividends. An
  April 2000 business intelligence report for NIBCO
  management benchmarked the firm as an IT leader
  within its industry.

12
Lessons from the NIBCO Case

• Unusual in some respects
• Vanilla implementation NIBCO adapt to R3
• Leadership team of three
• Big Bang
• speed of implementation
• degree of business ownership of the project
• strength of change management
• Analysis of effects of new processes and systems
  at the individual level
• Communication training

13
Change management

• We were convinced we could configure a system.
  We were convinced we could build a technical
  infrastructure that would support it. We were NOT
  convinced that we could change peoples attitudes
  and behaviors in a way that we could successfully
  use what we came up with.

14
Lessons from the NIBCO Case

• Typical in many others
• value of top management support (Martin)
• software selection
• team formation core team (3 business process
  teams, 1 technical team, 1 change management
  team)
• use of consultants (to bring in knowledge)
• motivation

15
Lessons from the NIBCO Case

• Typical in many others
• learning how this strange new piece of software
  worked
• need for strong change management
• data conversion difficulties
• difficulties after go live
• claimed benefits

16
Comments from NIBCO CEO

• The CEO of this worldwide plumbing supplier says
  the pain of a major IT implementation is worth
  it.
• Glasser, Perry, NIBCOs Rex Martin, CEO NIBCO,
  CIO Enterprise Magazine, Oct. 15, 1999
  http//www.cio.com/archive/enterprise/101599_new.h
  tml

17
Comments from NIBCO CEO

• How important is IT to NIBCO's strategy?
• We revise our long-range strategy every year or
  so. In late 1995 we realized that our systems
  were fragmented. We knew we wanted to go to an
  ERP system, so in mid-1996 we commissioned a team
  that looked at various vendorsBaan, PeopleSoft,
  Oracle and some others. After six months, we
  settled on SAP. People hadn't heard the horror
  stories about SAP yet, but we've had no troubles.
  SAP has been well-suited to our needs.
• We rolled it out on Jan. 1, 1998, but
  getting there nearly killed us. We had at least
  150 people assigned full-time to the project, and
  we brought it in on time and on budget. Our cost
  was 18 million, including training time,
  consultant time and our time. Our service to
  customers diminished during that time, but the
  pain was worth it. We're upgrading every 18
  months or so, but that's easier.

18
Comments from NIBCO CEO

• And the benefits?
• We took care of our Y2K problem, but that's only
  incidental. Our inventory from the beginning of
  1998 to now has dropped 25 percent, and our
  fulfillment rate has risen from 80 percent to 95
  percent. It used to take two or three weeks to
  get our monthly financials now we are
  disappointed if we don't have them in two or
  three days. The system has been wonderful for us

19
Comments from NIBCO CEO

• What are NIBCO's future IT plans?
• We're putting radio frequency bar-coding on our
  products to better track our inventory, and we're
  pushing to expand our Web site. By year's end
  we'll be able to conduct transactions. This is
  unusual in our business.
• We've done EDI with our retailers, such as
  The Home Depot, because they said, "You do EDI or
  you will not do business with us," but 85 percent
  of our sales are to plumbing wholesalers that are
  not technologically advanced. With technology
  costs getting lower, we think wholesalers will
  catch up. When they do, they'll be able to check
  for stock on our Web site.

20
Comments from NIBCO CEO

• What's your advice to less IT-savvy CEOs?
• Invest a lot of money in hiring a good CIO. We
  did that in 1995 when we hired Gary Wilson as
  director of IT, who came to us with a lot of
  experience. Staffing IT is extremely
  competitiveyou can retain top-notch people if
  you have cutting-edge projects.