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Vandelay: Implementing an ERP System

Vandelay Industries is a major producer of industrial process equipment used in the

production of rubber. Vandelays offerings are known for their design quality and innovative
engineering. The company began to experience difficult times in the mid 1980s as a result of
severe competitive pressures. Strong foreign competitors emerged, offering less expensive
alternatives in many of Vandelays product lines. As a result, the American companys
traditional emphasis on features and customization became a liability. Vandelay was forced to
search for cost reduction opportunities. Internal investigations showed that actual
manufacturing times accounted for less than 5% of total lead times experienced. Large parts
of the remaining time were devoted to information processing. This was because the computer
systems in use across the firm to guide order fulfillment and production activities were poorly
integrated, and in some cases completely incompatible.
Problems were particularly acute in the following areas:
- Scheduling: One of Vandelays American plants made a variety of machined and stamped
metal parts which were used by the other North American assembly sites. The plant used an
outdated MRP system which required all data to be entered manually. Requirements from all
downstream users were keyed in at the beginning of each week, a task that often required
almost a full day. No other inputs were allowed during the week, and the plant was deluged
with complaints about its responsiveness.
- Order Management: Customer orders were taken manually by an inside sales organization in
each region (North America, Europe, and Asia), then routed via fax to the appropriate
production plant where they were keyed in to that sites order entry system. Faxes were
sometimes lost.
- Accounting: The manufacturing software was not integrated with the sites financial
package, so information such as labor hours charged, materials purchased and orders shipped
had to be entered into both systems. This introduced potential for error, and necessitated
periodic reconciliations.
Vandelays operational practices were as varied as their information systems. There was no
uniformly recognized bestway of performing business activities.
To alleviate these problems, Vandelay has decided to implement an Enterprise Resource
Planning (ERP) package. The company has chosen for the R/3 system from SAP AG.]
You have been hired as a consultant in this ERP project. Vandelays project team
management has expressed interest in the following questions:
What implementation method would be recommended in this situation and for what reasons?