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SAP for ATLAM

MAF 680
INTEGRATED CASE STUDY

Prepared by:
NUR ATIQAH PUSPA BT SARI

2011272756

AC 220 8K
Prepared for:
ASSOC. PROF. DR. MOHD ISMAIL RAMLI

EXECUTIVE SUMMARY
ATLAM is the maritime industry's diverse workforces establish on 15 TH August 1981
and become private on 1st January 1997. ATLAM is a subsidiary of Petra Group Companies.
Before 2001, ATLAM relied on a customised single-user system which only for recording
accounting entries purposes and facing deficit cash flow. End of year 2001, Zulkifli Osman,
Finance Manager of ATLAM has been responsible to organize new project on accounting
system. He has to choose whether he want to implement SAP or ACCPAC system. Key
Performance Index (KPI) setting is one of the most important aspects that private company
will focus on to improve and make huge changes to their company. We can clearly see that
EnZul is trying to make changes by implementing the SAP system which is parallel to the
parents (PETRA) system. However, argument arises between the project team. Lim, User
Representative did not agree with decision of EncikZul. Lim resist changing and making an
argument in term of cost and users acceptance.
Senior Manager of PETRA had been mentioned that the cost of implementing the
SAP in ATLAM was not the main concern. This is because we have the project sponsor
which is Faris. The reason he sponsored the project is because he want to promote the SAP
system to the ATLAM. It is good for ATLAM to accept the sponsor since they cannot afford
the expenses of implementing SAP system. There might be no sponsor in the future if
ATLAM did not implement the system now. In order to ensure the decision of implementing
SAP system is feasible, we need to evaluate and analyse the SAP system first.
In order to implement the SAP without wasting more time, encikZul terminate Lim in
this project. He should terminate Lim in this project because Lim might be whistleblower. Lim
might influence the staffs not to accept the new system if we not terminate him. In real world,
staffs have no power to reject what the upper level management asked to do. En.Zul has
acted bona fide in performing his jobs. He has the same objective with the company which is
to reduce the deficit of the company. EncikZul decision to terminate Lim is right to ensure
SAP could be implemented. Lim should accept the work since his position is below than
EncikZul.
PROBLEM STATEMENT
-

Implementation of accounting system whether encikZul want to implement SAP or

ACCPAC system in ATLAM Company.


Termination of Lim from being part of project team members in SAP project.

ALTERNATIVE SOLUTION

In order to ensure that implementation of SAP system is a good decision, EncikZul


are advised to conduct feasibility study. There are three feasibility analyses that need to be
considered in implementing SAP system which are economic, operational and technical
feasibility studies. I think termination of Lim is needed. Lim is one of the senior staff in the
company. He is quite good and very critical thinker. The sad thing is that he is negative
minded. He always sees the negative side effect of the project. I assume that people who
are negative minded is very narrow and scared to make changes. Lim know that sooner or
later, SAP system will be implemented too. He is just the user, he has to accept the changes
that the upper level implemented. I found that there are several ways to overcome staff
resistance to change. First way is education and communication. Top management should
communicate early and often to the staffs. So that they can mentally prepared and motivated
to accept the changes. Second way is facilitation and support. The management should
provide good facilities and give full support to the staffs. So that they are more encourage to
do the job efficiently.
CONCLUSION
ATLAM has to perform capital budgeting analysis to ensure the implementation of
SAP can bring a greater benefit to ATLAM. This includes Net Present Value (NPV), After-tax
Cash Flows as well as Internal Rate of Return. After taken into consideration of all the
assumption and calculation, I noticed that the result of NPV shows a positive value. After-tax
cash flow shows an increment result year by year. The IRR of 28.86% also shows positive
result which is higher than required rate of return, 25%. Thus, the calculation is quite strong
and acceptable for the company to implement the SAP system. (Further calculation is on
appendix). I dont think ACCPAC is a relevant to implement in ATLAM since it is lack in
performing financial reporting.
IMPLEMENTATION
Gantt chart is developed to ensure successful implementation of SAP. Planning is
the most important element. This is because fail to plan lead to the plan to fail. Analyse the
system by conduct feasibility analysis and cost benefit analysis. Implementing involves
review, testing and training. The system need to be reviewed by the experts and test first
before they train the staffs. Final preparation required review staff performance in using the
SAP system. Give feedback and motivate them to be more efficient in using this system.

APPENDI
X

Year

Cash Flow

PVIF 10 %

Present Value

802,385.94

0.9091

729,449.05

1,273,766.71

0.8264

1,052,640.81

1,908,158.03

0.7513

1,433,599.13

2,044,904.3

0.6830

1,396,669.64

2,468,876.84

0.6209

1,532,925.63

2,866,994.71

0.5645

1,618,418.52

Total Present Value


CALCULATIONS:NET PRESENT VALUE (NPV)

Net present value (NPV)


= RM 7,763,702.77 RM 4,344,390.00
=RM 3,419,312.77

7,763,702.77

*The present value is RM 7,763,702.77 and the initial outlay is only RM


4,344,390.00, hence the net present value is RM 3,419,312.77. Based
on the calculation above, the value of NPV is positive. This illustrate
that SAP is strongly enough to implement in the company.

CASH FLOW FROM YEAR 1 TO 6


CASH INFLOW

Year 1

Accountants time

Year 2

Year 3

Year 4

Year 5

Year

400,000

800,000

1,200,000

1,600,000

2,000,0

1,200,00

1,400,000

1,600,000

1,800,000

2,000,

500,000

900,000

1,200,000

1,500,000

1,800,0

1,200,00

1,500,000

1,500,000

1,500,000

1,500,0

7,300,

efficiency
Technical cost savings

600,000

0
Process & procedures
Working capital savings

900,000

0
TOTAL COST

1,500,00

3,300,0

4,600,00

5,500,00

6,400,00

SAVINGS

00

CASH OUTFLOW

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

150,000

200,000

225,000

250,000

250,000

100,000

160,000

180,000

560,000

600,000

640,000

300,000

420,000

490,000

560,000

600,000

640,000

Average SAP license


cost
Cost to convert old
data to new data

Cost of overhead

Cost of system

60,000

120,000

130,000

140,000

150,000

160,000

260,000

300,000

340,000

380,000

400,000

800,000

900,000

1,000,000

1,100,000

1,300,00

Maintenance and
firewalls
Cost of hardware
Expansion
Cost of training

500,000

0
TOTAL COST

960,000

1,910,0

2,200,00

2,825,00

00

3,080,000

3,390,0
00

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

540,000

1,390,000

2,400,000

2,675,000

3,320,000

3,910,000

Depreciatio

1,477,092.

974,881.12

643,421.54

424,658.21

280,274.42

184,981.12

n cost

60
824,336.53

544,062.11

359,080.99

Earnings
before tax
and
depreciati
on

(34%)
Net Book

2,867,297.

1,892,416.

1,248,994.

Value after

28

75

Earnings

(937,092.

415,118.8

1,756,578

2,250,341

3,039,725

3,725,018

Before tax

60)

.46

.79

.58

.88

Tax rate

(262,385.9

116,233.29

491,841.97

630,095.7

851,123.16

1,043,005.

(28%)

3)

Earnings

(674,706.

after tax

67)

depreciatio
n

29
298,885.6

1,264,736

1,620,246

2,188,602

2,682,013

.49

.09

.42

.59

Depreciatio

1,477,092.

974,881.12

643,421.54

424,658.21

280,274.42

184,981.12

n reversal

60

After tax

802,385.9

1,273,766

1,908,158

2,044,904

2,468,876

2,866,994

cash flows

.71

.03

.3

.84

.71

The after-tax cash flows for the implementation of SAP is increase year
by year.

INTERNAL RATE OF RETURN (IRR)


Rate 1-IRR

= NPV 1-0

Rate 1-Rate 2

27 IRR
27 29

27 IRR
-2
27 IRR

NPV 1 NPV 2

= 225,319.67 0
225,319.67 (- 16367.56)

= 225,319.67
241687.23
=0.9323

-2
27 IRR
IRR
IRR

=-1.8646
=27 + 1.8646
= 28.86 %

IRR is higher than required rate of return.

GANTT CHART