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Name : Mohammed Hashim Ansari

Subject : Management Information System

Submitted : Prof. Sabir Sayed

Batch : Philip Kotler (MMS 1st )

Seat No : 146

Registration number : 2201820026

ERP System in PUMA


Introduction
This assignment gives an in-depth understanding of various phases involved in an
ERP system implementation and studies various challenges faced by Puma Inc.
when they decided to implement an ERP system in year 2000. Puma opted for an
ERP system implementation in order to streamline their business processes and have
a centralised system. Puma Inc.was founded by Bill Bowerman and Phil Knight in
year 1964 at Beaverton, Oregon (Motiwalla & Thompson, 2011). Initially named as
Blue Ribbon Sports (BRS) it was in year 1972 when the company introduced Puma
as a new brand of athletic footwear. Puma witnessed rapid growth since then and by
year 2005 Puma comprised of 26,000 employees working in facilities at Tennessee,
Oregon, Netherlands and North Carolina, around dozen Puma women stores, 200
factories and 100 above sales and administrative offices (Motiwalla & Thompson,
2011). Puma reported revenues of $ 13.7 billion in year 2005 and since then has
never looked back. Puma has a number of subsidiaries like Bauer Puma Hockey,
Cole Haan Holdings, Hurley International LLC, Converse Inc., Puma IHM Inc. and
Execter Brands Group LLC. By year 2004 the company had around 137 factories in
Americas, 252 factories in North Asia, 104 in EMEA and 238 factories in South
Asia. The company was created 650,000 jobs for the local communities thus
supporting the economy. Today Puma is recognised as world’s largest manufacturer
and distributor of athletic footwear and apparels. It is also involved in the
manufacturing of some of the world’s best sports equipment.
Purpose of Adopting an ERP System:
Puma initially started as a sneaker manufacturer however it was in early 1970s when
the company started selling its products to different parts of the world thus becoming
a global company. Puma’s supply chain as a sneaker manufacturer was highly
centralised but as the company grew its global presence it was unable to run on 27
different order management systems that were highly customised and did not
communicated well with each other and to the home office. Puma primary purpose
behind adopting an ERP system was a need to increase reach, profitability and
information availability.

Puma was focusing on rapid global expansion with facilities, factories,


manufacturing plants and sales offices in different geographic locations. Their
operations were organised in a manner that product designs, deliveries and factory
contracts were managed through their headquarters in Beaverton, Oregon. Owing to
this fact by year 1998 Puma had developed 27 different order management systems
that were highly customised and hardly communicated to each other or to home
office. Thus a centralised system was urgently required to increase Puma reach to
different parts of the world. ERP systems are highly integrated thus can be used as a
centralised system in multiple geographical locations.

Puma had a manufacturing cycle of nine month that lacked proper control. In order
to increase their productivity and operational efficiency it wanted to have
Pumabetter control on their manufacturing cycle and eventually reduce it to six
months. The integrated system architecture of ERP system help organisations
integrate data and process from various departments and locations so that products
are moved faster, orders are processed quickly, customers are invoiced accurately in
time and shipments are reconciled rapidly. Thus, an ERP system owing to its high
processing speed and data accuracy help increasing overall operational efficiency
and productivity.

An inability to access real-time information from different order management


system resulted in malfunctioning of Puma’s complete supply chain. Orders were
missed and shipments delayed resulting in huge losses. Puma thus needed a system
that could deliver real-time information with high accuracy; this requirement could
be easily met by implementations of an ERP system.
Implementation Strategies:
ERP system implementation is a complex process and involves high risk thus it is
very important to ensure that resources are effectively allocated and the chosen
implementation strategy best suits the nature and type of organisation (E.O'Leary,
2004). The process starts with the assessment of organisation’s culture, environment,
staff expertise and overall readiness. It is important to ensure that the assessment is
carried out in an open and honest manner. The process involves selecting the most
suited implementation strategy along with the identification and planning of various
implementation components. Hardware, Software and Human resources are the
three main ERP implementation components (Motiwalla & Thompson, 2011).

Hardware components comprises of all physical hardware used in the


implementation process. An ERP system uses powerful set of servers for supporting
production, development and testing environments. Key resources that are referred
to as hardware resources include servers like high-end multiprocessor systems, main
and secondary memory of several gigabytes and terabytes respectively, clients like
end-users, developers and IT support accessing the system and peripherals like
printers, networking hardware and print servers.

Software components refer to the set of operating instructions and logical programs
that are used to direct and control the activities of system hardware (Finney &
Corbett, 2007). It includes system software/ operating system platform, database
management system and application software.
People resources for an ERP implementation include end-users like clients,
employees, vendors and anyone who uses the system (J.Morris, 2011). IT specialists
like trainers, database administrators, developers and change management. Project
Manager is an important human resource who ensures that the complete
implementation team works in coordination with each other to achieve desired
business goals.

Once the hardware, software and people resources are identified it is important to
decide over important aspects of virtualisation, use of third part products, database
requirements and governance. Governance is an important part of ERP
implementation that is concerned with defining and outlining committees and
workgroups that will be responsible for different components of implementation,
how they interact and making decisions related to those components (Motiwalla &
Thompson, 2011). Different components of implementation include technical
development, functional components, hardware and software installation,
communications and reporting, project management, change management, budget
management, project owners and sponsors and escalation process. Roles and
responsibilities of implementation are divided among owners, project executive,
steering committee, application steward, chairperson, project management office,
project teams; project team leads and cross functional teams

Vanilla implementation and Chocolate implementation are the two most commonly
used implementation strategy (Addo-Tenkorang & P.Helo, 2011). Vanilla
implementation strategy is one in which organisations prefer to make considerable
changes to their business practices in order to fit the system instead of modifying or
customising the ERP system (E.O'Leary, 2004). This strategy is best suited for
businesses that have simple and common business practices. It is good for businesses
that lack the needed resources to build and change systems. Changing business
practices also serves as a competitive advantage in some situations. Chocolate
implementation is one in which organisations chose to customise or modify the ERP
system in a way that fits with the existing business practices (Finney & Corbett,
2007). It is a single-system instance thus is easy to maintain and support. It also help
in accessing organisational change as resistance to change and risk is greatly
minimised by customising the system so that it fulfils business needs. Modify the
ERP implementation strategy however require considerable focus on effective
knowledge transfer.

The case depicts use of chocolate implementation strategy by Puma to implement a


purchased single-instance ERP system. It helped in effective change management
and handling resistance to change. Business process re-engineering helped them
define performance based goals which was one of the driving force behind
successful ERP implementation.

Vendor Selection:
Vendor selection is a crucial step in ERP implementation as it is essential to ensure
that the selected vendor fulfils needs and goals of the organisation. It is important to
have a well-defined vendor selection process in place in order to ensure successful
implementation. There are a number of consulting firms that help businesses select
most appropriate vendor. Two most important criteria for evaluating an ERP vendor
is the degree to which the ERP fits the business functions and the ERP product
performance in the market (Motiwalla & Thompson, 2011). A high level ERP
purchase process involves following predefined series of steps starting from vendor
research and information gathering, evaluation of vendor demonstrations,
assessment of needs and requirements, request for bid development, analysis and
selection that include evaluation of bids, technical and functional evaluation,
detailed demonstrations from vendor, reference checks and development of total cost
of ownership. Next step is vendor negotiation where contracts are reviews and
changes done if needed and prices for software, maintenance, support and consulting
are finalised. Once all the above steps are completed the ERP system is purchased
from selected vendor.

ERP systems are afforded by number of vendors in the market however some of the
most recognised ERP vendors are; SAP is the market leader of world’s ERP market
with 24% market share and provide solutions for industries of all types and sizes.
SAP faces competition from other vendors like Oracle, Microsoft, IBM, Lawson,
SSA Global, Infor Visual, Epicor, Great Plains and Plex Online (Motiwalla &
Thompson, 2011). It is important to review vendor documented processes to identify
their system functionality. The two main documents to be views are data and
functional flow of business processes and table of functions performed in each
department also presenting priorities assigned to each function.

The case does not give enough information about the vendor selection process
followed by Puma. No specific ERP vendor is named in the case. It is important that
management of the organisation give enough time to evaluate the system, review
detailed demonstrations and communicate effectively with references and other
organisations using the system. As Puma was looking for a single-instance ERP
system which would centralise their operations SAP would have been the best choice
for them.

Knowledge Transfer
Before the Go-live it is important to ensure that proper training has been delivered
to end-users and the knowledge transfer process is almost complete (E.O'Leary,
2004). Once the ERP system goes live the organisation needs to undergo a
stabilization process of 60-90 days. It is important to ensure that there is well-defined
and continuous process in place which works effectively so that knowledge and
skills are transferred to employees and team members during the implementation as
well as stabilisation process. Development of a knowledge transfer plan is important
to ensure that knowledge is transferred effectively as implementation proceeds from
one phase to another. It helps ensuring that knowledge is retained, cost of support is
reduced by reducing number of support calls, faster learning is facilitated, system
capabilities are enhanced and that system is used correctly.
Ineffective knowledge transfer and lack of proper end-user training was the main
reason behind the failure of demand planning system at Puma. They realised their
mistake and so in case of ERP implementation they ensures that employees are not
allowed to work on systems until they undergo a mandatory training for 140-180
hours. End-users were completely trained before the go-live which made them use
the system properly.

Critical Success Factors

Apart from choosing a perfect implementation strategy, effective vendor selection


and focused knowledge transfer it is also important to ensure that effective human
resources and leadership team is allocated to handle different activities of ERP
implementation (E.O'Leary, 2004). Some other factors that are critical for overall
success of the project are:

 Decision making process: It is important to have a well-defined decision


making process which minimises risk related to scope, productivity and
efficiency (Finney & Corbett, 2007). Puma had a strong decision making
process that helped them identify faults and according plan improvements in
demand planning system.

 Project Scope: It is essential to identify what is actually expected from the


project. Puma wanted ERP system to achieve business goals and was not at
all concerned about getting the systems running. They focused on
performance which helped them make the process successful
 Teamwork: Project team comprises of internal employees and external
consultants who need to work in coordination with each as a team. Effective
team work helped Puma achieve desired business goals.

 Change Management: Effective change management is important for


handling resistance to change shown by employees. Business process
reengineer helps Puma in defining performance based goals and accessing
organisational change in an effective manner.
Puma opted for single instance ERP system with a phased roll out over six years.
They adopted modify the ERP (chocolate) implementation strategy which proved
out to be successful as their goal was to achieve desired business goals and not to
get the systems running. Puma learned from their mistakes which resulted in
failure of demanding planning system implementation thus gave due importance to
knowledge transfer in case of ERP implementation. Puma lacked required
expertise and resources for an effective ERP implementation as presented in the
case thus vanilla implementation strategy could have been a better choice for them.
Vanilla implementation strategy is best suited for companies whose business
practices are not unique and all are followed in same manner across different
locations. Hiring an external consultant with expertise in ERP implementation
would have helped them complete their project within the allocated budget. As
Puma comprised of large number of employees working in different geographical
locations they needed a centralised ERP system with integrated functional modules
that provided high cross departmental visibility and real-time information instead
of two different systems. Also one of the best advantage of vanilla implementation
is that it involves almost no customisation of the ERP system, lesser the
customisation less are the risks involved in implementation and so cost and time
involved is also comparatively less. Highly customised systems are relatively very
difficult to manage and call for a reimplementation every time business processes
are altered. The changes made in the business practices during vanilla
implementation also serve as a competitive advantage in today’s dynamic
marketplace.