Real World Case #5

Chapter 10

Page 376

General Motors
Crystal Crockett Johnny VanHorn Stacy Adkins Reanetta Walker Christian Gasse Thilo Grabo

GM History

H.L. Hamilton and Paul Turner incorporate Electro-Motive Engineering on August 31, 1922. Electro-Motive sets up headquarters in Cleveland, Ohio. 1923- Hamilton sells the first M300 rail motor car to the Chicago & Great Western and another to the Northern Pacific. 1925- Changed the name to Electro-Motive Corporation and during the first full year of operation, sold 27 railcars. Horsepower also increased to 275 hp and EM opened a new sales office in New York City.

Reanetta Walker

GM History cont

1930- General Motors Corporation purchases Winton Engine on June 20 and Wintons chief customer, Electro-Motive on December 31. These two new GM Divisions play a key role in the GM Research and Development efforts of Charles F. Kettering's two-cycle lightweight diesel engine project. The diesel-electric locomotive era begins on April 7, 1934 when GM EMD's first diesel-electric streamlined train rolls out of the Budd Manufacturing plant in Philadelphia.

Reanetta Walker

More GM History

GM EMD breaks ground on a 74 acre site for a 200,000 sq. ft. locomotive plant in LaGrange, Illinois on March 27, 1935. General Motors expands its locomotive manufacturing capacity in North America by opening the GM Diesel Division plant in London, Ontario, Canada. Another historic milestone is reached ---In 1983, the production of the 50,000th GM powered locomotive. In 2000- The largest single order for locomotives ever placed with EMD, by the Union Pacific Railroad, is also their largest order ever given in their history.

Reanetta Walker

Products

Services

Diesel Engines Marine Equipment Stationary and Industrial

Locomotive Maintenance Locomotive Management Leasing Training Welding

Crystal Crockett

GM-Corporate Officers

Crystal Crockett

General Information
General Motors Corporate 2002 Financials

Net Income=$1.7 billion Annual Earnings Per Share increased to $3.35 from $1.77

Crystal Crockett

GM Locomotive Group had several problems during the rollout of SAP R/3 and the supply chain system.

Effect

Order backlogs and fulfillment cycle times still are not at levels that fully meet customer statisfaction.

Handling

Problem
Recreation
The $ 2 billion GM subsidiary hired new consultants to fix the ERP & SCM Systems integrator completed the initial rollout.

Who ?

SAP Software had to be reconfigured, flushed, and repopulated with clean data.
Thilo Grabo

GM Locomotive installed the SAP R/3 and SCM system to improve its financial reporting, its ability to forecast spare parts needs, and to order entry procurement.

However, the software was not configured well enough to match internal business processes, and legacy mainframe data were not properly formatted for the new system.

It was a disappointed experience for GM.

There were no problems with R/3 software itself, but the applications were not properly configured to meet GM needs.
Statements of David Scott, Executive Director of the GM ElectroMotive Division.

GM spent a lot of money and expected to get something for it, and got something else instead.

The aftermarket department could not accurately forecast demand or ensure the right level of parts inventories.
Thilo Grabo

The materials supply and forecasting modules in the ERP system were especially troublesome. The configuration did not reflect the complexity of the distribution process of supply parts worldwide.

Statements of Mike Duncan, Director of Worldwide Sales & Development, GM ElectroMotive Division.

Most operations have returned to normal.

The Technology Solutions Co. helped us to reconfigure the inadequately formatted data which did not run on SAP R/3.

Nevertheless, the major start-up problems with the SAP R/3 Software has nothing to do with the software itself. GM still plans to install SAPs ERP Software for other operations and departments.

However, in future the GM Locomotive Group is also outsourcing SAP-related application support, end-user training, and follow-on software implementation for new ERP Systems to Technology Solutions Co.

Thilo Grabo

Question #1

GM Locomotive says the problem wasnt with the ERP software. Then what did cause the major failure of their ERP system?

GM
Locomotive
SAP R/3 ERP System Consulting Firm Legacy Mainframe

Applications were not configured well enough to match GMs internal business processes Legacy mainframe data were not properly formatted to work with the SAP system Materials supply and forecasting modules in the new ERP system were not constructed to reflect the complexity of the distribution process
*Poor Planning
*Consulting Firm Oversights
Stacy Adkins

GM
Locomotive
SAP R/3 ERP System Legacy Mainframe

As a result-

The aftermarket department couldnt accurately forecast demand

They could not ensure that it had the right mix of inventory parts on hand Production literally came to a halt

Stacy Adkins

Question #2
What major shortcomings in systems implementation, conversion, or project management practices do you recognize in this case?

The major shortcomings occurred in the pre-implementation phase and might be divided into technical-related (1) and HRM-related factors (2): (1) Technical-related Factors:

Conversion Process

Data Compatibility

Problems

Testing

Configuration
Christian Gasse

(2) HRM-related Factors:

Training BPR

Training Applications

Problems

Briefing of Consultants

Project-Team Building

Note: Interdependencies in between the factors are possible and might cause some factors to become redundant.
Christian Gasse

Question #3
What would you advise GM Locomotive do differently to avoid similar problems in their upcoming ERP implementations? Explain the reasons for your proposals.

S. Mark Young
Implementing Management Innovations Successfully

1). The Importance of Organizational Culture 2). Only Implement those innovations consistent with current corporate, divisional, and plant strategies. 3). Dont attempt an innovation if an organization is simultaneously engaging in downsizing. 4). Spend as much time and resources on managing the human side of change as the technical side 5). Educate and train employees at all levels of the organization regarding the purpose and benefits of the innovation 6). Use medium and long-term performance measures to gauge innovation success 7). Generate useful and understandable reports to illustrate the effects of change programs 8). Make explicit agreements regarding when and if existing information systems should be turned off once a new system is in place Johnny VanHorn