Business Proposal: Recommendation for Implementation of the SAGE Enterprise Suite. Debbie Miksiewicz. Elaine Kithcart BSA 375. Mr.

Transcription

1 Business Proposal: Recommendation for Implementation of the SAGE Enterprise Suite Debbie Miksiewicz Elaine Kithcart BSA 375 Mr. Andrew Mahaney April 17, 2011

2 Business Proposal 2 Table of Contents Introduction 3 Business Need 4 Figure 1: On-Time Delivery for FY Figure 2: Types of Errors in Shipments to Customers in FY Figure 3: Time to Customer Problem Resolution 7 Business Purpose 8 Constraints 8 Assumptions 9 Business Requirements 10 Figure 4: Existing Telco Supply Incorporated Network. 12 Figure 5: Manufacturing System Flow Diagram 13 Business Solution Design 14 Figure 6: Software functionality comparison and projected first year cost 14 Recommendation 18 Figure 7: Implementation cost versus Penalty for FY References 20 Glossary of Technical Terms 21

3 Business Proposal 3 Business Proposal: Recommendation for Implementation of the SAGE Enterprise Suite Introduction The goal of this project proposal is to create an executive level summary of the evaluation and resulting recommendations for the implementation of a new Manufacturing Resource Planning system. SAGE Enterprise Suite is an MRP system that will satisfy our growing MRP needs, in addition to being able to proactively track open purchase orders. Our company, Telco Supply Incorporated, is a major supplier of telecommunications equipment and supplies to customers in the telecommunications industry. With the rapid expansion enjoyed in this industry over the last few years, we have exceeded the materials resource planning capability of our existing MRP system, ASK. This proposal sets forth recommendations relating to the acquisition of SAGE Enterprise Suite, an MRP system more suited to our current and future business requirements. SAGE Enterprise Suite is a flexible, scalable (to 1000 users), and robust integrated series of applications covering all areas of business for the enterprise. These areas include customer relationship management (CRM), accounting and financials, distribution, manufacturing, human resources, payroll, enterprise reporting, and electronic commerce.

4 Business Proposal 4 Business Need Customer service is an important factor in the continuing success of our company. Repeat customers insure a stable customer base, so it is imperative that we attend to the needs of this population. One of the most important indicators of customer satisfaction is measured in terms of overall service quality. Recent customer satisfaction surveys have given us a wealth of information on how our customers perceive our customer service. Our systems analyst recently concluded a one-year study on the needs of our specific customer base. Using data questionnaires, personal interviews, and onsite reconnaissance, our analytical team gathered data in a multitude of areas focusing on internal efficiency to external customer satisfaction. With this information, a root cause analysis was performed on the three most important factors as determined by our customer base. These items are as follows: On time delivery, accuracy of delivery, and customer problem resolution. First, our On-time delivery was rated as the item requiring the most improvement. Our customers have expressed a need to ensure the timely arrival of telecommunications installation materials shipments to them from our facility. Ontime delivery is critical to the scheduling of their work activity, and delays in material can cause significant financial losses. In this industry, the Public Utilities Commission exacts still financial penalties upon installation companies that cannot make the required commitment date. Clearly this is of great concern to our customers. Figure 1 shows the current on time delivery, and highlights the need for

5 Business Proposal 5 improvement. Figure 1 shows us that fully 35% of our current shipments are not on time, and of those, 20% incur financial penalties that we are responsible to pay. Figure 1: On-Time Delivery for FY2001. On-Time Delivery On-Time 65% Late 15% Late with penalty 20% Root cause analysis shows that the order and delivery tracking capabilities of our current system do not adequately address the issue of on time delivery to these critical customer sites. In the current MRP system, order visibility is lost until after the anticipated shipping date has passed. There is no capability to proactively schedule orders and proactively track them through our materials process. Only when a customer shipment does not arrive at its intended destination on time are we made aware of potential problems, and clearly, this is too late for the customer. Our second major concern is how to correct shipments that are late, or missing items due to various causes. Once it is realized that a shipment is late, we often incur additional shipping costs for special handling, rush deliveries, and expensive overnight delivery in an effort to meet the customer s requirements. Further costs absorbed by our company in the payment of late penalties or fines imposed on our

6 Business Proposal 6 customers by their customers, typically the Public Utilities Commission. While it is good public relations for us to offer to pay these fines when the responsibility for the late or missing shipments lies with us, it is a very costly policy, and one that affects not only our profitability, but our standing as a reliable supplier in the industry. Fines associated with these problem shipments cost the company $93,000 in FY2001. In the case where items may be missing from the shipment, our system allows us no method of verification of what was actually shipped. There is no final shipment tracking functionality. We incur additional costs because we cannot prove nor disprove that whether we actually shipped the item, therefore we end up shipping the same item again. Figure 2 shows the types of errors in customer shipments for the one-year period of As shown, the largest area of concern is missing or incorrect parts, all which can be directly related to the current control system. Nearly 50% of the total number of shipments have some type of error. Figure 2: Types of Errors in Shipments to Customers in FY2001 Types of Errors in Shipments to Customers Incorrect 38% Missing Parts 43% Damaged 19%

7 Business Proposal 7 Our third major concern is how to address problems once they occur. Our customers need quick resolution, yet our current system is incapable of allowing us to make corrections once an order is completed. Once an order is shipped, it is closed in the system, and we must reopen a new order to correct any issues or errors we might have had with the original order. This causes conflicts in our inventory control systems, as orders can only be complete, and there is no partial shipment capability that would give us the freedom to correct errors. In addition, the current system does not allow us the functionality to quickly resolve these customer issues. It takes a minimum of five working days to process an order using the current system, something that can prove disastrous to a customer s schedule. Figure 3 shows that in FY2001, the typical replacement order took an average of 17 days to conclude, with a median of 10 days per order typical. When you consider the cost of daily penalties sometimes reaching $5000 per day, this becomes a clear issue in need of resolution. Figure 3: Time to Customer Problem Resolution Time to Customer Problem Resolution (days) Number of Customer Problems Time (Days)

8 Business Proposal 8 The acquisition and implementation of a state of the art order tracking system will not only greatly increase our customer response capability, the return on investment benefits realized will offset the cost of the new system within 2 years. The SAGE Enterprise Suite system described in this proposal has the full functionality needed, and is the most cost effective solution, as detailed later. Business Purpose The purpose of this new MRP system will be to increase overall company efficiency, not only in the customer service areas, but also in the manufacturing, order entry, and materials control areas. Our company has a need for a system that accurately and proactively tracks our orders through our process, and this system is capable of that functionality. In addition, this system will help us to ensure that our customers critical need for timely delivery of ordered goods is managed in a continuous and proactive manner. Constraints Manpower: While every new system has a learning curve, we do not expect manpower to be an issue with this implementation. During the transition, personnel dedicated full time to the project will be assigned to train in-house personnel, thus no offsite training will be required, and this will allow us to make the best use of the existing personnel. There will be some overlap of responsibilities during the transition phase, but we do not expect this to seriously impact our overall functionality. Budget: As with most projects, the amount of funding is severely limited. Once the system is purchased, there are very few additional dollars to be allocated to this project for implementation and training. The project must be completed using existing

9 Business Proposal 9 personnel, and current hardware and software platforms. The estimated cost of this migration will be $75,000, over a one-year period. Schedule: The projected schedule allows 90 working days for the implementation of the new MRP system. Project management will consist of team leaders who will report back to the main project team on a weekly basis, and who will be responsible for scheduling. The team leaders will be responsible for proactive management of this implementation project, establishing and meeting critical milestones as the project progresses. Training: Due to the lack of additional funding for implementation and training, all training materials must be developed in-house by the few chosen personnel who will be initially trained on the software. The goal of the trainers will be to develop welldocumented procedural documentation on each step required in the use of the new systems, there by providing a reference manual for ease of use. This manual will contain step by step diagrams of the complete training process. Environmental: There are no anticipated changes required in floor space, personnel, or equipment at this time. Legal: There are no anticipated legal issues associated with the use of this software in this application, and we anticipate no other issues. All licensing agreements are in place. Assumptions Personnel: We anticipate that our existing personnel will have the technical expertise to both operate this system and train new users. Equipment: We anticipate that the SAGE Enterprise Suite software package will be compatible with our existing hardware platforms, and no additional hardware or software will need to be obtained.

10 Business Proposal 10 Order tracking: We anticipate that the information in our current system can be uploaded into this new system, and that we will incur no unexpected issues as we move towards implementation. Our initial implementation will be done in parallel with our existing system, and once confidence is achieved, the original system will be terminated. Management Commitment: We anticipate that management will be amiable to assigning required resources, primarily manpower, to this project, in order to ensure the fastest and most accurate changeover can occur. Business Requirements As part of the customer satisfaction discovery process, our systems analysts also were required to review our internal processes and available resources. A full systems analysis is critical in any process evaluation, and our analysts first began by studying our process from order entry through customer receipt. Manpower, machines, software, and processing power were all evaluated for accuracy and efficiency. Each item was evaluated in terms of its ability to meet our business and informational requirements, and prioritized as to importance. Each item has also been evaluated in terms of its technical efficiency, operational benefits, and economic feasibility. Details are provided in the following paragraphs. Because the new software package would be installed upon existing hardware platforms, all fully secured in house; we do not anticipate any security issues. The corporate Intranet provides sufficient bandwidth, and indeed, we expect to see decreased bandwidth usage, as this new platform is more efficient. The evaluation of our current hardware shows that these platforms are adequate to the task of this new software package. Figure 5, our Manufacturing System Flow Diagram displays our current manufacturing, and ordering processes including the MRP/DRP (Manufacturing Resource

11 Business Proposal 11 Planning/Distribution Requirements Planning) process. With the addition of the MRP/DRP end users will be able to generate specific material or distributions plans for each manufacturing warehouse or distribution center. This software package allows for planning to provide what are simulations of the material and distribution plans. The addition of the DRP portion of the process allows for the managed and actual inventory transfers from centralized warehouse to subsidiary warehouses. The capable-to-promise function of this software package can be used during sales order entries for MRP/DRP customers. The CTP (Capable-to-promise) function calculates either the quantity of items that will be available by specified date, or the data that a specified quantity of items will be available. Lead-time and production times for all finished goods, subassemblies and raw materials can be calculated. The multiple access points feature of this software allows end users to view material requirements specific to a selected work order or sales order. The addition of this software and planned process will enhance the corporations current system. Because this software integrates with our existing hardware and software platforms, no additional costs will be incurred in this area. Our manpower is adequate, and no additional hiring is anticipated for this new software addition. Figure 4 shows the current Telco Supply Network.

12 Figure 4: Existing Telco Supply Incorporated Network. Business Proposal 12

13 Figure 5: Manufacturing System Flow Diagram Business Proposal 13

14 Business Proposal 14 Business Solution Design Our system analysts have discovered after their complete review of our internal processes that there is a critical need to improve several areas of our current MRP process. Our analysis considered several software packages; however, most that were comprehensive were out of our budgetary range. There are three packages commercially available that would suit our needs, with the differentiating factor being cost and additional functionality. Figure 6: Software functionality comparison and projected first year cost Software Package ASK 4th Shift Sage Functionality Available CRM (Customer Relations Management) No Yes Yes Accounting/financials Yes Yes Yes Distribution Yes Yes Yes Manufacturing Yes Yes Yes Human resources No No Yes Payroll No No Yes Enterprise reporting Yes Yes Yes Projected cost for first year $50,000 $90,000 $70,000 In figure 6, we see that while Sage falls mid-price between ASK and 4 th Shift, it offers more functionality per dollar. In addition, there were several specific features making it more attractive to our specific business needs, which are detailed here. MRP/DRP Sorting Selection- This process addition allows for our material planners to easily customize their plans prior to MRP generation. Process improvements under sorting selection are increased capability for sorting material and distribution plans by item or location. Filters allow users to sort and select multiple criteria such as buyer codes, item ids, item classes, item types, purchase product line, and warehouses.

15 Business Proposal 15 Addition of a user-defined demand time fence that can be set to freeze a period of time to prevent planned orders from interfering with current production and distribution schedules. DRP and CTP: The addition of DRP and CTP which assist in the managing and transferring of orders from feeder warehouses to subsidiary warehouses and run capableto-promise (CTP) inquires during sales order entry. Manage planned and actual inventory transfers from centralized warehoused to subsidiary warehouses. Manage the supply chain by establishing relationships between manufacturing facilities, main warehouses, and subsidiary warehouses. The capable-to-promise function is available during sales order entry for MRP/DRP customers. The CTP feature calculates either the quantity of items that will be available by specified date or the date that a specified quantity of items will be available. MRP Calculations- The addition of Sage Enterprise Suite will allow for the use of advanced replenishment formulas and demand forecasting principles something that our company has lacked. This will increase the accuracy of material and distribution plans. MRP/DRP will enable our company to determine the total lead-time production times for all finished goods, subassemblies and raw materials. Demand calculations will be based on demand per business day as to the current demand per month. This will allow for our company to be able to handle customers whose business is seasonable, or that has industry specific requirements.

16 Business Proposal 16 The addition of the Sage Enterprise Suite and the combination of MRP/DRP will allow our company to consider safety stock, min/max quantities and transaction data from sales orders, work orders, purchase orders and inventory management. Critical Planning Information: The addition of the planning screen option will provide one-click access to item and period information eliminating the current lengthy that are necessary to find such information. The planning screen will display summary and detail item information including the onhand balances, adjusted on-hand balances (which would include safety stock), and warehouse location of the item. With the use of this new information our planning department will be better equipped to plan future production schedules with greater accuracy. The availability of MRP/DRP exception messages that can be sorted by both the severity and the message type will all planning access to new information that they had to previously acquire form other work groups. The old process was time consuming and many times unsuccessful. Single-Screen Planning: Single screen planning will allow end user to generate actual orders and firmed orders from a single point of entry. This addition eliminates current process that has various order entry points. The use of the MRP/DRP feature will allow for the creation of purchase orders, field work orders, and the transfer of existing orders. All of these features can now be accessed from a single screen through the use of the single screen-planning feature.

17 Business Proposal 17 The addition of an automatic feature that will flag late orders in a manner for quick identification will help eliminate our current problem orders that reaching the customer in a timely manner to meet their installation date. Planned orders can now be easily added to the production schedule through a new automated process eliminating the need for the current manual process. Multiple Access Points: One of the most useful new features of this software addition will be the multiple access point. Prior to the addition it was a lengthy process just to access various portions of the current system in use. MRP can be accessed from the work order or the sales order system when the need arises to view material requirements specific to a particular work or sales order. The purchase order systems also includes a link to MRP/DRP to view material and distribution requirements for items on the current purchase order. The addition of the new Sage Enterprise Suite-MRP/DRP software will improve inventory-tracking capabilities, in addition to manufacturing production processes. Service tracking improvements lie with the addition of the feature that will flag late orders for quicker identification. Late orders can be identified quickly. The problem that caused the situation can be resolved, and we can ensure that our customers will receive their material in time to meet their manufacturing, and regulatory needs. The use of the single-screenplanning feature, and the capable-to-promise function should eliminate any future service tracking issues.

18 Business Proposal 18 The capable-to-promise function will calculate the availability of the ordered item when the order is placed, and if that item is not available it will allow our sales force to provide a real time shipment date to our customers. The capable-to-promise function used with the single-screen-planning portion of the software that offers the late order identification will ensure that our customers receive their material at their site when it was promised. The addition of this customized software will allow our corporation to truly become a forerunner in the telecommunications manufacturing industry. Recommendation Our evaluation of the Manufacturing Resource planning system currently used by Telco has shown us our inefficiencies primarily in the following areas: On time delivery, Accuracy of delivery, and Customer problem resolution. We have shown where these defects have their origin, and have discussed how these defects cost us both financially and in customer image. It is critical to the continued success of this organization that these issues be resolved in a most cost effective and timely manner. An analysis of the SAGE Enterprise System shows it has the functionality required to meet these goals, and to increase the overall efficiency of our organization. Several points have been noted above concerning specific solutions to defined issues. While other software solutions also provide much of this functionality, the dollar per functionality is higher in this package because we can use all of the functions. In addition, because the solution is a totally software solution, we are able to utilize existing hardware, and therefore keep to the requested budget limitations while simultaneously fulfilling the corporate needs. Implementation of the SAGE Enterprise System will be accomplished in stages over a 4-month period. The phases are outlined below:

19 Business Proposal 19 Phase 1: System modeling and specific database requirement analysis. Phase 2: Initial user training. Implementation of pilot system. Phase 3: Parallel implementation and testing with existing system. Phase 4: Cut over to new system, removal of existing system. The following figure, Figure 7, shows the Implementation costs versus the cost of penalties incurred over a one-year period. Figure 7: Implementation cost versus Penalty for FY2001 As you can see from the above graphic, the cost associated with simply purchasing the new software is still lower then the current fines we are now paying due to order issues. This does not address other costs we anticipate savings from, such as increased efficiency, accurate orders, and non-tangibles such as employee satisfaction. Having completed the study of several MRP systems, and having narrowed these choices to the three discussed in the paper, and now make the recommendation to acquire SAGE Enterprise Systems as a fully functional, feature rich, and cost effective solution.

20 Business Proposal 20 References Best Software Incorporated. (2000) SAGE Enterprise Suite [Computer Software]. Retrieved January 10, 2001 from the World Wide Web: Curtis, G. & Hoffer, J.A., & George, J.F. & Valacich, J.S. (2000). Introduction to Business Systems Analysis. Boston: Pearson Custom Publishing Computer Associates (2000) CA/ASK-MAN/MAN [Computer Software]. Retrieved January 10, 2001 from the World Wide Web: Fourth Shift (2000) Fourth Shift ERP System Software [Computer Software]. Retrieved January 10, 2001 from the World Wide Web:

21 Business Proposal 21 Glossary of Technical Terms Term Definition 4th Shift Manufacturing Resource Planning Software ASK Manufacturing Resource Planning Software BOM Bill of Material CAD Computer Aided Design CPR Customer Problem Resolution CRM Customer Relations Management software CTP Capable to Promise DRP Distribution Requirements Planning ECM Engineering Change Management FY2001 Fiscal Year 2001 MRP Manufacturing Resource Planning Software PO Purchase Order SAGE Manufacturing Resource Planning Software WIP Work in Progress WO Work Order