UNIVERSITAS INDONESIA

CASE STUDY 3
ERP HELPS PRODUCTIVITY AT NORTHERN DIGITAL INC.
SISTEM INFORMASI DAN PENGENDALIAN INTERNAL
Chitarani Kartikad!i " #$%&'($&)(
D*i S+*anti
Karina A,+ Ditriani " #$%&'($-#3
FAKULTAS EKONOMI
PROGRAM MAKSI"PPAK
SEPTEM.ER (%#$
1
CHAPTER I
INTRODUCTION
Northern Digital Inc. (NDI) in Ontario, Canada, is a supplier of 3D/6D measurement products.
The relatiel! small compan! emplo!s "# people and generates oer $%# million in annual
reenue.
Th Pr/012
NDI faced a challenge &hen rapid gro&th and aging technolog! threatened to stand in the &a! of
compan! goals. Instead of ena'ling operational improements, NDI(s e)isting s!stems &ere
impeding progress. *)isting technolog! &as causing pro'lems, such as+
,. -issed delieries and creating a high num'er of 'ac. orders
%. Inentor! control &as poor and the planning &as inaccurate
3. Customer satisfaction &as at ris. and internal morale &as slipping
/ith some customers e)pecting shipment in as much as nine months and others e)pecting
shipment in as little as nine da!s or een less, more sophisticated and accurate planning has 'een
critical. /ith almost t&ent! !ears in 'usiness, NDI0s &ell1esta'lished reputation for high12ualit!,
high1performance products &as at ris..
Th S/1+ti/n
NDI selected an *34 (from Intuitie -anufacturing 5!stems) 'ased on factors that directl!
supported corporate o'6ecties. Intuitie *34 proided a leel of s!stem functionalit! that could
immediatel! improe inentor! management and the e)panda'ilit! and fle)i'ilit! to support
NDI(s gro&th. The *34 includes+
,. Complete planning s!stem
%. 7utomated inentor! management
3. *nhanced technolog! infrastructure
8. The s!stem(s leel of ease of implementation
9. The s!stem(s leel of ease of use
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Th R*+1t*
The results of implementing Intuitie *34 s!stems in Northern Digital are as follo&s+
,. Improing inentor! management
%. Dou'led the inentor! turns and e)pectations are that the compan! &ill 'etter that in the
near future
3. Increasing reenue, from $,# million to oer $%# million &ith little increase in inentor!
alue
8. 3educed order c!cle time for their flagship product, from four months to four &ee.s
(Improed almost :#;)
9. Improed planning capa'ilities
6. <etter serice for their customers
=. Improed customer delier!
:. 7'le to understand &hat &as in stoc., &hat &as needed, and &hat the! &ere 'u!ing
". 5upporting the gro&th strateg! 'ecause of the s!stem0s leel of ease of use and the
s!stem0s scala'ilit! (7llo&ing the compan! to e)pand from 9 users to %9 users &ithout
&orr!ing of the constraints on their 'usiness infrastructure)
,#. Increased customer0s alue
,,. Improing financial performance
Sources: Complied from: Managing Automation (2004) and from ndigital.com (accessed May
2005).
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CHAPTER II
META"PERSPECTIVE OF ENTERPRISE RESOURCE PLANNING
7n *34 integrates all departments and functions across an organi>ation onto a single computer
s!stem that aims to sere practicall! eer!one(s particular needs. It eases the e)change of data
and facilitates communication among departments. *34 s!stems run on client1serer net&or.s11
personal computers connected to more po&erful serers (including possi'l! mainframes) that
feed them data. *ach module &or.s separatel!, performing specific data1processing functions.
*)amples of *34 modules include the follo&ing+
?uman resource management
@inancial management
5uppl! chain management
4rocurement
Aogistics and materials management
4lanning and 'udgeting
5ales and distri'ution
5tudent administration
-an! *34s include the capa'ilit! to interface data &arehouses to support managerial reporting
and 'usiness intelligence re2uirements such as online anal!tical processing and data mining.
Current *34s are structured on a client1serer architecture that consists of presentation, Internet1
ena'ling, application and data'ase la!ers. These la!ers could either 'e installed in one serer,
e.g., an enterprise serer or mainframe, or distri'uted among a num'er of serers for scala'ilit!.
7lso, the heart of the *34 is a relational data'ase management s!stem that ensures data
consistenc! and integrit!. 7nother feature is a &or.flo& manager that supports the management
of a d!namic &or. process.
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.n3it* /3 ERP
<esides integrating organi>ations( actiities, *34s emplo! 'est practices that hae 'een proen
in the real &orld. 7t least one *34 soft&are pac.age incorporates more than a thousand 'est
practices. *34s also ena'le organi>ational standardi>ation. The user interface, the se2uence of
operations for a process and s!stem maintenance procedures can 'ecome common standards
across the organi>ation. *34s improe information management '! haing a single data'ase as
opposed to multiple, often duplicatie s!stems. <ecause of this centrali>ed data source, *34s
proide online and real1time information and facilitate intra1 and inter1organi>ation
communication and colla'oration.
I2412ntati/n Strat5i*
Implementation steps are summari>ed 'elo&, using, as a guideline, the accelerated
implementation techni2ues used '! 574 consultants. The! include+
4ro6ect preparationBDetermine the implementation strateg!, organi>e the pro6ect team,
define the s!stem landscape, identif! technical demands, select the hard&are and
data'ase endors and gain consensus among sta.eholders.
<usiness 'lueprint and reali>ationBCreate the technical design and, 'ased on this design,
configure the *34 soft&are. <ased on the re2uirements, test the soft&are, install the
production s!stem and start planning the data migration strateg! from the legac! s!stems.
@inal preparationBChec. the s!stem settings, test the s!stem throughput for .e! 'usiness
processes and esta'lish a help des..
Co lie and supportB5tart the production s!stem, ensure its aaila'ilit!, monitor .e!
'usiness processes, manage the help des. and define the long1term release strateg!.
Maintnan6 /3 an ERP
*34 pro6ects do not end &ith its implementation. It is a continuing effort that must address ne&
and/or changing re2uirements associated &ith the follo&ing+
5
5!stem 'ugs
Dser assistance
Changes to s!stem
-anagement of different input and output re2uirements
Documentation
Training
-aintenance and update of soft&are
<udget
F+t+r /3 ERP*
*34s &ill enhance &e' interfaces to 'etter support e1commerce, enterprise portals and
e)tensi'le mar.up language (E-A), &hich facilitates data interchange oer the Internet. 7lso,
application serice proiders (754s) &ill hae a gro&ing role in the outsourcing of the often
e)pensie *34s.
Improements in enterprise application integration (*7I) middle&are for lin.ing *34 &ith
legac! s!stems are e)pected pro'a'l! in terms of CO3<7 and CO- technologies.
F*34 IIF is the term, recentl! coined '! the Cartner Croup, for the ne)t generation of *34 tools
that F'etter supportF internal and e)ternal colla'oration, hae more industr!1specific
re2uirements and human capital management.
C/n61+*i/n*
The implementation of an *34 and its associated 'usiness practices is a ma6or 'usiness and IT
strateg! for meeting an organi>ation(s ision and goals. It has the potential of high re&ard, 'ut at
a price11high cost and high ris. of failure. To address the ris., carefull! planned change
management is a critical success factor inoling the smooth transitioning of people, process and
s!stems to the ne& *34 enironment. One &a! to accomplish this is to follo& I57C7(s Control
6
!"ecti#es for $nformation and related %echnology (CO<IT) guidelines, &hich proides a
frame&or. for management to understand and manage technical ris.s in an uncertain
enironment.
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CHAPTER III
PRO.LEM CASE
7+*ti/n*8
,. @or such a small compan!, &h! is an *34 'etter than 5C- applicationsG
%. Identif! the suppl! chain segments that the *34 supports, 'e specific.
3. 3elate this case to 4orter(s alue chain and to its competitie model (Chapter ,8). 5ho&
the *34(s contri'ution.
8. *nter intuiti#emfg.com and report on the capa'ilities of their *34 product.
9. 3elate this case to 'usiness planning and strateg!.
An*!r 3/r 7+*ti/n #
*34 coers the oerall processes of the &hole organi>ation from front1office to 'ac.1office
operations. It supports internal suppl! chain &ithin an enterprise. 5C- 'asicall! are processes
inoling 'ill of materials, manufacturing, inentor!, &arehousing, and logistics. It support 6ust
certain part of internal suppl! chain.
In certain industries, such as manufacturing, freight for&arding, and logistics proiders, 5C- is
a su'set of *34. Therefore, for small companies li.e NDI, it0s more efficient and effectie to
implement one s!stem, namel! *34, instead of more 5C- s!stems. <ecause if a small
companies li.e NDI onl! implements 5C- instead of *34, the! hae to e)pand to another
s!stem such as ?3- (?uman 3esources -anagement), @- (@inancial -anagement), and 4<
(4lanning and <udgeting), if the compan!0s demand of 'usiness process is e)ceeding the s!stem
that supports it.
@urthermore, *34 soft&are support seeral functionalities for 5C-, and small companies li.e
NDI could choose &hich functionalities the! &ould li.e to implement, i.e. 5uppl! Chain
-anagement, ?uman 3esource -anagement, @inancial -anagement, or 4lanning and
<udgeting. 7lso, unli.e 5C- applications, *34 s!stem of ne& generation proides ne&
opportunities for enterprises in (near) future+ to connect to their 'usiness partners, to integrate
8
ne& functionalities (open *34), to use Internet capa'ilities, to integrate &ith C3- solutions, etc.
In practical sense, maintenance/sericing and training for *34 soft&are instead of seeral 5C-s
are 'etter for NDI in financial and time sense.
An*!r 3/r 7+*ti/n (
*34 supports inentor! management that helped to+
,. Dou'le inentor! turns
%. Order c!cle, &hich has reduced since the implementation of *34
3. 4roduction control, &hich had a direct impact on customer delier!
8. 4lanning s!stem that improed significantl! after using *34 and positiel! influenced
la'or and materials.
In the case of NDI enterprise, implemented *34 s!stem &ould support those actiities &hich
produced greatest costs in preious period, putting customer satisfaction at ris. and ma.ing
internal moral decreasing. 7lso, the *34 supports the segments in NDI as &ell as its
enironment. @irst, *34 optimi>es the production processes in NDIH including ta.ing into
account the needs of its emplo!ees. 5econd, *34 contri'utes to 'etter forecasting of demands
and, additionall!, 'etter processing of their orders. Third, *34 efficientl! coordinates upstream
actiities 'et&een NDI and suppliers. In other &ords, *34 supports the suppl! chain segments
li.e inentories, delier! timing, and flo& of materials and cash in NDI.
An*!r 3/r 7+*ti/n 3
7ctiities in 4orter0s alue chain model can 'e diided into % parts+ primar! and support
actiities. 4rimar! actiities inole purchase of materials, the processing of materials into
products, and delier! of products to customers. There are fie primar! actiities+ in'ound
logistics (inputs), operations, out'ound logistics, mar.eting and sales, serices. The suppliers
proide inputs necessar! to the firm and their alue chains. 7s NDI is a supplier of 3D/6D
measurement products, it sta!s at the first step of alue chain. That0s &h! the *34 contri'ution is
significant in this case as it helps the compan! to 'e successful at the first stage of suppl! chain,
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&hich is er! important, and to influence positiel! other stages and to help compan! to .eep its
competitie position.
An*!r 3/r 7+*ti/n $
Intuitie offers *34 soft&are solutions that ena'le mid1mar.et manufacturing enterprises to+
Improe productiit! and reduce costsH
Ieep customers satisfiedH
-a.e 'etter 'usiness decisionsH
*nhance IT infrastructure.
Intuitie *34 addresses the follo&ing 'usiness needs+ *nterprise 3esource 4lanning (*34),
Customer 3elationship management (C3-), 5upplier Colla'oration, <usiness Intelligence, *1
commerce, *)tended *nterprise, and Technolog! Infrastructure. <! organi>ing information and
automating 'usiness processes the *34 soft&are is capa'le to influence on *34, C3-, supplier
colla'oration, 'usiness intelligence, e1commerce, e)tended enterprise, technolog! infrastructure.
An*!r 3/r 7+*ti/n '
Implementation of *34 helped to improe 'usiness processes related to inentor! management,
planning s!stem, enhanced technolog! infrastructure. 7s a result 'etter planning capa'ilities
hae influenced positiel! customer serice.
*34 has also improed NDI0s gro&th strateg!. /ith the implementation of Intuitie *34, NDI
has found the &a! to increase the alue it proides to customers &hile also improing financial
performance.
<usiness planning1&ise this case sho&s that *34 reall! ena'led the compan! to plan their
actiities &ith less uncertaint!. This is due to 'etter data transfer and communication internall!
and e)ternall!. *34 also supports strateg! through improed operational performance.
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