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BROADBAND-X: ENTERPRISE RESOURCE PLANNING IMPLEMENTATION

Fatih Yegul wrote this exercise solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

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It was a July afternoon in a major North American metropolis when Brian Tumbler, president of Broadband-

X, dialed the number of Preet Zayan, the top candidate among those who applied for the new enterprise

resource planning (ERP) implementation lead position.

Broadband-X was an electronic contract manufacturing (ECM) company that had outgrown its current

tracking processes and needed to find a solution that could incorporate the various departments’ needs while improving cross-departmental and customer communication. After conducting research into several

options, Tumbler decided that the company’s needs could be met with an ERP system that would standardize, streamline, and integrate business processes. Tumbler acquired an ERP package with the

intention of handling the implementation project himself, just as he had done with the QuickBooks

accounting software package a few years prior. After a couple of failed deployment attempts, Tumbler

decided that he could not lead the ERP implementation, and unless he chose another course of action, he

would end up with an unused ERP package into which he had already invested a considerable amount of

funds. He needed help from an experienced professional, and instead of working with a consultant, he

decided to hire someone in-house who would lead the project.

As he waited for Zayan to pick up the phone, he questioned whether Zayan was up for the challenge of

analyzing the current systems, conducting employee interviews to figure out the issues and the priorities,

and begin working on an implementation strategy and project plan.

BROADBAND-X

After a successful engineering career in the electronics industry, Tumbler decided to take ownership of his

own career and founded his own company, Broadband-X, over a decade ago. It was a risky endeavour to

invest in expensive equipment and enter the market as a new ECM company. He already knew that ECM

companies operated on a small profit margin in a volatile market that was never short of bankrupt businesses.

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However, having a Master of Business Administration degree on top of his engineering credentials helped

him to build a smart sales strategy and allowed him to balance the risks with proper financial planning.

Broadband-X began its journey in the suburbs of a metropolitan area with a single surface-mount technology

(SMT) line and a few employees, to meet the demands of a small number of customers. Over the next decade,

to serve several dozen companies, Broadband-X added 4 more SMT lines to its assets, which was supported

by a workforce of 40 to 60 employees, depending on the demand fluctuations. To scale up its operations,

Broadband-X purchased a property in one of the industrial zones of the main urban area.

As part of its corporate strategy of offering high-quality products to its customers, Broadband-X

successfully implemented the International Organization for Standardization (ISO) 9001:2015 and ISO

13485:2016 (medical) standards and secured the certifications. Broadband-X wanted to further its growth

and acquired an ERP software package to efficiently plan, control, and execute its manufacturing operations

in harmony with its sales, accounting, and logistics functions.

ECM

ECM was an industry that produced printed circuit boards (PCBs) for brand-name companies, who used

the PCBs in their merchandise, varying from mobile phones to home appliances. The services offered by

ECM companies included designing the PCBs, building and testing prototypes, and manufacturing PCBs

in low or high volumes.

PCBs could be found in electronic products. If you disassembled a mobile phone, a light-emitting diode

(LED) light bulb, or a television remote control, you would find a PCB inside of it.

The technology for building PCBs had dramatically changed over several decades. In the early years,

workers had to assemble and solder all parts (transistors, resistors, capacitors, etc.) manually on the boards.

As the electronics industry advanced, the parts became smaller and smaller, making manual assembly

infeasible and expensive. Consequently, SMT emerged, thus automating the assembly and soldering of

most electronics parts on PCBs, which were called the “SMT components” (see Exhibit 2).

Some bigger components that could not be handled by SMT lines were required to be assembled and

soldered manually by experienced workers. These were called “thru-hole components” (see Exhibit 2), and various expensive machinery could automate the assembly of certain thru-hole parts, which might have

been feasible for large-volume production.

A generic product assembled by an ECM company comprised a blank PCB as well as SMT and thru-hole

components that needed to be assembled based on the design provided by the customer.

The ECM industry could be safely characterized as a high-mix low-volume (HMLV) production

business, especially in countries where the labour cost was higher, such as in this case. ECM companies

could receive orders from different companies for distinctive PCB designs in quantities ranging from a

few to possibly millions.

PCB products were usually subject to typical demand patterns throughout their lifecycle. ECM customers

initially ordered a few prototypes for new products, mainly for testing purposes. After several back-and-

forth adjustments—and once the company was content with the prototype—it would likely order a small

number of products for the initial market launch. If the product was successful, the order sizes would D o

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eventually increase based on the market demand up to a volume size, which made it feasible for the ECM

customers either to build their own dedicated lines for the specific product or transfer the orders to bigger

ECM companies in Asia for economies of scale. The production may have returned to smaller ECM

companies in high-labour-cost countries toward the end of the product market lifecycle, as demand fell.

ERP SYSTEMS

Starting in the 1960s, as production companies discovered the power of computers, the use of material

requirement planning (MRP) software became widespread to improve productivity by estimating material

quantities and scheduling deliveries. At the same time, companies started using software to perform their

bookkeeping, accounting, and finance functions. As network and database technologies became more

advanced and accessible in the 1990s, major software companies introduced enterprise-wide software

solutions that came with a central database that could record all business transactions from receiving to

inventory management, from production scheduling to shipment, or from human resources (HR) to finance.

As these systems had the power to centralize data from almost all the departments and locations of an

enterprise, the term “enterprise resource planning” was coined to define them. Initially, ERP had been widely adopted by major manufacturing companies. After about three decades, the ERP market, comprised

of hundreds of software/service providers, was still a growing trend globally as organizations from all

industries continued to invest in new implementations or upgrades.

Successful ERP implementations helped organizations to overcome the drawbacks of the silo effect caused

by the lack of information flowing between the departments. It also enabled them to develop efficient real-

time data-sharing mechanisms. Additionally, ERP systems established the transactional foundations necessary

to harness data warehouses that offered valuable data analysis opportunities for effective decision making.

ERP packages came with different modules that companies could choose to implement depending on what

kinds of business processes they had in place. Broadband-X’s contract with the ERP provider covered the following modules: estimation and quoting, sales, shop floor control, bill of materials (BOM), engineering,

scheduling, MRP, inventory management, shipping, purchasing, receiving, accounting, finance, HR,

customer relationship management (CRM), and quality management.

BROADBAND-X BEFORE THE ERP

Broadband-X used the QuickBooks accounting software to manage the quoting, sales, payroll,

purchasing, accounts payable, and accounts receivable processes. The software worked well, except for

an important detail: QuickBooks was not designed to manage and control production processes. As a

result, spreadsheets were used for the planning, scheduling, and execution of the production operations

as well as the quality management system.

Any necessary communication between the spreadsheet-managed production processes and QuickBooks-

managed support processes required time-consuming manual interventions. For example, each shop floor

employee completed a daily activity sheet, which was then entered manually into QuickBooks by the

bookkeeper for cost accounting. In contrast, the ERP system had a module that allowed the workers to

easily enter their activities into the system using a barcode reader and few keyboard strokes as they moved

from one work order task to another. All that was needed were a few computer stations on the shop floor

located in proximity to their workbenches. D o

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Furthermore, the manual intervention was so time-consuming that sometimes it was abandoned altogether.

For instance, some electronic components were bought in reels (batch quantities) for specific customer

orders (jobs), and once the job was completed and the products were shipped to the customer, several

unused components were recorded on a separate spreadsheet that was dedicated to that specific job. Because

the number of distinct components on a PCB could be quite large, employees did not deplete the used parts

in the QuickBooks database manually, which is why the inventory balances in QuickBooks were not always

reliable. Occasionally, the staff needed to search through thousands of spreadsheets to figure out where a

specific component could be found. Zayan was optimistic that the inventory control, BOM, and MRP

modules of the ERP would help them to sort out the problems mentioned above.

About one year before hiring Zayan, Tumbler evaluated approximately 10 ERP software packages.

Statistically, many ERP deployments were not successful, as the system either got cancelled or the company

switched to a different ERP package, so Tumbler was worried that the time and funds might be wasted.

Tumbler determined that all the ERP systems he was considering appeared to be good, based on their

advertising or conversations with a salesperson. During his evaluation, he attended several ERP

demonstrations; in some cases, he attended multiple demonstrations for the same ERP package. He even

installed a couple of them on the company server for test runs, which was how he realized that most of them

were not designed in a way that could handle various processes specific to Broadband-X.

Following extensive market research, Tumbler settled on an ERP system produced by a company based in

another country. The selected package was a good fit, as it was based on a design-to-order business model,

was affordable, came with an open database for customizations, and offered strong customer support.

Broadband-X purchased the ERP with an annual maintenance agreement.

Years back, and thanks to a well-managed effort by Tumbler at the time, the company had successfully

implemented the QuickBooks accounting software, which was why Tumbler was confident the company

would be able to implement the ERP system using the existing personnel under his leadership.

Once Tumbler began working with the ERP system, it did not take long for him to understand that it was

much more comprehensive compared to the QuickBooks accounting software. It required a dedicated

employee accompanied by a company-wide project management effort to implement it effectively. At the

same time, the business was thriving, with strong market demand keeping the company busy with new

customers and new products. This diverted Tumbler’s focus to other initiatives that needed his attention. As such, he decided to put the ERP project on hold until a better time.

After about a year, when business with newer customers began to stabilize, Tumbler thought it was time to

recruit someone to champion the ERP project, as he had already invested a considerable amount of money

in purchasing the software along with an annual maintenance fee.

Zayan had worked in several different business sectors and had a solid understanding of how ERP systems

functioned, especially from a manufacturing point of view. He had experience in project management,

implementing and managing MRP systems, and handling databases. Zayan was in search of a new job,

ideally an ERP-related position, when Tumbler invited him for an interview.

The interview commenced, and shortly after, formalities were underway. Zayan and Tumbler immediately

began discussing the challenges of ERP implementations. It was a quick decision for both Tumbler and

Zayan. Zayan started in his new position at Broadband-X three weeks after the interview, and he was

immediately tasked with managing the ERP implementation project for the company. D o

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CRITICALLY DEFICIENT PROCESSES AT BROADBAND-X

Zayan took a couple of weeks to analyze the system in detail, reading the quality management system

documentation, reviewing the historical data, and interviewing his co-workers. He needed to understand

the entire system to determine which ERP modules would be implemented in what order, whether any

customization of the ERP would be needed, and what changes to the current processes would be required.

During Zayan’s initial discussions with Tumbler, they agreed on two general implementation strategies. The first strategy was to concentrate on real value-adding ERP modules rather than on ones that did not

present a functional purpose. According to past research,1 one reason ERP projects may fail was the wasted

effort of implementing some ERP modules only because they looked fancy, instead of solving a real

problem in the company. The other strategy was to keep the historical legacy data (transactions) where they

were, instead of migrating them all to the new ERP system. This could initially create various reporting

challenges because the data would exist in two different systems before the ERP system went live. However,

migrating historical data was a cumbersome and error-prone undertaking, which overshadowed the cost of

dealing with some temporary reporting issues.

The disconnect between the quotation, purchasing, and production functions was possibly the biggest issue

Broadband-X faced. Once a request for quote (RFQ) had been received from a prospect/customer, the

account managers needed to estimate labour costs and material costs as well as the time needed to complete

the job, so that they could quote a price and a shipping date. Ideally, a quote would be sent back to the

customer within 24 hours from the receipt of the RFQ so that the job would not be lost to competitors.

However, it started to become routine that customers had to wait approximately two to three days for a

quote because of the email-intensive, cumbersome communication procedures between the sales,

purchasing, and production departments.

In some cases, to avoid losing commission income by missing a sale due to a delayed quote, experienced

account managers took shortcuts to produce a quote. Based on the BOM sent by the customers as part of

the RFQ, account managers simply conducted a quick online search for the component prices to estimate

the material costs. As for the labour costs, they used a mini formula sheet provided by the production

department. For the lead time, they made an optimistic guess, making it possible to send quotes to customers

quickly, bypassing the production and purchasing departments. Swift as it was, the process often created

problems if the job was acquired. First, the online price search was not as reliable as an official quote

acquired by the purchasing department from the suppliers. The online price search also did not guarantee

the availability of the components. Consequently, at times, the company ended up paying more for the

components than was estimated during the quoting process and/or faced longer-than-expected lead times

for some components. Second, the existing production schedule might not allow on-time delivery unless it

was expedited, creating many other issues. The company had suffered financial losses on some jobs as a

result of the delay in communication between departments and employees finding shortcuts.

Zayan noticed that the ERP’s estimation and quoting module would fix the complications mentioned above with some customization. Specifically, the module was lacking certain functionality related to

interdepartmental communication; therefore, they would need to generate an additional database

application to handle the collaboration between departments before a quote could officially be completed.

The ERP provider did allow its customers to customize and manipulate the ERP database within certain

limits and produce supplementary applications that would address the communication issues.

1 Matus Peci and Pavel Važan, “The Biggest Critical Failure Factors in ERP Implementation,” Applied Mechanics and Materials 519–520 (2014): 1478–1482. D

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Another problem Tumbler wanted to fix was the coordination of the sales efforts, to have account managers

work more collaboratively. Tumbler hoped the CRM module would offer a standardized practice in lead

management that would give him access to the CRM data, making his communication with account

managers more effective. Tumbler’s rich market experience made his involvement highly valuable for the account managers. Improved communication would ultimately enable better decisions, increase customer

satisfaction while at the same time understanding the needs of current customers better.

An additional obstacle was presented by Ratna Anand, the quality manager, who worked very

systematically to make sure that Broadband-X continued to comply with the ISO 9001:2015 and ISO

13485:2016 (medical) standards. She did an effective job in organizing the documentation of procedures

and work instructions, but she encountered problems collecting and analyzing the necessary quality data

from production, such as product defects at various stages, return material authorizations (RMAs) from

customers, preventive maintenance planning and execution, and corrective action requests (CARs).

Luckily, the ERP had a quality management module that could handle the data collection she needed as

well as a separate application dedicated to preventive maintenance.

Finally, Broadband-X had two separate coding systems for its raw materials and finished products, which

created problems during deployment, especially when dealing with BOMs. A coordinated effort between

the engineering, production, and inventory control departments were needed to work out a standardized

coding system.

ADDITIONAL DEFICIENT PROCESSES AT BROADBAND-X

During his process evaluation, Zayan learned that Broadband-X did not have routine management meetings.

The management team gathered to make decisions as issues arose, but this arrangement would not be

effective because he needed all managers (i.e., sales, accounting, purchasing, production, quality, and

inventory managers) on board regularly to get the feedback he needed as the project progressed. He also

needed a platform to communicate the progression and direction of the ERP project, and he needed buy-in

from all departments, as it would be a company-wide initiative.

Zayan also discovered that Broadband-X controlled its production activities with reference to sales orders

(SOs). The shop floor employees recorded their activities based on the SOs that came from QuickBooks,

which did not have a production management module. However, an ERP system would require work orders

(WOs) with coded activities that were normally, but not necessarily, tied to SOs. The updated WO and SO

numbering system posed a challenge, as the whole workforce, including engineers, had trouble

understanding the rationale behind having separate SOs and WOs.

Another issue the company faced was that most employees were so accustomed to working with

spreadsheets that they were complaining about some of the entry screens, reports, and built-in dashboards

that came with the ERP. Zayan agreed that some of the ERP functions were not efficient and did not serve

their purposes. Zayan was requested by employees to produce spreadsheets, such as an SO dashboard, a

WO dashboard, BOM and router analysis reports, BOM mass-entry sheets, and purchase order (PO) mass-

entry sheets. It was technically possible to synchronize spreadsheets with the ERP database to create the

requested tools, making the workflow easier for many employees.

One critical issue was that the payroll function under the HR module of the ERP did not comply with the

laws of the country where Broadband-X operated. The same issue was reported regarding the taxation

regulations. The ERP provider promised that it was working on a fix, but it could take months, possibly D o

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years. Broadband-X could not rely on the accounting, payroll, and finance modules of the ERP, which

meant that it could not scrap QuickBooks altogether in the mid-term. As a result, the project team decided

to run on two systems in parallel until the ERP became compliant with the laws of the country. Ultimately,

the company continued to handle its payroll and accounting using a more affordable version of QuickBooks

and worked to devise a solution to rapidly transfer necessary bookkeeping data from the ERP to

QuickBooks. Additionally, the solution was to be as automated as possible in order not to waste the time

of the accountant with double entries.

One final concern was that customers complained about not getting status updates on their orders. There

were lots of email and phone communications with the customers to update them about what stage their

order was at and when exactly their order could be shipped. Tumbler hoped that the ERP would eventually

enable them to have real-time data about work orders, which would then be shared with customers regularly.

Though it was not at the top of the priority list, considering other pressing problems, Tumbler believed that

having real-time control over production activities combined with the implementation of the scheduling

module of the ERP would result in considerable productivity gains.

PROJECT PLAN

Thanks to the maintenance agreement with the ERP provider, Zayan had access to all training

documentation and videos, user forums, and a fast-response support line. He could also use some of these

resources for employee training during the transition period and for new hires once the ERP was

implemented. He thought he also needed to create some custom training materials specific to how the ERP

operated at Broadband-X.

As Broadband-X did not have an information technology (IT) department but rather outsourced support as

needed, Tumbler hoped that Zayan’s prior knowledge in IT would mostly be sufficient for the implementation of the ERP, coupled with the responsive support line of the ERP provider.

The ERP provider had a cloud-based option as well. However, Tumbler opted to go ahead with on-site

installation as he thought cloud solutions were not mature enough, and he was concerned about the security

of proprietary company information. So, the ERP had a dedicated server located in the Broadband-X

building, which was to be maintained by Zayan. The company would also acquire a backup server, which

would be placed in another corner of the building, backing up the ERP database automatically every night.

After a thorough analysis and lots of feedback, Zayan compiled a list of tasks and milestones that shaped

his project plan. He was confident that he had enough information for a feasible implementation plan (see

Exhibit 2). He knew there would be some bumps and challenges along the road, but he thought the enormous

change that Broadband-X would experience during the implementation of the ERP was manageable.

He was aware that the company would need to run on parallel systems (i.e., the incremental implementation

of ERP modules while the legacy system kept running) for a while before they could go fully live. He also

felt somewhat uneasy about running two accounting systems in parallel until the ERP provider offered a

country-specific fix, but there did not seem to be a second option at the moment.

He unlocked his computer screen, created a new document and project file, and began typing to draft his

implementation strategy and the project timeline. D o

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EXHIBIT 1: EXAMPLES OF COMPONENT CONNECTIONS TO A PRINTED CIRCUIT BOARD

Below is an image of a printed circuit board with several surface-mounted technology components assembled on it.

Below is a printed circuit board with thru-hole components on it, marked by circles, that were manually placed and soldered.

Source: First photograph: axonite, photographer. No title. Photograph. June 7, 2017. From Pixabay. https://pixabay.com/photos/cyber-security-network-internet-2377718/ (accessed December 12, 2020); second photograph: Christian Taube, photographer. MOS 6581 Sound Chip from a Commodore 64 Main Board. Photograph. December 26, 2009. From Wikipedia. https://commons.wikimedia.org/wiki/File:MOS6581_chtaube061229.jpg (accessed December 12, 2020). Circles added by the author of the case. D

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https://commons.wikimedia.org/wiki/File:MOS6581_chtaube061229.jpg

https://pixabay.com/photos/cyber-security-network-internet-2377718

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EXHIBIT 2: ENTERPRISE RESOURCE PLANNING PROJECT PLAN WITH TASKS AND MILESTONES

Milestone 1 (Transfer data from QB) 1. New coding system for the products and parts (2 weeks)

2. Formal training for the employees (4 weeks)

3. Bill of materials module (4 weeks, 1FS)

4. Inventory management module (4 weeks, 1FS)

Milestone 2 (Customer-side implementation complete) 5. Develop quoting communication application (8 weeks, 4FS)

6. Estimation and quoting module (8 weeks, 4FS)

7. Engineering module (8 weeks, 4FS)

8. Sales module (8 weeks, 4FS)

9. CRM module (6 weeks, 8SS + 2 weeks)

10. Shipping module (5 weeks, 8SS + 3 weeks)

Milestone 3 (Supplier-side implementation complete) 11. Purchasing module (6 weeks, 4FS)

12. Receiving module (6 weeks, 4FS)

Milestone 4 (Go live, end of parallel run of the legacy system) 13. Accounting module (6 weeks, 12SS + 1 week)

Milestone 5 (Start of automated regular transfer of bookkeeping data from ERP to QB) 14. Develop the ERP-to-QB transfer application (3 weeks, 13FS)

Milestone 6 (Production-side implementation complete): 15. MRP module (3 weeks, 4FS)

16. Start using work orders (9 weeks, 15FS)

17. Scheduling module (9 weeks, 16SS + 3 weeks)

18. Shop floor control module (2 weeks, 16FS)

19. Quality management module (6 weeks, 18FS)

20. Preventive maintenance module (4 weeks, 18FS)

Milestone 7 (End project): 21. Develop customer status reporting application (4 weeks, 19FS, 20FS)

Notes: Milestones are achieved once all its tasks are complete; QB = QuickBooks; CRM = customer relationship management; ERP = enterprise resource planning; FS = finish-to-start precedence relationship; SS: start-to-start precedence relationship; (4 weeks, 1FS) = task is estimated to take 4 weeks and can only start once Task 1 has been completed; (6 weeks, 8SS + 2 weeks) = task is estimated to take 6 weeks and can only start 2 weeks after the start of Task 8. Source: Created by the case author.

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BROADBAND-X: ENTERPRISE RESOURCE PLANNING IMPLEMENTATION
- BROADBAND-X
- ECM
- ERP SYSTEMS
- BROADBAND-X BEFORE THE ERP
- CRITICALLY DEFICIENT PROCESSES AT BROADBAND-X
- ADDITIONAL DEFICIENT PROCESSES AT BROADBAND-X
- PROJECT PLAN
- EXHIBIT 1: EXAMPLES OF COMPONENT CONNECTIONS TO A PRINTED CIRCUIT BOARD
- EXHIBIT 2: ENTERPRISE RESOURCE PLANNING PROJECT PLAN WITH TASKS AND MILESTONES
  - Milestone 1 (Transfer data from QB)
  - Milestone 2 (Customer-side implementation complete)
  - Milestone 3 (Supplier-side implementation complete)
  - Milestone 4 (Go live, end of parallel run of the legacy system)
  - Milestone 5 (Start of automated regular transfer of bookkeeping data from ERP to QB)
  - Milestone 6 (Production-side implementation complete):
  - Milestone 7 (End project):

Questions:

1. What are the motives that drove Broadband-X to implement ERP software?

2. Do you think custom built ERP software could have been a viable alternative for Broadband-X? What do you think about the way Tumbler selected the ERP system and what could he have done differently?

3. What are the biggest challenges and risks Broadband-X will face during the implementation of the project? How can the challenges be managed?

4. Develop an ERP implementation project plan most fitting to Broadband-X’s situation, accompanied by an implementation strategy (communication, project roles, training, etc.) – Use this question to develop your project planning skills. Use the data in the Project Plan section and in Exhibit 3. As part of your answer, a Gantt chart created using Microsoft Project is required.

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