Gst5083 mis w4 a2 summit electric lights up

Team Members:§ Cherry Linda Keripin (P14D393P)§ Elina Tiu Chai Hui (P13D160P)§ Alexander Mathew Kana (P14D384P)§ Gesna Michael Jepus (P14D400P)§ Teo Chiat Huat (P14D395P)

GST5083 : INFORMATION SYSTEMMS AND E-COMMERCE

Week 4 (Assignment 2 – Summit Electric Lights Up with a New ERP System)

Lecturer : Prof. Dr. Rusli Abdullah



BRIEF INRODUCTION:General company background:• Established in 1977 in Albuquerque, New Mexico, Summit Electric has grown very quickly

to be one of the top wholesale distributors of industrial electrical equipment and supplies in USØ Operating In 4 statesØ Has a global export division based-in HoustonØ Has a marine division based-in New OrleansØ Has a sales office in Dubai

• Employed 500 employees• Achieved revenue of $358 million in 2011Products/ Services provided:Products:• Distributes products such as motor controls, wire and cable, cords, lighting, conduit and

fittings, wiring devices• Support systems and fasteners, outlet boxes and enclosures• Transformers and power protection equipment(Summit Electric obtains finished goods from manufacturers and sells them to electrical

contractors working on projects ranging from small construction to sophisticated industrial projects.

Services:Summit Electric acts as distributor on the supply chain, and have the ability to rapidly

handle a high volume of transactions and swift inventory turnover.



BRIEF INRODUCTION:In-line with it’s rapid business growth, their legacy information systems built-in 1980s could

not handle the increased business volume.

Issues that was faced by the 1980s developed legacy information systems are:• Independent systems for sales entries, purchase orders and back-end reporting.

o Integration have to be done manually in batches for the sales entries & purchase orders

• Systems could only handle a fixed number of locations which limited the range of numbers that could be used on documents – creating inconveniences as the same range of document numbers are reused over & over again every few months.

• Problem in processing nightly inventory and financial updates within the timeframe availableWith rapid growth of it’s business and increased business

transactions, Summit Electric had to make the decision to change the legacy information systems for a new enterprise resource planning (ERP) system. To change to a new ERP system, Summit Electric was facing a fair bit of challenges as many of the business processes was built around the legacy system.

A new ERP system would mean changes to business processes and the way people worked. A business process re-engineering exercise needs to be executed before implementation of the new ERP system.



BRIEF INRODUCTION:

Most of the proven-ready ERP software are designed for manufacturing or retailing businesses and did not cater for some of Summit Electric unique processes and priorities of the distribution industry.Summit Electric System Requirements for the new ERP

system:• To handle a very large number of SKUs (stock-keeping

units, which are numbers or codes for identifying each unique product for sales) and transactions

• To handle very short lead times for order processing, inventory distributed in various models – as customer might call to place an order while driving to pick-up the order immediately and Summit Electric needs to know immediately what product is available at what location

• To handle products sold in one quantity that could be sold in another

• To handle no-touch inventory• To handle shipping process whereby some products are

shipped directly from manufacturer to the customer’s job Summit Electric needs a scalable and flexible inventory management system and this is their top priority for Inventory Management System.



BRIEF INRODUCTION:

After extensive reviewing of various ERP vendors and review of electrical distributors using SAP, Summit Electric finally select ERP software from SAP because of:

• Functionality in sales and distribution,• Materials management (inventory),• Financials, and• SAP knowledge of Summit Electric distribution business

nature

In Janaury 2007, Summit Electric goes live with it’s new ERP system across 19 locations which are fully-integrated.

Through customization to handle Summit Electric’s unique business requirements, the new SAP ERP system delivers the following:

• Overnight processing (this period have longer lead time for order fulfillment)

• Instead of overnight inventory updates which could delay their sales processes, system was customize to handle smaller, more frequent updates for just he materials received during the day so as to have timely and accurate snapshots of the inventory availability and orders are processed rapidly

• Customization of wire and cable inventory management separately from other products



BRIEF INRODUCTION:

To summarize, Summit Electric’s old legacy system used separate systems for orders and financials and facing difficulty in combining data for business intelligence reporting and analysis. This is resolved with implementation of SAP’s NetWeaver BW data warehouse and business intelligence solution to make better use of the data in it’s ERP system.



Q1. Which business processes are the most important at Summit Electric Supply? Why?

SAP’s NetWeaver BWThis data warehouse and business intelligence solution

provides the tools to enable Summit Electric to make use of the data in it’s ERP system to evaluate profitability of it’s sales channels,, using what-if scenarios eg analysis of profitability by sales person, manufacturer, customer or branch.

The findings encouraged Summit Electric to focus more attention to areas such as sales order quotations and to supplier performance and delivery times.

This gives management greater visibility into how the organization is operating and is able to make better decisions.



Q1. Which business processes are the most important at Summit Electric Supply? Why?

PAYBACKS AND CHARGE BACKSSummit Electric’s SAP produced a significant return on

investment (ROI) from automating sales tax processing and chargebacks and this affects their profit on all dealings.

Chargebacks occurs when a supplier sells a product at a higher wholesale price to the distributor than the price the distributor has set with a retail customer. A chargeback agreement allows the distributor to bill the manufacturer an additional contracted amount in order to make some profit on the deal.

Processing chargebacks requires very close comparison of sales to contracts and Summit Electric have hundreds or thousands of different charge back contracts. Chargeback management is a large part of the wholesale distributor’s profit model and Summit Electric was losing revenue opportunities because it’s chargeback process was flawed until the implementation of the new SAP’s ERP system.

The new SAP’s ERP system helps Summit Electric to capture charge back data; manage claims, control varied and changing charge back agreements, ultimately changes paybacks and charge backs management to a systematic and effective system.



Q2. What problems did Summit have with its old systems? What was the business impact of those problems?

Summit Electric is one of the top wholesale distributors in US and in the 1980s, it had developed it’s own legacy information systems to handle their main business processes. But due to the rapid growth of their business which quickly made there is inefficient and not been able to handle the incremental huge business transactions.

One of the key issue of it’s old system is a non-integration between the different business functions and data needs to be re-entered at different stages and no business intelligence tools built into the IS to assist in providing helpful business statistics or reports to make better decision makings. Each module of the old legacy system operates on it’s own and some functions such as document numbering are fixed to a range resulting in having to re-use the numbering at different months.

Due to the non-integration of various functions of the information system, data have to be manually integrated and a lot of non-productive processing time are created, making the process inefficient. The old system only had a limited number range for documents and numbers needs to be reused from time to time. This creates not only confusion but gives constraints to financial updates and inventory couldn’t be updated on timely manners gives discrepancies to it’s inventory management and sales order as latest snapshots of available products stocks are not accurate.



Q2. What problems did Summit have with its old systems? What was the business impact of those problems?

With inaccurate data, constraints of the way the old IS is built would affect their customer services as sales order would not be able to be efficiently processed with inaccurate inventory data, financial updates would be hard to managed with re-usage of unique order numbering as it’s hard to differentiate the business transactions and the great amount of time needed for re-entry of data as there’s no integration between different IS functions. Besides great amount of time wasted, inaccuracy could arises due to data entry error, etc.

Certain processes are built around the old IS system which makes process re-engineering difficult as changes to improve business processes would required re-coding of IS system, causing downtime – affecting customer supports, which might result in loss of sales as Summit Electric is not the only wholesale distributor of electrical products. There’re competitors ready to win-over their customers.



Q3. How did Summit’s ERP system improve operational efficiency and decision making?

Give several examples.

Summit Electric’s ERP system improve operational efficiency and decision making through:

• Running smaller and frequent inventory update throughout the day instead of night provide accurate inventory and shipping orders information which allows Summit Electric to ship customers’ orders at a faster pace

• To enable a more accurate replenishment of wire and cable, the ERP batch material management system identified the customer, purchase amount, length of wire and product manufacturer. This enable better tracking of the volume of wire and cable sold and stock replenishment order to manufacturer would be more accurate

• To secure inventory for special customers, with long-term projects, Summit Electric created a “parent-child” warehouse relationship in the ERP system to secure the material in inventory so that the consigned inventory would not be sold to other customers in the warehouse.



Q3. How did Summit’s ERP system improve operational efficiency and decision making?

Give several examples.

Summit Electric’s ERP system improve operational efficiency and decision making through:

• To create a more efficient finances and order system, Summit Electric implement the SAPNET Weaaver BW data warehouse and business intelligence solution to make use of the ERP data to enable them to analyze:o The profit of each sales person, manufacturer, customer and branch (using

the analysis produce to improve it’s ROI)

o Automating sales tax and charge backs – ability to identify the billing activity, if there’s any charge back, the system will automatically submit the information to bill the charge back. This system allows Summit Electric to increase its charge back claims of up to 118%, increasing it’s revenue as a percentage of sales.

• The new ERP system enables Summit Electric to focus on sales orders and quotes, supplier performance and delivery schedule and this had bring about a better understanding of the organization as a whole.

• The new ERP system enable Summit Electric to run it’s operations with flexibility and efficiency besides providing management a greater vision for making decision.



Q4. Describe two ways in which Summit’s customers benefit from the new ERP system.

1. Improved customer supports – customers can do business with Summit Electric in a more effective and efficient way through giving customers more flexibility such as customers could make sales orders to any of Summit Electric outlets and could get their orders from the nearest outlet besides been able to get their order(s) at a shorter time period.

2. Summit Electric is able to accommodate large customers with long-term job sites, this is through setting-up of temporary warehouse on site to supply these customers; creating “parent-child” warehouse relationship to be able to work with customers for their consigned products availability.



Q5. Diagram Summit’s old and new process for handling chargebacks.

OLD PROCESS:Handling chargebacks had flaws and the company was losing money. • Processing chargebacks has to compare the sale to contract.• A distributor can have up to hundreds to thousands of contracts.• Summit Electric need to identify the chargeback and which manufacturer with

enough documentation of the contract or a lot of manual work and time consuming process subjected to missed-out & human errors.

• Summit Electric need to go through the customers invoice with detailed manufactuers identified and put the chargeback in Microsoft Excel to tabulate.

NEW PROCESS:With the new ERP system, handling chargebacks are more efficient as it’s

automated.• System automatically review Summit Electric’s billing activity for the day• All chargebacks agreements are loaded in the SAP system by the end of each day.• Matching will be done by the system and chargeback claim computed.• Separate chargebacks document outside the customer invoice is created and able

to process more quickly with review in the same day.• With this, Summit Electric increased its claim of chargebacks by 118% over the

old system.

Q5. Diagram Summit’s old and new process for handling chargebacks.



Gst5083 mis w4 a2 summit electric lights up

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