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Copy of NIBCO’s “Big Bang”: An SAP Implementation

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Purwedi Darminto

on 30 November 2014

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Transcript of Copy of NIBCO’s “Big Bang”: An SAP Implementation

TIGER(Total Information Generating Exceptional Results)
Management actions
Each team's responsibilities
Management and organization issues
Business – Beutler

Finance and Controlling Team:

Materials Management/Production Planning Team:
PP, extended team members

Sales/Distribution Team:
process changes

Technical – Wilson

250-page technical document blueprint

Change management – Davis

Changed 7 aspects of management
Identify key changes
Provide information, and keep open communication lines
The triad leadership design was effective.

IBM consultants were not familiar with ERP-specific.

The final project was 30 percent higher than the estimated one due to a failure to include third party consulting.

The “Go Live” date was delayed ( the original plan was to launch the new project on Monday after thanksgiving).

The loading of manufacturing data was not efficient.
Ruizhu Xiong

Jaafar Megzari

Gracie Sepulveda

Case Overview
What do they want to achieve?
NIBCO’s Objectives
3. Get more information to assist in better business decision-making
4. Better meet the customers’ needs
5. Facilitate the company’s growth and become more global
6. Go live without consultants on December 30th, 1997 using the SAP ERP software systems

NIBCO’s “Big Bang”: An SAP Implementation
November, 11,2014
1995: NIBCO’s Cross-functional teams decided to redesign the supply chain process. Gary Wilson became the head of the IS department.

August-December 1995: Boston Consulting group elaborated an IT study plan, and concluded that NIBSCO should adopt the enterprise system “on client/server platform”

July 1996: The Executive Leadership Team (ELT) and board of directors approved the purchase of the SAP R/3, and the “Big Bang” implementation.

August 1996: A contract with SAP for R/3 modules was signed, and IBM was selected as the implementation partner.

December 1996: Final project estimations/scope was presented to ELT, and board of director.
April 1997: A weekly electronic newsletter was initiated, and PCs for customer service associates were installed.

Summer 1997: The maintenance for legacy systems was ceased (except for emergency repairs).

September 1997: The trainings began at headquarters and remote sites ( Sandbox practice system).

December 30, 1997: “Go live” date (without the assistance of consultants).
If a mid-sized company like NIBCO wants to implement software systems,
they should consider many factors such as internal regulations, financials, cost, labor force, among others.

A “Big Bang” approach is risky.
A more experienced team is necessary if this type of approach is considered.
IBM was selected as a partner over Cap Gemini

Organized the TIGER team members
Financial control
Materials management & production Planning
7 directors for business review
2 business analysts
IBM consultants for each team
Extended team members
What did they do?
Final Project Plan
What happened?
Went over budget by 30%
1/3 – infrastructure cost
1/3 – team costs and education of NIBCO associates
1/3 – third-party consulting

Long-term strategy – consolidate 17 distribution centers
Did they solve the problem?
To some extent they did solved the problem but the results are not the optimal
A mid-sized company like NIBCO should have more thoughtful consideration before using a “Big Bang” approach for SAP ERP system implementation.
The TIGER Triad at the heart of the project is a more effective management structure.
A company could also use a
staggered/gradual approach
which is less risky for SAP ERP system implementation.
NIBCO’s Facts
NIBCO is a leading international manufacturer of valves, fittings, and piping products used in plumbing, heating, air conditioning, and irrigation.
NIBCO has a manufacturing history of over 100 years in operation with $400 million in revenue earnings as of October, 2013.
NIBCO serves a global market, and it operates 10 manufacturing plants throughout Mexico, Poland, and the United States.

NIBCO’s journey to the “Big Bang” implementation began three years earlier.

A cross-functional team was charged with engineering processes that were integrated, and in the process better meet their customers’ needs.
NIBCO’s Issues
Major investments in information technology were outdated. They had been implemented 5 years prior.

Those systems had developed into a patchwork of legacy systems, and reporting tools that were not integrated.

There was dissatisfaction with the functionality of the legacy environment and data.
NIBCO'S Problems
The organization could not prosper with its current information systems.

NIBCO’s management team came to a consensus that the company was “information poor,” and needed to be “cut loose” from its existing information systems.

There were concerns about being able to achieve company growth, and become global without the integrated information system.
Four major legacy systems supported the order entry, manufacturing, distribution, and accounting functions.

Workers’ details
Purchasing the product

Different business units had their own packages for some applications:
NIBCO’s SAP Implementation Validates
the Contents within Chapter 10

The purchasing steps:
Initiating the purchasing process:
BCG helped determine the need for changes.
Definition Phase:
BCG said, “You really need to look at integration as a major factor in your thought processes.”
Construction Phase:
System design, system building, and system testing.
Implementation Phase:
IBM was selected.
Implementation consulting
Change management consulting
Technical consulting
Contract a consulting firm as a third-party Implementation partner.
NIBCO hired Boston Consulting Group to conduct strategic IT planning.
Consulting firms (IBM) can be contracted to help with “change management.”
They help make changes in the way people do their jobs, and help overcome resistance.
Enterprise Resource Planning (ERP) Systems offer benefits such as:
Cost reduction, efficient business processes, legal compliance, and IT platforms.
Packages should be evaluated in depth.
7 ERP packages were evaluated at NIBCO.
Benchmarking was conducted.
There should be a project team for purchasing packages.
NIBCO had a project champion, Rex Martin, who was the executive sponsor for the team along with 3 project’s co-leads that informed him of key issues.

Materials and Frameworks Learned in the Previous Chapters
“All business managers, not just IT managers, are responsible for wisely investing in, and effectively utilizing these information technologies for the benefit of their organization.” (Chapter 1)
“The only way to get a handle on how various machines would handle your computer workload is benchmarking.” (Chapter 2)
Client/Server applications (Chapter 2, 3 & 5): The processing power is distributed between a central server system, and number of client computers.
An ERP system (Chapter 5) is a set of integrated modules that carry out common business functions (unlike what NIBCO had, see Exhibit 2):
General ledger accounting
Accounts payable
Accounts receivable
Material requirements planning, order management
Inventory control
Human resource management
Wilson (Project co-lead for technology) supervised an IS department of about 30 IS specialists that mostly used COBOL programming (Chapter 2).
SDLC Project (Chapter 2, 8, 9 & 10): Definition, Construction, and Implementation.
A contract was signed with SAP for the FI/CO, MM, PP, SD, and HR modules (SAP as a vendor: Chapter 8)
ERP systems are integrated primarily through a common set of definitions, and a common database (Chapter 5).
Old ways of doing business have separate functional departments, and do not “talk” to each other. Processes are more time consuming, and it is difficult to gather accurate data about the company as a whole (Chapter 5).
As-Is and To-Be (Chapter 8 & 10)
Six IS specialists developed a 250 page technical document that became the blueprint for building the new technology infrastructure (Chapter 8).
Key Factors Learned from NIBCO’s “Big Bang”
Motivation is important:
Stock options
Employees’ attitudes are crucial for success.
Extensive training is imperative. At NIBCO each employee had to receive over 45 hours of mandatory R/3 training.
If working for a mid-size company, such as NIBCO, it important to incorporate an implementation partner.
The integration really had to work, otherwise anyone in the organization would claim they were better off before the switch.
Other company initiatives were put on hold.
If the project ran late, it could really hurt the company.
A competitor actually went live during the course of NIBCO’s implementation, and they could not take a customer order for the first two weeks.
Realize that the final project budget might change.
It was estimated to be $17 million, which was 30% higher than the mid-summer estimate due mainly to the inclusion of change management costs (including training).
Additional Research- Two Most Popular ERP Implementation Strategies (Lee, 2013)
Big Bang’s Pro’s:
Lower costs
Every employee moves forward on the same day
The firm does not have to operate their business in two different computer systems
Shorter implementation time
Frustrations are condensed into one time period
Phased Rollout Pro’s:
Less risky
Employees learn as they go
More time for users to adapt to the new system
Not a sink or swim experience
Details can be fixed as you go
Skills are obtained with each phase
Smoother process
Big Bang’s Con’s:
High risk
Testing can be tough during implementation
Failures in one part of the system can cause failures in others
Fall out plans do not always work as planned
Performance can be diminished temporarily after the initial implementation
Phased Rollout Con’s:
More costly
Takes more time to be fully converted
Not as focused as the Big Bang
There may be information gaps
Temporary bridges need to be made from old to new
Additional Research- Empirical Study of ERP Implementation Strategies (Madkan, 2014)
According to the results conducted on 45 organizations, the “big bang,” and the “phased rollout,” or a combination of the two strategies were implemented by 89% of users.
40 out of 45 ERP implementations were successful. The 5 that were not successful reported to have been because of miscellaneous reasons.
In conclusion, NIBCO could not prosper with its current information. Therefore, ERP implementation was a strategic factor that brought about greater productivity and efficiency, and better customer service.
Analysis of the Issues
NIBCO’s SAP ERP implementation was successful in part because they had an executive sponsor, and a centralized management structure of three co-leads.
Employees had to work very long hours. Not every firm wishing to make the same change might have the same compliance.
Attendance at trainings was very high. This allowed for participants to be more ready to make the switch on the “Go Live” date.
There were incentives that motivated top management to strive against all odds.
The budget was not well planned out, but the improvements made proved to be detrimental to the success of the ERP implementation.
The implementation of the ERP was extremely important since it helps companies manage the effective use of resources by providing an integrated solution for the firm’s information-processing needs.

Management team’s solutions to the problems based on the knowledge we have learned in class.
Top management was completely engaged in the project, not just involved. NIBCO had an executive sponsor, and three co-leads.
Project leaders were veterans. Wilson was the information services director, Davis was a quality management director, and Beutler was the VP of operations.
Third parties fill gaps in expertise and transfer their knowledge. BCG was brought in to evaluate NIBCO’s processes, and to make recommendations on how the firm could best make the changes to the new system.
Change management goes hand in hand with project planning. The executive leadership team (ELT) hired IBM to facilitate the implementation.
A satisficing mind-set prevails. At NIBCO, the R/3 package was to be implemented in a “vanilla” form with essentially no customization.
General Questions
Because of the integrated nature of the modules of an ERP package, firms usually implement the package in as “vanilla” (Chapter 10) a form as possible. What do we mean by “vanilla” form?
What does As-Is and To-Be mean?
Top level management were given Stock Options as incentives. Does anybody know of any other companies that offer that?
What does the term “Big Bang” implementation mean?
About NIBCO . (n. d.). Retrieved November 3, 2014, from http://www.nibco.com/about/
Brown, C. (2012). Managing information technology (7th ed.). Upper Saddle River, N.J.: Prentice Hall/Pearson.
Brown, Tatikonda, Vessey. (2003). NIBCO: mySAP Supply Chain Management. Kelley School of Business, Indiana University. Retrieved from file:///C:/Users/Teo/Downloads/0c96051ca6af897b3d000000.pdf
Empirical Study of ERP http://www.ripublication.com/irph/ijict_spl/ijictv4n6spl_13.pdf
ERP Implementation Strategies: The Pro’s and Con’s of Big Bang vs. Phased Rolled-Out http://erpvar.com/blog/bid/98952/ERP-Implementation-Strategies-The-Pro-s-and-Con-s-of-Big-Bang-vs-Phased-Roll-Out
ERP VAR http://erpvar.com/blog/bid/98952/ERP-Implementation-Strategies-The-Pro-s-and-Con-s-of-Big-Bang-vs-Phased-Roll-Out
NIBCO‟s Big Bang Payoff By: Michelle Sims: http://www.academia.edu/7733224/NIBCOs_Big_Bang_Payoff
Spencer, J. (Oct 28, 2014). NIBCO’s Big Bang SAP ERP Implementation, The Lemon Center. Retrieved from http://lemoncenter.com/nibco-big-bang-sap-erp-implementation/
The 11 Greatest Supply Chain Disasters. (2006, January 1). Retrieved November 5, 2014, from http://www2.isye.gatech.edu/~jjb/wh/tidbits/top-sc-disasters.pdf

Staggered/gradual Approach
has smaller risk because the implementation is only partial in a given timeframe.
may pushes workers in a staggered manner into the race to the winning group.
reduces output and release employment more gradually.
is more costly
has larger possibility of production inefficiencies.
Big Bang Approach
has greater risk for SAP ERP system because the entire system is implemented throughout the firm right away.
it has potential effects.
it requires a more experienced project management team.
it requires more intensive technical support for users during and immediately after implementation.
is cheaper
Additional Research (cont’d.)
1. The plan was to convert to SAP R/3 at all ten plants and the four new North American distribution centers the same time.
2. The budget was $17 million and expected complete the project in 15 months
The project was conducted in four large phases: Preparation; Analysis; Design; Implementation
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