Schmidtco

Background
• Schmidt Co, a family owned firm is in
Automobile parts distribution business.
• Annual turnover $ 40 Million.
• 10,000 SKU’s distributed on an average to
1000 different destination. Shipping 20 million
pieces a year.
• Volume & Complexity of business made
information system critical to the success of
business.
 Present Info System
• 18 year old unreliable and obsolete system.
• Increasingly unable to process information in efficient
manner prompting the owners to replace the same
with a state of art system.
• The current system essentially an inventory
management system.
• The vendor of the original software was out of business
and subsequently firm used an independent consultant
to customize and enhance the system.
• Severe Limitations in two crucial functions: Inventory
Management & Purchasing.
• Systems for accounting and other aspects operated
 New System
• The new system expected to integrate all information
system within the company and assist in better control of
inventory.
• Decision to implement an ERP (Enterprise Requirement
Planning) system.
• The new system was proposed by a cross functional team
of 8 managers.
• The new system would have the following Modules:
Warehousing, Inventory, Accounting, Purchasing, Sales &
Customer Relationship Management.
• Firm aimed reduction in overall inventory and improve
service levels
• Automating of functions would result in reduction of staff.
 New Project
• The firm DTech System chosen after 3 months of
survey.
• DTech system chosen because of it superior
functionality in Warehousing and Inventory
Management.
• DTech new entrant in US market. Till date only 15
ERP systems deployed in US compared to runner
up vendor (US based) which had installed several
hundred system.
• System cost by both vendors was same ($
400,000).
 Current State of Implementation
• Implementation commenced in December , PDC
6 months.
• Old system to continue operations in the interim.
• 10 member team to manage implementation
internally. DTech 3 person to handle the technical
side.
• “Conference Room Pilot “ to test the
effectiveness of the system with hypothetical
data. Concurrently IT manager to design reports
required to be generated by the system.
• Validation of system to take place with real data.
 Decision problem
Uncertainties in Implementation of new ERP based system:
• SchmidtCo is using old system for long time. Most of the employees were
comfortable with existing systems and it’s hard for them to adapt for new changes.
Now company has decided to go with DTech as ERP vendor. But DTech failed to
meet the expectations and project is running late and over run in cost. Some
people from implementation teams are arguing with John to dump DTech and turn
to runner up ERP vendor.

Change in top level management:

• John Schmidt is leading transition of old system to new ERP based systems. Should
he resign as manager of project during middle of implementation phase? Should
he choose new experienced person for the implementation of ERP systems?

Poor Implementation of new ERP systems:

• In Schmidt no one had prior experience of implementing new ERP based systems.
They didn’t have qualification to choose right vendor and product. Prolonged
implementation process, leading some in the firm to question the decision of
vendor selection at the same time exposing the lack of in house expertise.
 Present Status
• Expenditure of $ 600,000 incurred.
• Presently $ 50,000 over budget and 3 months behind
schedule.
• Implementation team trained extensively.
• Vendor defaulted in provision of quality project
management.
• Firm’s IT Manager inability to convert existing data and
setting up of reports further delaying the project.
• The IT consultant quit the firm which further
compounded the problem.
 Difficult Decision
• Current state of things not very encouraging.
• System implementation not progressing as envisaged.
• Cost over runs further burdening the firm.
• Requirement of full time project manager and IT
person for data conversion, infrastructure
improvement and Report writing likely to add to the
fixed cost of the firm.
• John being advised to dump DTech resultant fall out
the loss of some initial payment made.
• Further delay in implementation of ERP likely if new
vendor appointed.
 Problems to be addressed
1. Poor History of Software providers in past, previous one went out of business
soon after SchmidtCo acquired their product. increased volume and complexity
of distribution, an independent consultant enhanced their original system which
has many limitations and requires a lot of manual work Late implementation,
over budget, and bad quality
2. DTech is mainly used in Europe / only 15 systems have been installed in the U.S
3. DTech is in the middle of their own integration / acquisition
4. Newly acquired consultants at DTech don't even know the DTech system that
well
5. John promoting staff lay-offs as a result of the new system - (not exactly a great
motivator)
6. IT consultant quitting and nobody to run the current system. ( due to being
overloaded and acting as an assistant to DTech consultants)
7. Lack of time on John's part to devote to the new project that he is spearheading.
8. Poor / prolonged implementation process diverting attention away from day to
day operations
9. System should have been installed earlier and before rapid product expansion
10. Fragmented implementation teams on both DTech and SchmidtCo and
consultants
 Objective
• To address the issues relating to troubles in other
areas of IT consequent to unexpected quitting of
the IT Consultant.
• To manage the Project cost over run and reduce
execution and implementation time.
• To get greater commitment from the ERP
implementation firm Dtech
• Improve the functioning of the internal team by
reviewing the progress and laying down timelines
for sub tasks within the ERP implementation.
 Alternative & Consequences
• Change the Vendor
• Project will be delayed further, forego initial payment & start from
scratch.
• Hire a full time project manager and IT person.
• Will improve the implementation and expedite deployment of the
system.
• Likely to add to fixed cost.
• To implement ERP system in Phases commencing with Inventory
and Purchasing Management.
• Scope being limited, easier to implement & manage.
• Further implementation could be planned based on the
effectiveness.
• David to replace John as Project Manager and ERP implementation
officer.
• David’s experience & background makes him an ideal choice.
 Suggestions
• David should replace John as Project Manager.
• A new IT person should be hired.
• To implement ERP system in Phases commencing with
Inventory and Purchasing Management.
• Inject more professionalism into the proceedings by
selecting the right people to take part in the
Implementation process.
• Get in touch with other companies who have used the
services of DTech to see how the systems are working.
• Stay with DTech and demand greater response from
the firm and give them a time frame to fix problems
from their side failing which new firm