Introduction:
Analysis:
The first and foremost question that crosses the mind is that why do they at
all need a software implementation for supplier management. What is the key
issue is it managing supplier relationships effectively or is it something
else?
From the case it is evident that the primary focus was on reducing costs and
improving product quality.
o Garry Berryman believed that everything else would follow suit if the
organization could influence costs
o The goal of the Supply Management Strategy (SMS) was to reduce
costs and not supplier development
o They emphasized bringing competency to product development and
innovation shouldnt supplier development also been a part of the
initiative?
o The most important tangible benefit of SiLK value proposition was
purchasing cost reductions (evident form exhibit 3)
An analysis of Harleys financials reveals the following :
1994
revenues
% increase y-o-y
operating
expenses
% increase y-o-y
1995
1996
1997
1998
115888 135046 153122 176256 206395 cumulati
7
6
7
9
6
ve
17%
13%
15%
17%
16%
194829 226923 262001 320731 366222
16%
15%
22%
14%
18%
This shows that over a period of 5 years, their operating costs have increased
at a higher rate than their revenues. This obviously indicates inefficiencies
associated with their operations.
There were other implications also there was constant unmet demand; so
much so that employees were reluctant to bring the line down at any instant.
Many customers had to wait for almost 2 years to receive their order. What
were the reasons for these prolonged delays?
o According to the survey conducted, employees spent most of their
time doing internal (16%) and external (11%) correspondence and
reviewing invoices (10%). 90% of the total time was spent on nonvalue added activities
Reducing delay times was another major objective of the SMS (exhibit
3)
o 2000 individual purchase order requests were generated when the
purchasing organization had only 200 people indicating unstructured
processes and order duplications
Harley Davidson had operations spanning countries. As each site
independently ordered and procured materials, therefore a software solution
could indeed address the inefficiencies associated with the procurement
process. However, certain aspects need to be carefully looked into. These are
as follows
o Functionality and technology are the most important capabilities that
a provider must possess
o Implementation of such software solutions means dynamic changes in
the systems and processes which employees are accustomed to.
Therefore, change management becomes a vital function. Capability
of training employees to the new systems and addressing
(modification / enhancement) any user issues should have a high
priority when evaluating providers
o Scalability should also have high priority keeping in mind that in near
future, ERP systems might be implemented organization wide.
Therefore, flexibility to scale up, integration and interfacing
compatibility with existing/other systems and portability across
functions/sites become essential
o Since such systems are usually expected to have a long lifespan
(around 8-10 years), cost implications should be looked at more from
a long term perspective
Why not get a consultants opinion? A consultant firm would be better
equipped to have an all-round view of the various issues faced and come up
with more refined requirements analysis
Is software implementation the only solution? How will the centralized
process impact the independent attitude, developed over the years, of the
individual sites? Is it consistent with the organization culture? Will people find
it easy to adapt to the new system? Are people receptive to change?
o Is that the reason why the decision makers are putting so much
importance on the providers culture matching with theirs?
o Is it why they prefer the project to be done by an existing provider (of
a different solution)?
o
Provider Evaluation:
A scoring matrix is built to evaluate the providers based on the factors mentioned
below. Weights has been assigned to each of these criteria based on their
importance for better output. The evaluation criteria is basically divided into six
factors. Each factor has a metrics to evaluate. The current evaluation criteria of SilK
is not complete and we included the flexibility of the software has been added. This
factor is important to consider that the company is just considering single
functionality and there is every chance for an enterprise execution. So the
architecture so far suggested should be flexible enough to incorporate
modifications/additions.
Weightage criteria:
A high importance has been given to functionality and technology capabilities
of the providers as it decides the initial success of the project.
Secondly change management is given importance as better training is
needed otherwise even a sophisticated software is left obsolescent.
Scalability follows the CM and it is important for evaluating the provider as
the flexibility and the portability of the package is vital for long term use.
Culture has given relatively less importance as the relationship with the
providers is short-term. But it too has importance as the company believe in
their culture and the interaction with the Harley employees should be fruitful.
We considered cost to be least priority as this is a one-time cost and financial
viability of the project is given higher weightage.
Based on the scoring, provider 1 is leading and the difference between provider 1
and provider 2 is marginal.
Recommendations:
Hire a consultant firm to analyze the underlying problems and develop
solution approach based on the requirements
As these types of enterprise software implementations are very complex in
nature and have high failure rates, it is advisable to pilot run the project at
one site first. Based on its success, it could be scaled up to the other sites
also
Give priority and weights to evaluation criteria as per the excel
Evaluate
the
possibility
of
completely
decentralizing
the
ordering/procurement/production process to the individual cites which would
cater to the regional demands only. This alternative needs to be assessed
with respect to production facility costs, procurement costs and also supplier
capabilities
