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Mounica Vennamaneni

I am currently pursuing my MBA at San Francisco State University with focus on Information Systems and D
Feb 21, 2016 8 min read

Keda SAP ERP ImplementationAnalysis

Drivers for ERP
Kedas silo-based model was fostering innovation and entrepreneurial
culture but it was taking a toll on its business performance due to
redundancy among its business units, resulting in increased costs and
lower eciency. Business managers could not make holistic and
strategic decisions due to fragmentation of information. This also
meant that they could not properly assess cost and protability of
purchase orders and had to rely on experience and hunch. Keda was
also struggling to meet the market demand, as there was sub-optimal
usage of resources.
Keda diversied its business and product lines and opened multiple
production plants in 2004. Their existing Manufacturing Resource
planning (MRP-II) system was not built to handle multiple plant
operations. The problem was also exacerbated when the vendor of
MRP-II decided to stop maintenance support of the software. This
meant Keda had to urgently implement a new IT solution for their
business. And lastly, there was also pressure from Chinese
government on its companies to adopt IT and computerize their
processes so that they can better compete against foreign rms. The
government was providing explicit incentives and running campaigns
and this could have also driven Keda to adopt ERP.
Management at Keda rightfully identied that most of the problems
plaguing their business processes and production lines could be solved
by using an ERP system. Having a single database, as shown in the
gure 1, where all the data from dierent business units gets saved
will solve the problem of data fragmentation and streamline the ow
of data throughout a business (Davenport, 1998). Managers can now
take the right decision at every step of decision-making process since
they have all the information needed.
Processes of implementing an O-the-shelf ERP System:

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According to Ross (MIT, 2000), there are 5 phases of ERP

implementation. They are design, implementation, stabilization,
continuous improvement and transformation. Markus and Tanis
(Claremont, 1999) developed a four phase ERP implementation,
which are chartering, project, shakedown and onward and upward.
Shanks et al. (ECIS, 2000) developed a synthesis of the above two
process models leading to a four phase ERP implementation (gure
2).
Planning: involves selection of ERP system, developing the business
use case, identication of project manager, and formulating the
system architecture. In this phase, Keda evaluated various o-theshelf ERP suites and shortlisted SAP and then assembled an
implementation team consisting of members from all their business
units.
Implementation: This phase involves conguring and implementing
the software and usually disruptive to organizations performance.
During this phase, at Keda, they had to modify and streamline their
operations and workow and had to revamp the organization
structure. Users were also given training while parallelly testing the
system. There were also technical problems, production delays and
resistance from the users in adopting the new system.
Stabilization: In this phase, implementation problems are xed and
the companys performance increases. Dr. Zhu resisted any new
feature requests from users until the project was stable.
Improvement: In this phase, organization sees incremental or rapid
improvements in their performance. At Keda, after one year of ERP
implementation they were able to produce 30 machines per month
compared to 6 per month previously.
Leadership best practices
As Sumner (ACIS, 1999) and Zhang et al. (HICSS, 2003) point out,
sustained top management support is needed for successful ERP
implementation. At Keda, during each phase, there was a strong
leadership support from planning to stabilization, in terms of overall
project direction and also in making the critical decisions, which

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resulted in a successful SAP implementation. Some of the best

practices were:
1) Pivoting by halting all ongoing IT projects and refocusing on a
computerization plan to address both short-term and long term needs.
2) Identifying the core business competencies and realizing building
an in-house ERP solution would be a waste of resources
3) Picking the right members for the core implementation team by
identifying employees who are indispensable to the business unit
4) Involving the senior managers and directors right from planning
phase to make sure their support to the project was not supercial
5) Putting in place a proper reward system and identifying the key
users and award them with bonuses and also punishing the
unsupportive employees
6) Constant monitoring of the progress of the project by attending the
meetings and being involved in the blueprint design brieng.
7) Adequate ERP implementation strategy: According to Gibson and
Mann (1997), ERP can be rolled out in phases providing incremental
functionality or a big-bang approach that oer full functionality.
Kedas leadership team did thorough analysis of both approaches and
decided to go with big-bang implementation.
8) As Davenport (HBR, 1998) points out, implementation of ERP
should be speedy but not rash. Even though Keda had short timelines
to implement SAP, at no stage were they rash or tried to cover-up
potential gaps
Challenges faced during SAP implementation and how they were
overcome
Time: Tested the system and trained the users parallelly and adopted
big-bang approach for going live.
Resistance to work on ERP project: Introduced a reward system to
provide additional compensatory bonuses and also punish employees
unsupportive of the project.

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Disagreements between module owners and consultants: Adopted

consultants recommendations 100 per cent of the time and inclined
towards making changes to the workow and its management. As
Esteves (BIT, 2000) writes it is always better to avoid customizations
and adopt the processes and options built into ERP and modify the
business workows to suit it.
Production delays, technical problems after the implementation
of ERP: Kept the management in loop before rollout about possible
production delays. Total management support and tolerance from
leadership to ERP related delays. Timing of deployment was also
chosen to minimize business disruptions. Hersheys failed ERP
implementation caused by deployment during its peak season shows
the importance of choosing the right period to go live. (CIO, 2009)
Resistance from the users: Organizational culture was imposed.
Anyone not agreeing to the new workows was promptly replaced
and new persons were promoted to the positions.
Adopting Kedas strategies at other ERP implementations
While organizations across the world could use some of the strategies
used by Keda during the implementation of ERP, some of them like
forced compliance or punishing employees cannot be replicated either
because of the organizational culture or even because of ones
countrys culture. Some of the strategies used by Keda mentioned
below could be applied at other organizations:
1) Identifying early what the business problems are and clearly
dening the requirements for what a successful ERP implementation
would be.
2) Sustained Top Management support: Kedas management team
was constantly monitoring the project and providing overall project
direction and sometimes making the unpopular decisions.
3) Project Champion Role: Keda hired Dr. Fan Zhu as their IT head.
He was critical in the success of the project at Keda. As (Parr et al.,
1999) and (Sumner, 1999) write, this role is very important to market
the project throughout organization and the person should have the
skills that are critical to handle organizational change and would be
central to successful implementations.

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4) Choosing the right ERP software and version: Keda did due
diligence before nalizing on SAP as its ERP implementation. They
assessed multiple ERP vendors, did client visits, involved all the
stakeholders before zeroing on SAP. According to De Bruin (1997), it
is also important to determine which version to install and not
advisable to do frequent upgrades
5) Avoid Customization: 100 per cent of the time Keda adopted SAPs
business process and were inclined to change their existing workows
rather than customizing SAP. We can see that both ElevatorCo in
China and OilCo in Australia followed the same strategy and had
minimal customizations for their ERP (Shanks et al., 2000)
6) User testing and training: Keda adopted the strategy of testing
the implementation in parallel with training. This will save lot of time
and also potential issues could be found quickly.
Leveraging culture for a successful implementation of ERP:
According to Hofstede (1993), China has more power distance with lot
of hierarchy and more centralized power authority. People look up to
those in authority and accept top management changes. This helped
Keda in making critical decisions quickly as senior leadership were
able to impose their decisions without much resistance. They were
was also able to leverage culture by resorting to forced compliance.
Employees who were resistant to the project were either red or
punished by assigning to work in a cafeteria. In Chinese culture it was
highly embarrassing for someone like departmental managers to work
in a canteen and this was found to be an eective arrangement to
keep them work towards the success of the project. Also, new people
were promoted replacing other employees since a new person would
have no bias against the new system and will comply more willingly.
As per Zhang (HICSS, 2003), since most of the ERP vendors are based
in Europe or North America, the business practices built into ERP
sometimes directly clash with those practices of Chinese organizations
leading to negative eects on ERP implementation. But Keda
overcame it by changing their business practices, workow and
management and adopting the system as is.
Figure 1: Anatomy of an Enterprise System

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Figure 2 Phases of ERP implementation

References:
1) Thomas H. Davenport, Putting the Enterprise into the Enterprise
System, Harvard Business Review, 76(4), July-August 1998, pp. 121
131.

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2) J.W. Ross, The ERP revolution: surviving versus thriving, Working

Paper, Centre for Information Systems Research, Sloan School of
Management, MIT, 1998
3) M.L. Markus and C. Tanis, The enterprise systems experience
from adoption to success, Working Paper, Claremont Graduate
University, 1999.
4) Shanks, G.; Parr, A.; Hu, B.; Corbitt, B.; Thanasankit, T.; and
Seddon, P., Dierences in Critical Success Factors in ERP Systems
Implementation in Australia and China: A Cultural Analysis (2000).
ECIS 2000 Proceedings. Paper 53.
5) Sumner M. Critical Success Factors in Enterprise Wide Information
Management Systems Projects, Americas Conference on Information
Systems, Milwaukee Wisconsin, August 1315, 1999.
6) Zhang L., Lee M., Zhang Z., Banerjee P. Critical Success Factors of
Enterprise Resource Planning Systems Implementation Success in
China, 36th Hawaii International Conference on System Sciences,
2003
7) Gibson J., Mann S. 1997. A qualitative examination of SAP R/3
implementations in the Western Cape, research report, department of
information systems, University of Cape Town.
8) Esteves-Sousa J., Pastor-Collado J. Towards the unication of
critical success factors for ERP implementations 10th Annual Business
Information Technology Conference, Manchester, 2000
9) Wailgun T. (Mar, 2009) 10 Famous ERP Disasters, Dustups and
Disappointments.
Retreived from http://www.cio.com/article/2429865/enterpriseresource-planning/10-famous-erp-disasters--dustups-anddisappointments.html
10) Parr A., Shanks G., Darke P. 1999. Identication of Necessary
Factors for Sucessful Implementation of ERP Systems, New
information technologies in organizational processes, eld studies and
theoretical reections on the future work, Kluwer academic
publishers, 1999, pp. 99119.

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11) De Bruin P. 1997. Unpublished 1997 Sapphire conference notes in

Gibson and Mann 1997.
12) Hofstede, G. (1993, February). Cultural constraints in
management theories. Academy of management executive, 7, pp. 81
90.

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