Sample Project for an ASAP Implementation

Motor Sports International

© SAP AG ASAP91 & 92 MSI Case-1

Sample Project Information: MSI

Company Background
Motor Sports International (MSI) is headquartered in Hamburg, Germany with offices located in
Berlin, New York, California and Seattle. The Hamburg, Berlin and California offices have
manufacturing facilities. Hamburg has retail sales, teledirect, customer service, purchasing, and
finance departments. New York, California and Seattle have distribution warehouses as well as
small sales and marketing offices. The Berlin location also has two warehouses – Materials HH
and External HH. They are used for storing raw materials and finished goods respectively.

MSI sells motorbikes and has recently acquired a company that manufactures motorbike
accessories located in Quebec, Canada. This acquisition was executed as part of an overall strategy
to expand MSI’s operation. The acquisition presented MSI with a number of opportunities to
achieve economies of scale across key operational and strategic areas. The venture now presents
MSI with an imperative to address operational constraints arising from the incompatibility of
legacy systems across the two organizations.

Recently, MSI has experienced record growth and expanded its business by selling to major retail
distributors throughout Europe and North America, and has introduced a mail order catalog
business. Last year their total revenue exceeded $1.5 billion. MSI sells 20% of its products
through independently owned stores, 65% through retail distributors and the remaining 15% are
catalog teledirect via a toll free number. MSI imports 35% of its finished product directly to its
warehouses in Hamburg and Berlin. The remaining 65% is made or refined directly on site at their
manufacturing locations.

MSI management reasoned that the implementation of an ERP system would address many of its
system issues and, at the same time, providing the opportunity to address the process-related
issues arising from the merger of the two operations. The management of MSI reviewed the ERP
market offerings and selected the R/3 System as the integrated solution that could best support
MSI’s continued growth into the 21st century. Management has also demanded that the ASAP
methodology be used to implement the R/3 System.

H. Davidson, President of MSI:

“Due to our substantial business requirements and condensed timeline, it is necessary for
MSI to implement the R/3 System using the AcceleratedSAP methodology. We will
implement Sales & Distribution and Procurement. We will be taking advantage of the
many standard interfaces R/3 offers, such as EDI. The most important benefits we see, and
our main reason for choosing R/3, include the integration between components, and the
improved communication between sales and manufacturing. R/3’s superior reporting
capabilities and the ability to better support our distribution, manufacturing, retail and mail
order businesses will help us manage our growth in the future. We are anxious to start our
journey towards successfully going live.”

© SAP AG ASAP91 & 92 MSI Case-2

From the presales process, it was determined that the enterprise areas Sales & Distribution and
Procurement would be implemented. It was also determined that only the following scenarios for
these two enterprise areas would be set in scope.

• Sales Order Processing: Standard

• Sales Order Processing: Make/Assembly To Order
• Procurement of Materials & External Services
• Internal Procurement

(For the purpose of this exercise, only a few scenarios were selected. A typical project would include more.)

A preliminary review of the project also indicated:

• Variations across key processes, particularly in the purchasing area, will need to be addressed
(centralized purchasing).
• Issues relating to duplicate and redundant legacy systems will need to be resolved.

MSI has many legacy systems, which they would like to replace with the R/3 System. None of the
systems are integrated. Therefore, controls and reporting are less than ideal. They have recently
started an electronic commerce initiative via the Internet Project to increase point-of-sale profits
and bolster their share of the mail order market.

MSI specializes in the production and distribution of motorbikes. However, MSI has recently
acquired Motorbikes Accessories Inc., a Canadian-based company, thereby expanding operations
into motorbike accessories. The acquisition supports MSI’s strategy to dominate the motorbike
market. The new organization now comprises four manufacturing plants with separate and joint
distribution facilities for motorbikes and accessories. The distribution plants for motorbikes are
located in California and Berlin. The distribution plant for accessories is in Quebec. Quebec was
the former headquarters for Motorbikes Accessories Inc. and Hamburg is the headquarters for
Motorbikes International. These two headquarters have not yet been fully integrated. Currently,
the new organization’s marketing and sales, strategic planning and operations divisions are
managed from the Hamburg office although corporate services are run from Quebec.

At the inaugural Steering Committee meeting, the Vice President of Strategic Planning indicated
that MSI is planning to expand their manufacturing operations into Indonesia to capitalize on
lower costs of production, and a motorbike market there. This move is scheduled to take place
within the timeframe of the SAP implementation, and the Vice President of Strategic Planning is
seeking assurance from the SAP Implementation Partner that the implementation will eventually
incorporate the new site.

© SAP AG ASAP91 & 92 MSI Case-3

An organization chart showing geographic distribution of key divisions within post-merger MSI is
presented overleaf.

Organizational Issues
Initial discussions with the Information Technology division within MSI indicated that there is a
low level of computer literacy among operational staff. In particular, many purchasing-related
activities are carried out manually. The staff in general will have had minimal exposure to a
Microsoft Windows environment.

In addition to the computer literacy issue, MSI also faces some significant integration issues
relating to cultural differences between the Canadian, European and American operations. In
particular, many of the Canadian staff prefer French as the first language and are expected to resist
any requirements to operate exclusively in English.

The pay rates for the US-based operations staff are significantly higher than that of their Canadian
and European counterparts. This disparity is partially, but not entirely, attributed to the lower level
of technological skills required for motorbike operations. Motorbike operation is a significantly
smaller operation compared to accessories, and salaries reflected this scale difference. While the
rumors of pay differentials are filtering through the organization, the staff is also concerned about
possible job losses resulting from rationalizing duplicate activities across the new organization.
The announcement of the decision to implement SAP is seen as the first step toward reducing staff
numbers. Union officials have had initial discussions on the implications for MSI workers and the
packaging industry as a whole, but have yet to meet with management.

MSI was planning to establish a presence on the Internet, allowing customers to view their product
range, order accessories directly, and even custom-design motorcycles online to submit for
quotation. A business case for the project was prepared and approved by MSI management prior to
the SAP implementation. The Internet project, named New Wave, has a 12-month development
and implementation timetable, and has been under way for six months. To date, New Wave has
been progressing well, running to budget and on time.

© SAP AG ASAP91 & 92 MSI Case-4

 MSI : Organization Chart

President
M SI

Vice President Vice President Vice President Vice President

M arketing and Sales Corporate Svces Strategic Planning Operations
Location: Quebec Location: New York Location: Hamburg Location: Hamburg

M anager M anager, M anager,

Human Resources Information Tech Financial Services
(Hamburg) (Hamburg) (Hamburg)

M anager of Manager of M anager of M anager of

Operations: Production: Distribution: M aterials / Services
Accessories Motorbikes M otorbikes Purchasing: M otorbikes
(Quebec) (Berlin) (Hamburg) (Hamburg)

Supervisor : Supervisor : Supervisor :

Production Distribution Purchasing

Vision for MSI

MSI has a long-term strategic vision of dominating the motorcycle and accessories market in
Europe, North America and Canada. Three key strategies support this vision:

• Optimal use of technology in all business processes

• Strategic distribution of operations across target markets
• Best-practice staffing levels and business processes

© SAP AG ASAP91 & 92 MSI Case-5

Goals and Objectives for MSI
• Significantly improve information systems structure by replacing outdated legacy systems
• Synchronize data between all functional components, enabling numerous improvements in
processes
• Provide for future growth
• Improve reporting – Establish organizational reporting capabilities to meet current business
requirements and to lay the groundwork for future functionality
• Evaluate and reorganize organizational data to meet MSI’s current and future business
requirements
• Improve data integrity standards and processes
• Optimize use of available technology across the new company
• Establish common processes across geographical areas
• Increase staff skill-set in using technology to perform their functions
• Increase and sustain MSI’s financial performance

Project Background
The project was code named Project Harley. The project is to be managed as a series of
implementations, structured around specific processes. Initially, the project focus will be on the
procurement and sales and distribution processes, as this is seen as the greatest opportunity for
improvement. Other process areas will be addressed in future projects.

The preliminary budget for Project Harley was developed to include the following:
• Project management resources, both from MSI and the SAP Consulting Partner
• Technical resources from the SAP Consulting Partner to assist MSI in developing and
implementing a new system landscape
• SAP Consulting Partner resources to configure SAP System to ensure maximum fit to MSI’s
new procurement and sales & distribution operation
• Hardware procurement and software licenses
• 3 MSI full time resources on the project, one each from the Procurement for Motorbikes
division, the Accessories division and the Finance department
• Part time involvement of two key Steering Committee members
• Some initial Project Team Training, to be conducted by SAP

© SAP AG ASAP91 & 92 MSI Case-6

 MSI LEGACY SYSTEMS
Accessories Operation - High-level list of Purchasing & Inventory Mgt Systems:
Accounts Payable for
Accessories
Purchasing for Accessories
Financials for Accessories
Inventory Management
System for Accessories
Motorbike Operation – Systems around Purchasing & Inventory Mgt:
Accounts Payable for
Motorbikes
Order Status Monitoring
System for Motorbikes
Financial System for
Motorbikes
Material Inventory
Management System for
Motorbikes – Keep current
3rd Party Warehouse System
Blanket Purchase Order for
Motorbikes
© SAP AG
This system is used to track incoming invoices and payments to
vendors associated with the newly acquired Accessories
manufacturing location.
This system is used for vendor masters (source), tracking purchase
requisitions, and purchase orders. The types of POs that handle:
purchase orders for services, blanket purchase orders,
vendor-unknown purchase orders.
This is the Accessories division’s G/L and sub-ledger system for
internal reporting. Currently there is an interface with the Financial
System for Motorbikes which is utilized for external financial
reporting.
This system is used for inventory management of materials required
for operations (MRO), raw material, work in process (WIP), and
finished products.
This system is used to track incoming invoices and payments to
vendors.
This system tracks requisitions, from release through purchase order
to the actual receipt of the required materials or services.
Used for internal and external reporting.
This system is used for inventory management of materials required
for operations (MRO), raw material, work in process (WIP), and
finished products.
Managing of vendor masters and blanket purchase orders.
ASAP91 & 92 MSI Case-7
 MSI CURRENT HIGH LEVEL SYSTEM MAP

Motorbikes:

Order Status Accounts Financial

Monitoring Payable for System of
System for Motorbikes Motorbikes
Motorbikes

Blanket
Purchase
Order Material
for Motorbikes Inventory
Management
System for
Motorbikes

Includes a
Warehouse
System for
Motorbikes

Accessories:

Accounts Financials for

Purchasing for Payable for Accessories
Accessories Accessories

Inventory
Management
System for
Accessories

© SAP AG ASAP91 & 92 MSI Case-8

 MSI - Project Harley: Geographic Scope

Berlin

Hamburg

Quebec

Seattle New York

California
Indonesia

© SAP AG ASAP91 & 92 MSI Case-9