Keda's SAP Implementation

1. Business Context/Key Business Drivers

Keda began as a small capacity manufacturer of ceramic machinery in 1992. Keda began by imitating business
model of European ceramic machinery manufacturers, who were leading the market space at that time.
By early 2000s, Keda became the second biggest manufacturer of building machinery, second to SACMI of Italy
(who had implemented SAP system for ERP)
Keda set up a post-doctoral workstation for research in 2003. Company also made an additional investment of
$5.4M in ceramic engineering R&D facility. R&D, product and business innovation were of prominent
importance. With these initiatives, Keda established itself as product and management innovation leader.
By 2010, with more than 2000 employees, Keda was a force to reckon with; offering a broad spectrum of
services like stone processing, energy resource management, plant design & technical consulting etc.
Owing to the nature of its business, Keda received orders which were highly customized, had low volumes and
hence had higher margins. This, coupled with de-centralized inventory, made it difficult for the company to
keep track of and plan for its resources. Utilization of these was extremely poor compared to competitors.
Keda had a silo based model, which did not really work well for the company. The business units were not well
connected with each other and did not share enough information, which led to duplicity, redundancy and thus
higher costs. This resulted in company not having a clear idea about its costs and decisions were taken on a
hunch rather than based on data and its analysis.
Main drivers for Keda to switch to a new and comprehensive ERP system increasing pressure faced from local
and international competitors, Chinese governments policies to incentivize computerization and existing MRPII systems vendors discontinuation of support.
2. Initiative Objectives/Benefits
Key Business Objectives
Efficient data flow and integrated
business processes

Improved inventory management

Appropriate costing and pricing

Improved production efficiency,

reduced product lead time
Support multi-plant operations

Planned Benefits Of The Initiative

Decrease in redundancy and duplication of efforts better information
sharing among different business units. Improved control and
information quality (availability, accuracy of cost and qty. etc.)
Optimized inventory due to centralization and better coordination
between different entities.
Clearer idea of cost, enabling company to identify and get rid of nonprofitable orders. Accuracy of data improved from 85% to 98%.
With same manufacturing capacity monthly output increased from 6
presses to 30 presses.
Older MRP-II system did not support multi-plant operations which were
critical in achieving operational efficiency.

3. Initiative challenges
Key Challenges
Resistance from personnel to
use the new system, fearing
that it would lessen their
authority.
Changes demanded by users
Delays in production
Training
of
malfunction

users/system

Issue Resolution
Senior management lent its support to the implementation process, as it
would set a strong example of support for the new system. Those who still
wouldnt comply, were promptly replaced, i.e. forced-compliance
Users involved in setting process parameters during implementation. This
ensured their compliance.
Implementation took place during non-peak period. Director was informed
in advance and supported the project by allowing ERP related delays in
first year.
Training of key users and identification of potential issues with system was
carried out simultaneously and early on. Key users then trained others.
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4. Results
The initiative was successful. This can be seen from the results achieved after implementing these strategies:
Data accuracy improved from 85% to 98%. Better pricing and costing as decisions were taken on the basis of
analysis of the real data that was now available.
Capacity of press manufacturing increased from 6 a month to 30 a month, within same manufacturing facility.
Reduced costs.
Optimized inventory also reduced inventory holding costs.
Improved response to fluctuating market conditions and market demands.
Improved decisions non-profitable orders avoided, better control over pricing.
SAP ERP implemented across organization.
5. Relevance and analysis
Even though Keda had achieved great success and had an exponential growth, its margins were hurt by inefficient
and decentralized inventory management, improper pricing due to inadequate information about costs and
underutilized resources. MRP-II did not support multi-plant operations and having a streamlined, organization
wide flow of information was impossible. Hence Keda was in dire need of a comprehensive ERP system to put up
with the pressure exerted by local and global competitors and living up to the expectations of the market.
Taking the Chinese business culture into consideration, it wasnt expected that the ERP implementation would
occur smoothly, as personnel would have looked at it as a challenge to their authority. But management was firm
about their decision of implementing this system and top management supported the vision with a great
commitment. Management also chose to exercise local tools such as forced compliance to make sure that
everyone complied with the change and those who didnt were promptly replaced. (Case specific question 1)
I believe that Keda had a stroke of luck with their big-bang approach of implementation working out fine. A
cascaded approach during implementation would have made more sense, since, had the system not worked out,
Kedas losses would have been minimized. Another different approach that Kedas management could have taken
is clearly communicating the benefits of the new ERP system down the hierarchy and ensuring that users
authority will not be compromised by implementation of ERP, which was concern for some of the personnel, who
had to be replaced. (Case specific question 2)
The implementation was successful, although roughly 80% of such efforts fail in China. I believe this happened
because:
Support and commitment of higher management towards the project.
Key employees worked along with external consultants to ensure data accuracy.
Business processes such as inventory management were completely overhauled and reengineered to fit
perfectly in the new ERP system.
Third party vendor was chosen instead of developing the system internally. This ensured faster
implementation as this vendor was better versed with implementing such complex system.
Training to key personnel was given early on to ensure their compatibility with the new system and early
detection of malfunction.
Takeaways
Involvement of key users right from initial stages, commitment of higher management, seamless
communication between different participants, efficient selection of proper option, defining and sticking to a
timeline are some of the key factors which ensure success of implementation of an IT project.
Cultural context can be used to ensure success of a project.
Keeping senior management informed proactively can avoid bigger problems and also their involvement can be
used to drive success of a project without facing resistance from key stakeholders.
Decision of whether to go with a third party vendor or develop system internally should be taken carefully
considering the time at hand and speed with which system is required to be implemented.
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