Border States Industries Fuels Rapid Growth with ERP

         Border States Industries Inc., also known as Border States Electric (BSE), is a wholesale distributor for the construction, industrial, utility, and data communications markets. BSE’s goal is to provide customers with what they need whenever they need it, including providing custom services beyond delivery of products. Thus, the company is not only a wholesale distributor but also a provider of supply chain solutions, with extensive service operations such as logistics, job-site trailers, and kitting (packaging individually separate but related items together as one unit). In 2004, BSE began upgrading its ERP system to a more recent version of the SAP software. The software included new support for bills of material and kitting this functionality enabled BSE to provide better support to utility customers because it could prepare kits that could be delivered directly to a site. This time the company kept customization to a minimum and used the SAP best practices for wholesale distribution embedded in the software. BSE management has pointed out that much of the work that was automated by the ERP systems has been in the accounting department and involved activities that were purely transactional. This has freed up resources for adding more employees who work directly with customers trying to reduce costs and increase sales. The company is using SAP’s Web Dynpro development environment to enable wireless warehouse and inventory management activities to interact with the SAP software. And it is using SAP NetWeaver Business Intelligence software to learn more about customers, their buying habits, and opportunities to cross-sell and up-sell products.

CASE STUDY QUESTIONS

1. What problems was Border States Industries encountering as it expanded? What management, organization, and technology factors were responsible for these problems?

            The Border States Industries encountering problem of the implementation of their system up to-date in which they rely only to their old ERP system called Rigel that cannot support the BSE’s new lines of business and extensive growth processes. At that point, as a factor for the responsible of the said problem the BSE’s management decided to implement a new ERP system and selected the enterprise software from SAP AG in which the ERP solution included SAP’s modules for sales and distribution, materials management, financials and controlling, and human resources and BSE also decided to customize the system extensively. It wrote its own software to enable the ERP system to interface automatically with systems from other vendors, including Taxware Systems, Inc., Innovis Inc., and TOPCALL International GmbH

2. How easy was it to develop a solution using SAP ERP software? Explain your answer.

             At the time of the BSE’s management implementation, it’s not that easy to develop a solution using SAP ERP it is because the BSE had no experience with SAP software, and only few consultants can familiar with the version of the SAP software that BSE was using and instead of adopting the best-practice business processes embedded in the SAP software, BSE hired consultants to further customize the SAP software to make its new SAP system look like its old Rigel system in certain areas. Implementing these changes required so much customization of the SAP software that BSE had to delay the launch date for the new ERP system until February 1, 1999. By that time, continued customization and tuning raised total implementation costs to $9 million (an increase of 50 percent). Converting and cleansing data from BSE’s legacy system took far longer than management had anticipated.

3. List and describe the benefits from the SAP software.

            When the BSE decided to customize the system extensively they’ve wrote its own software to enable the ERP system to interface automatically with systems from other vendors, including Taxware Systems, Inc., Innovis Inc., and TOPCALL International GmbH that gives them beneficial, these are: Taxware system in which it enabled BSE to comply with the sales tax requirements of all the states and municipalities where it conducts business, the Innovis system that supported electronic data interchange (EDI) so that BSE could electronically exchange purchase and payment transactions with its suppliers and lastly, the TOPCALL system also enabled BSE to fax customers and vendors directly from the SAP system.

4. How much did the new system solution transform the business? Explain your answer.

            The SAP ERP acquired several small companies and expanded its branch office infrastructure to 24 states. Furthermore, because of the SAP software the business grew further, profits and inventory turns increased.

5. How successful was this solution for BSE? Identify and describe the metrics used to measure the success of the solution.

            Despite of far longer enough of the implementation of the system still the problem has been successfully resolve because in late 2006, BSE acquired a large company that was anticipated to increase sales volume by 20 percent each year. This acquisition added 19 new branches to BSE. These new branches were able to run BSE’s SAP software within a day after the acquisition had been completed. BSE now tracks 1.5 million unique items with the software. Since BSE first deployed SAP software in 1998, sales have increased 300 percent, profits have climbed more than 500 percent, 60 percent of accounts payable transactions take place electronically using EDI, and SPA processing has been reduced by 63 percent. The company turns over its inventory more than four times per year. Instead of waiting 15 to 20 days for monthly financial statements, monthly and year-to-date financial results are available within a day after closing the books. Manual work for handling incoming mail, preparing bank deposits, and taking checks physically to the bank has been significantly reduced. Over 60 percent of vendor invoices arrive electronically, which has reduced staff size in accounts payable and the number of transaction errors. Transaction costs are lower.

6. If you had been in charge of SAP’s ERP implementations, what would you have done differently?

            If had been in charge of SAP’S ERP implementations I would rather have to analyze in advanced regarding in our fast changing developing generation and set a funds for the implementation of the up to-date system that can be use as far as the company needed it when the time comes to avoid delayed implementation because of there is not enough funds to be implemented.