December, 2018

Case Study

Basic Electronics Co. Ltd. ( Al-Asasseih ) is a Limited Liability Company owned by Mr. Mohammad Ahmad Al Arfaj who has generally involved in the trade of Electronics in particular since 1961. He is the chairman to the Board of Directors as he owns 75% of the company capital, assisted by his son Mr. Qasim Al Arfaj as General Manager who owns 25% of the capital.

The company is employing now around 2000 employee, technician and specialist. The company is being managed from its head office in Al Khobar, while it has several branches with more than 150 locations of branches, stores, retail shops, in the various regions of the Kingdom, mainly branches and after sale service centers in the Eastern Region (Al Khobar,Dammam, Al Ihsa ), branches and service centers in the Central Region ( Riyadh & Gassim ), branches and service center in the Western Region (Jeddah ) and branches and service center in Khamis Muchait of Southern region.

The company is having distribution facilities and service centers at each of Gassim, Ihsa, Arar, Jizan, and Madinah with plenty of maintenance contracts Kingdom-wide. The total storing space at the company warehouses exceeds 150,000 Sq.m. The paid up capital of the company is SAR 80,000,000.00 supported by a reserve capital of SAR 40,000,000.00, thus the total working capital comes to SAR 120,000,000.00 ( USS 32,666,666.00 ).

The company activity is mainly including in the trade in electronic and electrical appliances, Biomedical Equipment’s, Electronic Security Systems, Watches & parts, Tapes, Batteries, and others procured from global reputed suppliers on exclusive agency representation in the kingdom of Saudi Arabia

ASASSEIH used over 5 systems before the ERP project was started, many of which were developed by local vendors and internally by ASASSEIH over the last decade. These legacy systems were expensive to operate and difficult to maintain and develop. They did not provide accurate, consistent and accessible data that was required for good and timely decision-making and performance assessment (e.g. delivery performance, quality metrics). These ageing systems often did not lend themselves fully to a modern Multiple Commercial Businesses environment. One particular down fall of the system was the lack of communication between individual sites. Work in progress was often transferred between sites and could not be tracked accurately; often causing inventory and stock take problems.

ASASSEIH also had a range of individual systems for controlling and monitoring commercial, financial and procurement functions, these systems had problems interfacing with each other, as they had different databases and file formats. The legacy systems did not allow ASASSEIH to establish direct, on-line communication with customers, partners and suppliers. In fact, these systems did not support significant growth of the business and were not sufficiently agile to keep pace with the changing business environment. At this point ASASSEIH recognized that the adoption of ERP system was the most significant factor that could enable the company to overcome the challenges and led to business success. In selecting the ERP vendor, ASASSEIH took into account traditional factors as financial situations, history, success/failure cases, and people. Within the project team are specialist internal managers and staff that have vital knowledge of cross-functional business relationships and experience of the old internal systems. In conjunction with this team each operational business unit (OBU) has its own ERP planning team, which is responsible for implementing, working on changes and training.

ASASSEIH decided to adopt and utilize SajayaERP solution offered for project-driven small- and medium-sized enterprises. There were several problems the implementation project faced and they are grouped into three areas of cultural, business and technical difficulties, Culture Problems, business problems & Technical problems.

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ASASSEIH’s ERP implementation project goes through several phases, the first phase was a short intensive study to set the scope of the project and provide an outline plan and costing. A steering committee was formed to administer the financial guidance of the project and an ‘ERP Core Team’ was formed to control and oversee the actual implementation process. Goals have been established and the implementation plan has been developed at this phase. The deliverables obtained out of this phase includes system implementation process, project team, roles & responsibilities of project team, project objectives, project Plan, project scope, project tracking process and implementation schedule.          

In second phase the scope of ASASSEIH’s SajayaERP implementation has been defined and which leads to the creation of the Business Blueprint. The Business Blueprint was a detailed documentation of ASASSEIH’s requirements in WinWord format. Activities carried out during the second phase of the project included reviewing information flow, defining external system interface, developing prototype of modules, and defining new policies & procedure. The expected deliverables of this phase were specified business process, system interface process, customization requirement, report requirement, the support of finance and staff work booking, and new policies & procedures. During phase two the projects core structures were identified. Integrated program management (IPM) was also adopted for research and development and would eventually cover the whole business. A significant change was also made from the original timing of phase one, the completion of wave one was deferred for about 6 months. This has resulted in a knock-on delay to wave two by a corresponding amount. The change in schedule was possible without a significant increase in cost because the problems were addressed early enough in the program.

In Third phase a small-scale pilot of the system was run for 3 months and throughout this period, a facility known as production shop became the central focus of attention for the whole company. This facility was chosen for the pilot run because the facility only produced parts, and material flowed into the facility at low volumes from external suppliers and internal operational units. The purpose of the pilot was to demonstrate: business principles, processes, procedures, role definitions and behaviors, and software, hardware and data transfers. A second pilot was also carried out for purchasing. The second pilot ran executively, covering Derby-based purchasing of ground support equipment. A third pilot also was run by the requisition section.

In Fourth phase the objectives of this training were to enable users get a better picture of global system’s features, to enhance the capability and confidence of user in running system, and to enhance the ability of user to relate the system with daily operation. Accompanying users in their learning curve was found very important to bring users in to the desired level of skill and understanding. The training covered finance modules, HR modules, distribution modules, manufacturing modules, project modules, service modules, and system training.

In final phase as the main ‘Go Live’ of the new system was planned, the most difficult part of the cut over process was in transferring the data from legacy systems. The sheer volume of data that has to be transferred is far greater than any normal transaction load that will be carried out by the system thereafter. In order for this process to be successful the data must be kept in a ‘stable’ state for a period of roughly 10 weeks. The initial data to be transferred includes some transaction data and master data, for example, lists of suppliers. If any changes occur to the data on the old systems after the transfer, they are logged and then passed through to the new system. The remaining data was loaded in after the ‘Go Live’. The next step during the ‘Go Live’ process involved running the MRP system to initialize the whole system. Purchase orders and purchase requisitions was not transferred from the old system, instead the MRP run should create them fresh. The whole ‘Go Live’ process took roughly 2 weeks to complete, and during this time the new system was ‘off the air’. Immediately after the ‘Go Live’ the existing legacy systems was switched to view only mode. The view only mode enabled comparisons to be performed between the old and new systems. However, the legacy systems ceased to be executive.

This study presents experiences that are obtained from a successful ERP implementation project in ASASSEIH. ASASSEIH has understood the business, cultural and technical difficulties of such a large project, and has developed a solid core implementation team. The team has used the specialist skills of consultants and the partnership with the consultant has produced a sound architectural framework for the project. ASASSEIH considered an ERP project risk analysis method and characteristics analysis method as good tools for risk management. The system will deliver its full benefit when it became at its executive level. The benefits of lower IT cost will be visible when the system become stable and users have had time to adjust to new working practices. An immediate benefit that will be achieved by the system will be the ability to promise and then deliver to the customer on time. This was something that the older systems could never achieve. The ability to deliver on time will improve customer satisfaction and also improve customer confidence, which should lead to an increase of orders in the future. The system will also improve the relationship in the supply chain, as transactions will be made easier via the use of electronic communications. The future of the project will eventually lead to the need for a data warehouse. The data is stored centrally and is extracted from operational, historical and external databases.

The database continually absorbs new data and integrates it with the previous data. As a conclusion, studies towards reporting successful ERP implementation projects should be encouraged. It is the best way to share successful experiences among companies of similar nature. Issues of post implementation period should also be taken in to consideration such that strategic needs and requirements for sustaining the effectiveness of such enterprise information systems after a period of relative stability following initial implementation will be clearly understood.