Naniwa Hitech: Implementing ERP
Robert E. Cole
Doshisha Business Cases 05-01
August 2005

Naniwa HiTech: Implementing ERP
Robert E. Cole, Omron Distinguished Professor, Doshisha University

Copyright © 2003 by Robert E. Cole, the Doshisha University. No part of this publication may
be reproduced, stored in a retrieval system, or transmitted in any form or by any means –electronic, mechanical, photocopying, recording, or otherwise – without permission from theDoshisha Business School.
This case was prepared by Robert E. Cole with the support of Doshisha University and theInstitute for Technology, Enterprise and Competitiveness (ITEC). He is indebted to Michael Ger
of Oracle USA, Hideyuki Yamagishi of Oracle Japan and Joshua Greenbaum, Principal,
Enterprise Applications Consulting for their patience in explaining the intricacies of ERP. Mostof all, he is indebted to the anonymous managers at Naniwa HiTech for taking the time to meetand share their experiences.

Introduction
Toshi Kikuchi sat in his chair in the eight floor of a decidedly modest Osaka
office building contemplating his situation. He has been dispatched four years ago fromhis corporate position at a major Japanese manufacturing company to an important
subsidiary, Naniwa HiTech. He serves as Vice president and General Manager of the
Production Division. His initial mission was to lead the implementation of Enterprise
Resource Planning (ERP) a major software application initiative designed to unify
enterprise-wide information systems. He was also expected to use this implementation
as a basis for corporate renewal. As the hard driving executive that he is, he was still
unsatisfied with the progress that Naniwa HiTech had made over the last four years.
Nevertheless, he believes that the firm had indeed succeeded in accomplishing many of
its corporate goals through introducing ERP, whereas many other Japanese corporations
have faltered or even refused to try. As a reward, he was being called back by the parent
company to oversee similar initiatives throughout its major subsidiaries.
In his new job, Kikuchi-san would be required to evaluate these last four years
and figure out what Naniwa HiTech had done right in implementing ERP and what
mistakes they had made that required new approaches. Moreover, he realized that the
template for implementing ERP wasn’t a “one size fits all” solution. Different
approaches are required in different companies; indeed; even at Naniwa HiTech, he hadfound that what worked in one plant didn’t always work in others. Nevertheless, in his
new job, he would need to draw out the major lessons of the Naniwa HiTech experienceso he could effectively help get them applied throughout other subsidiaries.

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Naniwa HiTech: Implementing ERP
Robert E. ColeIn fiscal year 2002, Naniwa HiTech did 325 billion yen in sales in printerproducts. It produces its own line of branded printers including a small printer formobile phones. It has particular strength in high resolution laser beam printers whosemarkets have grown over recent years especially in Asia. The firm has 6,000 employees
spread over manufacturing facilities in Japan, China, Thailand, Singapore, Italy, U.K.
and the U.S. It has sales offices in 23 countries and regions besides Japan. Its overseas
sales ratio is 45%. The company has many corporate customers with whom it works
closely to provide customized solutions. Naniwa HiTech’s markets are volatile andrapidly changing. This puts a premium on accurate and timely sales projections and an
ability to promptly respond to changing conditions as well as creating the need for close
coordination among its geographically distributed facilities. Both domestically andinternationally, the industry has been experiencing rapid growth as printers havebecome linked to workgroup and network printing solutions. At the same time, it is afiercely competitive market with falling market prices and many producers vying formarket share.

Background on Information technology (IT) Evolution Worldwide and in Japan
In the 1970s and 1980s, Japanese manufacturing managers honed theircapabilities in plant level optimization. During this period, there was ongoingcommercialization of software development and various tools became available to firms(database forms, entry reports). Data base software plus software tools were used tobuild custom applications. As these custom Information Technology (IT) tools weredeveloped, they were used to support plant level optimization. Using these methods,
alongside their focused factory approach, many Japanese manufacturing firms achieved
great success during these years; they leveraged their decentralized decision making
down to the shop floor (“genba shugi”) strategy to great effect in foreign markets.
As we entered the 1990s, the global competitive environment changed. Old andnew competitors began to match many of Japan’s operational efficiencies at the plantlevel. At the same time, system-level optimization became increasingly important as
firms sought enterprise-wide efficiencies. It wasn’t enough to focus on how an OEM
managed its suppliers but instead one had to look for how it managed its whole supply
chain. It wasn’t enough that one had an efficient production process but it was critical tobetter coordinate it with the sales process. It wasn’t enough that one had strong
optimization in one’s domestic operations, one needed to tightly coordinate those
operations with one’s foreign operations. Tremendous savings could result from
corporate-wide volume purchasing policies but that required standardization of parts
used in different plants and consistent product codes across plants to reflect thatstandardization. Similarly, the optimization of the whole supply chain had tremendous
potential for reducing inventory, increasing the number of inventory turns andDoshisha Business Case 05-01

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Naniwa HiTech: Implementing ERP
Robert E. Cole

improving customer satisfaction through shortened delivery times. This requires,
however, that each of the business units not simply think in terms of their own
optimization.
Such conditions were seldom met in the 1980s especially in Japanesemanufacturing where plant level optimization had been the focus; Naniwa HiTech was
no exception. As a result, in many large manufacturing companies, there were lots ofproblems with data integrity across plants; even if two plants were seemingly using thesame part, they were often describing it differently. Only when firms have centralized
access to data, common data definitions, uniform product code and part number
definitions, and standardized processes and parts could they expect reduced systemwide costs and an enhanced ability to make good and speedy decisions. Moreover, thisapplies to customers and suppliers as well since they often use different part numbers
from the OEM. One needs to standardize in order to get the benefits from centralization.
This is a very large challenge as different partners, plants and departmental culturescollide.
The spread of distributive processing in the 1980s, for all its advantages overcentralized processing, actually made the situation worse in that it led to the decay ofcorporate level management information as it spread customized applications formeeting specific user needs. 1 In keeping with this direction, software suppliers in Japan
created customized applications that built on single proprietary platforms (Fujitsu,
Hitachi NEC, etc.). In this environment, individual companies, plants and departments
had their own hardware and software and data consolidation was made via a timeconsuming tangle of interfaces.
It was around 1988, that ERP- like applications started to become available tocorporate users worldwide and it was in late 1992 that SAP announced the introductionof R/3, ERP’s first integrated application suite. Beginning around the mid-1990s,
corporations got access to the Internet and they now had a place that they could store
data centrally to which all employees and even partners had access, regardless of what
proprietary system they were using. The Internet provided a much cleaner and moremanageable technology environment for running highly distributed systems based onstandard communication protocols (TCP/IP) and low-cost hardware and software.
Browser-related systems simplified and lowered the cost of the desktop and madetraining and administration much easier as well as increasing deployment options. Allfirms needed was a browser, though security especially for inter-firm transfer is still an
issue.
Corporate adoption of ERP grew rapidly in the 1990s, though initially thegrowth was limited to Europe and then the United States, with Asia and in particular
Japan lagging behind. As indicated in Exhibit 1, by the late 1990s, Japanese firms were

1

Doane, Michael, 5th edition 2002. SAP Blue Book, Michael Doane.

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Naniwa HiTech: Implementing ERP
Robert E. Colewell behind not only their Europeans and American counterparts in adopting ERP, buteven their counterparts from other leading Asian economies.
Many reasons have been given for this laggard behavior. It has been argued thatJapanese firms were used to customized software that exactly satisfied their richinformation needs. Packaged software applications were often seen as too crude or
immature to meet these needs. Moreover, ERP software providers, SAP, Oracle,
PeopleSoft, were all Western companies relying on Western lead users to define bestpractice. Japanese companies often complained that this software did not fit their uniqueorganizational structures. At a minimum, it was the case that ERP marketing took place
initially mostly in Europe and the U.S., the home base of these companies. That thismarketing was so successful was a result of the somewhat coincidental ongoing
adoption of business process reengineering by large companies especially in the U.S.
These fortuitous conditions were not met in Japan at that time where the pressure forrestructuring was not felt as strongly by managers. Moreover, that there are no Japanese
ERP providers is itself a telling indicator of Japan’s lagging status both as a software
producer and user.
Perhaps more convincing than all these explanations, however, is that Japan’s
1980s manufacturing success was based on their “genba shugi” strategy and as is often
the case, firms are slow to give up or modify their winning formulas even after they
become insufficient. It is not a matter of simply changing the trade off between
corporate-wide efficiency and plant optimization. The challenge is to preserve thoseelements at the plant level that really contribute to competitive advantage whilechanging others to achieve system-wide efficiency.
Meeting this challenge requires that one be able to identify what reallycontributes to effectiveness and efficiency at the plant level versus those processes thatusers are simply accustomed to and would like not to change. The question becomeswhen should one customize the ERP application to fit current work processes (and risk
losing some of the benefits advantages that would result from implementation “as is”)
versus changing the work process to fit the application (and risk losing some efficiency
where there was insufficient functionality in the software). See Exhibit 2 for somecomparative regional data on this point. This, in turn, raises the issue of what are thecriteria one should use in making customization decisions. These decisions areimportant because the costs of customization are very high in terms of maintenancecosts as well as the costs associated with updating to new versions.
Despite a number of “early Japanese adopters of ERP,” there have been no great
widely publicized success stories in the Japanese business media documenting theclaimed benefits being trumpeted by ERP vendors. This has inhibited the diffusion of
ERP in Japan as reports of individual corporate successes often underlie the rapid
spread of new management innovations. Strong management leadership is said to berequired for successful ERP implementation but ERP vendors claim it is difficult to findsuch leadership in many Japanese companies.

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Naniwa HiTech: Implementing ERP
Robert E. ColeERP Implementation at Naniwa HiTech
In April 1998, The Board of Directors at Naniwa HiTech approved an important
proposal from the IT group, working in close collaboration with top company managers.
The President of the firm strongly supported the initiative. The IT group recommended
adoption of Oracle’s e- Business suite; the parent company had gotten a company-wide
license and that entitled Naniwa to an excellent price. The proposal to the Board
elaborated on eight themes:
1.
2.
3.
4.
5.
6.
7.

8.
9.

Company Circumstances
What is ERP package?
Features of ERP package
Why choose Oracle’s e-Business Suite for our ERP solution?
Functions of Oracle’s e-Business Suite and its impact on the relationshipamong business functions
Key Points of e-Business Suite Adoption
Key Factors for success (KFS)• Business process reform• Eliminate non-value added work from customer perspective
Ways of Moving Forward
Analysis of Oracle’s e-Business Suite Proposal

For an elaboration of each of these points, see Exhibit 3. Naniwa managers felt
increasingly trapped by the existing proprietary legacy systems with their uniquearchitecture and lack of a publicly defined open interface. Each department seemed tohave its own applications and its own data; tremendous effort and time was required toaccess data from one unit to another and to interact with key clients. An ERP systempromised an open network with immediate and transparent data across all operations
and an open interface to clients. Thus, a major appeal of ERP was simply that it would
provide a modern infrastructure on which to build the business. The parent firm recently
had hived off a number of units and consigned them to Naniwa. This created large
integration problems thereby also enhancing the appeal of ERP as a unifying focus.
The proposal to the Board of Directors, however, wasn’t limited toemphasizing the building of new infrastructure or enhancing firm-wide integration. It
heavily stressed that adopting ERP would enable using information technology forstrategic purposes. These strategic purposes included rationalization of the orderfulfillment process including both the financial payment system and the process bywhich sales projections were created through to the production and delivery of the
product to customers. It was envisioned that ERP could be used to integrate the various
business cycles from sales projections to delivery of the product by shortening eachcycle and performing them simultaneously.

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Robert E. Cole

Interestingly enough the original presentation to the Board did not include a costestimate. However, before starting each module installation, the implementation teampresented a cost estimate for top management approval. See Exhibit 4 for thecompany’s estimate of the distribution of implementation costs.
Once the proposal was approved by the Board of Directors, the architects of the
ERP proposal moved quickly to set up the infrastructure for implementing it. The plan
was to carry out a phased adoption of specific modules (financials accounting, sales,
production control, inventory control) at successive locations focusing initially on
domestic facilities.
A steering committee, the Production Management Standardization Committee,
was set up at each facility to set strategic directions, monitor project progress, deal withemergent problems and obstacles and keep things on track. Seven strategic objectives
were laid out:
1. Adjust supply and demand and strengthen the function of production planning;
2. Shift production system from planned production (build to stock) to build toorder
3. Construct seamless information system for the firm
4. Reduce lead time in production and procurement
5. Rationalize logistics
6. Integrate product models, standardization of design, reduction in number of parts
7. Speed up payment of accounts receivable.
Committee membership on the steering committee for the Shizuoka plant included 5
management officials (buchos) from the most relevant divisions of the plant, 3 from
corporate and 1 division head. This was a fairly typical makeup used at other Naniwa
facilities as well.
An implementation team known as the Operational Working Group was also set
up at each plant. In its key Shizuoka plant it was composed of 24 members: 4 from
Naniwa HQ and 20 from the Shizuoka plant. The Shizuoka members were key people
from the major functions. Eight of the 20 were the active core members:
manufacturing (2), production planning (2), and procurement (4). Again this was afairly typical committee makeup used in the other Naniwa facilities.
In addition to the implementation team, 22 IT staff were assigned fulltime as
programmers to the project. Ten of these were from the Shizuoka plant IT staff and 12
were from the parent firm’s IT staff.
The twelve from the parent company had been involved in carrying out an ERP
implementation at the parent company and although these efforts were not fully
successful, they nevertheless provided critical knowledge to Naniwa’s implementation.
Indeed, it was through their presence that Naniwa avoided needing to adopt the typicalJapanese practice of hiring a system integrator to lead the ERP implementation. As

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Naniwa HiTech: Implementing ERP
Robert E. Cole

Naniwa was a relatively early adopter in a broader Japanese business environment inwhich knowledge about successful ERP implementations was quite limited, these parent
company executives played an especially important role in educating them. Naniwa
executives themselves saw themselves as playing a pioneering role in introducing ERP.
Their “first mover” role, relative to their Japanese competitors, promised great strategic
advantage. Consistent with this pioneering role, however, Kikuchi acknowledged thatwhen they started implementing, they did not really know the key success factors (KSF).
In addition to the IT people from the parent company, a few Oracle personnel
also worked closely with the implementation team. They brought important knowledge
to the effort because of their understanding of the functionality of the ERP package.
They made clear it would be difficult to develop the system as “plain vanilla” (as is)because of some critical areas where the ERP modules adopted lacked the functionality
needed by Naniwa’s business. This meant considerable customization would be
required.
The challenges were huge. Just implementing the ERP package within a tightschedule was a major challenge that many companies had failed. On top of that, Naniwa
aimed to integrate implementation with the 7 strategic goals outlined above. Moreover,the implementation process was complicated by the parent firm’s decision to restructure
at this time, both spinning off plants to Naniwa HiTech as well as removing one.
The firm, after having had some success in adopting the sales module andinventory control module at the Service Parts and Sales Group, committed to
implementing ERP at the Shizuoka plant starting in Jan. 1999. An aggressive timetablecalled for the plant to adopt the production planning module and “go live” in October ofthe same year. Exhibit 5 shows the actual implementation milestones. To be sure,managers had been anticipating the go ahead and had started their planning in the final
two months of 1998. So they were ready to “hit the ground running” once they got the
go ahead signal for January. Much of that preparation had involved consulting withthose sites in the parent firm that had already adopted ERP.
The quickly established Steering Committee announced key strategic objectives
comparable to those described earlier. By virtue of the Board of Director’s approval, it
was believed that all employees would support the implementation. To buttressunderstanding by the broader management group, a half day’s conceptual training on
ERP was provided to the management class in July (mostly kacho and some bucho).
The Operational Working Group (implementation committee) was also quickly
set up. Following the kickoff of the project, they set immediately to work on developinga sample prototype and doing an ERP function study. This included setting up a
“Conference Room Pilot.” This was designed to serve as an evaluation site to show the
Naniwa IT team what ERP could do and what was required to make it happen. It served
to provide validation of the ERP module. It was a vanilla application in which some key
parameters (operational attributes) were setup and they verified a small pilot model

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Robert E. Cole

thereby providing validation for the ERP production planning module. This prototyping
was done only with the IT team to confirm the package functions.
The test server installation included configuring the software. This involved
initially setting the key parameters. The process involved close collaboration between
the IT team and the key managers on the implementation team. It involved issues likechoosing discrete continuous manufacturing rather than continuous manufacturing anddetermining the degree of security they wanted. (Configuration is about adjusting thesystem without customization per se and it doesn’t affect future upgradeability. All
configuration is fully supported by vendors such as Oracle).
The next step was system design (describing the required functional processes).
This required defining the scope of ERP coverage, identifying system requirements, andthe scope of extensions (extensions included add ons and customization) to be
developed. Critical to this effort was making judgments about how much they would
need to modify the production planning module. It was a key step with profoundconsequences for achieving their goals. It was determined early on that because of thelack of functionality of the Oracle production planning module in some key areas, someextensions (customization) and set up work would have to be done.
The process of defining system requirements involved first getting a list ofrequirements from the implementation committee members on what kinds offunctionalities were needed. Members were instructed to go back to their units andsolicit the necessary information from their constituents.
Some members did a very conscientious job collecting this information whileothers decided they knew what their units needed and simply reported their perceptions.
The head of the implementation team, Yoneda-san reported that the problem withrelying on end users for a list of requirements was that they answered with ways tomake their job easier to do. In practice, this meant customizing the ERP package topreserve current work processes and at best produce modest “kaizen” gains.
Once the list of requirements was received and the gap between them and the packaged
software specifications were identified, the second task was to evaluate theappropriateness of the requested requirements. In response to an overwhelming numberof requests for customization, the committee spent much of their weekly meetings
discussing how to respond. In March they calculated the working hours available before
they were scheduled to go live and subtracted the time required for other tasks like
product server installation, creating network and client environment, program
development and testing, system construction, data upgrading and verification processes.
This calculation largely determined the amount of time they could allow for
customization and still stay on schedule. They calculated the time required for
implementing each of the customization requests and then started making the harddecisions.

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Naniwa HiTech: Implementing ERP
Robert E. ColeThe prioritization was hard going. They had no simple criteria for distinguishinga reasonable customization request from a bad one. The actual decisions were made by
the implementation team after intensive discussions in their weekly meetings. The IT
developers fed input into these discussions
Later the firm was to discover that some seemingly minor business processes
that they had agreed to customize, created major roadblocks to achieving their strategic
goals. When making this observation, Kikuchi remarked “I couldn’t be everywhere atonce.” The amount of customization they did also added hugely to the costs ofsubsequent upgrades and required very large numbers of man-hours to maintain thesystem. While they realized at the time, that excessive customization was a problem,
because of their inexperience, they had no idea how large it was to become. They did
100% customization for ‘screens” of the final users and 100% for data entry. With manyolder workers and contract and dispatched employees, they believed they had to make iteasy for them to enter data.
The procurement department pressed hardest for customization because they had
to deal with many external vendors and they argued that it would be a big job to explain
all the changes to them. This was a unit that saw themselves as the “bosses of theirprocesses;” they had little standardization in these processes. While they didn’t get
everything they wanted, they did get considerable customization. It clearly didn’t hurtthat four members of the core Operational Working Group were from procurement. In
other words, just the unit that could benefit the most from standardization was able toresist it to a considerable extent. Kikuchi, reflecting on this undesired outcome, dryly
observed that if you don’t have a common language for describing required component
attributes, then the potential benefits such as volume purchasing are severelycompromised.
Naniwa learned from these experiences and indeed for each subsequent
implementation after Shizuoka, they customized less and less. Indeed, in their new
Shanghai plant, they did a vanilla application made possible by the improved
functionality of subsequent upgrades of Oracle ERP suite as well as its increased
configurability capabilities (extensible attribute architecture). The ability to do “vanillaapplications” was also aided by the fact that the Chinese had no long standing work
processes run by managers and workers with strong vested interests in maintaining them.
Another source of resistance to adopting the routines required of the ERP
package, was that employees were accustomed to conducting what they consideredefficient transactions via phone communications and informal meetings. Thus, they saw
the time required for data entry and doing things in a prescribed way bothersome andinitially claimed that efficiency was being reduced.
On the other side, implementation was infinitely easier for Naniwa compared tomany other firms because Naniwa management decided to totally dispense with existing
legacy systems. As a result they did not require a huge amount of time and resources for
system integration between the old and new systems.

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Robert E. Cole

The next step required completing the interface and modification design. This
meant doing installation of the application, modifying it, and developing the add ons(customization) that had been agreed upon utilizing standardized interfaces known as
Application Program Interfaces(APIs) to connect to the module.
Successive iterations were required to get it right with lots of frustration on thepart of all parties along the way. A major issue developed with the sales reps. With
ERP, the sales reps must enter more information into the system. They see this as aburden. Yet, ERP connects everyone in the firm to the data so it is a major benefit for
the firm in terms of transparency and speed. The sales reps, however, focus on their own
individual burden. They needed to accept this cost as a price for the broader firm-wide
benefit. Still, there are limits on how much burden should be placed on them. For
example, in one of the early iterations of the system, the sales people complained the
response speed was too slow. They said they couldn’t sit and wait for hours in front of
their PC to get the delivery due date information as they have to get back to customers
in a timely manner. The team had many meetings discussing these kinds of matters andtrying to draw the line between the benefits of system improvement versus the costs forthe sales reps. Eventually compromises were reached.
With these customization decisions made, the company moved into thesystem construction phase (Steps: 6,8,9,10,11 in Exhibit 5). The task was to build asystem that would work. This included completing the prototype setup which wasundertaken before system design was complete. Up to this point, the project was righton schedule but completion dates started to slide when they moved to program
development and test and procedure and end user documentation. The reason for theirfalling behind was incomplete work upfront and a delay in the preparation of user
manuals. A month before going live, end users received 6 hours training for the new
system spread over 3 days.
The system went live in Nov 1999. It was one month behind schedule but aremarkable feat notwithstanding. As in many companies, initially there was a decline inbusiness performance at the Shizuoka plant; it took about a month to get back toprevious performance levels. The decline was attributable in large part to the change
from picking parts before ERP on a weekly basis to picking parts after ERP installation
on a daily basis. This required a lot of adjustments to accommodate.
Results
Of all the strategic objectives listed earlier, the one that had the highest
immediate priority was to go from planned production on a monthly “product out” basis
to a build to order system based on weekly “market in” information. Coinciding withgoing live in Nov. 1999, they switched to weekly “market in” production. This was amajor achievement.

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While planned production worked reasonably well for generic commodity
products, it contained big risks for the company when it came to customized products
for large corporate customers. Before introducing ERP, the firm had 100% planned
production; by the end of 2003, they had moved to 50% build to order. This was asignificant change in how they did business with wide-ranging implications.
Manufacturing people at Shizuoka were challenged by the shift to weekly
production planning. They liked the old system of monthly production planning. Fromtheir point of view, moving to weekly production planning was not optimal because it
detracted from the efficiency of their operation. They have to purchase raw materials
and parts in smaller quantities raising their costs. With weekly production, they have tochange schedule frequently, thereby raising changeover costs and increasing theprobability of defects.
To optimize under the new system, they found that they had to move toward a
Toyota-style production system, shifting from a linear assembly line to cellmanufacturing. They also brought some work back into the firm from subsidiaries tobetter coordinate. This shortened production time and reduced defects. In support ofthese efforts to streamline production, they also needed to persuade engineers tostandardize parts and reduce unnecessary variety—to distinguish between variety
designed to meet real customer needs and the variety that satisfied their own needs andprofessional predilections. They made considerable progress in this area as well. These
were all hard-won achievements. Many of them occurred after going live as the Naniwa
managers sought to fully take advantage of the new IT capabilities. The company madea commitment in 1986 to learn from the Toyota system and had been working on it eversince that time.
With their focus on plant-only economies, the manufacturing people had sometimes
resisted the directions pushed by Kikuchi and this staff. Kikuchi’s vision, however, wasto optimize the whole production chain. As a result of the changes that have been made,firm-wide inventory costs were reduced by over 39% from 2000-2003. The inventory
turnover rate and Return on Assets (ROA) improved 30% and 25% respectively from1999-2002. Kikuchi believes these improvements show the effect of ERP
implementation and work restructurings not only at Shizuoka but at the other domestic
facilities as well. Put differently, Kikuchi fully believes that ERP provided the“backbone” that made these improvements possible as the firm began to optimize thetotal enterprise and not just given subunits. Before implementing ERP, sales,
manufacturing, and inventory information was stored in each department using different
IT systems. It took multiple days to tally up firm-wide figures. Now the same
information is instantly available everywhere in the firm. Kikuchi had little sympathy
for those experts who were now publicly saying that IT added little to productivity overthe last decade; he believes they are victims of the unduly high expectations in the late
1990s.

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Still there are many battles to be fought. Extending these principles to all
operations and to include the worldwide network of production, sales and marketingsites remains a major challenge. The sales people have only partially bought in to the
new total enterprise-wide perspective. Sales people want product in the warehouse so it
can be sent to the customer at a moment’s notice. This is a very expensive policy tomaintain. It doesn’t distinguish between those products that a customer is willing to
wait for a week or even longer as opposed to those they want tomorrow. Because sales
people don’t trust manufacturing to keep to its delivery time commitments, they try to
stock product in advance. These are all problems that need to be worked on.
For now, however, Kikuchi-san is reflecting on what he has learned from his
experience with implementing ERP at Naniwa. He wondered how to respond to somecritics who said he could have achieved the results he did without using much IT or bybuilding a customized package. Most of all, however, he wondered what he should do
the same and what he should do differently when he is called on to implement similar
initiatives at the parent firm’s other major subsidiaries.

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Exhibit 1
International Comparison of Rate of Introduction of IT-Related Applications

(%)
100

80

U.S.

Europe
60

Asia

40

(NIEs)
20

Japan

0
CAD

ERP

SCM

CRM

KM

EDI

Note: CAD figures are for the manufacturing industry, SCM figures are for the
manufacturing, wholesale and retail industries, and the others are for all industries.
Source: International Survey of Corporate Management Strategies (METI).

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Robert E. Cole

Exhibit 2
International Comparison of Organization Reform Undertaken
In Parallel with Introduction of IT

(%)
80
U.S.

60

40
EuropeJapan

20
Asia (NlEs)
0
Slimming/flattening

Transition of authority

Utilization ofOrganizational changes

organization

to lower levels

cross functional

made to apply the IT

in the organization

team

related software introduced

Note: Figures include all industries.
Source: International Survey on Corporate Management and Information Strategies(METI).

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Exhibit 3
Summary of ERP Proposal for Naniwa HiTech
Submitted by Information System Division
April, 1998
1. Circumstances around the Company
In our rapidly changing business environment, we can not survive without continuous change!!!
2. What is ERP Package?
ERP (Enterprise Resource Planning) is a technique/concept of total management to use
resources effectively and efficiently with the view of “effective management.” It is a new
business integration system from manufacturing to sales which covers whole supply chain.
3. Features of ERP Package
Equipped with business process functions which meet global/worldwide
standardization① Business integration system→ Integrate functions in real time → Strengthen supply chain② Realization of in-house Business Process Reengineering (BPR) by using ERP③ Short-term implementation/development by setting parameters↓
Available to cope with future changes in business environment. Oracle’s e-Business Suite
scalable to enable handling of future company needs.
4. Why Oracle e-Business Suite?
♦♦♦♦

Easy to transfer business operations globally
Provides open interfaces (ready for EDI and EC)
Breakout from existing one-section-one-application system to network
Integration of Information Systems (IS) sections across sites.

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Naniwa HiTech: Implementing ERP
Robert E. Cole

5. Function of Oracle e-Business Suite and its Relationship to Business Functions.

Order

Collection

Customer
Order

Plan

Production

Production
Plan

Procurement

Capacity
Plan

Picking
Shipment

InvoiceCollection

Requirements Plan
Production

Payment

Purchasing
RequestPurchase

MS/MRP*
Cost
Accounting

Inventory
Management

Order
Receipt

Check
Payment

ORACLE Database＊MRP(Material Resources Planning)＊MS(Master Schedule)

6. Key points of e-Business Suite Adoption
Change consciousness of top management to set directions for lower level employees so thatthey will know: what they should aim for, what to do to achieve their objectives, how to do it,
and by when.
Commitment to Business Process Reengineering (BPR)
Utilization of IT tools as strategic management weapon by adopting ERP

7. KFS (Key Factors for Success) of Oracle e-Business Suite① Global Optimization② Standardization of business processes and systems③ Reformation of people’s mind and business organization.

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Naniwa HiTech: Implementing ERP
Robert E. Cole♦Work process Reform Needed
CURRENTLY

Linear Process

Policy → Sales projection plan → Procurement plan → Production plan →Distribution plan
AFTER REFORM Concurrent Process (and shortening of each process)Policy♦→→→→Sales Projection plan
Procurement plan
Production plan
Distribution plan→
→ Shortening of cycles→→

Eliminate Work which does not Give Value to Customers①②③④

Adjustments among departments
Correct mistakes
Reports
Holding inventory

8. Approach to Future Advances♦♦♦

Set management goals① Shortening of lead times② Reduce indirect personnel (e.g., middle management staff)
Remove completely:① Overlapping of existing organizations② Management losses③ Operation losses
Analyze and identify existing business process, and imagine “to be process” for the
future.

9. Analysis of Oracle e- Business Suite Proposal
Propose “project organization” in order to analyze production-management BPR andinformation system reconstruction.
♦ Project organization and missions¾ Nagoya branch office… Working group 3 members from Supply/demand section, Procurement section and
Manufacturing section, etc.

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Naniwa HiTech: Implementing ERP
Robert E. Cole


¾

¾
♦

2 members from Information system section of HQ

Shizuoka factory…Already have setup a “Production-management BPR
working group”
 Participant(s) from Information system section of HQ
Missions… Determining “To be process” by analyzing existing process

Production management Standardization Committee (Steering Committee)¾ Members:
Director, Production section (Chief leader)
General Managers of manufacturing plants
Head of Information Systems Department of HQ¾ Analyze the standardization of:Business process
IT systems¾ Determine the information systemization plan

Expected Results① Support whole supply chain management
Work closely with external suppliers and partners using information linkages (as atool) and support the whole business from materials procurement to product sales.
② Support real-time management
Enable grasping of status of global production sites (parts stocks, production status,
etc.)③ Integration of incoherent information systems.

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Naniwa HiTech: Implementing ERP
Robert E. Cole

Exhibit 4
Estimate of breakdown of Implementation Costs
for Naniwa HiTech ERP Implementation

Software14%

Hardware26%

SystemIntegration40%

Headcount20%

Note: The project budget estimate does not include the cost of Naniwa’s personnel
time beyond members of the core implementation team and the IT department
members assigned fulltime to the project.

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Naniwa HiTech: Implementing ERP
Robert E. Cole

Exhibit 5
Summary of Actual ERP Implementation Schedule

1. Project Kickoff
2. Sample Prototype Complete
3. ERP Function Study Complete
4. Test Server Installation
5. Functional Process Approval
6. Prototype Setup Complete
7. Interfaces and Modifications Design Complete
8. Production Server Installation
9. Network and Client Environment
10. Program Development and Test Completed
11. Procedure and End-User Documentation Complete
12. Integration Test Complete GO/NO GO Decision
13. Data Conversion Complete
14. Go Live!

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beg. Jan 1999
mid. Feb 1999
end. Feb 1999
end. Mar 1999
beg. Apr 1999
end. May 1999
end. May 1999
end. Jun 1999
end. Jul 1999
end. Aug 1999
end. Sept 1999
mid. Oct 1999
end. Oct 1999
beg. Nov 199920