Diet Centre Case Study: Impact Of Incorporating ERP System
Task: This assignment requires you to write a 2000 word report. In this report, you must analyse a case study provided to you.
You need to address questions provided below and submit your responses. You are expected to use the information in the case study as well as do research around issues identified in the case study. To support your responses you need to refer to the provided case study as well as identify 5 more external cases that are dated no older than 3 years. The above mentioned 5 external cases should refer to real-life companies and demonstrate the issues you address in your response to questions below, related to the provided case study.
Your report should include:
- brief introduction identifying common issues in the provided case study.
- responses to questions for the case study
- conclusion summarising solutions to the common issues in the case studies
The given report is based on the Diet Centre case study which is focused on accentuating significant impacts along with negative impacts that are encountered by companies while incorporating an ERP system. With the assistance of Diet Centre case study, the concept of ERP system in boosting operation management process has been discussed. It can be determined that any company who is suffering in the market due to inappropriate organizational structure can be improved if an ERP system is incorporated.
Enterprise Resource Planning (ERP) is the ability of the firms for delivering an integrated suite regarding business applications. The tools of ERP incorporate a common data model and process that covers deep and broad operational end-to-end processes that are relating to supply chain, service, distribution, manufacturing, HR and finance management of the firms. The present report is based on the Diet Centre case study that relates to the decision made regarding the SAPERP implementation. The present report identifies the common issues that the company is facing and the needs of the company to implement the SAP ERP system. Based on the consequence of the ERP system on the firm’s costs, benefits, operations, and different management activities, the potential impact of the ERP system on the future of the company is discussed.
What are the issues identified in the provided Diet Centre case study?
From the given Diet Centre case study it has been evaluated those unstable political and social factors in Lebanon leads to lack of availability of basic infrastructural facilities. Due to these poor infrastructural facilities, the internal development of Wazzan Diet Center became difficult. Owing to the socially updated population of Lebanon, health awareness was found to be increased by the year 2000, which could be partially attributed to national television programs and easy accessibility of the internet. This leads to reducing the needs of diet centres in Lebanon. By the year 2005, many new competitors came in the Lebanon market, which increased the level of competition for Diet Center. Besides, consumer loyalty was becoming difficult to be a harness with the emerging of newcomers along with online information access. Despite being the strongest competitor in the market, DC was encountered with a loss of 19.14% in its profit margin. Besides, the gross margin of the company was also found to be reduced by 70% in the year 2015, accentuating weak financial and economic position of the company to incorporate any expensive business management strategy like ERP. The directors of DC were not aware of the bargaining approach for controlling financing and hence shifted their focus from cost management, which ended them up with huge debt.
The vision of the company Diet Center is to provide health and nutritional products and diet recipes to the customer to treat medical problems, food allergies and obesity. The mission of the company outlined in the Diet Centre case study was to spread health awareness among the individuals in the country and sell low-calorie and low-fat food that is designed for the management of weight as well as targeting the needs of patients under medical treatment. Initially, the growth strategy of the firm was confined at the enhancement of the sales in Lebanon by utilizing the high demand of the competitively priced health and nutritional products. It has also been identified that for the initial three months the company has encountered a high growth rate for which it has become an industry leader in Lebanon. However, it has also incurred numerous losses till 2014 resulting from the high costs, civil unrest, political instability and poor customer loyalty. SAPERP decision has become one of the solutions from the company to overcome the operational management and financial issues identified. With the SAP ERP system, it was the mission of the company to reduce cost by 10% and increase the sales growth of the business to achieve greater market share in Lebanon. The growth strategy in relation to the SAPERP decision was to systemize and formalize the business operations, to reduce the losses controlling the cash drain.
The reduction of the number of employees from the company was another major growth strategy associated with the SAPERP decision in Diet Center, focusing on re-utilizing the labour costs for growth and developmental activities for the organization. Additionally, the company explored in the Diet Centre case study aimed at the development of appropriate cost accounting, managerial and financial reporting along with optimal cost structure with the working of the ERP software. For instance, the analysis of the case of Whirlpool indicates a similar type of mission associated with the ERP implementation wherein the company aimed to minimise the cost of the company (Vyawhare, 2017).
From the Diet Centre case study, it has been evaluated that executive directors of DC were encountering challenges in resources allocation after they experienced 70% of loss in their sales. Besides, with increasing demands of health awareness in Lebanon along with increasing competition in the market has mandated DC to adapt management changes. According to Ranjan et al., (2016), ERP system is proven as an efficient technique that can be integrated for restructuring business functions and centralizing the priorities. In the Diet Centre case study, it can be determined that an ERP system would help the company control its outflow of cash by assisting the allocation of financial and other resources in an accurate manner. Besides, DC would be able to improve its collaboration with the systematic data-based that would be provided by ERP system. With the information provided in that database, DC would be able to reduce errors as its functions in improving incorrect data due to which effective allocation of resources is hampered.
For instance, Kenya Power Limited encountered similar challenges and obstacles associated with the operation management process for which is incorporated with the ERP system. After the incorporation, Kenya Power Limited successfully changed its organizational structure which allowed them to adapt necessary changes in their operating system, inventory control, product distributional aspects, financing along with product planning and tracking (Hassan, 2018). In the matter of DC, with an integration of ERP system, the company would be able to retain its customer’s loyalty, as the database of ERP accentuates tasks that are unproductive and which can be exchanged with other productive practices. By improving the customer’s base, DC would be able to regain its financial position by improving its sales margins.
From the analysis of the provided Diet Centre case study, it has been recognized that the implementation of the ERP system is advantageous for the company to tackle the different problems identified in relation to the operation management, increased debt, management of roles and responsibilities and the financial management. However, for the implementation of the specific software, the company has to bear a huge amount of cost. Additional cost will also be required for training of the staff on the new software, for dealing with the resistance from the end of the staff and running the old software along with the new software for the initial testing period. On the other hand, it has been also evidenced from the given Diet Centre case study that mistakes in the data transferring method from the old software to the new one can also result in huge data loss. Other direct costs include the cost to hire a financial consultant and auditor. The company would also have to bear indirect costs for fees regarding licence renewal, depreciation expenses, and up-gradation of the IT hardware and implementation of networking infrastructure.
As compared to the associated costs with the carrying out of the ERP system in Diet Center, the system was more likely to offer a range of benefits that could exceed the costs. Based on the explanation of the sales manager of SAP in the provided Diet Centre case study it can also be said that the associated costs would be lesser than the annual waste of materials, food, and labour. Among the numerous benefits that the ERP software would offer the Diet Center, the most important is the proper cost accounting and managerial reporting opportunity. In addition to it, increased focus of the company on the stock and payroll management would be gained. Similar kinds of benefits as observed in the Diet Centre case study were also recognized in the case study of a NASDAQ listed global company, like Mylan Inc. (Pohludka et al., 2018). As could be surmised and linked with the findings from the reported paper, the company can enjoy greater benefit from the execution of the ERP system as compared to the costs, as it would enable to manage the business data in a more efficient way, and present a method for more effective business planning.
In the context of the SAP ERP system on different business activities is evaluated in the provided Diet Centre case study. Wazzan, the co-founder and owner of Diet Center has identified that the SAP ERP system was much costlier than that of the Noria ERP system offered by a local organization Engineering Design and Manufacturing. However, the efficiency of the SAP ERP system was much more helpful for the focus company. The co-founder of the company had identified numerous advantages of SAP ERP system apart from its benefits in the financial and cost accounting. ERP system can offer the organizations to improve the quality control process as the system allows the firms to link all the processes in the business. Additionally, it is also demonstrated in the Diet Centre case study that the ERP system has a key role in the facilitation and centralization of all the business-related data in a single platform that can be accessed by different users. The implementation of the ERP system in companies allows the administration to identify the issues in the database so that various departments can be offered with customized solutions (Alshare et al., 2019).
As identified in the Diet Centre case study, the ERP system has the potential to conduct variance analysis, monitor the budget and safeguard data and data integration. The positive effect of the ERP system are found to be an effective approach even for agricultural firms, like Triton Agricultural Machinery, among other allied organizations that were located in Central-West region of Brazil on its diverse activities, which is further evidenced by the case study provided by Haberli Jr et al. (2017). In this case it has been identified that the ERP system can positively influence on the business’s decision making process and operations and performance.
In the Diet Centre case study, it has been identified that the company was encountering problems with the poor operational management and poor management of the finance, accounting and procurement departments. The application of the SAP ERP system was to enhance the management of finance and other business operation. As the organization has encountered severe loss and debt, the future of the company is dependent on its resolution to implement the ERP system. The application of the ERP system as evidenced from the Diet Centre case study can enhance the firm’s performance on the basis of the financial performance and operational management. It has been further discussed in this Diet Centre case study analysis that with the implementation of the particular system the company in the future can reduce inefficiencies and costs by 10%. Followed by the implementation of the ERP system from the SAP, the company is likely to improve coordination among the financials of the main departments. The software would facilitate all kinds of managerial and financial reporting with the integration of different interdepartmental operational functions. In subsequent research Efe, (2016) identified that SAP based ERP system allows executive management of organizations to oversee the business activities from a single lively database.
According to Alcivar and Abad, (2016), the ERP system enhances the financial results of organizations by increasing the quality control, sales growth, and efficiency whereby reducing procurement costs, stock levels. It has been further demonstrated that the SAP ERP system increases the external and internal financial reporting that results in a more appropriate cost accounting. Additionally, the organization Diet Center examined in the Diet Centre case study is recognized to be effectively helped from the application of the ERP system as it would enable the company to positively control of operations to achieve a good bottom line. In the case of Petropars Ltd, as could be surmised and linked with the findings of the article by Ghanbari, (2017), it has been identified that ERP system implementation had a significant impact on financial processes that improved the processes of the business as compared to the traditional systems that the company was using previously.
From the above argument based on the Diet Centre case study it has been evaluated that after incorporation of ERP system if the workforce resistance is noticed due to radical changes, the management system of DC can suffer a major loss. However, training and development programs can be organized by DC directors to educate their employees with the implication of ERP system, as with the effective knowledge of ERP function only CD would be able to sustain benefits from the software. Besides, by the time of transferring the data into a new system if any mistake arises, the company could encounter a huge loss of losing data which might attract negative tax implications. To eliminate this risk highlighted in the Diet Centre case study, the backup can be prepared of all the necessary documents before migrating them into a new system.
Alcivar, I. and Abad, A.G., 2016. Design and evaluation of a gamified system for ERP training. Computers in Human Behavior, 58, pp.109-118.
Alshare, K.A., El-Masri, M. and Lane, P.L., 2019. The determinants of student effort at learning ERP: A cultural perspective. Diet Centre case study Journal of Information Systems Education, 26(2), p.3.
Efe, B., 2016. An integrated fuzzy multi criteria group decision making approach for ERP system selection. Applied Soft Computing, 38, pp.106-117.
Ghanbari, A.M., 2017. The Impact of ERP Implementation on Financial Processes: A Case Study. Petroleum Business Review, 1(1), pp.40-48.
Haberli Jr, C., Oliveira, T. and Yanaze, M., 2017. Understanding the determinants of adoption of enterprise resource planning (ERP) technology within the agri-food context: the case of the Midwest of Brazil. International Food and Agribusiness Management Review, 20(1030-2018-023), pp.729-746.
Hassan, R.M., 2018. Effect of Enterprise Resource Planning On Supply Chain Performance of the Energy Sector in Kenya: A Case Study of Kenya Power Limited. Journal of International Business, Innovation and Strategic Management, 1(2), pp.61-80.
Pohludka, M., Stverkova, H. and ?lusarczyk, B., 2018. Implementation and unification of the ERP system in a global company as a strategic decision for sustainable entrepreneurship. Sustainability, 10(8), p.2916.
Ranjan, S., Jha, V.K. and Pal, P., 2016. Literature review on ERP implementation challenges. Diet Centre case study International Journal of Business Information Systems, 21(3), pp.388-402.
Vyawhare, S.A., 2017. Case Study of Whirlpool ERP-SAP Implementation.
Case study questions
- Evaluation of the firm’s growth strategy, mission and vision in relation to their SAPERP decision
- Assessment of the need and role of an appropriate ERP system in the operations of the firm
- Evaluation of the costs and benefits of implementing an ERP system
- Assessment of the effect of an ERP system on the various activities within the firm
- Discussion of the future of the firm by analysing the potential impact of the SAP ERP system on the operation and financial results