Enterprise Resource Planning (ERP) System Case Study
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- What inspired Skullcraft to pursue ERP even though the company had just 26 employees?
An Enterprise Resource Planning system is an integrated system which helps the organization to manage its resources; inventory, procurement, supply chain, finance, human resource etc. are few of the many resources an ERP helps to manage.
Although, the company had just 26 employees, an ERP system will enhance the managing of resources which is not limited to just human resources.
The following facts will justify the implementation of the ERP system:
- The company was rivalling Sony in the U.S. headphones market with sales of up to $37 million.
- The company had around 200 to 300 percent annual growth rate.
- The business had to handle large amounts of transactions.
- The finance department was using Excel spreadsheets and Quickbooks to manage the books.
- Wide distribution of products.
- No product tracking through supply chain till ERP was implemented.
In a nutshell, Skullcraft was a small business with transactions comparable to a big enterprise. Thus managing resources was getting more and more complicated as the company grew in sales and investing in an ERP system will help the company manage its resources in a more efficient way. Moreover, as the ERP system was fully hosted, the company did not need to manage a separate ERP infrastructure which was a bonus for them.
- What features caused Skullcraft to choose SAP's ByDesign?
SAP's ByDesign was a unique system which fulfilled Skullcraft's each and every requirement. After evaluating many systems, Beth Siron chose ByDesign for the following reasons:
- SAP's ByDesign was a fully system hosted system meaning that it did not required additional information system infrastructure to be implemented by Skullcraft. The organization would use the ERP system over the internet which made it easy for each and every department to use it from anywhere.
- It enabled big business practices for managing financials, inventory, customer relations, supply chain etc. in a format accessible to small businesses. This was perfect a was the small enterprise with annual growth rate of 200 to 300 percent.
- It helped Skullcraft to track the products through the supply chain.
- The ERP system was enabled the company to forecast future demand.
Thus, the software did everything a big company's Information System would do but without the additional infrastructure and a team to manage it. These features where perfect for Skullcraft which was a small firm with transactions equal to a large firm.
Critical Thinking Questions
- How do you think Skullcraft was able to maintain a small staff while increasing production 200 to 300 percent annually?
Rick Alden saw a unique business opportunity in selling high-end radically designed headphones to Skiers and Skateboaders. The company was also the first one to enable users to switch between music listening and cell phone conversations over headphones.
The reason behind the tremendous growth was the target market and distribution channel. The company first targeted specialty ski and skate shops and then later large retail chains. Specialty retail shops attracted large amounts of extreme sports fanatics which put Skullcraft on the map in the headphones industry.
Even with just 26 employees, the company was effectively able to manage its operations specially production and distribution. It is not unusually for a company to have a tremendous growth rate with such a small workforce. If operations are effectively managed, growth can be increased without comparable investment in additional resources.
The company may have had the production outsourced which makes sense as a small workforce cannot produce and maintain such large product demand. Moreover, the company could have arranged the goods to the picked up at the manufacturer's workshop and dropped at the specialty retail stores. Thus by effectively managing the flow of goods, the company must have been able to increase its production up to 200 to 300 percent with just 26 employees.
- Do you think Skullcraft is unusual in its size and needs? What other businesses can you think of that fit the Skullcraft model?
No, Skullcraft is not unusual in its needs and size. It I common for a company to have a tremendous growth rate even with a small size. Many small business offer services to a large number of customers. Skullcraft's Rick Alden realized an exceptional business opportunity which became a huge success and helped the company experience a growth rate of 200 to 300 percent annually. Also, the company was able to effectively manage and integrate operations resulting in huge sales while maintaining a small human capital.
Other businesses that fit the Skullcraft model are:
- IT firms like GoDaddy which provide domain services to small and large enterprises enterprises can serve a large number of customer with its small size. The advancement in internet services enables such firms to stay small and serve large. Thus, investing in an ERP system will enable GoDaddy to manage operations more effectively.
- Freight Forwarding firms consolidate good from various customers into one big container. This helps cut down the costs of shipping small amounts of goods. They use the infrastructure of big firms and manage operations right at their desks. Also, and ERP system will help freight forwarders to track the goods through the supply chain and mange customer relations.
- A small logistics firms manages the operations and uses resources of other organizations to transport the goods. Their small size demands huge amounts of resources. And ERP in a logistics firm with help the employees track the goods, manage the finance, maintain customer relations etc.
- Medical firms, architecture firms, designing and developing firms and many other IT sector firms are small in size but their needs are huge.
Thus, Skullcraft's size and needs are not unusual as it is very common for a firm to remain small but serve a large number of customers which will inevitably increase their needs.
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