Keda’s Sap Paper Analysis

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Table of Contents

• Executive Summary        3
• Case Synopsis        4
• Strategy Analysis        5
• Problem Analysis        6

                 Firm-based-value chain model        6

             Table 1        7

             Michael Porter’s Value Chain Model for Keda        7

                 Implementation Needs Analysis        8

• Implementation Effectiveness        11

                Tangible Costs Analysis        13

                Intangible Cost        15

                Tangible Benefits        15

                Intangible Benefits        15

• Conclusion and Recommendations        15
• References        17

Executive Summary

This document analyses Fung, Fang, Wang and Neufeld business case of Keda’s SAP Implementation (2017) in Keda Industrial Company Ltd. (Keda), a Chinese machinery manufacturer starting from the problems caused by their silo-based model to the success of the enterprise resource planning (ERP) implementation. The objective of this analysis is to study thoroughly how the lack of integration prevented Keda’s leaders from acting strategically and consequently affecting Keda’s production effectiveness and businesses against competitors from local and foreign companies.

By using Michael Porter’s value chain analysis, we will understand where the sources of value and misallocation of resources were found in the organization by Dr. Fan Zhu and how he has successfully led Keda through an ERP implementation. Recommendations for improvement and an outline for action plan will conclude the study.

Case Synopsis

Keda is one of the leaders worldwide in product and management innovation engaged in the solution for ceramics and building machinery and equipment industry. Keda is a Chinese company founded in 1992 by Lu Qin with a conservative capital of 90,000 Chinese yuan (CNY). Innovations has been the core of the business model and the fact that the key business units worked with high degree of autonomy and free-wheeling entrepreneurial culture enabled Keda to achieve its “pursuit of perfection” through “endless innovation” in the global market (Fung et al., 2017, p.2).

Keda soon became a world leader in building materials machinery, second only to SACMI of Italy by early 2000’s. In 2007, it reported a net profit of more than CNY 93 million.  By 2010, Keda had more than 2000 employees. Their mission statements of “Being the champion in the world of building materials and equipment Industry” forged their determination to rapidly achieve their growth and success becoming the second leader worldwide among over 280 players in the Industry, releasing as well 3 of the 10 most innovative new machinery products in the world (Fung et al., 2017, p.2).

In 2014 Forbes Enterprise (2014) ranked Keda Industrial #97 in the most innovative growth companies list reporting US$2.3 Billion enterprise value. However, their fast growth played against them as their departments due to their decentralized managements system, could not track efficiencies, costs neither timelines being reflected in production delays. Adding to the demise was the fact that the MRP-II system’s vendor, Beijing Riamb Software IT Co. Ltd., had ceased maintenance support for the system due to an internal corporate restructuring (Fung et al., 2017).  

The pertinent inclusion of Dr. Fan Zhu resulted in a six-month planning process consolidating the project team as an integral unit and the incorporation of the Enterprise Resource Planning (ERP).        

The paper analysis describes the planning process concentrating on the challenges and outcome of the SAP project implementation.

Strategy Analysis

Keda was created with the firm objective of being the leader of innovation in the building materials machinery industry. This constant focus established Keda not only as a leader in the market share and revenue but also as a product and management innovator being recognized as one of China’s top 500 national machinery manufacturers (Fung et al., 2017). Their sales orders were characterized by low volumes and high margins.

Keda’s business as a whole relied on several key business functions such as R&D, production and purchasing. Nonetheless, based on Keda innovation’s core, they had focused on R&D on which invested nearly US$5.4 million to set up a state-of-the-art ceramic engineering R&D testing center (Fung et al., 2017). From the start, they were in the cutting-edge technology releasing the very first 3,200 pressing machine in China included among three inventions awarded as the 10 most innovative new machinery products in the world (Fung et al., 2017). In 2003, the company set up a Chinese national enterprise post-doctoral workstation and invited post-doctoral scholars to work on research projects on such topics as supply chain management and human resource management (Fung et al., 2017).   Keda’s focused on its stuff promoting their career development, implementing important reward systems and stuff retention scheme, promoted the “value creation” and “innovation” culture among the personnel providing a significant advantage and functioned as strategy for the company’s success.

Production cost and location. To be able to compete globally, not only Keda’s creative inventions but low production cost helped them surpassed most of its competitors to become a world leader in building materials machinery, second only to SACMI of Italy (www.sacmi.com) (Fung et al., 2017). Keda has been benefited from the low manufacturing and labor cost in China as well as the partnership with local suppliers being reflected in low sale prices. In the 90’s the commercialization of their machine marked up even 50 percent under oversea competitors to similar series.