Tektronix, Inc.: Global ERP Implementation

History

The case revolves around the company called Tektronix, Inc. which was founded in 1946

and after 50 years of success, in 1993, the high tech producer of electronic equipments was facing

increased global competition. During the same time, Carl Nuen starts with his new position as the

company CFO. The biggest threat for the company was not from the external environment but

from within as they lacked integrated Management Information System and suffered from

decades of uncoordinated evolution.

As the company struggles to find itself in middle of the 5 year recovery program to

solidify its competitive footing, Carl Nuen focuses on simplifying his company’s operations and

restructure them thus increase visibility in operations.

The company plans to incorporate Oracle’s ERP solution in their current operations

which has been divided into 3 main areas spread across 60 countries around the world

i)                    Measurement Business Division (MBD)

ii)                   Color Printing & Imaging Division (CPID)

iii)                 Video & Networking Division (VND)

Executive Summary

The company was founded in 1946 as a maker of Electronics’ test equipments and grows

up to be $1.3 billion manufacturer of electronic tools and devices.

The company has a global presence with offices in 60 countries with worldwide

leadership in Oscilloscopes with a market share that is twice its immediate competitor.

Additionally it is also a market leader in Television Sets and measurement and monitoring

equipments as well as of color printers.

Tektronix, in spite of being the world leader in most of the businesses that it was catering

to, was limited in terms of flexibility of its operations and growth opportunities. In order to

overcome these limitations the top management felt that the organization had to be restructured

starting with Information Technology (IT) infrastructure.

The biggest hurdle that the company was facing was related to its IT Infrastructure. The

company had different application systems and technologies around the world for its different

divisions and operations with different chart of accounts and financials of each of its divisions.

This led to the following problems:

i) Global competition was increasing

ii) Financial performance was suffering

iii) Lack of integration and presence of incoordination of IT system

iv) The company was not able to ship “up to the minute” or on a Saturday

v)  Sales Order had to be created multiple times in different systems as its made its way through

the order cycle due to its patchy legacy system

vi)  The slow order process and services led to delays and created opportunities for errors to

creep into the system

vii)  Company didn’t had accurate information on performance

viii)  Company didn’t had capacity to effectively manage customer accounts and credit on global

basis

ix) The financial system was not integrated. Closing the book entries each month took 2 weeks

x) Profitability of products and divisions was hard to realize

Data Analysis

Carl Nuen’s vision gave a major impetus to the project to enforce ERP solution however

it was the CPID division that had been considering changing the legacy software to an integrated

platform since long as the division had outgrown so as to be supported by the legacy systems.

The management knew that involving into such big project would result in heavy cost but the

operational cost would go down significantly.

Once the picture was clear for CPID division, other divisions followed the suite to have a

common ERP provider to keep a common platform for the entire organization. The vision

comprised of 3 elements

i)   Seperability of Vision

ii)  Leveraging of Shared Services

iii) Staying “plain vanilla” as much as possible

The 3 elements were extremely critical considering the each division had its own instance

of the system that managed its customer fulfillment process and separate vision would ensure

that requirements of one organization should not drive the practices of other.

Leveraging shared services involved keeping the entire operations which requires a

common input/output from all divisions to be kept integrated so as to have a common platform.

It would also result in cost reduction as it avoids redundancy e.g. by consolidating financial

functions e.g. Accounts payables, Charts of Accounts, General Ledger etc

“Plain Vanilla” approached ensured that the company would presume minimal

modifications to the standard software which will subsequently reduce the maintenance cost, up

gradation cost and ensure integrity of the software was maintained.

The company decides to opt for a third party software instead of developing it in floor

was Carl Nuen feels that they don’t have vast expertise in developing the code & neither it is

their core competency and hence they will be able to leverage their R&D investment over

thousands and thousands of users who have implement the same software.

The company already has a ERP software for its Manufacturing division and hence opts

for a new software albeit the Manufacturing Division but ensures that the new service provider is

able to built up connectivity with the existing solution. The company finally decides to go with

Oracle!

ERP Implementation

The company begins the ERP implementation with FINANCIALS first in order to ensure

single view of all financial information worldwide. This involved making drastic changes in the

organization model and also on processes.

  The company first eliminates the Country Managers. Then the company decides on

English as the common language across all locations. The company transforms each country

from profit centre to commission center Office Managers replace Country managers albeit

supervisory or managerial duties. The Financial Transaction process is also changed by

eliminating the back offices in each country to continents.

Additionally, the company also includes financial consultancy firm “Aris” to ensure the

best practices are followed as their management lacked necessary expertise and faced stiff

opposition from the workers and management staff for pursuing a change. For roles that required

less functional and more business expertise, the company brought in technical consultants to

develop programs and routines to support functional process.

There are benefits of using ERP some of this are:

The team felt the time, effort and cost associated with the project was worth every penny

The company had finished goods inventory visibility regardless of its presence in the world

Improved data integration allowed financial analysts to drill down to several levels of detail

in a single account

Enhanced visibility in Sales trend and internal performance

Closing book of accounts at the end of every period was accelerated substantially

Standardization of business processes resulted in better decision making end users were also

pleased with the results. They felt more effective and satisfied in their jobs.

Conclusion

Successful ERP Implementation at Tektronix clearly shows that it is all about sound

management and problem solving. The most difficult challenge for any  management initiating

ERP implementation is not about acquiring and installing a new software, it is about making sure

that the entire organization-up, down, across-develops a new mindset and leaves the old,

ineffective ways behind. It is here that leadership skill becomes important.