Case Review of Vandelay Industries, Inc.

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Case Review of
Vandelay Industries, Inc.

Table of Contents
I.Problem Statement1
II.Background Information and Introduction of the Case2
III.Summary of Findings2
IV.Analysis of Alternatives3
V.Detailed Recommendations5

Case Review of
Vandelay Industries, Inc.

Problem Statement

Vandelay Industries, a global, multi-billion dollar corporation that manufactured industrial rubber and latex process equipment, was being ran on out-dated, fragmented, manufacturing and order fulfillment systems. Each manufacturing facility had purchased its own manufacturing resource planning (MRP) software and customized both their software programs and business processes specifically to their own plant’s needs. The diverse MRP solutions being used throughout the company were then integrated as best as they could be into the corporate financial systems but that was the extent of information systems compatibility throughout Vandelay. As market conditions changed drastically in the 1980’s new, cheaper competitors emerged in the industry and forced Vandelay executive management to realize that they had to seek more efficient, streamlined, manufacturing systems and processes to be able to drive down costs and price their products more competitively to survive. The company decided to purchase SAP R/3 Enterprise Resource System (ERP) and contract with Deloitte to implement the new system. The new software implementation would be a failure if executive management and Deloitte did not make the right decisions about the level of configurations allowed by the various user groups as well as identify what level of business process re-engineering, if any, would be needed to support the new solution.

Background Information and Introduction of the Case

Vandelay Industries was founded in Minnesota during World War II. The company’s products were regarded as high quality and innovative. The company grew quickly through a series of acquisitions and added steadily to the number of available product lines and manufacturing plants worldwide. Each plant at Vandelay was treated as a revenue center, meaning that each plant was a distinctly identifiable unit of the company. Because of the designation of a revenue center, the plants were run autonomously of one another. Because of this, each plant had its own information systems in the areas of Human Resources, Manufacturing Resource Planning, Forecasting, Capacity Planning, and Scheduling. The only single corporate wide system was a financial reporting tool that was patched work into each plant’s infrastructure. During the 1980’s the company started to struggle in their market due to increased competition from foreign competitors who offered less expensive alternatives with fewer features. Companies, who once favored Vandelay’s customizability of products, could no longer pay 20-30% more than comparable alternatives. Furthermore, the order fulfillment process at Vandelay was less refined and their lead times were much longer than the competition. During the 1990’s the company changed their market strategy and began to realign their production processes as well. The firm, with eyes wide open, realized they must change their manufacturing and order fulfillment processes to increase profit margins as well as meeting the customer’s demand sooner.

Summary of Findings

After Vandelay reviewed its operations, they found several issues that had arisen from having such a fragmented information system and non-standardized business processes. Scheduling: The lack of integration across plants that depended on supplies or parts from each other created a manual data entry process into each MRP system when orders were made. This manual effort was time consuming, expensive, inflexible, and would bottleneck manufacturing.

Forecasting: Planning groups were forecasting demand by the month. Manufacturing facilities were then allowed to decide when to...
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