Keda Case Study

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KEDA’S SAP IMPLEMENTATION

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Terrance Fung and Professors Yulin Fang, Huaiqing Wang and Derrick Neufeld wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2011, Richard Ivey School of Business Foundation

Version: 2011-01-20

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Dr. Fan Zhu, vice general manager of Keda Industrial Company Ltd. (Keda), was utterly satisfied with the outcome of the SAP project. A mere five months after forming an implementation team, Keda had successfully deployed SAP as its enterprise resource planning (ERP) solution, and the system was quickly paying for itself through more efficient inventory management. The success was all the more remarkable given that an estimated 80 per cent of ERP implementation efforts in China failed.1 Despite the success, Zhu was uneasy. Keda had a large backlog of other information technology (IT) projects waiting in the pipeline, and Zhu wanted to carefully evaluate the SAP project to determine what had been done right, what had gone wrong and what Keda had gotten away with due to blind luck.

COMPANY OVERVIEW

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Founded in 1992 by Lu Qin, with an initial capital outlay of only 90,000 Chinese yuan (CNY) (US$13,500), Keda began as a small manufacturer of ceramics machinery located in Shunde, in Guangdong province. At the time, the global ceramics machinery industry was dominated by European companies. Keda modeled its business after these market leaders and enjoyed rapid growth in the local Chinese market through the 1990s. In less than a decade, the company was recognized both as one of China’s top 500 national machinery manufacturers and as a top 10 building materials machinery enterprise in the world. By the early 2000s, Keda had surpassed most of its competitors to become a world leader in building materials machinery, second only to SACMI of Italy (www.sacmi.com). Keda Industrial (stock symbol 600986:CH) became a listed company on the Shanghai Stock Exchange in 2002. In 2009 Keda reported total revenues of more than CNY1,425 million (US$209 million), almost double the amount of its 2006 revenues of CNY931 million (US$119 million).

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Liang Zhang et al., “Critical Success Factors of Enterprise Resource Planning Systems Implementation Success in China,” in Proceedings of the 36th Hawaii International Conference on System Sciences, January 6–9, 2003, Computer Society Press, Washington, DC, 2003, pp. 236–245.

This document is authorized for use only by Imran Taseer until April 2013. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

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By 2010, Keda had more than 2,000 employees and a broad product offering, spanning industrial machinery for ceramics, stone processing, building materials processing and energy resource management. Keda also offered comprehensive plant design and technical consulting services to industrial clients. Due to the nature of Keda’s products, its sales orders were typically characterized by significant customization, low volumes and high margins.

DRIVERS FOR ERP

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Keda’s business as a whole relied on several key business functions, such as research and development (R&D), purchase of...
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