CASE 3 ERP Purchase Decision at Benton Manufacturing Company, Inc.
In case study III-4, titled “ERP Purchase Decision at Benton Manufacturing Company, Inc.,” describes in detail what a major manufacturing company experiences while considering a substantial investment with the implementation of an ERP (enterprise resource planning) system. Among the company’s management personal opinions vary, some doubt the need of such a system while others support and justify the expense. The question at hand; whether or not to implement a costly system with a lengthy transitioning phase? In his attempt to answer this question, Walter McHenry, CEO and President of Benton Manufacturing has formed a two man team to investigate and further research the negative and positive possibilities of and ERP system. We will explore the company’s background, component / analysis, and finally our conclusion / recommendation.
Background Benton Manufacturing Company, Inc., is a U.S. manufacturer of consumer durables with reported net sales in 1998 of nearly $1billion and operating profits of almost $180 million. In North America alone, the company operates 7 factories and 57 distribution centers while employing 5,200 people. Recently, through the acquisitions of several companies Benton’s product lines have expanded offering their thousands of independent dealers a broader selection. In the past, Benton Manufacturing enjoyed a 40% market share. However, as more independent dealerships are being acquired by large firms the traditional relationships between Benton and its dealers have shifted causing the profit margins to diminish. With the increased competition efforts to stave off the current pressures have also increased. The company implemented a Continuous-Improvement strategy that resulted in a 25% increased productivity, 30% inventory reduction, freed factory space, and reduced cycle time.
In order for Benton Manufacturing, to continue as an industry leader and keep its proven history of continuous growth management implemented the following four strategies: 1) Customer-driven new product development 2) The acquisition of business that complement existing ones, 3) International expansion 4) Emphasis o the Continuous-Improvement approach. Component/ Analysis What is ERP – Enterprise Resource Planning? According to the book Managing Information Technology 6th edition, an ERP system is a set of integrated business applications or modules, that carry out common business function such as general ledger accounting, accounts payable, accounts receivable, material requirements planning, order management, inventory control, and human resources management (211). In other words, it integrates all departments and functions throughout an organization into a single IT system. In this way it enables employees to make decisions by viewing companywide information. Walter S. McHenry, CEO and President of Benton Manufacturing Company, is under the belief that the industry is navigating toward ERP systems and fears Benton might be falling behind. Since he is not as informed as he would like to be about the technology, he decided to further inquire and set forth a quick study if whether such a system would be beneficial to the company. He assigned the ERP implementation study to a two person team, Adam T. Meyer, a senior systems analyst who has been with Benton in the IS department for 15 years and Jerry L. Cook, who has been with Benton for 12 years and has worked in various positions including engineering, production, finance, and market research. Once the in depth research was completed, Cook and Meyer both agreed that the long term benefits supersede the temporary transitional difficulties. Meyer states, “Our present
systems are growing old …and will have to be replaced. ERP systems have much more functionality and much better integration than our internal IT staff can provide.” Cook concedes the challenges will be monumental but emphasis...
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