Question

CASE STUDY - Global Bike Incorporated GBI Background Global Bike is a world class bicycle company serving the professional and “prosumer” cyclists for touring and off-road racing. Global Bike Inc. is registered as a US company, following US GAAP accounting standards. Due to several tax and export issues, Global Bike Groups’s headquarters remains located in Dallas while its subsidiary company, Global Bike Germany GmbH, which is based in Heidelberg is subject to IFRS accounting standards and German tax regulations. History GBI divisions were running multiple, independent application environments. This was inefficient, inaccurate, and expensive, and information was not available in real-time. In fact, many of GBI’s processes were obsolete and there was a need to dismantle existing processes into individual activities and put them back together in a new set of business flows. In addition to this, GBI ran into trouble with its reporting to the IFRS in 2017 because some significant financial transactions could not be accounted for. GBI started to struggle for market share with a relative newcomer to the bicycle industry, FED Bicycles who was emerging as a formidable player largely due to the company’s culture of embracing technology as a strategic competitive advantage in improving efficiency and customer service. GBI was experiencing shipping errors due to the wrong address or loading the box on the wrong truck. Errors happened frequently on systems that required manual data entry, and multiple systems required redundant processes to utilize the data. Much of the bicycles looked similar, which allowed for picking errors. Fixing these errors were expensive and time consuming. GBI’s customer service received an overwhelming number of phone inquiries each day that required time and cost-consuming processes to locate approximate package status. GBI divisions were running multiple, independent application environments. This was inefficient, inaccurate, and expensive, and information was not available in real-time. In fact, many of GBI’s processes were obsolete. In 2017, GBI ran into trouble with its reporting to the IFRS because some significant financial transactions could not be accounted for. It was at this time that GBI decided to dismantle existing processes into individual activities and put them back together in a new set of business flow, with an ERP system as the enabling technology. Technology Implementation GBI integrated a shared services model for all IT functions, located in the Dallas office. Along with this move to centralized IT, Global Bike also implemented SAP ERP (version 6.0). GBI set up teams to implement hardware and software, modify the software to meet the goals, convert the legacy data to the new system, and develop a reporting framework and initial set of reports to be included in the system implementation. Not having highly skilled IT developers and a proven process for managing such big technology projects, GBI engaged an external company as an implementation partner. The external consultant evaluated the different ERP systems on the market and recommended SAP. GBI initially believed that SAP was not a good fit, but as the company went through the evaluation process, finally decided SAP actually was the best system for them. The implementation approach started off with a goal to minimize the tailoring of SAP but later changed to become focused on changing the system to match their processes. Eight different modules were implemented, first starting with the Sales and Distribution, Procurement, and Accounting modules. Next the Warehouse Management, Production, and Asset Management were included, and finally, the Project Systems, and Quality Management modules were incorporated. Problems experienced in the implementation of the first three modules were also experienced in the implementation of the subsequent modules. Interviews with staff during the project revealed a culture of closed communication and very little commitment to training. At some point, there seemed to be no more contribution from the implementation partner, who was also responsible for providing training. The project took eighteen months to complete, and several staff resigned before the end of the project as they were unsure of the changes happening in the company. Despite the issues, the system went live. Difficulties continued in the first sixty to ninety days. Further interviews with staff indicated that there was a huge number of support calls recorded as many of them could not utilise the capabilities of the system and had in fact forgotten most of the things they had been taught about the new system. Many comments reflected that it took so much time to learn the system. There were also many comments reflecting incomplete integration of the Warehouse Management module with the Production and Sales and Distribution modules. Particularly, stock in the warehouse was not displaying correctly when viewed from the Sales and Distribution module. Stabilisation took a little longer than expected. One year later however, the implementation one year was considered successful. Outcomes By implementing the ERP, GBI saved a tremendous amount of money for the goods and services purchased from hundreds of locations around the globe. In addition, the GBI procurement network, which is very extensive due to numerous materials, is now rigorous because it was built on well-defined technological standards. When GBI adds new applications, therefore, they fit into the rest of their interconnected IT infrastructure, which doesn’t tolerate excessive waste. GBI makes sure all new technology fits in nicely over their architecture. Current Situation In the end, all ERP functions are centralized with the primary objectives to reduce costs and deliver best-in-class technology to all divisions globally. This centralized approach offers Global Bike an advanced business platform under a highly controlled environment, which enables consistency of operations and process integrity across the globe. Given the requirement for multiple accounting standards across the US and German companies, GBI maintains one leading accounting ledger for both companies, but also one accounting book for the US company and another for the German company. Material planning, finance, administration, HR and IT functions are consolidated at the Dallas headquarters. The Dallas facility manufactures products for the US and export markets and its warehouse manages product distribution for the central US and internet retailers. Global Bike Inc. also has warehouses for shipping and export in both San Diego and Miami. San Diego handles West Coast distribution and exports for Asia, while Miami handles East Coast distribution and Latin America exports. Global Bike Germany GmbH has its headquarters in Heidelberg Germany. The majority of research and development is housed in the Heidelberg offices. Heidelberg is also the main manufacturing facility for Global Bike in Europe. The Heidelberg warehouse handles all shipping for southern Europe. Global Bike operates two production facilities (Dallas and Heidelberg) and has outsourced the production of both off-road and touring frames and the carbon composite wheels to trusted partners who have specialty facilities to fabricate the complex materials used. Global Bike maintains very collaborative research and design relationships with these specialty partners to ensure that innovations in both material and structural capabilities are incorporated into the frames. Global Bike has established an extensive partner operation to ensure process continuity between Global Bike and its partners to deliver best-in-class products for its customers. Special attention has been paid to nurturing strong relationships with suppliers and Global Bike is generally the largest customer of its main suppliers. Given the highly specialized nature of Global Bike’s bicycles and the personalized needs of riders, Global Bike sells its bikes exclusively through well-known and respected Independent Bicycle Dealers (IBDs). These dealers employ staff members who are experts in off-road and tour racing to help consumers choose the right bike and accessories for their individual needs. GBI has several vendors across the US and Germany. Identification and selection of vendors, including negotiation of general conditions of purchase and contracts, for the US facilities are organised centrally from the US head office. Similarly, Identification and selection of vendors for the US facilities are organised centrally from the German head office in Heidelberg. GBI has several customers across the US and Germany. All credit for the US customers are managed by the US head office. Similarly, all credit for the German customers are managed by the German head office in Heidelberg. GBI has multiple assets and also tracks the financial consequences associated with the entire lifecycle of an asset, from acquisition to disposal. All financial transactions related to the processes and costs related to all of these processes are used for the internal management of the firm in terms of cost and revenue. What’s Next? GBI distributors and customers continue to desire the power to buy, sell, and research on their own terms – not as dictated by GBI. GBI still experiences data issues that make simple tasks such as tracking repeat customers difficult and needs all the data accessible in real time to track the individual customer’s buying behaviour and personal preferences. GBI is seeking to build close customer relationship by analysing customer information and permit coherent view of customer and is now contemplating a help desk ticket management software with fully integrated customer database to be connected to the ERP system. GBI’s key requirement is to provide gateway for customers to interact electronically with the company and in so doing create interaction points between the organization and the customer. In addition, GBI’s supply chain network remains very extensive due to numerous materials and now beginning to suffer as discount retailers have started to supply bicycles to GBI’s distributors, thereby encroaching on GBI’s market space. In response, GBI is now shifting to a high-end product line that would generate better profit margins by engaging suppliers to through joint design and collaborative planning, forecasting, and replenishment. To make this new strategy work, however, GBI is beginning to investigate new supply chain technologies and processes to drive the speed-to-market requirements of the new growth strategy.  

Answer the questions below in relation to the case study provided.

As part of Re-engineering business processes, GBI will need to dismantle its business processes into individual activities and put them back together in new sets of business flows.

a. Identify how processes are dismantled to drive benefits of Business Process Re-engineering

b. Once Business Process Re-engineering is concluded, how might GBI continue to improve its business processes to make it more efficient? (1 Mark)

Answer 1

A) GBI decided to dismantle existing processes into individual activities and put them back together in a new set of business flow, with an ERP system as the enabling technology.Technology Implementation GBI integrated a shared services model for all IT functions, located in the Dallas office.(implemented SAP ERP) (version 6.0).Set up teams to implement hardware and software modify the software to meet the goals, convert the legacy data to the new system, and develop a reporting framework engaged an external company as an implementation partner. GBI believed that SAP was good. Eight different modules were implemented, first starting with the Sales and Distribution, Procurement, and Accounting modules. Next the Warehouse Management, Production, and Asset Management were included, and finally, the Project Systems, and Quality Management modules were incorporated. Problems experienced in the implementation of the first three modules were also experienced in the implementation of the subsequent modules

B)

• build close customer relationship
• provide gateway for customers to interact electronically with the company
• now shifting to a high-end product line that would generate better profit margins
• beginning to investigate new supply chain technologies and processes to drive the speed-to-market requirements of the new growth strategy.