Case study: WIM’s transition to ERP

Welding Industries Malaysia (WIM) is the only local Malaysian company that manufactures welding machines for commercial use. WIM’s remarkable success story, which includes surviving the 1997/8 financial crisis and the rise of competition from China, is attributable to the very effective enterprise resource planning (ERP) system it has adopted. In the past, WIM was using a materials resource planning (MRP) system, but this system, while a large advance over paper-based management techniques, nevertheless created many problems as the company’s operations expanded. MRP systems do not integrated information from various divisions within a company, but instead automate processes and information within departments. For WIM this meant there was no platform with which to integrate data from different departments, there was a prevalence of data duplication and redundancy, and inconsistent data were supplied to managers. In addition to this, the departments within the company were acting as separate entities and information was not being shared. The growing size of the firm and the corresponding increase in the sizes of departments also bogged down the flow of information. There were no predefined standards for data communications and information was often lost. In the absence of an enterprise-wide approach to information, WIM had a difficult time meeting production schedules. The lack of communication of vital information resulted in a loss of crucial resources; that is, people, material, and machinery. Senior management could not obtain a complete view of the company as a whole, but instead had to rely on piecemeal reports from each division. As Keng Foon Leong, General Manager, WIM, explained, “The local MRP system had the manufacturing modules, but it couldn’t manage huge data. We could not see our material movement on our previous system”. Overall productivity of the manufacturing process was falling, employees were disengaged and customers did not return. This set alarm bells ringing.

Based on the problems in their existing system, the management at WIM developed a set of objectives to guide the development of a new system. The objectives included an increase in the visibility and sharing of all reports on manufacturing; improved coordination across functional departments to increase efficiency; better management of procurement and inventory processes; the facilitation of day-to-day management; and the 24x7 availability of financial information of the entire firm. Management also demanded standardization of data formats across the company, and greater accuracy, along with remote access and improved security. They also decided that the inclusion of best practices and other vital information could lead to an increase in productivity and greater ownership.

After careful assessment, WIM decided to hire the services of Epicor Software Corporation for their ERP needs. Epicor is a software solutions provider to various enterprises in the manufacturing, distribution, retail, and service industries. Epicor has over 40 years of experience and has more than 20,000 customers in over 150 countries. “We reviewed a number of ERP vendors. We looked at each system and its functionality. Epicor stood out with its ability to link to our operations and provide the data we needed” said Leong. The first step was to put together a functional team comprising project management, IT systems managers, and executive management. The project management team defined the scope of the ERP system, assessed available resources at WIM, and budgeted the cost of implementation. The executive team ensured that the resulting system achieved business objectives and strategies, while technical expertise and support was provided by the IT team. A communication plan was designed to keep each individual member informed about current progress and the next steps in the plan. This was an essential part of change management at WIM. The system was implemented using a phased approach, since Epicor believes that key functionalities of the system need to be implemented in the first phase, followed by less major processes in the second phase, and so on.

ERP at WIM has changed the way the firm functions. The role of ERP in managing manufacturing processes now extends from procurement all the way to consumption. Holistic information on material, machinery, and labor, such as the cost structure of all raw materials, can now be accurately assessed. WIM is now able to utilize its resources to reap maximum profits. ERP has also integrated different departments at WIM, resulting in increased efficiency in operations at the firm. The manufacturing process can now be effectively and minutely planned using ERP, through the identification of the tasks and activities underlying each process, and the time required to complete them. The start and end times of sequences are estimated, and this enables the manufacturing process to be carried out smoothly, with any delays being immediately flagged up for further action, thus minimizing downtime. Better planning also facilitates effective monitoring of the process. In addition to these positive outcomes, the complexity of risk management and issue management is reduced thanks to the increased visibility of process information.

The implementation of Epicor’s ERP software has helped WIM to scale up its operations. As Leong explains, “Epicor provides us with greater visibility over our material movement and having an advanced MRP system within a comprehensive solution like Epicor is very important to the business.” The success of any manufacturing company also lies in how inventory is utilized. The software tracks and controls all procurement activities, schedules production processes, manages costs, and generates information that helps WIM to manage its inventory. It accurately forecasts the demand for materials and provides clear visibility into the lead time of ordered material. WIM purchases materials near the time of consumption, which leads to a reduction in maintenance of inventory levels in the organization. For instance, when quantities of a particular raw material exceed the minimum level or the maximum level respectively, an email alert is generated by the system to notify users, who can then decide whether to procure further quantities.

Furthermore, accurate information from all departments is recorded on the system, and this allows WIM to measure performance against key indicators in order to improve the quality of its business. As Leong notes, “Epicor has helped us to save money because we can make business decisions more clearly. We know that the data is accurate and the reports are correct. We can call on the Epicor system to support our decision-making process and let us make decisions faster and justify our spending.

Instructions: Read the above case and answer all following questions. Your answers must be clear, well-organized, and more importantly display in-depth analysis of the case.

1. What problems led WIM to implement an ERP system?
2. What strategic objectives (refer to chapter 1) WIM was trying to achieve through the implementation of the ERP system? Thoroughly analyze these strategic objectives by providing details.
3. How did WIM manage the change from a local MRP system to Epicor’s ERP system? Identify specific phases of ERP implementation discussed in the case.

Economists worldwide argue that the effects of the COVID-19 (corona-virus) pandemic will be disastrous for the global economy and may result in a prolonged economic recession. This is mainly because the pandemic combines numerous simultaneous negative shocks to the economy. One of the shocks that may be the largest and longest lasting may be a consumer demand shock to the global economy. Based on what you learned from this course, discuss how you think individual demand may be affected by this pandemic? To give a complete answer, make sure to discuss how the concepts of preferences and income (budget constraint) may be affected by the pandemic. [It may help to remember that, in this course, we learned that individual demand (choice) is derived from both utility (preferences) and income (Budget constraint)]

As the sale and lease of both consumable as well as durable goods are the driving force of our economic marketplace, they also need be considered as the primary transactions for how individual  businesses do business.The  need to limit and/or somehow control the legal liability  that emanates from such transactions is of, however, critical importance .

Various mechanisms have been considered, implemented and relied upon to contain this potential and often costly liability . Considering those, as a result of governmental actions,  as well as private sector and individual initiatives, what do you regard as most reliably effective toward the objective of protecting your business entity.

Noting that while  there is no one answer to the issue presented, consider the most viable options to address this issue from your perspective as a business student.

Chimnesia has two equal-sized groups of people: smokers and nonsmokers. Both types of people have utility U = Ï W C, where C is the amount of consumption that people have in any period. So long as they are healthy, individuals will consume their entire income of $16,000. If they need medical attention (and have no insurance), they will have to spend $12,000 to get healthy again, leaving them with only $4,000 to consume. Smokers have a 10% chance of requiring major medical attention, while nonsmokers have a 2% chance.

Insurance companies in Chimnesia can sell two types of policies. The “low-deductible” (L−) policy covers all medical costs above $2,000, while the “high-deductible” (H−) policy covers only medical costs above $10,000.

1. What is the actuarially fair premium for each type of policy and for each group?
2. If insurance companies can tell who is a smoker and who is a nonsmoker and charge the actuarially fair premiums for each policy and group, show that both groups will purchase the L-policy.

   Suppose that smoking status represents asymmetric information: each individual knows whether or not they are a smoker, but the insurance company does not.

3. Explain why it is impossible, at any price, for both groups to purchase L-policies in this setting. Which groups, if any, do you expect to buy L-policies, and at what price?
4. Show that it is possible for both groups to purchase insurance, with one group buying L-policies and one group buying H-policies.

Chimnesia has two equally sized groups of people: smokers and nonsmokers. Both types of people have utility U =sqrt(C), where C is the amount of consumption that people have in any period. So long as they are healthy, individuals will consume their entire income of $16,000. If they need medical attention (and have no insurance), they will have to spend $12,000 to get healthy again, leaving them with only $4,000 to consume. Smokers have a 10% chance of requiring major medical attention, while nonsmokers have a 2% chance.

Insurance companies in Chimnesia can sell two types of policy. The "low deductible" (L-) policy covers all medical costs above $2,000, while the "high deductible" (H- policy only covers medical costs above $10,000.

(a) What is the actuarially fair premium for each type of policy and for each group?

(b) If insurance companies can tell who is a smoker and who is a nonsmoker and charges the actuarially fair premiums for each policy and group, show that both groups will purchase the L-policy

Suppose that smoking status represents asymmetric information: each individual knows whether or not they are a smoker, but the insurance company does not.

(c) explain why it is impossible at any price, for both groups to practice L- policies in this setting. Which groups if any, do you expect to buy L- policies, and at what price?

(d) Show that it is possible for both groups to purchase insurance, with one group buying L-policies and one group buying H-policies.

Suppose Carlos is a single parent with one child, and he is trying to determine the effect of transfer benefits and taxes on his implicit marginal tax rate (and thus his incentive to work). The following table shows the transfer benefits and income taxes at various income levels in the economy in which Carlos resides.

Compute the spendable income level Carlos would have at each level of earned income, and enter these values in the last column.

If Carlos's income from work increased from $18,000 to $24,000, his implicit marginal tax rate would be_______ .

^ Options: A. 59.4% B. 66.5% C.72.7% D. 133.5%

If Carlos's income from work increased from $24,000 to $30,000, his implicit marginal tax rate would be _______ .

^ Options: A.16.1% B.21.6% C.29.4% D.178.4%

1. On January 1, 2020, Blossom Ltd. had 498,000 common shares outstanding. During 2020, it had the following transactions that affected the common share account:

The company’s year end is December 31.Determine the weighted average number of shares outstanding as at December 31, 2020. (Round answer to 0 decimal places, e.g. 5,275.)

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020.

Calculate earnings per share for 2020, using the weighted average number of shares determined above. (Round answer to 2 decimal places, e.g. 15.25.)

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020. Assume that net income included a loss from discontinued operations of $400,000, net of applicable income taxes.

Calculate earnings per share for 2020. (Round answers to 2 decimal places, e.g. 15.25.)

A company secretary works for a small company and is also the financial officer for the company who generally advises the directors on the day-to-day operations of the company. The company has a constitution, which limits the ability of the company secretary from borrowing any amounts over $5,000 without the matter being referred to a meeting of the board of directors. The company specifically created a constitution because the shares are all held by family members and the company secretary is not a family member. The company secretary does in fact organise a line of credit for the company for some $50,000, which is directly in breach of the company constitution. When the directors discover the company has a liability to a bank for nearly the full amount of $50,000, they take action to suspend the company secretary and inform the bank that, due to the company secretary exceeding his authority, the company is not responsible for inappropriate lending by the bank, and that the bank needs to find some solution against the company secretary personally. What is the liability of the company for the actions of the company secretary? (Minimum 200 words)

Question 5

A company secretary works for a small company and is also the financial officer for the company who generally advises the directors on the day-to-day operations of the company. The company has a constitution, which limits the ability of the company secretary from borrowing any amounts over $5,000 without the matter being referred to a meeting of the board of directors. The company specifically created a constitution because the shares are all held by family members and the company secretary is not a family member. The company secretary does in fact organise a line of credit for the company for some $50,000, which is directly in breach of the company constitution. When the directors discover the company has a liability to a bank for nearly the full amount of $50,000, they take action to suspend the company secretary and inform the bank that, due to the company secretary exceeding his authority, the company is not responsible for inappropriate lending by the bank, and that the bank needs to find some solution against the company secretary personally. What is the liability of the company for the actions of the company secretary? (Maximum 200 words)