Choosing a Vendor Sourcing Plan Case Study
You are the senior director of information technology at Endothon Inc., a U.S.-based company located in Atlanta, Georgia. Your company makes aircraft seats and accessories for private and small commercial aircraft. You have five manufacturing plants in the United States. Your company has recently expanded into western Europe and Great Britain due to long-term contracts with Airbus, Dassault, and Bombardier in France and the United Kingdom. This business in western European was newly acquired and required the company to purchase three more working manufacturing plants in western Europe. Also, you currently have long-term contracts with Boeing, Cessna, and Grumman in the United States.
The executive staff at Endothon is composed of experienced aviation and manufacturing members. Maria Sousa is the chief executive officer (CEO) and has over 30 years of experience in the international aviation business. The chief operating officer (COO) is John Prescott, a former pilot for the Royal Air Force (RAF) and international aeronautical manufacturer. Alice Trebold is the chief of supply chain manufacturing and has 25 years of plant and materials management experience with several different aircraft manufacturers. Sam Goodwin is the senior vice president of sales, with over 23 years of sales and marketing experience in the international aerospace marketplace. Anne Scofield is the senior vice president of human resources and has over 20 years of personnel management in international companies such as Axon, IBIS, and Unilever. Kevin Cahill is the chief financial officer (CFO) and manages all domestic and international finance. Jon Rasmussen is the chief marketing officer (CMO) with 20 years of experience with several European airlines. Mei Lee is the new chief information officer (CIO) and has 15 years of experience leading innovative IT departments for Fortune 500 companies.
The CEO and the board of directors at Endothon have indicated they want a new enterprise resource planning (ERP) system for the company, and they would like it to be compatible with their customers’ systems. All of Endothon’s customers have Systems, Applications, and Products in Data Processing (SAP) provide their ERP systems. They want the ERP to be configured and implemented in the next 10 months. Realizing this is an aggressive schedule, they have authorized you to outsource the development of the ERP system to either an inshore or offshore company to contract for the necessary resources to accomplish this project. Your team will be involved in this endeavor so that they will eventually learn the system. However, the initial configuration, implementation, maintenance, and supportwill have to be serviced by your selected vendor and transitioned to your team two years after initial implementation. As the senior director, you have already determined that the cost to implement this project with a domestic contractor or within the company is prohibitive. To achieve the aggressive timeline and the budget, you must find a lower-cost resource capability offshore. You have issued a request for proposal (RFP) and have gone through a selection process to the point that you now have the final two competing vendors. The budget for this project is $10,000,000.
Endothon has a current ERP system that has supported its domestic operations in the United States well. It is an in-premise system called Epicor. However, this system is over 18 years old. Even though the company has tried to keep up with the software versions, you currently are three versions behind the latest update. The company has decided to use SAP as the ERP system, but the platform type, version, and method of operation will be left up to the vendors to determine as specified in their response to the RFP.
The SAP ERP system you are going to be implementing will have a number of modules that represent core business processes and areas. You will focus on three major modules within the SAP ERP system:
- Financial Accounting and Controlling (FICO) Module: This includes procurement and payments for international contracts. It also includes the recording of financial transactions and the assurance of the correct payments for the correct performance. Transfer pricing (monetary exchange rates) tracking and posting are continually managed by this system.
- Human Resources Management System (HRMS) Module: All personnel data, including personal information, work history, medical records, training history, salary information, and organizational placement are contained in this system.
- Sales and Distribution (SD) Module: The eight manufacturing plants are automated and tracked through this module. This includes the proprietary designs and components of the various products. Product design information is transmitted in encrypted form from the headquarters in Atlanta, Georgia, to the various plants on a continual basis. This includes customer data, shipping and receiving information, and inventory loads.
Context of the Sourcing Work:
The RFP has been sent to a myriad of international firms. With the assistance of your purchasing department, the list of competing vendors has been reduced to the following two vendors:
Bullzai, Ltd – Headquartered in Chandigarh, India, with offices in Milan, Italy; Berlin, Germany; New York City, United States; Kyoto, Japan; and New Delhi, India, Bullzai is publicly traded on the National Stock Exchange of India (NSE), and its current market revenue is 13B Rs (rupees). Bullzai is a medium-to-large business systems consulting firm that was established in 2002 and has clients around the world. It has been creating customized SAP ERP systems for companies since 2005. While Bullzai now has business offices in several cities around the world, all of the technical and programming work is done in Chandigarh.
Bullzai is known for developing ERP systems for both medium- and large-sized organizations. It has the resources to turn around projects very quickly and has a reputation for delivering projects ahead of schedule. It is a subcontractor for International Business Machines (IBM), Airbus, American Telephone and Telegraph Company (AT&T), General Electric (GE), and Ion. It has practice and expertise in ERP systems such as SAP, Oracle, Microsoft Dynamics, Infor Baan, J.D. Edwards, and Epicor. One common complaint about Bullzai is that their employees can be very difficult for most English-speaking Americans to understand. Also, in 2011, it had a security breach that compromised banking information of more than 100,000 individuals. Since then, it has implemented several new layers of security. Your sales representative is Fatima Patel.
Synesthor Ltd. – Headquartered in Sibiu, Romania, Synesthor is a private company and is a medium-sized business systems consulting firm that was established in 1995 and has clients mostly in Europe. It has been creating customized SAP ERP systems for companies since 1999. The company has one large office complex located in Sibiu. It has grown through small acquisitions and mergers and started out developing financial systems mostly for smaller companies. Its portfolio has expanded to include ERP systems, and it has recently started working with midsized organizations. It has limited resources and has a reputation of not completing projects on schedule.
One of Synesthor’s strengths is that it has several client-service representatives who are American and its predominantly eastern European software engineers speak English that is easy for most English-speaking Americans to understand. In 2012, Synesthor had to shut down for several months after not meeting its payroll obligations. A new owner bought the company after the shutdown, and it has since been thriving: it has nearly tripled in size under the new ownership. It has practice and expertise in ERP systems such as SAP, Oracle, Epicor, Lawson, and NetSuite. Your sales representative is Albert Kastov.