A Consulting Report: The General Electric Company, Research Paper Example
Words: 3147Research Paper
The General Electric Company has many divisions and one of those divisions include the Appliance Manufacturing Division. With the inherent difficulty with moving manufacturing processes from the established outsourced methodology to a more insourced centric model there is a need to utilize technology and e-business to create a strategic advantage. The focus on effectiveness and efficiency in not on the manufacturing steps of the process but also the entire procurement to payment lifecycle is critical to developing the advantages necessary to compete on a global market (General Electric, 2012). The Enterprise Resource Planning (ERP) will provide the framework to deliver products to the consumer while also all to the utilization of process, system and communication efforts to create that competitive advantage. The ERP program implementation requires multiple changes to the business processes as well as the implementation of new software technology. To establish a complete project there must first be a plan. The project plan incorporates multiple areas including scope, pricing, cost control, quality management and risk mitigation to name a few. The project plan provides the basis for understanding for what the project is and is intended to provide at the conclusion of the project lifecycle. It also provides a frame of reference during the project lifecycle for stakeholders to view and gain perspective on what the pure intentions of the project are. This plan will outline the necessary information regarding the ERP implementation for a manufacturing firm.
Table of Contents
Company and Project Strategy
Cost and Budget
1.1 Company and Project Strategy
The General Electric (GE) Appliances division provides multiple lines of washers, dryers, dishwashers, refrigerators, ovens, and other branded appliances for home and business use. Each model line targets different markets divided by price points, cooking needs and wants as well as other key demographic sub-sections. GE Appliances has been in business from over 50 years and with that age and experience comes processes and business systems that are antiquated and ingrained into the business model (General Electric, 2012). Through the drive of competition and the grasp on obtaining market share there are many opportunities that have arisen to align the business with consumer demands. Those demands are not only for the goods and services that GE Appliances provides but also how they obtain those goods and services. This includes managing the relationships between suppliers to ensure the business receives the parts it needs to manufacturer the appliances as well as providing the area for the consumers to easily obtain information about the products and purchase the appliances.
A solution in the form of collaborative effort by the business and information technology teams found that an Enterprise Resource Planning program could provide what the company needed. In this project it is vital to understand that while the replacement of legacy information technology systems will occur there are changes to the business processes that will drive the technology used for implementation (Magal & Word, 2011). The information technology processes and systems will change but how the business is conducted from procurement of goods from a supplier, through manufacturing and production to ultimately providing a finished product will change as well.
In order to understand the scope and how the project will be implemented there needs to be a base of what is going to be a large scale implementation project (Prencipe, Davies, & Hobday 2007). ERP is an approach to remove unnecessary and wasteful business processes as well as sun-setting applications that are aging and become an hindrance on the business. The ERP system provides a continual package of applications and business processes built and purposed to complimentary and integrated.
The span of this project encompasses multiple operating functions including accounting/finance, sourcing, manufacturing, scheduling, information technology and quality. Implementation of a project involving the ERP foundation involves IT system adaptations, removals and replacements as well as those necessary business process changes.
The benefits of ERP include real-time data transfer from one source of data. This is due to the fact that the sourcing systems used to procure parts for the manufacturing teams are collocated in the same environment and survive in an environment where updates and changes are felt throughout the process. The ERP program works by eliminating legacy and antiquated systems that are disparate from the collaborative efforts the ERP program strives for (Magal, & Word, 2011).
The project life-cycle starts in the initiation phase where the scope is determined and sets the project on its progression towards completion. During the initiation phase the project stakeholders establish how the project will be measured and what success looks like (Project Management Institute, 2008). The scope being defined helps provide a baseline of how the project manager will execute the project and provide guidance throughout the project lifecycle. The potential for failure is ever present in any project but when the scope is poorly defined the exponential growth for the potential for failure increases. The largest potential for failure for the ERP project is not involving the right people at the right time and not including key business partners into the decision process.
The scope of this project starts out at a high level as the implementation of a set of tools to replace the procurement to payment systems in a single finished good manufacturing facility in a solidified wing-to-wing system and process model. For those areas that are going to experience high rates of change they must be brought in through the project’s lifecycle to build and maintain interest and buy-in. The implementation of this project at first seems to only define the needs of one section of the business. The rest of the business is still producing finished goods and relies upon the same legacy systems as the facility which is moving on to the new and improved ERP system. The first iteration also owns the responsibility for building the figurative foundation to the house. The foundation will be the basis for future iterative roll-outs eventually involving every finished goods manufacturing facility in the business.
There are four areas that are going to be initially implicated by the implementation of the ERP project. This includes sourcing, materials, finance and the suppliers. This includes all of the processes that are required to procure parts and material from a supplier to paying and building a product for the consumer. The scope of this project does not include the actions taken in some other parts of the business such as sourcing and branding finished goods, sales, legal or human resource functions. The scope of the project is the implementation of the procurement to payment process for the manufacturing company based on the finished good model (Monk, & Wagner, 2009).
The scope of the project is clearly defined and the finished good manufacturing facility is chosen so the next step in the process is to establish a baseline cost for the project and present that out to the key leadership named in the project charter. These key business leaders will need to understand what results and deliverables they will receive at the end of their project as well as the associated costs. The project’s charter precedes the project plan and outlines the scope, business case, identifies stakeholders and provides the project manager the authorization to start working on the project. By gaining this authorization, the project manager could go out and build an estimate on the project.
1.2 Business Model
The business model of the General Electric Company’s appliance division revolves around supply chain management and a centralized focus on distribution of products to their consumers. With many companies that sell products to consumers, it is the sales force that drives market strategy and determines the best tools to provide key data to their customers. This is due to the fact that the more sales that are generated the more production supply is needed to meet that demand. The unique situation is the dual marketing strategy of GE based upon their customer. It is also GE’s responsibility to drive demand by providing world class appliances and to ensure the end consumer knows the reliability, features and other key performance specifications GE must provide a way for the end consumer to obtain that information. With the changing marketing environment, consumers have the ability to shop from the luxury of their homes and gather key data prior to going to the actual brick-and-mortar locations to see the products in person. This is why GE needs to embrace not only their internal view of product quality but also present that information externally through the use of ecommerce and the technological advances that the ERP system will offer. The ERP system will provide the ability to synchronize the internal systems to ensure quality products to the consumer while also meeting their demand schedule and allowing the availability needed by end consumers to have the product on-demand and in the specifications they desire (Monk, & Wagner, 2009).
This ability to provide the highest quality and dependability as well as the look and finish desired by the consumer will drive overall demand. With ecommerce the more information available to a consumer the better the consumer can be informed about their decision to buy. This also drives the ability to derive value through the use of the relevant theory. By searching on the internet for a “quality” or “dependable” appliance the search engine can return products such as General Electric or other appliance manufacturer. GE is not only taking advantage of this relevant theory attributes through quality and dependability but it is also utilizing the intangible gains of bringing manufacturing capability back to the United States through the potential efficiencies of the ERP system and processes. People searching for “Made in the USA” or “putting America to work” will fall upon the relevant returns such as General Electric Appliances.
With a system such as the ERP implementation, there are benefits that are derived from the implementation that include gains in proficiency and productivity (Monk & Wagner, 2009). The costs initially invested by the company provide the platform for increased production, marketing capabilities and a sense of ownership in the comeback in American manufacturing. With any program implementation there is the associated cost and it is important the type of investment required for a change to not only the information systems but also the business processes.
1.3 Cost and Budget
The essence is now understand that this project which is a temporary endeavor to provide a unique deliverable at the summation of its lifecycle and with a project there is an associated cost to that project to complete it. The implementation of the ERP project will be done in iterative releases by implementing the ERP solution to each manufacturing plant in a series. With the risk and capital necessary to establish and maintain multiple teams the implementation of the entire program was defined to be in a series of plant by plant as opposed to each plant triggering to start and ending at the same time in parallel. This also provided the basis for the same implementation team to be utilized through the entire project if possible and a keen focus on knowledge transfer.
Understanding only one plant is rolling out with the changes is vital for providing an estimate on cost due to multiple factors. The first is the gaining of the understanding regarding the gravity of the changes for the plant and how much actual change will occur in the plant. There are multiple factories with varying degrees of production and complexity. The manufacturing facility that was chosen has recently introduced a new finished good and was built around lean management theory as to build a foundation for future improvement projects. While lean management does not play a role in the implementation of ERP it does put the teams in that facility in the right frame of mind regarding change and accepting those changes.
Throughout this entire project cost management will need to be taken into consideration. Management of cost and project management knowledge of how to manage those costs will come into play throughout the project lifecycle (Dobson, 2004). The cost control methods used in this project include Earned Value Management and the establishment of an operating budget for the entire project. The Earned Value Management will be discussed shortly but first the operating budget will act as a reference tool as well as a deviation tracker throughout the project. The allotted budget (see below) will have specific sub-budget line items and the tracking of spend and deviation can be managed according (Fleming, & Koffleman, 2010).
How and why did you estimate these costs?
The Earned Value Management (EVM) is more of a management tool than the operating budget as it takes it a few strategic steps further. The EVM tool will establish a base-line cost and measure project spending according to the value of the work that is being performed. EVM will be used to compare work performed with expected work perform and the associated costs with each deliverable area. The reason EVM will be used is for the simple fact that it has the ability to combine the areas of scope, schedule and cost, all of which the project manager is ultimately responsible. The earned value of the project is a calculation of the planned value versus the earned value and that is well suited for the type of project implementation the project team is looking to utilize.
The cost controls utilized for this project are based on sound financial and budgetary management practices as well as use of the EVM tool. Another way the project team will ensure strict adherence to project costs and allocation is by providing stakeholder reviews with the results of their EVM and budget. Through the use of project cost management and the tools of monitoring and controlling the project by documenting and utilizing EVM, the stakeholders will have a fair and accurate depiction of the project’s scope, schedule and cost as well as areas that have meet, exceeded or missed meeting their intended objectives.
These reviews by leadership will also act as a forcing function to the project manager to manage the project costs. When implementation is coming about there will be track leads assigned to each project area such as finance, sourcing, manufacturing and supplier. These track leads will inherently incur costs with their sub-projects that will need to also be monitored and controlled. Cost incurred at the work package level will ultimately impact the overall utilization of resources to achieve the cost, schedule and quality requirements. Cost management of these tasks also includes more than reporting spend to specific tasks. It also provides the project manager with the ability to take the appropriate actions to successfully meet the requirements. If there are projects that are finishing early and on budget or on schedule and under budget, the project manager could review the cost management tools and re-assign project resources appropriately. This allows further cost control on the project to ensure the entire project is within the scope, cost and quality parameters.
The costs of the project are controlled by the project manager’s actions to manage the budget. This is accomplished by utilizing the EVM tool, reporting to leadership, controlling track lead costs and allocating resources to where they are needed to meet the overall objectives and not just micro-project tasks. The cost controls in place provide the necessary structure and purpose to enable the completion of a successful project while controlling cost.
The learning curve analysis showed that there are varying degrees of the learning curve dependent on what transactions are occurring with the new business processes and system. Overall this is not just a system change but a full ERP implementation into the manufacturing plant for a finished good product. While the system itself is new and will require adjustment to learn so will the new business processes that have been developed to support the new system.
The main objective of the learning curve analysis was how long it would be until the production rates could be meet. The current production rate is roughly 1000 units per week and through research and market studies a new implementation could decrease between 20-25% (Magal & Word, 2011). Since this will encompass more than a change in a production line, the implementation team will need to add an additional buffer stating the business would hit a target of 600 units per week. In order to derive the numbers the company will need to utilize a learning curve percentage. According to Stewarts’s manual “Cost Estimator’s Reference Manual 2nd Edition”, the learning curve is between 75% and 85% for complex manufacturing and systems processes (Stewart, 1995).
These results show that after eight weeks of production the implementation team can expect to meet the company’s expected production rates and will exceed those rates according to business need if necessary the following weeks.
1.5 Competitive Advantage
The competitive advantage of using the internet to facility the web based applications, enhance marketing communication flow and provide information to not only the consumer but also the key decision makers within the manufacturing chain of command provide a level of enhanced capability that is a differentiator in the manufacturing environment. The internet will continue to provide the ability to facilitate change through technological advancements. It is the conduit for communication and the faster and more reliable key decision makers can make decisions the faster the business can change and adapt to the variable business environment. With the implementation of the ERP system, the General Electric Company’s appliance division will be able to increase the efficiencies of the plant’s manufacturing, sourcing and finance divisions in order to offset the inherent costs of doing business in the United States as opposed to overseas markets. The ERP system will also provide key data points that would not be available in legacy systems. These key data points would shed light on previously masked areas of cost or inefficiency. With this implementation the ability to grow the business and adapt to consumer demands will be fortified by providing the key efficiencies in process and system integrations.
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