CASE study

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 Groupss 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 GBIs 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 companys 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. GBIs 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 GBIs 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 doesnt tolerate excessive waste. GBI makes sure all new technology fits in nicely over their architecture.

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

One of GBIs US customers has recently opened a new branch in Germany. This German branch however finds the credit German credit management process a little more complex as compared to the US branch.

a. Provide a simple explanation of how credit works at GBI (1 Mark)

b. Describe the model of credit control area being used (2 Marks)?

c. Explain one (1) benefit and one (1) disadvantage of this model (2 Marks)?