4-page Case Study - Posted 12/16/2012
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Defining the Global Management System: Deploying a united ERP system for headquarters and subsidiaries
Founded in 1966, Korloy is a major manufacturer for cemented carbide tools. Korloy continues to excel in its globalization strategy, having recently set up additional offices in Europe. As soon as it set up the European offices, Korloy worked swiftly on
the implementation of the ERP system. Korloy began to work on ERP implementation with Tectura Korea and Tectura Germany. Overseeing the entire project, Tectura Korea consulted with the Korloy Head Office to analyze the solution requirements. After establishing
the basic strategies, Tectura Korea began to accommodate Korloy's requirements using the basic Microsoft Dynamics NAV modules for sales, purchasing, finance, and costs. With the introduction of the ERP solution in its European office, Korloy also needed to
improve its sales support functions. Korloy plans to continue expanding its global business network. Korloy believes that the rich experience on localization and providing operational support from Head Office, which was gained from the Microsoft Dynamics NAV,
will prove very useful.
"We wanted a global ERP solution that can adequately accommodate various needs in different regions. The main reason why we selected Microsoft Dynamics NAV is because it could cope with our global strategy- the base
ERP structure to be implemented for the headquarter in Korea would be executed by Tectura Korea, and other areas that require localization, such as accounts management and tax regulations, would be carried out by Tectura Germany, as our European office is
located in Germany. This confirmed our decision to select Microsoft Dynamics NAV."
-Lee Hyeon-seok from the Management Support Group of Korloy-
Founded in 1966, Korloy is a major manufacturer for cemented carbide tools. Nearly 40 years of history within the industry, Korloy is globally competitive in cemented carbides, cermet, coating inserts, end mills/drills, and tool holders manufacturing and
R&D. It is building on its global brand as it continues to export its products to over 50 countries around the world (as of 2012).
Korloy started its first overseas expansion in 1974. After successfully exporting its goods for the first time in 1974, the company began to expand its market to Europe, America, Asia, and North Africa.
As overseas sales grew, Korloy set up its first overseas office in the US in 2007, aiming to be a global enterprise. Korloy continues to excel in its globalization strategy, having recently set up additional offices in Europe and India, in 2010 and 2012
With the establishment of overseas offices, Korloy prepared itself for a new framework of management as a global enterprise. As part of its preparation for globalization, Korloy introduced an ERP system in each of its offices to ensure business integration
with Head Office at a system level and smooth local business support. The Korloy Head Office had been using an ERP package developed by a Korean company since the early 2000s. After Korloy set up its first overseas office in the US in 2007, it installed an
ERP system for the US office in 2009 in order to establish a global management system.
Having reviewed solutions developed by multi-national enterprises as well as ERP systems developed by Korean companies, Korloy decided to install a Korean company's ERP solution after translating the system into English. The company thought that the low
initial investment requirement was a great attraction and customization would be easy since it entailed working with a fellow Korean company. When the actual work started, however, localizing a Korean ERP package for English-speaking users was found to be
far from easy. Simply translating menu items into English was not enough. Although an English version of the ERP system was put into use, the transaction statements printed out turned out to be in Korean and some entry values were displayed in Korean characters.
But a more serious problem was that the package did not take into account the fact that checks were widely used for transactions in the US. The package had to undergo many adjustments and re-developments. These experiences of trial and error are great assets
for Korloy today. Korloy now has a good understanding of how to roll out a global ERP solution. This knowledge proved its worth when the company had to choose an ERP system to install in its European office in 2010.
As soon as it set up the European offices in 2010, Korloy worked swiftly on the implementation of the ERP system. In the first stage of product selection, Korloy willingly made the decision to exclude Korean solutions and began exploring products from multi-national
corporations. The two final candidates were Microsoft and SAP.
The two solutions had clear pros and cons. On this subject, Lee Hyeon-seok from the Management Support Group of Korloy said, "Microsoft Dynamics NAV was better for placing desired functions in certain screen positions. Just looking at the number of screens,
it seemed to have more functions than SAP. On the other hand, SAP seemed to be more intuitive when it came to user experience."
After carefully examining the features, Korloy began to lean toward one solution based on costs. The functions were more or less the same, but pricing was not. As a result, Korloy decided to adopt Microsoft Dynamics NAV. But there was one thing that attracted
Korloy more than the pricing. Korloy wanted effective and organic global support for ERP implementation. Korloy really trusted Tectura Korea who proposed Microsoft Dynamics NAV.
Recalling the situation, Lee said, "Tectura Korea offered to oversee the entire implementation project and perform customization in partnership with Tectura Germany where localization was required. We wanted an ERP solution that could not only be used in
any country but could also adequately accommodate different needs in specific countries.
The proposal was that establishment of the ERP strategies and basic implementation would be carried out through partnership between our Head Office and Tectura Korea. The company also proposed that it would take care of the parts requiring localization,
such as accounts and taxation laws, since it is based in Germany, where our European office is located. This confirmed our decision to select Microsoft Dynamics NAV."
After finalizing the solution and making its partner selection, Korloy began to work on ERP implementation with Tectura Korea and Tectura Germany in early 2010. Overseeing the entire project, Tectura Korea consulted with the Korloy Head Office to analyze
the solution requirements. After establishing the basic strategies, Tectura Korea began to accommodate Korloy's requirements using the basic Microsoft Dynamics NAV modules for sales, purchasing, finance, and costs.
After this, Tectura Korea worked in partnership with its German office.
Tectura Germany's optimization work focused mainly on finance and accounting. Tectura Korea sent its consultants to Germany to work with employees of Tectura Germany. This joint effort resulted in the effective integration of the ERP system with German banks,
mapping of accounts required by local laws and regulations, which were more complicated than in Korea, and the successful establishment of financial/accounting processes.
At the beginning of the project, Korloy had to decide where the ERP server would be located. Based on the general idea that operational support should be provided by Head Office, it was initially considered best to install the server in Korea. But locating
the server in Germany also had to be considered in order to prevent the user interface slowing down too much. Torn between the two options, Korloy finally made a wise decision to increase user convenience and decrease operational costs. The decision was to
keep the server in Germany while ERP-related maintenance would be provided by the personnel in Head Office and Tectura Korea. This would entail reduced IT expenses overseas.
Synergy with ERP Upgrade at the Head Office
In addition to adopting Microsoft Dynamics NAV in time for the opening of its European office, Korloy worked at the same time on upgrading the ERP system at its Head Office. Korloy worked to integrate the ERP systems of the European offices and the US offices
with the SAP system that had been in use at Head Office. This enabled sales, orders, and other management information for each office to be sent to Head Office on a daily basis, completing a fully global ERP network. Lee said, "This involved linking each function
with SAP. Tectura Korea efficiently and successfully linked Microsoft Dynamics NAV and SAP."
Improved Local Sales Support for European Offices
With the introduction of the ERP solution in its European office, Korloy also needed to improve its sales support functions. The office's business was, after all, sales. For this, Korloy carefully studied Microsoft Dynamics NAV to identify functions useful
for sales. Although finance and accounting was the most important area for Head Office, the company recognized that the system, which would be effective in providing sales support, was essential from the viewpoint of the European offices. Lee said, "While
actively using the functions of the basic modules, we performed customization where required to improve the sales process. For instance, we made modifications so that discount rates and campaign periods could be entered for promotions. We also made some tweaks
to support sales functions within campaigns.
In addition, we made it possible to group various products into a single product code for promotions."
Inventory Management Efficiency Improvements with Barcodes
The European office also enjoyed an advantage in an area other than sales. Inventory management became much easier with the introduction of the ERP system. The Korloy Head Office knew full well that ERP could actually pose a significant hassle for inventory
management following product imports. They found that manually entering relevant data into the system would result in increased on-site workloads.
Therefore, each product was given a 2D barcode, which could be scanned by barcode readers on site, feeding all of the relevant information automatically into the ERP without any need for manual input. Lee said, "All of our products have 2D barcodes. Since
various inventory-related information, such as product and quantity, is included in the 2D barcode, a simple scan with the barcode reader allows us to enter inbound and outbound product history into the ERP system without any manual input."
ERP Benefits for All Offices
The benefits of ERP were not limited to the employees of Korloy's European offices. Korloy's European offices utilize a network of external sales agents to supply products to customers. Korloy decided that its top priority was keeping the
work process of its partners easy. To eliminate the inconvenience of an agent making a phone call for every order, Korloy receives orders over the Internet.
This is not just the case at Head Office. This is a universal partner policy for both Head Office and the offices in the USA, Europe, and India.
For the European offices, this was a major consideration since the installation of the ERP system. When an order is submitted through the web ordering system created for partners, the information is relayed immediately to the ERP system. Employees in the
sales department can also use this website to check available inventory, place orders, or retrieve information related to sales and receivables. In other words, sales representatives and agent partners do not actually need to access the ERP system but can
instead use this website to enjoy the benefits of ERP.
Recruiting Highly Qualified Individuals
Microsoft Dynamics NAV is also helping Korloy with to recruit highly qualified individuals at its European offices. The benefit of using a global solution is more than obvious. The hardships that Korloy had to endure when setting up the US offices were completely
non-existent with the European offices. Lee said, "As sales businesses, our overseas offices prefer to hire locals who have used ERP before. In the case of the European offices, it is easier to find people with experience since Microsoft Dynamics NAV is a
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