LG: A case study of successful Enterprise Resource Planning

Enterprise Resource Planning (ERP) solutions are great, but successful implementation requires careful thought, consideration and engagement from all stakeholders. This article discusses two examples for ERP solutions of different scenarios, scales and requirements.

When the global giant LG Electronics (LG) – with 114 subsidiaries, and more than 82,000 employees across 40 countries – tried to harmonize its Human Resources (HR) functions, the challenges were of a similarly giant scale. High maintenance costs, local controls lacking transparency, inefficient decision-making, under-utilization of resources, manual processes, etc. made it difficult for LG to operate as a global company. So it decided to take the ERP route.

The challenges for LG included:

• Location-specific multiple systems leading to unclear top-level reporting, lack of optimum resource utilization
• Location-specific processes lacking transparency and automation needs for a global reporting
• Disengaged employees, limited outlook, no room for information or best-practices sharing
• Limited localized resources for employee learning and training
• Difficulties with decision-making, with significant business impact

LG’s familiarity with Oracle technology made it easier to finalize a solution. It offered large data hosting, seamless migration of old data, easy scalability, multiple modules addition as needed and centralized access and control. LG hired Oracle Consulting to build a single centralized system that integrates available Oracle HR modules for uniform use at global level, thereby replacing location specific system dependency.

The ERP solution, which included a data mart, performance management system, staff portal and e-learning application, enabled the following benefits for LG:

• Centrally managed single system with minimal maintenance costs
• Transparency in the recruitment and employee appraisal processes, which hiring, engaging and rewarding performance based on the right competencies and proven performance
• Real-time reporting for higher management and tracking of set goals and objectives
• Informed decision-making due to readily available real time reports
• Centralized control over HR processes, with flexibility for regions to implement localized changes
• Efficiency improvement for HR functions
• Cost savings
• Easy sharing of best practices across the various centers
• Easy-access, self-service function for employees
• Facilitated learning for common tasks through document sharing and online tutorials, resulting in time and cost savings
• Increased employee morale, productivity and engagement

It was not a cakewalk, given the large and distributed scale of ERP system implementation. Spanned over five years (2002-2006) in five planned phases with a clearly set objective, the ERP solution enabled LG to mitigate the challenges posed by vastly spread global centers, for its Human Resource Management System requirements. Today, LG continues to benefit with the automated ERP solution, and continues to enhance it further as needed.

Fuze Energy Drinks, going through a rapid growth path, found its existing systems obsolete to meet the growing business needs.  Primary challenges were:

• Management of rapidly growing stocks and inventory
• Planning and managing production matched to demand and supply
• Reporting needs for financial decision-making

Fuze was looking for a cost-effective, easy-to-maintain solution, without getting into the hassles of computer maintenance. Their ERP vendor (Pyramid Consulting) offered the Sage Accpac ERP solution, which was completely web-hosted and was a proven system for the manufacturing industry, with specific modules matching their needs. It offered automation for inventory management, production lines and real-time financial reporting with no on-site maintenance, allowing Fuze to concentrate on its core business, instead of adding overhead for computer system maintenance.

The system had a quick and easy setup, with no installation costs. Among the happy results:

• Automation modules for inventory and orders ensured full and timely production reports, including alerts on stock that was “past the expiry date” or “about to expire."
• Production reporting resulted in full control on product lines, improving demand and supply status.
• Accounting entries enabled timely decision-making, based on real-time data.
• Web-hosted solutions prevented the need to purchase in-house computer hardware. It also ensured easy and timely access to the system from variety of devices.
• Off-site computer hosting significantly lowered costs, limiting them to annual maintenance charges.

In addition, the contract Fuze signed with Pyramid stipulated vendor engagement and availability for any ad hoc training, as needed.

ERP systems are usually big ticket projects with high costs and varying timeframes. Case studies of successful ERP implementations allow for the careful selection of vendors, systems and solutions; a clear understanding of existing gaps and objectives to be met; and sufficient and continuous engagement from the client with the vendor, as requirements keep changing dynamically over the implementation phase. Simply leaving implementation to the vendor may not be the best idea. Working with the vendor in a partnering role produces the best results.