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Teaching Note on Case Study III-3
ERP Purchase Decision at
Benton Manufacturing Company, Inc.
Objectives
This case describes how Benton Manufacturing Company is exploring whether or not to install an
enterprise resource planning (ERP) system (or simply an enterprise system). The issues are:
Why install an ERP? Why not install an ERP?
Do you try to cost/benefit justify such a system and, if so, how?
Are there corporate culture issues involved?
What degree of top management support is required?
What should Meyer and Cook recommend?
This can also be an interactive case where the students can experience the ambiguity and political
aspects of gathering information in the real world.
Overview
Benton Manufacturing Company is a U.S. manufacturer of consumer durables with sales of about
$1 billion and operating profits of about $180 million. Benton is a closely held, traditionally
managed, non-union company that is a leader in its industry. Benton has a history of growth, and
Questions for Discussion
1. Why install an ERP?
An ERP streamlines data flows and provides management with a wealth of real-time operating
information. By capturing data only once, an ERP may provide significant efficiencies. In the
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2. Why not install an ERP?
An ERP is quite expensive, and there is no assurance that its benefits are sufficient to justify the
effort and expense that would be required. An ERP requires an organization to adapt to the way
3. Do you try to cost-benefit justify such a system, and, if so, how?
4. Are there corporate culture issues involved?
5. What degree of top management support is required?
6. What should Meyer and Cook recommend to President McHenry?
Most students will recommend that Benton acquire an ERP. Others will recommend that Benton
should not install an ERP. A preferred approach would be to tell McHenry that an ERP, if
successfully implemented, would be of great long-term benefit to Benton. However, because of
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Role-Playing to Teach this Case
This case can be used in the traditional way as a vehicle to discuss the issues presented above. It
provides the opportunity to discuss what an ERP is, its advantages and disadvantages, the issue of
cost-benefit analysis, and perhaps some management support and organizational culture issues.
However, it can also be taught as an interactive case.
There are four roles in the case. The names of these managers are gender neutral, so each role
can be played by either a man or a woman. Each role player has a written role description
a
Where can you get four people to play these roles? There are a number of possibilities. We
have used business persons who are interested in supporting our program. You can use graduate
Little advanced preparation is required of the role players. They need to spend an hour or so
studying the written case and their roles. Then it is a good idea to get together with all four ahead
of time to discuss the roles and make sure that everyone understands what they are doing. One
How do I set it up? Tell the students that they are to play the role of outside consultants who
have been asked by President McHenry to advise him on what to do about the proposal to get an
ERP. They should read the case and come to class prepared to interview Jerry Cook, Lee Gibson,
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What can we get out of this interactive experience? First, you get much more intense student
involvement they really do get into the case. Second, the students find that getting answers is
Contents of the Enclosed Supporting Materials
The document titled Information for Role Players is intended to provide the persons playing the
roles of the four Benton managers with the information that they will need when playing these
roles. The first section gives general instructions for role-playing during the interviews.
There are four additional sections, one for each of the Benton managers, that briefly describe the
roles and then give questions and answers for questions that the students may ask each of the
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Instructions for Role Playing
After the students have read the case they will interview four persons, each playing the part of a
person mentioned in the case. The four interviewed persons have conflicting perspectives and
motivations. Jerry Cook is co-leader of the ERP study team and has become a proponent of
acquiring an ERP. Cook has the largest role in the case and will be the focus of many of the
questions from the student team. Lee Gibson, VP Finance, has the role of the traditional finance
executive who needs hard numbers to justify such a large expenditure. Pat Miller, VP
In the next sections we present the role description and answers to typical questions for each role.
You should become familiar with your assigned role and the anticipated questions and answers.
There may be some unanticipated questions, and you are asked to answer them within your role if
it makes sense to do so. Otherwise tell the students that you do not know the answer, but that an
answer can be obtained later.
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Jerry Cook, member of the ERP Study Team
Cook has worked for Benton for 12 years in various areas of the company. Although not an IT
professional, Cook has a lot of experience leading technical projects that involved computers and
is quite comfortable with both software and hardware. Because Meyer cannot be present, Cook
Questions for Cook
It is mixed. The director believes
that an ERP is the best alternative for Benton because there is no way that our IS department can
compete with an ERP on the basis of functionality, quality, and integration. He also realizes that
What is the budget of the IS Department? We are spending 1.2% of total revenues about
Questions about the cost-benefit analysis
There may be, but we
Some say that your cost-benefit analysis is pure speculation and is not an acceptable
analysis. How would you answer that criticism? It is impossible to cost-benefit analyze an
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As we have said, an ERP must be justified on the basis of its strategic impact on the organization,
and I have no doubt that an ERP is amply justified at Benton on that basis.
Reactions to ERP
How would you respond to the concern that ERP is incompatible with lean manufacturing
through Continuous Improvement? Lean manufacturing through Continuous Improvement
Most successful ERPs have been installed in companies much bigger than Benton. Is an
Certainly. Although most of the early
V.P. Human
Resources Hamilton is a strong supporter, as is V.P. Administration Hill. V.P. Engineering
? Yes, there are.
How can Benton deal with the resource issues of acquiring an ERP system? The $34 million
spread over three years is not a major problem for a company of our profitability. The personnel
Who will make the final decision on this? President McHenry and the board.
Are there any time constraints on making this decision? Not that I know of, but we need to
proceed as quickly as possible.
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Cultural issues (Be sure to check for confidentiality before answering these questions!)
How would you describe the Benton culture? This is a very traditional organization top-
How will an ERP change the Benton culture? There will be very significant change. First,
today each department has its own systems and owns its own data. With an ERP the data will be
in an integrated database and will be available to management throughout the company, so the
ERP software has thousands of options from which to choose when the software is
configured so that the system can be tailored to the special characteristics of each company.
Although
there are many options available about the details of how certain things are done, an ERP almost
Should Benton be centralized or decentralized? That is for top management to decide.
Management support issues
What concerns do you have about implementing an ERP at Benton? Top management
support is a major concern. The successful implementations that we have seen have pulled their
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nagement. How
would you suggest that this be dealt with when implementing ERP at Benton?
top-down culture you would expect that when the decision to implement an ERP is made
Why did you propose that Benton hire a consultant to help choose a vendor? Good
question! The ERP vendors all differ in important ways that relate to organizational issues. For
How did you select your consultant to help choose your ERP vendor? We did a thorough
What companies have you talked to about their ERP experience? P&G, Owens Corning,
Black & Decker, General Mills, and Motorola are some that come to mind.
Strategic reasons for ERP
International expansion. Our present systems cannot handle foreign languages or
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Mergers and Acquisitions. Install the ERP in the new partner and you have instant
integration and process standardization.
Use of IT as a strategic weapon. The ERP will give us instant access to so much more
Product line expansion. Standard systems allow easy expansion, whether internally or
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Lee Gibson, Vice President for Finance
Gibson has been Vice President for Finance for 10 years, and in that position is responsible for
Questions for Gibson
Attitude toward an ERP
Why are you opposed to an ERP? Lots of reasons. Most importantly, an ERP requires a huge
investment for a company our size, both in terms of money and also in terms of management
effort and attention that might better be employed elsewhere. This investment is very risky and
ERP software has thousands of options from which to choose when the software is
configured so that the system can be tailored to the special characteristics of each company.
Why do you insist on cost-benefit justification of an ERP system? I have had a lot of
experience with computer systems both as a user and when IS reported to me, and my experience
What do you think of the cost-benefit analysis produced by Cook and Meyer? They have
What rate of return on investment does Benton require? At least 20%.
How do you respond to the argument that an ERP is needed for strategic reasons and
subjected to a cost-benefit analysis? That is what you say when you
What would you do instead of getting an ERP system? I think that we need to upgrade our
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If the decision were made to acquire an ERP, would you support it? Of course.
The finance department
We have been told that some managers under you want an ERP because it would greatly
improve the performance of the Finance Department. For example, you could reduce the
time to close your books at the end of the year from three weeks to five days. That would be
nice, but what does it get us on the bottom line? Very little, if anything! The department is
already running efficiently.
What would be the biggest problem in implementing an ERP in your department? We have
a large number of people who have worked in our department for many years and are nearing
How many different applications does the Finance Department process?
Cultural issues (Please check for confidentiality before answering these questions.)
Please describe the Benton culture. We are a very traditional organization. We are
How will an ERP change the Benton culture? I would think that it would make us much less
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Recommendation
What should we recommend to President McHenry? Tell him that Benton should forget about
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Pat Miller, Vice President for Manufacturing
Miller is a hard-driving executive who is quite proud of the significant improvements in the
manufacturing area that have been achieved over the past few years and is sold on the Continuous
Questions for Miller
Cultural issues (Please check for confidentiality before answering these questions.)
What do you see as the biggest problem in implementing an ERP in your factories? We
have developed a culture in our factories of individual innovation and decentralization of decision
It has been a traditional, top-down organization,
I have heard that an ERP forces centralization and
conformity to the processes implied by the software. This is the opposite of what we have been
trying to do in manufacturing.
ERP software has thousands of options from which to choose when the software is
configured so that the system can be tailored to the special characteristics of each company.
Cook says that an ERP will empower workers and encourage Benton to organize around
Opposition to an ERP
Why are you opposed to an ERP? For the past several years we have been concentrating on
lean manufacturing through the Continuous Improvement approach, and have increased
productivity over 25% and reduced inventory by 30% in our factories. The Continuous
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entering more data
than we enter into our present systems data that we will not be using ourselves but will be there
Specifically what extra data will you have to enter? nderstand that we
will have to capture data for other departments in the company.
Cook asserts that an ERP and lean manufacturing through Continuous Improvement are
not in conflict that they are independent like the x- and y-axes. How do you react to that
argument? That may be, but it still seems counterintuitive to me because you have to use the
Miscellaneous
Please describe your manufacturing environment. Each of our factories produces a single
product line. We purchase many of our parts and components, but make some parts in a job shop
Lean manufacturing is another name
for highly flexible and responsive manufacturing systems and processes such as those
implemented at Toyota Motor Manufacturing that are so effective at producing at low cost, high
Continuous Improvement
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Recommendation
What should we recommend to President McHenry? Tell him to be very careful and consider
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Tracy Scott, Vice President for Distribution
m its seven factories to thousands of
Questions for Scott
Support for an ERP
Why do you think that Benton should install an ERP? We need an ERP for strategic
reasons we need it in order to compete in our industry. Our dealers sell our products to their
Do you think that an ERP should be cost justified? Why?
savings in my area, although we might reduce inventory some. But we need an ERP for strategic
Cultural issues (Please check for confidentiality before answering these questions.)
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How w
The distribution area
What problems do you anticipate in installing an ERP? Our biggest problem in the
Please describe the existing information systems infrastructure of the Distribution area. We
have a PC-based system at each distribution center that was developed in-house in 1991. It
How many people work in distribution? About 900.
Miscellaneous
We know that there are several Benton managers who are opposed to an ERP. If the
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Would you be just as happy with a new distribution system instead of an ERP? That would
Recommendation
What should we recommend to President McHenry? Tell him that an ERP could bring great