1.) ERP projects are expensive and risky. Why did Keda embark on a ERP implementation project?

Keda had several key business units and each of those units were given autonomy and this led to
decentralized decision making and resolving of problems in an ad-hoc manner. Although, this model
reflected Keda’s “endless innovation” policy and it made Keda a forerunner in market share capture
and leading product and management innovator, such silo-based model was taking a toll on its
overall business performance due to non-cooperation among its business units. This led to very less
information available for decision making and business heads could not make holistic strategic
decisions , resulting in increased costs and lower efficiency. This also translated to inability to assess
proper asset costs and profitability of purchase orders and they had to depend on their experience
in making the decisions. They also were not able to identify main business drivers among their highly
diversified products owing to low volumes and high customization.

Keda had diversified its business and opened multiple production plants in 2004. The system, which
was taking care of Manufacturing Resource Planning, MRP-II, was not designed to handle multiple
plant operations. This problem was further aggravated when the vendor of MRP- II stopped
maintenance support of the software in 2003. This meant Keda had to very urgently think about
implementing an IT solution. Adding to that, the Chinese government at that time was providing
incentives and running campaigns to promote adoption of IT and in their business and computerizing
their processes in order to compete on a global front. This might have been a positive driver in
decision of Keda to implement ERP solution. Also, owing to the sub-optimal usage of its resources,
Keda was very much behind in meeting the market demand.

Management at Keda identified that major cause of suffering of their business processes and
product lines was absence of an ERP system. As Davenport (HBR, 1998) mentions, a single database,
where all data from different business units are saved will solve the problem of data fragmentation
and streamline the flow of data throughout a business. Managers would be able to make right
decision at every step of decision making as they would have all the information that is needed.