Case Studies

CPDC Improves Business Health Through IT Innovation

"ERP introduction is pivotal to improving business health. CPDC's success proved that senior employees in the traditional industry were equally capable of pursuing innovation and addressing new IT challenges to enhance efficiency and competitiveness." -- Henry Feng, Chairman and President, China Petrochemical Development Corporation.

In face of the business challenges fueled by the economic downturn, traditional industries are again attracting investor attention. The combination of a slow-and-sure strategy and a commitment to innovation ensure success, and China Petrochemical Development Corporation (CPDC) is a case in point.

Established more than 30 years before, CPDC has been heavily computerized. However, the legacy system created more problems everyday, making it a stumbling block to business growth instead of a tool to improve business efficiency.

The most pressing issue was an outdated IT system. CPDC's legacy HP 3000 was a closed system plagued with increasing difficulty in internal and external data exchange and applications. The issue was further compounded by the hard disk vendor's discontinuance of parts and service support, which made a hardware update and migration to an open platform inevitable. The next issue related to personnel: the original system developers had left or retired from CPDC, so fewer employees understood the system. Maintenance, training, and the development of new functions to meet business needs were increasingly difficult. The IT system couldn't meet business growth or management requirements, and IT risks continued to rise.

To address its business needs and IT risks, CPDC commissioned a consulting firm to evaluate enterprise resource planning (EPR) systems. CPDC's considered system compatibility and total cost of introduction, but also took into account product flexibility, long-term maintenance cost, local support capability and commitment, vendor development performance, product development, and sustained development capability. With the introduction of Oracle E-Business Suite, CPDC not only reengineered business flow and improved business health but also infused new energy into workers.

Faster, Cleaner Business Data Through Automation

As the petrochemical industry is a relatively mature business, cost is one of the key competitive elements. Management and implementation of cost control measures at individual manufacturing sites directly affects the bottom line. Limited by its aged IT system and by labor cost, CPDC found that comprehensive management of all manufacturing and cost information was out of the question and couldn't be integrated with financial and other operations.

With the introduction of Oracle Process Manufacturing and other elements of Oracle E-Business Suite, production and cost management are now distributed to all manufacturing sites. Cost settlement and cost accounting are fully automated and integrated with financial and other operations. Account settlement and cost analysis are completed along with cost settlement, drastically improving transparency, timeliness, and integration of business management information about manufacturing performance, inventory production, procurement, and accounting. The more timely, accurate, and pertinent business information can be accessed everyday, but the improvement involved no extra burden on staff. In fact, some workers even found their workload lighter, enabling them to focus on higher-level management tasks.

An environment and tool that creates real-time cost tracking and review were all CPDC needed to implement comprehensive cost control, which would encourages workers to pursue cost benefits through efficiency. The development will have positive impact on corporate performance and business health. For example, monthly settlement-based cost control has been upgraded to daily cost control, conferring tremendous benefits for individual cost tracking and review for each manufacturing site.

Efficiency Through Limited Customization

The first key to successful introduction was the dual project manager system. Responsible for the user end of business flows and needs, the project managers clearly understood the general business flow and needs, which qualified them for managing the operational parts of the ERP project. Functional and technical issues were left to IT project managers.

The second key was the commitment to standard ERP system flow with limited customization. CPDC insisted on making internal adjustments to suit the standard process built into Oracle E-Business Suite. Combined with the highly flexible nature of Oracle products, the commitment enables CPDC to apply existing flows – with adjustment – to the new flow framework and requirements. Management commitment was pivotal to the successful ERP introduction in this traditional industry. Key ERP system users were senior workers between the age of 40 and 50, which created a tremendous challenge to fast and effective training. Senior management strongly communicated the commitment to and expectation of success. Innovative workers were receptive of new IT challenges and actively participated in the project. The entire company was driven to pursue a common goal.

CPDC considers enterprise resources planning (ERP) to be a pivotal infrastructure investment to e-business initiatives. The introduction of ERP system is essential to enhance business health. "ERP introduction is an important business management activity. CPDC's success underscores senior workers' innovation and acceptance of new IT challenges. It's also a tremendously positive boost to and transformation of morale in general," said Henry Feng, chairman and president of CPDC.

Why Oracle?

"Oracle performed in-depth and relevant analysis on the pressing issues such as an aged system and user requirements," Feng said. "Though it did not meet 100% of our requirements, the solution was enough to solve most of our problems. Furthermore, Oracle's technical skill as well as product integration and flexibility enabled us to launch the system in the facilities and head office simultaneously without adding extra workload."

Implementation Process

CPDC launched the project in September 2001. Training and existing operation analysis was initiated concurrently. New system flow design and configuration were finalized in July 2002. Parallel operations started in August 2002. The system was operational in November 2002, making CPDC the first Taiwan company to introduce Oracle Process Manufacturing.

When moving from a closed system to open platform, data conversion and exchange between the legacy and the new system is the most common challenge. The changed data input interface meant mass data input for daily operation would impact the new system's operation. Hence CPDC leveraged tools such as Oracle Applications Data Interchange to handle data conversion and regular data input maintenance for production order, which not only resolved the data conversion issue but also improved follow-up operating efficiency

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