United under SAP - The process of eliminating information islands for ThyssenKrupp Escalator in China (Zhongshan)

Table of content

Table of figures

Table index

Table of abbreviations

1 Introduction
1.1 Motivation
1.2 Objective
1.3 Thesis structure

2 Disambiguation
2.1 SAP System
2.1.1 SAP ERP w/ ECC 6.0
2.1.2 Accelerated SAP (ASAP)
2.2 Information
2.2.1 Information flow
2.2.2 Information island

3 Company introduction
3.1 ThyssenKrupp Group
3.2 ThyssenKrupp Elevator
3.2.1 Business Unit Structure
3.2.2 ThyssenKrupp in Zhongshan

4 Influence of Chinese Culture on the business company
4.1 Language and mindset
4.2 Corporate culture and Chinese work attitude
4.2.1 Systematic approach
4.2.2 Interpersonal relationships (Guanxi)

5 The process of implementation
5.1 Prearrangement
5.1.1 System Requirements
5.1.2 (Project) Management organization and requirements
5.2 Actual analysis (as is)
5.2.1 Business processes at present
5.2.2 Currently used applications and procedures
5.2.3 Current problems
5.3 Target / Analysis (to be)
5.3.1 Project plan
5.3.2 Scheme of improvement
5.4 Realization of the project
5.4.1 Project Preparation
5.4.2 Blueprinting
5.4.3 Realization
5.4.4 Final Preparation
5.4.5 Go Live and Support

6 Reaches & Results
6.1 Project appraisal
6.1 Reaches in relation to the process of eliminating information islands
6.1.1 Disclosing information islands
6.1.2 Discovered existing information islands
6.1.3 Method of treatment
6.2 Comparison: “as is” - “to be”
6.3 Assets & Drawbacks

7 Conclusion

Reference list

Appendix

Table of figures

Figure 2.1-1: SAP ECC Modular System

Figure 2.1-2: Example Sub-System PP

Figure 2.1-3: ASAP Roadmap

Figure 2.2-1: Information filter

Figure 3.1-1: Graphic representation of the group structure

Figure 3.1-2: Plants worldwide (including Corporate)

Figure 3.2-1: Business Unit Structure (Segment Elevator)

Figure 3.2-2: TKE ESC Production Growth

Figure 3.2-3: Zhongshan Company structure

Figure 3.2-4: TKE ES/PBB plant Zhongshan

Figure 5.1-1: Network configuration

Figure 5.1-2: SAP project organization chart

Figure 5.2-1: High level “as is” process

Figure 5.2-2: Simplified process for IQC

Figure 5.3-1: Strategy and targets

Figure 5.3-2: Project time schedule

Figure 5.3-3: TKE Business Process - SAP Module Mapping

Figure 5.4-1: Stages as CPA (Critical Path Analysis) with resource planning

Table index

Table 2.2-1: Overview of potential motives

Table 4.2-1: Differences between Chinese and German

Table 5.4-1: BPR: Key activities and planned results

Table 5.4-2: RLZ: Key activities and planned results

Table 5.4-3: FLP: Key activities and planned results

Table 5.4-4: GLS: Key activities and planned results

Table 6.2-1: Comparison: “as is” - “to be” 1/3

Table 6.2-2: Comparison: “as is” - “to be” 2/3

Table 6.2-3: Comparison: “as is” - “to be” 3/3

Table of abbreviations

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1 Introduction

Nowadays, companies all over the world face incredible pressure in global markets. To survive and to stay competitive, procurement of every description needs to be developed as a major leverage to save cost in the recent years. To achieve competitive differentiation with advantage, companies have to empower information workers. Business processes are the key to unlock the potential of these strategies.

1.1 Motivation

A supportive IT structure may play a decisive role for business processes and can make a great deal of difference. The implementation of an ERP system provides an opportunity of a ‘‘configurable information system (IS) package that integrates information and information-based processes within and across-functional areas in an organization’’¹. In information system areas, implementation is defined as ‘‘the process that begins with the managerial decision to install a computer-based organizational information system and is complete when the system is operating as an integral part of the organization’s information system’’². After implementation, significant benefits such as improved customer service, better production scheduling, and reduced manufacturing costs can accrue from successful implementation of ERP systems as well as staying competitive against competitors in matters of flexibility and adaptively. But especially, more transparence through a common used system enables the opportunity of increasing inner-company’s processing and working flows with fast and convincing criteria of decisions.

1.2 Objective

In the scope of this thesis the methods and concepts of SAP implementation for ThyssenKrupp Escalator in Zhongshan (in the South of China) have to be investigated and presented. This investigation has to include both the project approach and before-after situation in order to increase the practical relevancy.

However, ERP systems are expensive and time-consuming, and once ERP systems are implemented, management should evaluate whether it is successful and delivers promised benefit. The successful implementation is extremely coupled on the predetermined goal(s). Furthermore, Chinese culture is quite different from Western countries; so is organizational culture imbedded within national culture and it is a core attribute to discern between the Chinese view of satisfaction and the Western view.

The SAP implementation project in Zhongshan cut both ways: for ThyssenKrupp Co. (China) Ltd. and ThyssenKrupp Airport Systems Co. (Zhongshan) Ltd., which means both companies - N.B. based in the same location - will be united from the IT point of view. Finding existing information islands and to see the effect of improvement by implementing SAP needs a research of the whole project’s analysis. Target is to find out potential of improvement of the company’s business processes according to eliminate existing information islands. The specific aspects of business in China have to be shown and the main barriers pointed out, as well as possibilities emerging. With these facts as basis, a result of implementation success has to be worked out, which provides enhancement to the existing methods of capability improvement by considering the local requirements.

1.3 Thesis structure

In order to attain meaningful results, this thesis’ approach is primary based on an attending survey on issues of the implementation project of SAP directly in situ at ThyssenKrupp Escalator in Zhongshan, in respect of practices in China.

In the beginning of this work, definitions are given on the main terms required, so e.g. “SAP system” and “Information island”. “Information island” may be confused, since that term may not be defined in other works. Further, explanations are given to show the considered aspects.

After that, from ThyssenKrupp Group down to the company’s plant ThyssenKrupp Escalator in China (Zhongshan) is introduced with thoughtful details such as the organizational structure and facts and figures.

In the following, Chinese culture on the business company is focused. The fundamental circumstances to consider are explained. This chapter has been involved due to the site survey according to the matter of relative importance about information treatment. The Chinese culture aspect contains special characteristics and can be of strategic and operative influence. The basic indicators are introduced and illustrated.

As next, the main activities are focused: the process of implementation with its goals, including actions and responsibilities. This is concluded by the requirements in aims, a strong focus on the actual analysis with current used processes and software as well as the scheme of improvement. The differences between the “as is” and “to be” are shown by that and the specific approach analyzed, in order to understand the importance for a structured approach like the relevant one for this thesis: ASAP. The actual analysis based primarily on a representatively chosen core process. The accelerated SAP roadmap during the realization phase is presented with its key activities and deliverables as it is the method of choice for the project approach.

In chapter 6 the survey results are presented, reaches are described. Researches of internal information islands are discussed, the general issues presented and evaluated upon applicability in China. The SAP implementation plays the essential role, so its utility is emphasized as well. Reaches and results in form of a once more comparison between the “as is” and “to be” is a useful extension and derivation to show the major drivers for success. Assets and drawbacks is the discussion for possible improvements but also for barriers after going live. After the description of results, a summary and an outlook for the future conclude this work.

2 Disambiguation

Before dipping into the matter, a description of the thesis’ two main topics will be now examined in this chapter. One core point is the implementation of the Enterprise Resource Planning (ERP) software from SAP. The second is the field about information (rather information islands). The thesis deals with these terms and therefore a brief introduction about “SAP System” as well as an explanation of the term “information” is given.

2.1 SAP System

SAP AG is an international enterprise founded in Germany in the year 1972. The developer of proprietary software for business solutions used to focus chiefly on middle and large sized enterprises but now starts to actively target small sized enterprises. It aims to support and improve everyday business processes in different industry sectors. Amongst others, SAP ERP is one of the main products and for this thesis the one of importance.

SAP stands for “Systems, Applications and Products in data processing”³. SAP R/3 was first released in 1992 and is still core of SAP products. The “SAP R/3” version gives references about its system structure. This means that “R” stands for “Real-time” and “3” is related to the 3-tier (Client- Server) architecture: database, application server and client.⁴ A great leap forward was made by upgrading the product using SOA technology (Service-Oriented Architecture) which offers a more and quicker flexibility.⁵

Enterprise Service-Oriented Architecture

Independent of the operating system, enterprise SOA provides a reusable runtime environment and enables to link stand-alone processes to quickly compose new end-to-end processes and selectively combine and/or redesign existing processes. Beside the advantages of adaptability and flexibility, the possibility to automate many process steps that used to require human intervention. It also empowers information workers to gain a plus in cost efficiency.⁶ In this context, the application server provides the technical basis between enterprise SOA and the business process platform, on which it is built on.⁷

2.1.1 SAP ERP w/ ECC 6.0

ECC 6.0 is the latest up-to date version and the successor of SAP R/3 Enterprise. The token “ECC” stands for ERP Central Components, hence, in SAP ERP ECC are the central ERP functions included.

Software library

SAP’s successful concept is running in a modular system. SAP offers all financial, logistic, supply chain and human resource modules which are very tightly intertwined and integrated:

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Figure 2.1-1: SAP ECC Modular System

Each of these modules is so complex and deep, they are further divided to sub modules⁸ shown in the example of a PP module:

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Figure 2.1-2: Example Sub-System PP

It shows that such modular system provides a high degree of cross-functional integration (amongst: operations, manufacturing, marketing, sales, logistics, purchasing, finance, human resources, etc).⁹

2.1.2 Accelerated SAP (ASAP)

Purpose of Accelerated SAP (ASAP) is a comprehensive solution for implementing SAP ERP Software quickly and efficiently. A large drawback of SAP is that it takes too long to implement. Long-term implementation means higher costs. SAP developed ASAP methodology and shall cut the implementation time and reduce costs.¹⁰

ASAP includes and combines several accelerators and tools, such as templates, forms, check lists, “Q&A” and examples¹¹. The ASAP Roadmap constitutes a key part of the implementation assistant. Each level of the Roadmap structure stores documents. These contain recommendations for implementing SAP software as well as links to helpful accelerators (tools).¹²

The roadmap below visualizes the ASAP methodology:

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Figure 2.1-3: ASAP Roadmap

It divides the implementation process into the five phases: (1) Project Preparation, (2) Business Blueprint, (3) Realization, (4) Final Preparation and (5) Go Live & Support. This will be further explained in chapter 5 “The process of implementation”.

2.2 Information

It is important to clarify the term information. According to the Duden and encyclopedias, the term “information” has its origin from the Latin word: “informatio”, “in” and “forma” respectively meaning “to give something shape”, “to deal”, “to outline”.¹³ The definition further outline the term and fits even better:

“ By information we mean data that have been shaped into a form that is meaningful and useful to human beings. Data, in contrast, are streams of raw facts representing events occurring in organizations or the physical environment before they have been organized and arranged into a form that people can understand and use. ” ¹⁴

But actually, to define the term “information” depends on several point of views, that is why there are plenty definitions in different ways. Due to integration function and focusing on information systems, the term “information” is highly signifant in the field of in business computing.

The graphic account below is based on material from the study course “information industry” and helps to point out the differences between the keywords data, messages and information:

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Figure 2.2-1: Information filter

Sent signals or characters (as in a communication system or computer) may contain thousands of bits of information and - if the syntax is matching - representing facts or data. A message is received and understood as one, if the semantic is given which again is necessary to elicit whether it is information. With knowledge acquired through study or experience or instruction the message might become to information for the receiver if the pragmatics can be extract.¹⁵

2.2.1 Information flow

The importance of information is obvious: variety compounded technical words contains the term information (for example information system, information flow, information management, information service, information islands, etc.).¹⁶

The characteristic of information flow consists of communication as information exchange between sender and receiver (interchange between people, person(s) and computer, between systems) to gain useful information. But to enable modeling, analyzing and to help improving processes safely, security management with access control must be regulated as well. In this way, information flow (e.g. along a process within departments) can have different level of security - quasi a question of transparency. Important to manage is, who (is allowed to) get which (parts) of information and also where, how and when. This flow should be proceeding fluently. According to that, if information won’t be delivered complete or too late or even incorrect, an existing lack of information flo appears - an information island.¹⁷

2.2.2 Information island

Those “islands” exist among everyday business processes of a company’s range of operations. They aggravating the feasibility to delimit and solve problems. To keep an information flow up, transparence in (IT) structure to link the information islands is inevitable. Therefore, the source has to be found and the background reason has to be understood. The reason why such islands exist can be very manifold and even depends from which view the things are considered. But this can either consist on a single person or on several persons, on the approach or other circumstances. Indices for information islands are if between sender and receiver information run crawling and haltingly, although mostly the wanted and necessary information exists.

The following high level structure is an exemplary, categorized overview of potential motives, why those information islands could come out:

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Table 2.2-1: Overview of potential motives

Due to the fact that all aspects are associated with each other or may depend and infect others, it is a plexus that makes it easier to discover than to deal with information islands or rather to eliminate them.

3 Company introduction

3.1 ThyssenKrupp Group

The official registration of ThyssenKrupp AG is dated on March 17, 1999.

ThyssenKrupp is a German corporation with more than half of all employees and two thirds of the customers are located outside Germany. ThyssenKrupp companies’ operations lie in numerous international markets in the five segments: Steel, Stainless, Technologies, Elevator and Services. The share of foreign sales in the Elevator segment is more than 90%. At the moment, more than 191.000 people are employed worldwide. Around 600 foreign subsidiaries and associated shareholdings have about 106.000 employees, which mean that more than one in two ThyssenKrupp employees work outside Germany.¹⁸

ThyssenKrupp’s operation in the five segments:

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Figure 3.1-2: Plants worldwide (including Corporate)

3.2 ThyssenKrupp Elevator

ThyssenKrupp Elevator is one of the worlds largest elevator company and is represented at over 800 locations in more than 60 countries. Products include passenger and freight elevators, escalators and moving-walks, stair and platform lifts, passenger boarding bridges (PBBs) as well as service for all products.¹⁹

3.2.1 Business Unit Structure

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The Asia-Pacific region is becoming more and more important for ThyssenKrupp. In terms of local presence, China and India are the most important bases in the region. In these two countries alone, ThyssenKrupp currently has more than 10.700 employees (6.100 are currently employed in China with 98 % of them are Chinese nationals) representing 80% of workforce in Asia-Pacific.²⁰

The strong growth of the Chinese economy and its immense potential offer attractive market conditions for ThyssenKrupp’s products and services. One prime example is the planning and realization of the world’s first commercial Transrapid line, running between the city of Shanghai and Pudong Airport.

In November 2006, ThyssenKrupp Elevator opened a new plant for escalators (ES), moving walks and passenger boarding bridges (PBBs) in Zhongshan in the Chinese province of Guangdong.

3.2.2 ThyssenKrupp in Zhongshan

The Zhongshan plant consists of ThyssenKrupp Escalator Co. (China) Ltd. (TKE ESC) and ThyssenKrupp Airport Systems Co. (Zhongshan) Ltd. (TKE PBB). TKE ESC (Zhongshan subsidiary factory) is specialized in production of lift, escalator and moving-walkway which has been implemented ISO 9001 Quality Management System in designing and development, production, sales, installation, improvement and after-sales services. Contributed from the rapid progress and development of the escalator and moving-walkway, where results in the foundation of TKE ESC specialized in manufacturing escalator and moving-walkway. Meanwhile, TKE PBB, was set up for production of airport system products, such as aerobridge. As standards, there are four different models of escalator and two models of boarding bridge being produced in Zhongshan.

About 850 are currently employed. The new facility compound is about 195.000 square meters and the workshop floor is 40.000 square meters. In 2008, capacity is about 2.400 escalator units and 50 boarding bridge units.

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Figure 3.2-2: TKE ESC Production Growth

Target is to further expand the operation to reach a capacity of 4.000 escalator units and 200 boarding bridge units per year.

The Zhongshan company structure:

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Since its establishment, the new plant has started or worked on projects, for instance, escalator products had been successfully built in Shanghai Metro 2nd Line Project, moving-walkway products had been built in Capital International Airport 2nd Stage Project and airport systems products (aerobridge) had successfully won the bid of the Expansion Project of Guangzhou Airport.

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Figure 3.2-4: TKE ES/PBB plant Zhongshan

4 Influence of Chinese Culture on the business company

“Men’s nature are alike,

it is their habits that carry them far apart.” Confucius ²¹

This chapter will be an extract to understand the affect on businesses by cultural differences. Also the preparation of this present thesis was touching that kind of barriers so that it has to be explained a bit what “doing business abroad” (or equated with to produce a scientific work like a bachelor thesis) means. The necessity of consideration and knowledge of a foreign country its culture and way of living may have a deep influence. The complex structure of society and fast growing change in the last centuries makes it nearly impossible to understand the whole Chinese culture, whereby this paragraph does not claim to be exhaustive.

In general, but in this case primarily referring to the location at ThyssenKrupp Escalator in China (Zhongshan), whether corporate culture, Chinese’ work attitude or just the language: the culture difference is mentioned as the main reason for arising difficulties in collaborations between Chinese and foreigners.²²

4.1 Language and mindset

The official language is High Chinese, also called Mandarin or Putonghua. On the strength of complexity and distinction, Chinese - for western foreigners - is normally hard to learn. Beside, great many dialects are spoken in certain regions. The dialects are so dissimilar, that only the people in those regions are able to understand. One popular dialect is Cantonese in the south province of Guangdong (where Zhongshan is) and in Hong Kong. That is why sometimes the written- language (Chinese characters “hanzi”) is the only way of communication. Chinese people’s mindset and way of acting is influenced by the language as well.²³ Studying and using Chinese enhances young Chinese’s their capability and perseverance of (optical) differentiation ability and also to link coherences. On the other hand, faculty of abstraction and analytical skills are in part less skilled.²⁴

First barriers are caused if direct communication is impossible because of no local language ability. In addition, ThyssenKrupp Escalator Co. (China) Ltd. in Zhongshan has only few non-Chinese employed (normally less than two percent). Firstly, Chinese are usually less used to apply English, at least depending strongly on regional, economical and age-related realities. Although it is not difficult to get a whole text translated nowadays, e.g. through online dictionaries, it is suitable to only a limited extent. Fundamentally, Chinese language is built up very different compare to, for instance, European languages. Secondly, even existing language skills are no guaranty for communication without any problems. Without professional support by an experienced and/or involved person, the meaning is easy to miss-(understand).

Another element that becomes important is the problem solving and the personal communication channel. Chinese prefer an indirect form of information exchange and argumentation.²⁵ A problem will be circuited first and a direct touch avoided. Comparing for Germans it is more common to directly emphasize the gist and collect details or ideas afterwards. This characteristic entails communication difficulties and misunderstandings.

4.2 Corporate culture and Chinese work attitude

China is indeed a specialty for “Western” foreigners but also because in comparison to their own point of view - compared to the own culture and work attitude. The motive is rather based on being unaware of the country-specific (corporate) culture. To reach success in business requires to acknowledge and to bridge that gap. Flexibility and tolerance is inevitable.²⁶

[...]

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¹¹ SAP AG: “AcceleratedSAP”, p. 5, 2008

¹² SAP AG: “AcceleratedSAP”, p. 5, 2008

¹³ Duden: “Information“, http://www.duden.de, 28.07.2008

¹⁴ According to Laudon (1997) as cited in Rolf Alexander Teubner (2008): “Grundbegriffe der Wirtschaftsinformatik”, p. 5, 2008

¹⁵ Merriam-Webster: Online Dictionary, 30.07.2008

¹⁶ According to Maier, Lehner (1995), p. 213 as cited in Rolf Alexander Teubner (2008): “Grundbegriffe der Wirtschaftsinformatik“, p. 2, 2008

¹⁷ Hansen / Neumann: “Wirtschaftsinformatik 1“, Stuttgart, pp. 310-313, 2005

¹⁸ TK Magazine: “Global Views“, | 1 | 2007 | January, 2008 All figures relate to the 2006/2007 fiscal year, Annual Report, as of September 30, 2007

¹⁹ ThyssenKrupp AG: http://www.thyssenkrupp-aufzuege.de, 1.9.2008

²⁰ ThyssenKrupp AG: http://www.thyssenkrupp.de, 12.08.2008

²¹ Chinese philosopher & reformer (551 BC - 479 BC)

²² BusinessForum China. Special Issue: “German Business Expansion in China: 2008 - 2010", 2008

²³ Kampf, C. (2007): “Deutsche Expatiaten in China”. GaTec Verlag, 2007

²⁴ Kampf, C. (2007): “Deutsche Expatiaten in China”. GaTec Verlag, 2007

²⁵ Kampf, C. (2007): “Deutsche Expatiaten in China”. GaTec Verlag, 2007

²⁶ BusinessForum China. Special Issue: “German Business Expansion in China: 2008 - 2010”, 2008