BIS_CASES
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Case 2: Nike Stumbles Implementing ERP Nike is the world's leading shoe company and sells its products throughout the United States and 140 other countries. Nike also sells Cole Haan dress and casual shoes and a line of athletic apparel and equipment. In addition, Nike operates Niketown shoe and sportswear stores and is opening Nike Godd ess stores catering to women. The firm issued an earnings warning in February 2001, blaming its $400 million project to roll out a new demand- and inventory-management system²as well as lower shoe sales²for an expected earnings shortfall of $100 million. Nike said that after implementing a new ERP system in the summer of 2000, orders for some shoes were placed twice²once by the new system and once by its existing order-management system. Also, orders for many new shoe styles were lost and never processed. The heavily customized ERP system included modules from Dallas-based i2 Technologies Inc. i2 provides software that helps manufacturers plan and schedule production and related operations such as raw materials procurement and product delivery. In its defense, i2 said the company's software modules represented only about 10 percent of the $400 million ERP project. The installation was also large and complex, requiring a high degree of customization on the i2 applications that were then linked with other ERP and back- end systems. In addition, the wide range of apparel products sold in a multitude of sizes and styles led to further difficulties in tailoring the i2 software to match to Nike¶s internal business processes. i2 said that Nike failed to follow i2's recommendation to minimize customization, to adopt i2¶s best practices for the footwear and apparel business, and to deploy the system gradually and in stages. Instead, Nike heavily customized the software and brought the system to thousands of suppliers and distributors at once. The Nike announcement created a serious public relations problem for i2, and potential customers began to question the viability of the company's software. Shares of i2 stock dropped from just over $25 i n March 2001 to under $4 in May 2002. (The stock had been as hi gh as $104 in March 2000). The Nike incident was not the sole or even primary cause, but it was certainly a contributing factor. Interestingly, brokerage firm Wells Fargo Van Kasper lowered its rating of Nike in December 2001, in part based on the perceived problem with Nike's implementation of SAP software. In addition to the difficulties Nike has already encountered, investors were concerned that the installation of a new SAP software system in the company's core U.S. business segment would impede the flow of Nike's spring 2002 merchandise line. Discussion Questions 1. What business benefits would Nike likely gain from the successful implementation of an ERP system? 2. Do research on the Web on the i2 Technologies and write a paragraph summarizing its current business state.
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Case 2: Nike Stumbles Implementing ERP
Nike is the world's leading shoe company and sells its products throughout the UnitedStates and 140 other countries. Nike also sells Cole Haan dress and casual shoes and a line of athletic apparel and equipment. In addition, Nike operates Niketown shoe and sportswear stores
and is opening Nike Goddess stores catering to women.
The firm issued an earnings warning in February 2001, blaming its $400 million projectto roll out a new demand- and inventory-management system²as well as lower shoe sales²for an expected earnings shortfall of $100 million. Nike said that after implementing a new ERPsystem in the summer of 2000, orders for some shoes were placed twice²once by the newsystem and once by its existing order-management system. Also, orders for many new shoestyles were lost and never processed. The heavily customized ERP system included modulesfrom Dallas-based i2 Technologies Inc. i2 provides software that helps manufacturers plan andschedule production and related operations such as raw materials procurement and productdelivery.
In its defense, i2 said the company's software modules represented only about 10 percentof the $400 million ERP project. The installation was also large and complex, requiring a highdegree of customization on the i2 applications that were then linked with other ERP and back-end systems. In addition, the wide range of apparel products sold in a multitude of sizes andstyles led to further difficulties in tailoring the i2 software to match to Nike¶s internal business processes. i2 said that Nike failed to follow i2's recommendation to minimize customization, toadopt i2¶s best practices for the footwear and apparel business, and to deploy the systemgradually and in stages. Instead, Nike heavily customized the software and brought the system tothousands of suppliers and distributors at once.
The Nike announcement created a serious public relations problem for i2, and potentialcustomers began to question the viability of the company's software. Shares of i2 stock droppedfrom just over $25 in March 2001 to under $4 in May 2002. (The stock had been as high as $104in March 2000). The Nike incident was not the sole or even primary cause, but it was certainly acontributing factor.
Interestingly, brokerage firm Wells Fargo Van Kasper lowered its rating of Nike inDecember 2001, in part based on the perceived problem with Nike's implementation of SAPsoftware. In addition to the difficulties Nike has already encountered, investors were concernedthat the installation of a new SAP software system in the company's core U.S. business segmentwould impede the flow of Nike's spring 2002 merchandise line.
Discussion Questions
1. What business benefits would Nike likely gain from the successful implementation of an ERPsystem?
2. Do research on the Web on the i2 Technologies and write a paragraph summarizing its current business state.
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Critical Thinking Questions
3. Supply-chain software vendor i2 says Nike pushed the $400 million system into productiontoo quickly, insisted on too much customization, and went live with too many suppliers anddistributors at once. That could be²but for $400 million, did Nike have a right to set some high
expectations of the software vendors?
4. This isn't the first time a company has attributed lowered earnings to new software mishaps.How might a financial auditor or IS consultant pinpoint the amount of the earnings shortfall dueto weak sales and the amount due to IS problems? Would knowing this information make anydifference?
Sources: adapted from Bob Evans, ³Listening Post,´ InformationWeek , June 4, 2001,http://www.informationweek.com; Marc Songini, ³Nike Says Profit Woes IT Based,´Computerworld , March 5, 2001, http://wwwcomputerworld.com; John Soat, ³IT Confidential,´ InformationWeek , March 5, 2001, http://www.informationweek.com; Steve Konicki, ³Nike Just
Didn¶t Do It Right,´ InformationWeek , March 5, 2001, http://www.informationweek.com; AaronRicadela, ³The State of Software Quality,´ InformationWeek, May 21, 2001,http://www.informationweek.com; John Soat, ³IT Confidential,´ InformationWeek , December 17, 2001, http://www.informationweek.com.
Case 3: MetLife Implements CRM
MetLife is a leading provider of insurance and other financial services to individual andinstitutional customers. It serves 10 million individual U.S. households and 64,000 companiesand institutions with 33 million employees and members. MetLife is one of the largest U.S.insurers, offering life and property/casualty insurance (including home and auto coverage), aswell as savings, retirement, and other financial services for groups and individuals. It also hasinternational insurance operations in 13 countries. MetLife demutualized and sold about a thirdof the company to the public in 2000.
The business environment for insurance companies has changed dramatically in recentyears. Consumers have many more purchasing options thanks to the 1999 Gramm-Leach-BlileyAct, which allowed banks to merge with securities and insurance companies. The act enabled
insurance companies and financial institutions to sell a broader array of products and, in turn,created a highly competitive environment. Insurance consumers' buying habits have changed² instead of agents pushing products, consumers are now seeking out information, often from bothinsurance companies and banks that are developing hybrid insurance and securities products.
Insurance companies are aggressively pursuing new business strategies that will helpthem keep their existing customers and win new customers from new and old competitors. Manyof them are turning to customer relationship management systems to market their services.
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MetLife, in particular, is concentrating its efforts on implementing a CRM system and customer-centric service strategy to help it retain consumers and, in turn, boost sales.
MetLife has been working with software vendor DWL Inc. since 2000 to develop anddeploy DWL Customer, a real-time transactional application that consolidates customer data.
This application creates a single master record for each customer by pulling information fromover 30 transaction processing systems. The goal is to ensure that every business unit and everyMetLife employee has a consistent and current view of a customer's data. Doing so enables thesales department to better target customers for cross-selling opportunities. For example, a servicerep could sell a life-insurance policy to someone who holds a health-insurance policy with thecompany.
Creating a master record for each customer will also help MetLife keep records up to dateand identify any data accuracy problems. For example, if a customer has a life-insurance policythat states his age is 32, but he later opens a mutual fund and gives his age to the agent as 52, thesystem will alert the agent of the problem.
Successful implementation of the CRM system inevitably will change the way MetLifeemployees do their jobs. Sales and service representatives, for example, will be expected to dealwith all aspects of their customers¶ financial needs, not just the one or two product lines they'vetraditionally handled. MetLife¶s management believes that customer service is imperative notonly to MetLife's ability to grow but also to its ability to survive. Changes in work processes androles coupled with successful implementation of the CRM system will enable the company toconnect with customers in a way that provides intrinsic value and growth for the future.
Discussion Questions
1. What challenges is MetLife facing that is driving it to invest in a CRM system?
2. What benefits does MetLife expect to achieve through successful implementation of CRM?
Critical Thinking Questions
3. Gaining the desired business benefits from the CRM system requires people to change theyway they operate. What sort of changes must be made? What can MetLife management do tohelp ensure that employees are willing to make these changes?
4. Imagine that you are a MetLife service agent with 15 years of experience. Make a list of all
the pros and cons you can imagine that such an individual would associate with moving to thenew way of doing business.
Sources: adapted from Jennifer Maselli, ³Data Central,´ InformationWeek , January 21, 2002, pp.45±46; Jennifer Maselli, ³Insurers Look to CRM For Profits,´ InformationWeek , May 6, 2002,http://www.informationweek.com; ³MetLife Launches New Company Web Site,´ BusinessWire,April 30, 2002, accessed at http://www.news.moneycentral.msn.com; and ³About Us,´ MetLifeWeb site at http://www.metlife.com, accessed May 12, 2002.
