Dirt Bikes Case Study

Team E :Ryadh ZITOUNIEkaterina YAZYKOVAMelissa ZEPHIRYann LANDREVIE

Contents 1. Business Challenge

Current Situation Challenge

2. Business Solutions (Objectives) 3. Information System (Plan)

3.1. ERP System 3.2. Benefits of an ERP 3.3. ERP Modules 3.4. Providers (SAP, ORACLE, OPEN SOURCE) 3.5. Investment Analysis 3.6. Securing IS

4. Controls 4.1. Balance Score 4.2. Financial Perspective

5. Backups / Sources

Diagram of IS

Informatio

n Syste

m

Business

Solutions

Business

Challenge People

Organization

Technology

1.1 Current Situation

Dirt Bikes USA is a small company founded in 1991 that manufactures and sells racing and off-road dirt bikes.

Dirty Bikes produces 4 bikes models : Enduro 250, Enduro 550, Moto 300, Moto 450, and sells it between $3.250 and $9.000

Headquarters are in Carbondale, Colorado. The company has approx. 129 employees.

1.1 Current Situation

As Top Managers we have to focus on Financial Reporting based on the information we have on the consolidated statements of income and the balance sheet from 2006 to 2008.

1.1 Current Situation DUPONT ANALYSIS :

To Be Successful, a business must manage its:

– Operating Profits

– Level of Assets

– Amount of Debt

FIVE KEY FINANCIAL RATIOS :

• Profit Margin (PM)

• Total Asset Turnover (TAT)

• Equity Multiplier (EM)

• Return on Investment (ROI)

• Return on Equity (ROE)

1.1 Current Situation

2008 2007 2006

Accounts Receivable 12 872 000 12 981 000 13 083 000

Accounts Payable 7 592 000 8 694 000 8 943 000

Cash & Cash equivalents 6 891 000 7 197 000 6 994 000

Total Assets 59 442 000 62 527 000 65 077 000

Total Liabilities 25 136 000 27 414 000 29 592 000

Shareholders’ Equity 34 306 000 35 113 000 35 485 000

Assets / Liabilities / Equity

1.1 Current Situation

Formula 2008 2007 2006

PM = Net Income / Revenue 15,03% 11,41% -2,40%

TAT = Sales / Total Asset 1,04 1,02 0,92

EM = Total Asset / Total Equity 1,73 1,78 1,83

ROI = Net Income / Total Asset 103,51% 102,46% 92,42%

ROE = NI/S x S/TA x TA/SE 26,95% 20,82% -4,07%

PM = Profit Margin SE = Shareholders EquityTAT = Total Asset TurnoverEM = Equity MultiplierROI = Return on InvestmentROE = Return on Equity

1.2. Business Challenge

More Competition (new comers) Market is growing up Outdated systems Manual business processes

2. Business Solution

Reduce Costs Increase capacity by squeezing costs Improve asset turnover Reduce excess inventory Decrease Account Receivable / Increase

Cash on Hand Increase profitability 10% per year Increase productivity

3. Information System People :

Appoint new management team (tech friendly)Design strategic transformation plan

OrganizationAdopt best-practice processes

TechnologyImplement ERPDeploy Intel server running windows operating

systemDepoy SQL Server database

3.1. ERP System Enterprise resource planning (ERP) is an

enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order, fulfillment  or billing.

An ERP solution is characterized by supporting a variety of business functions such as manufacturing, supply chain management, financials, projects, human resources, and customer relationship management from a shared date store.

3.2. Information System : ERP

Benefits of an ERP System :Help reduce operating costs :(inventory

control, production, marketing and help desk support)

Facilitate day to day management : (backbone data warehouses, better accessibility to data for decision making and managerial control. helps track actual costs of activities and perform activity based costing)

Support Strategic Planning

3.3. IS : ERP Modules

E.G :Order Fulfillment Process

Fulfilling a customer order involves a complex set of steps that requires the close coordination of the sales, accounting, and manufacturing functions

Sales

Manufacturing

Accounting

Generate Order

Submit Order

Check Credit

Approve Credit

Generate Invoice

Assemble Product

Ship Product

3.4. Providers & Costs Study

Implement ERP System :Software : SAP, ORACLE, OPEN SOURCEHardware : Dell and MicrosoftTraining : 20 named usersMaintenance : Flat Support or per user

Costs : * DeliverySAP : $16,8 Million . SAP : 20 MonthsORACLE : $12,6 Million .Oracle : 18,6 MonthsOpen Pro : $200,000 . OP : 17,8 Months

3.4. Open Pro

OpenPro Cost Study Number of employees: 129 Number of named users: 20 Upfront costs (licenses, customization, training,

and implementation): $40,000 or, $2,000 per user

Hardware and operating system (Dell and Microsoft): $30,800

On-going support from Compiere partner: $24,000/year or, $1200 per user

On-going support as percentage of upfront costs ($24,000 / $40,000): 60%

3.5. Investment Analysis Feasibility :

Fixed costs (Hardware, Software Training) : $70,800 On going costs (Support, Maintenance) : $64,000 Other Costs : $50,000 TOTAL : $184,800

Acceptability : The ERP System will increase profitability 10% per year Current Gross Profit : $20 457 000 20,457,000 x 0,10 = $2,045,700 ROI = 2,045,700 / 184,800 = 11,07 Delay : 18 Months

Risk : Very low

3.7.Securing IS

Confidentiality Availability Integrity Access control

Identificationauthentication

4.1. Balance Scorecard

4.2. Financial Perspective

Objective Measure Target InitiativeProfitable ROE 10% per year Sales

Revenue Growth PM 10% per year # of Customer

Costs ROI 5% Investment

Dividends PM 3% Sales

5. Sources

Wikipedia (http://en.wikipedia.org/wiki/Information_security )

Prenhall / Laudon (http://wps.prenhall.com/bp_laudon_mis_9/32/8212/2102336.cw/index.html )

Managing Information System (Prentice Hall 2007)

Oracle / SAP / OpenPro

Thank You