PEGATRON CORPORATION

Case Study SAP® ERP Solution

PEGATRON is a leading Taiwanese OEM/ODM company specializing in electronics. Spun off from ASUS in 2008, the company inherited a local Taiwanese ERP solution, but executives preferred to have their own system. They decided to implement SAP® ERP 6.0, and turned to ABeam for assistance. Drawing upon its depth of knowledge on the best practices of the OEM/ODM industry, ABeam worked closely with PEGATRON, helping them to create add-ons that could meet their unique requirements, while providing them with the skills they needed to maintain and expand the new system in the future. And ABeam did it all in two-thirds the projected timeframe.

Challenges・The SAP® ERP implementation needed to be adjusted to fit PEGATRON’s unique business model, in which all decisions are made in headquarters and plants only carry out manufacturing operations・The system needed to be able to accept data from vendors and meet the requirements of each major brand company PEGATRON does work for・PEGATRON hoped the project would encourage employees to think about methodology for changing business practices

Solutions・SAP® ERP 6.0 was implemented for a whole range of business operations (financial accounting, management accounting, business management, distribution, sales, supply chain, etc.)・The system was installed in plants first and headquarters last ・While the team was rolling out SAP ERP in each plant, they also worked to integrate each location with a virtual system set up in the headquarters, necessitating less work in the final phase

Success Factors・ABeam and PEGATRON worked as a single team throughout the project・The SAP® ERP implementation had the full support of PEGATRON’s Chairman, who assigned General Manager Denese Yao to the project and instructed that each business unit make their best personnel available to her ・ABeam explained each part of the project thoroughly to PEGATRON’s IT department, giving them the skills they needed to maintain and update the system in the future

Taiwan – a hub for the OEM/ODM industry in Asia, and home to ASUS, one of the region’s foremost computer compa-nies. Around 2007, ASUS executives began to worry that along with continued growth they risked competing with the compa-nies they undertook OEM/ODM work for, and so they spun off their manufacturing operations, creating PEGATRON. This new company inherited the business processes and infrastructure of ASUS, including the local Taiwanese ERP solution it used. How-ever, the Chairman of PEGATRON wanted to implement an ERP system of a higher, global standard. He decided that the switch to a new system would be the young company’s first proj-ect, and assigned PEGATRON’s General Manager of IT Refor-mation Denese Yao to take charge of this. Each business unit leader was instructed to provide their best personnel to the proj-ect. Ms. Yao worked with her team of PEGATRON’s finest to re-search which ERP system would be best for the company. They chose SAP® ERP 6.0 for the benefits it offers to manufacturing-oriented operations.

With operation sites in Taiwan, China, Japan, Czech Republic, Mexico and the United States, reconsidering PEGATRON’s ERP system looked to be a difficult task. PEGATRON needed the sys-tem to work with their unique business model, in which all deci-sions regarding procurement, supplies and other matters are made in the headquarters, and plants only handle manufacturing opera-tions. The company also wanted the new system to integrate seamlessly with data provided by vendors and customers. Finally,

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Project Plan

20092008 2010MarFeb Apr May Jun Jul Aug Set Oct Nov Jan Feb Mar Apr May Jun Jul Aug Set Oct Nov Jan Feb Mar Apr May JunDecDec

Phase 0: Group Blueprint Design (Taiwan HQ)Steering Committee Meeting

Phase 1: Shanghai (China) ImplementationProject Golive

Phase 2: Suzhou (China) RolloutProject Golive

Phase 3-1: Taiwan HQ RolloutProject Golive

Phase 3-2: Songjiang (China) RolloutProject Golive

Case Study SAP® ERP Solution

Improving PEGATRON’s Business Practices

and Empowering its Employees

through a Speedy SAP® ERP Implementation

PEGATRON CORPORATION

Ms. Yao hoped the system would help PEGATRON initiate Business Process Reengineering (BPR), and wished to see measur-able success using Key Performance Indicators (KPIs). PEGA-TRON realized that this project would be no easy task, and that it was going to need some assistance. It turned to ABeam for help.

“Actually, at the time there were only really three parties in Tai-wan that could support this type of project,” explained Ms. Yao, looking back over the consultant selection process. PEGATRON sent these three companies – ABeam and two other global con-sulting firms – a Request for Proposal (RFP) detailing the project’s objectives, complexity, and the number of sites involved. “We managed to screen out one company during the proposal stage,” continued Ms. Yao, “We then had face-to-face discussions with each candidate project leader. Why did I pick ABeam? During the screening process, we first tried to check which company had the professional knowledge and skills we needed. Our next con-sideration was culture. People are the most important factor in implementing this kind of project. We needed a partner who could both fit into our culture and push for change.”

With ABeam on board, the two companies set out on a three-month planning period to work out the best implementation process for the project. One particular benefit of organizing this planning period is that it allowed the two sides to get used to working together as one team. “We talked to many companies about how they had implemented an ERP system, and most of the stories we heard were of pain – how people resisted change and resisted the consultants. Although people want change, they want it done their own way. However, in reality SAP ERP is rigid.

Planning for Change

A New Company’s First Project

Finding a Real Partner

For the first three months, I let ABeam explain and inform the users about the system,” explained Ms. Yao.

Andrew Chen, Principal, ABeam Taiwan, recalled this period, “The most important aspect of this project was the cooperation model we used from the very beginning. We did not separate roles and responsibilities between our two sides. We worked with their IT department and users together as one team.”

The two sides knew they would need to closely cooperate, as they faced a unique challenge. Mr. Chen explained, “PEGA-TRON uses a unique model in the OEM/ODM industry, which we call the ‘consignment model.’ Basically, all materials are owned by headquarters. Plants only manufacture, they don’t make deci-sions about supplies. This was a big challenge for the system as it changes the way we need to calculate costs, ownership, and other issues. It required us to set up a very unique synchronization pro-cess for the database.” The team used the first three months to fig-ure out how to integrate every section of the system, eventually deciding that the process would start in PEGATRON’s two larg-est plants in Shanghai and Suzhou before moving on to the head-quarters. “If we had started in the headquarters,” clarified Chen, “it would have meant changing about 50,000 different items at once every time PEGATRON wanted to change a part number, for example. We did this so that such changes could be done in phases, starting from the plants.”

Although the project required an unusual workflow, ABeam knew it was possible because of the commitment shown by PE-GATRON. “Having an enthusiastic partner made everything easier,” explained Chen, “Ms. Yao was the strong sponsor we needed to make everything move. She attended our project review meetings every week. About 100 people did. Whenever someone

said something was impossible, she would make it happen.”

Once the planning stage was completed, the project unfolded over three phases. It was decided that the first phase would occur in Shanghai, so selected because PEGATRON’s plant there was both moderately sized and made use of every operation model the company had in place. The project team spent eight months working out the overall specifications for the SAP ERP imple-mentation in this plant before moving on to phase two in Suzhou. The lessons learned from Shanghai helped ABeam and PEGA-TRON wrap up work for phase two in six months. After that, it took just another six months to complete the third phase in PE-GATRON’s Taipei headquarters. This was thanks to careful plan-ning on the part of the project team – during phases one and two, team members worked to set up a virtual SAP ERP system in PEGATRON’s headquarters to act as a sandbox environment in which they could simulate the integration of plant operations and headquarter decision processes. Thus, by the time the project reached phase three, 80% of the work for the headquarters system had already been finished. The project completed in January 2010, within budget and a year ahead of schedule.

When asked about the speed of the implementation, Ms. Yao commented, “I think the key factors that sped up this project were that the team believed it could be done, and that everyone worked seamlessly as one. For example, we met often, almost dai-ly to discuss the project’s progress. Whenever we needed to do something that affected the company’s rules, I brought up the is-sue with other members of management and we changed our policies. I let my team know throughout this effort that no matter

Case Study SAP® ERP Solution

Global Blueprint DesignProjects

Driving Central Design

ERP Implementation and Rollout Projects

Establishes business process and technical

standards for the future

Technology ProjectEstablishes the IT

infrastructure and support organization

Purchasing

Key Account

SalesOEMSales Logistics Mfg. Procurement Finance

OrganizationRestructure Warehouse

SAP R/3, MM, WM, PP, SD, FICO, BW and IEB Systems

Manufacturing Planning

Shared Service

Data Center Design,Implementation

IT Support Organization Design, Implementation IT Infrastructure Upgrade

Process

Codes

Rules

KPI

Process

Codes

Rules

KPI

Process

Codes

Rules

KPI

Process

Codes

Rules

KPI

Process

Codes

Rules

KPI

Process

Codes

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KPI

Implementation and the Resulting Benefits

Project Coverage

“ABeam had the professionalism needed to make this project a success. I think they are good at step-by-step implementations, and they do it all with a soft attitude. They had really good interactions with the users. Before, we didn’t have any methodologies for systematic processes – this project empowered our employees.”

Ms. Denese YaoGeneral Manager IT Reformation,PEGATRON CORPORATION

what, we could do it. I always have confidence in my team.” The frequent meetings about the project and seamless coopera-

tion between ABeam and PEGATRON meant that by the end of the project, the IT team on the PEGATRON-side was doing much of the work first handled solely by ABeam. Chen ex-plained, “We didn’t just put into place an SAP ERP system here, we also helped PEGATRON gain the skills they needed to imple-ment SAP ERP themselves in their plants in Mexico and the Czech Republic. We told them everything we did. We didn’t hide anything. We explained to their IT department how we were set-ting up the system, empowering them to run things on their own. After the Go Live, we did help them a bit to implement dual cur-rency functionality in their headquarters, but moving forward they will probably only need a minimum amount of support from us.”

Outfitting PEGATRON with a stronger IT department was not the only benefit ABeam provided the company – the results of this project can also be seen in the mindsets of each and every PEGATRON employee. “A positive impact of this was that peo-ple talk about processes now,” commented Ms. Yao, “They think more about problems and how to solve them. This was one of my original goals – to improve employee mentalities about business changes through this ERP implementation.” Thanks to the les-sons learned throughout the project, PEGATRON now has a

methodology for developing new business processes and employ-ees know how to behave when participating in user groups.

Beyond the change seen in employee mindsets, the company also met several of the KPIs it set for the project. Monthly closing used to take 15-20 days. The company now closes its accounts in three. Seven days used to be required to close many work orders. Now 70-80% of orders take only five, perfectly in line with the established KPI.

Daniel Yin, Principal, ABeam Taiwan, reflected on the work the team did for the project, “The PEGATRON project was one of the most challenging projects we ever implemented due to its complex operation models and changes made during the imple-mentation. With the clearly defined goals, well-designed global blueprint, and great teamwork with the customer’s project team, we made it a great success.”

PEGATRON has been furnished with the ERP system it wanted and the skills it needs to improve the system further. For its part, ABeam has gained another satisfied customer and a valu-able experience in the OEM/ODM industry. ABeam revamped PEGATRON’s ERP system, helped them with BPR, and turned their IT department into a stronger and highly skilled organiza-tion.

ABeam did all this for PEGATRON, and in record time.What can ABeam do for you?

● Client DataCompany overviewCompany name: PEGATRON CORPORATIONHQ Location: No.76, Ligong St., Beitou, Taipei 112, TaiwanEstd.: June 27, 2007Business: A leading Taiwanese OEM/ ODM company with extensive experience manufacturing motherboards, desktop PCs, notebooks, broadband systems, wireless systems, game consoles, LCD TVs, and moreTotal sales: NT$533 billion (2010, consolidated) Employees: 79,000 (as of 2010)

Project overviewSummary: SAP® ERP implementation tailored to PEGATRON’s requirements as a growing OEM/ODM companyTimeframe: August 2007 to January 2010Member count: PEGATRON: 60; ABeam: 12Software: SAP® ERP 6.0

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Case Study SAP® ERP Solution

ABeam's Real Partner campaign featuring PEGATRON

Corporate data and titles are those in use at the time of writing.

Andrew ChenPrincipal,China and TaiwanABeam Consulting Pte. Ltd., Taiwan Branch

Daniel YinPrincipal,ABeam Consulting Pte. Ltd., Taiwan Branch

Grace HsiaoDirector,ABeam Consulting Pte. Ltd., Taiwan Branch

Lumi WangSenior Manager,ABeam Consulting Pte. Ltd., Taiwan Branch

Core Members of ABeam

Hunglin TangManaging Director,China and TaiwanABeam Consulting Pte. Ltd., Taiwan Branch