CASE STUDY - Global Bike Incorporated GBI Background Global Bikeis a world class bicycle company serving the professional and“prosumer” cyclists for touring and off-road racing. Global BikeInc. is registered as a US company, following US GAAP accountingstandards. Due to several tax and export issues, Global BikeGroups’s headquarters remains located in Dallas while itssubsidiary company, Global Bike Germany GmbH, which is based inHeidelberg is subject to IFRS accounting standards and German taxregulations. History GBI divisions were running multiple,independent application environments. This was inefficient,inaccurate, and expensive, and information was not available inreal-time. In fact, many of GBI’s processes were obsolete and therewas a need to dismantle existing processes into individualactivities and put them back together in a new set of businessflows. In addition to this, GBI ran into trouble with its reportingto the IFRS in 2017 because some significant financial transactionscould not be accounted for. GBI started to struggle for marketshare with a relative newcomer to the bicycle industry, FEDBicycles who was emerging as a formidable player largely due to thecompany’s culture of embracing technology as a strategiccompetitive advantage in improving efficiency and customer service.GBI was experiencing shipping errors due to the wrong address orloading the box on the wrong truck. Errors happened frequently onsystems that required manual data entry, and multiple systemsrequired redundant processes to utilize the data. Much of thebicycles looked similar, which allowed for picking errors. Fixingthese errors were expensive and time consuming. GBI’s customerservice received an overwhelming number of phone inquiries each daythat required time and cost-consuming processes to locateapproximate package status. GBI divisions were running multiple,independent application environments. This was inefficient,inaccurate, and expensive, and information was not available inreal-time. In fact, many of GBI’s processes were obsolete. In 2017,GBI ran into trouble with its reporting to the IFRS because somesignificant financial transactions could not be accounted for. Itwas at this time that GBI decided to dismantle existing processesinto individual activities and put them back together in a new setof business flow, with an ERP system as the enabling technology.Technology Implementation GBI integrated a shared services modelfor all IT functions, located in the Dallas office. Along with thismove to centralized IT, Global Bike also implemented SAP ERP(version 6.0). GBI set up teams to implement hardware and software,modify the software to meet the goals, convert the legacy data tothe new system, and develop a reporting framework and initial setof reports to be included in the system implementation. Not havinghighly skilled IT developers and a proven process for managing suchbig technology projects, GBI engaged an external company as animplementation partner. The external consultant evaluated thedifferent ERP systems on the market and recommended SAP. GBIinitially believed that SAP was not a good fit, but as the companywent through the evaluation process, finally decided SAP actuallywas the best system for them. The implementation approach startedoff with a goal to minimize the tailoring of SAP but later changedto become focused on changing the system to match their processes.Eight different modules were implemented, first starting with theSales and Distribution, Procurement, and Accounting modules. Nextthe Warehouse Management, Production, and Asset Management wereincluded, and finally, the Project Systems, and Quality Managementmodules were incorporated. Problems experienced in theimplementation of the first three modules were also experienced inthe implementation of the subsequent modules. Interviews with staffduring the project revealed a culture of closed communication andvery little commitment to training. At some point, there seemed tobe no more contribution from the implementation partner, who wasalso responsible for providing training. The project took eighteenmonths to complete, and several staff resigned before the end ofthe project as they were unsure of the changes happening in thecompany. Despite the issues, the system went live. Difficultiescontinued in the first sixty to ninety days. Further interviewswith staff indicated that there was a huge number of support callsrecorded as many of them could not utilise the capabilities of thesystem and had in fact forgotten most of the things they had beentaught about the new system. Many comments reflected that it tookso much time to learn the system. There were also many commentsreflecting incomplete integration of the Warehouse Managementmodule with the Production and Sales and Distribution modules.Particularly, stock in the warehouse was not displaying correctlywhen viewed from the Sales and Distribution module. Stabilisationtook a little longer than expected. One year later however, theimplementation one year was considered successful. Outcomes Byimplementing the ERP, GBI saved a tremendous amount of money forthe goods and services purchased from hundreds of locations aroundthe globe. In addition, the GBI procurement network, which is veryextensive due to numerous materials, is now rigorous because it wasbuilt on well-defined technological standards. When GBI adds newapplications, therefore, they fit into the rest of theirinterconnected IT infrastructure, which doesn’t tolerate excessivewaste. GBI makes sure all new technology fits in nicely over theirarchitecture. Current Situation In the end, all ERP functions arecentralized with the primary objectives to reduce costs and deliverbest-in-class technology to all divisions globally. Thiscentralized approach offers Global Bike an advanced businessplatform under a highly controlled environment, which enablesconsistency of operations and process integrity across the globe.Given the requirement for multiple accounting standards across theUS and German companies, GBI maintains one leading accountingledger for both companies, but also one accounting book for the UScompany and another for the German company. Material planning,finance, administration, HR and IT functions are consolidated atthe Dallas headquarters. The Dallas facility manufactures productsfor the US and export markets and its warehouse manages productdistribution for the central US and internet retailers. Global BikeInc. also has warehouses for shipping and export in both San Diegoand Miami. San Diego handles West Coast distribution and exportsfor Asia, while Miami handles East Coast distribution and LatinAmerica exports. Global Bike Germany GmbH has its headquarters inHeidelberg Germany. The majority of research and development ishoused in the Heidelberg offices. Heidelberg is also the mainmanufacturing facility for Global Bike in Europe. The Heidelbergwarehouse handles all shipping for southern Europe. Global Bikeoperates two production facilities (Dallas and Heidelberg) and hasoutsourced the production of both off-road and touring frames andthe carbon composite wheels to trusted partners who have specialtyfacilities to fabricate the complex materials used. Global Bikemaintains very collaborative research and design relationships withthese specialty partners to ensure that innovations in bothmaterial and structural capabilities are incorporated into theframes. Global Bike has established an extensive partner operationto ensure process continuity between Global Bike and its partnersto deliver best-in-class products for its customers. Specialattention has been paid to nurturing strong relationships withsuppliers and Global Bike is generally the largest customer of itsmain suppliers. Given the highly specialized nature of GlobalBike’s bicycles and the personalized needs of riders, Global Bikesells its bikes exclusively through well-known and respectedIndependent Bicycle Dealers (IBDs). These dealers employ staffmembers who are experts in off-road and tour racing to helpconsumers choose the right bike and accessories for theirindividual needs. GBI has several vendors across the US andGermany. Identification and selection of vendors, includingnegotiation of general conditions of purchase and contracts, forthe US facilities are organised centrally from the US head office.Similarly, Identification and selection of vendors for the USfacilities are organised centrally from the German head office inHeidelberg. GBI has several customers across the US and Germany.All credit for the US customers are managed by the US head office.Similarly, all credit for the German customers are managed by theGerman head office in Heidelberg. GBI has multiple assets and alsotracks the financial consequences associated with the entirelifecycle of an asset, from acquisition to disposal. All financialtransactions related to the processes and costs related to all ofthese processes are used for the internal management of the firm interms of cost and revenue. What’s Next? GBI distributors andcustomers continue to desire the power to buy, sell, and researchon their own terms – not as dictated by GBI. GBI still experiencesdata issues that make simple tasks such as tracking repeatcustomers difficult and needs all the data accessible in real timeto track the individual customer’s buying behaviour and personalpreferences. GBI is seeking to build close customer relationship byanalysing customer information and permit coherent view of customerand is now contemplating a help desk ticket management softwarewith fully integrated customer database to be connected to the ERPsystem. GBI’s key requirement is to provide gateway for customersto interact electronically with the company and in so doing createinteraction points between the organization and the customer. Inaddition, GBI’s supply chain network remains very extensive due tonumerous materials and now beginning to suffer as discountretailers have started to supply bicycles to GBI’s distributors,thereby encroaching on GBI’s market space. In response, GBI is nowshifting to a high-end product line that would generate betterprofit margins by engaging suppliers to through joint design andcollaborative planning, forecasting, and replenishment. To makethis new strategy work, however, GBI is beginning to investigatenew supply chain technologies and processes to drive thespeed-to-market requirements of the new growth strategy.  

Answer the questions below in relation to the case studyprovided.

As part of Re-engineering business processes, GBI will need todismantle its business processes into individual activities and putthem back together in new sets of business flows.

a. Identify how processes are dismantled to drive benefits ofBusiness Process Re-engineering

b. Once Business Process Re-engineering is concluded, how mightGBI continue to improve its business processes to make it moreefficient? (1 Mark)