Case 4. 2 Summit electric lights up with a new erp system
G S T 5 0 8 3
INFORMATION SYSTEMS & ELECTRONIC COMMERCE
• Summit Electric Supply Co., Inc. engages in the wholesale
distribution of electrical equipment, supplies, and solutions for the
electrical professionals in the United States and internationally.
• This company is one of the top wholesale distributors. Summit
obtains finished goods from manufacturers and sells them to
electrical contractors working on projects ranging from small
construction job to sophisticated industrial projects.
• This company was known as middle on the supply chain, so it must
be able to handle high volume of transactions and swift inventory
• However, the information built in the 1980s could not keep up with
the business growth, it could only handle a fixed number of
locations and limited the range of numbers that could be used on
Question 1 :
Which business processes are the most important at Summit Electric
• The company is known as a one of the top distributors, Supply chain
management played the most important business process at Summit
Electric. Supply chain management (SCM) is the management of the flow
• It includes the movement and storage of raw materials work-in-process
inventory, and finished goods from point of origin to point of
• The reason business processes are the most important is both
manufacturers and end users rely on distributors to efficiently bring
products to market.
• As the ‘middle men’ of the supply chain, distributors thrive on high
transaction volumes and swift inventory turns.
• Distribution industry has some unique aspects that drive its business.
• The company has a very large number of SKUs (Stock-keeping –units)
and transaction (very short lead times).
• Inventory distributed in various models, including at customer job sites.
• In the distribution business, the lead times for fulfilling an order can be
• An ERP System is a packaged business software system that enables a
company to manage the efficient and effective use of its resources.
• It’s automated and integrated the majority of an organization’s business
• It is functionality in sales and distribution, materials management and
financials. Moreover, it share common data and practices across the
entire enterprise, produce and assess information in real-time
• SAP is a core ERP application. It’s the best practices function in sale and
distribution, materials management, Human Resources and Financials and its
knowledge in distribution business.
• SAP’s Net Weaver support Summit Electronic more organize and be able to
control how much was needed to be produced and distributed. It’s useful for
business intelligence reporting and analysis. it helped the company to
evaluate the profitability of its sales channels, using what the solution.
• It is a software that treats a wire reel a batch rather than single as single
products. It used to cater high demand for wires and cable products.
• For examples- every time customer buys a length of wire, the length can be
entered into the system to track how much of the batch was sold.
• The batch management process removed the problem of maintaining the
inventory of such product.
• Summit had facing problem with its old system where the system had
reached their breaking point.
• The old system could no longer process its nightly inventory and financial
updates in the amount of time that was available. For example, it separate
or different systems for sales and purchase order and back-end reporting-
integration between the system was done manually in batches.
• The system could only handle a fixed number of locations and limited the
range of numbers that could be used on documents. Summit’s information
system had to use the same range of document numbers over again few
• Not able to handle the volume and complexity of the company’s chargeback
agreement and reporting capabilities were limited.
• Gathering and reviewing invoices tool an entire month- invoices 2-3 months
Question 2 :
What problems did Summit have with its old systems ?
What was the business impact of those problems?
The business impact from the problems was that the system was not
able to keep up with the fast growing business. It limited the business
as it was only able to handle a few range of numbers and location at a
time. It caused of delays and time consuming task that was not
needed to take as much time as it did in its business operations.
ERP improved operational efficiency and give scalability and the ability in
Summit’s business process, especially in supply chain areas like sales and
distribution, inventory management and financial reporting system-as
the company expected strong growth in these areas.
Question 3 :
How did Summit’s ERP system improve operational efficiency and
decision making? Give several examples.
Running more frequent inventory updates
It’s running smaller and frequent inventory update throughout the day,
instead of a night-which caused a delay. New system provided accurate
information of shipping order, which Summit’s was able to ship
Changing how inventory is managed at job sites
To secure inventory for special customers, with long term projects, Summit
created a “parent- child” warehouse relationship in ERP system to secure the
materials in inventory as well as on premises.
Adapting the inventory tracking process
To replenish wire and cable, the ERP batch material management identified
the customer purchase amount, length of wire and product manufacturer.
Each time a customer buys a length of wire, the length is entered into the
system to track how much of the “batch” was sold.
To make a better manage its finance and ordering system, Summit implemented
the SAP’s/NetWeaver BW data warehouse and business intelligence. By
integrating the NetWeaver, Summit was able to analyze the profit of each sales
person, manufacturer, customer and branch. Using SAP software, Summit was
able to improve its ROI, by automating sales tax and chargeback’s. The
SAP/Paybacks and Chargeback’s application was able to identify the billing
activity, if there was a chargeback, the SAP system would automatically submit
the information to bill the chargeback- increase its chargeback claims of up to
118%. Summit decision making for implementing the new ERP system was based
on the growth of the organization, the complexities of processing orders,
analyzing finances and back and reporting. Once the new ERP/SAP was in place,
Summit management was able to focus on sales and orders and quotes, supplier
performance and delivery schedule. The new SAP/ERP has allowed Summit to
run its operations with flexibility and allow the SAP to operate efficiently. The
new ERP system allowed management to have a greater vision for decision
making and managing its operations.
Customer can rely on the company for their needs and products- the
company now more efficient. The company wants that customers to feel
that they can provide that they have produced products the customer
want and sent to them in short time period.
To accommodate large customers with long term job sites. SES sets up
temporary warehouse on site to supply these customers with its electrical
products. Create “parent – child” warehouse relationship to be able to
work with customers. If the SES office has more than a few temporary
onsite warehouse, the warehouse can be controlled like subparts of the
main SES warehouse. It helps to prevent anybody from selling the
consigned inventory into the warehouse.
Question 4 :
Describe two ways in which Summit’s customers benefit from the new
Chargeback is the return of funds to a consumer. The chargeback
mechanism exists primarily for consumer protection. For the distribution
company, chargeback occurs when the supplier sells a product at a higher
price to the distributor than the price they have set with the end user.
For handling charger backs had flaws in it where the company was losing
money and sometime barely making any profit. Processing chargeback
have to compare the sale to contract. A distributor can have up to
hundreds maybe thousands of contract. SES need to identify the
chargeback and which manufacturer with enough documentation of the
contract or a lot of manual work. SES need go through the customers
invoice with detailed manufacturers identified and put the chargeback in
Question 5 :
Diagram Summit’s old and new process for handling chargebacks.
For handling chargebacks had flaws more efficient. It automatically
review Summit’s billing activity for the day. All chargebacks
agreements loaded in the SAP system by the end of every day. There
is a match in the system and they are able to claim. New process is
able to create a separate chargebacks document outside the
customer invoice and able to process more quickly with review in
the same day. SES increased its claim by 118% over the old system.