Enterprise Resource Planning at Topps Ireland Ltd.

by Frederic Adam and Eleanor Doyle

Overview

Beginning in 1995, Topps Ireland Ltd. investigated and then started a project to acquire and implement a state-of-the-art Enterprise Resource Planning (ERP) system. The purpose of the new system was to increase control over operations and to develop management information systems to improve decision-making in relation to the strategy of the firm. This case study examines the improvement of Topps' competitive situation enabled and facilitated by the greater control from its ERP system. The case begins with a description of Topps - its line of business and its development over time - and its business strategy in 1995. The reasons for the decision to select an ERP system for Topps are explored and a consultant’s report included in an Appendix evaluates the relevance of ERP systems for Topps Ireland Ltd. The implementation troubles associated with the system are addressed and information from Topps Ireland management on the success of the implementation and an update concludes the case. In general, this case example demonstrates that a reliable information systems infrastructure is important in supporting the operations and the development of a modern business.

Introduction

Topps Ireland Ltd. has been operating since 1977 and is a subsidiary of a U.S.-owned multinational company specialising in the confectionary business. Topps Ireland is a player in the children’s entertainment business on the European market and describes its business as the marketing and distribution of fashion items for the children’s market. Hence, Topps is not a typical manufacturing company. Some of the most famous products on which Topps success has been built were the Bazooka chewing gums and the Push-Pops lollipops which have now become household names. More recently Topps have become famous for adding an entertainment component to their confectionary products in the shape of ‘Casper the friendly ghost’ toy containers, containing gum or sweets. Topps has been particularly successful with their purchase of the rights to make Pokemon-branded products including the sale of stickers and catalogues.

The emphasis of their business has changed substantially over the years from a heavily manufacturing perspective to an approach based more on the trade of goods imported from the Far East. By 1995, 20% of their products were manufactured locally, the remainder being imported from China, Thailand and other countries. This represented a significant shift from the position even five years earlier when less than 20% of products were imported. This switch in business emphasis allowed sales growth to mushroom with corresponding increases in the import/export activities. The product life cycle of some of the products was extremely short so the company needed to react quickly to change, emphasising the company’s requirement for accurate information that was readily available. This acceleration of the business flows was aggravated by the rapid development of the new trading element of Topps business.

Topps products were distributed out of three warehouses – Cork (Ireland), Liverpool (UK), and Rotterdam (Holland). The Cork plant stored the products manufactured in Cork while the Rotterdam depot stored imported products and the Liverpool depot maintains stocks required to serve the UK market. All activities were managed from Cork with outside companies providing warehousing and distribution facilities at both external locations. The UK was the biggest market and a team of sales representatives handled sales to multiple stores and wholesalers. Ireland and the rest of Europe were serviced through distributors in each country. Products were sold mainly on a sale or return basis making it vital that returns were identified quickly and re-sold within the life cycle where possible. Sales campaigns were not launched simultaneously in all countries and regions so it was often possible to pass unsold products onto another less saturated market.

Identifying the Critical Success Factors for Topps Ireland in 1995

Topps business success revolved around making correct management decisions quickly. Information Technology (IT) supported the vital provision of rapid, accurate information on which to base these decisions. Spreadsheets were used extensively (on a limited number of PCs used in the company) to create mini profit and loss accounts representing scenario analyses on specific markets or for specific products and to identify windows of opportunity aimed at maximising the rotation of stock. The main business tools centred on the official plan and operational plans derived therefrom which were based on a number of spreadsheet models developed in a PC-based software package. The majority of information was gathered manually and the non-strategic data processing services (payroll, invoicing, inventory control, and other non-strategic transactions processing systems) were provided by software supplied by an external supplier. Both the software and the computer used to run it were completely obsolete - Topps was the final customer using these services, which were becoming increasingly expensive and unreliable.

Management at Topps had repeatedly complained to its parent company about the failure of their largely manual systems, but each time clearance to purchase a new system was requested, it was refused by headquarters (in New York). Topps management realised that too much replication and duplication was taking place and that a fully integrated Financial, Manufacturing and Distribution system was required to both:

• Support the basic business processes, and
• Automate basic flows of information.

In March 1995, Topps Ireland Ltd again attempted to purchase such an integrated software package that would cover the financial, distribution and manufacturing aspects of their business. The business was growing rapidly across all European markets and they were also looking to expand into a number of South American countries. They had been mainly a manufacturing organisation, but 75% of their turnover was now coming from trading in goods produced by Far East suppliers.

The most significant problem for Topps was identified as the lack of online stock control for key personnel as the basic computerised stock system used tracked only goods manufactured in Cork. There were also frequent failures to meet shipping deadlines because of paperwork delays. The robustness of the cash-flow was compromised by the lack of control of debtors balances and invoice due dates. In addition, there were also problems with reporting to the US headquarters due to the unavailability of information on territory and product profitability. Compliance with requirements for regular monthly and quarterly reports on EU movements of goods was slow. As described by the then Financial Controller, the company was vulnerable in the shipping, credit-control and treasury departments. He concluded that too much information was contained in employees’ heads rather than in the company’s information systems. Reports that were written at this time pointed out that hiring extra staff would not solve these problems and that the availability of a fully integrated system of the Enterprise Resource Planning type would be required (see, for example, the Consultants Report in the Appendix). In addition to this operational data layer, a powerful report generation application would also be required to generate better quality managerial reporting.

At the time, a number of potential failures were threatening:

• Sales order processing required attention as it was feared that Topps might begin to lose a significant portion of the ever-growing business due to orders not being met on time or being forgotten
• Invoicing, while a crucial element of business, Topps management sometimes had no clear idea how much had been shipped to a particular customer. In fact, some shipping deadlines were not met due to paperwork delays.

Convincing HQ

Over twenty months of time and effort (in tendering, and development) was involved in the process that culminated in the selection of the required ERP system and the local Information Systems supplier who was to supply the system. Consultants had argued that local support would be a very important asset during the implementation phase as people in Topps has little experience with large computer systems (there was no IT personnel in Topps at the time). The next step in the process was to commit the money to this investment of roughly £180,000 and the signs were good when the IT Director at HQ responded favourably to the request and agreed with the conclusions of the final report he had been sent.

Topps’ parent company then purchased Merlin Publishing, a UK-based company similar in size to Topps but operating in the complementary children’s entertainment market (i.e. the production of stickers of players in the English premiership and other major European soccer leagues). Due to numerous uncertainties regarding the sharing of business between Topps and Merlin and the relations to be developed between the two companies, HQ decided, again, to block the investment in Topps. Following a number of meetings with equivalent personnel in Merlin, a new strand of reports was sent to HQ to indicate how the systems in both Topps and Merlin could operate and the processes that could be shared between the two companies. A joint report signed by Topps and Merlin was even sent to the US to emphasise the support that Merlin were ready to give Topps in their implementation of the system selected. A further series of negotiations took place but the project was put on hold while a global IT strategy for Topps was developed by the IT director at HQ. More than two years after the first reports had been written and sent to the US about the weaknesses of the systems in Topps, nothing had been done and the manual systems were still holding on. A computerised system for Topps Ireland had never seemed so far away.

In a final attempt to demonstrate that there were no managerial grounds for postponing the commitment of Topps to the purchase of a system (software and hardware) another report was sent to HQ. In this report, it was particularly emphasised that a global IT strategy for the company made little sense as no truly shared processes requiring integration of computer systems had been identified either between Ireland and the US or between Topps and Merlin (the computing cultures differed significantly as Merlin had full-time IT personnel and a networked IT infrastructure with its international subsidiaries; no common processes existed between Merlin and Topps – no consolidation of financial information was required; one supplier of systems would lead to significant cost increases in IT provision). Compatibility of each organisation’s systems would, however, be required to enable the smooth exchange of information, and for example, reports on the performance of various Topps and Merlin products. In addition, the implementation of a global strategy meant that Topps would have to sacrifice the possibility of using local support for the software, an added - and potentially very costly - difficulty for a company without full-time resident IT expertise. This report was to change the minds of managers in the parent company. In mid December 1995, news from HQ indicated that management should start implementing the decision to purchase an integrated computer system covering the financial and distribution activities. Before the end of January, the cabling had been put in place and system installation began in earnest.

ERP "Teething Troubles" Following Implementation

Topps management found that committing to a solution was not the only important aspect of the decision making in relation to deciding to implement its ERP system. Actual implementation involved enacting the choices made on the basis of management expertise and consultants’ advice, and raised new issues and fresh interrogations which were overlooked or ignored throughout the previous stages.

More specifically, there were problems with the support provided by the system for the manufacturing operations of Topps business. ERP systems are an extension of the Materials Requirement Planning (MRP) systems of the 1970s and are all based on some MRP logic. This means that companies should have an MRP-organised factory before they can implement an ERP system that also supports their manufacturing. At the time, Topps had reduced its manufacturing to a small number of products (most originating in the far East) but the factory floor had never been MRP-oriented. In fact, there had never been any just-in-time requirement in the factory and it was not know how useful it would be to switch to MRP so late in the day. This issue was increasingly relevant as the manufacturing operations of Topps’ activities were being phased out. As a result, “workarounds” had to be implemented at the interface between the ERP and the manufacturing activities. Workarounds were portions of business processes that had to be “invented” in the system to ensure it could be used even though it didn’t exactly match the way things were being done. Developing the workarounds was not likely to compromise the success of the ERP implementation because the products being made in the factory represented a very small fraction of Topps turnover (approx. 15%).

There were also problems with the lack of familiarity of Topps’ staff with the software. These types of problems are very common with enterprise-wide software such as ERP and most companies who implement them find themselves on a steep learning curve from the moment their new systems goes live. No amount of training is ever going to give staff the confidence needed to use their ERP to its full extent. Thus, even though training was quite extensive, it took a while before staff became accustomed to the new ways of doing business through the ERP system. Topps’ business, like any other business, includes a certain level of idiosyncrasy and, in the ERP area, software providers can never become so familiar with a company that they would be able to anticipate every detail of the business processes. Some are replaced by new processes suggested by the package, but some remain and require workarounds that take a while to establish and to integrate into day-to-day routines. After a few weeks, staff became more comfortable with their systems, and after a few months, they became true experts at exploiting the functionality of their ERP software to develop Topps’ business.

Another problem that arose was that of data migration, which is also common with ERP systems. ERP systems are organised around very large databases that contain all the data required for the systems to operate properly and to link up with other information systems the company may have decided to keep. These data must often be uploaded from the previous system (which is referred to as migration). This applies to the more stable data a business uses, such as Bills of Material (describing the recipe of the company’s products), customer data, but also some much needed transactional information such as invoicing data, sales data and any other accounting-based data. In the case of Topps, the previous system was an obsolete integrated package running on an even more archaic computer. The data proved difficult to extract on account of the lack of flexibility of the old system. Also, the data did not always have the proper level of detail as modern ERP systems offer far greater depths of information and far more schemes to classify and organise data. Thus, a substantial amount of manual data entry was originally required before the system could go live.

After a few months however, it became clear to the managers in Topps that their ERP system was a sound investment and that the benefits obtained in terms of inventory management and acceleration of business processes would far outweigh any initial problems.

Using the ERP System – January 2001

According to the Financial Controller in 2001, the ERP project had been very useful and positive from the first year of its implementation and Topps had progressed in leaps and bounds in terms of its information systems. At month’s end half an hour of work was sufficient to produce the group results including UK operations and all other European branches. This used to take two weeks and even then did not allow managers to drill down into products, geographical areas and activities with any flexibility. The ERP system provided managers with the complete set of information required to analyse the activity of the business. This added flexibility had been achieved despite enormous growth of sales from IR£20m in 1996 to over IR£50m in 2000. The greatest advantage of the ERP system identified was how it allowed managers to control stocks, sales volumes and quality control in a way that was never possible before. Slow moving lines were exposed, quality problems could be traced down to specific consignments and first-in first-out stock movements can be strictly enforced. Such is the accuracy of the ERP system that managers in Ireland could tell operators in the Rotterdam warehouse which cases should be shipped first. In practice, however, they did not need to do so because the Rotterdam operators had a remote access to the ERP system.

This was a very significant improvement from a quality control point of view because the appearance of lollipops degrades over time (even though they are extremely slow to perish) and become impossible to sell. Since the implementation of the ERP system products no longer had to be destroyed on a regular basis.

As far as reporting was concerned, the ERP package was not initially sufficient to meet the needs of Topps Ireland managers. Even though all the required information was available, the report generation capabilities of the system were not sufficiently flexible. This problem was solved in 1998 by the purchase of an additional package (Daytum) which used the data contained in the ERP system to provide the drill-down and reporting capabilities required by Topps managers. Reports could then be written for every single line or item sold by Topps and customer profitability analyses could be carried out to an extent never possible before.

Update 2007

By 2004, Topps had ceased to operate any manufacturing activity. The site of their factory in Ballincollig, Ireland had been sold and they rented office space in it. The core activity, in line with the strategic choices made in the late 90s is to purchase the rights to children entertainment products and to leverage their excellent relations with 3 core manufacturing outsourcers in China to mass produce their products as fast as possible (the window of opportunity is shorter and shorter for such products as public attraction switches to other marketing products quickly).

The 5 years up to 2007 have seen unprecedented increases in the volumes sold and ever improving turnaround time for new products. The decision making process from the acquisition of the rights to a new entertainment image to the design and testing of a toy and then to full production has been drastically shortened and the remote administration of large shipments of these goods straight to their target markets has become a routine, if time consuming activity. Despite the three week lead time in ordering, producing and transporting products from the Far East, Topps have been able to achieve very nimble decision making thanks to their ERP, which allows a small managerial group to run large volumes of orders. The only snag at this point resides in the lack of direct electronic links between their systems and those of their suppliers. Though the future is clearly about achieving a "paperless" communication where Far East suppliers can administer the orders themselves and schedule production themselves, the current situation is still all about Topps administering the whole supply chain from their offices in Ireland. They do the bundling of orders together in batches and send orders to the suppliers of their outsourcers themselves.

In outsourcing arrangements, there is a natural progression towards greater value being generated and greater levels of trust developing. In the case of Topps, the product design/product quality / manufacturing execution have all reached high levels. It is now the business process element that must be further worked on so as to make the relationship between Topps and their outsourcing partners more nimble and less onerous. In the future, shared systems will allow their partners in China to visualise orders as they come in and to source raw materials in real time ensure daily scheduling of batches to an ever widening range of destination including South Americ a, one of their latest markets.

In this scenario, Topps' managers can focus increasingly on the entertainment decision making: which rights to acquire, for which duration, which toy design to select, etc. ... which is where significant improvements in revenues can be obtained, rather than in the flawless execution of the business processes, which will become increasingly routinised and computerised.

Appendix: 1995 Consultant’s Report for Topps Ireland Ltd.

Goals of Information System Implementation for Topps

As an introduction, it should be acknowledged that Topps is currently a reasonably healthy organisation with a clear management structure and a very good knowledge of its market. This does not mean, however, that the performance of Topps could not be improved significantly. Topps possesses a combination of up-to-date managerial thinking but rather outdated administration. It is therefore certain that the introduction of state-of0-the art computing in Topps could have a significantly positive impact on the performance of the business and create a more reliable administration and management structure of the organisation as a whole, especially give the recent increases in the volume of transactions dealt with by Topps Ireland Ltd. Additional benefits arising from such an introduction could include

• An advance towards ISO certification (and the potential resulting benefits)
• Freeing of manpower for either higher level analytical tasks or improved customer service
• An administrative system less reliant on individuals, thereby providing more permanent and consistent long-run company operations

Required Systems for Topps

As an initial step, the application of a modern software package would substantially improve the quality of managerial reports. However, from the investigations carried out, excessive replication and duplication also need to be addressed. A fully integrated Financial and Distribution system would support both the basic business processes carried out at Topps and automate the basic flows for information within the organisation. All modules of the system need not be implemented simultaneously and a phased approach to implementation should suffice, once commitment to ultimately implement all modules in the medium term is established.

Strengths and Weakness of Enterprise Resource Planning Systems

Enterprise Resource Planning (ERP) systems are an integrated enterprise-wide software package designed to support the key functional areas of the organisation. ERP systems have inherent strengths and weaknesses, and are therefore better suited to certain types of organisations and certain circumstances. Management at Topps should, therefore, understand the inherent trade-offs of an ERP system before they make any decision regarding the potential appropriateness of the ERP concept for their organisation. While many consultants and media reports are prompt to emphasise the benefits of ERP implementations, the key issue resides in understanding the specific needs of an organisation and the business model best suited to its operations.

The added difficulty in ERP projects is that few companies, if any, could possibly contemplate developing such vast applications in-house. For the majority of companies, the decision to implement ERP functionalities will mean buying a software package from one of the major suppliers on the ERP market. The software selection phase is not straightforward and managers must understand what ERP packages are on offer, how they differ, and what is at stake in selecting one ERP over another. Each ERP package uses a business model as an underlying framework and can be quite different relative to competitors’ products in terms of how they operate or the business processes they support. The problem for Topps management is that not all business models fit all organisations and the cost of failing to recognise the relationship between the nature of one’s business and the ERP system to be purchased can be very high indeed. Quite literally, selecting the right software package, i.e. the right blueprint for one’s organisation is a critical failure factor in ERP projects. An analysis of the strengths and weakness of ERP systems can help managers facing such decisions.

Strengths and Weaknesses of ERP Systems

The Case for ERP Systems

In many ways ERP systems represent the implementation of a managerial dream of unifying and centralising (or at least under one name) all the information systems required by the firm in one single system. Most notably, ERP systems support the recording of all business transactions from purchase orders to sales orders and the scheduling and monitoring of manufacturing activities. Most ERP systems are based on an inventory control module that records the movements of goods in and out of the company which makes them particularly suited to organisations seeking to rationalise their internal processes and obtain higher performance from their operations.

ERP systems provide employees within organisations with a common language and a common pool of data. At a practical level, ERP systems have very beneficial effects that remove the need for often disparate and unreliable end-user applications, operating and reporting procedures can be standardised and some of the key processes of the firm (e.g. order acquisition and processing or inventory control) can be optimised. In addition these systems offer high levels of portability and reasonable flexibility in adapting to the requirements of specific organisations.

One of the key strengths of ERP systems is that they are built on top of a relational database which enables a reliable and rapid circulation of the data between the modules and eliminates the need for multiple data entry. Thus, ERP systems simplify, accelerate and automate much of the data transfers that must take place in organisations to guarantee the proper execution of operational tasks. The relational database underlying an ERP can be quite large, depending on company and operational complexity (some SAP applications implemented reported to have in excess of one thousand different tables).

Currently, the case for ERP systems seems compelling and the development of more powerful and user-friendly platforms makes it now possible to integrate many large systems in a way that was not possible up to very recently. This is clear from the fact that Microsoft spent 10 months and $25m replacing 33 existing systems in 26 sites with ERP systems. Managers in Microsoft claim to save $18m annually as a result and Bill Gates reportedly expressed great satisfaction with the system. Microsoft had reportedly grown so fast that it could not keep up with itself - the number of applications developed to support the company’s operations and their lack of integration meant that IS staff had lost control over the complexity of the systems they administered. Moving to a single ERP architecture enabled better linkages between business areas as well as with suppliers and customers.

The Case Against ERP Systems

The strengths of ERP packages are matched by the high level of risk associated with ERP projects. ERP projects are complex and require the reliance on many different types of expertise often sourced outside the organisation. Consultants often advise managers to undertake some degree of re-engineering of key processes before acquiring ERP systems and this adds to the complexity and political character of the projects. There is empirical evidence of the dangers inherent in such vast projects.

These difficulties have lead some researchers to take a negative view of ERP systems. Some researchers argue that the current interest in ERP in the business community is justified more by political reasons than by sound managerial reasoning. Relevant surveys show low levels of satisfaction of firms having implemented ERP systems with 45% of firms perceiving no improvements whatever from implementation and 43% claiming that no cycle reduction had been obtained.

The difficulty inherent in ERP implementations is largely due to the fact that organisations implementing them should typically only hold on to 20% of their previous application. But the extensive replacement of previous systems may be a requirement if the major benefits of ERP implementation – greater integration of functional areas and, in the case of multinational firms, greater co-ordination between entities and between sites - are to be obtained. The consequence of this “clean slate” approach is that organisations find it virtually impossible to revert to their pre-ERP situation and, in any case, their investment either cannot be recouped or generates very low returns.

Finally, there is anecdotal evidence that many companies were pushed into ERP projects by the much-publicised fears of what might happen to legacy systems during the year 2000 change.

ERP Conclusions for Topps

These arguments paint a very mixed picture of the potential of ERP packages which may be portrayed as silver bullets as often as villains. The message to be taken from the potential strengths and weaknesses of ERP systems for Topps management is that they would be well advised to conduct a detailed analysis of proposed benefits and costs of their ERP system prior to going down the implementation road to ensure that the system can appropriately meet the organisational requirements. Of vital importance in this process is the consideration of the business strategy needs of Topps and the specific improvements that an enterprise-wide integrated software package can provide.

References Consultant’s Report

Adam, F. and Doherty, P. (2000) Do ERP Implementations have to be Lengthy? Lessons from IRISH SMEs, 5th Conference of the Information and Management Association Montpellier, France, November.

Bancroft, N. (1996) Implementing SAP/R3: how to introduce a large system into a large organisation, Manning / Prentice Hall, London, UK.

Bingi, P., Sharma, M. and Godla, J. (1999) Critical Issues Affecting an ERP Implementation, Information Systems Management, Summer 99, 7-14.

Forrest, P. (1999) Les ERP à l’épreuve de l’organisation, Systèmes d’Information et Management, 4(4), 71-90.

Kalatoka, R. and Robinson, M. (1999) E-Business – Roadmap to success, Addison-Wesley, Reading, MA.

Rowe, F. (1999) Cohérence, Intégration informationnelle et changement: esquisse d’un programme de recherche à partir des Progiciels Intégrés de Gestion, Systèmes d’Information et Management, 4(4), 3-20.

Wood, T. and Caldas, M. (2000) Stripping the “big brother”: unveiling the backstage of the ERP fad, http://www.gv.br/prof_alunos/thomaz/ingles/paper5.htm

White, B., Clark, D. and Ascarely, S. (1997) Program of Pain, Wall Street Journal, 14th March 1997, 6.

About the Authors

Frederic Adam is a Lecturer of Information Systems at University College Cork, Ireland. He was awarded a dual PhD by National University of Ireland and Universite Paris 6 (Jussieu, Paris, France ) under supervision of Prof. Jean-Charles Pomerol (Université Paris 6) and Prof. Ciaran Murphy (UCC). He is Editor in Chief of the Journal of Decision Systems and Vice-President IFIP working group 8.3 on DSS.

Eleanor Doyle is a Lecturer in Economics at University College Cork, Ireland. She developed the highly successful MBS (Business Economics). Following completing her PhD in International Trade and Growth at the University of Birmingham, her research publications relate to business strategy, international trade and competitiveness, and public sector strategy. She has also conducted consultancy projects in related areas and is involved in executive development.

Some Questions for Further Analysis and Discussion

1. What is the purpose of the ERP at Topps Ireland?
2. Does the system have a Decision support subsystem? If so, what type?
3. What technologies were used? Why? Web-based?
4. What is the major benefit of using the new system to provide information to decision makers? Why?
5. Are there capabilibities that need to be added to improve decision making?
6. How does management know which vendor to select? Do you think it is difficult to change vendors? Why or why not?
7. What are the key IS/T challenges in manufacturing? Today? Five years from now?
8. What problems or difficulties do you anticipate with the use of this type of decision support solution? Process issues? change management? customer issues?

Related References

Adam, F., Doyle, E. (2001), "Enterprise resource planning at Topps Ireland Ltd", in Johnson, G., Scholes, K. (Eds), Exploring Corporate Strategy, 6th ed., Prentice-Hall, Englewood Cliffs, NJ.

Adam, Frédéric and O'Doherty, Peter (2000), "Investigating the Reality of ERP Implementations", Journal of Information Technology, 15, 305-316.

Please cite as:

Adam, F. and E. Doyle, "Enterprise Resource Planning at Topps Ireland Ltd.", May 16, 2007 at URL DSSResources.COM.

Frederic Adam provided permission to publish this case at DSSResources.COM on November 16, 2006. He also provided an update May 14, 2007.

This case study is provided for informational purposes only. DSSResources.COM makes no warranties, express or implied, about this case summary.