Question

HASBRO DEVELOPS A GLOBAL SYSTEMS STRATEGY

If you’ve ever played in a sandbox with a Tonka dump truck, accessorized a My Little Pony, manipulated a Transformer, or engaged in mock combat with a G.I. Joe, you have experienced a piece of the Hasbro Inc. juggernaut. Begun by brothers Henry, Hilal, and Herman Hassenfeld in 1923 as a pencil box and school supplies company, Hasbro transitioned to toys in the 1940s. Acquisitions, including Milton Bradley, Tonka, and Wizards of the Coast helped drive growth in the second half of the 20th century. Today Hasbro, based in Pawtucket, RI, is a multinational entertainment giant. It has licensing partnerships with Lucas film’s Star Wars franchise and Marvel Entertainment to produce action figures based on some of their films and will release its own productions of a second G.I. Joe, fourth Transformers, and first Stretch Armstrong film in 2014. With Hasbro Studios’ television programs climbing the ratings, numerous digital game licensing deals, and a newly opened adventure park ride, Hasbro’s self-description as a “branded play” company is strikingly appropriate. With nearly 6,000 employees, two manufacturing plants (Waterford, Ireland and Springfield, MA), offices in 40 countries, and recent expansion to Korea, Russia, China, Czech Republic, Romania, and Latin America, Hasbro requires state-of-theart management information systems to bolster its global core-brand strategy and $400 million net earnings. In the 1990s, Hasbro chose SAP, a German enterprise application software corporation, to provide its enterprise resource planning (ERP) system. Hasbro implemented SAP/R3 and supporting business processes on a broad scale in 27 business units. This sweeping deployment, however, was tempered with customization to suit local needs. If not immediately a drawback, as time went on this became a strategic liability. There were many different implementations of standard business processes containing only minor variations, such as Hasbro’s order-to-cash process. The order-to-cash process entails order placement, fulfillment, shipment, invoicing, and payment. Rather than a standardized process, different Hasbro offices used different terminology for the same step, included unnecessary steps, or contained needless forms or process divisions. The lack of centralization and standardization was inefficient, hampering coordination between business units. In addition, it stifled new IT initiatives because services and business processes that should have been shared were not, necessitating avoidable modifications. When Hasbro decided to move to a unified SAP implementation in 2007, it upgraded its enterprise resource planning software to SAP ERP (ECC6) in its mature markets. But the “Way to Work” initiative aimed to do much more. Hasbro wanted to create a shared-services structure that would foster corporate efficiency while still delivering individualized support to local offices, particularly those in emerging markets. Assimilation of emerging market offices onto the global team was paramount. Hasbro knew that it could expect its largest growth beyond 2010 to come from outside the United States. The 60%:40% ratio of U.S. to foreign revenue would shift to favor its global operations. The new sales and marketing offices needed to be integrated into the SAP environment quickly and efficiently in order to maximize this opportunity. To reduce implementation time and the learning curve, SAP Business One, an ERP system designed for small businesses, was implemented as an interim solution in these emerging markets. After these markets had matured, they could be incorporated into the larger enterprise SAP infrastructure, which was undergoing a thorough overhaul. The Way to Work initiative for the mature markets first tackled a standardized approach to business processes. Step one was to meet with leaders to outline how their business processes were currently being performed. Face-to-face meetings were also employed to smooth the transition to uniform business intelligence (BI) and data management. Hasbro found that this technique not only promoted a team atmosphere, encouraging people to get onboard, but also motivated leaders to push for consistency in additional areas. The result was a comprehensive reduction in the complexity of Hasbro’s systems. Business processes became globally consistent and integrated with the SAP ERP system. A new global demand and supply system was instituted, and a master data management solution was customized to suit Hasbro’s material master data needs. Now all materials Hasbro purchased, produced, and kept in stock had consistent part numbers, stock codes, and descriptions. Consistency in material master data management (MMDM) allows the seamless flow of data into purchasing, accounting, sales, distribution, warehousing, and materials planning and control operations. Business intelligence and reporting was another key focus of the Way to Work initiative. With business units in different locales choosing their own reporting tools, including Microsoft Access, Microsoft Excel, Cognos, and SAP BusinessObjects, one office would devise an innovative method for querying and analyzing data that could not be replicated by other divisions. The logical solution was to capitalize on the SAP infrastructure by implementing SAP BusinessObjects globally. This BI and Enterprise Performance Management (EPM) tool is particularly adept at providing key performance metrics. Hasbro knew that to continue to expand globally it would need the best tools available for quickly accessing and analyzing trending and sales data. According to Denise Clark, CIO and Senior Vice President, improved analysis of Hasbro’s pointof-sale data was a key goal so that Hasbro would have a clearer understanding of who its customers were and how their spending patterns might be influenced. With the multiple project goals including unifying two ERP systems, standardizing business processes, combining multiple BI and reporting systems into one, adopting a standard global MMDM system, instituting a new global demand and supply system, and consolidating four planning systems, Hasbro’s IT department had its work cut out for it. Because it enjoyed vigorous support from Hasbro management, the department decided the traditional systems life cycle waterfall approach could be bypassed. Rather than methodically completing each stage of the life cycle before starting the next stage, the IT project team chose an agile development approach with 30-day development cycles. This way it could rapidly roll out a series of small subprojects to an IT test team and select employees, receive immediate feedback on any faulty or missing functionality, make any necessary modifications, and then allow all employees to experience a facet of the new functionality. In addition to the ability to stick to an aggressive time table, the agile development method fostered employee acceptance and according to CIO Clark, “allowed users to learn the new system quickly and efficiently.” Moreover, it created a core group of power users prepared to train their coworkers and respond to concerns as they surfaced. Deployment of the revamped systems landscape began in the United States and Canada in 2009. European operations instituted Way to Work in 2011, and adoption by Hasbro’s Mexican and Latin American units began in 2012. The final regions to be incorporated are the Far East and Asia Pacific. Business benefits are already flowing. The common data warehouse in an SQL Server database and revamped materials master data provide data consistency across all business processes. Reliable data passes to SAP BusinessObjects, improving data analysis. A global accounts payable workflow process promotes information sharing and collaboration between business units. Most importantly, a unified vision for the future has been provided to Hasbro’s planning teams.

Case study questions

1. What problems was Hasbro having with its legacy SAP/R3 enterprise resource planning (ERP) system installed in the 1990s and how did it affect its operations and global strategy?

2. What management, organization, and technology issues did Hasbro address in order to implement a new global systems strategy?

3. Describe Hasbro’s new global systems and the problems they solved. How did they improve operations and management decision making?

Answer 1

Answer 1: Key Issues Hasbro having with its Legacy SAP/R3 ERP systems are:

a) There ERP system was inefficient : With the presence in 40 countries with 27 different business units, it was quite a challenge to meet the business goals. Using different terminologies which suits local needs and different process divisions, resulted in very inefficient business processes

b) Hinderance in effiecient foreign operations: Current SAP system was not centralized and standardized which is affecting coordination between different business units. A;ll the departments including finance, HR and Management needs to be centralized. As Hasbro is expanding rapidly to new countries and revenue will also increase outside US, they need a new centralized ERP system to be integrated to maximize growth.

Answer 2:

a) New sales and marketing offices needed to be integrated into the SAP environment quickly and efficiently in order to maximize their business.

b) Need to reduce implementation time and learning curve to extract the early benefits

c) SAP ECC6 is for mature markets. Used SAP Business one to cater immediate need

Answer 3:

Hasbro's new global systems SAP ECC6 is for mature markets. It is little complex and need large implementation time. To cater immediate need for emerging markets they used SAP Capital one. When the markets will get mature they will gradually use large SAP ERP Support.

This helped in solving numerous problems like:

a) It will improve business performance and company's growth

b) Integrated system at multiple locations

c) Standardized and Centralized global business operations

d) Consistency in Material master data management

e) Key performance metrics can be measured

It Improved operations:

a) Integration of business processes

b) scalable and flexible

c) Reduce operating cost

d) Provide Consistent data

It improves decision making:

a) Follow shared services structure

b) Qick access and analyze sales data

c) Improvement in analyzing point of sales data