International Game Technology (IGT) is a leading manu- facturer of slot machines and lottery machines for casi- nos and
Posted: Thu May 05, 2022 1:09 pm
International Game Technology (IGT) is a leading manu- facturer
of slot machines and lottery machines for casi- nos and government
lotteries. Headquartered in Reno, Nevada, with sales headquarters
in Las Vegas, the com- pany also maintains sales, manufacturing,
and service sites in Africa, Australia, Europe, and South America.
Its Reno site alone produces 140,000 machines annually. It has been
profitable for many years. In 2005, it had a profit of $437 million
on revenue of $2.4 billion, appar- ently a situation that would
lull executives of other com- panies to think “If it ain’t broke,
don’t fix it.” Not IGT managers.
Until 2002, each business function had its own infor- mation
system. IGT had different systems for handling sales, customer
orders, manufacturing, and accounting. When managers wanted to
receive information about a specific customer order, they had to go
to each func- tional unit to receive a different piece of the
information: customer details from the sales department, status of
the machines being manufactured from the manufactur- ing units, and
payment status from accounting. The accounting department itself
had several software appli- cations that handled different books,
such as accounts receivable, accounts payable, and the general
ledger.
As business was growing, managers complained that they could not
get comprehensive information on orders. The IT department
developed interface software to connect the systems, but there were
still complaints that information was not coherent. The IT
specialists admitted that they were maintaining a mishmash of
software. The loudest complaints came from the accountants. Every
year it took them two weeks “to close the books.”
The accounting department pressured management to purchase a new
system that would make their work more efficient. The CIO
understood their plea but was afraid that satisfying this
department’s request would trigger similar requests from other
units, such as engi- neering and manufacturing. The result might be
a bet- ter information system for each department, but disparate
systems that still were not connected to each other. On the CIO’s
advice, IGT management decided to implement an ERP system.
A steering committee and project team were assembled. Their members
focused on business func- tionality rather than the technology.
After the first selection, systems from three companies were
considered: SAP, Oracle, and J.D. Edwards (which was later acquired
by Oracle). After further consideration,SAP won the contract, and
IGT embarked on a two- year effort. In 2003, the company switched
to using the R/3 ERP system. IGT did not disclose the cost of the
project, but analysts estimate it was well over $10 million.
When the system was ready, three functions were incorporated into
one enterprise system: product devel- opment, manufacturing, and
finance. Like other ERP systems, R/3 is highly structured even when
modified for a particular customer. As often happened, the new
system forced IGT to change some of its business processes.
However, the company chose SAP’s system because it found it less
rigid than other ERP systems. This was important to IGT, because it
builds machines to order.
The system afforded the company several benefits. Price proposals
are made based on more accurate information and estimates. Managers
on the manufac- turing floor can view or print out manufacturing
pro- cess sheets at their own PCs. Employees can no longer ignore
specifications or “cut corners.” The system does not allow a
process to continue when an attempt such as this is made. The
products are made more effi- ciently and with fewer errors. The
system connects all of the company’s sites around the globe. One of
the system’s modules is project management, which enables managers
to monitor design changes and costs involved in new product
development.
The new system replaced the old MRP (material requirements
planning) system, but the company still uses its internally
developed factory control system, which has been successfully
integrated into the SAP system. The factory control system enables
managers to know which machines are built at which plant.
IGT reduced the average period of order to shipping from 9−10 weeks
to 7−8 weeks. When a rush order is entered, IGT can now fulfill it
in four weeks instead of seven weeks. Between 2002 and 2005 the
error rates in orders for raw materials decreased from 10 percent
to almost 0. Inventory turn increased from 6.3 to 8.4 per- cent per
year.
IGT’s CIO admits that the implementation was challenging. The
company makes a variety of machines, which meant that many bills of
materials had to be entered into the system (and new ones will have
to be entered for new products). Adapting some features to the way
IGT operates was not easy. However, the imple- mentation was
successful. The CIO credits the success to strong support from
senior management, the establishment of a steering committee with
members from all affected units, a capable project management
team, a training program to help employees understand how to use
the new system, and the rigorous testing the system underwent
before it was used.
Source: Bartholomew, D., “ERP: Gaming Company Hits Jackpot,”
Baseline, October 2, 2006; (www.igt.com), 2007.
Thinking About the Case
1. What problems did IGT face before the implementation of the ERP
system?
2. How does the new system help control processes?
3. Compared to the situation in 2002, what are the ben- efits of
the ERP system?
4. IGT decided to continue operating its older factory control
system. Why do you think it did so?
of slot machines and lottery machines for casi- nos and government
lotteries. Headquartered in Reno, Nevada, with sales headquarters
in Las Vegas, the com- pany also maintains sales, manufacturing,
and service sites in Africa, Australia, Europe, and South America.
Its Reno site alone produces 140,000 machines annually. It has been
profitable for many years. In 2005, it had a profit of $437 million
on revenue of $2.4 billion, appar- ently a situation that would
lull executives of other com- panies to think “If it ain’t broke,
don’t fix it.” Not IGT managers.
Until 2002, each business function had its own infor- mation
system. IGT had different systems for handling sales, customer
orders, manufacturing, and accounting. When managers wanted to
receive information about a specific customer order, they had to go
to each func- tional unit to receive a different piece of the
information: customer details from the sales department, status of
the machines being manufactured from the manufactur- ing units, and
payment status from accounting. The accounting department itself
had several software appli- cations that handled different books,
such as accounts receivable, accounts payable, and the general
ledger.
As business was growing, managers complained that they could not
get comprehensive information on orders. The IT department
developed interface software to connect the systems, but there were
still complaints that information was not coherent. The IT
specialists admitted that they were maintaining a mishmash of
software. The loudest complaints came from the accountants. Every
year it took them two weeks “to close the books.”
The accounting department pressured management to purchase a new
system that would make their work more efficient. The CIO
understood their plea but was afraid that satisfying this
department’s request would trigger similar requests from other
units, such as engi- neering and manufacturing. The result might be
a bet- ter information system for each department, but disparate
systems that still were not connected to each other. On the CIO’s
advice, IGT management decided to implement an ERP system.
A steering committee and project team were assembled. Their members
focused on business func- tionality rather than the technology.
After the first selection, systems from three companies were
considered: SAP, Oracle, and J.D. Edwards (which was later acquired
by Oracle). After further consideration,SAP won the contract, and
IGT embarked on a two- year effort. In 2003, the company switched
to using the R/3 ERP system. IGT did not disclose the cost of the
project, but analysts estimate it was well over $10 million.
When the system was ready, three functions were incorporated into
one enterprise system: product devel- opment, manufacturing, and
finance. Like other ERP systems, R/3 is highly structured even when
modified for a particular customer. As often happened, the new
system forced IGT to change some of its business processes.
However, the company chose SAP’s system because it found it less
rigid than other ERP systems. This was important to IGT, because it
builds machines to order.
The system afforded the company several benefits. Price proposals
are made based on more accurate information and estimates. Managers
on the manufac- turing floor can view or print out manufacturing
pro- cess sheets at their own PCs. Employees can no longer ignore
specifications or “cut corners.” The system does not allow a
process to continue when an attempt such as this is made. The
products are made more effi- ciently and with fewer errors. The
system connects all of the company’s sites around the globe. One of
the system’s modules is project management, which enables managers
to monitor design changes and costs involved in new product
development.
The new system replaced the old MRP (material requirements
planning) system, but the company still uses its internally
developed factory control system, which has been successfully
integrated into the SAP system. The factory control system enables
managers to know which machines are built at which plant.
IGT reduced the average period of order to shipping from 9−10 weeks
to 7−8 weeks. When a rush order is entered, IGT can now fulfill it
in four weeks instead of seven weeks. Between 2002 and 2005 the
error rates in orders for raw materials decreased from 10 percent
to almost 0. Inventory turn increased from 6.3 to 8.4 per- cent per
year.
IGT’s CIO admits that the implementation was challenging. The
company makes a variety of machines, which meant that many bills of
materials had to be entered into the system (and new ones will have
to be entered for new products). Adapting some features to the way
IGT operates was not easy. However, the imple- mentation was
successful. The CIO credits the success to strong support from
senior management, the establishment of a steering committee with
members from all affected units, a capable project management
team, a training program to help employees understand how to use
the new system, and the rigorous testing the system underwent
before it was used.
Source: Bartholomew, D., “ERP: Gaming Company Hits Jackpot,”
Baseline, October 2, 2006; (www.igt.com), 2007.
Thinking About the Case
1. What problems did IGT face before the implementation of the ERP
system?
2. How does the new system help control processes?
3. Compared to the situation in 2002, what are the ben- efits of
the ERP system?
4. IGT decided to continue operating its older factory control
system. Why do you think it did so?