EastGate Technology Outsources its ERP System Based on Best-of-Breed Partnership and Solutions

"By outsourcing the ERP system, we were able to significantly reduce our upfront investments, operational and manpower costs - through a best-of-breed solution provided by industry leaders such as Sun, Oracle and Failsafe Corporation. Today, our MIS department consists of only two staff mainly servicing the in-house LAN - in other words, we have peace of mind," Peter Karlsson General Manager, EastGate Technology Ltd.

Name of Company

• EastGate Technology Ltd

Industry/Market

• Manufacturing

Applications/Solutions

• Oracle Financials
• Oracle Purchasing
• Oracle Order Management
• Oracle Discrete Manufacturing
• Oracle Internet Developer Suite
• Oracle 9i Application Server, Enterprise Edition
• Oracle Discoverer Administration Desktop Edition

Products/Services

• Sun Enterprise[tm] 420R
• Sun Enterprise 220R
• Sun Cataloguedge D1000

Key Business Challenges

• Eliminate duplication of information processing
• Maximize the use of manufacturing capacity
• Improve customer service through greater visibility
• Support for expansion plans

Key Business Results

• Better picture of inventory and financial status
• Complete Web-based financial solution using outsourcing model
• Overall costs savings while enjoying combined benefits of best-of-breed solution

EastGate Technology, a contract manufacturer of optical storage media, wanted to achieve greater flexibility, dependability and speed in the way it handled production and execute orders. The company chose to implement an ERP system to consolidate information processing and provide greater visibility throughout the whole organization. The entire system was implemented on an outsourcing model based on best-of-breed solution from Sun, Oracle, Failsafe Corporation, giving EastGate the advantage of top-line IT services and infrastructure at a competitive cost. Singapore based integrator, iOM Pte Ltd, was employed to implement the solution.

Information: Key to remaining competitive
EastGate Technology Ltd is an integrated manufacturer of content storage products, offering a range of services including mastering, replicating, printing, packaging and distributing compact disc (CD) ROMs, audio and video CDs, digital versatile discs (DVDs) and CD cards. Among its customers are multinational corporations such as Microsoft, Adobe, Hewlett Packard, IBM, Compaq and Iomega. It has an annual turnover of about SG$45 million and staff strength of 400 spread out over three plants in Singapore, Hong Kong and Taiwan.

The company operates in the highly competitive field of contract manufacturing where lead-time for fulfilling an order can be as short as 12- 72 hours. It is not unusual for the company to receive an order and be expected to fulfill it in less than a day.

Peter Karlsson, General Manager, EastGate Technology, said, "The five pillars of contract manufacturing are flexibility, speed, quality, cost and dependability. If you are good at this, you will survive."

"A peculiar element in our industry is the very short lead-time that we have. The demands of the operation are quite high. We can miss delivery time if we are off-schedule even by a few hours. It is for this reason that we needed a company wide system to handle everything so that we can work very much in a real-time environment," said Karlsson.

To that end, EastGate Technology elected to implement an Oracle-based ERP system to meet the following challenges:
1. Eliminate duplication of information processing
2. Maximize the use of manufacturing capacity
3. Improve customer service through greater visibility
4. Support for expansion plans

The solution was to run on Sun Microsystems servers, as availability and scalability were key factors. The system would be completely outsourced to technology service provider, FailSafe Corporation (Singapore) Pte Ltd.

Outsourcing: A secured alternative
Outsourced IT services have been gaining grounds steadily in the past few years. According to IDC, spending on IT outsourcing reached US$56 billion in 2000 and is expected to top US$100 billion by 2005. Among the reasons that prompted companies to adopt an outsourcing model are lower costs of set-up, better company focus and lack of internal IT resources. All these are factors that contributed to EastGate's decision to outsource its IT services.

EastGate chose FailSafe Corporation, a technology services provider operating in Singapore since 2000 as its outsourcing partner. FailSafe would provide a completely N+1 redundant infrastructure and would give EastGate support for 24x7 availability. These were important as security and reliability were two main issues that prompted EastGate's decision to outsource its technological needs.

"Our factory operates 24x7. When it comes to IT systems, which is so critical to everything that is happening in your operation, you must be able to support it 24x7." said Karlsson. "We house the intellectual property for all the major software houses in our premises. Our manufacturing facility is as secure as a bank, and we have the same philosophy for our data. We absolutely cannot afford to compromise on this."

At FailSafe's facility at Singapore Science Park II, security is tightly controlled with security patrols and camera surveillance. Access to critical areas are restricted by programmable cards and fingerprint identification systems.

Technologically, FailSafe offers its partners dual firewall protection monitored by intrusion detection subsystems. There is also an option to increase the level of security by installing additional layers of firewalls. All these gave EastGate the peace of mind to run a round-the-clock operation.

Tier-1 infrastructure at minimal cost
Implementation was carried out in two phases. Phase 1 covered the financial side of EastGateís operation, including finance, purchasing and order management functions. Simplifying and integrating functions such as accounts receivable and payable, asset, cash and inventory management, order entry and shipping documentation. Phase 2 focused on implementing an online manufacturing system to integrate planning, routing, material handling and warehousing. iOM was instrumental in EastGate selecting Oracle solution by means of active engagement of studies and presentations over several months. This resulted in EastGate placing the order for the Oracle Software and complete education and implmentation with iOM.

Considerable emphasis was placed on training. The company set up a steering committee and a working committee to ensure that all major users of the system would be trained and familiarized with the system.

The system is based on Oracle's e-business application suite, including Oracle Financials(tm), Oracle Purchasing(tm) and Oracle Order Management(tm) for the financial module, and Oracle Discrete Manufacturin(tm) for the manufacturing module. These solutions run on Sunís Enterprise[tm] E220R and StorEdge[tm] D1000.

Phase 1 of the implementation went 'live' on 1 January 2001 and phase 2 began operation 1 May 2001.

Outsourcing its ERP system has meant that EastGate would be equipped with the tier-one infrastructure and support that its outsourcing partner is able to provide. Such support would normally be found only with 2-3 million dollar installations.

"When an SME like EastGate decides to adopt technological solutions, they have some decisions to make because big MNC's are already using technology with huge investments, and if an SME will have to step into the process of acquiring the expertise and infrastructure, they will be moving significantly away from their core competencies,"said Lee J. Volante, chief marketing officer, FailSafe Corporation.

"With the integrated solutions of today, the demands of technology areeven higher, and the issues of availability and security becomes much more important in terms of technology decisions. Again that drives the cost up, so how do you get it cheaply. That's why they come to a service provider"

The initial cost of the whole EastGate implementation is approximately SG$800,000.

Meeting all objectives
EastGate's Singapore operation today is fully integrated into the ERP system that it has implemented slightly less than a year ago. It has plans to expand the system to cover all its plants in the Asia Pacific region and engages in discussions with integrator iOM for ongoing implementation and technical services.

Since implementing the outsourced ERP solution, the manufacturer has found its on-time delivery performance improving by 20 percent and its inventory holding cut down by 30 percent to a mere 6 days of stock holding from 11 days. With this technology, the company is moving rapidly towards just-in-time production schedules.

However, the biggest achievement for EastGate may have been the ability to avoid building an IT infrastructure internally while reaping all the benefits of a complete implementation.

"The systems have gone live since 1 May 2001. In these 8 months of operations we have had a better than 99.9% availability with 0% data loss. In this respect we have achieved our goals," said Karlsson.

"By outsourcing the ERP system, we were able to significantly reduce our upfront investments, operational and manpower costs - through a best-of-breed solution provided by industry leaders such as Sun, Oracle and FailSafe Corporation. Today, our MIS department consists of only two staff mainly servicing the in-house LAN...in other words, we have peace of mind."

Through outsourcing its ERP system, EastGate has reaped the benefit of a tier-1 installation without all the costs of putting such a system in place internally. It has been able to enjoy a high degree of services in terms of security, availability and reliability while remaining focused on its core business of delivering quality products to its customers.

"To most companies, the IT infrastructure is a critical part of the operation, and this is likely to be more prominent in the future as more companies make the transition from the old manufacturing-based to the new knowledge-based economy. This means that the financial capital of the company will not be the only measure by which the company is valued. Our financial capital is already outsourced to various banks. We had to find a similar solution to our IP capital, a secure place to store it," said Karlsson.

©2001 Sun Microsystems, Inc.
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