Week 6 (b) - Honam Petrochemical’s Quest for better Management Reports

INTRODUCTION

Honam Petrochemical manufactures a variety of petrochemical products from two facilities in South Korea. Its primary product is ethylene, and Honam ranks among the country's leading producers of polyolefins like high density polyethylene (HDPE) and polypropylene as well as other downstream chemicals like ethylene glycol. The integrated company also operates a naphtha cracker, which supplies the raw materials for its other products. Honam Petrochemical was established in 1976 and is a part of Japanese conglomerate Lotte's Korean network. In 2010 Honam acquired Malaysia's Titan Chemicals for $1.27 billion. While it's publicly traded, various Lotte companies own a majority share in Honam Petrochemical.

LOTTE CHEMICAL’s Yeosu, Daesan, and Ulsan plants boast of the largest scale of domestic and international operations. The company has accomplished vertical systematization with respect to raw materials and products through steady plant and business expansion as well as production of basic petrochemical raw materials and products such as olefin and aromatics. Among the high-quality products produced by LOTTE CHEMICAL through its efficient processes are ethylene, HDPE, LDPE, LLDPE, PP, functional resin, EG, SM, PIA, PET, etc. Moreover, the LOTTE CHEMICAL Research Institute in Daejeon is establishing a solid foothold in the domestic petrochemical field through the steady development of new products. LOTTE CHEMICAL’s products are being distributed to 152 countries around the world. With the acquisition of Pakistan’s PTA in 2009, Artenius in the UK in 2010 and Titan Chemical Corp., LOTTE CHEMICAL is now able to efficiently supply excellent products to an increasing number of countries.

The company is further accelerating its efforts to strengthen its global competitiveness by establishing overseas branches in Hong Kong, Russia, and USA, along with the sales corporation in China for active sales activities both in domestic and abroad. As Asia’s top chemical company, LOTTE CHEMICAL will become a global chemical company that genuinely cares for the improvement in the quality of humanity and a balance with the environment.

PROBLEM OF STATEMENT

1. List and describe the information required of HPC's new management system. What problems was the new system designed to solve?

2. To what extend were “ people” problems affecting management decision making at HPC? What were some of the management, organization and technology issued that had to be addressed by the new system? How did system's designer make the system more 'people- friendly'?

3. What role did end user play in developing HPC's new system? How did the projects team make sure users were involved? What would have happened to the project if they had not done this?

4. What other step did HPC's take to make sure the system was successful?

5. What types of system-building methods and tools did HPC use for building its system?

6. What was benefit of the new system? How did it change the way Honam ran its business? How successful was this system solution?

FINANCIAL ANALYSIS

  

Summarized Consolidated Income Statement

Fixed Date: 2013.12.31 [Unit: KRW Billion]

Division	2011	2012	2013
Sales	15,700	15,903	16,439
Operating Profit	1,470	372	487
Net Income Before Income Taxes	1,527	387	375
Consolidated Net Income	1,133	316	286

Summarized Consolidated Statement of Financial Position

Fixed Date: 2013.12.31 [Unit: KRW Billion]

Division	2011	2012	2013
Total Assets	10,747	10,372	10,688
Total Liabilities	4,589	4,288	4,393
Total Stockholders’ Equity	6,158	6,084	6,294
Debt Ratio	75%	70%	70%

·         Revised details of K-IFRS No. 1001 (Decisions made in the 19th regular meeting: related to operating profit division) are reflected on the information for 2012 and 2013.

SUGGESTION AND ACTION

QUESTION 1:

List and describe the information required of HPC's new management system. What problems was the new system designed to solve?

ANSWER:

Information Requirement	Problems was the new system designed to solve
Reliable report	Report that are able to accurately measure management performance and provide useful, accurate information for increasing sales and reducing costs
Unsanitized data	-Report must up to date -not need to sanitized to “look better” to senior management
Fast report	Anytime access on the report anywhere and anytime
Enterprise wide visibility	Can access and share the data easily across the various business unit and functions

Question 2:

To what extend were “ people” problems affecting management decision making at HPC? What were some of the management, organization and technology issued that had to be addressed by the new system? How did system's designer make the system more 'people- friendly'?

ANSWER:

-To what extend were “ people” problems affecting management decision making at HPC?

• Individual managers were processing and manipulating the data to make their departments look better to senior management. The report data were somewhat stale and presented only on periodic basic.
• Executives at the chemical firm wanted access to the data before they went through manipulation or processing. They didn’t want each department’s own interpretation report thus delay the report to management. The executives wanted anytime access to the timeliest data but they did not want to be overloaded with unnecessary data so they could focus on the “watch-up indicators”

-What were some of the management, organization and technology issued that had to be addressed by the new system?

• Up to date information can be shown during the meeting to ensure all discussions and decision making are based on the consistency and timely view of the data. An executive can access the data at anytime to get a more accurate and timelier picture of how their organization is performing without any outside interpretation.
• No longer do top level decision makers i.e. to send their staff members on data-hunting excursions. The staff should know data is available and how to get it to expedites their decision making process.
• The system should be more users friendly.

How did system's designer make the system more 'people- friendly'?

• ·         Web access from multiple location
• ·         Required little training on how to use the system
• ·         Well designed– user friendly screen and data entry forms
• ·         Simple and easy ti updates
• ·         Easy to troubleshoot
• ·         Efficient

Question 3 :

What role did end user play in developing HPC's new system? How did the projects team make sure users were involved? What would have happened to the project if they had not done this?

ANSWER:

a) Interview and discuss with department involved

• ·         IT organization started by asking executives to list existing report they were received and to access the usefulness of each.
• ·         To list existing reports
• ·         Executives were asked if there were additional report old data from which of their organizational group were benefit. The dialogue proved very helpful in developing the right set of reports and dashboard for executives
• ·         Meeting with executives at different location where the system was being rolled out to received any user’s requirement.

b) Campaign

• ·         Project team encourage users to start working with the new system
• ·         Discussion and explain with executives regarding the system benefit.
• ·         Continuous campaign and awareness program to executives to ensure their use the system effectively

c) Benchmark with others and develop strategy

• ·         Benchmarks with other companies in the industry that can provide a good look at the data brings to most value.
• ·         Project team visited the various manufacturing plants when the system was being rolled out and had in depth discussion with executives about benefits of the new systems as well as hoe to use it.

What would have happened to the project if they had not done this?

• ·         Less refine data as required by the users and for management decision making.
• ·         It will create unpleasant experience for three end user should there is any hick up.
• ·         Inaccurate or untimely data flowing into executive’s dashboard.

Question 4 :

What other step did HPC's take to make sure the system was successful?

ANSWER:

1.      Phase approach

• ·         Rather than pushing a new system onto executives in the ERP life cycle ERP software and confident with the quality of the report.

2.      Emphasized benchmark

• ·         Emphasized the important of bench marking before designing and implementing an executive facing system

3.      Modern interface & mobile access

• ·         Executives can immediately accessing report and dashboards on daily, weekly and monthly basic
• ·         Mobile devices providing anytime, anywhere access to the new systems

Question 5:

What types of system-building methods and tools did HPC use for building its system?

ANSWER:

Type of system-building methods

Tools did HPC use for building its system

SAP Business Objects Dashboards

-A drag and drop visualization tool designed to create interactive analytics for powerful, personalized dashboard. -To make the data easily accessible, the system displayed a very intuitive web-based user interface. -Used for performance management, planning, reporting, query and analysis and enterprise information management. -Provide self-service access to data from databases and excel-spread-sheets. -An ad hoc query, reporting and analysis tools that is used to create queries or use existing reports, format retrieved information and perform analysis to understand trends and root cause.

Question 6 :

What was benefit of the new system? How did it change the way Honam ran its business? How successful was this system solution?

ANSWER:

Benefit	Change the way	Successful system solution
Unbiased Data	Executives no longer are limited to sanitized scale data in an outdated presentation format.	Accurate data
Timelier decisions	Reduce time to collect, process and track data for decision making. Delivers timely information and various analytics to end users.	Efficient result & right decision making
Improved business competitiveness	Ensure consistency of information and establishes structure for global sharing of information.	Increase business competitiveness through global used of information system.
Improved accessibility	Display data via management, cockpits, dashboard or widgets. Provides unstructured .to ensure readability	Get up to date data and easy to prepare a report