Engineering Data Newsletter #4, 1996

LETTER FROM RUSSIA

By Leonid Ototsky and Anatoly Savin

Implementation of Information Technology products in todays Russia pose a

number of problems, most of which stem from the past economic system. The main

task of the enterprise in the past was to fulfil the central plan that was

downloaded from the top. The same situation was repeated inside the enterprise

with plans dictated from the top down to the shop floor. To achieve their tasks,

managers at every level tended to hide their real resources and capacities to

give themselves an extra safety margin for fulfilling the rigid plans.

In addition, there was a special procedure for centralised assignment of

consumers to suppliers. Every enterprise was responsible for delivering products

to the consumer and every consumer was responsible to approve them in accordance

with the plan. Because of the lengthy procedure of centralised assigning, every

consumer was responsible for sending specifications to higher management in

advance - often more than 6 months before deliver! Neither supplier nor consumer

worried about the extra stocks or costs. Today, the main shortcomings in

business processes in Russia are;

. there are no mechanisms for receiving and representing reliable information

about moving resources for reducing extra stocks (there are no grounds for

implementing inventory modules of MRP systems),

. there is no culture of, and management experience in, cost reduction,

. there is no culture of, and management experience in, free competitive

environment,

. there is no understanding of the need to standardise business processes in

different industry sectors,

. there is no clear understanding of the real benefits of implementing MRP

systems. On the one hand, it is difficult to prepare a proper business case for

investment in such systems. On the other hand, investment may result from

aggressive selling techniques by the vendor. Such systems usually end up as

white elephants.

In other words, there is no traditions and experience in managing to survive.

However, this is changing. There is an increasing interest in MRP systems from

the West in Russia today. Because of the huge differences between business

practices in Russia from those in the West, vendors currently spend a great deal

of money and effort tailoring and customising their products for the Russian

market. Computer Associates and SAP were the first companies to arrive with

mainframe versions of their products. Now there are many more companies

including BAAN, Avalon, Oracle, MBL, SQL*Systems, IFS, etc.

The installation base of MRP systems in Russia is still small, and most

implementations pre-date the current generation of object-oriented based

systems. This could be seen as an advantage, since it would be easier to

implement new ideas in Russia rather than fix existing ones. Therefore, a

radical move from the dated systems to the upcoming systems based on CORBA and

STEP may be a practical proposition. This is in line with the new economic

conditions in Russia where there is a great need to introduce a wide variety of

technologies to speed up the economic development process.

In summary, Russia could be seen as a green site for the new generation of MRP

and PDM technologies. Implementing such technologies should however, follow

careful planning that allows for the different and fast changing economic

conditions in Russia.

It is not difficult to find local people or firms to help foreign companies with

translations, and advertising and promotion of Western products, but this is not

sufficient to achieve successful implementations. Some of the factors and

practical experiences for successful implementations will be introduced in the

next Letter From Russia.

EOT