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    Thermowatt Electronic



    Thermowatt (Wuxi) Electronic Co., Ltd.

    BPCS System Implementation Project

    Proposal for Providing Professional Services

    November 10, 1999

Thermowatt Electric

    Table of Contents







    Appendix A Standard Terms and Conditions

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    Thermowatt Electric

    I. Project Background

Thermowatt (Wuxi) Electronic Co., Ltd. (“Thermowatt (Wuxi)”) is a wholly foreign

    owned investment entity of MTS Group in which Thermowatt (Wuxi) is engaged in

    the manufacture and sale of sheathed heating elements and thermostats for water


Thermowatt (Wuxi) has just begun its business in China and is going to setup a

    complete ERP system. In this regard, Thermowatt will engage Arthur Andersen

    (“AA”) to support the implementation of BPCS system, including Finance,

    Distribution and Manufacturing Module from the beginning of December, 1999.

    II. Project Objectives and Scope

Thermowatt (Wuxi) required that BPCS implementation will cover the following


    ? CEA

    ? SCM

    ? MMM

    The major objectives of implementing BPCS CEA, SCM, and MMM is to:

    ? Recording the General Ledger in the BPCS system

    ? Generate general voucher automatically from the subsystem module

    through proper link and setup

    ? Facilitate the check between the general ledger and the subsystem at the


    ? Link up the subsystem modules of purchase, sales, inventory management,

    manufacturing information

    ? Reduce the time of document circulation and speed up the information


    ? Realize integration among Financial, Distribution and Manufacturing


    ? Minimize duplication work in source data input especially in costing,

    material requisition and production control areas

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    Thermowatt Electric

    III. Project Approach

    Based on the methodology of BASIS, Thermowatt(Wuxi)’s business requirements and implementation schedule. below is the summary of key tasks to be performed:

    Steps Detail Objectives Key Tasks Perform Est. AA

     By Working

    Mandays 1. Implementation Understand current business AA 1 ? Familiar with the enterprise Preparation process and future business running process and overall (10) requirements situation

     ? Identify required changes to

    Prepare business process AA 2 software and business

    requirements report processes

     ? Obtain agreement on all

    Prepare preliminary AA/ 1 required changes

    prototyping for MRP/MPS MTS ? Design all changes modules (China)

    Perform basic system testing AA 1

    Prepare conceptual training AA 1

    materials and prepare

    Training Plan

    Conduct conceptual training MTS 2

    for end users (China)

    Prepare the prototyping data AA 1

    Supervise the input of

    prototyping data

    Benchmark against Global AA 1

    Best Practices Database and

    prior engagement experience


     ? Business Process

    Requirements Report

    ? Training Materials

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    Thermowatt Electric

    Steps Detail Objectives Key Tasks Perform Est. AA

     By Working

    Mandays 2. Development Conduct Prototyping AA/ 10 ? Make all required changes to

    And according to the business MTS business processes

    Confirmation process requirements (China) ? Make all required changes to

    (25) BPCS software

    Explain to the end users on the AA/ 5 ? Approve all changes

    new business processes MTS


    Prepare New Business System AA 5


    Conduct Conference Room AA/ 3

    Pilot Thermo



    Prepare Requirement 2

    Definition Report AA/





     ? Business System Map

     ? Requirement Definition


    ? Approved New System

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    Thermowatt Electric

    Steps Detail Objectives Key Tasks Perform Working

    Day By 3. Implementation ? Ensure the readiness of Conduct End User Training AA 10 (20) procedures, personnel and Workshop data

    ? Convert static and variable Prepare data and System AA 2

    data to the new system Conversion Plan

    ? Cut-over to the new system

     Resolve data conversion AA 5

    issues and test converted


    Prepare Cut-Over Readiness AA 1


    Monitor cut-over and AA 2

    resolve cut-over issues


     ? System Conversion Plan

    ? Cut-over Readiness


    ? New System Operating

    4. New ? Evaluate the Effectiveness Review the implementation AA 1 System of the New System progress of new system Operation (5) Identify possible major AA 1

    implementation problems

    Recommend further AA 2


    Arrange New System AA 1

    Evaluation Meeting


    ? New System Evaluation


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    Thermowatt Electric

    IV. Project Team Organization

Project Organization

As the success of this implementation project requires significant commitment of

    MTS management and employees, we propose the following project team


     Project Steering Committee

    MTS Senior Management AA Project Director Norman Sze

    Internal Project Manager Project Management MTS Designated Personnel AA Project Manager

     User Representative and Functional and System System Support Consultants

    MTS Key Users AA Consultants ? The Project Team will consist of personnel from both Arthur Andersen and


? The Steering Committee will take responsibilities of authorization, direction,

    resource assurance, and quality control.

? The project director from Thermowatt(Wuxi), project manager and consultants

    from Arthur Andersen will work together to manage project activities,

    resources allocation, and resolving project issues.

? The project team will also include at least one user representative from each

    business function within the project scope.

? The key users must be familiar with business processes of their responsible

    business function(s), and have authorities to authorize changes in business

    processes as a result of this project. The key users will also be responsible, with

    the assistance from Arthur Andersen consultants, for training end users of their

    responsible business function(s).

? Software vendor will provide technical services on solving system bug and data


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    Merloni TermoSanitari

V. Time Schedule

    Based on our understanding of your needs and our initial work plan, we estimate that the project duration will be approximately 4 months to complete the tasks described above. A high-level work plan by is presented below. Detailed project plan will be prepared separately.

     99,12 00, 6 7 00, 8 00, 9 00,1 00,2 00,3 00,4 00,5 00,

    1. Implementation


2. Development &


3. Implementation

4. New System


    8 Cut over to New System

Merloni TermoSanitari

    Key Assumptions:

? Thermowatt(Wuxi)’s senior management is committed to support our

    implementation and solve any issues during the project in a timely manner;

    ? Thermowatt(Wuxi) will assign a full-time project manager, and he will be fully

    delegated to the project;

    ? The key users and end users will be available when the training is conducted;

    ? With the supervision from Arthur Andersen, Thermowatt(Wuxi) will be responsible

    for the preparation and input of data;

    ? Thermowatt(Wuxi) will be required timely sign-off the deliverables developed

    during the implementation on critical milestones;

    ? We understand that Thermowatt(Wuxi) do not require modification/customization

    on BPCS Manufacturing modules. The time and fee estimated in this proposal do not

    include any work related to system modification/customization. If

    modification/customization is needed, we will discuss with Thermowatt(Wuxi) and

    prepare a separate fee arrangement.

    ? For prototyping, we understand that AA will mainly train the Thermowatt(Wuxi)

    project team member how to perform the prototyping and propose solutions to

    resolve issues during prototyping. Thermowatt(Wuxi) will take the lead in

    prototyping. Should there be any additional work arisen from prototyping, AA will

    discuss with Thermowatt(Wuxi) on a separate fee arrangement.

? We understand that Thermowatt(Wuxi)’s manufacturing operation is newly set up.

    There does not require significant business process improvement and

    Thermowatt(Wuxi) will be responsible for the implementation of such improvements.

    ? Since the license agreement is signed between SSA and Thermowatt(Wuxi), SSA will

    undertake to indemnify Thermowatt(Wuxi) in all matters concerning licensing rights

    and third party liability regarding the use of the package. In addition, SSA will

    provide assurance that BPCS V6.04 is year 2000 compliance


Thermowatt Electric

VI. Professional Fees and Expenses

    We provide the following best-estimated AA mandays for BPCS V6.04

    Implementation of Manufacturing and Costing modules:


    Phase Manday

    1. Implementation Preparation 10

    2. Development and Confirmation 25

    3. Implementation 20

    4. New System Operating 5

    Total 60

    Our fee estimates do not include costs associated with customization. However,

    should the need arises, we are pleased to assist on specific work areas under

    separate fee arrangement.

     Our charges of the work described above will be based on the time required for

     completion and the experience level of the personnel involved, plus actual out-of-

     pocket expenses(OPEs). OPEs will include charges for transportation,

     accommodation, communications, photocopying, staff allowances, business

    tax (5%) and other expenses actually incurred for the project. In view of the sound

    relationship between Thermowatt(Wuxi) and AA, AAs estimated mandays will be

    80 days and will not charge OPEs for this project.

    Based on the above mentioned implementation scope and approach, the estimated

    professional fee for BPCS Manufacturing and Costing Modules implementation will

    be USD 48,000, equal to RMB 397,344 at current exchange rate ( 1 USD =


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