Like any other country, Japan has more or less unique business practices and requirements. This article is to provide some insight into Japan specific considerations when implementing Dynamics AX or ERP software. We will examine functional, technical and project related requirements in general rather than looking into technical and setup details. This article is intended for key business users and project members as well as technical specialists who just need a quick reference about ERP system requirements in Japan. The article is not to cover all Japan specific ERP implementation requirements. These can differ case by case over various Dynamics engagements and industries. This article is based on the author’s professional experience form Dynamics implementations in Japan and Japanese companies in the region. It does not represent any implementation methodology or best practice recommendations neither provides any product commitments or warranties.
ERP Functional Requirements
Japanese UI and Business Documents
Like in most of the non-English speaking countries, Japanese users would prefer Japanese language user interface (UI) instead of English. Business documents like invoices, delivery notes, accounting documents and various reports in domestic business would normally be requested in Japanese. Dynamics AX localization generally support this requirement.
The final layout of documents and customized functions will depend on company’s requirements since business documents are normally reviewed and adjusted for each organization rather than using “Out of the box” objects. Examples of this work include changing layout, adding logo, adding or removing fields etc. Unique to Japan and some East Asian countries is seal (hanko) graphics or box design required on business documents. Organization or user can ask for a red seal appearing on company address in a document.
While customizing forms, documents and reports to be viewed in multiple languages, it might be necessary to adjust the size of labels in order for layout to look nice in Japanese as well as English.
Consolidated invoice is one of the often mentioned country-specific requirements in Japan. This means consolidating more than one sales order with posted packing slips into one invoice as of consolidation date. Invoicing schedules can differ per agreement with customer. Consolidated invoice feature is supported in relations sales orders in Dynamics AX. Invoice consolidation practice is also used in other countries than Japan.
T-Account journal is preferred form layout for many users in Japan when processing accounting transactions with debit and credit amounts. It allows user to enter debit and credit transaction in the same line. This requirement is normally supported in most of Japanese accounting packages (Glovia, NEC Explanner, Grandit etc.) and is part of Dynamics AX Japan localization.
Japanese language uses Kanji - adopted and modified Chinese characters. Phonetic guidance of these characters uses kana writing system. This requires additional fields on multiple forms for Kana names to provide correct pronunciation and meaning of Kanji. These fields are normally required on customer, vendor, and employee forms showing a person’s name.
Electronic Banking Standard
In order to upload vendor payments into banking systems directly from Dynamics AX, all the major Japanese banks (Mizuho, Tokyo-Mitsubishi UFJ etc.) will require payment data files to be prepared according to Japanese Bank Association (JBA) bank format. Dynamics AX localization provides support for this function since version 4.0.
Promissory note (bill of exchange) is a document that allows payment to be settled by specifying (promising) that another party will pay for the goods or services. Usually this 3rd party is a bank. Popularity of promissory notes seems to be declining in Japan due to low interest rates associated with this financial tool. Dynamics AX supports rich functionality for bill of exchange transactions. Recently electronic promissory note integration with bank account has been required by some companies while not yet supported with Dynamics standard functionality.
It is possible to set up rounding of different types within the standard system including for JPY. Meanwhile, companies might want to set up rounding on specific criteria like customer base. Some Japanese ERP packages have functionality with different rounding types for the same transaction on sales details (lines) and collective invoice
While Dynamics AX offers rich functionality in managing Fixed Assets, there has been some reluctance to adopt it as “Out of the box” solution in Japan. An area requiring further evaluation by a company implementing Dynamics is special tax depreciation rates and reports. To address specific requirements of Japanese companies, product exists to integrate Dynamics AX with OBC Shokyaku Bugyo, a popular Japanese fixed assets accounting package.
Japan requires Consumption Tax handling and reporting to the tax authorities. The overall process and logics of consumption tax setup and processing is rather familiar to international practice and largely supported in Dynamics AX. The final calculation method and format of the official tax form shall be confirmed upon implementation of the system. There are no specific tax declaration reports printable from standard system as at the time of this writing.
Like some other East Asian regions, Japan has its own counting system of years. This counting is based on the name of reigning emperor. The display of year consists of the year (era) name and number of year. This can be followed by month and date. In Dynamics AX, the functionality is addressed by implementing a special date conversion function for Japanese era.
Many organizations in Japan might already have workflow system implemented. Therefore, one of the challenging customer requirements would be to integrate their existing workflow solution with Dynamics AX. Such work would require additional customization since no workflow integration solution for Dynamics exists in the Japanese market for the time being. If Dynamics AX workflow system is considered – Japanese organization might ask to have seal (hanko) graphics on the workflow related documents as well as some specific approval workflows like “Googisei”.
Lean manufacturing originally can be referred to as philosophy derived from Toyota Production System in Japan. “Lean” means a production or business practice that considers the consumption of resources for any other goal than the creation of value to the end customer to be wasteful and to be avoided. Lean is of interest to Japanese as well as many overseas companies. Therefore, Microsoft has implemented rich lean management functionality like Kanban management etc in the global release of Dynamics AX 2012 manufacturing.
Seiban is another manufacturing and management practice in Japan likely to require customizing in Dynamics. “Seiban” can be translated from Japanese as “Manufacturing Number”. Seiban number is assigned to parts, materials, purchase orders or other objects for a particular job or project requested by customer etc.
Languages such as Japanese, Chinese and Koreas require double byte encoding due the vast number of characters in these languages. Double-byte is supported in Unicode. If organization has a non-Unicode system to interface with, then conversion package like HULFT is required.
Change Management: Avoid Rebuilding Legacy Systems in Dynamics
Japan is no exception - enterprise ERP implementations require strong leadership and substantial team efforts across whole organization along with deep business and technology understanding. When faced with these challenges and various dependencies, key users and management might end up basing their requirements on what the old legacy systems delivered. In most cases, this will not take advantage of opportunity to simplify business processes and systems while preventing Dynamics implementation to be on time and budget with expected returns. Successful implementation will need a complete buy-in by the highest members of the IT and business hierarchy to ensure the project is not jeopardized from the start.
In reality, not every executive really likes to take responsibility of challenging tasks. The result is having irresponsible members doing irresponsible projects. Therefore, responsibility must clearly be defined in the Project Charter and related documents to ensure commitment by the organization. Sign-off process, timing and signatories have to be agreed before execution of any phase of the project.
Lost in Translation
Notable differences between Japanese and English languages in writing, grammar and cultural contexts mean that it takes much longer for Japanese national to acquire business English skills than people in many other countries. Depending on your implementation project and company, chances are that many key users and managers will not be able to discuss or write freely in English. While cultural context and practices are not scope of this article, Japanese unique cultural context also cannot be ignored. It is recommended to consider in advance the language and communication aspect in Dynamics projects in Japan. Partial solution is hiring interpreters and translators or using machine translations. While hiring interpreter would make things easier, it can add to project costs and not necessarily avoid miscommunication in the context of particular industry, company and culture. The same consideration goes for machine translation software. While it is very appealing to have whole project documentation translated in just few minutes, these documents can considerably confuse any team relying on translated information. Consider having bilingual team members in the key project roles. These individuals shall sense local context, understand particular business, technology, organization and are to enable smooth knowledge transfer among team members in various language skill levels.
Focus on Detail
Another experience often pointed out by many doing business or implementations in Japan is high attention to detail. Japan is famous for high quality services and products with attention to every detail. As a result, this approach can take much longer time to achieve project objectives due to longer decision making associated with detail preparations and reviews etc. Furthermore, the Japanese management also would like to see the “complete picture”. The combination of these makes developing innovative and leading edge application very challenging. In the past, Japanese did well through reverse engineering and strict discipline, but is struggling with innovations now.
There can be various explanations from the Japanese business customs, organizational hierarchy, risk management as well as individual’s point of view during engagements. To understand more about Japanese business customs, there are good materials searchable on the Internet.
In general, the ERP requirements in Japan are not so complicated. Language and local context can make a significant impact on Dynamics project. In the words of long time SAP and Dynamics implementer in Japan, who asked not to be named: “For the project to be a success all the politicians should be aligned from the start and given responsibility and held to those responsibilities – 60% politics, 20% change management and 20% technology is the usual blend of a project here”.
This article is based on the professional experience of the author who makes no representations or warranties regarding the products and advices mentioned. The opinions expressed here do not necessary represent the ones of author’s employer.
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