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7/29/2019 Intro to SCM
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22-Sep-13 Sarthak Chandra 1
Post graduate Diploma In Logistics &
Supply Chain2011-12
St. Xavier’s college, Kolkata
Introduction to SCM
By,
Sarthak ChandraPGDM – IIM (B), SAP SD SCM - Certified Consultant (SAP AG Germany)
CEO – SARV
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Course Overview
Evolution & Process of SCMBusiness Process Re-engineering
Reengineering and relevance to SCM?
Why reengineer? Benefits of Reengineering?
Operational Innovation
What is the right Supply chain for a
product ?
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The New Paradigm of Business ProcessManagement
Rapid, endless change is a cornerstone of business success, notan exceptional event
• Processes of excellence are able to adapt to change
• Constant change is required for business survival
Ability to define, measure, analyze, improve and controlprocesses are the keys to business innovation and growth
Processes must allow different people with different skills - ITdeveloper, manager, business analyst, marketing personnel - toeach view and manipulate the output in different ways
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Supply Chain Management
What is SCM?
Where does it start from?
Where does it end?
What are the components and management elements thatform a part of the supply chain?
Finance, Marketing, Operations, Sales, HR, Projects, Admin., etc. ??
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The first supply chain was the barter system
Traces of outsourcing was seen when Charles S. Rollsbecame selling agent for cars made by F. Henry Royce
The essence of SCM was understood with the first phasecharacterized as an inventory „push‟ era that focusedprimarily on physical distribution of finished goods
Ancient Times
1904
1960-1975
1975-1990
1980 Emergence of SCM1985 WalMart introduced the concept of Cross Docking
Internet revolutionized the distribution system of the business
1996
Concept of e-commerce changed the definition of
business1998
Companies began migrating from an inventory push toa customer pull channel
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Customer could be an internal customer or anexternal customer
Next, we see the processes performed in a supply chain as a CYCLICAL view
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Cycle I
Cycle III
Customer
Distributor
Manufacturerupplier
Retailer
Outsourcing
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A push-based SCM takes longer to react to thechanging market place
In a push-based supply chain, production decisionsare usually based on long-term forecasts
In push-based strategies, SCM experience increasedtransportation costs, high inventory levels and highmanufacturing costs
In a pull-based supply chain, manufacturing is demand driven
so that it is coordinated with actual external customer demandrather than a forecast
Push View of SCM
Pull View of SCM
Lead-time reduction occurs as the variabilitiesare better monitored in pull-based SCM
Pull-based systems are often difficult to implement when lead timesare so long that it is impractical to react to demand information
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What is Re-engineering?
Definition – “The fundamental rethinking andradical redesign of business processes to bringabout dramatic improvements in performance.”
Radical change, fast A fundamental rethinking and transformation of an
integrated set of business processes
Aims for dramatic business results
Unlike quick hits and incremental improvement,reengineering is a form of organizational change
Characterized by dramatic process transformation
Is forgetting how work was done at the times of mass
markets and how it can be done best now.
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Reengineering isn‟t…
Reengineering isn‟t an idea imported from
China
Reengineering isn‟t a program to hike employee
or worker‟s moral or motivate the sales force It won‟t push an old computer system to work
faster
Reengineering isn‟t about Fixing anything
Business Reengineering means starting all overagain from the scratch.
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Process Reengineering for Change
Relies on reevaluating the purpose of the
process and questioning both the purpose
and the underlying assumptions
Requires reexamination of the basic
process and its objectives
“Out of the box” thinking for the creation
of solutions to old and new problems
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The term process in the context of reengineering
A process is a series of related activitiesthat:
takes an input
adds value to it produces an output for a customer to
generate value for him
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BPR Methodology
A Methodology for Business Process
Reengineering (Fitzgeraldand Murphy 1996)
Select process to be reengineered
Establish process team
Understand current process
Dev elop a v ision of improved process
entif y actions needed to mov e to new process
Negotiate/execute plan to accomplish actions
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Why BPR projects are failing?
Lack of senior management sponsorship
Failure to make an ongoing commitment to the toughmanagement decisions needed to effect these changes to the
work environment
Lack of motivation
Lack of Knowledge & capitalizing on ignorance
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Methodologies: Issues
SELECTION; Many companies are developing their ownBPR methodologiesTIME; The need to test the project empirically so that it canbe validated and modified as appropriate. In the case of BPR,this poses a problem since a typical reengineering project
can last 1-2 yearsBPR efforts cannot be uniformly applied across differentcultures but need to be tailored to the specific contingenciesof the situation
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Methodology:
A consolidatedmethodology has beendeveloped from thefive methodologies
and a model wasdeveloped to provide astructured approachand to facilitateunderstanding(Muthu, Whitmanand Cheraghi 1999).
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Future Trends
Area of supply chain management and logistics.
Although currently fading, however BPR may increase inimportance again, in some form or known by some other name; the BPR phenomenon would be of enduringimportance.
SCM to take a lot of significance for organizations
Operational efficiency the key differentiator between aceperforming companies and mediocre companies
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Operational Innovation
Operational Improvement, Operational Excellence & OperationalInnovation
Some of the Greatest Success stories – Operational Innovation – Wal-Mart, Toyota, Dell etc.
“Dell Business Model”
“Toyota Production System”
Wall-mart
$ 44 Million – 1972
$ 44 Billion - 1992
2 reasons to tell these stories
1 – Its worth telling, as it has generated extraordinary results
2 – Not many stories, not more than 10% of the largeorganizations
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A Powerful Weapon
Strategic benefits Marketplace benefitsHigher Customer retention Lower PricesGreater market Share Greater Customer SatisfactionAbility to execute strategies Differentiated OfferingsAbility to enter new Markets Stronger customer relationships
Greater agility
Operational benefitsLower Direct costBetter use of assets
Faster Cycle timeIncreased accuracyGreater customization & precisionMore added valueSimplified processes
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Why Operational Innovation
Most companies are struggling with:
Low growth
Stagnation
Over Capacity production & competition
No pricing power
The Solution
Take market share from competition
Lower costs
Extraordinary Quality & Service
Operation Excellence and Operational Improvements areobsolete terms
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Challenges for operational Innovation
Business culture Undervalues operations
Out of Sight & Out of mind
Nobody owns it
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Making it work
Need to start at the grassroots level
Find a leader
Look for role models
Identify & defy a constraining assumption
Make the special case into the norm
Rethink critical dimensions of work
Implement in phases/step change
Can you answer “is it sustainable?”
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What is the right supply chain for your product ?Devising a SCM strategy
Before devising a supply chain
Analyze the nature of demand for the product
Primarily 2 types of products
Functional Products
Primarily Innovative products
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Types of Products
Functional Products
Staples – e.g. Grocery, petrol, gas etc.
Satisfy Basic needs
Don‟t change much over time Have stable, predictable demand & long life cycles
Innovative products
Any functional product where some innovation isdone
E.g. Fashion apparel, computers, mobile phones
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Enterprise
R esource
Planning
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ERP
General Concepts
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ERP – General Concepts
What is ERP?
The Current Scenario
Why ERP?
Definition
Evolution
Expectations
BPR & ERP
BPR & ERP – The Stages
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What is ERP?
facilitates company-wide integrated informationsystems, covering all functional areas
performs core Corporate activities and increasescustomer service augmenting Corporate Image
ERP is a solution, which
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The Current Scenario
Islands of Information
Difficult to get timely & accurate information
Heterogeneous Hardware & Software
platforms & practices
Poor connectivity between different
organizational locations
Sticking with obsolete technology
Resist to change
Lack of proven man-power to develop
integrated software
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Information Islands
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ERP - Definition
“Software solution that addresses the Enterprise needs, taking a process view of the overall organization to meet the goals,
by tightly integrating all functions andunder a common software platform”
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Why ERP?
For Management – to know what is happening
in the company
One solution for better Management
For cycle time reductionTo achieve cost control & low working capital
To marry latest technologies
To shun the geographical gaps
To satisfy the customers with high expectations
To be Competitive & for survival
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Evolution of ERP
1960’s - Systems Just for Inventory Control
1970’s - MRP – Material Requirement Planning(Inventory with material planning & procurement)
1980’s - MRP II – Manufacturing Resources Planning(Extended MRP to shop floor & distribution Mgnt.)
Mid 1990’s - ERP – Enterprise Resource Planning
(Covering all the activities of an Enterprise)2000 onwards – ERP II – Collaborative Commerce(Extending ERP to external business entities)
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Benefits of ERP
Benefits of ERP
• Help reduce operating costs and transaction costs
• Facilitate Day-to-Day Management
• Support Strategic Planning• Support supply chain management
• quicker response time
• improve the accuracy of the information
• improve the efficiency of the supply chain
• improve production
• improve supplier relationship and reliability
• bargaining power of trading partners
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ERP implementation challenges
Lack of top management commitment
Lack of MRP II education for the users of the system
Inaccurate data
Poorly managed MPS
Over-sophistication/Addition of fancy options
Lack of user control
Time consuming implementation process delayed payback
Behavioral problems
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Why Implement an ERP?
To support business goals
Integrated, on-line, secure, self-service processes for
Business, thereby Integrating all the functions
Eliminate costly mainframe/fragmented technologies
Improved Integration of Systems and Processes
Lower Costs
Empower Employees
Integrating the systems running in all the locationsEnable Partners, Customers and Suppliers
Transparency of information using a single data sourceacross the organization
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How to Implement an ERP?
Obtain the right mix of people, processes andtechnology!People
Project Structure
Should be aligned to processes
ProcessImplementation Process (outlined in detail)
Adapt your processes to those of the ERP.
TechnologyHardwareSoftware
Integrated Systems
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BPR & ERP
Just automating the existing business practiceswill not help ERP to achieve the anticipated results
Business Process Re-engineering [BPR] brings out the
deficiencies of the existing setup
BPR and ERP will give way to implement newsystems and the long pending improvements in theexisting systems
BPR may be time consuming but the scope can berestricted & controlled by the Management
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Pre Implementation Stages
The implementation of an enterprise resource planningsystem was an expensive, difficult and time taken task.
In-house/outsource development.
Adaptation of standardize package
1. Set up Steering CommitteeRepresentative from Senior ManagementDepartment ManagersInformation System Manager Consultant
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2. ERP TrainingFor the relevant personnel to understandintegrated computer system.For the relevant personnel to understand ERP
and its advantage and disadvantage.3. Feasibility Study
DriversInhibitors
4. Requirement analysisOperation requirement of individual departmentComputer access and control of individual staff within
different department.ReportsData exchange between individual department as well as
outside parties.Physical layout of computer equipments
5. Preparation of Testing DataExtract the critical and/or representative data from the
major operation (department) required for the
selection of standardize package
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6. Development of the system or selection of standardizepackage
Functions and features should capable for the futuredevelopment (atleast can lasted for three years) of
the organizations.Ability of the solution provider on future development and
maintenance.Data and procedures set up and standardization.Implementation methods and qualities.
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Implementation Stages
Typical tasks
The sample schedule in this section is at a high level but indicates relativetime frames for individual tasks and overall project accomplishment. It isintended to suggest the type of tasks that make up the schedule.
You should break the high level tasks into detailed steps complete withresponsibilities and timeframes that fit your company's specific project.
1. Change managementWho are the resistance individuals and/or groups?
What are their needs?What beliefs and values do they have?What are their interest?Effective communicationProject management
Project championMonitoring and evaluation of performance
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2. DurationExperience has shown that selection and implementation of these types of systems takes 6 months or less depending on
what is being installed and the condition of the
company's data.This depends on the system and the user's motivation.
3. Information/Data PreparationOne of the most important tasks in implementing an ERP
system is getting the information or data that the
system requires in a condition that will allow the systemto function properly.
4. Site PreparationAnother important area that needs specific attention is
preparation of the physical site for acceptance of the new system.
Here again the magnitude of this task is dependent on whatis being installed and the current condition of the facility.
However, the following items usually will needattention as a result of the system implementation -
a. Network b. Hardware
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5. Converting and Loading DataConverting and loading all required data into the new
system is a formidable task. Before you begin it isadvisable to understand the magnitude of the entire
task. As part of your system search be sure to understand fromthe vendor what assistance they can offer your
particular conversion effort.If you are converting from a computerized system, find out
if they have conversion programs that can formatand move the data from your old system to the new.
If not, ask what other options are available.It is important to understand the total logistics of this task.
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Success factors for an ERP implementation
Clear understanding of strategic goals
Commitment by top management
Business process reengineering (BPR) and minimum
customization
Data accuracy
Extensive education and training
Focused performance measures Use of consultants
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ERP – Options
OPTION 1 – MAKE [Using Internal resources]
Developing a custom-built ERP package, specific to therequirements of the organization, with the help of thein-house IT department
OPTION 2 - BUY
Going for Tailor-made ERP packages available in the market likeSAP, Oracle applications, Baan, PeopleSoft etc.
OPTION 3 –
MAKE [using External resources]
Developing a custom-built ERP package, specific to therequirements of the organization, with the help of asoftware solution provider
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Building ERP solutionsusing
Internal Sources
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ERP – Building using Internalresources – The Facts
Lack of adequate & qualified manpower Not driven with clear focus on expectations,
time & cost Poor software project management Lack of seriousness with the Management & the
IT Team High employee turnover Lot of schedule gaps during Project execution
Normally project life is more Frequent change in the scope with the approval
of the Management
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Tailor-made
ERP
Solutions
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Tailor-made ERP solutions
About this option Execution Phases ERP product selection phase Product selection - Parameters
Preparation Phase ERP product acceptance - Options Gap Analysis Production Phase
Implementation Phase Post-Implementation Phase Pitfalls & Points of Concern Critical Success factors
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About
Generalized off the shelf application s/w packagesModules based on rich functionalities for all businessfunctionsUser tested with lot of installationsNo lead time requirement for software developmentTuned for more users/networks with adequate & in-built securityParameterized for flexibility
Can sit on latest hardware & software platformsUpgradation of functionalities with version control
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Execution phases
ERP product selection
Preparations
Production
Implementation
Post-Implementation
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ERP Product selection Phase
ERP Team formation for selection
Appointment of Consultants [if needed]
Scoping study
Product selection
Implementation partners selection
Hardware/Communication cost estimation
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Product Selection - Parameters
Reputation of the ERP product
No.of installations in the geographical vicinity
% of the overall functional availability
Customization possibilities
After sales support
Your investment plan & budget
Implementation partner’s track record
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Technology
Support
Costs
5 Strategic
Requirement
Levels
FunctionalityGoal:
To select the
Most Suitable Software
Package Solution
Vendor
ERP Product selection Criteria
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Preparation Phase
Framing ERP Implementation Strategies
Formation of Apex & Steering committees
Functional & IT team formation
Training on ERP functions & features
Scope finalization
GAP analysis
Action plan to resolve the gaps
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ERP product acceptance - options
1. Adapting directly, all the functions available inthe ERP Product [Applicable for startup companies]
2. Change the way the firm does the business to fitthe product [Compromising]
3. Customize the ERP product to suit the businessProcesses. [Customization]
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GAP Analysis
This is the process to identity the gaps by mappingthe expectations of the company with thecapabilities of the ERP product
Results of Gap Analysis
Directly SupportedWorkaround suggested
Extension requiredChange in business process – suggestedNot full supportedManual – not under the scope of ERP
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Production Phase
Installing the software & hardware
Tuning the software to meet thecustomization needs
Master & Control data arrival as perthe Product data structures
Location & people specific roles & rightsallocation for module access & security
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Implementation Phase
Conference Room Pilot [Parallel run]
Resolving the Parallel run issues
Training the end users Live run
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Post-Implementation Phase
Regular monitoring
Tuning [hardware/software] for patchingthe performance issues
Maintenance
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Pitfalls & Points of concern
Costly comparing to custom-built options Lot of hidden costs Chances of cost & time overrun are high The Level of customization/Indianization
Compulsion to pay for redundant modules/features Vigorous involvement of all during implementation Non-availability of special practices like Customer
Complaint, Logistics Linking historical data – offline & painful
The requirement of Change Management is a must Dependency on outsiders is high IT department – Poor grip on the Implemented systems
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Critical Success Factors
The firm & optimistic approach of the Management- on adapting the ERP product driven methodologies- on customization- on monetary commitments
The dedicated Team Good Training Strict adherence to the Project schedules Right technical infra-structure
Change Management
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Custom-built
ERP
Solutions
using external resources
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Building ERP using Ext.sources
About this option
The Principle!
The Steps
Why? Points of Concern
Software Vendor selection
Critical Success factors
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About
Here the whole package is designed & built
by keeping a specific enterprise & its businessPractices in mind
by incorporating the improvements/additions with due integration without compromising or changing the current way
of doing the business and
providing flexibility to accommodate your businessfluctuations
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The Principle!
The best as seen elsewhere, need not be thethe best for you.
What is your best is what
can be successfully implemented
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The Steps
1. Software vendor selection2. Detailed study by the vendor3. Scope & platform finalization4. Freezing the commercials
5. Development6. Hardware addition/upgradation7. Old master/transaction data migration8. Parallel run with Integration & connectivity check
9. Implementation10.Maintenance
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Why?
Very economical while comparing the cost of implementing
tailor-made ERP solutions
Less prone for hidden-cost hits
The company can opt for its choice of Hardware, Software &
communication platforms based on the skill availability
The company and the software vendor have the direct
relationship during the project execution. The proximity
would be high & convenient.
IT department has good control over the Project What is required only would be considered under the scope –
No redundancy
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Why? - Cont.
The requisite flavor of E-Biz & work-flow components
can be embraced towards value edition
The existing practices & applications can be tuned and
linked with the proposed package
Maintenance & improvements are easy & less costlier.
Even IT team can maintain the setup after getting the
source code
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Points of Concern
Software development vendor selection
Requirement/scope finalization [high chances of retaining the islands as it is]
Less chances of Value addition
Not time tested
Chances of Prolonged project duration
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The following traits should be considered while selectingthe software vendor for building the ERP application
Technical expertise
Domain knowledge
Adequate manpower
Project management skills
Long existence in the field
Extra skills [e-biz & workflow]
Software Vendor Selection
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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Key ProcessIntegrationvia ERP
ProductLifecycle
Management
Supply ChainManagement
Customer Management
Supplier Collaboration
DesignPartners
Consumersand Channels
Beyond ERP
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R/3
FIFinancial
Accounting
COControlling
PSProjectSystem
WFWorkflow
IS
IndustrySolutions
MMMaterials
Mgmt.
HR
HumanResources
SDSales &
Distribution
PPProductionPlanning
QMQuality
Management
PMPlant Maintenance
SMServiceManage-
ment Integrated Solution
Client / Server
Open Systems
ECEnterpriseControlling
AMFixed Assets
Mgmt.
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Supply Chain Process
Customer Order Picking Goods Issue
BillingAccounts ReceivableFinal Payment
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
h l
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams
h C i i l S
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The Critical Success Factors
• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards
meeting the ERP concepts
• Strict implementation schedules & periodicalmonitoring
• The involvement of the IT & functional teams