Session 7 Notes

IS560 ERP - Session Number: 7

Session Date: February 17, 2003 Session Objectives:

Administrative Items

Session Topics: ERP Support for eBusiness (continued) ERP Life Cycle Considerations

Enterprise Organizational Structures

Organization structure & management style will impact ERP implementation effort.

Specialization is concerned with division of labor. As organizations grow in size and complexity, they tend toward

specialization.

Functional Specialization

Geographical Specialization

Product or Service Specialization

Matrix Structures

Hybrid Structures

Centralization vs.. Decentralization Management

Functional Specialization

Advantages Professional expertise is enhanced Because it is the traditional form and widely encountered, it is

readily accepted by employees

Disadvantages May encourage narrow departmental interest to the detriment of

overall objectives (known as sub-optimality) May be difficulties in adapting to change e.g. geographical

dispersal, product diversification Narrow functional experience is less suitable as training for

management

Geographical Specialization

Organization is divided up on a regional basis, and local management given responsibility for the activities of the region

Advantages On the spot decision making using local knowledge Speedier reactions and better service creates customer goodwill Some operating costs are lower e.g. transport, storage The all-round experience is good training for managers

Disadvantages Loss of control by head office Problems of coordinating local activities Duplication of some jobs

Product or Service Specialization

Frequently encountered in large organizations which have a wide range of services or products

Advantages Develops expertise in dealing with a particular product or service Enables responsibilities to be clearly identified which may

increase motivation Diversification and technological change easier to handle

Disadvantages Managers may promote their product or service to the detriment

of the organization as a whole Possible coordination problems and loss of top-management

control

Matrix Structure

Concept developed from the aerospace and high tech industriesProject teams (each with designated manager) are combined with a conventional functional structureAttempts to combine the efficiency and stability of the more conventional departmental and functional structure with the flexibility and directness of a project-based approachAdvantage Can increase motivation and helps in directing productive effort

Disadvantage Conflicts over divisions of responsibility between project groups

and functional heads, and over the way resources are allocated Functional heads may resent the apparent downgrading of their

responsibilities

Centralization and Decentralization Management

Decentralized organizations Dispersal of authority to parts of the organization. Authority to commit resources and to take real decisions is spread. Decentralization can improve local decision making, increase flexibility and reduce

communication problems. Potential problems include sub-optimal decision making, and problems with

coordination and control.

Centralized organizations Authority is exercised by top management.

Decentralized operations with centralized policy control. Certain functions are more easily decentralized (Purchasing and Marketing). Certain functions often remain centralized even in a largely decentralized

organization (Finance and Research). Operating units encouraged to act as largely independent entities, with clear

performance guidelines regarding core values (e.g. quality of product and service).

ERP Life Cycle Considerations - SAP Perspective

SAP Implementation HistoryImplementation SinsImplementation CSFsImplementation ExamplesProject Planning FundamentalsMicrosoft Project Familiarization

SAP Implementations Historical Perspective

First Wave Implementations1990-1998SAP R/3 software onlyImp Partners installed & configuredSAP only supplies softwareExpensiveLong time lines

Initially (90-86) installed via SAP “Ecosystem” Consultant firms- Ernst & Young, PriceWaterhouse, KPMG Standard methodologies

ASAP 1997

1997-now

SAP concerned Cost blowouts Market saturation SME penetration Improvement in competitive ERPs Globalization Technology advances

All above issues indicated need for affordable implementations Generic methodology Midsize System Integrators now enter the market Large SIs unhappy

SAP Implementations Historical Perspective (continued)

Second Wave2000-SAP concerned Fine Tuning core SAP Preparation for eCommerce Data preparation Improvement in ERPs

All lead to need for Upgrade core ERP & new functionality CBI Data Warehousing APO

ValueSAP(CBI) 2001- CBI (continuous business

implementation) Free Tools for improvement Pre-configuration packages SAP services, develops

templates as support for the software.


Third wave 2001-

Vertical Service Providers ASP model faltering, potential answer VSP From Estimated $22.7 billion 2003

New Functionality CRM SCM SEM BOLT third party functionality


1997

Products

People & Processes

Knowledge Transfer

• ValueSAP is the framework that changes the emphasis from “time to market” into “time to benefit”

Team SAP - Binding a network of industry experts from partners and SAP working together for customers success

AcceleratedSAP - Delivering methods and tools to ensure on-time and on-budget implementations

Knowledge maps to improve speed and quality of knowledge transfer between customers, partners and SAP

Launch of SAP Solution Maps for 17 different industries at SAPPHIRE Los Angeles (1998)

mySAP.com

1999

1998

Developed products with rich functionality and high quality

Using an up-to-date technology infrastructure Providing a powerful service and support infrastructure

worldwide

Sales &Marketing

OrderFulfillment

CustomerService

Trading PartnerManagement

ProcessControl

RegulatoryCompliance

Financial Planning & Controlling

Fixed AssetsManagement

Human ResourceManagement

Acquisitions& Mergers

R & DAdministration

FacilitiesManagement


Sales ForceManagement

ProductionExecution

ProductionPlanning

QualityManagement

Procurement

Transportation LogisticsPlanning

Storage & SiteManagement


Financial Reporting

ProductDevelopment

NewTechnologies

Environment, Health& Safety

PlantManagement

Safety Management

Pilot & TechnologyTransfer

QualityAssurance

OperationsAnalysis

WarehouseManagement

Enterprise Management

Research & Development

Plant Engineering

Process Engineering

Sales

Operations

Distribution


Critical Success Factors - Four Dimensions

REF: T Jace, Ernst & Young :

• People & Organization

• Process

• Knowledge

• Technology

People & Organization Considerations

Address business unit autonomy quickly and frequently

Define and publish staff selection criteria Highlight behavioral attributes, not just technical competency

Identify and openly discuss new organizational alignments

Comprehensive communication plans are mandatory Tailor to various audiences with a focus on aligning stakeholders Symbolize the new identity

Structure training to include facets of all four dimensions

Realize that pessimism will prevail until certainty is in sight (senior management support)

Process Considerations

Adopt best and leading practices (e.g. workflow, imaging) and constantly evaluate outsourcing options

Involve future staff in detailed redesign and re-engineering when appropriate

Detail the processes at a low level, encompassing: standardized business rules and control performance metrics non-SAP activities

Clearly differentiate hand-offs between shared services and business partners and ensure consistency amongst the business partners

Technology Considerations

Quickly establish enterprise-wide (world-wide?) communications backbone

Manage to an integrated SAP / BPR implementation methodology

Focus on integration testing

Minimize modifications while balancing differentiating business requirements

Evaluate Electronic Commerce opportunities rigorously

Double, triple, then double again your sizing estimates

Knowledge Management Considerations

Institute controlled scope and issues management through use of chartering and groupware

Couple the site selection process with the re-engineering initiative

Adopt strict data capture and version control

Build a culture of quick decision making

Centralize the communication mechanism to key stakeholders

Priorities knowledge transfer through use of user ‘champions’ and client configuration

Implementation Sins

1. Not understanding the scope

2. Not committing the right resources

3. Not managing the change

4. Not managing benefits

5. Not embracing integration

6. Not planning for the end of the project

Ref: Manoeuvre, The Six deadly ERP Sins

Implementation Sins (continued)

Not understanding the scope Last time you will replace major systems Partial delegation of your IT strategy to

vendor Every aspect & person to be affected These are business not IT projects Limit conflicting parallel activities, e-

commerce


Not committing the right resources Creative, capable & knowledgeable staff Use the best people in the organization Steering committee empowered to make

business decisions Full time people, not part time Team members will be greatly enhanced Motivate and retain team members



Not managing the change Change management, soft & psychological Communicate and influence change Be personal in your communications Use network of project reps, 2 way feedback Change man need to be trusted and respected User training crucial



Not managing benefits Costs & Times actively reported Benefits not actively reported Business case needs to be revisited including

benefits Benefits need - owners & key factors Bus case needs detailed benefit delivery plan



Not embracing integration Resistance to organizational restructure Functional depts. and senior man remain Operational staff are empowered Significant change to structure necessary Roles need to be redefined along processes



Not planning for the end of the project What are the long term implications Outsource vs. in-house for long term

management Build in-house support groups for future What is the future of project team after ERP? Continuous improvement, how do you

transfer from “project mode” to “structured improvement”?



Motivation to undertake ERP Motivation to undertake ERP

Note: Based on multiple answers per respondent

6%

10%

11%

12%

15%

15%

19%

20%

21%

24%

26%

27%

37%

42%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Unable to Support Growth

Inconsistent Processes

Obsolete Systems

Difficult to Integrate Acquisitions

Business Becoming Global

Unable to Implement New Business Strategies

Business Processes or Systems Not Integrated

Complex, Ineffective Business Processes

Not Responsive Enough to Customers

Cost Structure Too High

Poor Quality/Visibility of Info

Poor/Uncompetitive Performance

Disparate Systems

Systems Not Y2K Compliant

Pro

gra

m M

oti

vati

on

% Respondents

Source: Deloitte Consulting and Benchmarking Partners Circa 1999 (Based on a study of 62 companies that have gone live with an ERP system)

Anticipated Temporary Dip in Performance

… 4 months to bring back to legacy system baseline

… 6 months of decreased productivity

… 2 to 3 month performance decline due to the normal learning curve

… 6 months of stabilization aftergo-live

… reality is this hurts the business in the first 6 months

Some reported examples ...

Go-Live

Per

form

ance

Time

A

B

C

Source: Deloitte Consulting and Benchmarking Partners (Based on a study of 62 companies that have gone live with an ERP system)

Synthesize

Implement

Stabilize

Synergize

Go Live

3-6 Months

6-18 Months

Ongoing

Anticipated Timeline to Full Performance

Stabilize• Retraining

• Process cleanup

• Data cleanup

• Software reconfiguration

• Report design

Synthesize• Data

warehousing

• e-commerce

• Additional vendorsoftware

• Data collection systems

Synergize • Strategic planning

• Major processredesign

• Business casedevelopment

• Supply chain

• Lean manufacturing

ERP Optimization Will Drive a Variety of InitiativesERP Optimization Will Drive a Variety of Initiatives

Next Session Highlights:

Topics ERP Life Cycle Management (continued)

Read chapters 18 of “ERP Tools, Techniques, and Applications” by Ptak and Schragenheim.

Documents

Session 7 Notes