UNIT 2

UNIT 2ERP IMPLEMENTATION1Financial & Operations performance is unknown

Inaccurate customer expectations & job costs are predicted or even unknown

Inventories of a company do not meet or far exceed production requirements on a consistent basis

WHY ERP???SIMPLIFICATION OF BUSINESS PROCESSES

ENHANCE PRODUCTIVITY, FLEXIBLITY, & CUSTOMER RESPONSIVENESS

COMPLIANCE & CONTROL

EFFICIENCY IMPROVEMENTS

ENABLE NEW BUSINESS & GROWTH STRATEGIES

REDUCE COST & ELIMINATE INEFFICIENCIES

CONTINUOUS IMPROVEMENT

EXTEND YOUR BUSINESS USING THE INTERNET

ERP SYSTEM IMPLEMENTATION - BENEFITSSIMPLIFICATION OF BUSINESS PROCESSES

Nature of work is changing

ERP systems introduce the newer and the latest processes that make the operations simpler, faster, more efficient & more effective ERP SYSTEM IMPLEMENTATION - BENEFITSENHANCE PRODUCTIVITY, FLEXIBLITY, & CUSTOMER RESPONSIVENESS

ERP system gives you the tools to maximize the efficiency of business processes across the entire enterprise

Forecast demand to suppliers, increase on-time delivery, automate the shop floor, decrease lead-times, make commitments you know you can keep ERP SYSTEM IMPLEMENTATION - BENEFITSCOMPLIANCE & CONTROL

Globalization, mergers & acquisitions and regulatory burdens

ERP systems ensure compliance with policies & regulatory requirements by taking control of processes & enforcing business rules ERP SYSTEM IMPLEMENTATION - BENEFITSEFFICIENCY IMPROVEMENTS

An ERP system automates many business processes delivering work to the appropriate people and systems, enforcing rules & tracking completion against set deadlines

Significant expansion in daily work volume without adding staff, reducing cycle times

Efficiency improvements are the most important source of ROI from the ERP implementation

ERP SYSTEM IMPLEMENTATION - BENEFITSENABLE NEW BUSINESS & GROWTH STRATEGIES

New Business, New Infrastructure

Updating & integrating your business processes with an Enterprise system enables you to take on more business & grow in new directions.

ERP SYSTEM IMPLEMENTATION - BENEFITSREDUCE COST & ELIMINATE INEFFICIENCIES

An ERP system can improve the companys bottom-line significantly

Better resource management means more inventory turns, more efficient scheduling on the shop floor reduces down time & over time.

Improved customer service leads to repeat businessERP SYSTEM IMPLEMENTATION - BENEFITSCONTINUOUS IMPROVEMENT

Optimization of business performance

Metrics & Key performance indicators(KPI) mapped out & simulated in a process model can be displayed in real-time in performance management dashboards & reports.

ERP supports high level strategic metrics, drill-down analytics and alerts when results deviate from performance targets.ERP SYSTEM IMPLEMENTATION - BENEFITSEXTEND YOUR BUSINESS USING THE INTERNET

Business onto the internet provides a competitive edge

Web enabled technology allows you to access information, sell product, run business processes, & communicate with your customers & partners at any time & from anywhere in the world

ERP SYSTEM IMPLEMENTATION - BENEFITSINADEQUATE REQUIREMENTS DEFINITION

Requirements definition should clearly specify the issues and the problems, the additional capabilities expected out of the system

Failure to a clear definition could result in the selection of a wrong ERP package, unnecessary customization, lack of employee re-training, etc failure of ERP implementationIMPLEMENTATION CHALLENGESRESISTANCE TO CHANGE

Cooperation of everyone involved is an absolute necessity.

ERP is first an attitude, then a system Employees should be convinced about the importance of ERP & the benefits of using an ERP tool or system

Resistance - A cause of ignorance.

IMPLEMENTATION CHALLENGESINABILITY TO ACHIEVE ORGANIZATIONAL UNDERSTANDING

The biggest ERP Challenge faced by organizations is recognizing that the integration of previously unintegrated job functions requires that knowledge workers supporting different organizational functions will now be using the same software & they will each be entering information that affects the others.

The knowledge workers must have a much broader understanding than they did before the ERP solution, of how others in the organization perform their functionsIMPLEMENTATION CHALLENGESINADEQUATE RESOURCES

ERP implementation is a very costly affair that requires a variety of resources money, people, software, hardware...

A budget needs to be established

Lack of skilled & motivated personnel from the organization.IMPLEMENTATION CHALLENGESLACK OF TOP MANAGEMENT SUPPORT

The roles of top management in IT implementations include developing an understanding of the capabilities and limitations of IT& communicating the corporate IT strategy to all employees.

Going ahead without solid backing from top management is a sure recipe for disasterIMPLEMENTATION CHALLENGESLACK OF ORGANIZATIONAL READINESS

Preparedness of the organization for a new system of functioning is the main challenge in the successful implementation of an ERP system

Management should make sure that the organization, the work process and the staff are amenable to adapt to the ERP system IMPLEMENTATION CHALLENGESINADEQUATE TRAINING & EDUCATION

Lack of user training and failure to completely understand how enterprise applications change business processes frequently appear to be responsible for problem ERP implementations and failures

ERP projects appear to have a six-month learning curve at the beginning of the projectIMPLEMENTATION CHALLENGESPOOR PACKAGE SELECTION

Analyse the capabilities of the ERP service provider and the expertise to provide you a good solution

The choice of the package involves important decisions regarding budgets, timeframes, goals and deliverables that will shape the entire projectIMPLEMENTATION CHALLENGESCUSTOMIZATION ISSUES

Most organizations discover how compatible the new ERP is with their existing systems and processes when they turn on the new system

FOUR BASIC CHOICES TO CUSTIMAZATION

Modify the ERP to match the organizational processes and / or data structures

Modify the organizational processes and / or data structures to match the ERP

Perform some of choice 1 and choice 2

Ignore the problem

IMPLEMENTATION CHALLENGESLONG PAYBACK PERIOD

POOR COMMUNICATION & COOPERATION

HIDDEN IMPLEMENTATION COSTS

IMPROPER INTEGRATIONIntegration of ERP ModulesIntegration of ebusiness applications Integration with legacy systemsIMPLEMENTATION CHALLENGESERP implementation life cycle comprise of the following three phases

PRE-IMPLEMENTATION PHASE

IMPLEMENTATION PHASE

POST-IMPLEMENTATION PHASEERP IMPLEMENTATION LIFE CYCLEThis phase is the preparation phase or the planning phase.

The organization prepares a business case & decides whether to go in for ERP system; and plans how to move further in implementing the system

ESTABLISHING THE NEED FOR ERP SYSTEM

FEASIBLITY ANALYSIS

SELECTION OF THE APPROPRIATE ERP PACKAGE

HIRING OF THE CONSULTANT

PRE-IMPLEMENTATION PHASE

ESTABLISHING THE NEED FOR ERP SYSTEM

The decision to go in for the ERP system is taken.

The basic question that must be answered is WHETHER WE REALLY EED ERP SYSTEMPRE-IMPLEMENTATION PHASEFEASIBLITY ANALYSIS

Once the need for ERP system is established on the basis of strategic & competitive analysis, the viability of the solution in terms of technical , economic, legal, organizational and schedule is conducted.

The cost on such a system is justified in terms of return on investment (ROI); or the strategic value

PRE-IMPLEMENTATION PHASESELECTION OF THE APPROPRIATE ERP PACKAGE

An appropriate ERP package is selected that best fits the requirements of an organization

Selection of an ERP package must ensure the minimum need for customizationPRE-IMPLEMENTATION PHASEHIRING OF THE CONSULTANT

Before the actual implementation of ERP system takes place, the services of consultant are required to be hired

Sometimes an organization may also require the expert services to be hired even for the analysis of the need for ERP; determining feasibility, and for selecting an appropriate ERP package.

Selection of the right consultant is an important step in the pre-implementation of ERP life cycle

PRE-IMPLEMENTATION PHASEFor ERP implementation an organization has to take a conscious decision about the choice of implementation

VANILLA IMPLEMENTATION

An organization would buy the ERP software from the vendor & implement it without making any changes in the ERP system.

In this implementation an organization will align its business processes to the ERP system rather than modify the software.

ERP IMPLEMENTATION CHOICESCOMPREHENSIVE

This implementation plan involves the implementation of the full functionality of the ERP software in addition to industry specific modules.

Comprehensive implementation requires a high level of business reengineering as well as customization of legacy systems.

Most expensive & time consuming approach.ERP IMPLEMENTATION CHOICESMIDDLE OF THE ROAD

This involves some changes in the ERP software and a major business reengineering.

This approach is not expensive as the comprehensive approach or the straight forward as the vanilla approach, is called as the middle-of-road approach ERP IMPLEMENTATION CHOICESThe various steps involved in ERP implementation process are as follows

PREPARATION OF IMPLEMENTATION PLAN

A proper plan for the ERP implementation is prepared. The plan includes activities like , identification and the sequence of the activities, relation to each other, estimation of time required to complete the activities , risk assessment , cost estimates & so on.

A business analyst should make use of Gantt charts which is valuable in providing a clear picture of the total plan

IMPLEMENTATION PROCESSFORMATION OF STEERING COMMITTEE

A steering committee comprising people from all the functional areas is a must for the ERP implementation.

The committee generally has the people with a lot of experience & knowledge about the business processes of their respective areas.IMPLEMENTATION PROCESSACQUSITION OF FACILITIES

An organization needs to work out the requirements of the facilities like office, server room, computer room, & so on.

A proper plan for space; location; and layout of these facilities should be worked out and acquired or built for the smooth ERP implementationIMPLEMENTATION PROCESSREDESIGN OF THE BUSINESS PROCESSES

Business Processes of an organization are required to be analysed.

Analysis refers to the understanding of the existing or current businesses processes of an organization which are then compared to the selected ERP system.

Gaps are identified and on the basis of the gap analysis , the business processes of the organization are redesigned so as to match to that of ERP system.IMPLEMENTATION PROCESSCUSTOMIZATION OF THE ERP SYSTEM

Customization of the ERP package refers to the changes to be made in the ERP package so as to match the business processes of an organization & to design the formats for input and output of data.

Many a times the entire business processes of the organization cannot be redesigned as it may lead to total disruption in the organization.IMPLEMENTATION PROCESSACQUISITION OF IT INFRASTRUCTURE

This refers to procuring the required IT hardware & software for the implementation of ERP system.

Based on the requirements of ERP implementation, specifications of the hardware are prepared and acquired as per the policy or the IT acquisition strategy of an organization. IMPLEMENTATION PROCESSUSERS TRAINING

All the user must be properly trained to allay their fears & to convince them about the benefits of this system. The users may be identified & classified differently on the basis of the operations/functions performed by them

Clerical or managerial ; frequent v/s Occasional users

Change management is an important actitivity in the implementation of ERP system IMPLEMENTATION PROCESSCONVERSION OF DATA

Once the ERP system is customized & the design for input & output is over, the data is put in the system.

The various files are converted into computer file and thus a database is createdIMPLEMENTATION PROCESSTESTING

This phase is very important to make sure the reliability of the results obtained from the ERP system.

Various types of tests under simulated conditions are conducted for accuracy, range of inputs, frequency of inputs, operating conditions, reliability etc

The elements may include equipment, forms, programs, work procedures, & formats.

IMPLEMENTATION PROCESSDOCUMENTATIONDocumentation ensures easy updating & enhancement of the system.

TYPES OF DOCUMENTATION

SYSTEM DOCUMENTATIONIntended primarily for maintenance programmers or technical persons, records detailed information about a systems design specifications, its internal working, & its functionality

USER DOCUMENTATIONIntended primarily for users & consists of written or other visual information about an application system , how it works & how to use it

IMPLEMENTATION PROCESSGO LIVE

Final phase in the implementation of ERP System.

The go live phase is the event of switch over from the old system to the new system which takes place after the system is tested & found reliable.

The existing (legacy) system is replaced by the new system.

The decision to change over of the legacy system to the new ERP system is also known as ERP Implementation strategy

IMPLEMENTATION PROCESSCHANGE MANAGEMENT

After the implementation of ERP system, there may be certain bugs, errors, or some input/output issues, which need to be fixed.

The changes are required to be controlled to ensure that only required changes are entertained & a proper process for such changes is followed.

For the successful implementation of ERP systems, an organization must have a proper formulated & documented change management plan in placeIMPLEMENTATION PROCESSBIG BANG STRATEGY

PARALLEL STRATEGY

PHASED STRATEGY

PILOT RUN STRATEGY

HYBRID STRATEGY

ERP CONVERSION STRATEGIESAn entire suite of ERP application is implemented at all locations, at the same time.

Using big bang, the system goes from being a test version to being the actual system used to capture transactions.

The transformation takes place in the shortest possible time and hence , the name BIG BANGBIG BANG STRATEGY

Legacy systems & ERP systems are run in parallel for some time until it has been tested thoroughly

In parallel implementation approach, the outputs from each system are compared & differences reconciled.

The main advantage is that the accuracy of the system is properly checked before ERP system is accepted in an organization.PARALLEL STRATEGYA phased approach is one, in which ERP modules are implemented one at a time or in a group of modules , often a single location at a time

This method is also referred to as implementation by segments approach.

The main advantage of this implementation is more resources can be devoted to a particular module, users/managers gain knowledge in each phase, project managers can demonstrate a working system.PHASED STRATEGYRefers to the piecemeal implementation of ERP system in the organization.

For example, an inventory system module of ERP system may be implemented with only a selected product grouping or with all products in one location of a multiple location organization.

The main advantage is the risk of a system is localized, the problems identified in the system can be corrected before further implementation.PILOT RUN STRATEGYCombination of two or more strategies.

An organization may decide to combine two or more strategies for the change over of existing systems.

An organization may follow direct approach for marketing module; whereas it may follow parallel approach/ pilot run approach for the distribution system HYBRID STRATEGYThe system is required to be evaluated so as to find its worth as well as to keep it updated as per the new requirements of the organization.

Post implementation phase provides the feedback from the system usage which needs to be used for ongoing support that includes upgrades & patches as well as adjustments to the change management strategy

EVALUATION OF ERP SYSTEM

MAINTENANCE OF ERP SYSTEM

POST IMPLEMENTATION PHASEEVALUATION OF ERP SYSTEM

After an ERP system is implemented, it should be assessed to find out that the pre-determined objectives of the ERP system are obtained.

The organization would also come to know about the shortcomings in the system, which are rectified so as to get the reliable results.POST IMPLEMENTATION PHASEMAINTENANCE OF ERP SYSTEM

The dynamic changes in the environment and/or business organization, the ERP system is required to be maintained.

It may need corrections because of the bugs in the system, modifications because of the changes in business or the environment and/or enhancements because of the expansions or diversification in the business

Maintenance of a system starts after it has been implemented.POST IMPLEMENTATION PHASEERP project teams are formed not just for implementing ERP software but also for the ongoing maintenance required of an ERP system

The company management should do the ERP team formation in consultation with the consultants & vendor representatives & they too should be included in the team before, during and after the implementation.ERP TEAM FORMATIONPeople in an implementation can fall into several different positions project sponsor, executive steering committee, project manager, functional manager, team leader, team member, functional participant, consultant, vendor representative & end user

Basic skill sets that are important to any ERP team position include communication skills, computer literacy, maturity, conceptual skills & organizational knowledgePEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)PROJECT SPONSOR :

Ideally the CEO will be the project sponsor. The role of the project sponsor is to ensure that the ERP implementation gets all the assistance it needs from resources to management backing

EXECUTIVE STEERING COMMITTEE:

It formulates the long term goals, objectives, and strategies regarding the implementation of the ERP system in the company. It is headed by the project sponsor & includes the CIO, CTO, CFO, & other senior level managers & department heads. It also includes a representative of the package vendor & external consultantPEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)PROJECT MANAGER:Project manager is the most important person in the ERP implementation project. He is the person responsible for translating the vision & goals into reality. He reports to the executive committee & heads the project management team which consists of the head of the vendor representatives, the chief of the consultants & the work team leaders

FUNCTIONAL MANAGER:Oversee the day-to-day operations of their respective functional areas. Ideally they should have strong conceptual skills in understanding the overall ERP project & how it relates to the business.

PEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)THE IMPLEMENTATION TEAM:The implementation team or the work team consists of selected employees from the company in addition to vendor representatives & consultants. These employees will perform the various tasks in implementing the ERP system from installing the hardware, software, customizing, documenting, training & so on.

FUNCTIONAL PARTICIPANT:They have a limited role in the implementation of the project. They answer questions & review training programs & business process flows proposed in the new software. Through their feedback other members of the ERP team can get a basic feel of how well the new ERP system may workPEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)CONSULTANT:Consultants provide a wide variety of functions, often filling in the gaps. Some positions that can be filled include project manager, team leader, service representatives, & end user.

Consultants success depends upon a number of factors including computer literacy, conceptual skills, software knowledge, industry knowledge, maturity, problem-solving capability, communication skills and organizational skills.

THREE CATEGORIES OF SERVICEManagementApplicationTechnicalPEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)PACKAGE VENDORS

Are the people who have developed the ERP packages. They are the people who have invested huge amounts of time & effort in R&D, to create the packaged solutions.

The vendor representatives are responsible for fixing any problems that the implementation team encounters in the software.

Vendor representatives provide the initial training for the companys key users.PEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)END-USERS

Represent the largest group, are the general mass of people who will use the new ERP system.

They have the least control over the outcome of the ERP project.

Documentation & training programs are often prepared specifically for this group of people.PEOPLE INVOLVED IN THE ERP IMPLEMENTATION (TEAM)Once the ERP system is implemented, the new processes & procedures will replace the earlier ones

The technology will bring with it a series of new concepts and resources that must be mastered & correctly used in order to get the best out of the ERP system

Company should appoint its best , most efficient employees , invest in these people , create opportunities within the company, these are the people who are actually running the business, don't have time for anything else , yet it is these people who should be assigned to the implementation team

ERP TEAM FORMATIONERP implementation project needs people who can grasp new ideas quickly, have an open mind to new technologies & concepts & who love challenges.

They are the pioneers as they take their organization through untested environment, and uncharted waters, so their ability to think quickly, improvise effortlessly, innovate fast & act without hesitation is critical to the success of the project

Those selected The pioneers will have greater demands made upon their time.

ERP TEAM FORMATIONA typical implementation team will have the following members

CHIEF EXECUTIVE OFFICER (CEO)

EXECUTIVE COMMITTEE

EXTERNAL CONSULTANTS

PROJECT MANAGER

PROJECT MANAGEMENT TEAM

WORK TEAM OR IMPLEMENTATION TEAM

TECHNICAL SUPPORT TEAM

ADMINISTRATIVE SUPPORT TEAM

ORGANIZATION OF THE IMPLEMENTATION TEAM