UNIT III ERP IMPLEMENTATION Why ERP Benefits Simplification

UNIT III ERP IMPLEMENTATION

Why ERP? Benefits • Simplification of business processes • Enhance productivity, flexibility and customer responsiveness • Compliance and control • Efficiency improvements • Enable new business and growth strategies • Agility improvement • Reduce cost and eliminate inefficiencies • Continuous improvement • Expand your knowledge of key business data • Extend your business using the internet

Reasons for implementing ERP or Perspectives of ERP Implementation • • • Technology Business Operational Strategic Competitive.

Other Reasons • Replace legacy systems • Simplify and standardize systems • Improve interactions with suppliers and customers • Gain strategic advantage • Link to global activities • Pressure to keep up with competitors • Ease of upgrading systems • Restructure the organization

ERP Implementation Life cycle : Objectives • Speed • Scope • Resources • Risk • Complexity • Benefits

ERP Implementation Phases or Lifecycle 1. 2. 3. 4. 5. Pre-Evaluation Screening Package evaluation Project planning phase Gap analysis Reengineering 6. Customization 7. Implementation team training 8. Going live 9. End-user training 10. Post implementation

Critical phases of ERP Implementation • • • Adoption decision Acquisition Implementation Use and maintenance Evolution Retirement

ERP Implementation : Pre-Implementation Tasks • Assembling of participants • Feasibility study and need analysis review • Project mission and vision statements creation • Determination of organizational structure • Determination of the modules to be implemented. • Creating the core team • Establishing the training needs • Establishing the data conversion strategy • Establishing interfaces • Determining work estimates • Cost of consultants • Calculation of implementation time • Identifying constraints • Establish policies and guidelines

Requirements Definitions • Process of capturing and documenting the user requirements and specifications. - Understand current system - User triggers development of product /system - Emphasize - Product

Classification of requirements: • Business requirements • User requirements • Functional requirements

Requirements Engineering: Develop requirements based on • • • Human stakeholder System environment Feasibility studies Market analysis Business plans Analyses of competing products and domain knowledge Other requirements • Hardware & software requirements • Requirements for releasing product • Compatibility requirements

Requirements Engineering Requirements does not include • Design details • Implementation details • Project planning • Testing information Tools & techniques : Data flow diagram (DFD) Entity relationship (ER) diagrams etc. ,

People involved in ERP implementation: • • • Project Sponsor Executive committee Project Manager Implementation or Work team Functional Managers • • Functional Participants Consultants Package Vendors End-users

ERP Implementation Challenges. . 1. Inadequate requirements definition - Selection of wrong ERP package - Unnecessary customization - Lack of employee retraining 2. Resistance to change 3. Inability to achieve organizational understanding • Lack of good understanding of business functions and processes. 4. Inadequate resources • Money, people, software, hardware . Lack of top management support 6. Lack of organizational readiness • Organisation, Work processes and the employees. 7. Inadequate training and education 8. Unrealistic expectation • Under estimated : Implementation cost and time • Over estimated : Benefits and ROI

ERP Implementation Challenges. . 9. Poor package selection 10. Poor project management 11. Customization issues 12. Long payback period • Discontinuing support for systems 13. Poor communication & cooperation 14. Data quality costs 15. Hidden implementation costs 16. Improper integration • Integration of ERP modules • Integration of e-business applications • Integration with legacy systems 17. Improperation/use •

ERP Implementation Approaches/Strategies • Big Bang Implementation • Parallel implementation • Process line implementation • Phased Implementation • Pilot Implementation • Hybrid Transition Strategy

Big bang strategy • Implements all relevant modules at same time • Mini big bang strategy: To one or two business modules at a time. • Mega big bang strategy: It refers to a large company, with multiple sites, all going live at the same time using the big bang strategy. • Multi big bang strategy: It uses multiple big bangs sequenced in order for different geographical facilities.

Big Bang strategy Advantages : • Low overall implementation cost • Faster return on investments • Elimination of complex integration issues etc. , Disadvantages : • High amount of time and effort for pre-implementation planning • High failure rates • Do-it-right the first time nature etc. ,

Parallel Implementation • Parallel approach keeps both traditional system and new ERP system active simultaneously for a length of time.

Parallel Implementation • • Advantage: High success rates Low resource commitment Opportunity to learn from mistakes etc. , • Disadvantage: • High overall cost • Lengthy implementations etc. ,

Phased Implementation • Package is implemented in phases and sequentially. • Single module implemented at all sites or a single module implemented further in multiple phases at all sites.

Phased Implementation • • Advantage: - Less risk - Step by step approach - Low resource commitment etc. , • Disadvantage: • Large amount of technical resources for creating interface programs. • High overall cost • Lengthy implementations etc.

Pilot Implementation : Quick slice or slice approach • To put entire system through all of its paces utilising only a single product line or small area of the company.

Pilot Implementation • Advantages • Low complexity/low risk • Learning curves are fast and ROI is seen immediately • Shorter readiness step • Period for review and refinement is shorter • Disadvantage • Wrong pilot may be chosen • Too many pilots increase complexity • Requires intense focus from participants

Process Line transition strategy • Process line strategy breaks the implementation strategy to manage parallel business process flows or product lines. • The first product line and all related resources go first in making the transition from the legacy system to the new ERP system • Once this is completed the other product lines are moved to the new system in sequence.

Process line transition strategy • • Advantage: High success rates Low resource commitment Opportunity to learn from mistakes etc. , • Disadvantage: • High overall cost • Lengthy implementations etc. ,

Ideal Strategy Big bang strategy • Immediate ERP solution is needed • Suited for small companies • Limited amount of time available combined with immovable go-live date. Phased Approach • Do not share many common processes across departments or business units. Parallel Approach • Suited for mission critical situations that cannot survive a major malfunction of an ERP system. • Business environment that require the utmost in stability of an ERP system such as financial, pharmaceutical or medical companies. Process line Approach • Ideal for companies that have many product lines. Hybrid strategy • Combination of all the above strategies can be used in organization where the interdepartmental communication is excellent and where there is a strong leadership to manage the project.

ROI – ERP Implementation • Benefits Calculation Costs Calculation • • Inventory Reduction Improved process efficiency Improved vendor relations Waste reduction • • • Software licence Hardware costs Internal Training Change management Internal conversion

ERP Implementation : Hidden cost • • Training Integration & Testing Customization Data conversion • Data Analysis • ERP consultants • Brain drain (Employee turnover) • Continuing Maintenance

ERP Package Evaluation & Selection • Identify packages that fits the requirement • Find package flexible to meet company’s needs

Issues in ERP package selection • • Lack of clarity about customer’s requirements Complexity in business processes Increased ERP vendors Lack of planning Resistance to change Project cost Integration, Upgradeability, Adaptability and Applicability of software

Methods in ERP selection • Top management & consultants • Centralised selection process (IT & internal dept) • Considering suggestion of internal department • Combination of above.

Selection Committee • • Functional experts Top management (CIO or COO) Consultants (package experts) End users

Selection process 1. Assemble project team Executive sponsor Project leader Team members 2. Define Business Vision 4. Requirements & selection criteria 5. Develop scripted demonstration scenarios 3. Define business requirements Build or Buy Integrated or Best of breed Initial vendor screening - Vendor viability - Functionality - Scalability - Technology

Selection process contd. , 6. Finalise selection decision - Documentation requirements – Weigh based on priority - Participant feedback on demos - Gap analysis for software customization - Cost analysis for software and related services - Customer reference ability. 7. Transition to Implementation • - Qualitative factors Ease of use Flexibility Vendor support

Selection Criteria • Multi language & multi currency support • Installation in international specified countries • Local presence – vendors • Cost • Incremental module addition • Provide implementation & post implementation support • Training employees • Capability to interface with banks, suppliers, customers etc. . • Easy customization process • Vendor policy, practices regarding updates, version etc. , approachable.

Mistakes in ERP selection • Limit search to known vendors • Requirements not defined properly • Demonstrate before defining requirements • Over-specify their requirements : “Candy store” syndrome • Too involved in software analysis – Too much time studying requirements • Treat ERP selection as purchasing technology than as major business decision.

Framework for evaluating ERP • Traditional Approach BPR as pre-requisite of ERP implementation • Simplified Approach ERP implementation without BPR

Evaluation Criteria 1. 2. 3. 4. 5. Strategy fit Technology Change Management Risk Implementability 6. Business functionality 7. Vendor credentials 8. Flexibility 9. Cost 10. Benefits

Fitzgerald approach- Evaluation criteria • Identification of cost • Contribution to business strategy • Analysis of benefits • Second-order effects • Flexibility • Implementability • Risk • Testing the business idea.

Framework for evaluation • Creation of organisational infrastructure • Constitution of the repertoire of ERP Products. (NGT) • Preparation phase • Context setting phase • Evaluation and selection phase • Approval of the selection • Mid course evaluation

Data Migration • Migration of data from one or more legacy systems • Scale of complexity : small volumes to large volumes • Determines success of ERP implementation • Last activity of production phase • Minimal attention – Time constraints

Steps : Successful data migration 1. 2. 3. 4. 5. 6. Identifying data to be migrated Determining timing of data integration Generating data templates Freezing tools for data migration Deciding on migration related setups Deciding on data archiving

Data Migration : Objectives • Reduce risk • Lower operational expenses • Improve data quality

Data Migration : User perspective • Iteration : Identify corrupt and rectify data • Weeding • Inspection : Archiveddata

Data Migration : Development perspective • • Maximum safety Avoid risky big bangs Phased implementation Unique, consistent template document referenced by all projects • Development of generic modules - reusability

Data Migration processing : Steps Step 1 : Analysis - Data profiling : Content, structure, quality, integrity - Data Mapping : Table/dataset (source system) mapped to target field in ERP system Step 2 : Design Old data formats to new system format’s Supplement/transform coding structure for ERP Step 3 : Cleansing Remove obsolete, duplicate data, Data validation Step 4 : Extraction ETL tools – Extracting data from data sources and load to ERP Step 5 : Transform Step 6 : Load Step 7 : Verification

Data Cleansing techniques • Standardizing • Matching - eliminate duplications • Consoldiating : Analysing and identifying relationships • Correcting : Using algorithms and secondary data sources • Enriching : Value added data from external sources • Parting. Eg xxx-xxxx • Conditioning : Conversion of data types from source to target data • Scoring : Probablity of an event

Data Loading sequence • • • Material master Vendor master Open purchase order Open purchase requisition Stock balance Open vendor invoices Vendor excise details Excise tax rates Accounts receivable balances

Data Migration : Methods • Manual data Migration -Manually - Check source system and punch data in ERP - Time consuming - Costly - High chance of error - Small implementation

Data Migration : Methods • Electronic data migration -Volume of data is not constraint - Faster, cheaper - Low chances of error - Manual verification after migration

Training & Education • - Training needs – Different Managers – Focus on decision making & analysis Clerical staff – Perform job All users – overview of system & working - Automation of process - Change in process - Triggers host of events

• • Inadequate training – ERP system failure Select appropriate plan – training Effective understanding of business process Training inside or outside

Education or Training ? Who? • Level of education - Steering committee - Project leader - Functional teams

Budgeting : Education & Training • • Cash outlays Employee time Equipment Facilities

• What education & training needs? • Evaluation

People Organization in Implementation • Vendors • Consultants • Employees (Inhouse team and users)

Vendors • Supply product & documentation • Trainer • Project support function

Consultants • Guarantee success of project - Reduce cycle time, increase response time, improve productivity - Administer each phase of implementation - Finalise time schedule for each phase/task - Value : Know-how, expertise - Improve companies business process - Customization issues - Present advantages & disadvantages - Maintaining technical documentation.

Employees : Resistance • Fear of being redundant • Fear of failure • Fear of future

Handling : Employee resistance • Training & Education ERP champions • Creating ERP champions – Expert users, Facilitator, Trainer • Pilot projects • Involvement of Employee in ERP process • Managing expectations.