- NEED TO IMPLEMENT ERP SYSTEM
Why do we need to implement an ERP system?
Historically, companies created “islands of automation”. A hodge-podge of various systems that operated or managed various divergent business processes. Sometimes these systems were integrated with each other and sometimes they weren’t. Sometimes they were loosely interfaced and sometimes they were more tightly interfaced.
Further more these are the reasons why do we need to implement an ERP system:
- To support business goals
- Integrated, on-line, secure, self-service processes for business
- Eliminate costly mainframe/fragmented technologies
(There must be a value proposition, return on investment, total cost of ownership.)
- Improved Integration of Systems and Processes
- Lower Costs
- Empower Employees
- Enable Partners, Customers and Suppliers
(Often these can be part of your business goals as well)
- BENEFITS OF ERP SYSTEM
Enterprise Resource Planning provides many benefits to business such as
1. Enhance productivity, flexibility and customer responsiveness
By integrated core business processes together in one single application, it helps company maximize the efficiency of business process across the entire organization. Plant manufacturing can produces product faster. Increase on time delivery, Increase productivity, Increase ability to forecast demand to supplies, Increase order Capacity, and improve customer service (Customer Relationship Management (CRM)).
2. Eliminate costs and inefficiencies
Using an ERP system to standardize business processes can dramatically improve company’s operation. ERP enable company to manage relationship with vendor results in lower cost for purchased items. Better resource management results in more inventory turns and decreases the level of inefficiencies.
3. Data consistency
Because an ERP system integrates all business management functions, it decreases level of inconsistency information from different systems. Thus, by using ERP system, managers can gather correct information and make a right decision.
4. Extend your business using the Internet
By integrating all business functions together in one system, it increases ability of a company to use internet as part of the business strategy. Web-enabled technology allows you to access information, sell product, run business processes, and communicate with customers and partners at any time and from anywhere in the world.
- CUSTOMISED ERP SYSTEM
The ERP systems improve both backbone (business logic) and front-end (user interface) functions simultaneously, optimizing both user productivity and information processing.
The benefits that a custom ERP system brings to an organization are summarized below:
- Key characteristic of an ERP system:
Integration
Seamless integration of all the information flowing through a company – financial and accounting, human resource information, supply chain information, and customer information.
Packages
Enterprise systems are not developed in-house
- Its life cycle is different
- Mapping organisational requirements to the processes and terminology employed by the vendor and
- Making informed choices about the parameter setting.
- Organisations that purchase enterprise systems enter into long-term relationships with vendors. Organisations no longer control their own destiny.
Best Practices
- ERP vendors talk to many different businesses within a given industry as well as academics to determine the best and most efficient way of accounting for various transactions and managing different processes. The result is claimed to be “industry best practices”.
- The general consensus is that business process change adds considerably to the expense and risk of an enterprise systems implementation. Some organisations rebel against the inflexibility of these imposed business practices.
Some Assembly Required
Only the software is integrated, not the computing platform on which it runs. Most companies have great difficulty integrating their enterprise software with a package of hardware, operating systems, database management systems software, and telecommunications suited to their specific needs.
- Interfaces to legacy systems
- Third-party bolt-on applications
- Best of Breed Strategy
Evolving
Enterprise Systems are changing rapidly
- Architecturally: Mainframe, Client/Server, Web-enabled, Object-oriented, Componentisation
- Functionally: front-office (i.e. sales management), supply chain (advanced planning and scheduling), data warehousing, specialised vertical industry solutions, etc.
- ERP methodology :
Before we begin to implement ERP system, we should to understand the high concept or ERP model or ERP methodology.
The ERP model is consists of four components which are implemented through a methodology. All four components are :
1. The software component is the component that is most visible part and seen as the ERP Product which is not true. It consists of several modules such as Finance, Human resource, Supply chain management, supplier relationship management, customer relationship, and business intelligent.
2. Process Flow is the model that illustrates the way how information flows among the different modules within an ERP system. By creating this model makes it easier to understand how ERP work.
3. Customer mindset By implementing ERP system, the old ways for working which user understand and comfortable with have to be changed and may lead to users’ resistance. Employee-raised facts, beliefs, and values are good indicators of what may cause their resistance to change. For example, some users may say that they have spent many years doing an excellence job without help from ERP system. This is the value and belief that users have toward new ERP system. In order to lead ERP implementation to succeed, the company need to eliminate this kind of negative value or belief that users have toward new system. At Pratt & Whitney Canada, top management not only provide the resource, but they also formulated a clear vision of goals that they wished to achieve from the project. By doing so, it helped to guide employee expectations the benefits of new system.
4. Change Management In ERP implementation, Change needs to be managed at several levels:
4.1 User attitude Resistance to change is a big problem that can lead to project failure. If the company need to success in implementing new system, users need to be understand what the new system is and give a commitment to new system. By doing so, a company need to have a good management plan and implementation.
4.2 Business process changes when new system is implements, the business processes are also changed (Legacy systems are removed). Thus, a company should have a plan for these changes.
ERP methodology refers to a systematic approach to implement an ERP system that will ensure the proper integration of the four components. We can refer ERP methodology to Project life cycle.
- ERP Project management and implementations:
Project Management is the application of knowledge, skills, tools and techniques to a broad range of activities in order to meet the requirements of the particular project. A project is a temporary endeavor undertaken to achieve a particular aim. Project management knowledge and practices are best described in terms of their component processes. These processes can be placed into four Process Groups: Initiating, Planning, Executing, and Closing. – And nine Knowledge Areas that are:
- Importance of project management in ERP
Why project management is so important in ERP implementation?
Because ERP project generally is a big and complexity project. It requires a lot of resource such as time, human resource, budget etc. Even though, a company has all of the resource to implement the project, there are many factors that can lead to project failure such as corporate culture, user resistant to change commitment from top management etc. From “The Robbins-Giola Survey (2001)” 51 % of surveyed companies viewed their implementation as unsuccessful. An example of company failure was Nestle. Nestle spent $200 millions contact with SAP and an additional $80 million for consulting and maintenance, but at last the implementation was fail.
Consequently, by having good project management can help to minimize risk for project to fail and may help to reduce the chance for delaying and over budget which are big problems in ERP project implementation.
- Project Life Cycle in ERP implementation
1. Project Concept/Initiation This stage determines the scope of development. If this stage is not performed well; it is unlikely that the project will be successful in meeting the business’s needs. The key project controls needed here is an understanding of the business environment and making sure that all necessary controls are incorporated into the project (By using BPR (Business Process Reengineering). Any deficiencies should be reported and a recommendation should be made to fix them. Project Manager, Project governance, and core project team also have been assigned in this stage.
2. Project Planning in this stage of ERP implementation, Project management includes finalizing the detailed planning process and requirements (Technology, Hardware, Software, Data, and Functionality) which involves finalizing the project scope, schedule, resource requirements, quality and risk concerns, plus any organizational (e.g., centralization versus decentralization) issues. This stage should produce a request for proposal (RFP) to be sent to potential vendors. When sending out the RFP, project planners should address an evaluative scheme for comparing and ranking vendor responses such as a weighted scoring approach. It would include factors each vendor's product are to be evaluated against and their relative weights. Generally, scoring is completed after all RFP responses have been received.
3. Project Execution in this stage vendor has been selected and planning proceeds for swapping software previously used with the new ERP package. The most important issue in this phase is to ensure project activities are properly executed and controlled. During the execution phase, the planned solution is implemented to solve the problem specified in the project's requirements . The execution stage includes the actual implementation of the design or plan. In software systems, this includes conversion (transfer of data from an old system to a new system), documentation, and training. Training is also important because it helps users use the correctly. The bulk of the project's work and largest capital expenditure is realized in this stage.
4. Project Closure The final stage of the ERP implementation project-- closeout/operation and maintenance-includes carrying out the usual bug fixes, responding to enhancements that were not included in the original implementation, and preparing a final report. The report should include a critique of what went right and what went wrong over the life of the project so that lessons learned may be documented and incorporated into future projects.
- How should we implement ERP systems?
- Project Structure
- Should be aligned to processes
- Implementation Process (outlined in detail)
- Adapt your processes to those of the ERP.
- Hardware
- Software
- Integrated Systems
Process:
1. Definition and Analysis
Hold discussions with various functional personnel to establish the actual number of systems operating at client site, what they are used for, why and how often
Produce the Project Scoping Document outlining current situation, proposed solution and budgeted time
Challenge : REQUISITE EXPERTISE - No two clients are the same
2. Design :
Prepare various functional reports - specifies current scenario and wish list.Prepare Design document which specifies how the system is going to work.Prepare test scripts to be followed on system testing .Map out the interface paths to various modules
Challenge : INFORMATION SHARING - Availability of staff
3. Build
Configure system as per set up document specifications i.e. transfer conceptual model into reality
Test system to verify accuracy (preliminary tests)
Challenge : TECHNICAL ENVIRONMENT - System functionality
4. Transition
Train users on their specific areas
Assist in test data compilation and system testing by users
Finalise the Live system and captured opening balances
Challenge: USER RESISTANCE Understanding and acceptance data preparation.
5. Production
Official hand holding Effectiveness assessment
Business and Technical Direction recommendations
Technology:
Technology is an enabler, not the driver (it is there to assist the organisation to achieve business goals)
It is a means to an end, not the end.
Guideline for ERP implementations in Project management
- Deciding on project scope The scope of an ERP project has several components. The ERP project team must decide which business processes will be included in the implementation and it should not be changed frequently which will affect other area and project timeline. The scope should be build to prevent “never ending project”.
- The Right Staff one of the major issues with any IT project is the staffing issue. Good technology staffs, particularly those with deep ERP experience are extremely hard to find. Since it's difficult to transition ERP team members on and off projects thus by lower rate of turnover is importance.
- Preventing Drain Brain the company has to be ensuring that knowledge is still be in the company while consultants have left. By letting the consultants and corporate staff worked side-by-side throughout the implementation.
- Project scheduling the project manager should to manage a good time line that can maximize efficiency of resource.
- Monitor Progress The success criteria should be clearly defined in the procedures, methods, and techniques that are part of a high quality project control system. Standards and techniques for measuring the quality of performance expected from the new system should be defined early, and redefined as needed over the life of the project.
Three most common mistakes of ERP Implementation
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Focusing on Technology There is no evidence anywhere in the history of IT that software alone will solve a business problem.
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Ignoring the importance of requirement definition many companies try to adopt ERP system which doesn’t fit to business requirement which generally lead to project failure.
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Jumping from the Requirement definition to the development phase Most of projects have to deliver the system in the timeline, thus they may skip some important implementation steps. For example, Project manager may skip the change manage process which may create users’ resistance to new system and lead to project failure.
- Companies deals in ERP system:
- Conclusion
Enterprise Resource Planning (ERP) can provide a lot of benefits to organization such as lower cost, increase level of data consistency, enable different departments such as Marketing, Distribution, and Manufacturing etc. to share information together, increasing ability to do e-business. Even though, ERP can provide many benefits, it also can lead to tragedy in implementation because of complexity to implement, time consuming, requiring a lot resource such as money, human resource, hardware, and software. Not only resource that is needed, but the commitment from top management and users also. All of these requirements can lead to project failure easily as we can see that 51% of project fail rate.
resource is the all production sale and stock of buying the distribution which include physical, accounting and all management resources in very enterprise in which all staff and material properly, funds also include. ERP will manage all the management resources interacted altogether very well. It probably will keep effectively, the management technique concept that from viewpoint, it will manage these management resources integrated altogether enterprises, it probably will keep doing efficient management activity by the fact that optimumly it arranges & distributes.
Consequently, Project Management is very important in ERP implementation. In order to manage project efficiency and reduce the risk for project failure, a company needs to know the high level concept, components of ERP, and the project life cycle. However, by knowing the high level concepts, components of ERP and project life cycle is not enough. As describe earlier, ERP implementation is such a complexity project. Thus, we need to have some guideline and avoid the common mistakes that help project manager to prevent an unexpected outcome and well prepare for the unexpected events. ERP systems provide a mechanism for implementing systems where a high degree of integration between applications is required To successfully implement a proper mix of people, processes and technology should be maintained
- References:
http://www.umsl.edu/~sauterv/analysis/f06Papers/Wonglikphai/
http://www.Richardbyrom.com
by
yashika23s (student)
