Glance at Enterprise Resource Planning

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Glance at Enterprise Resource Planning (ERP)
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Introduction

• In today's fiercely competitive business
  environment, there has to be much greater
  interaction between the customers and
  manufacturers.
• The enterprise must be closely linked to both
  suppliers and customers.
• To achieve this ,an organization should seek to
  obtain operational efficiencies that will
• lower costs, improve supplier and customer
  relations, increase revenues, and ultimately
  increase their market share as a result.
• All units of the organization must work together
  in a goal congruence to achieve maximum
  operating effectiveness and efficiencies.
• So information must be accurate and timely
  managed.

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Enterprise Resource Planning
Integrate all departments and functions
across a company onto a single computer system
that can serve all those different departments'
particular needs.
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An Example of how ERP systems Work.
International Sneaker Company (ISC) is a
hypothetical U.S. company with worldwide sales
they manufacture their product in Taiwan.

• 1- Ordering.
• A sales representative from ISC takes an order
  from a retailer in Brazil.
• Entering the data on her personal computer, the
  sales representative accesses R/ 3 s sales
  module.
• The system checks the price as well as the
  discounts that the retailer is eligible for
• the systems also checks the retailers credit
  history to make sure that the firm wants to
  make the sale.

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An Example of how ERP systems Work (Cont).

• 2- Availability.
• R/3 software next checks the inventory, it finds
  that half the order is available from a
  warehouse in Brazil and so that portion of the
  order can fill immediately.
• R/3 finds that the other half of the order will
  need to be delivered from ISCs factory.

• 3- Production.
• R/3 alerts the warehouse to ship the portion of
  the order that is in stock to the retailer.
• In addition, R/3 s manufacturing software
  schedules the production of the remainder of
  the order.
• An invoice is printed up in Portuguese.

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An Example of how ERP systems Work (Cont).

• 4- Manpower.
• When scheduling production, R/3 notes that there
  is a shortage of workers to handle the order.
• It alerts the personnel manager of the
  requirement to hire temporary workers.

5- Purchasing. - R/3 s material planning
module notifies the purchasing manager that it
is time to order new raw materials and also of
the amounts that need to be ordered.
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An Example of how ERP systems Work (Cont).

• 6- Order tracking and more ordering.
• The Brazilian retailer logs onto to ISCs R/3
  system through the Internet and sees that a
  portion of the order has been completed.
• In addition the retailer uses this as an
  opportunity to place yet another order.

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What does ERP really cost?
Meta Group recently did a study looking at the
total cost of ownership (TCO) of ERP, including
hardware, software, professional services and
internal staff costs. The TCO numbers include
getting the software installed and the two years
afterward, which is when the real costs of
maintaining, upgrading and optimizing the system
for your business are felt. Among the 63
companies surveyedincluding small, medium and
large companies in a range of industriesthe
average TCO was 15 million (the highest was 300
million and lowest was 400,000).
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ERP Big Five!!

• SAP.
• Oracle.
• J.D. Edwards.
• PeopleSoft.
• Baan.

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How does ERP create value?

• ERP facilitates value creation by changing the
  basic nature of organizations in a number of
  different ways.
• ERP
• Integrates Firm Activities .
• Employ Use of "Best Practices.
• Enables Organizational Standardization .
• Eliminates Information Asymmetries .
• Provides On-Line and Real- Time Information .
• Allows Simultaneous Access to the Same Data for
  Planning and Control .
• Facilitates Intra-Organization Communication and
  Collaboration
• Facilitates Inter-Organization Communication and
  Collaboration

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DIS-Advantages of ERP
Until now, all what has been mentioned is the
good side of the ERP system but there are quite a
number of disadvantages can be listed as follows

• Time in Implementation.
• Implementing an ERP system is a daunting task
  and can take up to several years. Routine
  operations may be hindered as a result.
• Expense in Implementation .

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DIS-Advantages of ERP (Cont.)

• Implementations run into the tens of millions of
  dollars and have, on average, gone over budget
  by as much as 25 percent. Many
  hidden costs have contributed to the demise of
  the implementation budget. Those hidden costs
  are

• Training
• Integration and Testing
• Data Conversion
• Data Analysis
• Consultants

• Replacing your best and brightest
• Implementation teams can never stop
• Waiting for ROI
• Post ERP depression

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DIS-Advantages of ERP (Cont.)

• Customization
  
  - Add-ons are only
  the beginning of the integration costs
  of ERP.
• Much more costly, and to be avoided if at all
  possible, is actual customization of the core
  ERP software itself.
• - Happens when the ERP software can't handle one
  of the business processes and a decision to
  mess with the software to make it do what is
  wanted.
• - The customizations can affect every module of
  the ERP system because they are all so tightly
  linked together.
• - Upgrading the ERP package becomes a nightmare .
• - You will have to hire extra staffers to do the
  customization work, and keep them on for good
  to maintain it.

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• How do companies organize their ERP projects?
• Based on our observations, there are three
  commonly used ways of installing ERP.
• The Big Bang
• - Companies cast off all their legacy systems at
  once and install a single ERP system across
  the entire company.
• Most of the ERP implementation horror stories
  from the late '90s warn us about
• companies that used this strategy.
• Getting everyone to cooperate and accept a new
  software system at the same time is a
  tremendous effort
• No one within the company has any experience
  using it,
• 2. Franchising strategyThis approach suits large
  or diverse companies that do not share many
  common processes across business units.
  Independent ERP systems are installed in each
  unit, while linking common processes, such as
  financial bookkeeping, across the enterprise.
  This has emerged as the most common way of
  implementing ERP. In most cases,
• 3. Slam dunkERP dictates the process design in
  this method, where the focus is on just a few key
  processes, such as those contained in an ERP
  system's financial module. The slam dunk is
  generally for smaller companies expecting to grow
  into ERP.

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Why Projects Fail ???
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Change Management
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Change Management

• Projects fail more often from lack of effective
  change management than any other single
  reason.
• Teams that use change management techniques
  have
• Reduced turnover and the loss of valued
  employees.
• Accelerated the implementation of the change.
• Reduced productivity loss and employee
  resistance. 
• What many teams lack, however, is a solid
  understanding of what change management is
  and how to implement change management
  tactics.

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Change Management

• Change management - two perspectives
• - From those implementing the
  change (demanding the change)
• - From the recipients of change
  
  (unsure why a change is even needed).
• Project managers, consultants or members of the
  project team that first learn about the
  necessity for change management.

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So What is Change Management??
Engaging and enabling individuals and groups to
take responsibility for realizing the new vision
of their organization and the development of
their own potential
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ERP Is not like any other software!!
One of the biggest mistakes that companies make
when they launch new ERP applications is assuming
that they are going to be like any other piece of
software, says David Stanvick, vice president of
marketing for Knowledge Impact, an
enterprise-system consultancy in
Wayland,Massachusetts. "Microsoft Word is a
productivity tool --whether you use it doesn't
impact anyone else in the company--but an ERP is
a totally new environment. Everything you do in
an ERP affects the success of the company."  
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Why Manage Change!!
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Change Management Issues
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Attitudes Behaviors of Individuals Groups

• Expectations
• Identifying matching the different
  expectations of individuals and groups
  (stakeholders) affected by and affecting the
  project.
• Client leadership must have a clear and
  consistent project vision expectations.
• We should understand and take seriously the
  expectations of the various user groups.

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Attitudes Behaviors of Individuals Groups

• Experiences
• Experiences with change projects system
  implementations strongly influence
  expectations and behaviors.
• Past problems indicate areas which must be
  specially handled by the current project.

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Attitudes Behaviors of Individuals Groups

• Motivations
•   (a) Positive motivation
• Recognition, personal benefits team spirit.
   
• Rewarding individual performance for project
  participation (salary, bonus, career
  perspective, etc.)
• Conditions for success are best if the project
  team, including client members, develops
  team spirit and enthusiasm aimed at
  accomplishing project goals. 
• (b) Negative motivation  Fears,
  resignation, frustration uncertainty are the
  main barriers to success and change.
•  Fear of the unknown (What will happen to me?)
• Fear of losing authority, influence.
•  Fear of losing his/her job.
•  Too much work (frustration).
•  I have no input anyway (resignation).

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Organizational Dynamics Structures
Corporate culture Corporate culture has a
major influence on change behavior, achievable
change. Realistic project planning and execution
requires understanding corporate culture and
taking it into account.   
Organizational structures tools Changes to
business processes often require corresponding
changes to organizational structures, tools.

• Job descriptions.
• Company organization (hierarchical, matrix,
  functional, process, etc.)
• Compensation incentives systems.

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Leading the Project

• Business leadership
• Client leadership has a major influence on the
  success of every project.
• - What are the position, acceptance and
  influence of the project leader within
  the company?
•  - Is there a real leadership?
• - How do you communicate and delegate?
• Communication
• - Communication within the project team
  is important for a clear understanding
  of the project vision and its targets.
• - Information from the project team to the
  employees not directly involved in
  the project generates trust.
•   - Communication structure is defined
  properly Set up
  communication programs like project newsletter,
  newspaper, etc.

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Leading the Project

• Business participation
• The average client participation is about three
  times of the consultants participation. It is an
  important step to take over responsibility and is
  a presumption for knowledge transfer from the
  expert to the future expert in your enterprise.
• Is there enough capacity?
• Do they have enough capability?
• Who is managing the daily business?
• How do you deal with overtime?

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How does ERP fit with e-commerce?

• - ERP vendors were not prepared for the onslaught
  of e-commerce.
• - ERP is complex and not intended for public
  consumption.
• But now customers and suppliers are demanding
  access to the same information employees get
  through the ERP system Things like order
  status, inventory levels and invoice
  reconciliation except they want to get all this
  information simply, without all the ERP
  software jargon, through your website.
• E-commerce means IT departments need to build
  two new channels of access in to ERP systems

• One for customers (otherwise known as
  business-to- consumer)
• One for suppliers and partners
  (business-to-business).
• These two audiences want two different types of
  information from your ERP system. Consumers want
  order status and billing information, and
  suppliers and partners want just about everything
  else.