GPUG ® Summit 2011 November 8-11 Caesars Palace – Las Vegas, NV ERP: Integration, Not Merely...
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Transcript of GPUG ® Summit 2011 November 8-11 Caesars Palace – Las Vegas, NV ERP: Integration, Not Merely...
GPUG® Summit 2011November 8-11
Caesars Palace – Las Vegas, NV
ERP: Integration, Not Merely Implementation Is
KeyJames M. Noblitt, CPIM, CIRM
GPUG Summit 2011– Las Vegas www.gpug.com2
Agenda
Overview & Definitions
The Foundation - Six Imperatives for ERP Success
The Methodology - Twelve Steps to ERP Success
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Just What is ERP?
Gartner Group definition:
ERPII is a business strategy and a set of industrydomain-specific applications that build customer and shareholder value by enabling and optimizing enterprise and interenterprise collaborative, operational and financial processes.
ERP Suppliers Customers
ERP II
GPUG Summit 2011– Las Vegas www.gpug.com
ERP
CRM
QMS
e-Procurement
TMSMMS
WMS
MES
FSS
HT
TP
& X
ML APS
ED
I
Private
Exchange
Public
Exchange
HT
TP
& X
ML
Private
Exchange
Public
Exchange
ED
I
To Supplier To Customer
MRP is the core database and transaction engine.
B2BB2B
B2C
ERPMRP II DRPHR
HTTP & XML
B2E
APS = Advanced Planning SystemB2B = Business to BusinessB2C = Business to ConsumerB2E = Business to EmployeeCRM = Customer Relationship ManagementDRP = Distribution Requirements PlanningEDI = Electronic Data InterchangeERP = Enterprise Resources Planning
FSS = Field Service SystemMES = Manufacturing Execution SystemMMS = Maintenance Management SystemMRP II = Manufacturing Resources PlanningQMS = Quality Management SystemTMS = Transportation Management SystemWMS = Warehouse Management System
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ERP – Success or Failure
Close to 90% of all ERP implementation projects fail to achieve a positive return on the money invested in them the first time around
Well over 50% of all ERP implementations never result in a positive ROI
The root cause of this phenomenon is rarely the software
Most ERP implementations were doomed to failure at the outset
There are six key imperatives that must be addressed for successful ERP
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Keys to Successful ERP
Foundation Six imperatives Required
regardless of the methodology
Some overlap with the methodology
Methodology Twelve steps Used for new initial
implementations Used to remediate
existing failed implementations
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The 6 Imperatives of ERP SuccessThe Foundation
1. The ERP initiative must have an economic justification, i.e. a tangible reason to do it
2. ERP must be integrated not just implemented3. The ERP methods and business processes must
be in alignment4. The business processes must be sound and
support the business strategy5. The ERP system must have high quality data6. Everyone must understand ERP methods as well
as the tools
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1 – ERP Must Be JustifiedThe Foundation
Projects that don’t have a realistic, valid and well understood justification typically never get finished
– This is particularly true of large-scale projects of long duration such as an ERP implementation
Management support is difficult to obtain initially and especially difficult to maintain for long-term projects with little or no economic justification
– This tends to become problematic in long-term projects as they continue to accumulate costs with little or no anticipated ROI
– Management may experience fee fatigue and repurpose resources Change for the sake of change is virtually impossible to achieve
– Justification drives the WIIFM (What’s In It For Me) which is a necessary enabler for change
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1 – Create the Burning PlatformThe Foundation
Using a solid financial justification, e.g. ROI and Payback, will drive the “burning platform” necessary to obtain resources, garner buy-in and enable change
– ROI – Defines what the return is for the dollars spent. It demonstrates that the expenditure in dollars and human effort are justified
– Payback – Defines how long the financial benefits (ROI) will take to recoup the investment expended to integrate ERP into the enterprise
– TTV (Time To Value) – The elapsed time from the initial expenditure until the ERP integration project begins to generate a return
Once a valid justification has been developed it can be used to define the “cost of waiting”
– For example, a project with a savings of $20K per month is “costing” the company $20K in lost savings for each month during the TTV in addition to the costs accumulating for the project
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2 – ERP Must be IntegratedThe Foundation
Internal business processes must be integrated for maximum:– Effectiveness (best service)– Efficiency (lowest cost)
Customers (demand) and suppliers (supply) must be integrated for maximum:
– Effectiveness (best service)– Efficiency (lowest cost)
Implementation Integration
versus
Customers
Customers
Suppliers
Suppliers
Suppliers
Purchasing
AccountingBilling
OrderEntry
Inventory
CustomerService
Manufacturing
Customers
PurchasingQC
Receiving
ManagingCash
Shipping
Customers
Customers
Customers
Suppliers
Suppliers
Suppliers
CustomerService
OrderEntry
Inventory Purchasing
ReceivingQC
Manufacturing QC
Shipping Billing ManagingCash
Accounting
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2 – Implementation vs. IntegrationThe Foundation
Implementation ERP implementations don’t produce a positive ROI ERP implementations typically don’t even work
– Simply implementing ERP drives shadow systems ERP implementations may actually increase costs
– Increased administrative costs to utilize the ERP system along with existing (shadow) systems
– Increased inventory costs driven by the system
Integration ERP integrations produce a positive ROI, work well and
reduce costs
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2 – Integration & CollaborationThe Foundation
• Collaboration alone, without integrated processes and systems cannot produce efficient nor effective operational results
• Integration alone, without collaboration between knowledge workers, will not produce efficient nor effective operational results
• Together, a collaborative workforce enabled by integrated processes and systems, will enable the enterprise to become highly effective while, at the same time, maintaining an optimal level of efficiency
COLLABORATION + INTEGRATION = SYNERGY
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2 – Collaboration Without IntegrationThe Foundation
•Data•Transactions•Reports
•Data•Transactions•Reports
•Data•Transactions•Reports
•Data•Transactions•Reports
Un-integrated System
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
ProcessShadowSystem
ProcessShadowSystem
ProcessShadowSystem
ProcessShadowSystem
Information Flow Information Flow Information Flow
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2 – Integration Without CollaborationThe Foundation
•Data•Transactions•Reports
•Data•Transactions•Reports
•Data•Transactions•Reports
•Data•Transactions•Reports
Sales Planning Inventory Accounting
Integrated System
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
ProcessShadowSystem
ProcessShadowSystem
ProcessShadowSystem
ProcessShadowSystem
Information Flow Information Flow Information Flow
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•Data•Transactions•Reports
•Data•Transactions•Reports
•Data•Transactions•Reports
•Data•Transactions•Reports
Integrated System
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
Info
rma
tion
Flo
w
There are no shadow systems – everyone is using the same systems and data.
2 – Collaboration + Integration = SynergyThe Foundation
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3 – ERP and Process AlignmentThe Foundation
The ERP system is a tool to enable business processes ERP is designed around a specific set(s) of business
processes In order to integrate ERP into the enterprise, it must be in
alignment with the company’s business processes– Manufacturing, distribution, service, health-care, retail, etc.– Make to order, assemble to order, make to stock, engineer to
order– Discrete versus repetitive or flow manufacturing– Lean Manufacturing (Pull) versus traditional Push, Kanban, etc.– Appropriate interface for users– Appropriate level or amount of automation, integration with
MES (Manufacturing Execution Systems) or POS (Point of Sale Systems)
– Appropriate or necessary BI (Business Intelligence)
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3 – People, Process & TechnologyThe Foundation
The successful integration of an ERP system into an enterprise is driven by three key components.
Each of these components must be balanced and synchronized to ensure the ERP implementation provides a benefit to the company .
PeopleProcessTechnology
People
Process Technology
ERPMethods
YourCompany
ERPSystem
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3 – Keep the Balance for SuccessThe Foundation
Process
People
Technology
People
Process
Technology
BOTH FORCE & DIRECTION MUST BE BALANCED
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4 – Appropriate Business ProcessesThe Foundation
ERP is designed around a set of Leading Practices and will not support poor or outdated business practices
Companies must have sound business processes in order to leverage the benefits of ERP
Companies must CHANGE if necessary to effectively utilize the leading practices that ERP is designed to enable
Companies must have an Operating Strategy that is based upon accepted leading practices
Strategy drives Processes which drive Technology
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4 – Operating Strategy Drives Processes
The Foundation
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OPERATINGSTRATEGY
MANUFACTURING AND/OR DISTRIBUTION
MANUFACTURING METHODS
MANUFACTURING CONTROL TECHNIQUES
Single or multi-plant Single or multi-company
Make to stock Make to order Assemble to order
Engineer to order Project Manufacturing Assemble to stock
Process Repetitive
Discrete Flow
Job shop Batch
Coexistent
Each process requires a different ERP (system) as an enabler.
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4 – Operating StrategyThe Foundation
Develop a written strategy:– Necessary to define what techniques will be used to manage
each functional area– Necessary to provide a basis for all business systems within
the enterprise– Necessary to ensure everyone is on the same path, going in
the same direction and not at odds with each other or out of sync with the business processes and supporting systems
Development of an Operating Strategy is a critical element of a successful ERP integration
Strategy drives Processes which drive Technology
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4 – Operating Strategy Drives Processes
The Foundation
• Use the Operating Strategy to drive:– Processes– Methodologies– Techniques– ERP system
requirements
• DOCUMENT IT, PUBLISH IT, POST IT AND ABOVE ALL, FOLLOW IT!
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5 – High Quality DataThe Foundation
The database in an ERP system is its Achilles' Heel
GIGO “GARBAGE IN - GARBAGE OUT”. It was true thirty years ago and it is still true today. The data simply must be accurate
In order to motivate people to use the system, it must be credible
In order to make it even possible to use the system, it must be accurate
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5 – The Impact of 90% Data AccuracyThe Foundation
Inventory 90%BOM 90%Routing 90%Work Center 90%Customer Order Date 90%Work Order Date 90%Purchase Order Date 90%Compound Data Accuracy 48%
Although 90% data accuracy by data element may appear to be more than adequate, it could render an ERP system completely unable to support the business.
Typical Manufacturing DB @ 90%
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5 – Poor Data and CostThe Foundation
Poor data drives: Use of shadow systems,
hence loss of integration Erroneous BI, hence bad
decisions Missed shipments and lost
sales Excessive inventory Inventory shortages Poor customer service Inefficient use of labor Lost or unused capacity Overloaded capacity
All of these drive up costs and/or reduce revenue!
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6 – Embracing & Understanding ERPThe Foundation
The three main components of a successful ERP integration are:
– Most important People– Second most important Data– Least important Computer
Therefore, people must be educated and trained to fully embrace the ERP methods and tools
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6 – Understanding ERP TechniquesThe Foundation
Level of understanding and working knowledge of ERP logic and techniques:– People cannot be expected to implement nor
utilize a methodology that they don’t have a complete working knowledge of
– People will not embrace “what is in it for them” if they don’t understand the ERP techniques well enough to embrace and believe in the benefits of managing with it
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6 – Understanding ERP TechnologyThe Foundation
Level of understanding and working knowledge of the information system:– People cannot be expected to implement nor
utilize a technology (ERP system) that they don’t have a complete working knowledge of
– The implementation will not be as effective nor implemented as efficiently without a thorough understanding of the information systems functionality
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6 – ERP KnowledgeThe Foundation
Insight and ability to apply the appropriate ERP techniques and systems solutions to one’s business:– Simply knowing ERP methods and the
technology isn’t enough. One must posses a creative ability and broad scope of experience within a business organization in order to successfully manipulate a large multi-functional, integrated business system such as ERP
GPUG Summit 2011– Las Vegas www.gpug.com
6 – Training & EducationThe Foundation
The Role of Education & Training
Education
Training
I know Why
I know How
Working Knowledge
Understanding
Awareness I know about it
I could do it
I can apply and fix it
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6 – Who To Educate or TrainThe Foundation
Education and Training
Initial Education
Top Management
Develop understanding of ERP and the implementation requirements
Second Level Education
Mid Management Develop a working knowledge of ERP
Software Training
Mid Management
Develop a working knowledge of the information system
General Education
75% - 100% of work force
Create awareness of ERP and the change required
Functional Training
As required Create understanding of the procedures
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The Methodology
There are twelve key steps to successfully integrating ERP into the enterprise
They are of equal importance
Omitting even one may seriously jeopardize the chance of achieving a positive return on the investment in ERP
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1 – Top Management CommitmentThe Methodology
Top management commitment: Ensure the ERP initiative is justified
– Ensure the justification is valid– Ensure management understands the justification– Ensure there is management consensus for the
justification Communicate direction and mission Sell the benefits of change Create a climate for change Facilitate ownership and participation Reward performance, results and success
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1 – Top Management Commitment cont.
The Methodology
Top management commitment (continued): Approve objectives Formulate policies Provide resources Assign responsibilities Establish priorities Resolve conflicts Regular reviews Earnestly address the tough issues Really use ERP to manage the business
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2 – Desire to ChangeThe Methodology
Desire to change: Create an economic justification Develop, document and publish the justification People need a reason to change - they need to
know what is in it for them People need management’s encouragement and
support for change It doesn’t take many non-supporters to scuttle a
project of this scope and magnitude Overcome the “not invented here syndrome”
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3 – Understand ERP MethodologyThe Methodology
Level of understanding and working knowledge of ERP logic and techniques: Provide the required in-depth ERP education to
ensure that key individuals have the knowledge to match the appropriate ERP techniques with the business requirements
Provide the required general ERP education to ensure that all staff have the knowledge to utilize ERP methods on a daily basis
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4 – Understand the ERP SystemThe Methodology
Level of understanding and working knowledge of the information system: Provide the required in-depth ERP systems
education to ensure that key individuals have the knowledge to align the appropriate ERP systems with the business requirements
Provide the required general ERP systems training to ensure that all staff have the knowledge to utilize ERP systems and methods on a daily basis
GPUG Summit 2011– Las Vegas www.gpug.com38
5 – Capability to Implement & Use ERP
The MethodologyInsight and ability to apply the appropriate ERP techniques and systems solutions to one’s business: Ensure that the individuals responsible for the
integration have the creative ability and broad scope of experience within a business organization required to successfully manipulate a large multi-functional, integrated business system such as ERP
GPUG Summit 2011– Las Vegas www.gpug.com39
6 – High Quality ProjectThe Methodology
Quality of the project: The project must be well thought out and
planned in sufficient detail to manage all aspects of the conversion to ERP
The project must be doable The project must be documented People must be assigned to each task Performance to the project must be tracked
– “Plan your work and then work your plan.”
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7 – High Quality Project Leadership
The MethodologyQuality of the project leadership: This individual must possess the attributes
outlined in steps 3 - 5 Must have the position and ability to work
effectively with top and mid management Must have a high level of credibility Must demonstrate excellent leadership skills Must be focused and driven toward success Must be dedicated 90% - 100% to the project
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8 – Clear Direction and Deliverables
The MethodologyClear definition of measurable project goals and business performance measures: The project must have specific tasks with start
and due dates. Performance to these dates must be reported, tracked and controlled in order to manage the efficiency of the conversion to ERP
Performance measurements, as previously discussed, must be defined, reported and tracked in order to manage the effectiveness of the conversion to ERP
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9 – Assign ResponsibilityThe Methodology
Assigned responsibilities: The ERP project is a company wide endeavor and
requires the input, support and involvement of each department head. The accountability for the success or failure must start with these people– For completing, on time, each project task assigned– For achieving the business goals and objectives set
forth in the performance measures The project leader alone cannot be held
accountable for a company wide project
GPUG Summit 2011– Las Vegas www.gpug.com43
10 – Ensure Sufficient ResourcesThe Methodology
Amount (quantity) of resources that can be applied over the life of the project: The more resources applied, the quicker and
better the project will get done– The more resources applied, the more people get
involved. The more people that get involved, the more people get educated and trained, hence, the better the implementation.
The more resources applied demonstrates to everyone the urgency and importance of ERP
GPUG Summit 2011– Las Vegas www.gpug.com44
11 – High Quality Accurate DataThe Methodology
The database: Ensure that the database meets the accuracy
criteria necessary for the ERP system to function and provide credible and usable information
Develop and implement a formalized database maintenance and control process– Limit access to the database– Ensure that someone is responsible and takes
ownership for the database– Utilize a database coordinator or manager for
responsibility and control
GPUG Summit 2011– Las Vegas www.gpug.com45
12 – Stick with a Standard SystemThe Methodology
The standard system: The standard system, when implemented
properly, will produce tremendous results A non-standard system, even if perfectly
implemented, will produce non-standard results, i.e. sub-standard results
“They should look alike because they are alike. If they weren’t, they wouldn’t work.”
Oliver W. Wight
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ERP System Things You Should Not Do
The MethodologyDon’t create a monster by: Taking a standard system
and making it nonstandard Making a simple system
overly complicated Trying to use all of the
system’s capabilities at once
Implementing untested software or systems
Implementing a system that no one understands
Hey! I only tweaked it a little!
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ERP System Things You Should Not Do
The MethodologyDon’t reinvent the wheel by: Writing your own “special”
version of ERP Modifying all of the reports to
look like what you already have
Computerizing (automating) existing processes or systems that never really worked in the first place
Writing software you already have but don’t know about
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ERP System Things You Must DoThe Methodology
Improve your chances of success by: Use a “standard system”!
– When encountering implementation issues, using the same system that successful companies are using, will tend to take the focus off of the computer and on to what is most important: solving the “real” problems.
Become an expert in your system’s functionality in order to:– Maximize the efficiency of its implementation– Maximize the effectiveness of its use
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Why Is This So Difficult?
Why is ERP so difficult to embrace? No understanding of why, i.e. the justification No support or involvement from top management Deeply entrenched systems and culture Lack of performance measurements “Turf” protection Emphasis on the short term Past successes No perceived need Not invented here syndrome
GPUG Summit 2011– Las Vegas www.gpug.com
ERP Integration Methodology
Strategy drives Processes which drive Technology
The core of a successful integration methodology are the initial four steps of the integration process. These four steps provide the overall business operating strategy required to drive the business processes necessary to enable the strategy. These, in turn drive the technology requirements.
The initial four steps of the methodology are:1.Conduct an executive ERP round table discussion and educational session
2.Conduct a facilitated executive strategic planning session
3.Conduct the first cut of combined, integrated ERP and Process education, custom tailored for the business/industry
4.Conduct a facilitated middle management project planning session
4321Executive
Education
Operating Strategy
&
Project
Strategy
Middle
Mgmt.
Education
Detailed Planning
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Do It Right the First Time
The cost of remediating a failed ERP implementation is much greater that simply doing it right the first time
It is very difficult and costly to undo the poor business process and shadow systems that result from a failed ERP implementation
However, if you didn’t do it right the first time – then do it over and get it right
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If It Was Easy – Anyone Could Do It
The implementation of a successful ERP system is one of the most difficult projects a company can undertake. It is also one of the most lucrative projects, in terms of results and pay back, that a company can undertake.
“There are no gains without pains.”
Benjamin Franklin
GPUG Summit 2011– Las Vegas www.gpug.com54
Thank You!
NOTICE: Proprietary and Confidential
This material is proprietary to James M. Noblitt. It contains trade secrets and confidential information which is solely the property of James M. Noblitt. This material is solely for the Client’s internal use. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without the express consent of James M. Noblitt.
© 2011 James M. Noblitt. All rights reserved