UNIT III ERP IMPLEMENTATION. Why ERP? Benefits Simplification of business processes Enhance...
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Transcript of UNIT III ERP IMPLEMENTATION. Why ERP? Benefits Simplification of business processes Enhance...
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. Pre-Evaluation Screening
2. Package evaluation 3. Project planning phase 4. Gap analysis 5. Reengineering
6. Customization 7. Implementation team
training8. Going live9. 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 retraining2. Resistance to change3. 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 selection10. Poor project
management11. Customization issues12. Long payback period• Discontinuing support for
systems13. Poor communication &
co-operation14. Data quality costs
15. Hidden implementation costs
16. Improper integration• Integration of ERP
modules• Integration of e-business
applications• Integration with legacy
systems17. Improper operation/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 strategyAdvantages : • 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 StrategyBig 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 inter-departmental communication is excellent and where there is a strong leadership to manage the project.
ROI – ERP Implementation
• Benefits Calculation • Inventory Reduction• Improved process
efficiency• Improved vendor relations• Waste reduction
Costs Calculation • 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 process1. Assemble project teamExecutive sponsorProject leaderTeam members2. Define Business Vision4. Requirements & selection
criteria5. Develop scripted
demonstration scenarios
3. Define business requirements
Build or BuyIntegrated or Best of breedInitial 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 ApproachERP implementation without
BPR
Evaluation Criteria1. Strategy fit2. Technology3. Change Management4. Risk5. Implementability
6. Business functionality7. Vendor credentials8. Flexibility9. Cost10. 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 migration1. Identifying data to be migrated2. Determining timing of data integration3. Generating data templates4. Freezing tools for data migration5. Deciding on migration related setups6. 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 : StepsStep 1 : Analysis- Data profiling : Content,
structure, quality, integrity - Data Mapping :
Table/dataset (source system) mapped to target field in ERP system
Step 2 : DesignOld data formats to new
system format’sSupplement/transform
coding structure for ERP
Step 3 : CleansingRemove obsolete, duplicate
data, Data validationStep 4 : ExtractionETL tools – Extracting data
from data sources and load to ERP
Step 5 : TransformStep 6 : LoadStep 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-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.