Presentation on theme: "Glance at Enterprise Resource Planning (ERP). In today's fiercely competitive business environment, there has to be much greater interaction between the."— Presentation transcript:
Glance at Enterprise Resource Planning (ERP)
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. Introduction
E nterprise R esource P lanning I ntegrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.
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. An Example of how ERP systems Work.
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. 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. 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. 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. An Example of how ERP systems Work (Cont).
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 surveyed including 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). What does ERP really cost?
SAP. Oracle. J.D. Edwards. PeopleSoft. Baan. ERP Big Five!!
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 How does ERP create value?
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.
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 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. DIS-Advantages of ERP (Cont.)
How do companies organize their ERP projects? Based on our observations, there are three commonly used ways of installing ERP. 1.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 strategy This 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 dunk ERP 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.
Why Projects Fail ???
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. 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. 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 So… What is Change Management??
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."
Why Manage Change!!
Change Management Issues
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.
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. 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). Attitudes & Behaviors of Individuals & Groups
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.
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.
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? Leading the Project
How does ERP fit with e-commerce? 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. - 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