Presented by Your Friends at Team Gold “Putting the Enterprise into the Enterprise System” & Other ERP Insights Presented by Your Friends at Team Gold

Big Picture Enterprise Resource Planning (ERP) systems enable companies to “Integrate” data throughout the entire organization. Typically Modular Finance – Most popular Human Resources Operations and Logistics Sales and Marketing

Suppliers Customers Managers Sales Force Back Office Central Database Reporting Applications Managers Sales and Delivery Applications Service Applications Sales Force Inventory and Supply Applications Manufacturing Applications Financial Applications Back Office Central Database Suppliers Customers Human Resource Applications Employees

Fast Facts $10 billion per year industry Major Software Suppliers/Integrators SAP (e.g., NIKE, Weyerhaeuser/Norpac) Baan Oracle ( Used by Tektronix & Cisco in Cases) PeopleSoft

The Promised Land Autodesk IBM’s Storage Systems Division Fujitsu 2 weeks shipping to 24 hours IBM’s Storage Systems Division Reprice time from 5 days to 5 minutes 22 day shipping to 3 days Credit check from 20 min. to 3 sec. Fujitsu Order filling from 18 days to 1.5 days Close financials from 8 days to 4 days

The Dark Side FoxMeyer Drug Mobil Europe Dow Chemical Blames bankruptcy on ERP implementation Mobil Europe Abandoned implementation after $100 million Dow Chemical 7 years, $500 million, then started over

Only Three to Six Months, Huh… Time Issues Be leery of short implementation estimates Size of company Modules to be installed Standardization vs. Customization and time implications How long to train staff after the initial implementation? If, and how long, to run parallel legacy systems?

They have the time if you have the $$$ Cost of implementation Modular Decisions Big Bang Franchising Success Slam Dunk Hidden Costs Training of staff often miscalculated Integration & Testing Customization Conversion of Existing data Data Warehousing Costs What is Ed Warnock’s true earning potential?

To customize or not to customize… Standardization Easier implementation (in relative terms!) Consultancy less likely to be indefinite Software upgrades and module additions handled in less time and expense Is this really how we want out company to run though? Possible sacrifice of a competitive advantage! Customization Extended implementation (as well as maintenance…if it ever works) Consultants will most likely move in for good With upgrades or add-ons, the customization matrix has got to be reworked It’s great, but can our people really work with this?

CIO ERP Thought: Why did I do it?? Organizational implications Initial productivity losses This doesn’t work like the old system!! Panic by staffers. Implementation is only the first step Additional coding for reports, etc. Ongoing maintenance Employee retention Positions backfilled Poached by consulting firms

ROI? Yeah, not for a while yet… Investment returns on ERP Misconceptions of management Possible positives (it could happen) Integrated financial data great for roll-up Heightened management of supply chain Highly integrated information allow for great data mining and CRM by Sales & Marketing departments

CEO Thought: “What Happened?!? The most successful ERP deployments involved companies that viewed them in strategic terms. “ They stressed the enterprise, not the system.” Main reason for “failures” is that companies fail to reconcile the technological needs of the ERP with the business needs of the enterprise. “The logic of the system may conflict with the logic of the business.”

Key Learnings: Success Themes Strong Corporate Leadership Active Business Involvement Excellent Project Management ‘Homework’ Prepared Organizational Change Actively Managed Corporate Leadership – Active, involved sponsorship roles. (Makes the case for business change, eliminates barriers to progress including business redesign if necessary ) Scope, project pace, cost limitations, and standardization decisions made in context of business strategic goals. Businesses – Multi-level buy-in via negotiations to insure information flow to implement functional strategies supplied Supply capable, credible resources full time for process reengineering to modify the business processes to fit the system Project Management – Business leaders actively involved in status of project Project manager technically capable with previous ERP experience Vendor is a “partner” in success of project Homework – Business processes mapped before hand Clean legacy data and limited scope of data transferred to simplify early weeks of startup Organizational Change Process Plan for both technical and business process retraining Change management training and “super user” resources to deal with “loss of competence” after ‘go live’

Key Learnings : Failure Themes Conflict of business model with System model Lack of User acceptance of Process Change Budget and Schedule overruns Availability of adequate skills Technical Failures Conflict of business model with System model – Did not recognize trade offs, didn’t deal with them, External environment changed Lack of User acceptance of Process Change – Lack of recognition and planning for resistance to change and fear of change throughout organization. Budget and Schedule overruns – Underestimate hidden project costs, especially with process reengineering, training, customization requests and legacy data clean up. Availability of adequate skills – in company skills not developed, over reliance on consultants at exorbitant costs over time due to lack of disengagement plan Technical Failures – Rollout to long and software became obsolete, cut over to complex at go live and data not clean or lack of complete testing prior to go live

Key Learnings: Summary “ If the development of an enterprise system is not carefully controlled by management, management may soon find itself under control of the system.” Before Decisions, should answer the following strategic questions: What are the internal / external drivers for this change? How might an ERP strengthen our competitive advantages? How might it erode them? What will the system’s effect be on our organization & culture? Do we implement a limited amount of modules or all of them? What pace of rollout? For internationals; Is a global ERP better or regionalize it?

Questions to ask BEFORE an ERP How will an ERP strengthen, or erode, our competitive advantage? What will be the effect on our organization? Do we need to implement the system across all functions, or can we implement only certain modules? Are there other Enterprise systems which might suit our needs better?

What an ERP Won’t DO! ERP on its own will not improve processes ERP will not reduce inventory ERP will not embrace customization with easy upgrades ERP will not yield immediate results ERP will not revolutionize or revitalize your business

ERP – Wrap up Benefits: Costs: Seamless integration of all company data - integration of data from all functional areas Streamlines the company’s data flows and allows direct access to real time information Costs: Expensive Hidden costs High costs to reorganize or redesign company processes

ERP – Future Highlights Growth is forecasted to continue, although at a slower rate. CRM and APS (advanced demand planning software) will be the new functional niche categories ERP solutions will attempt to simplify their product offerings and implementation approaches as they move to smaller markets ERP solutions will offer web-enhancements to their current systems