1. Today we will be covering:
What exactly is ERP?
History of ERP.
How ERP can be used in our company?
ERP Implementation.
Company Examples.
Training Exercise.
Summary of today’s training.

2. What is ERP?
ERP software integrates all departments and functions onto a single system that can serve the needs of the entire company.
Some of ERP’s functions include:
Bookkeeping & Accounting
Human Resource Management
Planning Production
Supply-Chain Management
ERP seeks to integrate the entire company on to a single, common system. ERP is able to automate and cut down paperwork for a variety of business practices. It is able to keep track of and schedule payments for accounts receivable and payable. Bookkeeping functions are also able to track assets, centralize general ledger data and analyze cost control to bring down overhead costs. Human resource modules are able to keep track of employee payroll as well as keep track of employee records such as vacation and sick days, employee expenses, and training schedules. Production and planning modules are able to receive and track customer orders, plan production schedules, ship products, and manage company inventories.

3. More Of What ERP can do (Picture: Copyright 1999 SAP AG)
This slide gives a visual representation of how an ERP system such as SAP interrelates its modules to give a seamless company wide system.

4. History of ERP
ERP has its roots in the MRP and MRPII systems of the 70’s and 80’s.
Came about as companies realized that the management and flow of information was just as important as materials and inventory management.
ERP has also evolved considerably with computer and technology advances.
MRP systems had been integrating the production aspects of companies long before ERP. The idea for ERP came about as companies realized just how important the information flow was throughout the entire company. Initially ERP systems were implemented on the cumbersome mainframes of the 70’s and early 80’s but as technology has changed more and more companies are using client-server technology because of cost effectiveness.

5. How we can use ERP Update our legacy systems.
Cut down on inter-office paperwork.
To standardize our manufacturing processes and increase productivity.
Will give us more information and better access to our suppliers and customers.
An ERP system integrates all the business units with a single system using current client/server technology that will allow the phasing out of out-dated systems and hardware. The integration of the company will give all departments access to the same information at the same time cutting down on paperwork while increasing productivity in the office. Integration of production will assure us that all of our production units are using the same system and production procedures. Having real time access to all of our customer records and orders will allow us to tell them exactly where their order is and when it will be shipped.

6. Brainstorming Session
What are the employee’s looking for in an ERP system?
Are there any ideas on how else we can use ERP to improve our processes?
At this time we are asking if any employees in the session have new ideas pertaining to ERP and how it can help the company.

7. Implementation Steps for implementation: Cost analysis
Blueprinting of Business Processes
Staff Training
Integration
Data Conversion
Going live with ERP
This part the training session will help to explain the steps taken in a successful implementation of an ERP package such as SAP or Oracle.

8. Cost Analysis
Costs to implement an ERP system is not just a ‘one-time thing.’
Real costs are in constant training, upgrading, and maintenance.
Average Total Cost of Ownership (TCO) is $15 million.
Benefits are not seen right away.
ERP is a very large financial undertaking. Meta Group surveyed 63 companies in 1999 about their average total cost of ownership for ERP software. TCO includes initial installation and costs up to 2 years later including staff training, upgrading and optimizing the system to fit the business, and maintenance of the hardware. Of the companies surveyed the average dollar amount spent was $15 million while the lowest was $40,000 and the highest spent by one company was $300 million. Monetary benefits to the system were not seen right away either. The Meta Group’s study reports that companies waited and average of 8 months to see benefits after implementation and the annual average savings from the new system was $1.6 million

9. Blueprinting of Business Processes
Business processes must be modeled to fit
ERP software.
A blueprint can be modeled in-house.
We can choose from a ready made blueprint supplied by an ERP software company.
This is probably the biggest decision in the implementation process. Modeling a blueprint in-house is costly and time consuming. Picking a ready made blueprint saves time and money but competitive advantage can be lost if the company loses any of its functionality in trying to fit a blueprint. ERP designers recommend companies pick from their blueprints to lower the amount of customization needed when its time to install the new system. The next few slides will look at pro’s and con’s of picking a pre-designed blueprint.

10. Pro’s of Blueprinting Blueprints are made by industry professionals.
Blueprints can greatly optimize business processes.
Flexibility in choosing.
Few companies can afford a zero-based approach.
The main advantage in choosing a pre-designed blueprint is that they are made by industry professionals. These are experts in the business modeling and by picking their blueprints companies are also gaining their expertise in the process. These expert designed blueprints can help the company to optimize its processes and cut costs. ERP software providers have a great amount of blueprints to choose from, increasing the chance that one will be a perfect match for any company. Lastly, designing blueprints is very costly and few companies can afford this approach.

11. Con’s of Blueprinting Professionals may still not know enough.
Pre-designed blueprints may still not be enough.
There are so many blueprints its overwhelming.
Even though these are experts every company is different. There may not be a perfect blueprint for the company which leads to one of 2 choices: changing the business to fit the blueprint and possibly losing functionality in the process, or customizing the software which can lead to crippling software errors.

12. Staff Training Most overlooked of ERP implementation costs.
Needed to get the most out of new software.
Training is needed to make sure employees do not abandon the system.
This is easily the most overlooked of all implementation steps. Employees are not just learning a new software package but also have to learn any changes to current business processes that were made in the blueprinting stage. ERP software offers real-time information on all facets of the business and high levels of training are needed for employees to be able to understand and use this information to the best of their abilities. Going to an ERP system can have fundamental changes on an employee that has always done things the same way and training is needed to make them accept the new system.

13. Integration Installing new equipment and software.
Customization if needed.
Testing-Testing-Testing
Costs can skyrocket is the installation of client/server technology and software is not organized properly. Customization of the software may also be needed to fit business processes better. Testing is the biggest factor in the integration process. All factors, from production planning to order placement need to be tested to make sure the system is functioning properly.

14. Data Conversion Moving Data: Employee Records Company Information
Customer and Supplier Records, etc.
Moving data from legacy systems to ERP can be an expensive process. Manipulating data to fit the new systems and dealing with data that is old, corrupted, or not needed anymore can be an expensive process.

15. Going live with ERP Final changeover to ERP system.
Real test of software.
Most costly errors can happen at this stage.
Going live is the final changeover from the old systems to the new. This is the point where the software is used in everyday business by the employees of the company. There is also the biggest chance for costly errors since errors at this stage can cause lost money and customers. Implementation and consulting teams are still needed to fix any bugs that are still in the system to make the changeover as painless as possible.

16. 3 Steps to Integration: Implement entire business at once.
Implement one business unit at a time and make sure its right.
Implement one business unit until its right and then implement the rest all at once.
The following are the three main plans that companies use to implement ERP software. The first is rarely used by companies because the risks are high. Implementing all at once greatly increases the chance of systems wide errors, lost profits and customers, and upset suppliers. The choice of the next two options depends on how comfortable the company is with implementation. When Owen’s Corning implemented SAP in their six vinyl systems plants in the early 90’s the chose to work with one plant and then implement the rest all at once. They were already comfortable that their plants ran the same way and once the bugs were worked out of the initial plant they moved to implement the other five.

17. ERP & Raytheon Aircraft
$2.7 billion subsidiary of Raytheon Co.
Implemented SAP in just over 1 year.
Total cost of about $55 million.
Eliminated 30 legacy systems.
Integrated four manufacturing sites and fifteen airport service stations.
Raytheon chose SAP as their ERP package because of its faster implementation time. Although costs were $55 million, John Ferney, Raytheon’s ERP director says, “that's nothing compared with the time and cost of a full bore ERP implementation, which would have taken about three years and cost around $300 million.” To accomplish a fast implementation Raytheon also chose not to customize the SAP program to fit Raytheon’s accounting practices and changed the business process itself. Previously Raytheon had used actual-cost accounting but changed to fit SAP’s standard-cost system.

18. Raytheon’s Training $5.5 million went into training employees.
5,000 employees trained for 20 hours/week months before the go-live date.
150 go-live managers worked full-time on SAP before go live date.
Raytheon has credited their training for the reason implementation went so smoothly. Employees spent half their workweeks in SAP training in preparation for the go-live date. During the go-live period, 150 managers who had become experts in the new system wore red hats so that any employees that had problems could find a supervisor immediately to tackle the problem

19. Energy Northwest Chose an in-house approach.
Only implemented accounting functions.
Only $2 million in expenses.
Energy Northwest chose an in-house approach when it implemented PeopleSoft, another ERP provider early last year. Costs were cut tremendously by only implementing the functions that needed it most and using as little outside talent as possible. This worked better for them because although it was very time consuming the employees walk away knowing much more about the system. By having them integral to the implementation of the program the employees are better prepared to handle any problems that can arise, lowering maintenance and outside consulting fees.

20. Training Exercise Employee teams can now break off and
decide if ERP is right for us. Some thing to
look at are:
Can we afford implementation.
How and where can this help us.
How will our corporate culture be affected?
These are typically the most important questions asked by companies before deciding whether or not to implement ERP software. Costs can be staggering if not kept under control. Companies need to look exactly where they need help in their business and decide if ERP will be a move to fix things or possibly make them worse. Most importantly, companies need to look if their corporate culture. ERP software best fits companies with standardized, high speed production. Although it has been successfully implemented at many other types of companies it still may not be a good decision. If a company has to make many changes to fit an ERP mold there is the chance that competitive advantage could be lost and employees will not adapt well to the new system.

21. Summary ERP is a business wide common system.
Can integrate all of our business units.
Very expensive and time intensive.
Proper implementation can help the business function better.
Poor implementation can hurt the business immensely.
Training
In summation, the company needs to spend time looking into an ERP system and asking if its right for them. Although its an expensive undertaking the benefits to the company can easily make up for the high cost. Implementation needs to be highly ordered to get the most of of the new software. Lastly, training is an expense that cannot be ignored. High levels of training assure that employees will be able to adapt to the system and get the most out of the information available to them.

22. Bibliography
Callaway, Erin. ERP-The Next Generation: ERP is Enabled For E-Business. Charleston, SC: Computer Technology Research, 2000.
Curran, Thomas A. and Andrew Ladd. SAP R/3 Business Blueprint. New York: Prentice Hall, 2000.
Hoffman, Tom. “ERP: Not Just for HR anymore.” Internet February 2001.
Jordan, Win G. and Kip R. Krumwiede. “Reaping the Promise of Enterprise Resource Systems.” Strategic Finance October 2000:48-52.

23. Bibliography (cont.)
Konicki, Steve. “Fast Deployments at a Price.” InformationWeek October 2000:
Ptak, Carol A. and Eli Schragenheim. ERP: Tools, Techniques, and Applications for Integrating the Supply Chain. New York: St. Lucie Press, 2000.
Slater, Derek. “The ABC’s of ERP.” Internet February 2001.
Wah, Louisa. “Give ERP a Chance.” Management Review March 2000: