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UNIT III ERP IMPLEMENTATION.

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Presentation on theme: "UNIT III ERP IMPLEMENTATION."— Presentation transcript:

1 UNIT III ERP IMPLEMENTATION

2 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

3 Reasons for implementing ERP or Perspectives of ERP Implementation
Technology Business Operational Strategic Competitive. The reasons for going in for ERP systems can be grouped into four different sets of categories: Technology: Acquisition of an ERP system is motivated by the need for new information technology and mainly aims to support the current way of doing business. Business : Globalization, desire to adopt best practice business models, need for increased flexibility and agility etc., Operational: Poor and uncompetitive business performance, high cost structure, complex and ineffective business process etc., Strategic: To improve the efficiency, effectiveness and responsiveness of the organization. Competitive: To increase the competitiveness of the organization and enabling it to respond effectively to ever changing business environment.

4 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 The reasons for going in for ERP systems can be grouped into four different sets of categories: Technology: Acquisition of an ERP system is motivated by the need for new information technology and mainly aims to support the current way of doing business. Business : Globalization, desire to adopt best practice business models, need for increased flexibility and agility etc., Operational: Poor and uncompetitive business performance, high cost structure, complex and ineffective business process etc., Strategic: To improve the efficiency, effectiveness and responsiveness of the organization. Competitive: To increase the competitiveness of the organization and enabling it to respond effectively to ever changing business environment.

5 ERP Implementation Life cycle : Objectives
Speed Scope Resources Risk Complexity Benefits Speed: How much the company would like to take in implementing the system. Scope: Includes all the financial and technical characteristics that company wants to implement. Resources: Resources are everything that is needed to support the project including people, hardware systems, software systems, technical support and consultants. Risk: The risk of a project is a factor that impacts the overall success of the ERP implementation. Complexity: Complexity is the degree of difficulty of implementing, operating and maintaining the ERP system. Benefits: Benefits are the extent to which the company will utilize functionality of the ERP system for system development, maintenance and other support activities.

6 ERP Implementation Phases or Lifecycle
Pre-Evaluation Screening Package evaluation Project planning phase Gap analysis Reengineering 6. Customization 7. Implementation team training 8. Going live 9. End-user training 10. Post implementation Pre-Evaluation Screening The purpose of this phase is to eliminate those packages that are not at all suitable for the company’s business processes. Package evaluation In this phase the ERP package that I best suited for the organization is selected. Project planning phase In this phase the details of how to go about the implementation are decided. In this phase, the time schedules, deadlines etc., for the project are arrived at. Gap analysis This is the process through which companies create a complete model of where they are now and where they want to be headed. It is the step of negotiation between the company requirements and the functions a package possesses. Reengineering It is in this phase that human factors are taken into account. Customization In this phase, the ERP package is modified to suit the business processes of the organization. Implementation team training This is the phase where the company trains its employees to implement and later run the system. Going live This is the phase where the system that is being implemented is tested for any problems, bugs, errors etc., End-user training This is the phase where the actual users of the system will be given training on how to use the system. Post implementation This is the phase where the ERP system is used for conducting the business.

7 Critical phases of ERP Implementation
Adoption decision Acquisition Implementation Use and maintenance Evolution Retirement Adoption decision Includes definition of system requirements, its goals and benefits and an analysis of the impact of adoption at business and organizational level. Acquisition This phase involves selecting the product that best fits the requirements of the organization to minimize need for customization. Implementation This phase deals with the customization or parameterization and adaptation of the ERP package acquired, to meet the needs of the organization. Use and maintenance This phase consists of the use of the product in a way that returns expected benefits and minimizes disruption. Evolution In this phase, additional capabilities are integrated into the ERP system to obtain additional benefits. Retirement When new technologies appear or the ERP system or approach becomes inadequate to the needs of the business, managers decide if they will substitute another information system approach that is more adequate to the organizational needs of the moment.

8 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 Assembling of participants One of the first steps of the project planning session is to assemble the critical stakeholders of the project. This should include all people who have a direct influence over the project. Feasibility study and need analysis review Feasibility study report contains the factor that will affect the ERP implementation. The need analysis is the justification for the project. Review of these two documents will give an idea on what could be the potential problem areas and where more attention and resources will be needed. Project mission and vision statements creation The vision should be a global statement that is continuous and ongoing. The mission statements will consist of the major milestones of the project. Determination of organizational structure The organizational structure is determined to decide how the implementation is to proceed. Determination of the modules to be implemented. Creating the core team It includes project sponsor, executive committee, project manager, work teams etc., Establishing the training needs Determine how much education will be required, the type of education and the number of participants. Establishing the data conversion strategy The goal in this step is to establish what needs to be converted/migrated and how it is going to be done. It is best to have experienced people from the legacy system working together with application consultants to fully understand the complete need. Establishing interfaces The goal of this step is to identify any interfaces that require development. This section is for the required interface programs between systems for which none exist. Determining work estimates The work estimates for all the activities from planning sessions to training and maintenance after installation of the ERP project should be determined in advance. Cost of consultants In this step, the areas where the services of external consultants are needed are identified and the cost of hiring the consultants is calculated. Calculation of implementation time The scope, time and resources are decided and based on that the implementation time is calculated. Identifying constraints All constraints of the project should be identified and documented. Establish policies and guidelines Project policies and guidelines form consistent methods for dealing with situations and events are established and documented.

9 Requirements Definitions
Process of capturing and documenting the user requirements and specifications. - Understand current system User triggers development of product /system Emphasize - Product

10 Classification of requirements:
Business requirements User requirements Functional requirements

11 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

12 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.,

13 People involved in ERP implementation:
Project Sponsor Executive committee Project Manager Implementation or Work team Functional Managers Functional Participants Consultants Package Vendors End-users

14 ERP Implementation Challenges..
1. Inadequate requirements definition - Selection of wrong ERP package - Unnecessary customization - Lack of employee retraining 2. Resistance to change 3. 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

15 ERP Implementation Challenges..
9. Poor package selection 10. Poor project management 11. Customization issues 12. Long payback period Discontinuing support for systems 13. Poor communication & co- operation 14. Data quality costs 15. Hidden implementation costs 16. Improper integration Integration of ERP modules Integration of e-business applications Integration with legacy systems 17. Improper operation/use

16 ERP Implementation Approaches/Strategies
Phased Implementation Pilot Implementation Hybrid Transition Strategy Big Bang Implementation Parallel implementation Process line implementation

17 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.

18 Big Bang strategy Advantages : 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.,

19 Parallel Implementation
Parallel approach keeps both traditional system and new ERP system active simultaneously for a length of time.

20 Parallel Implementation
Advantage: High success rates Low resource commitment Opportunity to learn from mistakes etc., Disadvantage: High overall cost Lengthy implementations etc.,

21 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.

22 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.

23 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.

24 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

25 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.

26 Process line transition strategy
Advantage: High success rates Low resource commitment Opportunity to learn from mistakes etc., Disadvantage: High overall cost Lengthy implementations etc.,

27 Ideal Strategy Big 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.

28 ROI – ERP Implementation
Inventory Reduction Improved process efficiency Improved vendor relations Waste reduction Benefits Calculation Costs Calculation Software licence Hardware costs Internal Training Change management Internal conversion

29 ERP Implementation : Hidden cost
Training Integration & Testing Customization Data conversion Data Analysis ERP consultants Brain drain (Employee turnover) Continuing Maintenance Training : Learn new set of process Integration & Testing : Integration of various functional ERP modules/e-business software application/legacy systems Customization Data conversion:Customer, supplier records, product design data from old systems to new ERP systems Data Analysis : Data from ERP combined with data from external systems for analysis purposes. ERP consultants : Performance metrics and time schedules for consultants. Brain drain (Employee turnover) Continuing Maintenance

30 ERP Package Evaluation & Selection
Identify packages that fits the requirement Find package flexible to meet company’s needs

31 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

32 Methods in ERP selection
Top management & consultants Centralised selection process (IT & internal dept) Considering suggestion of internal department Combination of above.

33 Selection Committee Functional experts Top management (CIO or COO)
Consultants (package experts) End users

34 Selection process 1. Assemble project team Executive sponsor Project leader Team members 2. Define Business Vision 4. Requirements & selection criteria 5. Develop scripted demonstration scenarios Define business requirements Build or Buy Integrated or Best of breed Initial vendor screening Vendor viability Functionality Scalability Technology Scenarios are detailed stories that describe a business function, such as production planning, procurement and revenue realisation. The scenarios can then be divided into a series of use cases that detail what is to happen for every contingency.

35 Selection process contd.,
Qualitative factors Ease of use Flexibility Vendor support 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 Related services eg. Maintenance & training

36 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.

37 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. They demonstrate software before they define their requirements Candy store syndrome – Everyone asks for every feature they want in new ERP system. Cost, length, project complexity increase

38 Framework for evaluating ERP
Traditional Approach BPR as pre-requisite of ERP implementation Role of SME Simplified Approach ERP implementation without BPR

39 Evaluation Criteria Strategy fit Technology Change Management Risk
Implementability 6. Business functionality 7. Vendor credentials 8. Flexibility 9. Cost 10. Benefits

40 Fitzgerald approach- Evaluation criteria
Identification of cost Contribution to business strategy Analysis of benefits Second-order effects Flexibility Implementability Risk Testing the business idea.

41 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 Constitution of the repertoire of ERP Products : Nominal Group Technique (NGT) structured methodology that enables assimilation of ideas and judgements of knowledgeable individuals towards building a group consensus over desired outcome. It will provide list of criteria for constituting a repertoire of ERP products based on the information collected from various sources. The list is validated through communication to the representative structure and approved by the steering committee.

42 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

43 Steps : Successful data migration
Identifying data to be migrated Determining timing of data integration Generating data templates Freezing tools for data migration Deciding on migration related setups Deciding on data archiving

44 Data Migration : Objectives
Reduce risk Lower operational expenses Improve data quality

45 Data Migration : User perspective
Iteration : Identify corrupt and rectify data Weeding Inspection : Archiveddata

46 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

47 Data Migration processing : Steps
Step 1 : Analysis Data profiling : Content, structure, quality, integrity Data Mapping : Table/dataset (source system) mapped to target field in ERP system Step 2 : Design Old data formats to new system format’s Supplement/transform coding structure for ERP Step 3 : Cleansing Remove obsolete, duplicate data, Data validation Step 4 : Extraction ETL tools – Extracting data from data sources and load to ERP Step 5 : Transform Step 6 : Load Step 7 : Verification

48 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

49 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

50 Data Migration : Methods
Manual data Migration -Manually Check source system and punch data in ERP Time consuming Costly High chance of error Small implementation

51 Data Migration : Methods
Electronic data migration -Volume of data is not constraint Faster, cheaper Low chances of error Manual verification after migration

52 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

53 Inadequate training – ERP system failure
Select appropriate plan – training Effective understanding of business process Training inside or outside

54 Education or Training ? Who?
Level of education - Steering committee Project leader Functional teams

55 Budgeting : Education & Training
Cash outlays Employee time Equipment Facilities

56 What education & training needs?
Evaluation

57 People Organization in Implementation
Vendors Consultants Employees (Inhouse team and users)

58 Vendors Supply product & documentation Trainer
Project support function

59 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.

60 Employees : Resistance
Fear of being redundant Fear of failure Fear of future

61 Handling : Employee resistance
Training & Education ERP champions Creating ERP champions – Expert users, Facilitator, Trainer Pilot projects Involvement of Employee in ERP process Managing expectations.


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