1. Preparing for ERP

2. Team creation Multi-disciplinary Full time Decision making power Budget Representative – team leads Balance between allegiance to team and to area of competence Team spirit Team awareness Must have support from organisation

3. Team Characteristics Typical size: 25 to 60+ FTE Team leads: 10 to 20 Functional area experts Special roles: –Project manager –Integration manager –Data conversion and migration –Training manager –Hardware / IT specialist –Platform expert –Communication about project (internal & external)

4. Collecting requirements Interviews with key individuals Observation of activities Consultation of documentation Surveys Targets: –Staff –Suppliers –Customers –Other constituencies when needed (eg: vendors…) As-Is + New requirements

5. Scope arbitration Time and cost often already decided Time boxing used to segregate Trade off with having to do it again next year Arbitrate between requirements –Out of scope –Conflict between areas –Conflict with proposed project scope Steering committee (Director level)

6. Business Integration Focus on end-to-end process rather than single activity –Cross functional –Multi-competence Reduced autonomy Increased communication Increased reliance on tools Rationalisation of process? Benefits do not accrue where the system is most constraining

7. How it works InventoryShop floor control Sales management Field services planning ………….. Workflow

8. ERP Module ERP Module TraceabilityDrill DownData Flow Independent versus complementary integration One way versus two way integration + see figure 16.4 How it works InventoryShop floor control Sales management Field services planning ………….. Workflow

9. Example of Business Integration MUTAIR case study Meals for plane travelers Before: quality / high value service –Culinary business (chefs in toques) –Dedicated buying –Price not an issue After: commodity –Drastic price reduction –MRP type scheduling / purchasing

10. Mutair case study Process integration: –p/o, receiving, issue, inventory, invoicing, accounts payable & accounts receivable –Bulk buying from agreed suppliers –Tough negotiation on price of RMs But, rationalisation does not always work –80% of jobs are OK –Rest cannot be planned (delays, change of schedule, special meals…) Dysfunctional use of system => dysfunctional ERP

11. What can go wrong Integrated systems rely on actors to “play the game” –Need good perception of system Here, actors impeded by system –Inaccurate data entry –Physical stock VS theoretical stock –Faxed P/Os post-entered / never entered (supplier does not exist) –Ghost deliveries reached the loading bay –Either goods sent back (no stocks) –or invoice cannot be reconciled (payment impossible) –Emergency orders must be entered somehow => wrong codes used Overall performance of the process decreases –May keep going at local level –But overall vision is totally inaccurate Might as well have implemented nothing

12. Where problems originate? In preparation phase for project Lack of managerial awareness of risks / opportunities Lack of understanding of how to select software Lack of vision of the business impact Wrong scope (eg: areas pull out and weaken project) Not enough money for proper analysis Wrong team (not at the right level / too militant)

13. Communication Political / change management dimension Internal aspects –Expected support (we need you!) –Properly justify project (?) –Explain change in roles –Give assurances (when possible) External aspects –Be upfront about new rules –Adopt participative approach? –Seek collaboration / leverage other firms’ systems Perception of system / team

14. Benefit realisation Only occurs when definitive targets sought Only occurs if analysis was realistic and did not neglect downsides May be more intangible than measurable –Head count –Upfront implementation cost –Length of learning curve –Investment may not be exhausted by current usage (stage 2 / ERP2 etc…) Whose benefits are those anyway?!?! –Case of the multi-national –Case of a dominant coalition

15. The ITT – more details Trade off between detail and speed of processing of information –Cover everything –Sample the functionality –Buy on faith Available in generic format (see handout) But always better when tailor made to fit business goals See notion of fit in previous notes Also prepare ITT to facilitate analysis But some vendors will ignore the format

16. Other methods – Commercial presentations The armies of darkness…. Be prepared / ready to question Vendors: –Will always look good / sound good –Possible to preview software –Unlikely to be caught off guard Consultants: –Sound also very good –Try to ensure stable participation –Seek experience of very similar project / industry

17. Site visits Similar (completed) implementation site Volunteered by vendor (with prior agreement) Very realistic –Can talk to actual / current users –Can go down to area specific detail –Can ask about actual support received from vendor But unlikely to hear a horror story

18. Comparing tenders Likely they all look good Need a rigid set of criteria to decide –Criteria –Type of criterion –Relative weight –Rules for computing overall score How many would you like to end up with? Decide on shortlist

19. Shortlisted firms On or off site presentation Intense meeting Any item unclear in ITT Any contentious point –User requirements –Price –Support / maintenance contract –Technical characteristics (eg: response time) Then leave lawyers finish it off Don’t expect a clear cut answer Recommend for board level decision

20. Next steps Agree on exact schedule Freeze scope Schedule participation of all required users / technical staff Communicate communicate communicate Run awareness workshops etc… Negotiate re-skilling arrangements Ring fence resources and budgets Prepare for IMPLEMENTATION

21. Implementation phase Create fine configuration of package Define roll out strategy Schedule implementation in phases Organise data loads Go live (s) Define criteria for ramp up period (duration to full capacity) Measure progress and report

22. ERP roll outs Core team (global) Local implementation teams Roll out step: –Initial meeting with local pm –Local team set up –Bringing local team up to speed –Understand implications of template at local level –Create additional workarounds –Define criteria for acceptance / rejection of additional demands

23. FactorInput valuesDecisionComment 1 - ScopeGlobal / LocalOnly global changes will be considered Global changes are implemented at local level primarily 2 - Impact on BusinessHigh / Medium / LowOnly high impact changes will be considered Difficulty in ensuring consistent reporting of impact 2a – Savings QuantifiedNumber of transactions * time saved per time interval See point 9 belowFull justification for perceived saving must be presented 3 - SAP standard functionalityYes / NoOnly standard functionality will be considered Except for “must have” additions ** 4 - Support Project Business objectives Yes / No / MaybeOnly unambiguous Yes will be considered 5 - Impact on projectYes / NoOnly changes without overall impact on Alliage will be considered Impact on Alliage project focuses on the impact on time of delivery of deliverables 6 - RiskHigh / Medium / LowOnly low risk changes will be considered trade off to point 4 above 7 – Change in SOPYes / No / MinimalOnly properly documented And QMS approuved changes Reference of QMS approuval document required 8 - TrainingYes / No / MinimalOnly changes with minimal training requirements bullet points max 9 – CostsNumber of man days  IT  Users  QC Project requirements to be checked against accumulated usage of key resources. In case where total resource usage goes beyond Alliage budget, steering committee may recommend scope enlargement in special cases 10 – Pay back / Return on Investment Duration of payback period (comparison of 2 and 10) Only changes that pay for themselves within 12 months Also take intangible benefits into account

24. Training – Design training courses and develop material – Schedule training overall – Select and train trainers – Create facilities / sandpit – Book staff for training sessions – Coordinate training – Create assessment mechanism and monitor progress

25. Data transfers into an application First time system implementation Data warehousing projects Database version upgrade ERP projects Move to new version Called a migration –From a manual system –From old to new system

26. Data transfers between systems Static data (eg. Customers) Dynamic data (eg. sales orders) –Additional problems with a live system Conversion or interfaces often required

27. What can go wrong Data not available –feature activated from implementation onwards –Massive manual data entry (?) –Eg: different account structure Incomplete data –Some fields are missing Inconsistent data (eg: engineering vs accounts) Wrong level of granularity Data not clean - incorrect Most new system requires changes due to their different data structure / activity system

28. Data cleaning must address Different department record same info under different codes Multiple records of same company (under different names) Fields missing in input tables (eg: a/c #) Different depts. Record different addresses for same customer Use of different units for time periods

29. Labour intensive tasks Data entry Data validation Working on solving conflicts Allocating new codes Solution = introduce as much automation as possible –SQL –Custom conversion programmes to extract, modify and upload data –Filtering –Parsing (eg: excel) –Staging areas for conversion in progress

30. Example 1 – the supplier file Sup codeSup nameSup addressCityPhone 4 digits OLD New supplier code to include city where firm is based Assignation of category based on amounts purchased

31. Example 1 – the supplier file Sup codeSup nameSup addressCityPhone 4 digits Sup codeSup nameSup address…PhoneCat 3 letters +1,2,3 depending 4 digitson total purchases last year OLD NEW New supplier code to include city where firm is based Assignation of category based on amounts purchased

32. Example 2 – New Cost Accounting Structure Maintenance department expenditure: 1 account => separate accounts for different production activities Intervention codeDesc.DateLabourPartsTotal OLD

33. Example 2 – New Cost Accounting Structure Maintenance department expenditure: 1 account => separate accounts for different production activities Intervention codeDesc.DateLabourPartsTotal Intervention codeDesc.DatelabourPartsTotalAccount Will data still be available? Will an archive be maintained? OLD NEW

34. Example 3: merging files Complete customer file based on Accounts, Sales and Shipping OLD (finance) CustIDnameaddresscityaccount numbercredit limitbalance OLD (sales) OLD (Shipping) CustID*nameaddresscitydiscount ratessales_to_daterep_name CustID**nameaddresscityPreferred haulier

35. Example 4: change of business practices Payment by bank draft for international customers Automatic payment into account for national customers Payment direct into account for all customers

36. Data Upload Several rounds: –Trials –Static data –Open items –Dynamic data - transactions –Balances Staging areas –Local initially –Then central area Upload into live system –Specific predefined sequence (RDB) –Extract, translate, load –Rental of platform specific tools from vendor

37. Go live A single point in time First transaction routed through system – eg sales order In reality loads of data already in – incremental approach Plenty can still wrong although not right away Over first few weeks – ramp up to full capacity

38. Post Go Live Team is disbanded –Back into business –Promoted –Next wave of roll out Structure is permanently altered – eg: shared services ERP team put in place –Data experts / maintenance –Application experts – on-going developments and fixes –Platform experts – uptime –Business analysts – look to future releases and future requirements –Typical size 20 /25 staff full time for a multinational –Various names used – eg: knowledge centre

39. What can happen then Dysfunctional ERP => uninstall Next phase in implementation –More modules –More sites –More interfaces to legacy systems Update to new version Merger and acquisition => change to other platform

40. Conclusion: the ERP community ERP Vendors ERP Consultants Client - HQ Site A Site B Site C Site n… External Parties: Regulatory bodies Auditors Industry Experts

41. Conclusion: managing change Perception of staff Time Post-implementation Go Live Roll out Allocation of work Package bought Increasing Enthusiasm AnxietyBenefits Begin to appear Business as Usual – Low morale Low Motivation Fear Indifferent High Interest And motivation

42. Conclusion: Critical issues in ERP implementation Deciding scope of project HRM and setting up the team (and budget) difficulty in making a transition from an old model to an ERP model Preserve previous learning overestimation of the pace of change of some stakeholders (technical change is not sufficient) difficulty in obtaining any direct ROI

43. Conclusion: What happens to competitive advantage?

45. Conclusion: Working on a stronger rationale Prove the need for ERP Davenport’s questions: –How might ERP strengthen out comp. Adv.? –How might it erode …? –What will the ERP’s effect on the org. culture? –Do we need to extend the system across all functions? –Do we need to rollout globally? –Are there any alternatives?

46. Conclusion: Sales versus Needs