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Lecture 10

Ch.5 ERP Implementation

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Agenda

0. Why ERP?1. ERP Implementation - CSFs2. Technology3. Processes4. People Management5. Managing Change 6. Strategies for Implementing ERP7. What lessons were learned?8. Questions to Ponder9. Best Practices10. Optional Business Trends – a quality methodology11. Optional: NIBCO’s “Big Bang”

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Current Paradigm

Driving Force

Opposing Force

New Paradigm

Operations Functionality

ERP and Process Centric

Competing on Time No ERP Strategy

Customer Service

Functional Integration

State-of-the-art

Why ERP? - Force Field Analysis

No Support from Executives

Taking Too Long

Infrastructure Incompatibility

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1. ERP Implementation – Critical Successful Factors (CSFs)

Implementation of ERP is not easy. There are many factors that come into play.

We shall identify the three factors to explain ERP failures as technology, process, and people.

Samples of 1) successful companies 2) failed companies

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Implementation - Critical Successful Factors

People

ProcessTechnology

PM

PM: Project Mgt.

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It’s Working…

Enterprise Vendor Applications Organization

Cisco Systems, Inc.

Oracle Manufacturing, Financial, Order Entry

Supply Chain Networks

Pace U. SCT Banner

Student, Human Resource, Finance

Multi - Campus

Atofina Chemicals

SAP R/3 Material Mgt., Production Planning, Order Mgt., Financial Reporting

12 Business Units

Starwood Hotels

Oracle Payroll, Accounts Payable, General Ledger

750 Hotels

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It Failed…

A&P

FoxMeyer

Hershey Food (in the summer of 1999)

Allied Waste

Reasons for their failures ….

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Why it Failed?

Project ManagementOperational Reasons

Hershey

FoxMeyer

Inexperienced Managers

Expanding or Changing the Project Scope

Allied Waste

A&P

What does the enterprise need to do in the future?

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• With ERP, there is a tendency that the legacy system may be transformed or reengineered and the entire corporate cultureentire corporate culture may transform to adapt to ERP.

• The potential for organizational changes is enormous and without top management top management commitmentcommitment and support, ERP could not possibly be implemented.

• Therefore, to understand the ramifications of ERP on corporate goals, vision, and strategy, we need to look at the issues of technologyissues of technology, process and people and how they may be affected or influenced by ERP.

What does the enterprise need to do in the future?

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2. Technology

Decisions need to be made on the technologytechnology and its compatibilitycompatibility with the organization’s processes and culture.

TechnologyTechnology should be seen as a way of facilitating work process to meet the overall objective of the organization such as achieving customer satisfaction.

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A compatible technology should beshould be cost effective, adaptable to the organization, and flexible to enable the organization achieve its long-term goals.

One of the problemsOne of the problems in the early stages of ERP was that some of the technologies were not flexible or adaptable to other software products from different vendors.

Samples of Obstacles .. (to p12)

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Critical Concerns

• Nonrobust and incomplete ERP packages• Complex and undefined ERP-to-legacy

system interfaces• Middleware technology bugs• Poor custom codes• Poor system performance.

ERP software-vendors(to p13)

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Major ERP Vendors

• SAP

• Baan

• J.D.Edwards

• Oracle

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3. Processes

• The process includesincludes the methods, procedures, and guidelines for doing things. It may help to create a culture in the work place that could lead to increased productivity.

• ERP software often hasoften has their own processes and such processes may not be in congruence with the company’s process.

• Business processes supportsupport the strategic opportunities of the company and ERP should be seen as a means of enhancing such opportunities (to p15)

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To effectively take advantage of strategic opportunities, ERP shouldshould guide management’s actions and decisions in the following ways:

Before a company invests in ERP, it must first scrutinizescrutinize itself by taking a good look at its processes, business strategy, and work culture.

UnderstandUnderstand your business and how you are positioned against your competitors.

SelectSelect the right ERP software and infrastructure to support the strategic initiatives of the firm.

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4. People Management

People are the most important asset of any company and no new technology including ERP can be successfully implemented without the support of the people.

People are often resistant to change because its outcome could be uncertain and unpredictable.

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5. Managing Change

Managing change will require an articulation of why change is necessary as in the case of ERP replacing the legacy system and communicating that idea effectively to the people.

Resistance to change

Optional exercise: Change Management(to p2)

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Resistance

Appleton [1997] points out that resistance to ERP often stem from the fact that people are required to share information that once was closely guardedguarded and make decisions differently.

Ross [1998] notes that resistance may be intellectually orientedintellectually oriented, as employees may not see how they fit in with the new system.

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Change Management

Optional Internet Assignment: Visit and explore the Internet site for change management. Why is it important to understand change management before implementing any projects? Focus your discussion on organizational roles and structure, communication, training and education, performance management, and management practices.

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6. Strategies for Implementing ERP

• The Big Bang – doing all at once using re-engineering concept

• Franchising Strategy – different units adopt their ERP and then link

up together

• Slam Dunk – Focuses on few key processes and implement first

Can you evaluate their pros & cons?

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7. What lessons were learned?

Operationally Validated Theories

Application Area/domain

Project Management

ERP Competence

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8. Questions to Ponder

When implementing a new initiative such as ERP…

What are the CSFs? What major steps will we have to follow

(Hint: see next slide)? What is SAP’s Solution Manager (SM)?

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Commit (Selecting the project managers, Recruiting the project team)

Start (kick-off meeting, project team member training)

Manage (work plan, risk management)Analyze

Configure (Integrate the package)

Test

Change

Support

Convert (the data from the existing system into the new system)

Prepare (test the business process) Go-live

Improve

Typical ERP Implementation

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9. Best Practices

Prepare a summary of best practices for implementing ERP systems. Focus your discussion on people, processes, technology, partners, knowledge, outputs, and outcomes.

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10. Business Trends

Optional Internet Assignment: Visit and explore the Internet site for the Six Sigma methodology (Define-Measure-Analyze-Improve-Control). Why is it important to understand the Six Sigma methodology before implementing any projects?

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11. NIBCO’s “Big Bang”

• What have you learned from the NIBCO’s case?

• If you could do one or two things differently at strategic, tactical and operational levels, what would you do?

Internet Assignment: Download the article. Use the following key word: NIBCO’s “Big Bang”

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