ERP for Small Businesses 2

7/31/2019 ERP for Small Businesses 2

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Copyright2011 e-AccountingTecknowledge. All Rights Reserved

Successfully Implementing ERP Systems inSMEs

Accounting & Audit

Technology Conference andExhibition 2011


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Copyright 2011 e-Tecknowledge All Rights Reserved.

Successfully Implementing ERP Systems in SMEs

Outline

2

Background

ERP Implementation Readiness Check

Software/Vendor Selection

Project Management and Project Team Structure

Implementation Strategy

Data Conversion

Change management

Executive Support


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Background

A general definition of SMEs using size and scale of operation is not

easy, but within the fixed co-ordinates of national boundaries, we

will apply the definitions given at the 13th Council meeting of the

National Council on Industry held in July, 2001

Small-Scale Industry: An industry with a labour size of 11-100

workers or a total cost of not more than N50 million, including

working capital but excluding cost of land.

Medium Scale Industry: An industry with a labour size of between

101-300 workers or a total cost of over N50 million but not more

than N200 million, including working capital but excluding cost of

land.

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Common features of SMEs are that they are either sole proprietorships or partnerships, and most have labour

intensive production processes and centralised management


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Background

ERP (Enterprise Resource Planning ) system is an integrated information management

system that manages the flow of information among different functional modules in an

enterprise.

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Manufacturing

Finance

Engineering

Sales andMarketing

HumanResources

Manufacturing

MRP

Production

Planning

Scheduling& ActivityControl

Finance

Manufacturing

MaterialsandComponents

Quantities

Time

ERP

MRPII

MRP

InventoryControl

1960 1970 1980 1990

Planning &Inventory Control

MaterialsManagement

ManufacturingResourcePlanning

EnterpriseResourcePlanning

ERP combines all the business functions together into one single

integrated system with a single central database.

This system serves the information needs of all the departments

across geographies, while allowing them to communicate with eachother


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Background

SMEs are the backbone of any economy and are today faced with global competition. In order to respond to

the needs of the dynamic markets, SMEs are looking towards ERP systems.

A successfully implemented ERP system has proven to be provide the following key benefits:

Reduced Planning cycle time,

Reduced manufacturing cycle time,

Reduced inventory,

Reduced error in ordering,

Reduced requirement of manpower,

Enables faster response to changing market situations,

Better utilization of resources,

Increased customer satisfaction,

Enables global outreach

However ERP implementation is tough job for the organizations, especially for SMEs and there are many

challenges that an organization has to overcome before they can start reaping the benefits of an ERP system.

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Outline

6

Background





Data Conversion

Change management

Executive Support


7/37Copyright 2011 e-Tecknowledge All Rights Reserved.



Because of the benefits that ERP can bring, and the long period during which those

benefits may manifest themselves, ERP implementation is always a strategicinvestment for an organization.

Thus, the first and foremost thing is to identify whether your organization needs an

ERP solution at all. If an organization is experiencing one or more of the following

business conditions, it is time to seriously consider implementing an ERP solution or

replacing the current one:

Fast and uncontrolled growth: Is your organization growing at a very fast pace?

Your organization has recently opened multiple operational units/offices in

multiple locations. There is significant increase in volumes of production,

processes, and work force.

Lack of sufficient and accurate information on your companys performance: You are facing problems in capturing exact figures or are receiving mismatched

data on your companys performance indicators.

Consistent mismatch between inventories and production management:

There is a lack of coordination between sales order processing and inventory

management in your organization.

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Duplication of effort: The finance and HR departments store and maintain employee details

separately. Similar other instances of duplication exist in your company.

The right information is not accessible at the right time:

You are not able to access accurate data on stock in inventory, month-end sales

figures, orders in transit and other required information on time.

Little or no ability to forecast and plan:

Your organizations strategic and planning division is not equipped to forecast

and often relies on conventional methods for future projections.

Your current system is becoming obsolete:

The existing enterprise system in your organization is no longer efficiently

supporting your day-to-day processes and is negatively impacting the

organizations growth.

Need to Increase visibility and transparency into operations and finances

Need to Improve coordination and information sharing across different parts of

the organization

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Outline

9

Background





Data Conversion

Change management

Executive Support





The root cause of many failed business software implementation projects can be traced back to

an incomplete evaluation and hasty selection process.

The four cornerstones of a good software selection process are;

Product Fit,

Implementation and Support Approach,

Risk Mitigation and

Optimize Price/TCO.

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Software

Product Fit

Solution

Provider Approach

Optimize TCOMitigate Predictable

Risk

Success!

The

What

How Much

The How

Avoid

Surprises




Product Solution Fit

The first stumbling block for many failed implementations is a severe misalignment

between software functionality and business needs.

There are hundreds of enterprise software options in the marketplace, so it is important to

navigate carefully and find the product with the right fit.

Functional Fit

A high fit to your business functional requirements is critical for any solution to be viable. Need

to define your key high-level application requirements for evaluation purposes and if the vanillasolution does not provide complete fitness, how customizable is the solution to meet your

business requirements

Usability Fit

Ease of use is essential for user adoption and proficiency. It includes assessing the user interface

and the ability to easily getdata in and out of the system (without relying on IT) Compliance Management Fit

Includes IT controls, audit trails, electronic signatures, appropriate reporting and documentation,

and segregation of duties through roles and access rights

Technical Fit

Assesses how well a solution aligns with your IT plan requirements (defined previously) around

scalability, use of standard technologies (required skill sets, programming language, DBMS,

operating system), interoperability, and open interfaces.

Deployment Model Fit

Is alignment with your preferred IT architecture model (i.e. SaaS, Cloud, Hosted, or On-premise)

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Solution Provider Approach

Evaluate each solution vendors implementation approach to validate

how well they understand your business requirements and environment

Use of a defined implementation methodology

Ability to Meet Project Timelines

Evaluate their ability to execute the project considering

Breadth and depth of capabilities

Breadth and depth of related services

Evaluate their post go-live support approach

How does it work

What services do they provide

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Mitigate Predictable Risk

Aligned with your initial risk assessment , the third cornerstone is to mitigate

the predictable risks associated with each solution option.

When solutions rate similarly in other ways, this is the area that often clearly

differentiates between them;

Risk Management Approach

Business Risk Pricing/Contract Structure Risk

Change Management Risk

Compliance Risk

Product Risk

Project Delivery Risk

Operations Risk

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Optimize TCO

ERP systems have many hidden costs, thus Calculating TCO is essential for

making a fair comparison of different proposals.

TCO should include all anticipated costs in the first three years of ownership.

Life-Cycle Costs: and should be analysed along the following components

Acquisition

Deployment

Training

Maintenance

Services.

The identification and measurement ofdirect and indirect costs is a critical

requirement of TCO analysis.

Direct or budgeted costs include all expenditures related to hardware, license

fee and tangible resources.

Indirect or non-budgeted costs include downtime and services to end users.

These costs often are hidden and difficult to identify or measure.

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Outline

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Background





Data Conversion

Change management

Executive Support




Project Management

Select a project management methodology that provides a roadmap for managing projects

and a checklist of key deliverables and activities to avoid missing key tasks tExampl;PMI,

Prince2

The project manager and the project management team should be experienced to be

able to plan out the requirements.

The project management knowledge dimension consists of the following components: Project Definition

Project Planning

People/Resources

Time

Cost

Risk\Issue

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ProjectManagement Knowledge




Project Management and Team Structure

The implementation of an ERP system in an organization is an entire projectby itself and requires project management.. Project Management involvesplanning, organizing and

The project management knowledge dimension consists of the followingcomponents:

Project Definition

Project Planning

People/Resources

Time

Cost

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ProjectManagementKnowledge



Successfully Implementing ERP for SMEs


Three dimensions of knowledge are required for the successful implementation of an ERP

system and should form the basis for the composition of ERP implementation project team.

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Business andManagementKnowledge

TechnicalKnowledge





TechnicalKnowledge



The implementation of an ERP system in an organization is an entire project by itself and requires

project management. A structured approach should be used to plan and manage an implementation

project

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Three dimensions of knowledge are required for the successful implementation of an ERP

system and should form the basis for the composition of ERP implementation project team.

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Three dimensions of knowledge are required for the successful implementation of an ERP system and

should form the basis for the composition of ERP implementation project team.

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TechnicalKnowledge


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Outline

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Background





Data Conversion

Change management

Executive Support


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ERP transition technique focuses on how to make the transition from a legacysystem to a new ERP system. The selection of a transition technique that is best

suited for an organisation is crucial as a wrong technique can result in a failed or

flawed implementation.

Understanding the relationships of ERP transition techniques between the process,

people and technology will assist the ERP implementers to better understand what

type or combination of types of ERP transition technique is best.

The following ERP transition techniques can be considered for a successful

implementation;

Big Bang

Phased

Parallel

Process Line


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Implementation Strategy Big bang

Implementation happens in a single instance. All modules are installed across the entireorganization all at once, more or less.

All users move to the new system on a given date.

Advantages of Big Bang approach are low overall implementation cost, faster return on

investment, elimination of complex integration issues etc.

Drawbacks of this strategy are high amount of time and effort for pre-implementation planning,

high failure rate, do-it-right-the-first-time nature etc

Phased rollout (module/site/business unit )

Changeover occurs in phases over an extended period of time. Users move onto new system in

a series of steps.

A more cautious approach with a few modules such as the financial modules while linking

them back to the legacy system.

This usually takes more work to integrate because of development of interface programs and it

usually costs more in terms of consulting and internal team hours.

Parallel adoption

Both the legacy and new ERP system run at the same time. Users learn the new system while

working on the old.

It is often very difficult as the two systems usually take a different approach to gathering and

summarizing the data.

The parallel approach consumes considerably more resources than other techniques during the

transition as all functional interactions with the legacy system must also be duplicated exactly

in the new ERP system24


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Which Strategy? There certainly is no one-size-fits-all when it comes to implementing an ERP system.

Every company has unique goals, and an implementation requires careful planning andanalysis

Big bang approach is ideal in situations where an immediate ERP solution is needed.

This is better suited for SMEs where all the critical resources of the project can fall

within the immediate control of a project manager. It is also suited to any situation

where a limited amount of time is available combined with an immovable go-live date

The Phased approach suits companies that do not share many common processes across

departments or business units

The parallel approach is ideally situated for a mission critical situations that cannot

survive a major malfunction of an ERP system. It also works well for business

environments that require the utmost in stability of an ERP system such as financial,

pharmaceutical or medical companies

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Outline

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Background





Data Conversion

Change management

Executive Support


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Data Migration Data migration is the transfer of data from an old information systems (Legacy) to the new

system that is replacing it (ERP)

In order to have a successful ERP implementation, the ERP application must run on top of a

solid foundation of data. Poor levels of data quality within ERP system will cause a high level

of errors in transaction processing, which is a costly business proposition.

Data migration process should be executed along the following phases:

Pre MigrationAnalyzing, Mapping, Normalizing/Transforming, Testing, Backup

Migration

Post Migration Quality Control, Cleanup, Update Cataloguing Guidelines

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Data Migration Strategy Data migration strategy provides a roadmap for performing the conversion of data from the legacy

system to the new ERP system. Data migration strategy defines what is to be migrated, how andwhen it will be done.

The strategy should cover both depth and breath of scopewhat entities are to be migrated and

how much data. It should ideally consist of the following:

The data to be migrated - Configuration data, Master data, Transaction data

Timing of data loaddifferent data objects might follow different time line. Every load of the master data should be used totest the tools and the templates in addition to the data itself.

Templates to be used - it is best to freeze the template at the initial phase of the project and test its utility at different phasesof the project. This will help in identifying missing data requirements long before the final go live date.

Tools to be used - tools need to be evaluated from the perspective of speed, scope of errors and data volume.

Roles and ResponsibilityClear definition of roles and responsibilities of data migration team resources

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Best practices included the following:

Designating a central group to manage the data and policies

Delegating responsibility for various data items based on function, business unit, and geography

Implementing some workflow technology to ensure updates were made in a timely manner and did not slow down sales or

new product introductions

Cleaning up data on the old system prior to merging a unit into the common instance; this includes both

consistency and tagging records to be converted with enough information to be connected to the appropriate master data in

the consolidated system


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Data Migration Team Building a data migration team with the appropriate skills to your project, will to a large extent

determine the success and failure of the project.

Key roles to be considered for data migration team are likely to include:

Project manager/Lead should ideally be experienced in data migration and ERP as well as project management

Data object (business) ownersKey business stakeholders will be required to sign off various stages of datamigration process

Business Analyst/Process LeadsERP process leads should be involved at various stages of data migration process,from definition of data fields to be migrated to testing and validation

Data migration analyst

A Legacy Expert

Data subject matter expert

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Data Migration Risk Management

One of the project tasks which can be a wild card for both costs and timeline during

an ERP implementation is data migration. The following 4 key things can be done to

minimize your costs and risks associated with this important aspect of implementing

your new ERP solution

Be smart about what you migrate

The most important consideration is what to migrate. This should be carefully discussed

with your implementation partner during the sales process and incorporated into the

statement of work.

Key considerations are:

avoid high-risk sets of data,

Focus on what is critical to have.

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Scrub and test the data yourself

Ensure your implementation partner gives you specific templates and data specifications, then take the time internally to do the

cleanup of your old data. Work with your partner to understand how to test and validate the imported data so you can also do that

Have your team keep paper records of the final migrated data comparing old and new for audit purposes and troubleshooting later

Be OK with less-than-perfect data when possible

Obviously, most of your migrated data needs to tie out exactly with your old system. But in some cases it may not. Decide early

why you need each set of data and let that drive your requirements.

Be vigilant in monitoring status of the migration effort

Planning from the start, discussing your options with your partner and continual monitoring will reduce your risks substantially.


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Outline

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Background





Data Conversion Strategy

Change management

Executive Support


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Change management

Organizational Change Management is a process of aligning the organization's people and

culture with the changes in business strategy, structure, technology and business

processes.

One major factor for failure is considering ERP implementation to be a mere automation

project instead of a project involving change management. It is a business solution rather

than an IT solution, as is perceived by most organizations

The 4 main organisational change management activities in an ERP implementation:

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OrganisationalAlignment:

Managing impacts toemployees

Learning andDevelopment:

Providing the skills you need

StakeholderManagement

Ensuring businessreadiness

Communications:

Providing the informationyou need


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A model of successful ERP adoption To overcome users resistance to change, top management has to:

study the structure and needs of the users and the causes of potential resistance among them;

deal with the situation by using the appropriate strategies and techniques in order to introduce ERP successfully; and

evaluate the status of change management efforts.

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-Communicating ERP benefits

-Communicating ERP general

Operations

-Minimizing adoption cost

-Involving individual and groups

-Enhancing ERP interface quality

-Hands on training

- Securing support of opinion

leaders

-Timing ERP introduction

-Top Management and

Commitment Support

-Favourable

awareness response

-Favourablefeelings response

-Favourable adoption

Intension response

-Actual ERP Adoption

S f ll I l i ERP f SME


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Outline

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Background





Data Conversion Strategy

Change management

Executive Support

S f ll I l ti ERP f SME


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Executive Support

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Change Management Dimension- Process-oriented vision

- Commitment to change management

- Commitment along the whole project

- Definition and monitoring of the change plan

Process Dimension- Align ERP project with organization strategy

- Involvement in requirements analysis

People Dimension

- Process-oriented vision

- Commitment to change management

- Commitment along the whole project

- Definition and monitoring of the change plan

Project Dimension

- Attendance at project meetings

- Involvement in decision-making

- Resources funding

- Support project manager

- Project monitoring and control

- Awareness of ERP project complexity

Top Management

Support

Commitment

A critical success factor for ERP implementation is sustained management support and

commitment, both at top and middle levels during the implementation, in terms of their owninvolvement and the willingness to allocate valuable organizational resources

Only top managers are equipped to act as the mediator between the imperative of the technology

and the imperative of the organization. Top management support during ERP implementation

projects can be viewed four dimensions: change management, process, people and project

dimensions.



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Outline

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References

1. Measuring Sustained Management Support in ERP Implementation Projects: A GQM Approach (Jos Esteves, Joan Pastor, JosepCasanovas)

Documents

ERP for Small Businesses 2