ERP implementation and E-business

ERP Implementation: Six Deadly Sins

Not understanding the true significance of what you have taken on.

Not committing the right resources to the project.

Not managing the change effectively.

Not managing the benefits.

Not embracing integration.

Not planning for the end of the project before you start.

Project Management Fundamentals

Co-ordination Tasks Equipment Products People Time Money

Balancing Scope Time Cost Quality Needs vs..

Expectations Needs & Expectations

of stakeholders

Step 1: Define the Scope of the Project

Step 2: Estimate Staffing to Lead the Project and Support Each Process Area

Step 3: Estimate Custom and Interface Development

Step 4: Assess Data Conversion Magnitude

Step 5: Estimate Project Duration

Step 6: Assess External Connectivity Requirements

Step 7: Estimate Supplemental Staffing

Step 8: Create a Time-Phased, Resource-Loaded Project Plan

Step 9: Estimate Resource Rates and Apply Them to the Plan

Step 10: Estimate Travel, Contingency and Final Project Costs

ERP Project Management – 10-Step Estimation Process

Step 1: Define the Scope of the Project

• Typical Macro-Processes Identified as Part of an ERP Implementation

• Sample Process Decomposition

Step 2: Estimate Staffing to Lead the Project and Support Each Process Area

Step 3: Estimate Custom and Interface Development

• Custom Development

• Interface Development

ERP PM – 10-Step Estimation Process (continued)

Step 4: Assess Data Conversion Magnitude

• Code Tables

• Master Tables

• Transaction Tables

Step 5: Estimate Project Duration

• Project Planning and Preparation

• Phase 1: Standard Solution Design

• Phase 2: Standard Solution Development

• Phase 3: Pilot Deployment

• Phase 4: Rollout

• Project Management

ERP PM – 10-Step Estimation Process (continued)

Step 6: Assess External Connectivity Requirements

Step 7: Estimate Supplemental Staffing

• Point Staffing for Custom Development

• Point Staffing for Data Conversion

• Point Staffing for End-User Training

Step 8: Create a Time-Phased, Resource-Loaded Project Plan

Step 9: Estimate Resource Rates and Apply Them to the Plan

Step 10: Estimate Travel, Contingency and Final Project Costs

ERP PM – 10-Step Estimation Process (continued)

Change Management: Of Vital Important

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ERP enables better, faster decisions by unleashing the power of the integrated enterprise66

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There are three distinct stages in each wave after going live

Companies should anticipate a temporary dip in performance after going live

ERP also yields significant returns from unexpected benefits

ERP delivers significant tactical and bottom-line strategic benefits

ERP provides a backbone to further extend functionality through bolt-ons and other solutions

Issues and obstacles show dramatic shifts in emphasis after going live

An ERP implementation is at its core a people project

There are twelve best practices for accelerating, maximizing, and sustaining the benefits of the ERP journey

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ERP Success Factors: Top Ten Findings

Going live is not the end of the ERP journey

Findings and Conclusions

12 best practices for sustaining the benefits of ERP

Focus on Benefits

Alignment

Breadth of Change

Business Case

Post-Implementation Plan

Role Transition

Process Expertise

Extending Capabilities

Commonality

Using Capabilities

Benefits Ownership

Metrics

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Implementation: ERP The Next Wave

ERP 2: The e-business challenge

Information Sharing – ERP focus is on internal information , e-business provides ability to share info internally & externally

Optimization Focus – ERP focus is across one value chain, e-business focus is on multiple value chains

Internet Substitute – ERP “one in all in application” opposed to “standalone apps” linked on internet backbone

Technology Obstacle – Closed client/server vs. open standards

ERP Trends: Combined ERP & E-business Benefits

TANGIBLE BENEFITS INTANGIBLE BENEFITS

Increased revenue Improved customer and employee satisfaction

Reduced costs, inventories, and collection efforts

Frees employees to work on tasks requiring human creativity and judgment

Shorter cycle times Continuous operation

Capability to manufacture to actual demand

Improved supplier relationships

Improved cash management

E-business Models and Disintermediation

Pure e-business play? The case of Amazon.com

Click-and-mortar Hybrid of the pure e-business and the brick-and-mortar model Dependence of e-business and physical facilities

Disintermediation Manufacturers interact directly with consumers, bypassing intermediaries

such as wholesalers and retailers Impact on a company’s business processes

Warehouse must now manage a large number of low-volume orders Accounts receivable must now process a large number of invoices and

accommodate increased collection activity Customer service may be inundated with calls Customer returns must now be managed by manufacturer

The E-business Platform – Extreme Demands

Operating demands place a strain on e-business platforms. Fluctuating traffic. Frequent system changes. 24 x 7 operation.

Flawless system stability. True 24 x 7 availability requires 99.999% reliability.

Scalable. Dramatic spikes in site traffic.

Security. Exposure of corporate resources on the Web.

Robust Design. Testing tools available.

Examples of AOL, E*Trade, Charles Schwab and eBay.

ERP and E-business: Adaptive vs. Disruptive Technology

E-business is a revolution Internet (4 years to reach 50 million users) Television (13 years) PC (16 years) Radio (38 years)

Adaptive technologies move earlier technologies forward incrementally while Disruptive technologies change the way people live or the way businesses operate. ERP is adaptive while e-Business is disruptive. Touch-tone telephone was adaptive while telephone itself was

disruptive. Electric train was adaptive while the train itself was disruptive.

Life Cycle of Adaptive versus Disruptive Technologies

Impact

Time Disruptive technology

Adaptive technology

Critical Mass

(1)Initial hype

(2) Learning,

Experimenting,investing

(3)New wave of

Technology andequipment

(4)Infrastructure consolidation

(5)Critical mass

achieved.Mass marketing

ERP & E-business Recap

Structured approach to optimizing a company’s internal value chain.Organize, codify and standardize a company’s business processes and data. Collate and transform transactional data into useful information for analysis.Not intrinsically strategic; rather, it is an enabling technology.Business process re-engineering or re-design (BPR) often accompanies ERP projects to eliminate non-value-adding work, thus improving a company’s financial performance through operational improvements.ERP implementation requires employees to be willing to new technology, & also new ways of working.

This forces employees to upgrade their skill sets.

ERP implementation with BPR affects a company’s organizational structure. Affects individual roles within the organization. Staff reductions are often seen, or staff may be moved into other areas (in

expanding companies).

Change management is key to successful implementations.

ERP & E-Business Re-cap (continued)

E-commerce Leverage an Internet-based sales channel to enhance marketing and sell

products or services, or leverage the Internet to make purchasing more efficient.

Ideally, with minimal disruption to organizational culture and business processes e-storefront, e-catalog, e-billing, e-payment, e-procurement Focuses on efficiency in selling, marketing and purchasing

E-business Uses IT and open standards to connect suppliers and customers at all steps

along the value chain. Requires trust among business partners, and agreement on standard ways of

working. Focuses on effectiveness through improved customer service, reduced costs

and streamlined business processes. Many companies enter e-business by first engaging in e-commerce.

Complementary Technologies of ERP and E-Business

ERP and Internet technologies are rapidly coming together. Merger is still incomplete and its exact nature unclear

ERP is the internal technological hub of a single enterprise. Web-based technology extends each enterprise’s organizational boundaries.

ERP is focused on internal process efficiency and effectiveness while E-Business is focused on external, cross-enterprise process efficiency, operational effectiveness, and product promotion.ERP technology supports current business strategy while E-business opens the door to new strategic opportunities.E-business is best supported by a well-tuned ERP system.

What lies behind the web page is important. ERP is necessary to fulfill the promises made on the Web page, that is, the promise

of e-business. Enterprises need some sort of internal transaction engine to match the internal

information flow with the actual flow of goods and/or services. Key issue is to blend ERP and Web-based technology successfully and to push each

to achieve its maximum benefit.

ERP complements E-Business

ERP: The hub of a single enterprise Integrates resource planning, supply-chain management, demand-chain management

and knowledge management. Achieved through tightly integrated modules for Finance, Manufacturing, Logistics,

Human Resources, and Sales & Marketing.

E-Business: The ideal extension to internal processes Enables improved customer focus (individualized service, low-cost products, short

cycle times, and accurate delivery dates) and customer relationship management Enables interactive relationships with value-chain partners

ERP boosts E-Business potential Communication with partners in the supply chain and customers in the value chain is

not enough. Collaboration and coordination are also important. Processing logic is required in order to respond to information available across the

Internet.

ERP / E-Business Matrix

Greenfield

Non-integratedsystems

Limited / Single-Function ERP

Integrated Business-Unit ERP

Integrated Enterprise ERP

No E-BusinessCapabilities

ChannelEnhancement

ValueChain

IntegrationIndustry

Transformation Convergence

ERP / E-Business Organizational Issues: Domain & Level Matrix

Greenfield

Non-integratedsystems

Limited / Single-Function ERP

Integrated Business-Unit ERP

Integrated Enterprise ERP

No E-BusinessCapabilities

ChannelEnhancement

ValueChain

IntegrationIndustry

Partnership Convergence

1. Start-Up2. Enterprise Growth Limited (High Risk = Opportunity)

4. High Cost Relative to Benefit

5. Optimize Business at Unit Level

6. Optimize across Enterprise

3. Customer Benefit Limited (Reduced E-Options

and Flexibility)

E-Business Examples

CHANNEL ENHANCEMENT

- Point solutions such as selling over the Web, providing customer self-service and conducting Web-based indirect procurement. (e-commerce)

VALUE CHAIN INTEGRATION (e.g. Adaptec)

- Integrate customers’ and suppliers’ operations with their processes and systems (e-CRM and e-SCM).

INDUSTRY TRANSFORMATION (e.g. Solectron and Ingram Micro)

- Boundaries between companies and their partners become less pronounced as they link internal systems through the Web, creating new markets, new opportunities, new customers and new products and services. There is an intense relationship between the partners to create an environment for shared business improvements, mutual benefits and joint rewards.. (Collaborative Advantage)

CONVERGENCE (e.g. Shell, Mobil, BP, GM and GE)

- Coming together of companies from different industries to provide goods and services to consumers. This is not solely a function of e-business technologies: it is equally a function of industry deregulation, globalization of business, evolving customer demand and new competitive tactics. However, it is helped by decreasing costs and rapid adoption of technology. (Industry Convergence)

Summary: ERP Vendor Responses to E-Business Challenges

Employees Customers Vendors

Focus Inside Company Out Outside Company In

Release Process Periodic, Complex Upgrade

Continuous, Small Changes

Method of Integrating with Other Businesses

Through APIs or EDI Browser, Portals, IT

Business Processes Complex Simple

User Interface User Training Required

Intuitive

Traditional ERP versus E-Business Applications

Dimensions ERP Apps E-Business Apps

ERP Vendor Responses to E-Business Challenges (cont’d)

Extend ERP Functionality SCM CRM APS BI Internet-based Procurement

Build communities of users through portals and trading exchanges Public versus private Horizontal versus vertical Direct versus indirect materials

ERP Vendor Responses to e-business challenges (cont’d)

Create new ERP delivery and pricing models Traditional pricing includes initial license fee for a specified number of

employees, with annual maintenance fees Introduction of Role-based pricing (part of SAP’s mySAP.com strategy in

which users access the system through role-specific Workplaces) Industry-specific, pre-configured solutions to offset high implementation costs

(e.g. SAP’s Accelerated Applications and Oracle’s FastForward RPM) Pre-configured, pre-installed and pre-integrated (e.g. partnership between

IBM and vendors like J D Edwards, MAPICS, QAD and SAP) Traditional outsourcing (either through ERP vendors or their partners) Application service provision

Third-party service provider typically licenses the software from the ERP vendor and resells the package to many buyers for fixed, per-month, per-user fee. Users access the offsite system via Internet.

Internet-based delivery of basic ERP system (e.g. Biztone)