INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

NEW DELHI

PROJECT REPORT ON

ERP IMPLEMENTATION OF FMCG COMPANY

SUBMITTED TO:

MADHU BEHL

SUBJECT: INFORMATION TECHNOLOGY

SUBMITTED BY:

VISHAL SINGH

FN-4

SS 08-10

09911430593

cl.vishal@gmail.com

DATE OF SUBMISSION:-21/04/2010

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ABSTRACT

Manufacturing processes work out of required materials for the manufacturing processes

with unwanted materials not finding a place. This type of ERP will advocates smooth

flow of information between all stages of the production cycle. It also ensures less

probability of errors in subsequent stages of production and reduction in lead time. Every

manufacturing process aims to produce ‘A’ quantity of product within a given time. A

FMCG company can easily achieve this by shortening the production cycle time with the

help of appropriate ERP software. Automation is an inherent feature of almost all the

process based manufacturing ERP. Integrating all manufacturing processes ensure that

the chances of errors due to human intervention are minimized.

Enterprise resource planning (ERP) is an enterprise-wide information system designed to

coordinate all the resources, information, and activities needed to complete business

processes such as order fulfillment or billing. ERP system supports most of the business

system that maintains in a single database the data needed for a variety of business

functions such as Manufacturing, Supply Chain Management, Financials, Projects,

Human Resources and Customer Relationship Management. An ERP system is based on

a common database and a modular software design. The common database can allow

every department of a business to store and retrieve information in real-time. The

information should be reliable, accessible, and easily shared. The modular software

design should mean a business can select the modules they need, mix and match modules

from different vendors, and add new modules of their own to improve business

performance.

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Ideally, the data for the various business functions are integrated. In practice the ERP

system may comprise a set of discrete applications, each maintaining a discrete data store

within one physical database.

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ACKNOWLEDGEMENT

Through this acknowledgement I express my sincere gratitude towards all those people

who helped me in this project, which has been a learning experience.

I appreciate the co-ordination extended by my friends and also express my sincere

thankfulness to the entire faculty members of Indian Institute of Planning &

Management, Delhi, giving me the opportunity to do this project/study and also assisting

me for the same.

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TABLE OF CONTENTS

Topic Page No.

1. Abstract 1

2. Acknowledgment 2

3. Introduction 4

4. Theoretical Review/Perspective 6

5. Review and Research 20

6. New Developments in the Research Area 37

7. Topics for further research 38

8. Recommendations 39

9. Conclusion 41

10. Bibliography 44

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INTRODUCTION TO THE TOPIC

ERP requirements planning; later manufacturing resource planning) and CIM (Computer

Integrated Manufacturing). It was introduced by research and analysis firm Gartner in

1990. ERP systems now attempt to cover all basic functions of an enterprise, regardless

of the organization's business or charter. Non-manufacturing businesses, non-profit

organizations and governments now all use ERP systems.

To be considered an ERP system, a software package must provide the function of at

least two systems. For example, a software package that provides both payroll and

accounting functions could technically be considered an ERP software package

Examples of modules in an ERP which formerly would have been stand-alone

applications include: Manufacturing, Supply Chain, Financials, Customer Relationship

Management (CRM), Human Resources, Warehouse Management and Decision Support

System.

BEFORE

Prior to the concept of ERP systems, it was not unusual for each department within an

organization to have its own customized computer system. For example, the human

resources (HR) department, the payroll department, and the financial department might

all have their own computer systems.

Typical difficulties involved integration of data from potentially different computer

manufacturers and systems. For example, the HR computer system (often called HRMS

or HRIS) would typically manage employee information while the payroll department

would typically calculate and store paycheck information for each employee, and the

financial department would typically store financial transactions for the organization.

Each system would have to integrate using a predefined set of common data which would

be transferred between each computer system. Any deviation from the data format or the

integration schedule often resulted in problems.

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AFTER

ERP software, among other things, combined the data of formerly separate applications.

This simplified keeping data in synchronization across the enterprise, it simplified the

computer infrastructure within a large organization, and it standardized and reduced the

number of software specialties required within larger organizations

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THEORETICAL REVIEW/PERSPECTIVE

Best practices are incorporated into most ERP vendor's software packages. When

implementing an ERP system, organizations can choose between customizing the

software or modifying their business processes to the "best practice" function delivered in

the "out-of-the-box" version of the software.

Prior to ERP, software was developed to fit the processes of an individual business. Due

to the complexities of most ERP systems and the negative consequences of a failed ERP

implementation, most vendors have included "Best Practices" into their software. These

"Best Practices" are what the Vendor deems as the most efficient way carry out a

particular business process in an Integrated Enterprise-Wide system. A study conducted

by Lugwigshafen University of Applied Science surveyed 192 companies and concluded

that companies which implemented industry best practices decreased mission-critical

project tasks such as configuration, documentation, testing and training. In addition,the

use of best practices reduced over risk by 71% when compared to other software

implementations.

The use of best practices can make complying with requirements such as IFRS, Sarbanes-

Oxley or Basel II easier. They can also help where the process is a commodity such as

electronic funds transfer. This is because the procedure of capturing and reporting

legislative or commodity content can be readily codified within the ERP software, and

then replicated with confidence across multiple businesses who have the same business

requirement

IMPLEMENTATION

Because of their wide scope of application within a business, ERP software systems are

typically complex and usually impose significant changes on staff work practices.

[citation needed] Implementing ERP software is typically not an "in-house" skill, so even

smaller projects are more cost effective if specialist ERP implementation consultants are

employed.[citation needed] The length of time to implement an ERP system depends on

the size of the business, the scope of the change and willingness of the customer to take

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ownership for the project.[citation needed] A small project (e.g., a Jindal Stainless of less

than 100 staff) may be planned and delivered within 3-9 months; however, a large, multi-

site or multi-country implementation may take years.[citation needed]

To implement ERP systems, companies often seek the help of an ERP vendor or of third-

party consulting companies. These firms typically provide three areas of professional

services: consulting, customization and support. The client organisation may also employ

independent program management, business analysis, change management and UAT

specialists to ensure their business requirements remain a priority during implementation.

Data migration is one of the most important activities in determining the success of an

ERP implementation. Since many decisions must be made before migration, a significant

amount of planning must occur. Unfortunately, data migration is the last activity before

the production phase of an ERP implementation, and therefore receives minimal attention

due to time constraints. The following are steps of a data migration strategy that can help

with the success of an ERP implementation:

Identifying the data to be migrated

Determining the timing of data migration

Generating the data templates

Freezing the tools for data migration

Deciding on migration related setups

Deciding on data archiving

PROCESS PREPARATION

ERP vendors have designed their systems around standard business processes, based

upon best business practices. Different vendor(s) have different types of processes but

they are all of a standard, modular nature. Firms that want to implement ERP systems are

consequently forced to adapt their organizations to standardized processes as opposed to

adapting the ERP package to the existing processes. Neglecting to map current business

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processes prior to starting ERP implementation is a main reason for failure of ERP

projects. It is therefore crucial that organizations perform a thorough business process

analysis before selecting an ERP vendor and setting off on the implementation track. This

analysis should map out all present operational processes, enabling selection of an ERP

vendor whose standard modules are most closely aligned with the established

organization. Redesign can then be implemented to achieve further process congruence.

Research indicates that the risk of business process mismatch is decreased by:

Liking each current organizational process to the organization's strategy; analyzing the

effectiveness of each process in light of its current related business capability;

understanding the automated solutions currently implemented.

ERP implementation is considerably more difficult (and politically charged) in

organisations structured into nearly independent business units, each responsible for their

own profit and loss, because they will each have different processes, business rules, data

semantics, authorization hierarchies and decision centers. Solutions include requirements

coordination negotiated by local change management professionals or, if this is not

possible, federated implementation using loosely integrated instances (e.g. linked via

Master Data Management) specifically configured and/or customized to meet local needs.

A disadvantage usually attributed to ERP is that business process redesign to fit the

standardized ERP modules can lead to a loss of competitive advantage. While

documented cases exist where this has indeed materialized, other cases show that

following thorough process preparation ERP systems can actually increase sustainable

competitive advantage

CONFIGURATION

Configuring an ERP system is largely a matter of balancing the way you want the system

to work with the way the system lets you work. Begin by deciding which modules to

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install, then adjust the system using configuration tables to achieve the best possible fit in

working with your Jindal Stainless ’s processes.

Modules — Most systems are modular simply for the flexibility of implementing some

functions but not others. Some common modules, such as finance and accounting are

adopted by nearly all companies implementing enterprise systems; others however such

as human resource management are not needed by some companies and therefore not

adopted. A service Jindal Stainless for example will not likely need a module for

manufacturing. Other times companies will not adopt a module because they already

have their own proprietary system they believe to be superior. Generally speaking the

greater number of modules selected, the greater the integration benefits, but also the

increase in costs, risks and changes involved.

Configuration Tables – A configuration table enables a Jindal Stainless to tailor a

particular aspect of the system to the way it chooses to do business. For example, an

organization can select the type of inventory accounting – FIFO or LIFO – it will employ

or whether it wants to recognize revenue by geographical unit, product line, or

distribution channel.

So what happens when the options the system allows just aren’t good enough? At this

point a Jindal Stainless has two choices, both of which are not ideal. It can re-write some

of the enterprise system’s code, or it can continue to use an existing system and build

interfaces between it and the new enterprise system. Both options will add time and cost

to the implementation process. Additionally they can dilute the system’s integration

benefits. The more customized the system becomes the less possible seamless

communication becomes between suppliers and customers.

CONSULTING SERVICES

Many organizations did not have sufficient internal skills to implement an ERP project.

This resulted in many organizations offering consulting services for ERP implementation.

Typically, a consulting team was responsible for the entire ERP implementation

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including planning, training, testing, implementation, and delivery of any customized

modules. Examples of customization includes additional product training; creation of

process triggers and workflow; specialist advice to improve how the ERP is used in the

business; system optimization; and assistance writing reports, complex data extracts or

implementing Business Intelligence.

For most mid-sized companies, the cost of the implementation will range from around the

list price of the ERP user licenses to up to twice this amount (depending on the level of

customization required). Large companies, and especially those with multiple sites or

countries, will often spend considerably more on the implementation than the cost of the

user licenses -- three to five times more is not uncommon for a multi-site implementation

CUSTOMIZATION SERVICES

Customization Services involves any modifications or extensions that change how the

out-of-the-box ERP system works.

Customizing an ERP package can be very expensive and complicated. Some ERP

packages are not designed to support customization, so most businesses implement the

best practices embedded in the acquired ERP system. Some ERP packages have very

generic features, such that customization occurs in most implementations. It is also often

possible to extend the standard ERP package by purchasing third party software to

provide additional functionality.

Customization work is usually undertaken as bespoke software development on a time

and materials basis.

Customization can be further classified into: Core system customization or custom

extensions in custom libraries

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Core system customization is where customers change the software vendors’ proprietary

code. This means that the software will no longer be supported by the vendor for the

particular function that was customized as the code would be modified to the customers

need. The customers IT department will then normally support the code in-house or

subcontract a consulting organization to do so.

Custom extensions are where a customer build bolt-on custom applications that run

parallel to the standard system i.e. custom extended applications. Modules that are

extended but core code not changed remain supported but the extensions will have to be

supported by the customers IT department or subcontracted consulting organization

MAINTENANCE AND SUPPORT SERVICES

Maintenance and Support Services involves monitoring and managing an Operational

ERP system. This function is often provided in-house using members of the IT

department, but may also be provided by specialist external consulting and services

companies

DISADVANTAGES

Problems with ERP systems are mainly due to inadequate investment in ongoing training

for involved personnel, including those implementing and testing changes, as well as a

lack of corporate policy protecting the integrity of the data in the ERP systems and how it

is used.

DISADVANTAGES

Customization of the ERP software is limited.

Re-engineering of business processes to fit the "industry standard" prescribed by

the ERP system may lead to a loss of competitive advantage.

ERP systems can be very expensive leading to a new category of "ERP light"

solutions

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ERPs are often seen as too rigid and too difficult to adapt to the specific workflow

and business process of some companies—this is cited as one of the main causes

of their failure.

Many of the integrated links need high accuracy in other applications to work

effectively. A Jindal Stainless can achieve minimum standards, then over time

"dirty data" will reduce the reliability of some applications.

Once a system is established, switching costs are very high for any one of the

partners (reducing flexibility and strategic control at the corporate level).

The blurring of Jindal Stainless boundaries can cause problems in accountability,

lines of responsibility, and employee morale.

Resistance in sharing sensitive internal information between departments can

reduce the effectiveness of the software.

Some large organizations may have multiple departments with separate,

independent resources, missions, chains-of-command, etc, and consolidation into

a single enterprise may yield limited benefits.

The system may be too complex measured against the actual needs of the

customer.

Distinct but similar products are combined into aggregate product families that

can be planned together so as to reduce planning complexity. Similarly production

resources, such as distinct machines or labor pools, are aggregated into an aggregate

machine or labor resource. Care is required when specifying these aggregates to assure

that the resulting aggregate plan can be reasonably disaggregated into feasible production

schedules.

Finally for complex products, one must decide the level and extent of the product

structure to include in the planning process. For instance, in some contexts it is sufficient

to just plan the production of end items; the production plan for components and

subassemblies is subservient to the master production schedule for end items. In other

contexts, planning just the end items is sub-optimal, as there are critical resource

constraints applicable to multiple levels of the product structure. In this instance, a

multistage planning model allows for the simultaneous planning of end items and

components or subassemblies. Of course, this produces a much larger model.

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The PPS divides on into the production planning, which preplans the procedures central

until short term, and which production control, which releases and steers the orders on the

basis this planning. Both ranges interlink, and are in particular in small to medium sized

enterprises usually also summarized in an area of responsibility.

Parts of the PPS are production program planning, stock management, Termin-und

capacity planning (time economy), the order release and the order monitoring.

Usually the processes of the PPS are supported by PPS systems. First beginnings of

integrated systems were developed at the beginning of the 70's among other things by

IBM with COPICS.

Traditional PPS systems are based on a gradual planning concept. The tasks of

production planning and - control are divided into sub-problems, which are solved one

behind the other. However often are the transitions between the individual points flowing.

The massive spreading of technically complex products and constant of the product life

cycles lead for some years to a constantly rising disposal need, these leads rising

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relevance of disassembly planning and - control (DPS). The DPS is conceived in as far as

possible similar to the PPS.

Production planning can be divided after good mountain into three subranges:

Production program planning

Materials requirements planning

Production process planning

Production program planning

In production program planning (also primary requirements planning) kind, quantity and

manufacturing dates of the finished products (primary requirements) are specified.

Definition which products in which quantities in a certain long-range planning period to

be produced are.

Quantity planning

On the basis of primary requirements (output) in materials requirements planning it is

determined how many quantity units at intermediate products and raw materials are

needed for the covering of primary requirements. For this the product components in

parts lists or schedules must admit to be. Parts of the secondary (and Tertiary period

need) can be present already in the camp. Existing materials do not have to be

manufactured or procured either. Tertiary period need is not contained in the parts list,

since it concerns auxiliary and fuels. (e.g. oils, cooling lubricants for the machine, fats,

cloth etc.) the Tertiary period need is needed in production. The arrangement takes place

consumption controlled (stochastically)

Production process planning

This covers those

Lot size planning

Run and capacity time limitation

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Sequence planning and fine time limitation

Lot size planning

Lot size planning determines (i.d.R.) with consideration of developing production,

storekeeping, preparation and cleaning costs, how many orders of a product can

be combined into a lot, so that the sum of the cost factors mentioned above

achieves a minimum size.

Date and capacity planning

As soon as admits the quantities which can be produced are, with the scheduling one

begins. By means of the run time limitation earliest and latest dates for the execution of

individual work procedures are planned. Subsequently, the question must be clarified

whether the necessary capacities for the production program are present. This is roughly

planned in the capacity time limitation. With capacity bottlenecks individual work

procedures must be shifted into other periods. As soon as this happened, roughly

scheduled orders can be passed on to the production control.

Sequence planning and fine time limitation

During the detailed planning one specifies, which machines are assigned to certain

orders. Short term tasks of the production control are to be seen particularly in connection

with short term changes in the order or capacity reality:

unplanned loss of a machine or a plant and/or a coworker

unexpected customer orders with high priority.

Since the connections are multidimensional, the tasks of the production control

are accomplished increased with appropriate software systems. These do not only

permit to implement the tasks and boundary conditions mentioned efficiently and

comfortably it make possible besides a high flexibility of the planner and a high

transparency over current Belegungs-und date condition in production.

While some systems methods of the Research use operations for the optimization of the

results, practice-oriented systems are characterised by heuristic functions with

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consideration of job-referred priority rules, which correspond to the understanding and

the opinion of the production planner to a large extent.

The result are organisation of working of machines plans and operational fund allocations

of devices, tools, NCs-Programm and allocations of coworkers.

Production control

Production control is arranging, supervising and protection of the execution of the

approved orders. For the range of the manufacturing (and assembly) one speaks also of

progressing. After by fine time limitation the organisation of working of machines was

specified, the orders are arranged by making available work vouchers for the enterprise.

The monitoring takes place via suitable time near acknowledging systems. The protection

is the correcting intervention in the case of deviations, like quantity, dates and quality.

Order release

The roughly scheduled orders which are received from production planning are fine-

scheduled here. Some concepts to the order release are Kanban or the load-oriented order

release (BOA principle)

Order monitoring

A condition of a monitoring of the feedbacks over the current conditions of production

are short, a factory data capture. The feedbacks are made either by means of direct inputs

at workstations or by factory data capture systems (BDE systems). These acknowledging

data are not only for the progressing of importance, but also for gross wages, the

inventory updating, running along calculation and recalculation, quality control and the

maintenance for maintenance planning.

More and more supply chains emerge that include a return flow of materials. Many

original equipment manufacturers are nowadays engaged in the remanufacturing

business. In many process industries, production defectives and by-products are

reworked. These closed-loop supply chains deserve special attention. Production

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planning and control in such hybrid systems is a real challenge, especially due to

increased uncertainties. Even companies that are engaged in remanufacturing operations

only, face more complicated planning situations than traditional manufacturing

companies. We point out the main complicating characteristics in closed-loop systems

with both remanufacturing and rework, and indicated the need for new or

modified/extended production planning and control approaches. An overview of the

existing scientific contributions is given. It appears that we only stand at the beginning of

this line of research, and that many more contributions are needed and expected in the

future.

roduction Planning and Control (PPC) is a process that comprises the performance of

some critical; functions on either side, viz., planning as well as control.

Production planning: Production planning may be defined as the technique of foreseeing

every step in a long series of separate operations, each step to be taken at the right time

and in the right place and each operation to be performed in maximum efficiency. It helps

entrepreneur to work out the quantity of material manpower, machine and money

requires for producing predetermined level of output in given period of time.

Routing: Under this, the operations, their path and sequence are established. To perform

these operations the proper class of machines and personnel required are also worked out.

The main aim of routing is to determine the best and cheapest sequence of operations and

to ensure that this sequence is strictly followed. In small enterprises, this job is usually

done by entrepreneur himself in a rather adhoc manner. Routing procedure involves

following different activities.

(1) An analysis of the article to determine what to make and what to buy.

(2) To determine the quality and type of material

(3) Determining the Productionoperations and their sequence.

(4) A determination of lot sizes

(5) Determination of scrap factors

(6) An analysis of cost of the article

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(7) Organization of production control forms.

Production planning problems containing special characteristics from process industries

are addressed in this book. The main subject is the development of mathematical

programming models that allow to model production plans which are not disrupted by

discretization of time. However, discrete time models are used as a basis and are

subsequently enhanced to include aspects of time continuity. Their integration is achieved

by different building blocks which may be combined freely according to the specific

planning situation at hand. The primary area of application of these We study the optimal

flow control for a manufacturing system subject to random failures and repairs. In most

previous work, it has been proved that, for constant demand rates and exponential failure

and repair times distributions of machines, the hedging point policy is optimal. The aim

of this study is to extend the hedging point policy to non-exponential failure and repair

times distributions and random demand rates models. The performance measure is the

cost related to the inventory and back order penalties. We find that the structure of the

hedging point policy can be parametrized by a single factor representing the critical stock

level or threshold. With the corresponding hedging point policy, simulation experiments

are used to construct input-output data from which an estimation of the incurred cost

function is obtained through a regression analysis. The best parameter value of the related

hedging point policy is derived from a minimum search of the obtained cost function.

The extended hedging point policy is validated and shown to be quite effective. We find

that the hedging point policy is also applicable to a wide variety of complex problems

(i.e. non-exponential failure and repair times distributions and random demand rates),

where analytical solutions may not be easily obtained.

the following we describe the relation of inventory management to the different planning

steps which constitute a capacity-oriented system for production planning.

Production planning is strongly related to the layout type of a considered production

system. An empirical analysis of production systems to be found in industrial practice

reveals many differences which have a significant impact on the type of planning models

that may be applicable in a certain planning environment. There are numerous different

layout types, e.g. fixed position layout, process layout (job shop production), product

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layout (flow lines), just-in-time production systems, and cellular layout, among others. In

each type of production system specific planning problems emerge for which the

literature provides an appropriate modeling and solution approach.

For the solution of the production planning problems, the operations management

literature provides a wide variety of planning approaches which are in part implemented

in so-called Advanced Planning Software systems (APS). It is a common property of

most of these approaches, such as aggregate production planning, master planning as well

as lotsizing, that planning is based on forecasts of future demands which are treated as

deterministic data in the planning process. That means, not only the external demand

quantities but also the flow times (including waiting times caused by bottlenecks or

machine breakdowns) as well as the scrap rates which in some industries are significant,

are treated as deterministic factors.

However, since in reality random influences take effect, planning concepts are required

which are able to take the unavoidable uncertainty on all levels of planning and control of

the value-adding processes into account. From a theoretical point of view, this would

mean to extend, say, a mixed-integer multi-level capacitated dynamic lotsizing model by

including random variables in the model formulation. Unfortunately, such an approach is

not very promising as for many production planning models not even the deterministic

version of the problem can be solved satisfactorily.

Therefore, there are no concepts available that could be generally applied in practical

planning environments, linking the above-mentioned deterministic and capacitated

planning approaches to approaches that allow for the protection against stochastic

influences. In contrast, depending on which characteristic dominates a given planning

situation, basically two groups of planning approaches are discussed in the literature:

1. Deterministic approaches to production planning and scheduling which (sometimes)

take the limited availability of resources into account. Uncertainty is often considered

prior to optimization through the adjustment of the data (for instance, by using safety

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stock or safety time). The resulting production plans that are based on forecasts comply

with the push principle. An example is the aggregate production planning based on

deterministic linear programming models.

2. Stochastic approaches to inventory management which emphasize the uncertainty

inherent in the planning problem and which neglect the capacity of the resources almost

completely. Thus, there is no precise production schedule defined, but production rather

reacts on the realization of the random variables, e.g. the demand quantity observed in a

period. Many of these approaches follow the pull principle where activities are triggered

by the arrival of a demand at the most downstream node of the supply network. An

example is the $(s,q)$ inventory policy.

The low-cost story is becoming less applicable in Indian manufacturing because of rising

wages and firming interest rates. As for geographic expansion, most manufacturing

companies do not necessarily have the managerial capability to run profi t centers in other

parts of the world. Also, few Indian companies are cash-rich. Most would therefore end

up acquiring very small companies that might not add value. Mergers and acquisitions,

again, are often difficult to accomplish for Indian manufacturing companies.

That leaves innovation, which has not yet been fully exploited. An ongoing Deloitte

benchmark study of more than 35 Indian manufacturing companies against 140

multinational companies that have manufacturing operations in India has shed light on

what Indian manufacturing companies are doing right and what they need to change.

Companies across the spectrum agree that innovation is probably the manufacturing

industry’s most underexploited strategy. If the Indian manufacturing industry is to remain

competitive over the next 15 years, it will need to focus on its innovation capabilities.

The opportunity for dramatic improvement and transformation of business models in

Indian manufacturing is significant. With average annual growth rates of nearly 20

percent among the companies benchmarked based in India, companies are presented with

an unprecedented chance for re-inventing themselves. Growing at that rate, just five or

ten years down the road, the vast majority of investments in the business will be new

investments.

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As opposed to the multinational companies that have stopped depending on the well-

being of the economy or just the market in which they operate, Indian companies seem to

consider those two as the main drivers for business in the foreseeable future. Indeed,

Indian companies lag behind their global competitors in research and development. This

is, however, something that will start to change in the coming months and years as these

companies look to launch products and services on a continual basis. The challenge is

doing it right.

Indian Manufacturing and Global Competitiveness will achieve through The best-

performing companies in the global benchmark research, called “complexity masters,”

are far better at synchronizing innovation across the enterprise. They invest in better

processes and technologies for optimizing the entire life cycle of products and services.

The result is far better performance with profit levels up to 73 percent higher than the

competition. Many domestic Indian manufacturers as well as multinationals operating in

India have a hard time keeping up and building the capabilities needed to succeed.

In Indian manufacturing, the most worrying evidence is that of the lack of visibility into

strategic information. In fact, and somewhat alarmingly, the more strategic the

information, the less the visibility! This makes it difficult to take the right decisions in

strategy, planning and execution.

The other major challenge is that of flexibility. Indian companies will face increased

complexity and constraints on flexibility as they continue their domestic and global

expansion.

In fact, the average Indian Jindal Stainless is not lean at all. Even companies that operate

with just five or six customers have frozen timeframes for production of two weeks or

more.

Were they to aim for less time, they believe they would lose money reconfiguring their

manufacturing schedules. They have difficulty connecting their sales forecast to material

plans or even their production plans.

Indian manufacturers lack the technology support for looking at the life cycle data of the

products. Without this data, innovating on the product portfolio is difficult, if not

impossible. Indian manufacturers are far behind multinationals in India when it comes to

adopting leading technologies— despite the (perceived or real) low cost of technology in

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India compared to the more developed countries. This low rate of technology adoption

poses a real risk to Indian manufacturers’ futures, limiting their participation in global

value chains where these technologies are required.

In the absence of lean processes or visibility, a lot of management time goes into day-to-

day issues and fire fighting with very little time left over for future planning and

innovation. Despite a lack luster record when it comes to R&D, Indian manufacturing has

recorded high growth, creating a unique opportunity for innovation. In fact, India is the

top destination in the world for R&D investment. The cost of innovation in India is

typically one-third that in developed markets; it is among the lowest globally.

Manufacturers need to seize this opportunity to innovate with respect to products,

processes, technologies and business models. Reverse currents: going overseas for

growth Crompton Greaves is an excellent example of the new breed of Indian companies

that have cut their teeth competing with multinationals on the home turf after the

liberalization of the Indian economy. Success on the home front has prompted a foray

overseas.

The 68-year-old Jindal Stainless is the largest private electrical Jindal Stainless in India.

It is also the first Indian electrical multinational. The realization that it was a leader in all

the fi elds in which it had a presence in India prompted the Jindal Stainless to consider

entering the world market. India comprised only 2.5 percent of the world market. The

search for a bigger slice of the pie led Crompton Greaves to acquire Belgium-based

Pauwels Transformers.

The decision to enter developed markets via an acquisition came about after the Jindal

Stainless determined that a recognizable brand was crucial. Product approvals,

experience and image are the main barriers for Indian companies entering developed

markets. Customer relationships and quick service are also essential for success in

developed markets. Building such a brand from scratch would take time and be very

expensive, and serving developed markets from an Indian base would prove costly. In

addition, acquiring a Jindal Stainless in the developed market would provide access to

the latest technology.

With the current generation of ERP software there are fewer integration problems, so

ERP projects fail or drag on for other reasons. Most companies considering ERP today

24

are looking at migrating processes and data, from legacy systems to modern computer

systems running an ERP application. Fresh ERP implementations, or 'greenfield'

implementations, are rare. And migration brings along a whole set of problems, the

primary one being people.

An ERP implementation impacts people, systems, and the organization as a whole. And

barriers are expected from these areas since work processes are expected to be altered

when ERP is introduced. Business processes, roles, and responsibilities would undergo

change. And when this happens, the organization will encounter a sticky issue called

'resistance to change.'

Since ERP introduces transparency in operations and brings about more discipline,

people who are empowered are bound to oppose it. People who are very used to a

particular system or a certain set of processes, won't accept an alternative like ERP so

easily and won't adapt to the new system.

Prashant Karkhanis, Global Head-Business Consulting at Mahindra Consulting

Besides employees, people from the extended enterprise will also protest. Vendors for

instance may not take to the idea of updating data in the ERP system through a Web

interface. Change is welcome if it reduces workloads or gets the job done faster. But ERP

does not offer exactly that.

ERP consultants say the resistance to change can be minimized through initiatives like

change management, periodic training, 'hand-holding,' organization preparedness, and of

course, management support.

Change management

Change management is about handling the issues arising due to differences in legacy

processes/ systems and the new ERP system. Business processes may have to be re-

25

engineered for ERP, something that's bound to draw disapproval, especially from

function heads.

User organizations and consultants think of ways to motivate employees and get them to

accept the new system. Rewarding employees with cash incentives is one such approach.

Another approach is to involve all users, right from the beginning, or even before the

project begins. This helps get the 'buy-in' for ERP.

Mahindra Consulting, organizes workshops for users at various levels (end-users,

operational managers, executives), within the organization. This helps to involve them in

the processes of business process design, systems configuration, and testing.

"Such involvement helps us get their buy-in for the changes in the business processes,

system, and roles & responsibilities," said Prashant Karkhanis, Global Head-Business

Consulting at Mahindra Consulting.

Nalakumar R.S., Corporate Champion, IT & E-business, Emerson Network Power (India)

said, "You have to ensure that there is a business buy-in for any process changes that you

are bringing in. The business benefits must be realized at the user level. This must be

done before you roll out ERP or before implementing a new change."

Satish Gaonkar, Head-Consulting Services Practices, Blue Star Infotech feels the HR

department can play an important role in handling change among employees. But HR

must be involved at the beginning of implementation.

26

REVIEW AND RESEARCH

Given the current competitive business landscape and stringent time and cost constraints,

it is imperative for organisations to streamline enterprise-wide processes, divest

procedural maneuvers and delays, ensure smooth transactions and operate on real-time

information. Enterprises need to be integrated and the various functions, in unison, to

attain optimum efficiencies, glitch-proof operations and gain and leverage operational

and competitive advantage. However, this is easier said than done.

Conventional ‘silos ’-mode of functioning and geographic and functional boundaries

inhibit such enterprise-wide integration. Technological advancements in the field of

ERPs aim at providing the same, changing the very face of your business.

ERPs provide greater agility to business, ensuring optimum resource-use and huge costs

and time savings. Meeting current business requirements and being prepared to face

future demands are by-products of an ERP implementation.

Implementation of an ERP is 3 faceted - cost, time and technology decision that is taken

once but brings with it huge business benefits. Also, it is vital for organisations to

understand that there is more to ERP than just simply “software” as it entails fundamental

re-alignment of people, processes and data and simply re-designs and re-organises the

way business is done. A successful implementation calls for the right mix of people,

processes, technology and infrastructure.

Organisations face numerous hurdles while striving to get an ERP implemented at their

end. The first and most crucial of these barriers is to identify the apt ERP system suiting

your organisation, the cost and time considerations and subsequently the implementation,

support, maintenance, upgrades and training of the system.

27

In spite of these issues, organisations must not get overwhelmed with the complexity of

the system or the risk and organisational change that trail. Like any other purchase, it’s

about taking a well-informed and realistic decision which the business needs of today

have made essential and unavoidable.

Practice Composition

For years now, CMC's ERP practice has bred best-in-class enterprise applications and

technology and enabled organisations to implement, optimise and garner maximum value

from their technological investments. CMC leverages its highly skilled resource-power

and deep domain knowledge to bring forth extensive skills in business consulting, ERP

evaluation, selection, implementation, post-implementation support, maintenance,

upgrades, change management and related data management services.

CMC has vast experience and deep expertise in leading ERP applications including SAP,

Oracle, IFS, Baan (SSA LN), Microsoft Business Solutions and RSMART (CMC

developed ERP offering). CMC’s experience in ERP Application spans across a wide

28

range of industry sectors – from Real Estate, Utilities, Electronics, Consumer Goods and

Discreet Manufacturing, to Public Administration.

Services Offered Over several business-years and assignments, CMC ERP Practice has

acquired technical and operational excellence and extensive industry expertise to provide

actionable insights and solutions that address your business objectives, minimising the

TCO and maximizing the ROI.

The services that CMC offers in the ERP space are Pre-Implementation,

Implementation and Post-Implementation services.

29

Enterprise resource planning: a software system that coordinates every important aspect

of an organization's production into one seamless process so that maximum efficiency

can be achieved

ERP Implementation Life Cycle

The process of ERP implementation is referred as d as "ERP Implementation Life Cycle".

The following are the steps involved in completing the lifecycle

Shortlist on the basis of observation

Selecting an ERP package for the company can nevertheless be compared with the

process of "Selecting the right Person for the Right Job". This exercise will involve

choosing few applications suitable for the company from the whole many.

Assessing the chosen packages

A team of Experts with specialized knowledge in their respective field will be asked to

make the study on the basis of various parameters. Each expert will not only test and

certify if the package is apt for the range of application in their field but also confirm the

level of coordination that the software will help to achieve in working with other

departments. In simple terms they will verify if the synergy of the various departments

due to the advent of ERP will lead to an increased output. A choice is to be made from

ERP implementation models.

Preparing for the venture

This stage is aimed at defining the implementation of ERP in all measures. It will lay

down the stipulations and criterias to be met. A team of officers will take care of this,

who will report to the person of the highest hierarchy in the organization.

Gap Analysis

This stage helps the company to identify the gaps that has to be bridged, so that the

companys practice becomes akin to ERP environment. This has been reported as an

expensive procedure but it is inevitable. The conglomerate will decide to restructure the

business or make any other alterations as suggested by GAP analysis inorder to make

ERP user friendly. Click here for a detailed study on GAP analysis. A choice is to be

made from ERP implementation models.

Business process reengineering

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Changes in employee rolls, business process and technical details find place in this phase

of restructuring most popularly refered as business process engineering. For more details

on BPR click here.

Designing the System

This step requires lot of meticulous planning and deliberate action. This step helps to

decide and conclude the areas where restructing have to be carried on. A choice is to be

made from ERP implementation models.

In-house Guidance

This is regarded as a very important step in ERP implementation. The employees in the

company are trained to face crisis and make minor corrections as well because the

company can neither be at liberty nor afford the bounty to avail the services of an ERP

vendor at all times.

Checking

This stage observes and tests the authenticity of the use. The system is subjected to the

wildest tests possible so that it ensures proper usage and justifies the costs incurred. This

is seen as a test for ERP implementation.

The real test

At this stage the replacement takes place viz the new mechanism of operation and

administration takes over the older one.

Preparing the employees to use ERP

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The employees in the organization will be taught to make use of the system in the day to

day and regular basis so as to make sure that it becomes a part of the system in the

organization.

Post Implementation

The process of implementation will find meaning only when there is regular follow up

and proper instruction flow thereafter and through the lifetime of ERP. This will include

all efforts and steps taken to update and attain better benefits once the system is

implemented. Hence an organization has to perform ERP implementation safely and

correctly.

What are the steps to be taken to account the performance ERP software programs

in your organization?

Enterprise Resource planning ERP definition is not a technical aspect. Enterprise

resource planning is a huge investment on the part of company. Therefore it is necessary

to ensure the accountability of the ERP vendor.

An understanding of ERP and language is must to follow ERP best practices. The ERP

vendor cannot be blamed if the company does not follow the procedures correctly. On the

contrary when his services are not up to the industry standards he has to be held

responsible. But how to compute the services is another big question

Some of the steps that can be taken to compute are as underneath:

Preparations

The company should have a scale for evaluation right from the beginning stage. This will

help them to progress further in due course of time .This is the primary step in the process

.It includes everything is checking if the vendor has given the necessary supporting

32

services to the company in the process of implementation installation training and

relevant areas. This is very important because it forms the foundation for the ERP process

in the company. One needs to be clear about ERP best practices for this.

Evaluating the work

This step concentrates on the core function. The company must periodically make a note

of the work done. Any discrepancies will be brought to the vendor's notice immediately.

The vendor should extend his full fledged cooperation in making sure that the work gets

done as promised. Then only it is possible to scale ERP best practices.

Incase there are some inherent errors or technical flaws in the company the ERP vendor

can advise or suggest the company on how things are to be done. This step by and large

helps the company to find out if the vendor stands up to the promise in terms of delivery.

Understanding of ERP and language is a must.

Calculating ROI

ROI helps to directly account the performance of ERP software programs. In simple

terms ROI calculates the returns from ERP software programs. When the returns are high

or at least meets the expected and industry standards the performance of ERP software

can be rated as "promising". The ROI on ERP will not be merely achieved by ERP

implementation. The returns will be achieved only if the procedures are followed

properly. But if the software fails to deliver the required results even after following the

correct practices it shows lacuna on the part of ERP software. This will affect the rate of

ROI as well.

Following contracts terms

The performance of ERP software can be gauged on the basis of its working in relation to

the terms of contract. ERP software that accords to contractual terms in relation to

working definitely indicates better performance than vice versa.

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Compare ERP software on the 8 following criteria modules:

1. Finance

2. Human Resources

3. Manufacturing Management

4. Inventory Management

5. Purchasing Management

6. Quality Management

7. Sales Management

8. Technology

9.

Compare ERP on Financial Criteria

The finance section encompasses modules for bookkeeping and making sure the

accounts are paid or received on time.

How to compare ERP software on finance? Simple. Compare ERP software on the

following financial criteria:

1. General Ledger

2. Accounts Payable (A/P)

3. Accounts Receivable (A/R)

4. Fixed Assets

5. Cost Accounting

6. Cash Management

7. Budgeting

8. Financial Reporting

9. Project Accounting

Compare ERP on Human Resources Management (HRM)

The section dedicated to human resources management (HRM) encompasses all the

applications necessary for handling personnel-related tasks for corporate managers and

individual employees. 

Modules will include personnel management, benefit management, payroll management,

employee self service, data warehousing, and health and safety.

34

How to compare ERP software on human resources management? Simple. Compare ERP

software on the following HRMS criteria:

1. Personnel Management

2. Benefits

3. Payroll

4. Employee Self-Service

5. Data Warehousing

6. Health and Safety

Compare ERP on Manufacturing Management (Discrete and Process)

Manufacturing management (for both discrete and process manufacturing)

encompasses a group of applications for planning production, taking orders, and

delivering products to the customer.

How to compare ERP software on manufacturing management? Simple. Compare ERP

software on the following manufacturing management criteria.

Because we want to compare ERP software systems on an apple-to-apple basis, we need

to make a difference between discrete manufacturing and process manufacturing.

Discrete ERP

1. Product Costing

2. Shop Floor Control

3. Production Planning

4. Field Service and Repairs

5. Project Management

6. Product Data Management (PDM)

7. Product/Item Configurator

Process ERP

1. Product Costing

2. Shop Floor Control

3. Production Planning

4. Formulas/Recipes

5. Process Model (Formulas + Routings)

6. Process Batch Control and Reporting

7. Conformance Reporting

8. Process Manufacturing Costing

9. Material Management

Compare ERP on Inventory Management

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Inventory management (IM) encompasses a group of applications for maintaining

records of warehoused goods and processes movement of products to, through and from

warehouses.

How to compare ERP software on inventory management? Simple. Compare ERP

software on the following inventory management criteria:

1. Inventory Management On-line Requirements

2. Processing Requirements

3. Data Requirements

4. Reporting and Interfacing Requirements (Inventory Management)

5. Locations and Lot Control

6. Forecasting

7. Reservations and Allocations

8. Inventory Adjustments

Compare ERP on Purchasing Management

Purchasing management encompasses a group of applications that controls purchasing

of raw materials needed to build products and that manages inventory stocks.

It also involves creating purchase orders/contracts, supplier tracking, goods receipt and

payment, and regulatory compliance analysis and reporting.

How to compare ERP software on purchasing management? Simple. Compare ERP

software on the following purchasing management criteria:

1. Vendor and Supplier Profile

2. Supplier Rating and Profile

3. Requisitions and Quotations

4. Purchase Orders

5. Prices and Discounts

6. Vendor Contracts and Agreements

7. Purchase Order Management

8. Procurement Reporting, On-line Reporting Capability

9. Repetitive Vendor Procurement

10. Procurement Receipts

11. Repetitive Vendor Procurement

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12. Reporting

Compare ERP on Quality Management

Quality management encompasses applications for operational techniques and activities

used to fulfill requirements for quality control, inspection plan creation, and management,

defective item control and processing and inspection procedure collection planning.

How to compare ERP software on quality management? Simple. Compare ERP software

on the following quality management criteria:

1. Defective or excess material return processing must update on-hand

2. Customer return file: awaiting disposition

3. Damaged material—corrective action and failure analysis available to vendor on-

line

4. Inspection required indicator by supplier and by item

5. Pre-inspection receipts registered as "inventory on hold"

6. On-line inquiry of inspection and material review board (MRB) queue

7. Validation against automated inspection criteria

8. Inspection disposition with audit trail

9. Disposition delinquency report

10. Quantity rejected

11. Reject reason codes

Compare ERP on Sales Management

Sales management encompasses a group of applications that automates the data entry

process of customer orders and keeps track of the status of orders. 

It involves order entry, order tracing and status reporting, pricing, invoicing, etc. It also

provides a basic functionality for lead tracking, customer information, quote processing,

pricing & rebates, etc.

How to compare ERP software on sales management? Simple. Compare ERP software on

the following sales management criteria:

1. On-line Sales Management Requirements

2. Reporting and Interfacing requirements

3. Available-to-Promise (ATP)

4. Pricing and Discounting

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5. Customer Service and Returned Goods Handling

Customer Relationship Management (CRM) and E-commerce Requirements

NEW DEVELOPMENT UNDER THE TOPIC

The technology category defines the technical architecture of the ERP system, and the

technological environment in which the product can successfully run. Criteria include

product and application architecture, software usability and administration, platform and

database support, application standards support, communications and protocol support

and integration capabilities. Relative to the other evaluation criteria, best practice

selections place a lower relative importance, on the product technology category. 

However, this apparently lower importance is deceptive, because the product technology

category usually houses the majority of the selecting organization's mandatory criteria,

which usually include server, client, protocol, and database support, application

scalability and other architectural capabilities. The definition of mandatory criteria within

this set often allows the client to quickly narrow the long list of potential vendors to a

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short list of applicable solutions that pass muster relative to the most basic mandatory

selection criteria. 

During the process of ERP software selection, a great deal of attention is given to the

functional capabilities of the software being evaluated. While this aspect is obviously

important, ignoring the technical mechanisms by which the ERP software actually

operates can be fatal to the ERP software solution selection project.

TOPICS FOR FURTHER RESEARCH

Some of the topics for further research would be

Do you agree that for FMCG company CRM is more beneficial than the ERP.

Case study of any ERP implemented organization in India.

39

RECOMMENDATIONS

Erg's scope gets wider as it is implemented in an organization. There is a call for

including many tasks under the purview. This dilutes the ERP Existing system after

modifying it a couple of times. Repeated change in configurations and systems will only

add to the confusions. When the functions are operated by a machine it becomes

increasingly difficult to make the necessary changes. These troubles arise when they are

not foreseen and addressed in the implementation stage. They have to be given a place in

ERP implementation plan.

Organizational reaction to change

Changes do happen quickly and immediately in the organization after ERP is

implemented. But if there is no proper understanding of the process or mishandling of

information, it will result in questioning the ERP process. If updating is not done in the

40

machine it will only affect the business process and create unnecessary confusions. The

changes don't happen all on a sudden in an organization and expecting it immediately will

only cause needless disappointments. In spite of all this expecting every member in the

organization to respond proactively will not happen. If that happens the chances of ERP

implementation success are great.

Inflating resources for ERP implementation

The implementation time and money always exceeds the promises and stipulated

deadline and amount. This makes companies to lose faith on ERP and ERP vendors. They

think that ERP vendors overplay on the costs and time required but it is not so. Infact

they are aware of it in the very beginning stage itself but have a different reason for

concealing. They don't disclose it in the beginning because it would look like

exaggerating. Infact no one would like to lose a prospective business and vendors are

equally aware of the fact that "Truths are always bitter"! However many people mistake

this to be the cause for ERP implementation failure.

Organizations non adherence to the stated principles

Organizations largely experience a wide gap between practices and preaching .Infact this

has a negative effect on the entire business scenario itself. The voracity and impact of

loss could be greater and more devastating when this turns out to be true even in the case

of ERP. Since ERP successful functioning is purely based on following the laid down

procedures the lag could throw a serious challenge on ERP'S potential right from the

stage of its implementation.

Problem of Transformation due to ERP

Employees find it hard to digest the transformations that place in an organization all on a

sudden due to ERP implementation. Infact employees exhibit positive signs as everything

goes right in the first place. But as one progresses he finds difficult to work as it gets

more complex. The initial interest and expectation turns into apprehensiveness in due

course of time. There is another category of people who did not encourage ERP right

from the conceptualization stage. Their state of mind during these circumstances deserves

no special mention.

41

The acronym "ERP"—for enterprise resource planning—was defined in 1990 by Gartner,

Inc. (Stamford, CT). That was then. This is now. Gartner's Research Director in the

Business Process and Applications Group, Brian Zrimsek, sees three major changes

affecting ERP now:

1. Process extensions. "Today, ERP is still for the enterprise, but the enterprise is

changing. It's becoming more virtual." Consider how the OEMs are outsourcing aspects

of car design and the rise in contract manufacturing. Both of these business processes

span physical enterprise boundaries. "ERP starts to struggle as you outsource more

activities," says Zrimsek. The build/made items in ERP become bought/purchased items.

The visibility that comes from routings, work-order statuses, and work-in-process data

acquisition gets lost. Hence the drive for collaborative information systems among

outsource partners. But remember, points out Zrimsek, "ERP wasn't built with the

Internet in mind."

2. Verticalization of functionality. ERP was initially built for manufacturing and

distribution. Now, fully integrated, feature-rich, ERP systems have extensions for supply

chain management (SCM), customer relationship management (CRM), warehouse

management, and several other business processes. Zrimsek has seen ERP deployed in

just about all industry sectors; food, petrochemical, aerospace and defense, the armed

services, and even the public sector. Consequently, ERP vendors are deepening the

functionality of their systems to meet the needs of the target industries.

3. Architecture. Before client-server computing in the early 1990s, which was kind of

the birth of ERP, resource planning systems were very monolithic. ERP deployments

were basically mainframe deployments. Upgrading meant taking out the whole thing and

putting in a new system. Today, users are loathe to pay 20% to 60% of what they paid in

system implementation for upgrades/migrations. This is putting pressure on ERP vendors

to provide software that is open, component-oriented, and migratable in pieces—thereby

leaving existing, desired, ERP components (as well as SCM, CRM, etc.) in place and

functional.

42

Add that all together and

you see why Gartner is

coining the term "ERP II"

to label the "next act in

the evolution of ERP,

which expands beyond

enterprise-centric

optimization and

transaction processing to

a new focus on improving

enterprise

competitiveness." So, dismiss anything written that ERP is dead. "It's not accurate to say

there's nothing happening in ERP. There's lots happening. ERP is still growing and

evolving," exclaims James Shepherd, Senior Vice President at AMR Research (Boston,

MA). ERP is still doing what it's supposed to: provide a common database for an entire

enterprise. "ERP is truly the enterprise backbone. That can't go away," says David

Schaap, Product Marketing Manager for BRAIN North America, Inc. (Ann Arbor, MI). If

anything, ERP is manufacturing's equivalent to Microsoft's Office Suite: lots of core

functionality and changes that are far more incremental than they once were.

Automotive ERP

"What's new in ERP is no different than what has always been new in the product

category currently known as ‘ERP,' formerly ‘MRP II' [manufacturing resource

planning], formerly ‘MRP' [material requirements planning]: The difference has to do

with what's being added to ERP," says Shepherd. That is, the scope, features, and

functions of ERP continue to expand. Some of these, points out Shepherd, are invented

by the ERP vendors; most are invented by small, niche vendors, later co-opted by the

ERP vendors. "That's progress as usual in ERP," Shepherd adds.

And yet, ERP still doesn't fit automakers very well mainly because they have evolved

their own way of doing business, which is sufficiently different than other industry

sectors. However, ERP does fit the operations of the suppliers. Nowadays, suppliers are

implementing ERP packages rather than writing their own systems or modifying "off-the-

43

erp's Evolution Into ERP II

shelf" to some unrecognizable system state, as they did in the past. One key reason is that

because automotive is a key target market for the ERP vendors; automotive-specific

functionality is now the "price of admission." For example, look at Release Management

from Oracle Corp. (Redwood Shores, CA). This module manages customer schedules,

then reconciles demand with existing requirements. It posts shipping and sequence

schedules, and generates updates to sales orders and forecasts. The module lets OEMs

and suppliers automate the receipt and processing of inbound planning, shipping, and

production sequence schedules. As necessary, the module generates exceptions if data is

missing or invalid; valid schedules will continue to be processed. Once validated,

customer schedules are archived and accessed by schedule history, original schedule

date/quantity, associated sales order, and customer authorization information using the

Release Management Workbench.

CONCLUSION

Enterprise resource planning (ERP) is not a magic bullet. ERP systems have become

more affordable, effective and -- to a significant degree -- essential, but manufacturers

need to pause before joining the headlong rush toward implementation. Companies that

do not ready themselves before implementing ERP find it nearly impossible to fully

utilize their new systems, and risk upsetting their organizational culture with chaotic

implementation phases. However, manufacturers can prepare for ERP adoption with

44

straightforward activities that do not require outside consultation, require no investment

other than time and can typically be achieved within three months.These basic

preparedness activities focus on best business practices and pave the way for smooth

transitions to ERP adoption. Because best business practices vary across manufacturing

microverticals, we will examine how best practices apply to subcontractors and process

manufacturers. Additionally, we will see how manufacturers, regardless of their specialty,

can prepare for ERP adoption by benchmarking the organization against peers and then

removing all non-value-adding activities from the supply chain.

To establish best business practices before adopting ERP, process manufacturers first

need to develop a comparison between their organizations and their peer group through

benchmarking. This inside-out comparison will clarify the performance of the

manufacturer's competitors. Once a manufacturer knows how many units per hour a

competitor produces, and at what cost per unit or throughput per unit, understanding

which areas within the organization need improvement becomes self-evident. The next

step involves understanding what procedures and processes will best improve

performance.

For example, if you measure your organization against a peer group and realize that you

need to improve labor efficiency, the next step calls for an enterprise-wide assessment of

assigned labor, specific labor activities and duplication of business processes. This allows

you to identify unnecessary steps executed by labor, and in turn improve business

processes by removing non-value-adding activities and retraining workers.

45

Or, if the benchmarking activity determines a disadvantageous yield compared to the peer

group, you examine where and why waste occurs. This helps develop an awareness of

how each phase of process manufacturing's continuous production cycles enhances -- or

inhibits -- the overall effectiveness of the organization. If you discover that competitors'

machines run at greater efficiency, plant maintenance requires a closer look. How is each

machine's output measured? Have preventative-maintenance and production schedules

been adhered to? Have bearing and electrical-motor performances been recorded?

Process manufacturers do not need an ERP system to clearly answer these questions.

However, this sort of basic, but rigorous, self-assessment establishes the procedures that

pave the way for successful ERP implementations.

While process manufacturers examine how to strip away non-value-adding activities

from their continuous production cycles, subcontract manufacturers need to evaluate their

core processes. Because subcontractors pack out their partners' bulk production into

smaller quantities, peer-group benchmarking most often focuses on efficiency. If the peer

comparison shows the subcontractor lagging behind industry standards on packing out a

given chemical within a specified time window, the sub-contractors needs to locate the

deficient area. An examination of equipment, training procedures, labeling, pallet

preparation, storage and third-party drop shipments will reveal the general problem. If

mis-labeling proves to be the issue, what is the cause? By drilling down on labeling, the

subcontractor will eventually discover the root cause, whether malfunctioning equipment

or insufficient training.

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Companies looking at ERP often assume that they will simultaneously implement

enterprise software; translate redefined business processes into an optimized system;

prepare the necessary data; and conduct flawless training, all while change management

somehow takes care of itself. And, of course, all of this will happen on budget. In these

cases, the consultant comes in and has to start at a whiteboard, because the organization

has no point of reference for understanding their own enterprise needs. Business design

and blueprints require four months and configuring that information into the system takes

another six months. After training and testing, you're looking at an implementation that

will consume an inordinate amount of time and resources.

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