UNIT III

ERP IMPLEMENTATION

Why ERP? Benefits• Simplification of business processes• Enhance productivity, flexibility and customer

responsiveness• Compliance and control• Efficiency improvements• Enable new business and growth strategies• Agility improvement• Reduce cost and eliminate inefficiencies• Continuous improvement• Expand your knowledge of key business data• Extend your business using the internet

Reasons for implementing ERP or Perspectives of ERP Implementation

•Technology•Business • Operational•Strategic•Competitive.

Other Reasons

•Replace legacy systems•Simplify and standardize systems•Improve interactions with suppliers and

customers•Gain strategic advantage•Link to global activities•Pressure to keep up with competitors•Ease of upgrading systems•Restructure the organization

ERP Implementation Life cycle : Objectives

•Speed

•Scope

•Resources

•Risk

•Complexity

•Benefits

ERP Implementation Phases or Lifecycle

1. Pre-Evaluation Screening

2. Package evaluation 3. Project planning phase 4. Gap analysis 5. Reengineering

6. Customization 7. Implementation team

training8. Going live9. End-user training 10. Post implementation

Critical phases of ERP Implementation

•Adoption decision•Acquisition•Implementation•Use and maintenance•Evolution•Retirement

ERP Implementation : Pre-Implementation Tasks

• Assembling of participants• Feasibility study and need

analysis review• Project mission and vision

statements creation• Determination of

organizational structure• Determination of the

modules to be implemented.

• Creating the core team

• Establishing the training needs

• Establishing the data conversion strategy

• Establishing interfaces• Determining work

estimates• Cost of consultants• Calculation of

implementation time• Identifying constraints• Establish policies and

guidelines

Requirements Definitions•Process of capturing and documenting the

user requirements and specifications.

- Understand current system- User triggers development of product

/system- Emphasize - Product

Classification of requirements:

•Business requirements •User requirements•Functional requirements

Requirements Engineering: Develop requirements based on -

• Human stakeholder• System environment• Feasibility studies• Market analysis• Business plans• Analyses of competing

products and domain knowledge

Other requirements• Hardware & software

requirements• Requirements for

releasing product• Compatibility

requirements

Requirements Engineering

Requirements does not include

• Design details• Implementation details• Project planning • Testing information

Tools & techniques : Data flow diagram (DFD) Entity relationship (ER)

diagrams etc.,  

People involved in ERP implementation: • Project Sponsor • Executive committee • Project Manager • Implementation or Work

team • Functional Managers

• Functional Participants • Consultants• Package Vendors • End-users

ERP Implementation Challenges..1. Inadequate requirements

definition- Selection of wrong ERP

package- Unnecessary customization- Lack of employee retraining2. Resistance to change3. Inability to achieve

organizational understanding• Lack of good understanding

of business functions and processes.

4. Inadequate resources• Money, people, software,

hardware

. Lack of top management support

6. Lack of organizational readiness

• Organisation, Work processes and the employees.

7. Inadequate training and education

8. Unrealistic expectation• Under estimated :

Implementation cost and time

• Over estimated : Benefits and ROI

ERP Implementation Challenges..9. Poor package selection10. Poor project

management11. Customization issues12. Long payback period• Discontinuing support for

systems13. Poor communication &

co-operation14. Data quality costs

15. Hidden implementation costs

16. Improper integration• Integration of ERP

modules• Integration of e-business

applications• Integration with legacy

systems17. Improper operation/use•  

ERP Implementation Approaches/Strategies

• Big Bang Implementation• Parallel implementation• Process line

implementation

• Phased Implementation• Pilot Implementation• Hybrid Transition Strategy

Big bang strategy• Implements all relevant modules at same

time•Mini big bang strategy: To one or two

business modules at a time. •Mega big bang strategy: It refers to a large

company, with multiple sites, all going live at the same time using the big bang strategy.

•Multi big bang strategy: It uses multiple big bangs sequenced in order for different geographical facilities.

Big Bang strategyAdvantages : • Low overall

implementation cost• Faster return on

investments• Elimination of complex

integration issues etc.,

Disadvantages : • High amount of time and

effort for pre-implementation planning

• High failure rates• Do-it-right the first time

nature etc.,

Parallel Implementation

•Parallel approach keeps both traditional system and new ERP system active simultaneously for a length of time.

Parallel Implementation• Advantage:• High success rates• Low resource commitment• Opportunity to learn from

mistakes etc.,

• Disadvantage: • High overall cost• Lengthy implementations

etc.,

Phased Implementation

•Package is implemented in phases and sequentially.

•Single module implemented at all sites or a single module implemented further in multiple phases at all sites.

Phased Implementation• Advantage: • - Less risk• - Step by step approach• - Low resource

commitment etc.,

• Disadvantage:• Large amount of technical

resources for creating interface programs.

• High overall cost• Lengthy implementations

etc.

Pilot Implementation : Quick slice or slice approach•To put entire system through all of its

paces utilising only a single product line or small area of the company.

Pilot Implementation• Advantages• Low complexity/low risk• Learning curves are fast

and ROI is seen immediately

• Shorter readiness step• Period for review and

refinement is shorter

• Disadvantage• Wrong pilot may be

chosen• Too many pilots increase

complexity• Requires intense focus

from participants

Process Line transition strategy

•Process line strategy breaks the implementation strategy to manage parallel business process flows or product lines.

•The first product line and all related resources go first in making the transition from the legacy system to the new ERP system

•Once this is completed the other product lines are moved to the new system in sequence.

Process line transition strategy• Advantage:• High success rates• Low resource commitment• Opportunity to learn from

mistakes etc.,

• Disadvantage: • High overall cost• Lengthy implementations

etc.,

Ideal StrategyBig bang strategy• Immediate ERP solution is

needed• Suited for small

companies• Limited amount of time

available combined with immovable go-live date.

Phased Approach• Do not share many

common processes across departments or business units.

Parallel Approach• Suited for mission critical situations

that cannot survive a major malfunction of an ERP system.

• Business environment that require the utmost in stability of an ERP system such as financial, pharmaceutical or medical companies.

Process line Approach• Ideal for companies that have many

product lines. Hybrid strategy • Combination of all the above

strategies can be used in organization where the inter-departmental communication is excellent and where there is a strong leadership to manage the project.

ROI – ERP Implementation

• Benefits Calculation • Inventory Reduction• Improved process

efficiency• Improved vendor relations• Waste reduction

Costs Calculation • Software licence• Hardware costs• Internal Training• Change management• Internal conversion

ERP Implementation : Hidden cost• Training• Integration & Testing• Customization• Data conversion

• Data Analysis• ERP consultants• Brain drain (Employee

turnover)• Continuing Maintenance

ERP Package Evaluation & Selection

•Identify packages that fits the requirement

•Find package flexible to meet company’s needs

Issues in ERP package selection•Lack of clarity about customer’s

requirements•Complexity in business processes•Increased ERP vendors•Lack of planning•Resistance to change•Project cost•Integration, Upgradeability, Adaptability

and Applicability of software

Methods in ERP selection

•Top management & consultants•Centralised selection process (IT & internal dept)•Considering suggestion of internal

department•Combination of above.

Selection Committee

•Functional experts•Top management (CIO or COO)•Consultants (package experts)•End users

Selection process1. Assemble project teamExecutive sponsorProject leaderTeam members2. Define Business Vision4. Requirements & selection

criteria5. Develop scripted

demonstration scenarios

3. Define business requirements

Build or BuyIntegrated or Best of breedInitial vendor screening- Vendor viability- Functionality- Scalability- Technology

Selection process contd.,

6. Finalise selection decision- Documentation

requirements – Weigh based on priority

- Participant feedback on demos

- Gap analysis for software customization

- Cost analysis for software and related services

- Customer reference ability.

7. Transition to Implementation

• Qualitative factors- Ease of use- Flexibility- Vendor support

Selection Criteria• Multi language & multi

currency support• Installation in

international specified countries

• Local presence – vendors• Cost• Incremental module

addition• Provide implementation &

post implementation support

• Training employees• Capability to interface

with banks, suppliers, customers etc..

• Easy customization process

• Vendor policy, practices regarding updates, version etc., approachable.

Mistakes in ERP selection• Limit search to known

vendors• Requirements not defined

properly• Demonstrate before

defining requirements• Over-specify their

requirements : “Candy store” syndrome

• Too involved in software analysis – Too much time studying requirements

• Treat ERP selection as purchasing technology than as major business decision.

Framework for evaluating ERP• Traditional Approach BPR as pre-requisite of ERP

implementation

• Simplified ApproachERP implementation without

BPR

Evaluation Criteria1. Strategy fit2. Technology3. Change Management4. Risk5. Implementability

6. Business functionality7. Vendor credentials8. Flexibility9. Cost10. Benefits

Fitzgerald approach- Evaluation criteria • Identification of cost• Contribution to business

strategy• Analysis of benefits• Second-order effects• Flexibility• Implementability• Risk• Testing the business idea.

Framework for evaluation• Creation of organisational

infrastructure• Constitution of the

repertoire of ERP Products. (NGT)

• Preparation phase• Context setting phase• Evaluation and selection

phase• Approval of the selection• Mid course evaluation

Data Migration

•Migration of data from one or more legacy systems

•Scale of complexity : small volumes to large volumes

•Determines success of ERP implementation

•Last activity of production phase•Minimal attention – Time constraints

Steps : Successful data migration1. Identifying data to be migrated2. Determining timing of data integration3. Generating data templates4. Freezing tools for data migration5. Deciding on migration related setups6. Deciding on data archiving

Data Migration : Objectives

•Reduce risk•Lower operational expenses•Improve data quality

Data Migration : User perspective•Iteration : Identify corrupt and rectify

data•Weeding•Inspection : Archiveddata

Data Migration : Development perspective•Maximum safety•Avoid risky big bangs•Phased implementation•Unique, consistent template document

referenced by all projects•Development of generic modules -

reusability

Data Migration processing : StepsStep 1 : Analysis- Data profiling : Content,

structure, quality, integrity - Data Mapping :

Table/dataset (source system) mapped to target field in ERP system

Step 2 : DesignOld data formats to new

system format’sSupplement/transform

coding structure for ERP

Step 3 : CleansingRemove obsolete, duplicate

data, Data validationStep 4 : ExtractionETL tools – Extracting data

from data sources and load to ERP

Step 5 : TransformStep 6 : LoadStep 7 : Verification

Data Cleansing techniques• Standardizing• Matching - eliminate

duplications• Consoldiating : Analysing

and identifying relationships

• Correcting : Using algorithms and secondary data sources

• Enriching : Value added data from external sources

• Parting. Eg xxx-xxx-xxxx

• Conditioning : Conversion of data types from source to target data

• Scoring : Probablity of an event

Data Loading sequence• Material master• Vendor master• Open purchase order• Open purchase requisition• Stock balance• Open vendor invoices• Vendor excise details• Excise tax rates• Accounts receivable

balances

Data Migration : Methods

•Manual data Migration-Manually- Check source system and punch data in

ERP- Time consuming- Costly- High chance of error- Small implementation

Data Migration : Methods

•Electronic data migration-Volume of data is not constraint- Faster, cheaper- Low chances of error- Manual verification after migration

Training & Education

•Training needs – Different- Managers – Focus on decision making &

analysis- Clerical staff – Perform job- All users

– overview of system & working - Automation of process - Change in process - Triggers host of events

•Inadequate training – ERP system failure•Select appropriate plan – training•Effective understanding of business

process•Training inside or outside

Education or Training ? Who?

•Level of education - Steering committee- Project leader- Functional teams

Budgeting : Education & Training•Cash outlays•Employee time•Equipment•Facilities

•What education & training needs?•Evaluation

People Organization in Implementation•Vendors•Consultants•Employees (Inhouse team and users)

Vendors

•Supply product & documentation•Trainer•Project support function

Consultants•Guarantee success of project- Reduce cycle time, increase response time,

improve productivity- Administer each phase of implementation- Finalise time schedule for each phase/task- Value : Know-how, expertise- Improve companies business process- Customization issues- Present advantages & disadvantages- Maintaining technical documentation.

Employees : Resistance

•Fear of being redundant•Fear of failure•Fear of future

Handling : Employee resistance

•Training & Education ERP champions•Creating ERP champions – Expert users,

Facilitator, Trainer•Pilot projects•Involvement of Employee in ERP process•Managing expectations.