Transcript Preparing for and buying ERP

Databases for large scale
integration
Focus on ERP projects
Enterprise Wide Applications
• As the name indicates…
• Keywords:
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Integrated
Centralised
Best practice
Cross functional
“mega packages”
Costly (inc. hidden costs)
Highly complex
High impact on business
Definition
• No simple definition
• American Production and Inventory
Control Society (APICS)
an accounting-oriented information system
for identifying and planning the enterprisewide resources needed to take, make,
ship, and account for customer orders
• Transaction-oriented / operational
Family of applications
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Enterprise Resource Planning systems
Supply Chain Management
Customer Relationship Management
Other more specialised applications such
as planning, warehouse management …
• Merging into ERPII / XRP –encompassing
all aspects of the business
A Complete Family Tree
Late 90’s
CRM Early 00’s
SCM
Logistics
Electronic
Invoicing
Electronic
Marketplaces
Contract
Management
Early 00’s
ERP II
Sales Force
Automation
Contract
Management
Customer Service
& Support
Marketing
Automation
Documentation
Management
Product Data Management
New Product Introduction
Engineering Change Orders
Collaborative Product Design
Time frame and key milestones
EOQ
Safety Stock
More functions
become
Integrated in the
process to add up
to complete
business solution
BOMP
Work Orders
1950s
MRP
1965
MRPII
1975
ERP
1990
ERM / ERPII
2000
1950’s: unlimited demand
Deliver
Supplier
Make
Customer
1960’s : inventory costs money!
Deliver
Supplier
Make
Plan
Buy
Customer
1960’s : inventory costs money
Deliver
Supplier
Make
Plan
Buy
MRP
Customer
1970’s : first wave of integration
Deliver
Supplier
Make
Customer
Plan
Sell
Buy
MRP
MRP II
1980’s : sales order processing
SOP
Deliver
Supplier
Make
Customer
Plan
Sell
Buy
MRP
MRP II
1990’s : back-office integration
Accounting & Finance
Human Resources
Deliver
Supplier
Make
Customer
Plan
Sell
Buy
MRP
MRP II
ERP
2000’s : the extended enterprise
SCM
Accounting & Finance
Human Resources
CRM
Deliver
Supplier
Make
Customer
Plan
Sell
Buy
MRP
MRP II
ERP
Service
What’s next?
SCM
Accounting & Finance
Human Resources
CRM
Deliver
Supplier
Make
Customer
ERP II
Plan
Design
Buy
MRP
Sell
MRP II
ERP
Service
Goals of ERP implementations
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Standardisation / centralisation
Control – eg: integration of financial data
End fragmentation of legacy systems
More visibility on key processes
Optimisation / productivity gains
Competitive advantage?
Platform for other projects = infrastructure /
backbone
• Mechanism for integration of latest technologies
(eg: RFID)
Other strong points
• No more uncoordinated applications – eg
quality control
• No more re-keying
• Solution to reporting problems across the
board
• “Sorting out” HR
• Harmonising nomenclatures – eg: product
codes, inventory files …
Problems with ERP
• Impact on business processes (eg: flexibility)
• Understanding the “fit” problem
• Doubtful benefits realisation (50% failure rate?)
– Measurability
– True origin of benefits
• Impact on firm in wider sense
– People
– Clients / suppliers / partners…
• Cost / disruption factor
– $
– Time
– Learning curve
• Coping with evolution (version control)
Gorry and Scott Morton (1971)
“The integrated management information
systems ideas so popular in the literature
are a poor design concept. More
particularly, the integrated or company
wide database is a misleading notion and
even if it could be achieved, it would be
exorbitantly expensive”
Gorry A. and Scott Morton. M. (1971) A Framework for Management Information Systems,
Sloan Management Review, Fall, 55-70.
Dearden (1972)
“The notion that a company can and ought
to have an expert (or a group of experts)
create for it a single, completely integrated
super-system - an MIS - to help it govern
every aspect of its activity is absurd”
Dearden, A (1972) MIS is a mirage, Harvard Business Review, January / February
Preparing for the implementation
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Multi-disciplinary
Full time
Decision making power
Budget
Representative – team leads
Balance between allegiance to team and to area
of competence
• Team spirit
• Team awareness
• Must have support from organisation
Business Integration
• Focus on end-to-end process rather than single
activity
– Cross functional
– Multi-competence
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Reduced autonomy
Increased communication
Increased reliance on tools
Rationalisation of process?
Benefits do not accrue where the system is most
constraining
Inventory
Shop floor control
Sales management
Field services
planning
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How it works
Workflow
Workflow
Workflow
Workflow
How it works
Inventory
Shop floor control
Sales management
Field services
planning
…………..
Workflow
Workflow
Workflow
Workflow
Independent versus complementary integration
One way versus two way integration
+ see figure 16.4
ERP
Module
Traceability
ERP
Data Flow
Drill Down
Module
Example of Business Integration
• MUTAIR case study
• Meals for plane travelers
• Before: quality / high value service
– Culinary business (chefs in toques)
– Dedicated buying
– Price not an issue
• After: commodity
– Drastic price reduction
– MRP type scheduling / purchasing
Mutair case study
• Process integration:
– p/o, receiving, issue, inventory, invoicing, accounts
payable & accounts receivable
– Bulk buying from agreed suppliers
– Tough negotiation on price of RMs
• But, rationalisation does not always work
– 80% of jobs are OK
– Rest cannot be planned (delays, change of schedule,
special meals…)
• Dysfunctional use of system => dysfunctional
ERP
What can go wrong
• Integrated systems rely on actors to “play the game”
– Need good perception of system
• Here, actors impeded by system
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Inaccurate data entry
Physical stock VS theoretical stock
Faxed P/Os post-entered / never entered (supplier does not exist)
Ghost deliveries reached the loading bay
Either goods sent back (no stocks)
or invoice cannot be reconciled (payment impossible)
Emergency orders must be entered somehow => wrong codes used
• Overall performance of the process decreases
– May keep going at local level
– But overall vision is totally inaccurate
• Might as well have implemented nothing
Where problems originate?
• In preparation phase for project
• Lack of managerial awareness of risks /
opportunities
• Lack of understanding of how to select software
• Lack of vision of the business impact
• Wrong scope (eg: areas pull out and weaken
project)
• Not enough money for proper analysis
• Wrong team (not at the right level / too militant)
Communication
• Political / change management dimension
• Internal aspects
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Expected support (we need you!)
Properly justify project (?)
Explain change in roles
Give assurances (when possible)
• External aspects
– Be upfront about new rules
– Adopt participative approach?
– Seek collaboration / leverage other firms’ systems
• Perception of system / team
Benefit realisation
• Only occurs when definitive targets sought
• Only occurs if analysis was realistic and did not neglect
downsides
• May be more intangible than measurable
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Head count
Upfront implementation cost
Length of learning curve
Investment may not be exhausted by current usage (stage 2 /
ERP2 etc…)
• Whose benefits are those anyway?!?!
– Case of the multi-national
– Case of a dominant coalition
Team Characteristics
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Typical size: 25 to 60+ FTE
Team leads: 10 to 20
Functional area experts
Special roles:
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Project manager
Integration manager
Data conversion and migration
Training manager
Hardware / IT specialist
Platform expert
Communication about project (internal & external)
Collecting requirements
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Interviews with key individuals
Observation of activities
Consultation of documentation
Surveys
Targets:
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As-Is +
New requirements
Staff
Suppliers
Customers
Other constituencies when needed (eg: vendors…)
Overall Scope arbitration
• Time and cost often already decided
• Time boxing used to segregate
• Trade off with having to do it again next
year
• Arbitrate between requirements
– Out of scope
– Conflict between areas
– Conflict with proposed project scope
• Steering committee (Director level)
The ITT
• Trade off between detail and speed of
processing of information
– Cover everything
– Sample the functionality
– Buy on faith
• Available in generic format (see handout)
• But always better when tailor made to fit
business goals
• See notion of fit in previous notes
• Also prepare ITT to facilitate analysis
• But some vendors will ignore the format
Comparing tenders
• Likely they all look good
• Need a rigid set of criteria to decide
– Criteria
– Type of criterion
– Relative weight
– Rules for computing overall score
• How many would you like to end up with?
• Decide on shortlist
Shortlisted firms
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On or off site presentation
Intense meeting
Any item unclear in ITT
Any contentious point
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User requirements
Price
Support / maintenance contract
Technical characteristics (eg: response time)
• Then leave lawyers finish it off
• Don’t expect a clear cut answer
• Recommend for board level decision
Next steps
• Agree on exact schedule
• Freeze scope again
• Schedule participation of all required users /
technical staff
• Communicate communicate communicate
• Run awareness workshops etc…
• Negotiate re-skilling arrangements
• Ring fence resources and budgets
• Prepare for IMPLEMENTATION
Implementation phase
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Create fine configuration of package
Define roll out strategy
Schedule implementation in phases
Organise data loads
Go live (s)
Define criteria for ramp up period (duration
to full capacity)
• Measure progress and report
ERP roll outs
• Core team (global)
• Local implementation teams
• Roll out step:
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Initial meeting with local pm
Local team set up
Bringing local team up to speed
Understand implications of template at local level
Create additional workarounds
Define criteria for acceptance / rejection of additional
demands
Factor
Input values
Decision
Comment
1 - Scope
Global / Local
Only global changes will be
considered
Global changes are
implemented at local level
primarily
2 - Impact on Business
High / Medium / Low
Only high impact changes
will be considered
Difficulty in ensuring
consistent reporting of impact
2a – Savings Quantified
Number of transactions *
time saved per time interval
See point 9 below
Full justification for perceived
saving must be presented
3 - SAP standard functionality
Yes / No
Only standard functionality
will be considered
Except for “must have”
additions **
4 - Support Project Business
objectives
Yes / No / Maybe
Only unambiguous Yes will
be considered
5 - Impact on project
Yes / No
Only changes without overall
impact on the project will be
considered
Impact on Alliage project
focuses on the impact on time
of delivery of deliverables
6 - Risk
High / Medium / Low
Only low risk changes will be
considered
trade off to point 4 above
7 – Change in SOP
Yes / No / Minimal
Only properly documented
And QMS approuved changes
Reference of QMS approuval
document required
8 - Training
Yes / No / Minimal
Only changes with minimal
training requirements
bullet points max
9 – Costs
Number of man days

IT

Users
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QC
Project requirements to be
checked against accumulated
usage of key resources.
In case where total resource
usage goes beyond
Alliage budget, steering
committee may
recommend scope
enlargement in special
cases
10 – Pay back / Return on
Investment
Duration of payback period
(comparison of 2 and 10)
Only changes that pay for
themselves within 12 months
Also take intangible benefits
into account
Training
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Design training courses and develop
material
Schedule training overall
Select and train trainers
Create facilities / sandpit
Book staff for training sessions
Coordinate training
Create assessment mechanism and
monitor progress
Data transfers into an application
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First time system implementation
Data warehousing projects
Database version upgrade
ERP projects
Move to new version
Called a migration
– From a manual system
– From old to new system
Data transfers between systems
• Static data (eg. Customers)
• Dynamic data (eg. sales orders)
– Additional problems with a live system
• Open items
• Balances
• Conversion or interfaces often required
Data Upload
• Several rounds:
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Trials
Static data
Open items
Dynamic data - transactions
Balances
• Staging areas
– Local initially
– Then central area
• Upload into live system
– Specific predefined sequence (RDB)
– Extract, translate, load
– Rental of platform specific tools from vendor
Go live
• A single point in time
• First transaction routed through system –
eg sales order
• In reality loads of data already in –
incremental approach
• Plenty can still wrong although not right
away
• Over first few weeks – ramp up to full
capacity
Post Go Live
• Team is disbanded
– Back into business
– Promoted
– Next wave of roll out
• Structure is permanently altered – eg: shared services
• ERP team put in place
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Data experts / maintenance
Application experts – on-going developments and fixes
Platform experts – uptime
Business analysts – look to future releases and future
requirements
– Typical size 20 /25 staff full time for a multinational
– Various names used – eg: knowledge centre
The story continues
• Dysfunctional ERP => uninstall
• Next phase in implementation
– More modules
– More sites
– More interfaces to legacy systems
• Update to new version
• Merger and acquisition => change to other
platform