ERP IMPLEMENTATION

INTRODUCTION
• Enterprise Resource Planning - a software system that
integrates core business areas such as manufacturing,
distribution, financials and human resources.

• Example: A warehouse in Singapore enters a customer order

▫ data automatically flows to other areas of the company.
▫ It would flow to the financial and accounting people in
New York
▫ Automatically update accounts receivable.
 ENTERPRISE RESOURCE PLANNING

• The order would also flow to the manufacturing

operations in Europe instructing them to make another
component.

• Inventory levels would automatically be reduced in the

warehouse and an order would be placed to replenish
inventory.
 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 training
8. Going live
9. End-user training
10. Post implementation
IMPLEMENTATION LIFE CYCLE- PHASES
Pre Evaluation Screening

• Decision for perfect package

• Number of ERP vendors

• Screening eliminates the packages that are not at all

suitable for the company’s business processes.

• Selection is done on best few package available.

Package Evaluation
• Package is selected on the basis of different parameter.
• Test and certify the package and also check the
coordination with different department
• Selected package will determine the success or failure of
the project.
• Package must be user friendly
• Regular up gradation should available.
• Cost
Project Planning

• Designs the implementation process.

• Resources are identified.

• Implementation team is selected and task allocated.

• Special arrangement for contegencies.

Gap Analysis

• Most crucial phase.

• Process through which company can create a model

of where they are standing now and where they want
to go.

• Model help the company to cover the functional gap

Reengineering

• Implementation is going to involve a significant

change in number of employees and their job
responsibilities.

• Process become more automated and efficient.

Configuration
• Main functional area of ERP implementation

• This includes synchronizing existing company

practices with the ERP packages rather than changing
the source code and customizing it to suit the
company.

• Business processes have to be understood and

mapped in such a way that arrived solutions match up
with the overall goal of the company
Implementation Team Training

• Takes place along with the process of

implementation.

• Company trains its employees to implement and

later, run the system.

• Employee become self sufficient to implement the

software after the vendors and consultant have left.
Testing
• This phase is performed to find the weak link so that
it can be rectified before its implementation.

• Various extreme conditions are checked and made

sure system is error free.
Going Live

• The work is complete, data conversion is done,

databases are up and running, the configuration is
complete & testing is done.

• The system is officially proclaimed.

• Once the system is live the old system is removed

End User Training

• The employee who is going to use the system are

identified and trained.
Post Implementation

• This is the maintenance phase.

• Employees who are trained enough to handle

problems those crops up time to time.

• The post implementation will need a different set of

roles and skills than those with less integrated kind of
systems.
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
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 . Lack of top management
definition support
- Selection of wrong ERP 6. Lack of organizational
package readiness
- Unnecessary customization • Organisation, Work processes
- Lack of employee retraining and the employees.
2. Resistance to change 7. Inadequate training and
3. Inability to achieve education
organizational understanding 8. Unrealistic expectation
• Lack of good understanding of • Under estimated :
business functions and Implementation cost and time
processes. • Over estimated : Benefits and
4. Inadequate resources ROI
• Money, people, software,
hardware
ERP Implementation Challenges..
9. Poor package selection 15. Hidden implementation costs
10. Poor project management 16. Improper integration
11. Customization issues • Integration of ERP modules
12. Long payback period • Integration of e-business
• Discontinuing support for applications
systems • Integration with legacy
13. Poor communication & co- systems
operation 17. Improper operation/use
14. Data quality costs •
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 Strategy
Advantages : Disadvantages :
• Low overall implementation • High amount of time and
cost effort for pre-implementation
• Faster return on investments planning
• Elimination of complex • High failure rates
integration issues etc., • 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: • Disadvantage:
• High success rates • High overall cost
• Low resource commitment • Lengthy implementations etc.,
• Opportunity to learn from
mistakes 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: • Disadvantage:
• - Less risk • Large amount of technical
• - Step by step approach resources for creating interface
• - Low resource commitment programs.
etc., • 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 • Disadvantage
• Low complexity/low risk • Wrong pilot may be chosen
• Learning curves are fast and • Too many pilots increase
ROI is seen immediately complexity
• Shorter readiness step • Requires intense focus from
• Period for review and participants
refinement is shorter
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: • Disadvantage:
• High success rates • High overall cost
• Low resource commitment • Lengthy implementations etc.,
• Opportunity to learn from
mistakes etc.,
Ideal Strategy
Big bang strategy Parallel Approach
• Immediate ERP solution is needed • Suited for mission critical situations
• Suited for small companies that cannot survive a major
• Limited amount of time available malfunction of an ERP system.
combined with immovable go-live • Business environment that require
date. the utmost in stability of an ERP
system such as financial,
pharmaceutical or medical
Phased Approach companies.
• Do not share many common Process line Approach
processes across departments or
business units. • 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 • Data Analysis
• Integration & Testing • ERP consultants
• Customization • Brain drain (Employee
• Data conversion 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
Evaluation Criteria

1. Strategy fit 6. Business functionality

2. Technology 7. Vendor credentials
3. Change Management 8. Flexibility
4. Risk 9. Cost
5. Implementability 10. Benefits
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.
Integrative Framework For ERP
Implementation
Integrative Framework For ERP
Implementation
• Each level contains a critical factor

• Each factors are not independent to each other

• Each levels input varies

Dominant ERP Success Factors

• Top management commitment/support

• Business case
• Project management
• Change management
• Training
• Communication
 Top management
commitment/support

• Willingness of top management to provide

resources etc

• Commitment should be not stopped with initiation

and facilitation. Should end after full
implementation only.
 Business Case

• A true business case which can show the need

for implementation
• It focus on present scenario as well as expected
return
• Scope of project is designed based on the
business case
Project Management
• The most important one

• A best practice of project management should

includes following
▫ Project Schedule and Plans
▫ Monitoring and Feedback
▫ Risk Management
Change Management

• Activities , methodologies will be changed

• Employees must be created awareness regarding

• Employees view and their ability to change

must be studied
Training
• Proper training must be provided to employer

• Additional benefits can be provided

• An appropriate plan must be made and should be

implemented
Communication
• Challenging and difficult task
• A communication plan can be made
• The communication plan has to include the following
areas,
▫ Overview and rationale for the ERP implementation.
▫ Detail of the business process change management.
▫ Demonstration of applicable software modules.
▫ Briefings of change management strategies and tactics.
▫ Establishment of contact points.
▫ Periodic updates