Enterprise Resource Planning
Dan Asahl
Paul Bryant
Tammy McEntire
November 10, 2001
Enterprise Resource Planning
What Is Enterprise Resource Planning (ERP)?
 Definition
 A software solution that integrates information and business
processes to enable information entered once into the system to
be shared throughout the organization. (Swartz & Orgill)
 Purpose
 Ultimately integrate all departments and functions across a
company onto a single computer system that can serve all the
different departments’ needs. (Koch, Slater & Baatz)
2
Enterprise Resource Planning
The Anatomy of An Enterprise System - Thomas Davenport Model
MANAGER &
STAKEHOLDERS
Reporting
Applications
Financial
Applications
Sales &
Delivery
Applications
CENTRAL
DATABASE
CUSTOMERS
Service
Applications
Human
Resource
Applications
EMPLOYEES
3
Manufacturing
Applications
Inventory &
Supply
Applications
SUPPLIERS
Enterprise Resource Planning
The Functionality of Each Department Makes Integration Difficult
GER &
OLDERS
rting
ations
RAL
BASE
man
urce
ations
OYEES
FINANCIAL APPLICATIONS & PROCESSES
ACCOUNTS PAYABLE
Financial
Applications
Manufacturing
Applications
• Vendor Maintenance
• Invoice Processing
• Recurring Payables
• Check Writing
• Funds Transfers
• Bank Reconciliation
• Three-way Matching
• EDI Invoicing
SUPPLIERS
GENERAL LEDGER
Inventory &
Supply
Applications
ACCOUNTS RECEIVABLE
• Customer Management
• Invoicing
• Credit Management
• Statements
• Aging
• Dunning
ASSET MANAGEMENT
• Account Maintenance
• Asset Maintenance
• Extended Account Maintenance
• Capital Budgets
• Reversing Entries
• Fixed Asset Accounting
• Profit & Loss Statement
• Fixed Asset Inventory
• Trial Balance
• Depreciation Similar
• Recurring Entries
• Leasing
• Budgeting
• Financial Stmt Generator
• Revenue Accounting
• Cost Accounting
Source: Siebel Systems ERP Modules
4
Enterprise Resource Planning
The Functionality of Each Department Makes Integration Difficult
MANA
STAKEH
SALES & DISTRIBUTION
APPLICATIONS & PROCESSES
Repo
Applic
• Sales Order Management
• Quotations
• Contracts
• Customer Management
• Pricing
• Promotions Management
• Product Configuration
• Shipping
• Picking & Packing
• Invoicing
• Sales Analysis
• EDI Orders
Sales &
Delivery
Applications
Source: Siebel Systems ERP Modules
5
CENT
DATA
CUSTOMERS
Service
Applications
Hum
Reso
Applic
EMPLO
Enterprise Resource Planning
Why is ERP Important to General Managers?
 Strategic - (Davenport)

Compatible information systems

Consistent operating practices

Universal, real-time access to operational and financial data

Streamline process flow to cut costs and create efficiencies

Create interdepartmental coordination to achieve global production efficiencies

Seamless communication between multiple organizational systems

Consolidation of terminology
 Organizational - (Davenport)

Flatter, more flexible, more democratic

Centralization of information control

Standardization of processes
 Technical - (Hagman)

Consistent application logic, information and interface

Single System

Minimize need for custom-built integrated systems
6
Enterprise Resource Planning
The Big Five
 Baan
 J.D. Edwards
 Oracle
 PeopleSoft
 SAP
7
Enterprise Resource Planning
ERP Vendor Viability Chart
Vendor
Ticker /
Exchange Parent Company Headquarters
Earnings
One-Year One-Year
Per
Profit
Revenue Number of
Share2 Market Cap3 Revenue Net Income Margin Growth Customers
Enterprise
Solutions
Stock Price4
P/E Ratio1
iBaan
$1.61
52-wk hi $5.48
52-wk lo $1.58
0.00 4
0.06 4
$3.1 BB 4
$7.29
OneWorld Xe 52-wk hi $29.50
52-wk lo $6.00
0.00 4
-1.69 4
$832 MM 4
$13.95
52-wk hi $36.63
52-wk lo $10.16
31.00 4
0.45 4
$77.6 BB 4 $10.9 BB 6
$33.80
PeopleSoft, Inc. Pleasanton, CA PeopleSoft 8 52-wk hi $53.88
52-wk lo $15.78
61.45 4
0.64 4
$10.2 BB 4
$27.00
R/3 and
52-wk hi $53.13
mySap.com
52-wk lo $21.31
57.14 4
0.47 4
Baan
IVNSY /
OTC
Invensys Plc
Barneveld,
The
Netherlands
J.D. Edwards
JDEC /
NSDQ
J.D. Edwards &
Company
Denver, CO
Oracle
ORCL /
NSDQ
Oracle
Corporation
Redwood City,
CA
PeopleSoft
PSFT /
NSDQ
SAP
SAP /
NYSE
SAP
Aktiengesellschaft
Walldorf,
Germany
eBusiness
Suite
1.0% 4
N/A
15,000 10
-1.5% 7
6.0% 7
6,190 11
$2.6 BB 6
23.8% 6
7.2% 6
N/A
$1.7 BB 8 $146 MM 8
8.4% 8
21.5% 8
4,700 9
$34.10 BB 4 $5.9 BB 5 $596 MM 5
10.1% 5
14.3% 5
13,500 5
N/A
N/A
$1.0 BB 7 -$15.4 MM 7
1 - P/E Ratio is an indicator of a stock's value related to earnings. High P/Es typically indicate growth stocks, while low P/Es are sometimes considered overlooked value stocks.
2 - Earnings Per Share is an indicator of growth and profitability.
3 - Market Cap is the total number of company shares multiplied by the current price per share.
4 - Source: CBS.Marketwatch.com as of 10-25-2001
5 - Source: Hoovers.com for year ending 12-31-2000
6 - Source: CBS.Marketwatch.com for year ending 05-31-2001
7 - Source: CBS.Marketwatch.com for year ending 10-31-2000
8 - Source: CBS.Marketwatch.com for year ending 12-31-2000
9 - Source: PeopleSoft Corporate Report 2000
10 - Source: Baan.com
11 - Source: JDEdwards.com
8
Enterprise Resource Planning
How Much Does It Cost?
 N = 140
 N=?
 Less than $5MM - 58%
 Less than $5MM - 79%
 $5MM to $15 MM - 4%
 $5MM to $10 MM - 10%
 Greater than $15MM - 10%
 Greater than $10MM - 11%
 Note: 28% did not answer question
9
Enterprise Resource Planning
Meta Group Study - Reference by Koch, Slater & Baatz
 N = 63 (small, medium and large across all industries
 Average implementation cost = $15,000,000
 Range implementation cost = $400,000 to $300,000,000
 Per user fee = $53,320
 Median annual savings = $1,600,000 (90% due to cost reductions)
 Average implementation time = 23 months
10
Enterprise Resource Planning
How Long Does Implementation Usually Take?
 N = 140
 Less than 1 year - 23%
 1 to 3 years - 38%
 3 to 5 years - 9%
 More than 5 years - 2%
 Note: 28% did not answer question
11
Enterprise Resource Planning
Del Monte Case Study 1
Ticker Symbol: DLM
Web Site: www.delmonte.com
12
Enterprise Resource Planning
Del Monte - Outline
 Del Monte Background Information
 Sales and Profits
 Products
 Organizational Chart
 IT Budget
 Del Monte Capability Improvement Project
 Core Capabilities
 Project Background
 Current and Future State of Del Monte
 Process to complete project
—
Phases of Implementation
—
Gantt Chart
 Del Monte Lessons Learned
13
Enterprise Resource Planning
Del Monte - Background Information
 Del Monte Foods is the largest producer of canned fruits and
vegetables in the United States, with net sales of $1.5 billion in fiscal
2000
 Del Monte sells its products through national grocery chains and
independent grocery stores. Del Monte also sells to warehouse
club stores and mass merchandisers, such as Wal-Mart and Kmart.
 Del Monte also sells its products to the foodservice industry, food
processors, the U.S. military and in certain export markets.
14
Enterprise Resource Planning
Del Monte - Background Information
Del Monte has several products including
 Fruits

Peaches, Pears, Fruit Cocktail, Pineapple ……
 Vegetables

Corn, Green Beans, Peas, Carrots …
 Tomatoes

Crushed, Diced, Paste, Juice ……
 SunFresh
 Orchard Select
15
Enterprise Resource Planning
Del Monte - Background Information
 Del Monte performs business with
approximately 100 IT employees. (10
Internal, 75 EDS, 15 Accenture)
 There are approx. 4000-5000 DM
employees during pack season(June –
Oct.) and 1500-2000 employees year
around.
 DM is a Total Outsource Organization
with greater than 80 % of IT budget
outsourced.
 Approx. IT Budget – $25 million per
year
CEO
CFO
CIO
 Capability Improvement Project –
Approx. $30 million over 3 years
Internal
DM IT
16
Accenture
EDS
Enterprise Resource Planning
Del Monte - Capability Improvement Project
EFFICIENT CORE CAPABILITY DEFINITION
Building an efficient and effective core business foundation will be
critical to positioning Del Monte Foods for rapid growth and exploiting
synergies offered by strategic acquisitions. It will also offer Del Monte
Foods bottom-line cost reduction opportunities.
Objectives
•
Integrate and automate core transaction services
for efficient operations and cost reduction for:
• Distribution Center Operations
• Core Financial Processes
• Enterprise Reporting
• Supply Chain Operations
• Purchasing Process
•
Position Del Monte to achieve synergies offered
by strategic acquisitions
•
Build an adaptable and scalable process and
information systems architecture
ADAPT
Market
&
Sell
Plan/Manage
INTEGRATE
Distribute
AUTOMATE
Purchase
S
C
A
L
E
Enabling Information Systems
• Enterprise Resource Planning (ERP)
Modules
•
•
•
•
Manufacture
17
Financials (AR/AP/GL)
Order Management
Purchasing/Accounts Payable
Transportation and Warehouse Management
Enterprise Resource Planning
Del Monte - Capability Improvement Project
Capabilities will be built over a three year period that began in
June, 2000. They will be delivered in seven distinct releases:
Business Capabilities
 Advanced Demand Management (ADM)
- Demand Planning/Forecasting
- Integrated Supply Chain Planning
- Sales & Operations Planning
- Integrated Order Management
- Integrated Purchasing
 Core Foundation Efficiency (CFE)
- Financial Management
- Warehouse Management
i2 Releases
Delivery
• Demand Planning
• Master Production & Distribution Planning
• Demand Fulfillment/Deployment
Dec. 2000
Nov. 2001
Feb. 2002
JD Edwards Releases
Delivery
•
•
•
•
•
Oct. 2000
Nov. 2001
Jul. 2002
Oct. 2002
July 2003
ERP Advance Prototype
Financials (GL/FA/CM-P)
Purchase-to-Pay/Cost Mgmt Actuals
Order-to-Cash / Purchase-to-Pay
Warehouse Management
OTC / PTP / CM-A
• Distribution
• Sales order management, Advanced pricing,
EDI, Enterprise Profitability, Inventory
Mgmt, Stock Valuation, Procurement
• Financials
• Accounts Payable, Accounts Receivable
18
Enterprise Resource Planning
Del Monte - Capability Improvement Project
Capability/Release Name
Provider
Description
Implementation Dates
(In order of project start)
CFE - Financials
JDE
New processes to automate and integrate financial and
accounting functions
ADM - Order-to-Cash /
Purchase-to-Pay
JDE
New processes and systems to integrate and drive efficiencies in
order management, invoicing, receivables, purchasing, and
payables processing includes Cost Management Actuals.
ADM - Master Production &
Distribution Planning
i2
New processes, systems and organization to reduce overall
inventory levels and improve asset utilization while improving
customer service levels by integrating all supply chain planning
activities (constrained requirements planning)
19
11/00 - 11/01
07/01 -10/02
07/01 - 11/01
Enterprise Resource Planning
Del Monte - Capability Improvement Project
The OTC-PTP Release includes process and system changes that will drive efficiencies in the order management, invoicing,
purchasing, and payables processes. This is a key release that will capture transactional data to improve data visibility and create a
single data source to enable better data analysis and support forecasting.
In addition to supporting the single view of data, the
OTC-PTP
releaseProducts
will include the following changes:
Del
Monte
CURRENT STATE
FUTURE STATE
•
Purchasing Process involves manual steps. All approval is
paper signature. All purchase orders are manually
faxed/mailed.
•
Reduced transaction costs for purchasing. Automated
approval and capability to email purchase orders.
•
•
Improved pricing and supplier analysis due to data quality
Analysis of suppliers and price is time consuming as data is
not readily available.
•
•
Material and Supplies purchased are written off due to age
could have been prevented with advance warning of product
changes and knowledge inventory levels.
Purchasing will work with I2 and MRP to properly forecast
Material and Supplies needed thus reducing write-offs.
• Automating key process will provide a single point of access for all
account related data
•
A/R clerks will focus on issue resolution and utilize exception based
problem management
•
The majority of invoices require manual handling
•
Collection follow-up is done manually
•
Collection follow-up activities will be automated
•
Ensuring invoice accuracy is a labor-intensive process
•
Customer satisfaction will improve based on improvements in the order
fulfillment process
•
In a stock-out, customers may begin to place orders with
alternate suppliers
•
Enhanced reporting capability will lead to improved breadth and depth of
analysis enabling meaningful customer and product profitability analysis.
•
No customer segmentation or profitability analysis is
performed
20
Enterprise Resource Planning
Del Monte - Capability Improvement Project
Project Management
• Prepare Detailed Work Plan
• Time Reporting
• Weekly Status
Build and Test
Design
Deploy
• Design Business Processes
• Build Applications
• Execute Final System Test
• Design and Configure JD
Edwards
• Build RICE components
• Perform Training
• Execute Data Conversions
• Implement New Processes,
Policies, and Procedures
• Design Applications
• Design System Tests
• Design Technical Infrastructure
• RICE Designs
• Execute System Tests
• Fix Applications
• Develop Policies and Procedures
• Develop Training
• Build and Test Technical
Infrastructure
21
• Deploy Technical Infrastructure
Enterprise Resource Planning
Del Monte - Capability Improvement Project
Continuos Improvement Program
Purchase to Pay
Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02
Design
Build
Test
Deploy
Management
22
Enterprise Resource Planning
Del Monte - Capability Improvement Project
Release Scope and Goals
Major Processes Delivered
New processes and systems to integrate and drive efficiencies in order
management, invoicing, purchasing, and payables processes.
•
•
•
•
•
•
•
•
•
•
Manage supplier performance
Manage supplier data
Manage supplier agreements
Manage supplier invoices
Manage inventory transfers
Manage inventory reports
Design/Implement pricing strategy
Manage customer data
Manage customer agreements
Perform credit management
•
•
•
•
•
•
•
•
•
•
Manage customer orders
Bill and invoice customer
Manage customer invoices
Manage sales quality
Process customer returns
Perform collections
Identify opportunities
Process inquiries & quotations
Create proposals
Purchase items and services
Effort
Workdays (Total)
Del Monte Foods Workdays
Accenture Workdays
EDS Workdays
JD Edwards Workdays
Start Date
End Date
6080
1800
1320
2220
740
Resource Requirements
July 2001
October 2002
DMF
Business
Role
Release Managers
Team Lead
Process Developers
Custom Development Programmers
EDI Programmers
Human Performance Analysts
Business Analysts
23
2
.5
1
2.5
6
DMF/EDS
Information
Systems
1
1.9
3
1.5
ACN
1
1
1.4
JDE
.9
.6
1
1
7.4
4.4
2.5
Enterprise Resource Planning
Del Monte Lessons Learned
 Training – There are 2 lessons learned in training.
1. Extensive training to be provided to Del Monte Business Users. In
the past, projects focused less on business user training and the
software application was not used.
2. Improving the skill set of development. Developers were expert
mainframe and customer service support. Developers needed to
gain Client/Server and JD Edwards technical training.
 Physical workplace location. Accenture and EDS were separated
physically by different floors of the building. Accenture involved in
the Process Design/Configuration, Testing, and Training whereas
EDS involved in Development and Tech Architecture. Lack of
communication in key areas resulted in unnecessary overtime.
24
Enterprise Resource Planning
Solutia Case Study 2
Ticker Symbol: SOI
Web Site: www.solutia.com
25
Enterprise Resource Planning
Solutia Case Study 2
 Solutia Background Information
 Sales and Profits
 Organizational Chart
 Products
 Solutia SAP Project





SAP Implementation Background
Project Teams
Vendor Payment Task Force
Approach
Gantt Chart
 Solutia Lessons Learned




Consultants
Processes/Use
Implementation
Upgrades
26
Enterprise Resource Planning
Solutia – Company Background
Overview Of Solutia
 Created Sept. 1, 1997 from applied chemistry businesses of
Monsanto
 $3.2 billion in annual sales, $3.6 billion in assets
 Products No. 1 or No. 2 in target markets
 3 business platforms & 3 major JVs
 10,200 worldwide employees
 World Headquarters: St. Louis, Missouri,
 Global sales & manufacturing presence
 34 manufacturing sites in 13 countries (including guest operations,
excluding JVs)
27
Enterprise Resource Planning
Solutia – Organization Chart
Chairman of the Board
& CEO
John Hunter
Vice Chairman
CFO
General Counsel
Mike Miller
Bob Clausen
Karl Barnickol
CIO
Johnnie Foster
Leadership Team
28
Enterprise Resource Planning
Solutia – Organization Chart
 Annual IT Budget is $100 million
 Approx. 310 IT employees
29
Enterprise Resource Planning
Solutia - Products
Performance
Films
Specialty
Products
Integrated
Nylon
Saflex®, Saflex Inside®, KeepSafe®,
KeepSafe Maximum®, EPG, CPFilms
Resins & Additives, Pharmaceutical
Services, Plastic Products, Industrial
Products
Acrilan® Fiber, Carpet & Industrial
Nylon Fibers, Nylon Intermediates,
Nylon Plastics & Polymers
30
Enterprise Resource Planning
Solutia – SAP Project
SAP Implementation
 Scope: Module type implementation
 Start with Finance & then add modules
 Time: Cutover US within 2 years
 When US is functional add other world areas - 5 to 7 years
 Cost: Project cap at $40 million
 Still implementing
31
Enterprise Resource Planning
Solutia – SAP Project
32
Enterprise Resource Planning
Solutia – SAP Project
Form Task Force Teams after Start-Up
 Streamline Processes
 One to two years out
 Vendor Payment Task Force (VPTF)
—
VPTF was chartered to streamline the purchasing and payables process.
—
Established to sustain process improvements due to numerous shortfalls in the
purchasing process. Vendors were consistently not being paid on the agreed
payment terms. This caused many problems with vendors and Solutia
employees.
33
Enterprise Resource Planning
Solutia – SAP Project
 Developed detailed work flows (maps)
 Identified bottlenecks and gaps – 36 opportunities
 Grouped gaps into categories
 Divided into sub-teams to develop
recommendations and action plans to close the
gaps
 Reviewed and worked recommendations as a total
team
34
Enterprise Resource Planning
Solutia – SAP Project
Solutia SAP - Gannt Chart
Vendor Payment Task Force
May-00
Establish Team & Identify Opportunities
Map Process Flow
Analyze Processes for Opportunities - subteams
Present Recommendations to Management
Implement Process Changes
Develop Metrics Report for ongoing Monitoring
35
Jun-00
Jul-00
Aug-00
Sep-00
Oct-00
Nov-00
Dec-00
Enterprise Resource Planning
Solutia – SAP Project
Critical Success Factors
Solutia feels their implementation has an overall grade of Good. They
believe this is due to their approach:
 Use of Consultants
 Given a finite task and time
 Utilized Solutia people 100% of the time along with the consultants –
these people became the power users
 Diminished outside consultants on future Upgrades
 Streamline processes and force use
 Aggressively identify manual processes and change so employees
are utilizing SAP
36
Enterprise Resource Planning
Solutia – SAP Project (cont’d)
Critical Success Factors - cont’d.
 Implementation

Start with one or two modules and then work
outwards – this will help employees gain
knowledge without overload.
 Upgrades and new releases

Stay current on releases – this usually helps with
design issues within SAP
37
Enterprise Resource Planning
Solutia – SAP Project
The Solutia study gained information found within the
Solutia internal website and an interview with Eric
Nichols, Director of IT for Core Operations.
Mr. Nichols stated, “Don’t expect a great return right after
implementation – this will occur a few years out.”
38
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
39
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
40
Enterprise Resource Planning
STEP 1: Evaluate Business Strategies
41
Enterprise Resource Planning
STEP 1: Evaluate Business Strategies
 Consider FULL business implications - both STRATEGIC and ORGANIZATIONAL (Davenport)
 Evaluate Business Needs:

Common Platform

Process Improvement

Data Visibility

Operational Cost Reductions

Increased Customer Responsiveness

Improved Strategic Decision-Making (Business Intelligence)
 Questions Executives, Senior Managers and General Managers Need to Answer: (Davenport)

How will an Enterprise System (ES) strengthen our competitive advantage?

How might it erode them?

What will be the system’s effect on our organization and culture?

Which business functions would gain the most benefit?
42
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
43
Enterprise Resource Planning
STEP 2: Determine Feasibility of ERP as Solution (Burleson)
UNIQUE
COMPETITIVE
MODERATE
Alternative
Be Careful!!!
Weigh
ES
ES
ES
NO
YES
CONSIDERATIONS
NONE
FLEXIBILITY CONSIDERATIONS
NOTE: Compare this matrix to “Balancing Flexibility and IT Standardization” - Donald A. Marchand
44
Enterprise Resource Planning
STEP 2: Determine Feasibility of ERP as Solution (Davenport)
COINCIDE
ES
Be Careful!!!
CONFLICT
Alternative
Alternative
COINCIDE
CONFLICT
BUSINESS
IMPERATIVES
TECHNOLOGICAL IMPERATIVES
45
Enterprise Resource Planning
STEP 2: Determine Feasibility of ERP as Solution
 ES No-Brainers:

Functionality providing no competitive advantage AND needing little flexibility generally easily
integrated

No-to-moderate competitive advantage

Functionality anticipates evolving changes needing flexibility

Business imperatives coincide with technological imperatives
 Weigh Threats/Benefits:

Moderate competitive advantage

Little flexibility needed

Business imperatives coincide with technological imperatives
 Be Vewy, Vewy Careful:

Functionality provides a unique competitive advantage, yet desires flexibility for evolving
changes

Technological imperatives conflict with business imperatives

Best-of-breed may be more suitable solution
 Seek Alternative Solution:

Proprietary competitive advantage where little flexibility is needed

Business imperatives and technological imperatives conflict
46
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
47
Enterprise Resource Planning
STEP 3: Setup Internal Organizational Structure of Project Team
 CEO/President and senior management MUST be involved to be successful
 Senior manager appointed to champion the project - (Feeny & Willcocks)

Communicates vision, maintains motivation, and mitigates functional and technical battles

Reports to CEO
 Project Management: (Swartz & Orgill)

Two project managers - one functional and one technical

Internal employees with loyalty to the organization

Experienced professionals with demonstrated ability manage large projects efficiently and
effectively using standard project methodology to provide guidance and structure
 Team Members

Include both business analysts and information technologists - (Davenport)

Choose members motivated to make valuable contributions to direction and goals - (Romeo)

Best if business members are savvy in network operations - (Romeo)
48
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
49
Enterprise Resource Planning
STEP 4: Vendor Selection - (Golden & Scaiano)
 Identify vertical markets vendor specializes in
 Identify “best-of-breed” vendors to specific industries
 Develop specific questions and scenarios addressing key concerns and unique
needs
 Review financials

For private companies, require disclosure of financial information in the RFP
 Determine percentage of revenue allocated to R&D

Identifies commitment to products
 Determine system specifications
50
Enterprise Resource Planning
Vendor Selection: Evaluate Technology Platforms
Vendor
Baan
J.D.
Edwards
Operating Systems
Architecture
Unix: CompaqTru64 Unix, IBM Alpha, Power PC, PA, Intel,
AIX, HP-UX, Siemens Reliant MIPS, SPARC, AS/400, S/390
Unix; Sun Solaris, Microsoft
Windows 2000/NT, IBM
OS/400, IBM OS/390
Unix: IBM AIX, HP-UX; Sun
Solaris, Microsoft Windows
2000/NT, IBM OS/400
PA RISC, Intel x86, SPARC,
AS/400
Database Platforms
Programming Languages
Communication Environment
IBM DB2/UDB, IBM DB2/400,
IBM DB2/390, Microsoft SQL
Server, Oracle
ABAP Objects,
Java/JavaScript, Visual
Basic/C#, C/C++, 4GL
HTTP/XML/SOAP, .Net/COM+,
Java/CORBA, TCP/IP
IBM DB2/UDB, IBM DB2/400,
Microsoft SQL Server, Oracle
Oracle
Unix: CompaqTru64 Unix, IBM Alpha, Power PC, PA, Intel,
AIX, HP-UX, Linux, Siemens MIPS, SPARC, AS/400, S/390
Reliant Unix; Sun Solaris,
Microsoft Windows 2000/NT,
IBM OS/400, IBM OS/390
PeopleSoft
Unix: CompaqTru64 Unix, IBM
AIX, HP-UX, Linux, Siemens
Reliant Unix; Sun Solaris,
Microsoft Windows 2000/NT,
IBM OS/390
SAP
Unix: CompaqTru64 Unix, IBM Alpha, Power PC, PA, Intel,
IBM DB2/UDB, IBM DB2/400,
AIX, HP-UX, Linux, Siemens MIPS, SPARC, AS/400, S/390
IBM DB2/390, Informix,
Reliant Unix; Sun Solaris,
Microsoft SQL Server, Oracle,
Microsoft Windows 2000/NT,
SAP DB
IBM OS/400, IBM OS/390
Intel, MIPS, SPARC, S/390
Source: Network Computing
51
Oracle
Java/JavaScript, Visual Basic,
HTTP/XML, /COM+,
C/C++, JDE ER
Java/CORBA, IP, HTTPS, FTP,
SMTP
ABAP Objects,
Java/JavaScript, Visual
Basic/C#, C/C++
HTTP/XML/SOAP, .Net/COM+,
Java/CORBA
IBM DB2/UDB, IBM DB2/390, Java/JavaScript, PeopleTools HTTP/XML/SOAP, .Net/COM+,
Informix, Microsoft SQL Server,
Java/CORBA
Sybase
ABAP Objects,
Java/JavaScript, Visual
Basic/C#, C/C++
HTTP/XML/SOAP, .Net/COM+,
Java/CORBA
Enterprise Resource Planning
STEP 4: Vendor Selection - (Golden & Scaiano)
 Identify vertical markets vendor specializes in
 Identify “best-of-breed” vendors to specific industries
 Develop specific questions and scenarios addressing key concerns and unique needs
 Review financials

For private companies, require disclosure of financial information in the RFP
 Determine percentage of revenue allocated to R&D

Identifies commitment to products
 Determine system specifications
 Evaluate customer-support capabilities
 Evaluate software’s “look and feel”
 Require multiple scripted demonstrations customized to unique business functionality
 STRONGLY CONSIDER PRODUCTS MINIMIZING CUSTOMIZATIONS
52
Enterprise Resource Planning
STEP 4: Vendor Selection - (Golden & Scaiano) - cont’d.
 Compare Total Cost of Ownership

Software

Infrastructure

Third-party products and tools

External resources

Additional employees needed to maintain the application

Annual maintenance fees

Future upgrade fees

Frequency of future upgrades
 Consider scalability of product in relation to anticipated organizational growth
 Contract Specifications: - (Swartz & Orgill)

Write FIXED-COST contract for all implementation costs - (Burleson)

For Time-and-materials contracts, set clear milestones and performance benchmarks to insure best use
of resources

Allow for changing technology as new functionality and modules may come available during
implementation period

Be skeptical of promises - GET EVERYTHING IN WRITING!

Use contract to manage “scope creep,” especially in T&M contracts
53
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
54
Enterprise Resource Planning
STEP 4: Vendor Selection - cont’d.
55
Enterprise Resource Planning
STEP 5: Consultant Selection
 Balance internal and external

Maximize knowledge transfer - too many external limits knowledge transfer - (Swartz & Orgill)

Assess internal skills and abilities measured against skills necessary to successful implementation (Romeo)
 Determine experience with the company’s architecture, network and applications - (Romeo)
 Evaluate track record of overcoming implementation obstacles - (Romeo)
 Determine ability to effectively transfer knowledge to internal members - (Romeo)
 Identify vendor partners - (Golden & Scaiano)
 Use multiple resources: - (Swartz & Orgill)

Reduces leverage utilized by just one consulting group

Utilize high-dollar consultants for tasks requiring intimate product knowledge

Utilize cost-efficient consultants for run-of-the-mill programming and similar tasks
 Plan exit strategy to disengage upon completion of specific objectives - (Swartz & Orgill)
 Include “right of refusal” clause over any individual not performing to expectations - (Swartz &
Orgill)
 Integrate selected consultants with internal team to create a “single-team” environment (Swartz & Orgill)
56
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
57
Enterprise Resource Planning
STEP 6: Business Process Re-engineering
 Map business processes (flow-charts)
 Define term, functions and processes consistently across the enterprise
 Identify gaps needing bridges between ERP modules and company systems (Burleson)
 Define ERP software configuration
 Build ERP software modifications and customizations

Minimizing customizations is critical
 Convert data to be read by ERP software
58
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
59
Enterprise Resource Planning
STEP 7: Implementation
 Create launch plan



Big Bang
- (Koch, Slater & Baatz)
–
Entire company mobilizes simultaneously
–
Adversarial in nature - little compromise at the expense of user buy-in
–
Lead to many failures in 1990s
Franchising Strategy (guinea-pig approach) - (Koch, Slater & Baatz)
–
Suits large or diverse companies not sharing common processes across business
units
–
Install independent ES in each unit, and link common processes across the enterprise
–
“Pilot” installation in open-minded business unit where core business is not disrupted
–
Gain buy-in across functions and continue installation unit-by-unit
Slam-Dunk (Quick-Hit) - (Koch, Slater & Baatz)
–
ES dictates process design
–
Focus just on a few common processes
–
Fits small companies expecting to grow into ERP
–
Use it as an infrastructure to support more diligent installations in the future
60
Enterprise Resource Planning
Justifies Popularity of Phased Approach
61
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
 Create launch documentation
 Integrate applications
 Test modifications and customizations

Build test cases around user requirements - (Romeo)

Conduct actual load testing and functional testing from end-user perspective - (Romeo)

KEY - emulate user behavior as much as possible during testing process - (Romeo)
62
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
63
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
64
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
 Train users
65
Enterprise Resource Planning
Training Misperception Shown by Statistics:
Wouldn’t Quality Training Would Help Minimize Disruption?
66
Enterprise Resource Planning
Training Misperception Shown by Statistics:
Wouldn’t Quality Training Would Help Minimize End-User Adoption Issues?
67
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
 Train users

Quality of training will reflect success of entire implementation - (Wheatley)

Technical training to users is worthless; understanding of process and information flow is
critical to success - (Wheatley)

Broken down into two categories (Wheatley - citing Purina Mills success)
–
–
Education - why, who and where
•
Gains user buy-in and intimacy with process and system
•
Emphasizes dependence of data accuracy for cross-unit or multi-process functionality
Training - how
•
Simply teaches users how to use the system
•
DO NOT HIRE THIRD-PARTY THAT DOESN’T INTIMATELY UNDERSTAND THE
COMPANIES BUSINESS PROCESSES (Wheatley - citing Purina Mills stumble)
•
Hire ONLY outside training firm with specific teaching skills - (Romeo)
68
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
69
Enterprise Resource Planning
STEP 7: Implementation - cont’d.
 Training Budget

Most likely to result in budget overrun - (Koch, Slater & Baatz)

Benchmarking Partners Study - (Wheatley)
•
•
–
Training budget ranged from 1-30%
–
Average 8%
–
Employers budgeting near the average severely undercut training costs
DA Consulting Group - (Wheatley)
–
1998 - training budgets averaged 5%
–
2000 - training budgets averaged 11%
Gartner Study on SAP end-user training - (Burleson)
–
Training budgets should be 17% of total costs
–
Companies budgeting below 13% underestimated time and costs
70
Enterprise Resource Planning
Best-Practice ERP Implementation Model
STEP 1:
Evaluate
Business
Strategies
STEP 2:
Determine
Solutions to
Needs
STEP 3:
Setup
Project
Team
STEP 4:
Select
Vendor
STEP 5:
Select
External
Resources
STEP 6:
Business
Process
Re-engineering
STEP 7:
Implementation
STEP 8:
Launch
Go, Go, Go!
71
Enterprise Resource Planning
STEP 8: Launch and Go, Go, Go!
 30-Day Plan

Monitor

Report

Revise
 Continue to EDUCATE as learning curve steepens
 Control expectations

Companies expect to gain value immediately after installation - (Koch,
Slater & Baatz)

Learning curve still rising as users become more intimate with changes in
processes and functions

ROI not a valid measurement in the short-term

Deloitte Consulting Study
–
64 Fortune-500 companies
–
25% suffered loss in performance when ERP systems went live
72
Enterprise Resource Planning
STEP 8: Launch and Go, Go, Go!
73
Enterprise Resource Planning
The Six Deadly ERP Sins - (Manoeuvre - Cited by Baldwin)
 Sin 1: Not understanding the true significance of what you have taken on
 Sin 2: Not committing the right resources to the project
 Sin3: Not managing the change effectively
 Sin 4: Not managing benefits
 Sin 5: Not embracing integration
 Sin 6: Not planning for the end of the project before you start
74
Enterprise Resource Planning
Best-Practice Summary
 The alpha wolf MUST lead the pack!

CEO and top management involvement is mandatory
 The best plan is a well-planned plan!

Preparation, organization and structure is key
 Limit the seasonings added to your food!

Customizations can and will be detrimental
 Take small bites and chew it up!

Implement in phases and improve each step of the way
 Sponge off of the experts!

Maximize knowledge transfer
 Give a man a fish, he eats for a day. Teach a man to fish, he eats
for a lifetime!

Educate, educate, educate
75
Enterprise Resource Planning
References Cited

Baldwin, Paul. “Know the Six Deadly Sins.” TechRepublic. 16 May 2001.
http://www.techrepublic.com/article.jhtml?src-search&id=r00520010516bal02.htm

Burleson, Donald. “Selecting and ERP System: Build or Buy?” TechRepublic. 06 Aug 2001.
http://www.techrepublic.com/article.jhtml?src=search&id=r00620010806brl03.htm

Burleson, Donald. “Four Factors That Shape the Cost of ERP.” TechRepublic. 16 Aug 2001.
http://www.techrepublic.com/article.jhtml?src=search&id=r006200108016brl01.htm

Burleson, Donald. “An Insider’s View of Selecting an ERP Vendor.”” TechRepublic. 05 Sep 2001.
http://www.techrepublic.com/article.jhtml?id=r00620010905brl01.htm

Davenport, Thomas H. “Putting the Enterprise into the Enterprise System.” Harvard Business Review. July-August 1998.
http://www.hbsp.harvard.edu/products/hbr/julaug98/98401.html.

“E-Poll Results: ERP.” Network Computing. 17 Sep 2001. http://www.networkcomputing.com/1219/1219f25.html.

“Enterprise Resource Planning.” ERP Fans. http://www.erpfans.com/erpfans/erpca.htm

Feeny, David F. and Leslie P. Willcocks. “Transforming IT-Based Innovation Into Business Payoff.” Mastering Information
Management. p.304.

Golden, Adam and Dawn Scaiano. “Evaluating ERP Software Vendors.” TechRepublic. 29 Jun 2001.
http://www.techrepublic.com/article.jhtml?src-search&id=r00620010629gcn01.htm

Hagman, Anders. “ What Will Be of ERP?” ERP IT Toolbox. 30 Oct 2000.
http://erp.ittoolbox.com/browse.asp?c=ERPPeerPublishing&r=%2Fpub%2Fwhaterp%2Epdf

Koch, Christopher and Derek Slater and E. Baatz. “The ABCs of ERP.” CIO.
http://www.cio.com/research/erp/edit/122299_erp.html.

Romeo, Jim. “Less Pain, More Gain in ERP Rollouts.” Network Computing. 17 Sep 2001.
http://www.networkcomputing.com/1219/1219f2.html.
76
Enterprise Resource Planning
References Cited

Swartz, Dave and Ken Orgill. “Higher Education ERP: Lessons Learned.” 11 Oct 2000.
http://www.gwu.edu/~cio/presentations/erp.html.

“Technology Platforms for Major ERP Vendors.” Network Computing.
http://img.cmpnet.com/nc/1219/graphics/1219f2_chart1.pdf

“The Cost of ERP Implementation.” TechRepublic. 20 Feb 2000.
http://www.techrepublic.com/article.jhtml?src=search&id=r00120000220kim99.htm&adSiteNameOverride=bc&adPageNameOver
ride=Enterprise+Applications

Wheatley, Malcolm. “ERP Training Stinks.” CIO. 01 Jun 2000. Http://www.cio.com/archive/.
77