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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 Process ERP


1. Product Costing 1. Product Costing
2. Shop Floor Control 2. Shop Floor Control
3. Production Planning 3. Production Planning
4. Field Service and Repairs 4. Formulas/Recipes
5. Project Management 5. Process Model (Formulas + Routings)
6. Product Data Management (PDM) 6. Process Batch Control and Reporting
7. Product/Item Configurator 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

38
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.

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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, erp's Evolution Into ERP II
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-
shelf" to some unrecognizable system state, as they did in the past. One key reason is that

43
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

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

44
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.

46
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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