Functional areas of ERP

An ERP system covers the following common functional areas. In many ERP systems
these are called and grouped together as ERP modules:

Financial accounting: General ledger, fixed asset, payables including vouchering,

matching and payment, receivables cash application and collections, cash
management, financial consolidation
Management accounting: Budgeting, costing, cost management, activity based
costing
Human resources: Recruiting, training, rostering, payroll, benefits, 401K,
diversity management, retirement, separation
Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity,
workflow management, quality control, manufacturing process, manufacturing
projects, manufacturing flow, product life cycle management
Order Processing: Order to cash, order entry, credit checking, pricing, available to
promise, inventory, shipping, sales analysis and reporting, sales commissioning.
Supply chain management: Supply chain planning, supplier scheduling, product
configurator, order to cash, purchasing, inventory, claim processing, warehousing
(receiving, putaway, picking and packing).
Project management: Project planning, resource planning, project costing, work
breakdown structure, billing, time and expense, performance units, activity
management
Customer relationship management: Sales and marketing, commissions, service,
customer contact, call center support CRM systems are not always considered
part of ERP systems but rather Business Support systems (BSS).
Data services : Various "selfservice" interfaces for customers, suppliers and/or
employees

Benefits
ERP can improve quality and efficiency of the business. By keeping a company's
internal business processes running smoothly, ERP can lead to better outputs that
may benefit the company, such as in customer service and manufacturing.
ERP supports upper level management by providing information for decision
making.
ERP creates a more agile company that adapts better to change. It also makes a
company more flexible and less rigidly structured so organization components
operate more cohesively, enhancing the businessinternally and externally.[43]
ERP can improve data security. A common control system, such as the kind
offered by ERP systems, allows organizations the ability to more easily ensure
key company data is not compromised.[citation needed]
ERP provides increased opportunities for collaboration. Data takes many forms in
the modern enterprise. Documents, files, forms, audio and video, emails. Often,
each data medium has its own mechanism for allowing collaboration. ERP
provides a collaborative platform that lets employees spend more time

collaborating on content rather than mastering the learning curve of

communicating in various formats across distributed systems.[citation needed]
Disadvantages
Customization can be problematic. Compared to the best-of-breed approach, ERP
can be seen as meeting an organizations lowest common denominator needs,
forcing the organization to find workarounds to meet unique demands.[44]
Re-engineering business processes to fit the ERP system may damage
competitiveness or divert focus from other critical activities.
ERP can cost more than less integrated or less comprehensive solutions.
High ERP switching costs can increase the ERP vendor's negotiating power,
which can increase support, maintenance, and upgrade expenses.
Overcoming resistance to sharing sensitive information between departments can
divert management attention.
Integration of truly independent businesses can create unnecessary dependencies.
Extensive training requirements take resources from daily operations.
Harmonization of ERP systems can be a mammoth task (especially for big
companies) and requires a lot of time, planning, and money.[45]
Characteristics
ERP (Enterprise Resource Planning) systems typically include the following
characteristics:

An integrated system that operates in (or near) real time without relying on
periodic updates
A common database that supports all applications
A consistent look and feel across modules
Installation of the system with elaborate application/data integration by the
Information Technology (IT) department, provided the implementation is not
done in small steps[15]

Scope
Enterprise Resource Planning (ERP) is a planning philosophy enabled with software that
attempts to integrate all the business processes of different departments and functions
across a company onto a single computer system that can serve particular needs of the
different departments.
Typically, before ERP implementation, each department has its own computer system
optimized for the requirement that a department needs. Each department will maintain
separate databases and design applications as per their functionalities. These will result in
local optima and overall very poor results across all the departments or within the
company.

ERP combines all the business requirements of the company together into a single,
integrated software program that runs off a single database so that the various
departments can more easily share information and communicate with each other.
Conceptually ERP replaces the old standalone computer system in finance, HR,
manufacturing, etc., with a single software program that facilitates various functional
modules.
Thus everybody from the finance, manufacturing, purchasing etc will get their own
advantages of software, along with the added feature of availability of information across
other departments to improve decision quality. For example, someone in finance can use
ERP to see if any sale order has been shipped from the warehouse so that he can now
confidently plan for working capital management for the next period.
With the advent of Web-based ERP solution working environment started witnessing a
tremendous change. Web-based simplified back-office process automation for mid-sized
and growing business. It provided real-time information about finance, order
management, purchase, inventory, employee management, e-commerce and much more.
With web-based ERP solution, you can accelerate business cycles, improve productivity
and reliability, and provide higher levels of service to customers, suppliers and partners.
Needless to say eresource ERP is the most reliable enterprise resource planning
application available today, providing organizations with the strategic insight, ability to
differentiate, increased productivity and flexibility.
Why ERP is so important
Enterprise Resource Planning provides many benefits to business such as
1. Enhance productivity, flexibility and customer responsiveness
By integrated core business processes together in one single application, it helps
company maximize the efficiency of business process across the entire
organization. Plant manufacturing can produces product faster. Increase on time delivery,
Increase productivity, Increase ability to forecast demand to supplies, Increase order
capacity, and improve customer service (Customer Relationship Management (CRM)).
2. Eliminate costs and inefficiencies
Using an ERP system to standardize business processes can dramatically improve
companys operation. ERP enable company to manage relationship with vendor results in

lower cost for purchased items. Better resource management results in more
inventory turns and decrease the level of inefficiencies.

3. Data consistency
Because an ERP system integrates all business management functions, it
decreases level of inconsistency information from different systems. Thus, by
using ERP system, managers can gather correct information and make a right decision.
4. Extend your business using the Internet
By integrating all business functions together in one system, it increases ability of
a company to use internet as part of the business strategy. Web-enabled technology
allows you to access information, sell product, run business processes, and communicate
with customers and partners at any time and from anywhere in the world.
Project Management is the application of knowledge, skills, tools and
techniques to a broad range of activities in order to meet the requirements of the
particular project. A project is a temporary endeavor undertaken to achieve a particular
aim. Project management knowledge and practices are best described in terms of their
component processes.
ERP Functional Areas
ERP is designed to facilitate the sharing of information across functions to eliminate
inconsistency and duplication of effort. In selecting an enterprise resource planning
platform, organizations should consider the various ERP modules that align with their
strategic, economic and technical goals. Lets take a closer look at some of those
functional areas:

Marketing/Sales Sales and marketing departments can track the customer

experience from presale activities, which begin with contacting the customer,
through the actual dispatch of the customers order. Tasks related to customer

visits, expenses, shipping, invoicing, forecasting and competitor analysis can be

automated and/or enhanced through an ERP system. Employees can contact
customers, follow up on invoices and track orders. Additionally, sales and
marketing personnel can monitor their individual goals, which also can be
collated and analyzed by managers and business partners.
Customer Relationship Management ERP platforms also can incorporate
customer relationship management (CRM) modules to focus on how a business
communicates with its customers. This may include departments such as sales and
marketing, and call center support, as well as functions such as customer
interaction data, sales pipeline management, lead prioritization and customer
retention.
Supply Chain Management ERP modules supporting supply chain
management may feature functions for purchasing, product configuration,
supplier scheduling, goods inspections, claims processing, warehousing and more.
There are also related modules to manage order processing and distribution tasks.
Manufacturing Engineering, scheduling capacity, quality control, workflow
and product life management are among the core functions that can fall within an
ERP systems manufacturing module.
Accounting/Finance By automating and streamlining tasks related to
budgeting, cost and cash management, activity-based costing and other
accounting/finance functions, ERP systems can provide businesses with real-time
data and insights on performance while also ensuring compliance with relevant
financial regulations.
Human Resources Human resources modules within an enterprise resource
planning system may include tools and dashboards to gather and interpret data on
training, recruiting, payroll, benefits, 401(k), retirement and diversity
management. HR managers also can monitor and measure key performance
indicators (KPIs) for individual employees, job roles and departments.

As technology trends such as mobile, cloud computing, big data and the Internet of
Things continue to reshape the marketplace, ERP systems are evolving to provide
businesses with the competitive intelligence necessary to drive success across a variety of
functional areas.
Model: Dyanamic & process
A Global Business Process Model is created which represents the whole ERP software
product. This model is layered in 3 deeper levels.

The first level is the System Configuration Level, which scopes on highlevel optionality on the entire system. Option definition is therefore static:
once a high-level option of the ERP system is chosen to be used within the
organization, the choice cannot be made undone.
One level deeper is the Object Level, which scopes on single data objects.
The optionality on this level is more dynamic.

The deepest level is the Occurrence level, which analyses single process
occurrences. Because this level elaborates on object parameters, the
optionality is very dynamic, meaning that options can easily be altered.

The meta model below depicts the optionality levels of ERP modeling.
The optionality leveling is used to reverse engineer the ERP system and the
organizational structure to its full extent. Once properly mapped, both aspects are fully
alignable or at least compatible to be matched.
The correct way to align both ERP and organizational models is as follows:

1.
2.
3.
4.
5.

Convert the ERP system database to an object model

Construct a global business process model
Identify the system configuration-level business process alternatives
Identify the object-level variants of the business processes
Expose the occurrence-level business process options

process occurrences. Because this level elaborates on object parameters, the optionality is
very dynamic, meaning that options can easily be altered.
The meta model below depicts the optionality levels of ERP modeling.
The optionality leveling is used to reverse engineer the ERP system and the
organizational structure to its full extent. Once properly mapped, both aspects are fully
alignable or at least compatible to be matched.
The correct way to align both ERP and organizational models is as follows:
1.
2.
3.
4.
5.

Convert the ERP system database to an object model

Construct a global business process model
Identify the system configuration-level business process alternatives
Identify the object-level variants of the business processes
Expose the occurrence-level business process options

Unit ii
ERP A MANUFACTURING PERSPECTIVE
COMPUTER AIDED DESIGN / COMPUTER AIDED MANUFACTURING (CAD /
CAM)
Computer Aided Design (CAD) is a popular tool for product design and is major
focus area for manufacturing sector.
CAD systems are computer programs or integrated packages for work station
hardware and software that allow the user to draw and easily modify product
designs on a computer screen.
Eg-aerospace & automotive are largest user of CAD/CAM. Like M&M
Advanced CAD systems provide designers with at least three major benefits:
A.

GRAPHICS

CAPABILITIES:

CAD systems allow the designer to view a product from different perspectives,
including three-dimensional rotations, and various cross-sections.
The designer can also make proportional changes in scale, or change the angle of an
arc with the click of a computer mouse rather than having to redraw the entire
product.
B.
DESIGN,
STORAGE
&
RETRIEVAL:
Some CAD systems can store the design characteristics of existing products &
components.
Example, if a company needs a gear for a new product, the designer can enter
relevant information about the gear, such as it diameter, tooth pattern and required
hardness, into the CAD system .
The CAD system determines whether the company is already using an identical or
sufficiently similar gear, in which case a new one in unnecessary, if not, then use the
design of this similar gear as a starting point for the new gear.
This capability not only promotes the use of common components but also reduces
design time.
C. AUTOMATIC EVALUATION OF SPECIFICATIONS:

1. One of the most time-consuming aspects of design for highly technical products is
calculating whether or not product specifications, such as strength, heat resistance
or aerodynamic drag, are satisfied.
2. These calculations can be programmed into some CAD systems so that whenever
the designer changes the design (by altering the shape or material to be used) these
performance characteristics are recalculated automatically and compared to the
product requirements.
3. This is sometimes called Computer-Aided-Engineering (CAE)
The overall benefits of CAD systems can be substantial. The features
described above reduce the development time and cost, and they improve product
quality because more design options can be evaluated in greater detail more quickly
MATERIALS REQUIREMENT PLANNING(MRP)
MRP is a method for ordering components than the independent demand inventory
models
MRP : It is a phase in the development of computerized methods for planning the
use of company resources , including scheduling raw materials, vendors, production
equipments and processes.
MRP evolved into a comprehensive priority planning system.
MRP provides a method that helps keep order due dates valid even after the orders
have been released to the shop floor or outside vendor.
MRP systems can detect when the due date of an order the date the order is
scheduled to arrive- is out of alignment with its need date , the date the order is
actually required.
The expanded MRP system became known as closed loop MRP, because it provided
feedback from the execution function to the planning functions, so manufactures
could change plans if necessary.
The new system, which was called manufacturing resource planning (MRP-II), was
a comprehensive approach for the effective planning of all resources of a
manufacturing organization.
Production & materials planning is critical to the success of a manufacturing
company.
A company can have the best product design, the newest manufacturing facilities,
the latest equipment & all the latest production technologies like CAD/CAM,
robotics , automated guided vehicles (AGVs) etc. but not the ability to compete.
MRP has proved to be an effective production & inventory planning system in a
wide variety of environments.
An MRP system requires 3 types of information:

Master Production schedule (MSP)

Bill of Material (BOM)
Inventory Records (IR)
The MSP is detailed production schedule for finished gods or end items that
provides the major input to materials requirement planning process.
Associated with each finished product is BOM , which describes the dependent
demand relationships that exist among the various components materials, parts,
subassemblies , etc.- comprising the finished product.
The entire set of BOMs for the company finished products is called BOM file.
Inventory status data for each product or component such as stock-in hand, stockon order, etc, .are provided by the inventory records, which also contains planning
factors like lead time, safety stock, re order, and so on.
MRP logic uses the MPS, the BOM file & the inventory records to determine the
following for the components:
Planned order quantities
Planned order release dates (to shop floor/suppliers)
Planned order due dates
The MRP system calculates the release dates & due date taking into consideration
the lead times required to produce or procure the components and by recognizing
the order in which they are assembled into the finished product.
If the MRP process is carried out in conjunction with the capacity planning, the
production facility should have to complete the orders on time.
BILL OF MATERIAL (BOM)
A BOM defines the relationship of components to end items. The BOM identifies all
components used in the production of an item, the ordered quantity & the order in
which components are assembled.
A BOM can define products as they are designed (engineering bill of materials), as
they are ordered (sales bill of materials), as they are built (manufacturing bill of
materials), or as they are maintained (service bill odf materials .
Closed Loop MRP
Closed loop MRP uses capacity planning & feedback to improve the ability of the
production system to complete work as planned.
To determine how well the planning factors & tools are working ,MRP planners
need feedback from the shopkeeper and purchasing department.
With effective feedback MRP planner can revise the planning factors and
techniques so that better materials can be developed for future.
DISTRIBUTION REQUIRMENT PLANNING
DRP is having same logic as of MRP into Physical distribution System. DRP assist
companies that maintain distribution inventories in fields warehouse, distribution

centers by improving the linkage between marketplace requirements &

manufacturing activities.
It helps mgmt to anticipate future requirements which closely match the supply of
products to the demand for them.
A DRP system also improves savings through improved planning of transportation
capacity needs , vehicle dispatching & warehouse receipt planning.
DPR has a central role in phsical dist. system., similar to MRPs role in coordinating
material in manufac. system.
MANUFACTURING
RESOURCE
PLANNING
(MRP

II)
1. MRP was originally developed as a computer system that was limited to materials
planning.
2. MRP II is an expansion of closed loop MRP for managing an entire
manufacturing company.
3. MRP II system provides information that is useful to all functional areas &
encourages cross- functional interaction.
4. MRP II supports sales & marketing by providing and orders- promising
capability.
MRP-II is expansion of closed loop .
5. Order promising is a method of tying customers orders to finished goods in the
MPS.
6. This allow sales personnel to have accurate information on product available &
gives them the ability to give customers accurate delivery dates
7.MRP II supports financial planning by converting materials schedules into capital
requirement.
8. A company can use MRP II to simulate the effects of different master production
schedules on material usage, labor, & capital requirement. MRP II provides the
purchasing department with information for developing long range buying plans .
9. It is common for suppliers to directly access a customers MRP system to receive
up to date information on the customers planned materials needs.
10. Information in the MRPII system is used to provide accounting with information
on materials receipts to determine accounts payable. Shop floor control information
is used to track workers hrs for payroll purposes.
11. MRP II system increases a companys efficiency by providing a central source of
management information.

PRODUCT

DATA

MANAGEMENT

(PDM)

1. One of the major manufacturing challenges is to maximize the time-to-market

benefits of concurrent engineering while maintaining control of the data, and
distributing it automatically to the people who need it, when they need it.
2. The way PDM systems cope with this challenge is that the master data is secured
once in a secure vault, where its integrity can be assured as all changes to it
monitored, controlled and recorded.
3. Duplicate reference copies of the master data, on the other hand, can be
distributed freely, to users in various departments for design, analysis and approval.
4. The new data is then released back into the vault. When a change is made to the
data, signed and dated, is stored in the vault alongside the old data which remains in
its original form as a permanent record.
Understanding of the basic Business Processes
A business process represents a specific business need or goal, such as hiring an
employee, processing a sales order, or reimbursing a business expense. Business
processes are broken down into logical steps called activities, each of which can comprise
one or more tasks. Tasks are assigned roles that determine which participants will
perform the tasks. The transitions between activities determine the order in which they
are performed and the basic workflow for the process.
WorkSpace lets you interact with business processes based on your assigned roles within
your company. You can manage work items, get information about business processes,
interact with other participants, and perform tasks.
In WorkSpace, a business process involves the following basic workflow:
1. A user logs in to WorkSpace and runs an application, which are often used to
initiate a business process.
2. A work item is generated and sent to the participant assigned to the item's first
task.
3. The participant logs in to WorkSpace and views the new work item, assessing its
required tasks. The participant views any notes and attachments included with the
work item. If necessary, the participant can send a consultation to another
participant to ask a question about the work item.

4. The participant performs the first task for the work item. The appropriate
application automatically launches, the participant enters the required
information, and the task is submitted.
5. The work item is processed and sent to the participant assigned the next task.
6. The next participant logs in to WorkSpace, performs the task, and the task is
processed and sent to the next task and participant.
7. After all tasks have been performed, the work item is completed.

Business process reengineering

Business process re-engineering is a business management strategy, originally
pioneered in the early 1990s, focusing on the analysis and design of workflows and
business processes within an organization. BPR aimed to help organizations
fundamentally rethink how they do their work in order to dramatically improve customer
service, cut operational costs, and become world-class competitors.[1] In the mid-1990s,
as many as 60% of the Fortune 500 companies claimed to either have initiated
reengineering efforts, or to have plans to do so.[2]
BPR seeks to help companies radically restructure their organizations by focusing on the
ground-up design of their business processes. According to Davenport (1990) a business
process is a set of logically related tasks performed to achieve a defined business
outcome. Re-engineering emphasized a holistic focus on business objectives and how
processes related to them, encouraging full-scale recreation of processes rather than
iterative optimization of sub-processes.[1]
Business Process Reengineering is also known as business process redesign, business
transformation, or business process change management.
Definition
The most notable definitions of reengineering are:

"... the fundamental rethinking and radical redesign of business processes to

achieve dramatic improvements in critical contemporary modern measures of
performance, such as cost, quality, service, and speed."[7]
"encompasses the envisioning of new work strategies, the actual process design
activity, and the implementation of the change in all its complex technological,
human, and organizational dimensions."[8]

Evolution/History of Business process reengineering

Business Process Reengineering (BPR) began as a private sector technique to help
organizations fundamentally rethink how they do their work in order to dramatically
improve customer service, cut operational costs, and become world-class competitors. A
key stimulus for re-engineering has been the continuing development and deployment of
sophisticated information systems and networks. Leading organizations are becoming
bolder in using this technology to support innovative business processes, rather than
refining current ways of doing work.[1]
Reengineering Work: Don't Automate, Obliterate, 1990[edit]
In 1990, Michael Hammer, a former professor of computer science at the Massachusetts
Institute of Technology (MIT), published the article "Reengineering Work: Don't
Automate, Obliterate" in the Harvard Business Review, in which he claimed that the
major challenge for managers is to obliterate forms of work that do not add value, rather
than using technology for automating it.[3] This statement implicitly accused managers of
having focused on the wrong issues, namely that technology in general, and more
specifically information technology, has been used primarily for automating existing
processes rather than using it as an enabler for making non-value adding work obsolete.
Hammer's claim was simple: Most of the work being done does not add any value for
customers, and this work should be removed, not accelerated through automation.
Instead, companies should reconsider their inability to satisfy customer needs, and their
insufficient cost structure[citation needed]. Even well established management thinkers, such as
Peter Drucker and Tom Peters, were accepting and advocating BPR as a new tool for
(re-)achieving success in a dynamic world.[4] During the following years, a fast-growing
number of publications, books as well as journal articles, were dedicated to BPR, and
many consulting firms embarked on this trend and developed BPR methods. However,
the critics were fast to claim that BPR was a way to dehumanize the work place, increase
managerial control, and to justify downsizing, i.e. major reductions of the work force,[5]
and a rebirth of Taylorism under a different label.
Despite this critique, reengineering was adopted at an accelerating pace and by 1993, as
many as 60% of the Fortune 500 companies claimed to either have initiated reengineering
efforts, or to have plans to do so.[2] This trend was fueled by the fast adoption of BPR by
the consulting industry, but also by the study Made in America,[6] conducted by MIT, that
showed how companies in many US industries had lagged behind their foreign
counterparts in terms of competitiveness, time-to-market and productivity.

Development after 1995[edit]

With the publication of critiques in 1995 and 1996 by some of the early BPR
proponents[citation needed], coupled with abuses and misuses of the concept by others, the
reengineering fervor in the U.S. began to wane. Since then, considering business
processes as a starting point for business analysis and redesign has become a widely
accepted approach and is a standard part of the change methodology portfolio, but is
typically performed in a less radical way than originally proposed.
More recently, the concept of Business Process Management (BPM) has gained major
attention in the corporate world and can be considered as a successor to the BPR wave of
the 1990s, as it is evenly driven by a striving for process efficiency supported by
information technology. Equivalently to the critique brought forward against BPR, BPM
is now accused[citation needed] of focusing on technology and disregarding the people aspects
of change.
The role of information technology[edit]
Information technology (IT) has historically played an important role in the reengineering
concept.[10] It is considered by some as a major enabler for new forms of working and
collaborating within an organization and across organizational borders[citation needed].
BPR literature [11] identified several so called disruptive technologies that were supposed
to challenge traditional wisdom about how work should be performed.

Shared databases, making information available at many places

Expert systems, allowing generalists to perform specialist tasks
Telecommunication networks, allowing organizations to be centralized and
decentralized at the same time
Decision-support tools, allowing decision-making to be a part of everybody's job
Wireless data communication and portable computers, allowing field personnel to
work office independent
Interactive videodisk, to get in immediate contact with potential buyers
Automatic identification and tracking, allowing things to tell where they are,
instead of requiring to be found
High performance computing, allowing on-the-fly planning and revisioning

In the mid-1990s, especially workflow management systems were considered as a

significant contributor to improved process efficiency. Also ERP (Enterprise Resource
Planning) vendors, such as SAP, JD Edwards, Oracle, PeopleSoft, positioned their
solutions as vehicles for business process redesign and improvement.
Factors that are important to BPR success include:
1. BPR team composition.
2. Business needs analysis.

3. Adequate IT infrastructure.
4. Effective change management.
5. Ongoing continuous improvement
The aspects of a BPM effort that are modified include organizational structures,
management systems, employee responsibilities and performance measurements,
incentive systems, skills development, and the use of IT. BPR can potentially affect every
aspect of how business is conducted today. Wholesale changes can cause results ranging
from enviable success to complete failure.
If successful, a BPM initiative can result in improved quality, customer service, and
competitiveness, as well as reductions in cost or cycle time. However, 50-70% of
reengineering projects are either failures or do not achieve significant benefit. regarded
[15]

There are many reasons for sub-optimal business processes which include:
1.
2.
3.
4.
5.

One department may be optimized at the expense of another

Lack of time to focus on improving business process
Lack of recognition of the extent of the problem
Lack of training
People involved use the best tool they have at their disposal which is usually
Excel to fix problems
6. Inadequate infrastructure
7. Overly bureaucratic processes
8. Lack of motivation
Many unsuccessful BPR attempts may have been due to the confusion surrounding BPR,
and how it should be performed. Organizations were well aware that changes needed to
be made, but did not know which areas to change or how to change them. As a result,
process reengineering is a management concept that has been formed by trial and error or,
in other words, practical experience. As more and more businesses reengineer their
processes, knowledge of what caused the successes or failures is becoming apparent. [16]
To reap lasting benefits, companies must be willing to examine how strategy and
reengineering complement each other by learning to quantify strategy in terms of cost,
milestones, and timetables, by accepting ownership of the strategy throughout the
organization, by assessing the organizations current capabilities and process realistically,
and by linking strategy to the budgeting process. Otherwise, BPR is only a short-term
efficiency exercise

Unit 5
ERP Implementation Plan

1. Discovery and Planning

This first phase begins during the sales process and then continues post-sale. During this
period, the project team will be created. There will be initial meetings and documentation
developed as the team works to identify current issues and potential solutions. An
important part of this phase is constructing the project plan, which will serve as a guide
throughout the rest of the project. More detail on the Discovery and Planning phase.

2. Design
Were not talking about painting the office or rearranging furniture. Instead, what will the
new enterprise-wide system look like and how will it be used in the organization? In the
ERP Design phase, the project team and implementation team will be working out the
various configurations for the new system, defining roles, and documenting standard
procedures. Read more on the Design phase.

3. Development
The purpose of the development phase is to prepare the entire system for going live. This
includes activities such as completing any necessary customizations, developing user
trainings, and importing data. With ERP implementations, like any custom software
development projects First, Solve the problem. Then, write the code. Get a better
look at the Development phase.

4. Testing
Is the systems functionality aligning with the set requirements for the project? The
Testing and Development phases will often overlap, as the implementation and project
teams jump between the two constantly fine tuning the configuration. By the end of this
phase, project team members will be comfortable doing their jobs in the new system. This
is the final step before diving into the live system. Check out more on the Testing phase.

5. Deployment
The project team and implementation team will assess the situation and make the final go
or no-go decision. Prior to going live, the final data will be loaded and validated. The
project team will train other employees who will then start working in the new system,
and completely stop using the old one. Read the article on the Deployment phase.

6. Ongoing Support
Once the ERP system has gone live, the purpose of the project team will shift. Over time,
as the way the users work within the system evolves, adjustments and changes to the
system configuration may be needed. Get more info on Ongoing Support.
Challenges Faced in ERP Implementation
1. It is very important, that implementation is done in stages. Trying to implement
everything at once will lead to a lot of confusion and chaos.
2. Appropriate training is very essential during and after the implementation. The
staff should be comfortable in using the application or else, it will backfire, with
redundant work and functional inefficiencies.
3. Lack of proper analysis of requirements will lead to non-availability of certain
essential functionalities. This might affect the operations in the long run and
reduce the productivity and profitability.
4. Lack of Support from Senior Management will lead to unnecessary frustrations
in work place. Also, it will cause delay in operations and ineffective decisions. So,
it is essential to ensure that the Senior Management supports the transformation.
5. Compatibility Issues with ERP Modules lead to issues in integration of
modules. Companies associate different vendors to implement different ERP
modules, based on their competency. It is very essential that there is a way to
handle compatibility issues.
6. Cost Overheads will result, if requirements are not properly discussed and
decided during the planning phase. So, before execution, a detailed plan with a
complete breakdown of requirements should be worked out.

7. Investment in Infrastructure is very essential. ERP applications modules will

require good processing speed and adequate storage. Not allocating suitable
budget for infrastructure will result in reduced application speed and other
software issues. Hardware and Software Security is also equally important.
Key Success Factors for an ERP Implementation
The key success factors are:

1. Project Startup
2. Management Commitment
3. Project Scope
4. Project Team
5. Change Management, Communication and Training
6. Customizations/Modifications
7. Budget
8. Project Closure

1. Project Startup

Perform the due diligence of getting the project on the right track by preparing all the
necessary information and communicating it to the appropriate personnel.

Recommendations:

Prepare/review the business strategy.

Prepare/review the IT strategy.
Prepare/review the ERP strategy.
Prepare/review the project scope (included in more detail below).
Prepare the organization for process changes and the new system by applying the proper
change management strategies and techniques.

2. Management Commitment

An ERP implementation is going to impact how a company operates by updating

business processes and changing system transactions. IT should not be the only area
responsible for the project. Senior managers and mid-level managers should be involved
in the project from its inception to its completion. This gives the project the proper
visibility across the organization and shows the staff in general the importance of the
project.

Recommendations:

Involve management in project sponsorship, a steering committee, issue escalation and

issue resolution. This involvement will help to maintain management support and keep
them informed about the project.

3. Project Scope

The core ERP system will most likely not satisfy all the needs of the organization.
Develop the ERP strategy and understand the components of the ERP, and how it will fit
with other systems and tools. Define your project scope from a position of knowledge,
fully detailing what the project is going to include.

Recommendations:

Understand the business requirements and plan how they are going to be satisfied.
The ERP will satisfy some of your business requirements. Put together a plan as to how
other business requirements such as data management, business intelligence, social
media, etc. will be met.
Document items that are not in scope.

4. Project Team

The core project team should be composed of full-time personnel, including a project
manager and others representing the core areas of the business. If a consulting integrator
is used, the core project team needs to have a good and cohesive working relationship
with the consultants. Also, identify a set of resources from the various areas of the
business to provide subject matter expertise.

Recommendations:

Use proven implementation methodologies and tools for the project.

Empower the implementation team to make decisions.
The core project team should be in the same location to aid in communication.
Create a competency center for post go-live support needs.
Identify subject matter experts (SMEs) from pertinent areas across the organization.
Project team to have a good working relationship with the consultants.

5. Change Management, Communication and Training

The ERP project will not only result in changes in systems, but also process and
organizational changes. A change management team will be necessary for the
organization to deal with the impact. The size of the team will vary depending on the size
of the project and amount of changes. Training falls under change management, and the
most common method is to train the trainers. Normally the software vendors or the
consulting integrators will train the trainers, who are employees in the organization. This
approach is most helpful, because the organization will end up with the trained
professionals on its staff.

Recommendations:

Create communication mechanisms such as a website, newsletters, road shows, lunch

and learns, etc.

 Develop good communication between the project team and the organization as a
whole.
Key users should be involved with the project and its progress, as this will aid in
acceptance of the changes.
Create a business case that shows the changes to processes and system functionality,
and also the benefits brought about with the changes. Share the business case with the
pertinent individuals within the organization.
Hire a third party to perform an organization readiness assessment.
Be prepared to train during the project and after the post go-live date.

6. Customizations/Modifications

Most ERPs are built with embedded best practices. An organization must keep a tight
control on the customizations, as they may diminish the application of the best practices.
These modifications may result in an increase in scope and budget as well.

Recommendations:

Study other ERP implementations in the industry and see what customizations were
required.
Perform a gap analysis and prioritize the gaps (High=Required, Medium=Workaround
Exist, Low=Nice to Have).
Set clear expectations on the companys position regarding customizations.
Create a process by which a business case must be created for every customization.
Be prepared to maintain these modifications as the software vendor releases new
versions of the software.

7. Budget

Organizations must create a realistic budget to include all costs for the implementation,
such as software, hardware and staff resources. Most organizations expect a timely
Return on Investment (ROI) from an ERP project. Some companies reduce the project
budget in an attempt to improve on the ROI. The areas most commonly reduced are
change management, training and project management.

Recommendations:

Create a good estimate of your implementation costs and keep tight control of the costs.
Do not cut costs in change management, training and project management. Instead,
consider rapid implementation methods and tools. Some of the consulting implementers
offer these methods and tools.

8. Project Closure

Having good project closure is just as important as the project start up. Personnel need to
have clear lines of communication as to when the new system is going live and when the
legacy system is being decommissioned. This also applies to the introduction of new
business processes.
Organisational issues & social issues
Implementation Time
ERP systems come in modular fashion and do not have to be implemented entirely
at once. Several companies follow a phase-in approach in which one module is
implemented at a time. For example, SAP R/3 is composed of several "complete"
modules that could be chosen and implemented, depending on an organization's
needs. Some of the most commonly installed modules are sales and distribution (SD),
materials management (MM), production and planning, (PP), and finance and
controlling (FI) modules.
The average length of time for a "typical" implementation is about 14 months and
can take as much as 150 consultants. Corning, Inc. plans to roll out ERP in ten of its
diversified manufacturing divisions, and it expects the rollout to last five to eight
years.(n11) The length of implementation is affected to a great extent by the number
of modules being implemented, the scope of the implementation (different functional
units or across multiple units spread out globally), the extent of customization, and
the number of interfaces with other applications. The more the number of units, the
longer implementation. Also, as the scope of implementation grows from a single
business unit to multiple units spread out globally, the duration of implementation
increases. A global implementation team has to be formed to prepare common
requirements that do not violate the individual unit's specific requirements. This
involves extensive travel and increases the length of implementation.
The problem with ERP packages is that they are very general and need to be
configured to a specific type of business. This customization takes a long time,
depending on the specific requirements of the business. For example, SAP is so

complex and general that there are nearly 8000 switches that need to be set properly
to make it handle the business processes in a way a company needs. The extent of
customization determines the length of the implementation. The more customization
needed, the longer it will take to roll the software out and the more it will cost to keep
it up-to-date. The length of time could be cut down by keeping the system "plain
vanilla" and reducing the number of bolt-on application packages that require custom
interfaces with the ERP system. The downside to this "plain vanilla" approach is
conforming to the system's mold, which may or may not completely match the
requirements of the business.
For small companies, SAP recently launched Ready-to-Run, a scaled-down suite of R/3
programs preloaded on a computer server. SAP has also introduced AcceleratedSAP
(ASAP) to reduce implementation time. ERP vendors are now offering industryspecific applications to cut the implementation time down. SAP has recently outlined
a comprehensive plan to offer 17 industry-specific solutions, including chemical,
aerospace and defense, insurance, retail, media, and utilities industries. Even though
these specific solutions would able to substantially reduce the time to implement an
application, organizations still have to customize the product for their specific
requirements.
Implementation Costs
Even though the price of prewritten software is cheap compared with in-house
development, the total cost of implementation could be three to five times the
purchase price of the software. The implementation costs would increase as the
degree of customization increases. The cost of hiring consultants and all that goes
with it can consume up to 30 percent of the overall budget for the implementation.
According to Gartner Group, total cost of an outside SAP consultant is around $1600
per day. Going for in-house SAP-trained technologists creates its own worries. Once
the selected employees are trained after investing a huge sum of money, it is a
challenge to retain them, especially in a market that is hungry for skilled SAP
consultants. Employees could double or triple their salaries by accepting other
positions. Retention strategies such as bonus programs, company perks, salary
increases, continual training and education, and appeals to company loyalty could
work. Other intangible strategies such as flexible work hours, telecommuting options,
and opportunities to work with leading-edge technologies are also being used. Many
companies simply strive to complete the projects quickly for fear of poaching by
head-hunting agencies and other companies.
ERP Vendors
As there are about 500 ERP applications available and there is some company
consolidation going on, it is all the more important that the software partner be
financially well off. Selecting a suitable product is extremely important. Gartner
Group has BuySmart program, which has more than 1700 questions to help a
company choose a suitable ERP package. Top management input is very important
when selecting a suitable vendor. Management needs to ask questions about the
vendor, such as its market focus (for example, midsize or large organization), track
record with customers, vision of the future, and with whom the vendor is strategically
aligned. For a global ERP rollout, companies need to be concerned about if the ERP
software is designed to work in different countries. Also, the management must
make sure the ERP vendor has the same version of the software available in all the
countries the company is implementing the system. Vendor claims regarding global
readiness may not be true, and the implementation team may need to cross-check

with subsidiary representatives regarding the availability of the software. Vendors

also may not have substantial presence in the subsidiary countries. It is important to
evaluate if the vendor staffers in these countries are knowledgeable and available. If
there is a shortage of skilled staff, bringing people from outside could solve the
problem, but it would increase the costs of implementation.
Selecting the Right Employees
Companies intending to implement an ERP system must be willing to dedicate some
of their best employees to the project for a successful implementation. Often
companies do not realize the impact of choosing the internal employees with the
right skill set. The importance of this aspect cannot be overemphasized. Internal
resources of a company should not only be experts in the company's processes but
also be aware of the best business practices in the industry. Internal resources on the
project should exhibit the ability to understand the overall needs of the company and
should play an important role in guiding the project efforts in the right direction. Most
of the consulting organizations do provide comprehensive guidelines for selecting
internal resources for the project. Companies should take this exercise seriously and
make the right choices. Lack of proper understanding of the project needs and the
inability to provide leadership and guidance to the project by the company's internal
resources is a major reason for the failure of ERP projects. Because of the
complexities involved in the day-to-day running of an organization, it is not
uncommon to find functional departments unwilling to sacrifice their best resources
toward ERP project needs. However, considering that ERP system implementation
can be a critical step in forging an organization's future, companies are better off
dedicating their best internal resources to the project.
Training Employees
Training and updating employees on ERP is a major challenge. People are one of the
hidden costs of ERP implementation. Without proper training, about 30 percent to 40
percent of front-line workers will not be able to handle the demands of the new
system.(n6) The people at the keyboard are now making important decisions about
buying and selling -- important commitments of the company. They need to
understand how their data affects the rest of company. Some of the decisions frontline people make with an ERP system were the responsibility of a manager earlier. It
is important for managers to understand this change in their job and encourage the
front-line people to be able to make those decisions themselves. Training employees
on ERP is not as simple as Excel training in which you give them a few weeks of
training, put them on the job, and they blunder their way through. ERP systems are
extremely complex and demand rigorous training. It is difficult for trainers or
consultants to pass on the knowledge to the employees in a short period of time. This
"knowledge transfer" gets hard if the employees lack computer literacy or have
computer phobia. In addition to being taught ERP technology, the employees now
have to be taught their new responsibilities. With ERP systems you are continuously
being trained. Companies should provide opportunities to enhance the skills of the
employees by providing training opportunities on a continuous basis to meet the
changing needs of the business and employees.
Employee Morale
Employees working on an ERP implementation project put in long hours (as much as
20 hours per day) including seven-day weeks and even holidays. Even though the
experience is valuable for their career growth, the stress of implementation coupled

with regular job duties (many times employees still spend 25 to 50 percent of their
time on regular job duties) could decrease their morale rapidly. Leadership from
upper management and support and caring acts of project leaders would certainly
boost the morale of the team members. Other strategies, such as taking the
employees on field trips, could help reduce the stress and improve the morale.