UNIT 2

ERP IMPLEMENTATION

WHY ERP???
Financial & Operations performance is unknown
Inaccurate customer expectations & job costs are
predicted or even unknown
Inventories of a company do not meet or far exceed
production requirements on a consistent basis

ERP SYSTEM IMPLEMENTATION - BENEFITS

SIMPLIFICATION OF BUSINESS PROCESSES

ENHANCE
PRODUCTIVITY,
RESPONSIVENESS

COMPLIANCE & CONTROL

EFFICIENCY IMPROVEMENTS

ENABLE NEW BUSINESS & GROWTH STRATEGIES

REDUCE COST & ELIMINATE INEFFICIENCIES

CONTINUOUS IMPROVEMENT

EXTEND YOUR BUSINESS USING THE INTERNET

FLEXIBLITY,

&

CUSTOMER

ERP SYSTEM IMPLEMENTATION - BENEFITS

SIMPLIFICATION OF BUSINESS PROCESSES

Nature of work is changing

ERP systems introduce the newer and the latest

processes that make the operations simpler, faster,
more efficient & more effective

ERP SYSTEM IMPLEMENTATION - BENEFITS

ENHANCE PRODUCTIVITY, FLEXIBLITY, &
CUSTOMER RESPONSIVENESS

ERP system gives you the tools to maximize the

efficiency of business processes across the entire
enterprise

Forecast demand to suppliers, increase on-time

delivery, automate the shop floor, decrease lead-times,
make commitments you know you can keep

ERP SYSTEM IMPLEMENTATION - BENEFITS

COMPLIANCE & CONTROL

Globalization, mergers & acquisitions and regulatory

burdens

ERP systems ensure compliance with policies &

regulatory requirements by taking control of
processes & enforcing business rules

ERP SYSTEM IMPLEMENTATION - BENEFITS

EFFICIENCY IMPROVEMENTS

An ERP system automates many business processes delivering

work to the appropriate people and systems, enforcing rules &
tracking completion against set deadlines
Significant expansion in daily work volume without adding
staff, reducing cycle times
Efficiency improvements are the most important source of ROI
from the ERP implementation

ERP SYSTEM IMPLEMENTATION - BENEFITS

ENABLE NEW BUSINESS & GROWTH STRATEGIES

New Business, New Infrastructure

Updating & integrating your business processes with

an Enterprise system enables you to take on more
business & grow in new directions.

ERP SYSTEM IMPLEMENTATION - BENEFITS

REDUCE COST & ELIMINATE INEFFICIENCIES

An ERP system can improve the companys bottomline significantly

Better resource management means more inventory

turns, more efficient scheduling on the shop floor
reduces down time & over time.

Improved customer service leads to repeat business

ERP SYSTEM IMPLEMENTATION - BENEFITS

CONTINUOUS IMPROVEMENT

Optimization of business performance

Metrics & Key performance indicators(KPI) mapped out &
simulated in a process model can be displayed in real-time in
performance management dashboards & reports.
ERP supports high level strategic metrics, drill-down
analytics and alerts when results deviate from performance
targets.

ERP SYSTEM IMPLEMENTATION - BENEFITS

EXTEND YOUR BUSINESS USING THE
INTERNET
Business onto the internet provides a competitive edge
Web enabled technology allows you to access
information, sell product, run business processes, &
communicate with your customers & partners at any
time & from anywhere in the world

IMPLEMENTATION CHALLENGES

INADEQUATE REQUIREMENTS DEFINITION

Requirements definition should clearly specify the

issues and the problems, the additional capabilities
expected out of the system
Failure to a clear definition could result in the selection
of a wrong ERP package, unnecessary customization,
lack of employee re-training, etc failure of ERP
implementation

IMPLEMENTATION CHALLENGES

RESISTANCE TO CHANGE

Cooperation of everyone involved is an absolute

necessity.
ERP is first an attitude, then a system Employees
should be convinced about the importance of ERP &
the benefits of using an ERP tool or system

Resistance - A cause of ignorance.

IMPLEMENTATION CHALLENGES

INABILITY TO ACHIEVE ORGANIZATIONAL

UNDERSTANDING

The biggest ERP Challenge faced by organizations is

recognizing that the integration of previously unintegrated
job functions requires that knowledge workers supporting
different organizational functions will now be using the same
software & they will each be entering information that affects
the others.
The knowledge workers must have a much broader
understanding than they did before the ERP solution, of how
others in the organization perform their functions

IMPLEMENTATION CHALLENGES

INADEQUATE RESOURCES

ERP implementation is a very costly affair that requires

a variety of resources money, people, software,
hardware...
A budget needs to be established
Lack of skilled & motivated personnel from the
organization.

IMPLEMENTATION CHALLENGES

LACK OF TOP MANAGEMENT SUPPORT

The roles of top management in IT implementations include

developing an understanding of the capabilities and limitations
of IT& communicating the corporate IT strategy to all
employees.

Going ahead without solid backing from top management is a

sure recipe for disaster

IMPLEMENTATION CHALLENGES

LACK OF ORGANIZATIONAL READINESS

Preparedness of the organization for a new system of

functioning is the main challenge in the successful
implementation of an ERP system

Management should make sure that the organization,

the work process and the staff are amenable to adapt to
the ERP system

IMPLEMENTATION CHALLENGES

INADEQUATE TRAINING & EDUCATION

Lack of user training and failure to completely

understand how enterprise applications change
business processes frequently appear to be responsible
for problem ERP implementations and failures

ERP projects appear to have a six-month learning curve

at the beginning of the project

IMPLEMENTATION CHALLENGES

POOR PACKAGE SELECTION

Analyse the capabilities of the ERP service provider

and the expertise to provide you a good solution

The choice of the package involves important decisions

regarding budgets, timeframes, goals and deliverables
that will shape the entire project

IMPLEMENTATION CHALLENGES
CUSTOMIZATION

ISSUES

Most

organizations discover how compatible the new ERP is with

their existing systems and processes when they turn on the new
system
FOUR BASIC CHOICES TO CUSTIMAZATION

Modify

the ERP to match the organizational processes and / or data structures

Modify

the organizational processes and / or data structures to match the ERP

Perform
Ignore

some of choice 1 and choice 2

the problem

IMPLEMENTATION CHALLENGES

LONG PAYBACK PERIOD

POOR COMMUNICATION & COOPERATION

HIDDEN IMPLEMENTATION COSTS

IMPROPER INTEGRATION
Integration of ERP Modules
Integration of ebusiness applications
Integration with legacy systems

ERP IMPLEMENTATION LIFE CYCLE

ERP implementation life cycle comprise of the

following three phases

PRE-IMPLEMENTATION PHASE
IMPLEMENTATION PHASE
POST-IMPLEMENTATION PHASE

PRE-IMPLEMENTATION PHASE

This phase is the preparation phase or the planning phase.

The organization prepares a business case & decides whether to

go in for ERP system; and plans how to move further in
implementing the system

ESTABLISHING THE NEED FOR ERP SYSTEM

FEASIBLITY ANALYSIS

SELECTION OF THE APPROPRIATE ERP PACKAGE

HIRING OF THE CONSULTANT

PRE-IMPLEMENTATION PHASE

ESTABLISHING THE NEED FOR ERP SYSTEM

The decision to go in for the ERP system is taken.

The basic question that must be answered is WHETHER WE

REALLY EED ERP SYSTEM

PRE-IMPLEMENTATION PHASE

FEASIBLITY ANALYSIS

Once the need for ERP system is established on the

basis of strategic & competitive analysis, the viability of
the solution in terms of technical , economic, legal,
organizational and schedule is conducted.

The cost on such a system is justified in terms of return

on investment (ROI); or the strategic value

PRE-IMPLEMENTATION PHASE

SELECTION OF THE APPROPRIATE ERP PACKAGE

An appropriate ERP package is selected that best fits the

requirements of an organization

Selection of an ERP package must ensure the minimum

need for customization

PRE-IMPLEMENTATION PHASE

HIRING OF THE CONSULTANT

Before the actual implementation of ERP system takes place,

the services of consultant are required to be hired

Sometimes an organization may also require the expert

services to be hired even for the analysis of the need for ERP;
determining feasibility, and for selecting an appropriate ERP
package.

Selection of the right consultant is an important step in the

pre-implementation of ERP life cycle

ERP IMPLEMENTATION CHOICES

For ERP implementation an organization has to take a

conscious decision about the choice of implementation

VANILLA IMPLEMENTATION

An organization would buy the ERP software from the

vendor & implement it without making any changes in the
ERP system.

In this implementation an organization will align its

business processes to the ERP system rather than modify
the software.

ERP IMPLEMENTATION CHOICES

COMPREHENSIVE

This implementation plan involves the implementation of the

full functionality of the ERP software in addition to industry
specific modules.
Comprehensive implementation requires a high level of
business reengineering as well as customization of legacy
systems.
Most expensive & time consuming approach.

ERP IMPLEMENTATION CHOICES

MIDDLE OF THE ROAD

This involves some changes in the ERP software and a

major business reengineering.

This approach is not expensive as the comprehensive

approach or the straight forward as the vanilla
approach, is called as the middle-of-road approach

IMPLEMENTATION PROCESS

The various steps involved in ERP implementation process are as

follows

PREPARATION OF IMPLEMENTATION PLAN

A proper plan for the ERP implementation is prepared. The plan

includes activities like , identification and the sequence of the
activities, relation to each other, estimation of time required to
complete the activities , risk assessment , cost estimates & so on.

A business analyst should make use of Gantt charts which is

valuable in providing a clear picture of the total plan

IMPLEMENTATION PROCESS

FORMATION OF STEERING COMMITTEE

A steering committee comprising people from all the

functional areas is a must for the ERP implementation.

The committee generally has the people with a lot of

experience & knowledge about the business processes
of their respective areas.

IMPLEMENTATION PROCESS

ACQUSITION OF FACILITIES

An organization needs to work out the requirements of

the facilities like office, server room, computer room, &
so on.

A proper plan for space; location; and layout of these

facilities should be worked out and acquired or built for
the smooth ERP implementation

IMPLEMENTATION PROCESS

REDESIGN OF THE BUSINESS PROCESSES

Business Processes of an organization are required to be

analysed.

Analysis refers to the understanding of the existing or

current businesses processes of an organization which are
then compared to the selected ERP system.

Gaps are identified and on the basis of the gap analysis ,

the business processes of the organization are redesigned
so as to match to that of ERP system.

IMPLEMENTATION PROCESS

CUSTOMIZATION OF THE ERP SYSTEM

Customization of the ERP package refers to the changes

to be made in the ERP package so as to match the
business processes of an organization & to design the
formats for input and output of data.

Many a times the entire business processes of the

organization cannot be redesigned as it may lead to total
disruption in the organization.

IMPLEMENTATION PROCESS

ACQUISITION OF IT INFRASTRUCTURE

This refers to procuring the required IT hardware &

software for the implementation of ERP system.

Based on the requirements of ERP implementation,

specifications of the hardware are prepared and
acquired as per the policy or the IT acquisition strategy
of an organization.

IMPLEMENTATION PROCESS

USERS TRAINING

All the user must be properly trained to allay their fears

& to convince them about the benefits of this system.
The users may be identified & classified differently on
the basis of the operations/functions performed by them

Clerical or managerial ; frequent v/s Occasional users

Change management is an important actitivity in the

implementation of ERP system

IMPLEMENTATION PROCESS

CONVERSION OF DATA

Once the ERP system is customized & the design for

input & output is over, the data is put in the system.

The various files are converted into computer file and

thus a database is created

IMPLEMENTATION PROCESS

TESTING

This phase is very important to make sure the reliability of

the results obtained from the ERP system.

Various types of tests under simulated conditions are

conducted for accuracy, range of inputs, frequency of inputs,
operating conditions, reliability etc

The elements may include equipment, forms, programs,

work procedures, & formats.

IMPLEMENTATION PROCESS

DOCUMENTATION
Documentation ensures easy updating & enhancement of the
system.

TYPES OF DOCUMENTATION

SYSTEM DOCUMENTATION
Intended primarily for maintenance programmers or technical persons,
records detailed information about a systems design specifications, its
internal working, & its functionality

USER DOCUMENTATION
Intended primarily for users & consists of written or other visual
information about an application system , how it works & how to use it

IMPLEMENTATION PROCESS

GO LIVE

Final phase in the implementation of ERP System.

The go live phase is the event of switch over from the old
system to the new system which takes place after the system
is tested & found reliable.

The existing (legacy) system is replaced by the new system.

The decision to change over of the legacy system to the new

ERP system is also known as ERP Implementation strategy

IMPLEMENTATION PROCESS

CHANGE MANAGEMENT

After the implementation of ERP system, there may be certain

bugs, errors, or some input/output issues, which need to be
fixed.

The changes are required to be controlled to ensure that only

required changes are entertained & a proper process for such
changes is followed.

For the successful implementation of ERP systems, an

organization must have a proper formulated & documented
change management plan in place

ERP CONVERSION STRATEGIES

BIG BANG STRATEGY
PARALLEL STRATEGY
PHASED STRATEGY
PILOT RUN STRATEGY
HYBRID STRATEGY

BIG BANG STRATEGY

An entire suite of ERP application is implemented at all

locations, at the same time.

Using big bang, the system goes from being a test

version to being the actual system used to capture
transactions.

The transformation takes place in the shortest possible

time and hence , the name BIG BANG

PARALLEL STRATEGY

Legacy systems & ERP systems are run in parallel for

some time until it has been tested thoroughly

In parallel implementation approach, the outputs from

each system are compared & differences reconciled.

The main advantage is that the accuracy of the system

is properly checked before ERP system is accepted in
an organization.

PHASED STRATEGY

A phased approach is one, in which ERP modules are

implemented one at a time or in a group of modules ,
often a single location at a time

This method is also referred to as implementation by

segments approach.

The main advantage of this implementation is more

resources can be devoted to a particular module,
users/managers gain knowledge in each phase, project
managers can demonstrate a working system.

PILOT RUN STRATEGY

Refers to the piecemeal implementation of ERP system

in the organization.

For example, an inventory system module of ERP

system may be implemented with only a selected
product grouping or with all products in one location of
a multiple location organization.

The main advantage is the risk of a system is localized,

the problems identified in the system can be corrected
before further implementation.

HYBRID STRATEGY

Combination of two or more strategies.

An organization may decide to combine two or more

strategies for the change over of existing systems.

An organization may follow direct approach for

marketing module; whereas it may follow parallel
approach/ pilot run approach for the distribution system

POST IMPLEMENTATION PHASE

The system is required to be evaluated so as to find its worth as

well as to keep it updated as per the new requirements of the
organization.

Post implementation phase provides the feedback from the

system usage which needs to be used for ongoing support that
includes upgrades & patches as well as adjustments to the
change management strategy

EVALUATION OF ERP SYSTEM

MAINTENANCE OF ERP SYSTEM

POST IMPLEMENTATION PHASE

EVALUATION OF ERP SYSTEM

After an ERP system is implemented, it should be

assessed to find out that the pre-determined
objectives of the ERP system are obtained.

The organization would also come to know about the

shortcomings in the system, which are rectified so as
to get the reliable results.

POST IMPLEMENTATION PHASE

MAINTENANCE OF ERP SYSTEM

The dynamic changes in the environment and/or business

organization, the ERP system is required to be maintained.
It may need corrections because of the bugs in the system,
modifications because of the changes in business or the
environment and/or enhancements because of the expansions or
diversification in the business
Maintenance of a system starts after it has been implemented.

ERP TEAM FORMATION

ERP project teams are formed not just for implementing

ERP software but also for the ongoing maintenance
required of an ERP system

The company management should do the ERP team

formation in consultation with the consultants & vendor
representatives & they too should be included in the
team before, during and after the implementation.

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)

People in an implementation can fall into several

different positions project sponsor, executive steering
committee, project manager, functional manager, team
leader, team member, functional participant,
consultant, vendor representative & end user

Basic skill sets that are important to any ERP team

position include communication skills, computer literacy,
maturity, conceptual skills & organizational knowledge

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)

PROJECT SPONSOR :

Ideally the CEO will be the project sponsor. The role of the project
sponsor is to ensure that the ERP implementation gets all the
assistance it needs from resources to management backing

EXECUTIVE STEERING COMMITTEE:

It formulates the long term goals, objectives, and strategies regarding

the implementation of the ERP system in the company. It is headed
by the project sponsor & includes the CIO, CTO, CFO, & other
senior level managers & department heads. It also includes a
representative of the package vendor & external consultant

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)
PROJECT MANAGER:
Project manager is the most important person in the ERP
implementation project. He is the person responsible for
translating the vision & goals into reality. He reports to the
executive committee & heads the project management team
which consists of the head of the vendor representatives, the
chief of the consultants & the work team leaders

FUNCTIONAL MANAGER:
Oversee the day-to-day operations of their respective functional
areas. Ideally they should have strong conceptual skills in
understanding the overall ERP project & how it relates to the
business.

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)
THE IMPLEMENTATION TEAM:
The implementation team or the work team consists of selected
employees from the company in addition to vendor
representatives & consultants. These employees will perform the
various tasks in implementing the ERP system from installing the
hardware, software, customizing, documenting, training & so on.

FUNCTIONAL PARTICIPANT:
They have a limited role in the implementation of the project. They
answer questions & review training programs & business process
flows proposed in the new software. Through their feedback
other members of the ERP team can get a basic feel of how well
the new ERP system may work

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)

CONSULTANT:

Consultants provide a wide variety of functions, often filling in the gaps.

Some positions that can be filled include project manager, team leader,
service representatives, & end user.
Consultants success depends upon a number of factors including
computer literacy, conceptual skills, software knowledge, industry
knowledge, maturity, problem-solving capability, communication
skills and organizational skills.

THREE CATEGORIES OF SERVICE

1. Management
2. Application
3. Technical

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)

PACKAGE VENDORS

Are the people who have developed the ERP packages. They are
the people who have invested huge amounts of time & effort in
R&D, to create the packaged solutions.
The vendor representatives are responsible for fixing any problems
that the implementation team encounters in the software.
Vendor representatives provide the initial training for the
companys key users.

PEOPLE INVOLVED IN THE ERP

IMPLEMENTATION (TEAM)

END-USERS

Represent the largest group, are the general mass of

people who will use the new ERP system.

They have the least control over the outcome of the

ERP project.

Documentation & training programs are often prepared

specifically for this group of people.

ERP TEAM FORMATION

Once the ERP system is implemented, the new processes &

procedures will replace the earlier ones

The technology will bring with it a series of new concepts

and resources that must be mastered & correctly used in
order to get the best out of the ERP system

Company should appoint its best , most efficient employees ,

invest in these people , create opportunities within the
company, these are the people who are actually running the
business, don't have time for anything else , yet it is these
people who should be assigned to the implementation team

ERP TEAM FORMATION

ERP implementation project needs people who can

grasp new ideas quickly, have an open mind to new
technologies & concepts & who love challenges.

They are the pioneers as they take their organization

through untested environment, and uncharted waters,
so their ability to think quickly, improvise effortlessly,
innovate fast & act without hesitation is critical to the
success of the project

Those selected The pioneers will have greater

demands made upon their time.

ORGANIZATION OF THE IMPLEMENTATION

TEAM
A typical implementation team will have the following members

CHIEF EXECUTIVE OFFICER (CEO)

EXECUTIVE COMMITTEE

EXTERNAL CONSULTANTS

PROJECT MANAGER

PROJECT MANAGEMENT TEAM

WORK TEAM OR IMPLEMENTATION TEAM

TECHNICAL SUPPORT TEAM

ADMINISTRATIVE SUPPORT TEAM