Enterprise Resource Planning: Unit Ii - Building Business Cases For Erp

Enterprise Resource Planning
UNIT II BUILDING BUSINESS CASES FOR ERP
Christ University RADM ERP Jan 2012
1-1
Objectives of Unit II
Roles and Need for ERP. Gap Analysis, Competitive Environment Analysis Strategic Needs Analysis Feasibility Analysis ERP Project life cycles and Cost elements.
1-2
Roles and Need for ERP?

ROLES OF ERP - Managing multiple configurations that the customer demands for the multiple options. ERP allow management of multiple configurations. - Customer expects Innovative products with modified versions with various new features which demands continuous product development with reduced cycle for development. NPI feature will help in promoting concurrent Engineering. - Efficient Supply chain is very important to ensure firms have competitive edge over others. Principles of JIT, Lean Mnfg that the application supports aids in improving the efficiency.
1-3

ROLES OF ERP - Pressure of reduced delivery time and cost and best Quality. QM module support this. - In a Make to Order scenario which require CTO(configured to Order) and is geared to handle any complexity and can automatically convert the requirement into BOQ and routing. - Challenge of delivering customer specific products at short notices. ERP facilitates quicker cycles through MTO to MTS a balancing act. - Spares management for Equipment suppliers and after sales service demands. ERP helps in scheduling the service requirements, quick diagnosis and rectification of faults and managing the after sales contracts.
1-4

ROLES OF ERP - Spares management especially for Equipment suppliers and after sales service demands. ERP helps in scheduling the service requirements, quick diagnosis and rectification of faults and managing the after sales contracts with customers. - For the Equipment supplies, each transaction turns out to be a project which Projects Systems in ERP can support. - Managing inbound and outbound logistics especially for FMCG /fertilizer industries ensuring no stock-outs. - TPM for Maintenance of equipment to achieve zero defect and zero breakdown and able to predict the health of plant and machinery.
1-5

ROLES OF ERP - For batch processing industries, monitoring traceability, identification and shelf life management is key and ERP modules highly effective and ensures fault free transactions. - Project Engineering (Engineer to Order ETO) demand endto end ERP solutions to facilitate inerface and integration of various functions. Projects are complex and estimation of cost / time is a challenge and ERP assists reducing the associated risks through Exception based budgeting. In nutshell, the business application should ensure the cost, delivery and cycle times are reduced and the quality and features offered improved on a continually.
1-6

1. 2. 3. 4. 5. NEED OF ERP Cost and quality improvement through coordinated operations JIT / TQM, concurrent Engg. Reduce the cycle time between order to delivery High level of after sales customer support for maintenance, spares parts availability and technical sales service team Upstream and downstreaming the trade partners and making the business partners to become more competitive. A repertoire of standardized business process to support management initiatives such as BPR, SCM, activity based costing etc. Real time analysis of MIS to generate required output data with decisions enhancing the corporate image and building market capital value.
6.
1-7

7. NEED OF ERP ERP enforces Best Practices in the organization at the same time it supports each organizations unique requirements and environment. It will enable distilling the lengthy, multi step processes into fewest number of steps. ERP package adopted required software to change over to Client server computing instead of mainframe platform which enabled many companies to afford ERP. Enables Organizational standardization, allows simultaneous access to data for planning and control, facilitates intraorganization communication and collaboration. Brings in efficiency, cost reduction and elimination of inefficiencies in the system and processes.
8.
9.
10.
1-8
Gap Analysis
GAP ANALYSIS AS IS MAPPING Understand the new requirements functional requirement, system requirement and Information flow(MIS) and decision points/levels. Conduct study and Generate AS IS report to assess present level of automation of transactions. Analyse the gaps and prepare the Gap analysis report for final review and sign off. The gaps so generated could be in transactional system, automated system, Geographical system and analytical system. Finally the end result is of achieving the integration of all functions and real time sharing of information for relevant department / personnel. List the MIS and summary reports required to be generated and posted to various users / decision makers and sign off. Tracking system / approval systems to be finalised.
1-9
Feasibility Analysis
FEASIBILITY ANALYSIS is taken up to determine whether to go ahead with the ERP project or not based on the business needs, requirements and the business value that it brings.
1.

Technical Feasibility :
Familiarity with application Familiarity with technology Project size. Compatibility with system and business transactions
1-10
2. Organizational Feasibility : To ensure that the project will be well adopted and well received. Support from top management, Senior person available for influencing the process Dedicated personnel for implementation and adaptation of users to this new technology Compliance with other stakeholders like customer/ vendors and government. Review for strategic alignment with companys goals and mission Committed cooperation from all users without any disruptive motives.
1-11
3.
Schedule Assess whether the project can be implemented by a specific date : Time dimension of the project monitored
Implement Project Management techniques to review ERP implementation to see it is on on track

Time of the year to be decided to ensure financial results which are to be declared for the external agencies, not get affected.
1-12
4.
Risk Time delays / cost over-run / implications on declaring the financial results
Impact on operations / competition

Commitment from implementation team and associated delays or affecting other works. Effective use and reaping the benefits
1-13
5.
Other Issues Security Reliability Resource commitment ROI(Cost benefits)
1-14
Competitive Environment Analysis
Objective is to review the influence of external environmental forces on the industry to ensure that the organization remains competitive and profitable. This is one of the deciding factor for the strategic plan and policies of the company. External environment takes into account the influence of government policies and regulations, national and International economics, Competitors strategies, industry specific developments, material availability/price fluctuations and market scenerios.
1-15

The various factors influencing the decision are the : Entry Barriers Cost Benefit / ROI Resources requirement / Commitment Economies of scale Expected retaliation / resistance to change / transparent Access to inputs Government Policy Being competitive
1-16

Threat of Substitutes Switching Cost Upgradations of the modules from time to time Hardware related up-gradations / new platforms necessitating further investments Low priced Substitutes replacing existing system which affects being competitive Obsolescence Additional requirements demanding further integrations.
1-17

Bargaining power of Buyers Bargaining leverage and Buyer Volume Buyers access to information on the products availability / competitors offerings leading to price sensitivity Threat of Backward integration Substitutes available Buyers incentives Brand identity and product differentiation
1-18

Bargaining power of Suppliers Importance of Volume & Supplier concentration Differentiation of inputs and its impact on cost Threat of forward integration Inputs Substitutes available Cost relative to total purchase in industry
1-19

AS IS STUDY OF THE ORGANIZATION IS DONE TO : Identify gaps and competitors Asses competitors strength and weaknesses(SWOT) Intensity of competition Favourability of environment Influencing power of both buyers and suppliers Competitive pressure is the major factor in implementation of ERP in the company.
1-20
Design Alternatives
Complete implementation
Complete vendor package Benefits
Total integration across all functional areas Re-engineering of all business processes
Deficits
Expensive Time-consuming
Selected ERP modules

Benefits
Less costly and time-consuming Lacks total integration of data Limited applicability and use
Deficits
1-21
Design Alternatives, continued
Build in-house
Benefits
Can create system based on its needs Competitors will not have access to similar system Time- and resource-consuming Expensive Risky May not provide competitive advantage
Deficits

Maintain concurrent legacy systems

Benefits
Familiarity May be a competitive disadvantage
Deficits
1-22
Cost-Benefit Analysis
Net Present Value

Time value of money 5-year timeframe for ERP Non-recurring costs:
Hardware, software, consulting, training, Staff and system integration & implementation cost
Licenses, maintenance AMCs, consulting, teams
Recurring expenses:
1-23
Cost Elements
The returns in terms cost benefits to the company is assessed through performance of following parameters :
Working Capital and Fixed Assets Turnover ratio Reduction in Inventory carrying cost Manpower and Equipment utilization / efficiency Finished Goods inventory Business process lead times / OTD Drastic benefits out of BPR.
1-24
Cost Elements
The global benchmarks for benefits of ERP driven business process are
30-35 % reduction in cost of sales 65-70 % in cost of Quality 75-80 % reduction of delivery time 35-40 % reduction in manpower 60-80 % reduction in inventory Actual benefit depends on current level of performance and potential improvements.
1-25
Cost Elements
INVESTMENTS COST ELEMENTS

Network Infrasturcture LAN / VSAT Rs. 20K to 40 Lakhs Hardware database incl nodes / Operation system - 4- 40 L Database (Memory) 35 K to 3-4 Crores Licence for business application no. of users 3-4 Crores Implementation of Business application 10L to 2.5 Crore Consultants 1- 50 L Maintenance (AMC) 2 L to 2 Crore Total 30 L to 500 Crore(depending on scale/ divisions ) Running Cost 2 L to 50 L
1-26
Cost Elements
INVESTMENTS COST ELEMENTS

Network Infrasturcture LAN / VSAT Rs. 20K to 40 Lakhs Hardware database incl nodes / Operation system - 4- 40 L Database (Memory) 35 K to 3-4 Crores Licence for business application no. of users 3-4 Crores Implementation of Business application 10L to 2.5 Crore Consultants 1- 50 L Total 30 L to 500 Crore(depending on scale/ divisions ) Running Cost 2 L to 50 L
1-27
Strategic Needs Analysis

From the Corporate perspective, analyze the requirement Authentication of reports and MIS for the board and external stake holders Competitive advantage, image building Essential for global business / exports Scales of operation / expansion / integration of different units
1-28
ERP Project Life Cycle

Basically ERP implementation as project will have 3 stages namely ; Stage 1 Pre-Implementation Stage Stage 2 Implementation Stage Stage 3 Post-Implementation Stage
1-29
Stage 1 Pre-Implementation Stage

Understand the need and the role of ERP and conduct the gap analysis Determine the requirements Develop Business case for ERP including the feasibility and the cost benefit analysis. Justification and approval for the project Send RFP to various Vendors and get quotes
1-30

Stage 1 Pre-Implementation Stage Develop Evaluation criteria for selection of suitable vendor Have final round of technical and commercial discussion, finalise the specs/requirements, negotiate and award the contract.
1-31

Stage 2 Implementation Stage Consider ERP implementation as a Project by itself, create project team with a project manager as in-charge of the team. Ensure representation from all sections/departments Develop and establish the Project Plan Plan and position required resources
1-32

Stage 2 Implementation Stage Make necessary arrangements for the vendor team systems / space availability, separate project room / individual personnel from each deptt responsible for co-ordination for the deptt.
1-33

Stage 2 Implementation Stage
Vendor Preparation : Finalizing the requirements with the user deptt and signing off with the Deptt Head. Developing the templates for capturing the existing data and creation of pertinent fields
1-34

Stage 2 Implementation Stage Vendor Preparation :
Suiting the ERP to the requirements and developing the data files and various application modules. Sign off on MIS requirments and developing suitable Templates. Training at various levels. Implement the ERP GO LIVE and attend to various problems during this phase.
1-35

Stage 2 Implementation Stage
Buyer Preparation :
Finalizing the scope of the ERP, transactional requirements and MIS and signing off. Providing the data as required to the vendor Approvals at various stages to move to next level
1-36

Stage 2 Implementation Stage Buyer Preparation :
Conducting reviews as per the schedule/ contingency and take appropriate measures/ actions Provide all the necessary support / resources to the vendor Go Live and monitor the implementation Check the reliability and integration with various other functions.
1-37
Stage 3 Post -Implementation Stage

Conduct audit / survey to assess the efficacy and the benefits. Extend the scope if reqd to add any new requirements. Employ corrective measures to remove certain inefficiencies in the system. Assess overall Business Performance and competitiveness.
1-38
Implementation Challenges
Inadequate Requirements Definition
To be decided before getting the proposal To sign off the requirements before commencement of the implementation Assist in finalizing the best suitable ERP and customization Failure chances high if this is addressed by the management
1-39
Resistance to Change
Users being skeptical ERP being transparent exposes the inefficiencies of each operation Co-operation is absolutely necessary Users be convinced before implementation and not forcing them to adopt Misconceptions / ignorance need to be addressed.
1-40
Inability to Achieve Organizational Understanding Understanding the new requirements of ERP, technical as well as system is essential for successful implementation. Training the relevant people is essential.
1-41
Inadequate Resources
Extremely important to provide the necessary resources manpower, infrastructure, IT support Getting right people to man the project and dedicate time for the project Otherwise this will affect the schedule drastically
1-42
Lack of commitment from Top Management
Support and commitment from Top Management providing required resources and direction to the team is very crucial. Top Management need to conduct reviews from time to time to assess the status and provide additional resources if required. Set reasonable goal and take appropriate decisions when required.
1-43
Not Ready yet ?
Preparedness of the organization to take up the project and the will to take off at the stipulated date/time commencing the implementation( Go Live ). Provisioning for the resources including fund allocations and making sure these are available as per the requirement.
1-44
Inadequate Training & Education
Lack of training the users will delay the process of implementation Initial 3- 5 months learning curve during the implementation phase expected and trainers should be available during the initial phase of implementation.
1-45
Inaccurate Expectations
Expectations of a company may exceed the capabilities of the system. (Vendor oversold) Organization not trained how effectively to use the system. While cost and time are underestimated, the scope is routinely overestimated(Performance)
1-46

Implementation Challenges Poor Package selection
Analyse the capability and assess that the provider has the capability and expertise to provide you the good solution. Choice Budget, time frames, goals and deliverables.
1-47

Implementation Challenges Poor Project Management
Project team members are competent, adaptable and with good inter-personal skills. Defined the scope, timeframes and budget and planned all the activities. Monitoring and control through reviews, feedback mechanism. Initiate suitable corrective measures to put on track.
1-48

Implementation Challenges Customization Issue
Modify the ERP to match the organizational processes or data structure Modify organizational processes to match that of ERP Finalization of all the requirements including MISs.
1-49

Implementation Challenges : Poor Communication and co-operation
Communication is the key for successful implementation. Corporate culture / systems and processes play a vital role. Value of trust between partners, employees and other stakeholders. Co-operation of all involved is critical.
1-50

Implementation Challenges : Quality and reliability of Data
During data entry, accurate date entry is important. Create checks to screen the data. Wrong / bad quality data affect the performance. Reliability checks are carried out to establish the system and validate the data.
1-51

Implementation Challenges : Improper Integration and use
ERP effective only when all Information system and modules are integrated. Success of ERP is nothing but success of integration. Critical challenge is the optimal utilization of the ERP solution to its best potential and reap benefits. ERP can create dramatic changes in business performance.
1-52

Enterprise Resource Planning: Unit Ii - Building Business Cases For Erp

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Enterprise Resource Planning: Unit Ii - Building Business Cases For Erp

Uploaded by

Copyright:

Available Formats

Enterprise Resource Planning

UNIT II BUILDING BUSINESS CASES FOR ERP

Christ University RADM ERP Jan 2012

Roles and Need for ERP?

Christ University RADM ERP Jan 2012

Roles and Need for ERP?

Roles and Need for ERP?

Roles and Need for ERP?

Roles and Need for ERP?

Roles and Need for ERP?

Implement Project Management techniques to review ERP implementation to see it is on on track

Christ University RADM ERP Jan 2012

Impact on operations / competition

Christ University RADM ERP Jan 2012

Other Issues Security Reliability Resource commitment ROI(Cost benefits)

Christ University RADM ERP Jan 2012

Competitive Environment Analysis

Competitive Environment Analysis

Competitive Environment Analysis

Competitive Environment Analysis

Christ University RADM ERP Jan 2012

Competitive Environment Analysis

Christ University RADM ERP Jan 2012

Competitive Environment Analysis

Selected ERP modules

Design Alternatives, continued

Maintain concurrent legacy systems

Net Present Value

Christ University RADM ERP Jan 2012

Christ University RADM ERP Jan 2012

INVESTMENTS COST ELEMENTS

INVESTMENTS COST ELEMENTS

Christ University RADM ERP Jan 2012

Strategic Needs Analysis

ERP Project Life Cycle

ERP Project Life Cycle

Stage 1 Pre-Implementation Stage

ERP Project Life Cycle

Christ University RADM ERP Jan 2012

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

Stage 3 Post -Implementation Stage

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

Christ University RADM ERP Jan 2012

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

ERP Project Life Cycle

Christ University RADM ERP Jan 2012

ERP Project Life Cycle

ERP Project Life Cycle

Christ University RADM ERP Jan 2012

ERP Project Life Cycle