Erp

INTRODUCTION TO BPR & ERP

What is BPR

The fundamental rethinking and radically redesign of business processes to achieve dramatic improvement in critical, contemporary measures of performance such as cost, quality, service and speed.

The implementation of deliberate and fundamental change in business processes to achieve breakthrough improvements in performance.

Enabled by IT Also known as Reengineering or Process

Innovation is offered as an enabler of organizational transformation.

BPR Objectives:

To dramatically reduce cost Reduce time To dramatically improve customer services or to

improve employee quality of life To reinvent the basic rules of the business e.g.

the airline industry Customer satisfaction Organizational learning

BPR

Change: To transform an organization, a deep change

must occur in the key behavior levels of the organization: jobs, skills, structure, shared values,

measurement systems and information technology.

Role of IT BPR is commonly facilitated by IT e.g.

Organizational efficiency Effectiveness Transformation

BPR Transformation

Applications in the transformation category change the basic ways that people and departments work and may even change the very nature of the business enterprise itself. A major change in the organization, including structure, culture,

and compensation schemes

Efficiency Applications in the efficiency category allow users to work faster

and often at measurable lower cost Mere automation of manual tasks, resulting in efficiency

gains

Effectiveness

Applications in the effectiveness category allow users to work better and often to produce higher quality work. Requires changes not only in technology, but in skills,

job roles, and work flow (deeper).

Process

A process is set of logically related tasks performed to achieve a defined business outcome

A collection of activities that, taken together, create value for customer e.g. new product for customer. This tasks are inter-related tasks

How can Companies Identify their Business Processes. Manufacturing: As the procurement-to-shipment process

Product development as the concept-to-prototype process

Sales as the prospect-to-order process

Order fulfillment as the the order-to-payment process

Service as the inquiry-to-resolution process

Identify the need - consultant

Simple Rules Start with a clean sheet of paper.

With my current experience what can I do today

If I were to re-create this company today, given what I know and current technology, what would it look like.

How will I be focusing, organizing and managing the company?

Simple Rules - Consultant

Listen to customer

Enhance those things that bring value to the customer or eliminate those that don’t

Be ambitious, focus your commitment to radical change on the process

What is an enterprise

An enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve this goal.

(ERP – Alexis Leon)

What is ERP

“Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget about planning—it doesn't do that—and forget about resource, a throwaway term. But remember the enterprise part. This is ERP's true ambition. It attempts to integrate all departments and functions across a company onto a single computer system…”From the Darwin “Executive Guide” reading

Basic Idea

Unification of all key operational systemsIntegration is Geographic (multiple sites in USA, Europe & �

Asia for many large firms)Functional, with modules for Logistics� Financial� Human Resources� And more specialized areas, such as real �

estate

Problems:

Delays, lost orders, keying into different computer systems invites errors

Major Suppliers

SAP� Oracle� J.D Edwards� PeopleSoft� Siebel Systems�

Advantages Lower cost� Data entered only once, used by all �

processes and departments Better customer service� Current data accessible to all �

participants E.g. customer service rep can see

stock levels in other divisions, progress on order,

etc. Allows management of processes �

across organizational boundaries

Issues

Project cost is 2 to 10 times software price

High profile implementation failures Inflexibility

Can’t find better ways to do things Loss of supports for distinctive culture

Inherent complexity of global project Training costs for users easy to

underestimate.

Issues

Integration When doesn’t work well in one area Problems in integrating into other

systems Dependence

How to deal with things it won’t support? Upgrade

Like all software, frequent new releases can cause major disruption

Latest Trends

Increased Modularization of suites Shift to web based front ends Broadening to focus corporate

portals, external links.

ERP History

MRP Began its life in 1970 MRP asks the following

What products are we going to make What are the materials needed to make these

products What are the materials that are presently

available in stock What are the items that are need to be

purchased

Closed Loop MRP Planning of sales and Production levels Development of production schedules Forecasting sales planning Capacity planning and order processing

MRP II Sales and Operational Planning Financial interface and simulation

capabilities (Decision Making)

ERP Myths

MYTH: “Our project is not progressing as planned because it lacks management commitment”

FACT: Progress is often not achieved because of management burn-out. People involved can be disillusioned by promises made and expectations that were built-up by overzealous vendor reps, consultants who collect exorbitant fees as the project lingers and IT personnel who were looking for big budgets and the opportunity to rub shoulders with the “big boys.”

MYTH: “Our system went live in just a few months”

FACT: It is more likely that the financial part of the ERP went live in a few months rather than the whole system. Corporate financials are fairly straight forward to implement

MYTH: “Once we finished getting our ERP system up and running, our expenses went down drastically.”

FACT: Outside consulting fees may have been reduced and the initial costs for setting up the system are paid off, but companies often fail to take ongoing internal implementation investment into consideration. In the words of one CIO, “we planned for $600,000 and a 6 months project; we reached both and then stopped counting.” An ERP implementation extends over long periods of time, and any worth its salt will take years, not months

MYTH: “Consultants are professionals who can guide the selection process and manage the project while maintaining an objective stance.”

FACT: Its all

Myth: You Must Use Only the Latest ERP Technology

Fact: Although the latest ERP integration technologies offer many advantages to small business owners, they have their own share of problems. The biggest problem is the integration of new technology to the old. In some systems, you will find that retaining older applications may be more useful than overhauling it completely

Myth: Installing ERP System Means That You Can Keep Fewer IT Staff

Fact: The ERP system is not meant to replace your IT staff, it is there to help them with day-to-day problems related to maintenance and troubleshooting.

ERP and Related Technologies BPR Dataware Housing Data Mining OLAP Product Life Cycle Management Supply Chain Management CRM GIS Intranets and Extranes

Dataware Housing

Data warehouse is a repository of an organization's electronically stored data. Data warehouses are designed to facilitate reporting and analysis.

Data Mining

Data mining is the process of extracting hidden patterns from data. As more data are gathered, with the amount of data doubling every three years, data mining is becoming an increasingly important tool to transform this data into information

OLAP

is an approach to quickly answer multi-dimensional analytical queries

OLAP is part of the broader category of business intelligence, which also encompasses relational reporting and data mining

Product Life Cycle Mgmt

The product life cycle goes through many phases, involves many professional disciplines, and requires many skills, tools and processes.

Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures;

whereas product lifecycle management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view. To say that a product has a life cycle is to assert four things: 1) that products have a limited life

Supply Chain Management

Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (supply chain).

GIS

A geographic information system (GIS) captures, stores, analyzes, manages, and presents data that refers to or is linked to location.

In the strictest sense, the term describes any information system that integrates, stores, edits, analyzes, shares, and displays geographic information

CRM

Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with its current and prospective customers.

Security and ERP

Data Security: Computer owners and administrator use

a variety of security techniques like low-tech locks to hightech software scrambling

Passwords, use of firewalls, encryption of audits, creating backups, etc

Physical Security: Physical protection could be of human

access to buildings and information stored in critical rooms, in much the same way a bank are secured.

Crime and Security

A Dismissed employeee Employee with over all access Unauthorised access by a

criminial(hacking) Virus

Worms, trojans etc.

ERP Modules Technical Modules

Basis ( SAP Administration) ABAP ( SAP Coding)

Functional Modules Finance Module Manufacturing Modules HR Module Materials Management Production Planning Plant Maintenance Quality Management Module Purchasing module Marketing Module Sales and Distribution module

Finance Module

Gather Financial Data from different departments

Generates valuable financial reports such balance sheet, general ledger, trail balance, and quarterly financial statements.

Sub-Systems Financial Management ( general ledger, accounts

receivable/payable, special ledger, fixed asset accounting, Legal consolidation)

Investment Management ( Investment Planning/budgeting/controlling, depreciation forecast/forecast.

Controlling( Overhead cost controlling, activity based costing, product cost accounting, profit ability analysis)

Treasury ( Cash management, treasury management) Enterprise controlling ( business planning and

budgeting)

Manufacturing Module

It Provides the information base upon which the entire operation should be run.

It contains the necessary business rules to manage the entire supply chain process.

Sub-Systems Material and capacity Planning Shop floor control Quality management JIT/Repetetive management Engineering data management Engineering change control Configuration management

HR Module

Streamlines the management of human resources and human capitals.

Maintain complete employee database

Sub-systems Personnel Management Organizational Management Payroll accounting Time management Personnel development

Materials Management

Maintains the appropriate level of stock in a ware house.

Activities Identifying inventory requirement Monitoring item usages Reporting inventory status Integrating inventory control to sales ,

purchase and finance modules and generate executive level reports.

Production planning Module Optimizes the utilization of

manufacturing capacity, parts, components material resourcing using

historical production data and sales forecasting.

Plant maintenance module

Provides technical and business reports and various presentation options Eg: organization unit, location, execution

period for the tasks. This info helps to reduce the duration and

costs of plant down times Subsystems

Preventive maintenance control Equipment tracking Component tracking etc.

Quality Management Module

Supports different quality management Modules Quality Planning Quality Inspection Quality Control

Purchasing Module

Streamlines the procurement of required raw materials.

Automates the processes of identifying potential suppliers

Negotiating price Awarding the purchase orders to the

supplier Billing process.

Marketing module

Maximize the efficiencies of marketing resources

Empowers marketers to acquire and develop long term customer relation ship. Marketing resource management Segment management Campaign management Email marketing Trade promotion management Lead management Marketing analytics Web based marketing surveys

Sales and Distribution

Implements functions of Order placement Order scheduling Shipping and invoicing

Closely integrate with the ecommerce websites

Sales related business transaction Sales queries such as inquiries and

quotations Sales orders Outline agreements ( Contracts and

scheduling aggmnts) Delivery/shipment Invoicing/billing After sales support

Basic Functions Inquiry handling Quotation preparation and processing Contract and contact management Monitoring the sales transactions Checking the availability Transferring requirements to material planning Scheduling the delivery Calculating prices/taxes Checking credit limits invoicing/billing Printing/edocuments

Phases of ERP Implementation Pre – Evaluation screening Package evaluation Project Planning Phase GAP Analysis Re-engineering Customization Implementation team training Going Live End user training Post-implementation

Transition strategies

Big bang strategy Phased Parallel Process line Hybrid

Big Bang Strategy

Installation of all modules will happen at once

Promised to reduce the implementation cost

Higher failure rate Not many organizations dare to

attempt anymore Requires careful preparation and

sound planning

Advantages Overall cost of implementation is less

( No interface app) Eliminates all the sequencing and

decision making of implementing one module at a time

Well designed for rapid implementations Avoid complex integration issues

Disadvantages Amount and cost of planning and

preparation is high Bottlenecks are high ( Lack of funds and

resources etc) Recovery process is very difficult if

something goes wrong Consequences of failed implementations are

huge may lead to shut down of business itself

Variants in big bang

Mini big bang Takes single big bang approach and break into

multiple sections ( based on few modules) Mega big bang

With multiple sites, all going live at a time Do or die situation

Multi mega big bang Multiple big bangs for multiple geographical

locations For large companies which are located in

different geographical locations

Phased implementation

Implements one module at a time Limits scope for one functional

department at a time Suits to companies that do not share

many common processes across departments and units

Integration will be done later part Reduces the risk of implementation,

customization and operation of system

Advantages Allows to implement module at time Risk of implementation failure is less Total number of resources required is

less at a time Scheduling of people is convenient

Disadvantages Large number of resources required ,

because of conversion and interface problems.

Overall and cost of implementation is high

High turn over rate because of the length of duration.

Parallel Implementation

Keeps both the legacy system and new system simultaneously active for some time

Have good recovery options in case something goes wrong

Gives good psychological cushion as both the systems running parallel

Advantages Ideally suited for mission critical situations that

cannot survive major malfunctions Advantageous for the business environments

which require utmost stability like finance, pharma, insurance etc

Disadvantages But requires more resources Confusion may erupt when people don’t interact

with the both the systems Not suitable for which the legacy system has an

expiration date ( y2k issue)

Process Line Transition Strategy

Conceptually similar to mini big bang But breaks implementation strategy to

manage parallel business flows and product lines

Mainly utilized by small and mid sized companies which have less critical processes

The smaller process lines, which pose less risk and have a higher probability of success, usually go first. Increasing its overall probability of success.

Hybrid Transition strategy Combination of process line, phasing

and parallel implementation. Tend to evolve into the needed

configuration as ERP team members learn and analyze information.

Small single site ERP implementations tend to have a simple hybrid strategies

Flexible in adapting to the specific needs of the situation.

Choosing a strategy

Technical resource availability Number of users Consultant availability Structure of erp team Deadlines Reliability Hardware resources

ERP Implementation Process

Before you leap consider How do we want to run our business? What problems need to be resolved? Do we know and understand our priorities? Have we defined an action plan for pre-implemntation

activities What tasks will be accomplished and by what dates? What are the missing links in our software of choice? What are real costs, benefits, and timetable Do you have an executive level ERP champion that

provides link to top management Who will implement ERP and make it work?

Pre-implementation planning session

Assembling the participants – stakeholders Need analysis review Project vision and mission statements creation Determination of organization structure Determination of modules to be implemented Creating the core team Establishing the training needs Establishing the data conversion strategy Establishing interface Determining work estimates Cost of consultants Calculation of implementation time Identifying constraints Establishing policies and guidelines

Implementation Methodologies Adoption decision Acquisition Implementation Use and maintenance Evolution Retirement

Organization of the project team

CEO Steering committee Project Manager Project team Consultants Vendors

Implementation strategy

Speed or urgency of implementation Availability of people for carrying out

the implementation tasks Availability of time for training all

users Cost Confidence in the new system Disruption to operations Total timescale

ERP implementation plan

Risk Assessment

Budget

Cost

Hardware Operating system Database license fee Core software license fee Additional module license fee Additional seat license fee Third party software license fee Integration of third party software Software customization Project Management

Cost

Consultancy Training Living and travel expenses Software maintenance or warranty

renewal upgrades

Performance measurement

Performance Related Measures Costs, time and benefits, deliverables Objectives vs actual Asses the variation Learn Apply in further phases

Problem Resolution

Issues which are raised and which will require resolution

Agreed procedure to resolve issues and their resolution

Keep the track of problems Close the issues which are resolved.

System Issues

How does the system perform when the erp app is under heavy use?

How quickly will space be consumed when the system is live

What is the backup procedure Can production server be maintained? What happens when two persons try retrieve

the same data Does the system locked, if so, how it can be

unlocked Do the locations of pcs and printers required to

be changed

How secure the system How will be the user access be

selectively restricted How are passwords managed Automated logout facility Disaster recovery procedure

Implementation methodologies by vendors and consulting firms Methodology is a road map to

implementation Diff vendors have diff methods Mainly used for marketing purposes Now methods used in

implementation based on their experience.

Hidden Costs

Eights areas most likely result in budget overruns Training Customization Integration and testing Data conversion Data analysis Consultants Employee turnover Continuing maintenance

Training and education

Define Learning Objectives Determine Content Plan Deliver Asses Learner Review effectiveness of the training

program

Data migration

Translating data from one format to another

Good data migration solution Reduce risk Low operational expenses Improve data quality