Title: Enterprise Resource Planning (ERP)
1Enterprise Resource Planning (ERP)
- Doug Anderson
- William Hodge
- Raj Vardhan
2How ERP Affects Managers
- Finance
- Production
- Human Relations
- Customer relations
- Sales
- Warehousing/Inventory
- Manufacturing
- Purchasing
3Definition
- ERP (enterprise resource planning)
- A business strategy that integrates
manufacturing, financial and distribution
functions to dynamically balance and optimize the
enterprise's resources. - An integrated application software suite that
balances manufacturing, distribution and
financial business functions. ERP is the
technological evolution of manufacturing
requirements planning (MRP) II through the
introduction of relational database management
systems (RDBMSs), computer-aided software
engineering (CASE), fourth-generation language
(4GL) development tools and client/server
architecture. When fully implemented, ERP can
enable enterprises to optimize their business
processes and allows for necessary management
analysis and appropriate decision making in a
quick and efficient manner. As more-robust
technology is implemented, ERP improves an
enterprise's ability to react to market changes.
Gartner Group
Source www4.gartner.com/6_help/glossary/GlossaryM
ain.jsp, viewed 10/13/03
4ERP Scope
MANUFACTURING
FINANCIAL
DISTRIBUTION
HUMAN RELATIONS
ERP
SALES
INVENTORY
WAREHOUSING
5ERP Scope
Sources www.sap.com/businessmaps/pdf/Industrial_M
achinery__Components_Solution_Map.pdf , viewed
10/13/03
6ERP Evolution
- Manual records
- Separate Inventory control Production control
- 1960s Material Requirements Planning (MRP)
- Use bill of material, inventory, and schedule to
plan production - 1970s Closed loop MRP
- Adds sales operations planning, master
production scheduling, capacity requirements
planning to MRP - 1980s Manufacturing Resource Planning (MRP II)
- Business planning, production planning (sales
operations planning), master production
scheduling, MRP, capacity requirements planning,
and the execution support systems for capacity
and material - 1990s Enterprise Resource Planning (ERP)
- MRP II with graphical user interface, relational
database, use of fourth-generation language, and
computer-assisted software engineering tools in
development, client/server architecture, and
open-system portability
- Sources
- Preston W. Blevins, Enterprise Resource Planning
(ERP) An Executive PerspectiveAn Update, APICS
2000 International Conference Proceedings, pp.
208-216 - George W. Plossl, Making ERP Systems Really
Work, APICS 2000 International Conference
Proceedings, pp. 122-125 - APICS Online Dictionary, members.apics.org/Publica
tions/dictionary Viewed 10/29/03
7Sophistication Levels
- Data Management System
- Organization views ERP as a large repository for
organizational data - Data printed on reports distributed
- No analysis
- Software Modules/Shared Database
- All systems use same data
- Most common perception
- Manufacturing Philosophy
- Collection of Rules Procedures for planning
reporting
Source Karl M. Kapp, Maximizing Your ERP
System, APICS 2002 Conference Proceedings, Paper
B-02
8Sophistication Levels
- Business Philosophy
- Upper Management sets parameters, thresholds,
etc. - Organization relies on ERP for information and
direction - Begins to provide a strategic advantage
- Knowledge Management System
- Use of information to make intelligent and timely
decisions - Contains information, alerts, reports to
provide decision makers with accurate, up-to-date
information
Source Karl M. Kapp, Maximizing Your ERP
System, APICS 2002 Conference Proceedings, Paper
B-02
9ERP Suppliers
- SAP
- PeopleSoft
- J.D. Edwards (PeopleSoft)
- Oracle
- Baan (SSA Global)
- Computer Associates
- IFS
- Microsoft (Axapta, Great Plains, Navision)
- Manugistics
- Agilisys
- many others
10ERP Market
- Manufacturing Sector
- 1999 15 B (Peak)
- 2002 8.5 B
- 2007 11.9 B (Proj.)
- 5.8 growth
Sources David Kodama, Jump Starting ERP,
Managing Automation, March, 2002
www.arcweb.com/common/inc/news_win2.asp?ID328,
Viewed 10/18/03
11ERP Market
- Historical Market
- Large manufacturing companies (Tier 1)
- 15 B at peak (1999)
- Driven by Y2K concerns
- Historical Results
- Incredibly risky for early adopters
- bet-our-company type of failure
- Heavy reliance on consultants significantly
increased project costs
Sources www.arcweb.com/common/inc/news_win2.asp?I
D328, Viewed 10/18/03 Carol V. Brown, Iris
Vessey, Managing the Next Wave of Enterprise
Systems Leveraging Lessons from ERP, MIS
Quarterly Executive, Vol. 2, No. 1, March 2003
12ERP Market
- Future Market
- Mid-size companies (Tier 2)
- 2002 41 of total market, 6.3 growth
- ERP Services
- Tier 1 re-architecting solutions
- Tier 2 68 of total revenue
- Pre-packaged solutions
- Portal solutions
- Europe, Middle East, and Africa
Sources www.arcweb.com/common/inc/news_win2.asp?I
D328, Viewed 10/18/03
13Points to Ponder
- Structured Methodology Strategy
- People
- Process focused
14ERP Points to ponder - II
- 1) assess the risks of the change up front (the
most serious are the changes needed in the
business, not the changes in the technology), - (2) mitigate the causes of highest risk at the
front end and as the project progresses, - (3) adjust the method of managing the project to
minimize the remaining risks.
Sources www.misqe.org/jsp/showabstract.jsp?ob126
ob24
15Selection Criteria
- Functional Specs - what you want to do with the
software and what the software will accomplish.
(If you don't spend time and money every vendor
in the market is a candidate in your list !)
16ERP and Windows OS
- Due to changes in Windows operating systems ERP
companies are not able to use the same software
to include the modern technological changes and
hence they spend a fortune on developing new
codes every 5 years. - This results in huge software budgets apart from
the networking expenses and hence the total
operating budgets are increasing year after year.
17 18Company Info
- Index Membership SP 600 Small Cap
- Sector Capital Goods
- Industry Construction Services
- Employees (last reported count)1,938
Source Jacob Thomas Interview, 10/29/03
19Financial Results
- Sales and Service Billings increased while the
Profits were gradually decreasing. - Two companies were acquired within the same
period. - New European operations started.
Source Jacob Thomas Interview, 10/29/03
20Project
- Project Sponsor
- CFO
- Project Manager
- Project Director
- Original Project Schedule
- Duration 9 Months
- Original Go Live Date September 30, 2001
- Original Project Budget
- 300,000
- Conversion of Payroll Module from World to One
World software of JD Edwards ERP. -
Source Jacob Thomas Interview, 10/29/03
21Selection
- Selection Team
- Business units
- Insituform East (sister company)
- IS Department
- Proposals
- J.D. Edwards selected since JD Edwards was the
main vendor for all the other modules.
Source Jacob Thomas Interview, 10/29/03
22Selection
- Modules selected
- Payroll
- Human Resources
- All other modules will reside on the World
Software while the above two alone will be on the
One World Software Such systems are called
Co-existence systems They use the same DB2
database while the front end programs are coded
in C in the One World Software
Source Jacob Thomas Interview, 10/29/03
23Implementation
- Both the Payroll and HR to go live together.
- 10 consultants were used.
- Software customized to meet all requirements.
- Couple of Project Directors were involved.
- Target to go live was Sept 2001 Went live in
Dec 2001. - Took 3 more months to iron out the rest of the
issues.
Source Jacob Thomas Interview, 10/29/03
24Project Results
- Original Project Budget - 300,000
- Final Project Cost - 600,000
- Functionality - gt 85 of desired functionality
within one year. - Future Projects To move all the other modules
to One World. Target date to complete the
project is June 2005.
Source Jacob Thomas Interview, 10/29/03
25ERP Example
26ERP Example
27ERP Example
28ERP Example
29ERP Example
30ERP Example
31ERP Example
32ERP Example
33ERP Example
34ERP Example
35 36Company Info
- Privately held
- Sector Services
- Industry Printing and Distribution
- Employees Around 500
- Operations in US and UK
37Financial Results
- Sales for year 2002 330 Million
- Budget for IS for 2002 20 Million
- Sales for year 2001 - 343 Million
- Budget for IS for 2001 18 Million
- 2002 - Lost some major clients to competitors due
to higher prices on warehousing and product
distribution.
38Project
- Project Sponsor
- CFO
- Project Manager
- IS Director
- Original Project Schedule
- Duration 15 Months
- Original "Go Live" Date April 1999
- Original Project Budget
- 8 Million
- Conversion of Legacy system to JD Edwards ERP
39Selection
- Selection Team
- Business Units
- IMS (Group Company until 2002)
- IS Department
- Proposals
- JD Edwards World selected as the Hardware
- AS/400 was already available and there
- was no need to buy a system. The only
ERP - with all functionalities to run on
AS/400 at that - time.
40Selection
- Modules Selected
- Sales Order
- Accounts Receivables
- Accounts Payables
- Distribution/Logistics (Shipping)
- Warehouse Inventory
- Purchase Order
-
-
41Implementation
- All modules to go live together.
- 25 consultants were used.
- Software customized to meet all user needs.
- Two Project Directors were involved.
- Target to go live April 1999 Went live in
October 1999 ! - Took more than a year to iron out issues.
42Project Results
- Original Budget - 8 Million
- Final Project Cost - 18 Million
- Functionality - gt 90 within one year.
- Future Projects Manufacturing and EDI
(Electronic Data Interchange) enhancements for
Bankers.
43Comments
- The users in the company realized the benefits
after 2 years of implementation. - Orders were repeated for various warehouses with
one single mouse click. - The total order processing time from start to
finish improved almost 30 . - Financial Reports were produced by the users
without any need of additional Programming.
44Lessons Learned
- Multi Currency module did not go live as it had
several issues. Resulted in using excel
spreadsheet for a couple of weeks !! Microsoft
Products are useful !! - Let the Team Members decide as they know the
actual requirements of the "users"
Source Bob Bradshaw Interview
45 46Background
- Products
- Equipment for public safety vehicles
- Light bars, flashers, sirens, speakers, and push
bumpers - Small Manufacturing Enterprise
- Created 1974
- Revenue 50 Million
- Employees 270
- 2 manufacturing sites (1 for sub assemblies)
- Purchased by Britax Ltd. 1998
- Source
- www.code3pse.com/about.asp viewed 10/15/03
- Ray Scott Interview, 10/15/03
47Background
- IS Department
- Size 5, including Director
- Budget 0.5 Million
- Previous ERP Experience
- Home Grown system
- Not integrated
- Not Y2K compatible
Source Ray Scott Interview, 10/15/03
48Project
- Project Sponsor
- Vice President of Operations
- Project Manager
- CFO
- Original Project Schedule
- Duration 10 Months
- Original Go Live Date September 30, 1999
- Original Project Budget
- 1.5 Million
Source Ray Scott Interview, 10/15/03
49Selection
- Selection Team
- Business units
- Code3
- Kustom Signals (sister company)
- IS Department
- Proposals
- J.D. Edwards selected
Source Ray Scott Interview, 10/15/03
50Selection
- Modules selected
- Financial
- Order entry
- Product configuration
- Product data management
- Inventory control
- Shop floor control
- Shipping
- Sales
- Sales reporting
Source Ray Scott Interview, 10/15/03
51Implementation
- Financials installed first
- Manufacturing modules installed together
- ERP Vendor implemented system
- 3 Consultants used throughout project
- Pilot individual modules
- No customized code
- Changed business processes to match software
Source Ray Scott Interview, 10/15/03
52Results
- Initial results
- Did not pilot Go Live
- Quite a struggle for first 2 weeks
- Duplicate Invoices Orders
- CEO suggested going back to old system after 1
month - Major problems worked out in 6 months
- Really comfortable in 2 years
- Project Manager (CFO) full time for 2 years
Source Ray Scott Interview, 10/15/03
53Project Results
- Actual Project Schedule
- Go Live Date June 30, 1999 (ahead of schedule)
- Original Project Budget
- 1.5 Million (on budget)
- Functionality
- gt80 of desired functionality within 2 years
Source Ray Scott Interview, 10/15/03
54Precision Pattern, Inc.
55Background
- Products
- Executive Aircraft Furniture
- Small Manufacturing Enterprise
- Founded 1972
- Revenue 30 Million
- Employees 300
- 1 manufacturing site
- Part of Cabin Management Group of Decrane
Aircraft, Ltd.
Source Kate Keltz Interview, 10/16/03
56Background
- IS Department
- Size 3
- Previous ERP Experience
- Home Grown Foxpro system
- Inadequate for many uses
- Written in late 1970s early 1980s
Source Kate Keltz Interview, 10/16/03
57Project
- Project Sponsor
- President
- Project Manager
- IS Manager
- Original Project Schedule
- Original Go Live Date August 31, 2003
- Original Project Budget
- 1.2 Million
Source Kate Keltz Interview, 10/16/03
58Selection
- Selection Team
- Business unit
- IS Department
- Characteristics
- High Volume, Custom Order manufacturing
- Very MRP-based
- Proposals
- Originally 5-6 vendors
- Glovia selected
Source Kate Keltz Interview, 10/16/03
59Selection
- Modules selected
- Financial (3 divisions)
- Planning
- Engineering
- Purchasing
- Sales
- Inventory
Source Kate Keltz Interview, 10/16/03
60Implementation
- Financials installed first (May 2003)
- Manufacturing modules installed together
- ERP Vendor implemented system
- No consultants used in project
- No changes to business processes
- Customized a fair amount
- Software designed for automotive industry (High
volume, Repetitive manufacturing) - Minimal training
Source Kate Keltz Interview, 10/16/03
61Results
- Initial results
- Financials successfully implemented
- Manufacturing modules still being implemented
- Actual Project Schedule
- Go Live Date November 2, 2003 (projected)
Source Kate Keltz Interview, 10/16/03
62 Five Success Factors
- For Complex, Value-Chain-Spanning projects
- 1. Top Management is engaged in the Project,
not just involved. - 2. Project Leaders are veterans and team members
are decision makers. - 3. Third parties fill gap in expertise and
transfer their knowledge. - 4. Change management goes hand-in-hand with
project management. - 5. A satisficing mindset prevails.
Source Carol V. Brown, Iris Vessey, Managing
the Next Wave of Enterprise Systems Leveraging
Lessons from ERP, MIS Quarterly Executive, Vol.
2, No. 1, March 2003
63Success Factors
- Engage Top Management, not just involve
- Insituform CFO
- Schwarz CFO
- Code3 VP Operations
- Precision Pattern President
64Success Factors
- Experienced Project Leaders other team members
are decision makers - Insituform Leader Project Director
- Schwarz Leader IS Director
- Code3 Leader CFO
- Precision Pattern Leader IS Manager
65Success Factors
- Third parties used to fill gaps in expertise and
training - Insituform 10 consultants
- Schwarz 25 consultants
- Code3 Vendor used to install software,
Consultants used to determine configuration rules - Precision Pattern Vendor used to install
software, No consultants used
66Success Factors
- Change Management
- Insituform Customized to meet all requirements
- Schwarz Customized to meet all user needs
- Code3 Very few changes to software Business
processes changed to match software best
practices - Precision Pattern Many changes to software
Software changed to meet manufacturing style
67Success Factors
- Satisficing Mindset
- Insituform
- Schwarz
- Code3 Very few changes to software
- Precision Pattern Many changes to software
68Standish Group CHAOS ReportIT Projects
classification
Type I Success on time, on budget, promised
functionality Type II Challenged over-budget,
over-time and or missing
functionality Type IIIFailed Severely
impaired projects cancelled projects
Source Lacity, Mary C., Course presentation
clserver.ppt, p. 10
69Project Classifications
- Insituform Type II (Over budget, Late
completion) - Schwarz Type II (Over Budget, Late completion)
- Code3 Type I (On Budget, On-time completion)
- Precision Pattern Type II (Late completion
70Lessons Learned
- The commandments
- 1. Thou Shalt Acquire and Sustain thy
Managements Support. - 2. Thou Shalt Establish Accountabilities for the
Accuracy of thy Data. - 3. Thou Shalt Set Objectives and Measure thy
Performance Against Them. - 4. Thou Shalt not Place thy Least Experienced in
thy Companys Most Critical Position. - 5. Thou Shalt not Economize on Educating thy
People. - 6. Thou Shalt not Endeavor Implementation Without
Experience. - 7. Thou Shalt not Duplicate the Informal System
on thy Computer. - 8. Thou Shalt not Bear False Witness Declaring
Extended ERP a Data Processing System. - 9. Thou Shalt not Omit Tasks in thy Haste nor
Prolong Them for thy Comfort. - 10. Thou Shalt not Expect Extended ERP to
Eliminate all thy Problems
Source Blevins, Preston W., Enterprise Resource
Planning (ERP) An Executive PerspectiveAn
Update, APICS 2000 International Conference
Proceedings, pp. 208-216
71References
- http//www.openitx.com/archives/archives.asp?i700
94