Implementation of an ERP System

Implementing an ERP system in an organization is an extremely complex process. It takes lot of systematic planning, expert consultation and well structured approach. Due to its extensive scope it may even take years to implement in a large organization. Implementing an ERP system will eventually necessitate significant changes on staff and work processes. While it may seem practical for an in-house IT administration to head the project, it is commonly advised that special ERP implementation experts be consulted, since they are specially trained in deploying these kinds of systems.

Organizations generally use ERP vendors or consulting companies to implement their customized ERP system. There are three types of professional services that are provided when implementing an ERP system, they are Consulting, Customization and Support.

•Consulting Services – are responsible for the initial stages of ERP implementation where they help an organization go live with their new system, with product training, workflow, improve ERP’s use in the specific organization, etc.

•Customization Services – work by extending the use of the new ERP system or changing its use by creating customized interfaces and/or underlying application code. While ERP systems are made for many core routines, there are still some needs that need to be built or customized for a particular organization.

•Support Services – include both support and maintenance of ERP systems. For instance, trouble shooting and assistance with ERP issues.

The ERP implementation process goes through five major stages which are Structured Planning, Process Assessment, Data Compilation & Cleanup, Education & Testing and Usage & Evaluation.

1.Structured Planning: is the foremost and the most crucial stage where an capable project team is selected, present business processes are studied, information flow within and outside the organization is scrutinized, vital objectives are set and a comprehensive implementation plan is formulated.

2.Process Assessment: is the next important stage where the prospective software capabilities are examined, manual business processes are recognized and standard working procedures are constructed.

3.Data Compilation & Cleanup: helps in identifying data which is to be converted and the new information that would be needed. The compiled data is then analyzed for accuracy and completeness, throwing away the worthless/unwanted information.

4.Education & Testing: aids in proofing the system and educating the users with ERP mechanisms. The complete database is tested and verified by the project team using multiple testing methods and processes. A broad in-house training is held where all the concerned users are oriented with the functioning of the new ERP system.

5.Usage & Evaluation: is the final and an ongoing stage for the ERP. The lately implemented ERP is deployed live within the organization and is regularly checked by the project team for any flaw or error detection

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How can ERP improve a company’s business performance?

ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes it into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn’t handle the up-front selling process (although most ERP vendors have developed CRM software or acquired pure-play CRM providers that can do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer’s credit rating and order history from the finance module, the company’s inventory levels from the warehouse module and the shipping dock’s trucking schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. With luck, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. ERP can apply that same magic to the other major business processes, such as employee benefits or financial reporting.

That, at least, is the dream of ERP. The reality is much harsher.

Let’s go back to those inboxes for a minute. That process may not have been efficient, but it was simple. Finance did its job, the warehouse did its job, and if anything went wrong outside of the department’s walls, it was somebody else’s problem. Not anymore. With ERP, the customer service representatives are no longer just typists entering someone’s name into a computer and hitting the return key. The ERP screen makes them businesspeople. It flickers with the customer’s credit rating from the finance department and the product inventory levels from the warehouse. Will the customer pay on time? Will we be able to ship the order on time? These are decisions that customer service representatives have never had to make before, and the answers affect the customer and every other department in the company. But it’s not just the customer service representatives who have to wake up. People in the warehouse who used to keep inventory in their heads or on scraps of paper now need to put that information online. If they don’t, customer service reps will see low inventory levels on their screens and tell customers that their requested item is not in stock. Accountability, responsibility and communication have never been tested like this before.

People don’t like to change, and ERP asks them to change how they do their jobs. That is why the value of ERP is so hard to pin down. The software is less important than the changes companies make in the ways they do business. If you use ERP to improve the ways your people take orders, manufacture goods, ship them and bill for them, you will see value from the software. If you simply install the software without changing the ways people do their jobs, you may not see any value at all—indeed, the new software could slow you down by simply replacing the old software that everyone knew with new software that no one does.

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Guidelines for successful ERP implementation

Companies today have realized the benefits of having an ERP system in place. However, an ERP implementation has several facets to it and if not executed properly, could result in a business disaster rather than an advantage. We discuss five important parameters for a successful ERP implementation.

1) Backup of the executive management: The executive management should always be closely associated with an ERP implementation. Having a top down approach will ensure successful ERP implementation. This is because the top management can understand the company’s ability to adopt the changes and will push for the application until the last level, guaranteeing a faster implementation. On the other hand, a bottoms up approach will not result in a very smooth implementation.

2) Create buy-in among shop floor people: People are resistant to changes. And this holds true for ERP too. For instance, if you are implementing an ERP process in a manufacturing sector, you have to first understand the people who will use it. While the corporate people will accept it willingly, the people on the shop floors will definitely resist it. This stems from the fact that the shop floor people are scared of losing their jobs if you initiate any kind of technological changes. To overcome this, show the user benefits of the ERP implementation right at the start. For a successful ERP implementation, it is important to create a buy-in for the application amongst the people who will be using it.

3) Avoid excessive customization: ERP is like a lubricant that will help your business run faster. Many a times, people mold the ERP system to be implemented to fit their business processes. For a successful ERP implementation however, it is much easier to slightly tweak the business process rather than the ERP system. Most ERP systems don’t fit perfectly into an organization, due to different businesses and mindsets of people. Hence, instead of totally customizing or localizing an ERP system, it is more preferable to do a little bit of business reengineering.

4) Focus on what can be easily done, initially: For a successful ERP implementation, it is advised not to expect a 100% fit for your organization, initially. Any new implementation will have a hitch. It is always encouraged to first implement 70 to 80% functionality of the ERP software and then focus on the remaining 20% irritants. In this way, you will have quick gains among your stakeholders and complete the project on time. For instance, a certain company, while undertaking an ERP implementation, decided to first focus on solving 20% of the irritants, instead of implementing 80% of the functionality, which was easier. After rebuilding and reprograming, the implementation stretched from a deadline of four to seven months and all the resources were allocated towards addressing the problems. This also delayed implementation of 80% of the processes.

5) Training for smooth change management: People training is very important for any implementation. For a successful ERP implementation, it is vital to train the employees properly, after convincing them about its various benefits. Providing incentives could be one way to encourage quick learning among employees. Another method could be displaying to the employees how the implementation can help them address certain difficulties they might be facing in their day-to-day operations

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ERP usability and functionality: Must they be mutually exclusive?

Many ERP end users have come to accept that rich functionality comes with the tradeoff of a complex and hard-to-use system. An unintuitive user interface, loads of training and subsequent frustration simply comes with the territory.

But does it have to be this way?

A group of professors at Bentley University is tackling that question. Backed by a National Science Foundation grant, four Bentley professors — Wendy Lucas, Heikki Topi, Tamara Babaian and Jennifer Xu — have been studying ERP usability for the last three years. Led by Lucas, the team has studied ERP use at half a dozen companies, ranging in size and industry. They’ve presented their findings at academic conferences and before users, but they haven’t had the opportunity to tell a vendor yet; they’d love to, Topi said.

To be fair, the group said, these same challenges exist in the ERP context and apply to many of the large-scale enterprise software vendors, not simply SAP.

The problem is the whole way in which the system interacts with the user. For example, when the Bentley research team would ask a non-super user to do something they hadn’t done before, that user couldn’t do it. They typically ran right to expert users within the organization for help.

Additionally, ERP systems give the user terminology they don’t use in everyday work, the research team said. There are buttons on the screen that users don’t know what purpose they serve and fields that they don’t use. Tasks run across multiple screens, and users don’t understand why.

Heikki Topi, the associate dean of business graduate and executive programs, discusses the ERP usability project

The help systems and the help mechanisms provided through ERP systems aren’t usable either. People at the companies the Bentley research team interviewed would instead create their own notes for workarounds. The team found that having literally thousands of pages of cheat sheets in-house was far from the exception at most organizations. In many cases, users don’t even look to the help function, but to the big binder of workarounds. In one instance, the papers in the workaround binder had been laminated because they were referenced so often.

When it comes to navigation and the steps in completing a process, there is no indication of how far the user is into completion. Sometimes, there’s no indication of when it has been completed.

More important, many users don’t have any understanding of the broader implication of their part on the process, Topi said. And users often use third-party software to export the data — predictably, most often, it’s Excel — to complete their work outside of SAP.

ERP also lacks adaptability. Oftentimes, the information presented on the screen is irrelevant to the user’s particular task. That creates a lot of confusion, especially for new users.

Instead of being a command driven-tool, the system should help the user work as a partner, the research teamsaid. That partnership approach should play into design approaches, and the ERP system should be more collaborative.

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ERP software systems generates more income on a daily basis

A company that implements an enterprise resource planning (ERP) system can expect to enjoy increased revenue on a more regular basis, it has been suggested.

In a piece for Lon’s Article Directory, Janine Barclay noted businesses that have implemented the technology – such as SAP Business One – have discovered the numerous benefits of doing so.

The expert said companies should not be resistant to major changes, as ERP software provides them with the capabilities to gain many advantages.

She observed: “For instance, you might find ways to make products at a lower cost than you do now by improving the bottom line and being more competitive.”

Corporations considering an ERP deployment should make sure they read up on the software before doing so as this will allow them to better understand the processes involved, Ms Barclay added.

Writing for Panorama Consulting, Eric Kimberling advised companies to consider using an independent partner to help them through the ERP implementation operation.

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ERP customization boosts software value, but beware runaway costs

More companies have figured out that ERP customization is the key to realizing the software’s value but often blow their budgets and schedules implementing it, according to a new report from Panorama Consulting Group.

“What we’ve seen is that the customization levels are not only high, they’re increasing,” said Eric Kimberling, president and CEO of the Denver-based consulting firm. “It’s somewhat dispelling the myth that most companies can implement off-the-shelf ERP without any customization whatsoever. That’s some unfortunate hype that the industry’s using right now.”

The figures come from an online survey of 185 respondents — nearly a third of them manufacturers or supply chain providers — that completed ERP implementations in 2010.

The deep recession that began in 2008 apparently caused companies to spend less on ERP implementations and try to finish them sooner, according to Kimberling. The average ERP implementation cost fell from $6.2 million in 2009 to $5.48 million in 2010, and the average duration of ERP projects dropped from 18.4 months to 14.3 months.

“The fact that the numbers dropped as much as they did — that was a surprise to me,” Kimberling said.

“The good news here is it’s forcing companies to be lean and focus on value.”

The recession probably prevented companies from implementing entire ERP suites and instead forced them to focus on modules that provide the fastest return on investment, he said.

Still, nearly three-quarters of companies reported going at least 5% over budget, a sharp rise of 23% compared with the previous year.

Meanwhile, schedule overruns also increased significantly, to 61%, which represents a 26% jump.

Panorama hypothesizes that a steep drop in the percentage of companies that chose not to customize their ERP package was largely responsible for the more frequent overruns. In 2010, only 15% of companies went with the out-of-the-box version, nearly half the number in 2009. Kimberling said Panorama hopes to prove the correlation with further data analysis.

ERP meets expectations, but overruns disappoint

Panorama conducted a similar survey last year, and one in the inaugural year, 2008, both of which had well over a thousand validated responses. Kimberling said Panorama opted for a higher-quality sample this year, performing statistical analysis and selective confirmation of responses to ensure their validity. Because they could only respond if they completed their implementations in the calendar year, different companies were included in the two surveys.

Seeming to run against the negative trends were substantial increases in the percentage of respondents who said the ERP system met their expectations. The number of companies that saw at least half of the anticipated business benefits increased 9%, to 42%, while large drops were seen in those that realized less than half the expected benefits.

The takeaway lesson on ERP success factors, according to Kimberling, is for vendors and consultants to properly set expectations and not scrimp on the change management that can help manage project costs and duration.

SAP, Oracle, Microsoft continue to dominate shortlists

Panorama again asked ERP implementers which vendors had been on their shortlists for selection. SAP again led, at 38%, followed closely by Oracle, at 32%, then Microsoft, at 24%. Epicor, Exact, Infor, IFS, Lawson, Openbravo (the first open source vendor to make the top 10) and Sage were all in single digits.

But when companies were asked which vendor they eventually chose, Oracle bested SAP slightly, 22% to 19%. The order was similar in 2009, but with Oracle’s product lines broken out.

Kimberling, who said Panorama helps implement both vendors’ products and prefers not to play favorites, nonetheless suspects the numbers say something about the archrivals’ fortunes.

“That would suggest Oracle is taking market share from SAP,” he said. “This could be considered a leading indicator of where the market share is heading.”

Kimberling said Panorama also expects 2011 to be a strong year for customer relationship management (CRM), as IT purse strings have loosened enough to make more money available for CRM, which has a shorter payback period than most ERP modules and can help companies ride the recovery without adding staff.

“Companies are still in the cherry-picking mode with ERP,” Kimberling said, adding that increased demand for ERP among small companies in “high-growth mode” also bodes well for CRM, which fits well with their emphasis on new sales.

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Ensuring an ERP implementation delivers

Even with a perfect business survey and total understanding of the enterprise, any organization faces formidable implementation challenges regarding ERP. Any true IT leader has experience with other projects and core implementations, and knows this: Not only is the human equation involved (by virtue of changes in methods, practices and jobs), but all of the organization’s data, enterprise programs and systems also are up for review and potentially radical change.

As with any major business or IT change, define the ERP strategy in advance. Avoid going into any aspect of ERP if the business has a murky understanding of the technology, or if IT is making assumptions on the business’ behalf. Business drives business, with suggestions and support from IT. Do not proceed into any area without proper business understanding and sanction.

Be certain to complete a comprehensive survey that captures whole-enterprise resources for true ERP and management. Don’t overlook efficiencies to be had, costs to be cut or shared, redundancies that can be eliminated, and customizations that can be “umbrella-ed” over multiple areas or process — or that can be repurposed to other areas with minor tweaks.

What to avoid in an ERP implementation

The experiences of other organizations should help you avoid common mistakes, so perform due diligence as you would with any change management program. Keep in mind this survey conducted by Panorama Consulting Group LLC:

-More than half of companies that implement ERP systems get no more than 30% of the business benefits they expected.
-Of the 1,600 organizations surveyed, 72% said they were “fairly satisfied” with their ERP package. But this can be misleading, according to the study: “Some executives are just happy to complete projects … and give little thought to whether or not the company is better off with the new software or whether or not they’re getting as much out of the system as possible.”
-More than half (51.4%) of ERP projects went over budget, and about 35% of the respondents said their projects took longer than expected, the survey found.
How to avoid mistakes in an ERP implementation

The IT leader must engage the senior executives, achieve full-business buy-in, hold business’ and stakeholders’ feet to the fire about defining needs and expectations accurately, deliver ERP as a jointly owned system, and enable and ensure best use — and that’s it! Easy, right?

Highly recommended is a business implementation team (BIT). It’s headed by the IT leader, and involves key business stakeholders and IT staff members, who are steeped in knowledge about your organization’s business processes from the front- and back-office perspectives. The BIT must be recognized and sanctioned by senior executive management, thus ensuring engagement of members who are fully committed to traction and forward momentum.

By branding the team a business implementation team (as opposed to a technology implementation team or, in this specific case, the ERP implementation team), the emphasis is where it belongs — on the business of the organization, the business process and the business people. This is an important cultural distinction for the team and its subsequent engagement with ERP: It protects the IT leader and staff so they don’t get too far ahead of business’ desires, understanding and fully vested participation.

-First and foremost, ensure executive support: Know where you stand, what your sanctions are and the levels of support for every aspect of ERP. Executive buy-in is vital to ultimate success.
-Diagram existing business processes and map existing workflows, have “business eyes” acknowledge their accuracy and document them with a business sign-off.
-Diagram proposed changes to business process and new workflows in service to the business.
-Expose any “shadow” systems, procedures, workarounds and so forth, that fly under the radar. Unless it’s absolutely necessary, avoid continuing them because they would obviously undermine ERP’s advantages, reach and purpose. (In fact, your survey of the business should help tease these shadow processes out, and assist in documenting and formalizing them.)
-Ensure that financial support exists for customizations.
-Develop ROI measurements and analysis to expose present opportunities (and initial customization needs), as well as evolving opportunities against which you can assess the adaptability and affordability of an ERP system.
-Ensure that expected levels of customization are supported by available or future staff, and that consolidations of resources and any job eliminations are fully understood so as to serve true ROI. As such, the human resources department (HR) should have a presence on the BIT.
-It may sound obvious, but management and end users must be involved in every step of ERP implementation planning. Seek feedback through all steps and brand ERP as our shared system driven by business.
-In concert with business, define intentions and goals. Establish metrics for progress and the rapid exposure of problems for fast resolution during the implementation period, as well as use post-delivery

Determine whether a phased or all-at-once approach makes sense for your enterprise. The all-at-once approach may create too much disturbance and interruption, so part of this decision will be determined by the overall skill, culture and willingness of the organization’s business and IT staff. It will also be determined by the expectations of senior executive management and their sanction.

Organizations that have weathered comprehensive, challenging implementations have the experience, and therefore the culture to remain positive and push toward ultimate success. If your IT staff is a little green, or if your business counterparts are nervous, you may be better served by a phased approach.

Post-ERP implementation considerations

A post-implementation assessment of your ERP system is an important step, and should be followed by periodic reviews and actions:

-Following delivery, have an established roster of surveys and measurements to expose level of use versus best (expected) use of the system. Be prepared to modify and institute better surveys according to needs.
-Deliver survey results to senior executive management and respective functional business areas.
-Help the business carry out ERP’s effects: Close gaps in performance, conduct training, make suggestions, seek advice from the vendor and so forth.
-Place specific surveys and responsibility for reporting in business areas — in other words, tether ERP’s ROI to stakeholder observations.
-Guide all post-delivery business engagement regarding ERP through this prism: the maximization of all efforts toward best fit and best use.
-Survey for routine updates.
-Survey to anticipate necessary corrections.
Bottom line: Ensure sanction from senior executive management to make certain there is full stakeholder engagement in each functional area of business that comes under ERP’s influence. This will serve the implementation and its associated challenges, and will ensure ERP’s best use for maximum ROI.

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Advantages and Disadvantages of ERP Systems

There are many advantages of implementing an ERP system. A few of them are listed below:

• A perfectly integrated system chaining all the functional areas together
• The capability to streamline different organizational processes and workflows
• The ability to effortlessly communicate information across various departments
• Improved efficiency, performance and productivity levels
• Enhanced tracking and forecasting
• Improved customer service and satisfaction

Disadvantages of ERP Systems

While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:

• The scope of customization is limited in several circumstances
• The present business processes have to be rethought to make them synchronize with the ERP
• ERP systems can be extremely expensive to implement
• There could be lack of continuous technical support
• ERP systems may be too rigid for specific organizations that are either new or want to move in a new direction in the near future

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ERP systems ‘help improve multitasking management’

ERP software systems helps to improve multitasking management

Enterprise resource planning (ERP) software systems can help a company better organize its multitasking needs, it has been suggested.

Writing for Lon’s Article Directory, Alexa Benson noted the technology – which includes platforms such as SAP Business One – is becoming more popular among employers looking to save both time and money.

The expert observed the applications are such powerful tools that they can efficiently manage a complete office space.

She added companies are beginning to realise the benefits of the software, where “everyone wants to do things under a certain programming where they don’t have to bother to do things on their own, instead they do it all by pressing buttons”.

The technology can simplify accounting processes by improving invoice processing, speeding up collections and reducing credit risk, Ms Benson added.

A recent report from the Aberdeen Group, entitled ERP in Small and Medium-Sized Enterprises: Fuelling Growth and Profits, found the software can offer many benefits – such as real-time visibility – to small-scale organisations..

We are here to help you find a suitable ERP solution for your organization. Drop a few lines about your organization. You will be surprised by the right choice of the ERP solution that will offer 100 per cent satisfaction.

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ERP Software sector ‘being transformed by cloud computing’

ERP software sector ‘cloud computing being transformed’

The enterprise resource planning (ERP) software sector is seeing a process of evolution thanks to the growing popularity of cloud computing.

Analysis from Panorama Consulting suggests that a rising number of companies are looking to cloud-based ERP systems as they seek to leverage the maximum cost efficiency benefits from the technology, reports Channel Insider.

For example, a quarter of organisations are now employing off-site hosting for their ERP software, while another 17 per cent are relying on software-as-a-service delivery.

This is primarily occurring in certain targeted niches of business operations, including document management systems and customer relationship management infrastructures.

According to the report, this is helping to contribute to an overall fall in the average cost of ERP software implementation, with deployment times also falling on the whole in 2010.

This comes after Alan Bowling, chairman of the UK & Ireland SAP User Group, told Computerworld UK earlier this month that cloud-based ERP is becoming an increasingly prominent trend.

We are here to help you find a suitable ERP solution for your organization. Drop a few lines about your organization. You will be surprised by the right choice of the ERP solution that will offer 100 per cent satisfaction.

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