3. Project Management A Case Study Of A Successful Erp Implementation


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3. Project Management A Case Study Of A Successful Erp Implementation

  1. 1. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1753-8378.htm IJMPB 1,1 Project management: a case study of a successful ERP implementation 106 Fergal Carton, Frederic Adam and David Sammon Business Information Systems, University College Cork, Cork, Ireland Received 5 August 2007 Accepted 20 October 2007 Abstract Purpose – The success rate of enterprise resource planning (ERP) implementations is not high in view of the sums invested by organisations in these applications. It has often been indicated that a combination of inadequate preparedness and inappropriate project management have been responsible for the low-success rate of ERP implementations. The purpose of this paper is to present a case study of a successful ERP implementation. Design/methodology/approach – In this paper, the authors use a case study of a very successful roll out of an ERP application in the Irish subsidiary of a UK multinational to investigate the validity of one of the most commonly cited project management frameworks, the project management body of knowledge (PMBOK), to ERP projects. Discussing each category of the framework in turn, the case data to illustrate where the PMBOK framework is a good fit or needs refining for ERP projects is used. Findings – It is found that, by and large, PMBOK, because it is a very broad framework, can shed light on most of the key aspects of an ERP project. However, the specificities of this type of project require a different emphasis on some of the factors, as discussed in the authors conclusions. The case analysis also raised some interesting insights into how companies evaluate the success of such highly complex change management initiatives. Research limitations/implications – This research work will need to be extended to cover other case studies of ERP implementation across other industries and organisational contexts; for example in less tightly regulated industries and smaller organisations. Practical implications – This discussion will be of great value to ERP project managers who are in the early stages of a project and need to understand and anticipate the areas which will require specific attention on their part, based on their knowledge of the specific circumstances within their organisational context. Originality/value – This paper presents an investigation into the project management strategy adopted in the Pharma Inc. case and illustrates the mechanics of a successful ERP project implementation, categorised using the PMBOK framework. Keywords Manufacturing resource planning, Project management Paper type Case study 1. Introduction A considerable volume of research has been carried out on enterprise wide systems and most notably on enterprise resource planning (ERP) systems. This research has established that on the one hand, significant benefits can accrue to organisations implementing these systems (Shang and Seddon, 2002) but on the other, many International Journal of Managing implementations are not conclusively successful (Holland et al., 1999). There is Projects in Business evidence that the degree to which organisations prepare themselves for their Vol. 1 No. 1, 2008 pp. 106-124 implementation projects has a bearing on whether they encounter many problems q Emerald Group Publishing Limited 1753-8378 during implementation and ultimately, whether they achieve any of the benefits they DOI 10.1108/17538370810846441 sought (Sammon et al., 2004). It also appears that inadequate project management leads
  2. 2. to short-term solutions being applied to the problems that occur during the Project implementation of ERP systems with substantial side effects when systems go live management (Saint-Leger and Savall, 2001). Previous research has indicated that the scope and complexity of ERP implementations are different from traditional analysis and design projects (Davenport, 2000) suggesting specific project management strategies should be developed to tackle the specific challenges of such projects. In particular, it is argued that ERP projects are often associated with the widespread “re-engineering” of 107 business practices, whereas traditional projects have smaller organisational “footprints” and are designed to match current practices. In this paper, we leverage our investigations of a very successful ERP implementation in a multinational pharmaceutical company (Pharma Inc.) to gain an insight into the project management strategy adopted to manage what was a successful ERP implementation. To facilitate the presentation of our findings from this case investigation we use the nine areas of the project management body of knowledge (PMBOK) framework. The remainder of this paper is organised as follows. The next section presents the PMBOK framework, which has been put forward as a best practice vehicle to understand project management in information systems (IS) projects (Project Management Institute – PMI, 2000). In the second section, we present the case study protocol we followed and the methods we applied to the case study of Pharma Inc. In the third section, we review the findings of the case under the nine headings of the PMBOK framework and, finally we propose conclusions towards excellent project management practices for ERP projects. 2. The PMBOK framework Project management helps project managers to standardise routine tasks and ensure that available resources are used both efficiently and effectively. The application of its principles allows senior managers to establish and use appropriate measures of success, to quantify value commensurate with cost and to optimise the use of organisational resources. Project management as a discipline is only a recent concept and yet, over the past 50 years a considerable body of knowledge has been built up around its tools, skills and techniques. The PMI is acknowledged as the pioneering group worldwide for bringing professionalism to the area of project management. The PMI boasts a worldwide membership of several hundreds of thousands. The PMI provides a variety of services for project managers, including: education and certification, and standards in the form of the PMBOK. The PMI produced the first version of the PMBOK in 1987 and the PMBOK has been continually enhanced since then, with the third edition produced in 2000. The PMBOK is a set of standards (management best practices that are common to projects) and it describes the sum of knowledge within the profession of project management. The body of knowledge rests with practitioners and academics that apply and advance it (PMI, 2000). The PMBOK is organised into nine knowledge areas that are considered a subset of project management and describes the knowledge and practices in terms of the component processes required to ensure a project is properly coordinated (PMI, 2000) such that the project: . will satisfy the needs for which it was undertaken; . will be successfully completed in a timely fashion and within the approved budget;
  3. 3. IJMPB . will make the most effective use of people involved; 1,1 . will have timely information provided; . will avoid unnecessary risks; and . will have the required external resources available. The processes within each knowledge area interact with each other and with the 108 processes in other knowledge areas. Each process has an input for the process tools and techniques to carry out the process, and an output from the process. While each process presented within the knowledge areas appear as discrete elements with well-defined interfaces, some interaction and overlap is expected in practice. The nine areas are illustrated in Table I. 2.1 The application of the PMBOK framework to ERP projects One of the recommendations of the PMI is that although the PMBOK is generally accepted and there is widespread consensus regarding the value and usefulness of the nine knowledge areas, it does not mean that the knowledge and practices described should be applied uniformly on all projects. Ultimately, “the project management team is always responsible for determining what is appropriate for any given project” (PMI, 2000, p. 3). Therefore, one issue of importance in this paper is whether this PMBOK framework is immediately applicable to ERP projects. It is useful to consider to what extent ERP implementations are like or unlike other IS projects. Prima facia, most of the salient points (either good or bad) that have been reported about ERP projects in the literature, either in terms of case studies or in terms of critical success factor (CSF) research, seem to fall naturally within these categories. Thus, we can argue that there is a good fit between the PMBOK “traditional” framework and ERP projects. Knowledge area Description of required processes Project integration management Ensures that various elements of the project are properly coordinated Project scope management Includes all of the work required, and only the work required, to complete the project successfully Project time management Ensures timely completion of the project Project cost management Ensures that the project is completed within the approved budget Project quality management Ensures that the project will satisfy the needs for which it was undertaken Project human resource management Makes the most effective use of people involved with the project Project communications management Ensures timely and appropriate generation, collection, dissemination, storage, and ultimate disposition of project information Project risk management Is concerned with identifying, analysing, and responding to project risk Project procurement management Involves acquiring goods and services from outside the performing organisation Table I. Nine areas of the PMBOK Source: PMI (2000)
  4. 4. Nevertheless, reported cases of ERP failure seem to indicate that certain, particularly Project sensitive areas of traditional project management require greater emphasis than management others. For example, the specification of requirements for ERP projects is often non-existent or applied retrospectively because organisations are hoping to acquire ready-made solutions that embody best practice that is directly applicable to them. In these cases, the project begins with discussions with consultants already propounding a particular software solution and technical architecture where other important aspects 109 are overlooked, for example, how the project should be managed. Based on calls from previous researchers to derive better suited project management practices and better approaches to ERP in general (Sauer, 2002; Swanson and Ramiller, 2004) and on available evidence of the problems that have led to significant failure rates in the past for such projects, there is a need to analyse the nine areas of the PMBOK and discuss their relevance in the context of a successful ERP project implementation process in order to fully understand how to apply the framework in the case of an ERP project. According to the PMI, project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations from a project (PMI, 2000). However, there are competing demands among scope, time, cost, and quality; differences in stakeholders needs and expectations; and identified requirements (needs) and unidentified requirements (expectations). As a result, it is critical to the success of a project and the ability to address these competing demands that the organisation’s structure and approach to the management of projects is a match to the objectives of the ERP implementation. While an understanding of “vanilla” project management is beneficial, it is not sufficient, due to the fact that projects and project management operate in an environment broader than that of the project itself and the project management team must understand this broader context. For example, managing the day-to-day activities of the project is necessary for success, but not sufficient (PMI, 2000). In this paper, we examine a case study of an ERP roll out in an American multinational involved in the pharmaceutical sector. We also investigate the perceptions of a project team responsible for the implementation of an ERP package as the project progress through the stages of the project lifecycle. Using the nine areas of the PMBOK to organise the case data we present an insight into what happened and into the evolution of the project team members’ perceptions of the project management challenges. 3. Methodology In this paper, we present a case study of Pharma Inc., where a successful ERP implementation took place over a period of time between early-2003 and end-2004. We followed the case study over this period, and as a benchmark project it has considerable value in that it is perceived by all participants as being a notable success, both for the implementing subsidiary and for the parent company. Concretely this means that the system went live as expected, on time and within budget, and that the project team were able to achieve a rapid ramp-up to full production volumes ahead of time (seven weeks instead of the predicted nine weeks after go-live). This makes Pharma Inc. an example of an extreme case in Patton’s (1990) classification of purposeful sampling strategies and this justifies the choice of this case as a basis for determination of best practice in ERP implementations.
  5. 5. IJMPB 3.1 The case study 1,1 The case involves a manufacturing subsidiary of a multinational pharmaceutical firm implementing a single instance of specific technical skills (SAP) across a large number of sites worldwide (refer to Table II for key information about the case). This subsidiary is what is termed a “primary site” meaning that it produces batches of active ingredients to be used in other “secondary” sites where the tabletting and 110 packaging of the drugs is performed. One feature of this case study is that previous waves of the ERP implementation had only been carried out at secondary sites. The manufacturing subsidiary studied here was the first primary site to go live on the new SAP system, and this raised additional challenges that were not anticipated. Project members from the implementation team studied here were solicited by the core team post go-live to assist with the SAP roll-out in further primary sites, based on the skills and know-how gained in adapting the global template to their local (primary site) requirements. 3.2 Data collection and analysis In Pharma Inc., we carried out 26 interviews and distributed a total of 63 questionnaires over four rounds. The fieldwork was focused on the local implementation team and the evolution of their perceptions of the project management challenges as the project progressed from initiation to go-live and beyond. Table III summarises the data collection carried out. An original facet of the research method employed was that interviewees themselves were asked to define the key strengths of the company, and then in subsequent interviews, as the project progressed through the preparation and implementation phases, they were asked to comment on how ERP impacted these strengths. This internal view of key strengths and their subsequent evolution is a method of self-reporting that removed any notion of “putting words into people’s mouths” as the project progressed. Researchers have been trying for some time to Key features Pharma Inc. case study Type of organisation Multi national Industry Pharmaceutical Size (emp.) 100,000 Turnover $25 billion (2004) Scope of project Manufacturing, planning, procurement, sales and distribution, finance, engineering, quality for local manufacturing site Type of project Worldwide roll-out of SAP in four waves Duration Five years for entire roll out, 18 months for local manufacturing site Project leadership Local steering committee, local project team and global core implementation team Project managers Local managers from affected functions seconded to project Team members availability 100 per cent for 18 months Project resources 40-70 people locally þ 45 in core teama Table II. Note: aThe core team is based at corporate headquarters, is independent of the IT organisation, and Key characteristics of the moves from location to location to facilitate the local roll outs during the successive waves of the case study organisation project
  6. 6. Project Number management Interviews by function Finance 2 Manufacturing/distribution 14 Sales 2 Information systems 3 111 Engineering 2 HR 3 Total 26 Questionnaires completed April 2003 22 May 2003 11 December 2003 16 Table III. September 2004 14 Summary of data Total 63 collection understand the low-success rate of ERP projects by analysing retrospectively the implementation experience of practitioners in terms of either CSF’s or business benefits accrued (Markus et al., 2000; Parr and Shanks, 2000; Somers and Nelson, 2001; Murphy and Simon, 2002; Shang and Seddon, 2002; Lam, 2005; Finney and Corbett, 2007). Therefore, in the case of the novice ERP project team studied in this case, we decided that letting the interviewees define the criteria to be measured at the outset, based on their own expectations of the forthcoming organisational change, ensured relevance and a sense of ownership of the field data. We began this research as invited facilitators of a team building and ERP awareness seminar pre-project implementation in April 2003. This allowed us direct access to the team members at a very early stage in the process, and the feedback from the first round of interviews and questionnaires demonstrated a certain perception of the benefits of ERP that radically changed over the remaining months of the project. Becoming known as the team “confessors” we had privileged access to the local implementation team for the duration of the project. Being seen as neutral observers, we were privy to the personal opinions, doubts and convictions of the team as they struggled with the concept, timescale and reality of spearheading the organisational changes that are part of an ERP roll-out. We feel that this “insider knowledge” allowed us to make judgments on what elements of the project management had contributed most to its success, and in so doing, to enrich the PMBOK framework with criteria specifically aimed at achieving success in large-scale enterprise integration projects. 4. ERP project management at Pharma Inc. The following sections report on the findings and important observations from the case study organised using the nine areas of the PMBOK framework. 4.1 Project integration management/project quality management An ERP system involves a serious transformation process that requires fundamental change in the way business processes are designed and conducted. Various methodologies have been put forward to ensure the package is implemented in a manner that ensures the quality of the final system, i.e. that the system is
  7. 7. IJMPB implemented in an efficient way and the objectives are met (Minahan, 1998; Stefanou, 1,1 2000). Most of these methodologies insist on preparing properly and thoroughly from the chartering phase itself prior to acquiring or implementing any technologies. The problem inherent in such ideas is that this is precisely the stage in a project where managers’ awareness levels are at their lowest and when they are least able to make key choices, hence the recourse to external parties which, unfortunately are rarely 112 independent and un-biased. In Pharma Inc., the overall level of preparation was quite good at the local site, given that this was the fourth wave of a global project that had already seen five manufacturing sites go-live with the ERP global template. It was understood from the outset that the number one objective of the project was process compliance, which would have an immediate impact on the plant’s ability to withstand an audit from the industry regulatory body, the Food and Drug Administration. In this context, ERP was ultimately seen as a necessary cost avoidance investment. This was confirmed in a survey question aimed at soliciting team members’ understanding of the expected benefits to be delivered by the new ERP system. Table IV highlights the results of this survey question from April 2003. There was a general acceptance that the benefits to be derived from the ERP roll-out were for the “greater good” of the corporation, rather than any particular advantage to be derived from the local site. The aggregated results of the answers to the question “Is ERP an enabler or a driver of change?” in April 2003, when the project team was still being consolidated, and there may still have been some hope among team members that some benefits would accrue to the site, despite the acknowledged compliance agenda show our respondents split 45 per cent (enabler)/55 per cent (driver). By contrast, in December 2003, just before the project went live, only 9 per cent of respondents held on to their belief that the ERP had been a enabler of change, 91 per cent judging it to have been a driver of change. This conviction, that ERP was imposing change, softened somewhat after go-live, with the 91 per cent dropping to 71 per cent six months later, after go-live. It might be argued, that at this point, any remaining “naivety” about the rationale behind the ERP implementation had evaporated, but that team members could sense the potential for engineering “improvements” to the newly implemented compliant processes. Key here would be the confidence of the team as it had gone through a very aggressive project, gone live on time and come out intact. Expected benefits Number of respondents Greater compliance/validated system 9 Integrated well documented ways of working 7 Standardisation to global processes 3 Integration of all key sites’ systems 3 Better control of tasks 2 Increased accuracy of inventory 2 Table IV. Integration with the global supply network 1 What are the expected One set of data 1 benefits from the ERP Better planning and scheduling functions 1 implementation? Do not know 7
  8. 8. It is interesting to note that, at the early stage, team members were quite uncertain Project about the task facing them and that they feared that SAP would jeopardise much of the management work accomplished in previous years in streamlining and optimising key processes. They perceived themselves as being far ahead of other sites in Pharma Inc., particularly with respect to customer satisfaction, a key performance indicator measuring the per cent shipments made to customers within the commit date. Local management were worried that this global roll-out would impact their customer 113 satisfaction rating, their efforts in distinguishing themselves being therefore nullified. However, this impression was slowly reversed over the course of the project. When initially asked in April 2003 to list the core competences or areas of excellence that made them stand out from other subsidiaries, respondents identified the following strengths: customer responsiveness, innovation, new product introduction (NPI), “CAN DO” attitude, R&D (research and development), implementation of new processes/technologies, manufacturing knowledge and ability, project delivery track record/proven performance, and highly efficient and flexible operation/quality. Approximately nine months later, just prior to go-live, they were asked to rate the impact of the new ERP systems on these core competences. The results of this question are displayed in Table V. This picture changed dramatically in the months following go-live, with a polarisation of opinion around key strengths such as customer responsiveness and “CAN DO” attitude. Table VI shows the post go-live situation in September 2004 for the same question. The relevance these findings have for our study is that the rationale for ERP project implementations is not a static business case, showing a monetary ROI after x number of years. It is much more closely linked to company’s values, and the perception of impact on those values, among core team members (who are arguably best placed to judge the impact), evolves in a negative sense over the lifetime of the project. As already argued by Davenport (1998), top management need to answer some serious questions at the outset to ensure that they understand what an ERP system actually implies. Wood and Caldas (2001) discovered that many organisations failed to implement their ERP systems because they viewed them as just another IT project or some type of IT-meets-reengineering-project. Once top management have committed themselves to the project it is vital that they are able to document the reasons for choosing to implement that system and that they publish the reasons widely across the organisation (Minahan, 1998). Clear and unambiguous statements by top management regarding why the ERP system is being pursued are vital in ensuring the success of the project. At Pharma Inc., it is clear that a good deal more could have been done for local sites’ ability to question and change a global template, if not the choice of package itself. multinational corporations (MNCs) need to take into account the idiosyncrasies of local operations when imposing a global corporate standard on critical business processes such as cash collection, procurement, and material planning. By the time all sites had been implemented, the first sites had been left behind and had to upgrade to the newer version of the package. Staff seemed resigned to the fact that an ERP implementation is never truly over and that one cannot get too comfortable with any business practice. In the case of Pharma Inc., an operational excellence group, which had been founded well in advance of ERP to examine process improvements and improve performance
  9. 9. 1,1 114 Table V. IJMPB (December 2003) on core competences Level of impact of ERP Level of impact High Medium Low Core competency/area of excellence P N P N P N Customer responsiveness 3 4 3 Medium to high positive/medium negative Innovation, NPI 3 2 3 3 Medium to low positive/low negative “CAN DO” attitude 1 2 1 1 3 2 Low positive/high to low negative R&D 1 1 2 1 4 2 Low to medium positive/low negative Implementation of new processes/technologies 4 1 2 3 Medium positive/low negative Manufacturing knowledge and ability 2 4 4 1 Low to medium positive Project delivery track record/proven performance 1 4 2 3 2 Medium to low positive Highly efficient and flexible operation/quality 1 5 2 1 2 Medium positive/medium to low negative Notes: The “level of impact” is categorised as positive (P ) or negative (N ) across high/medium/low. The numbers in the cells relates to the total number of respondents selecting that level of impact for a specific “core competency/area of excellence”. For example, three respondents perceived the ERP system to have a high positive impact on customer responsiveness while four respondents suggested a medium positive impact on customer responsiveness
  10. 10. Level of impact High Medium Low Core competency/area of excellence P N P N P N Customer responsiveness 2 1 5 3 1 1 Medium positive/medium negative Innovation, NPI 3 1 1 2 2 4 Low to medium negative “CAN DO” attitude 1 1 5 3 1 1 Medium positive/medium negative R&D 2 1 2 6 1 Low to medium positive Implementation of new processes/technologies 3 1 3 3 3 Low negative/high to low positive Manufacturing knowledge and ability 3 7 1 1 Medium positive Project delivery track record/proven performance 3 5 2 3 High to medium positive/low negative Highly efficient and flexible operation 2 3 6 1 Medium negative/medium positive Quality 10 1 3 High positive Inspection readiness 10 3 High positive Notes: The “level of impact” is categorised as positive (P) or negative (N) across high/medium/low. The numbers in the cells relates to the total number of respondents selecting that level of impact for a specific “core competency/area of excellence”. For example, two respondents perceived the ERP system to have a high positive impact on customer responsiveness while five respondents suggested a medium positive impact on customer responsiveness management Project (September 2004) on core competences Level of impact of ERP 115 Table VI.
  11. 11. IJMPB metrics in general, was responsible for carrying out an extensive after action review 1,1 (AAR) of the entire project, which involved revisiting objectives 12 months after go live to evaluate whether they had been achieved. A media rich presentation collating the results of the AAR was published internally on CD and on the web. Indeed, this same group plays a role of ongoing process improvement and its “mentors” are uniquely placed to advise different parts of the business on how to get the best from the 116 ERP system. As she put it herself, the head of the operational excellence group will go “investigating” how to get information from the ERP system, when addressing a particular process inefficiency. It is the researchers’ conviction that it is this “trial and error” approach to exploiting the vast richness of transactional data stored in the ERP system, that will yield benefits in the years following implementation, rather than bemoaning the lack of vanilla reports from the system and the construction of parallel data warehouses to address specific functional reporting needs, so prevalent among other less successful implementations. Indeed, this approach is evidence of the survival of the “CAN DO” attitude, despite the perceived constraints of ERP! 4.2 Project communications management It has been observed that organisations find it very difficult to communicate internally, each department viewing its information as its own and being reluctant to share it (Scott and Kaindl, 2000). Indeed, implementation team members discovered that it was easier to learn and share experiences with people from outside their organisation than within intra-organisational teams. This is where the primary benefit of using consultants to aid implementation is apparent as they add value to the project by facilitating meetings and the open discussions of requirements, prioritising issues and avoiding conflicts. Thus, consultancy agencies are important in ERP projects despite the possible lack of technical experience or knowledge (as in Wood and Caldas, 2001) because they facilitate open and productive communication. At Pharma Inc., of an initial core team of 24 business representatives only two team members had direct experience of an ERP system implementation. This meant that much work was done in the project preparation phase from mid-2003 to educate team members on the background to ERP projects, the key challenges they would face as a project management team and the communication channels that would be used to make decisions. Following this rapid learning curve, with just nine months on the project and with go-live imminent, team members were extremely aware of the extent of the changes that were about to take place and for which they would have to take responsibility. Table VII illustrates their response to the question “What level of change do you expect across the main business processes impacted by ERP?” It was recognised at Pharma Inc. that dealing with change of the scale implied by a new ERP system would require particular attention and careful monitoring. In the case studied, an additional team member was hired from a local PR company in order to concentrate on communication between the project team and the other employees at the plant. As part of his effort he set up countless meetings, particularly with representatives of the unions, where extremely sensitive negotiations with respect to changes to job specifications were navigated to success with requisite care and attention. Furthermore, the project PR consultant and his team published four issues of a special internal magazine, solely dedicated to communicating project news, progress reports on achieving targets and on respecting key milestones. This served as a channel
  12. 12. Project Process level of change High Medium Low management Warehouse/material movements 6 3 Production planning and production execution 6 3 Plant maintenance 6 Quality control 6 117 Engineering 3 NPI/R&D 1 1 Procurement 1 1 Customer service/supply 1 Financial management 1 Sales and distribution 1 Notes: The “process level of change” is categorised as high/medium/low. The numbers in the cells relates to the total number of respondents selecting the “process level of change” for a specific business Table VII. area. For example, six respondents perceived the ERP system to have a high “process level of change” What level of change do in warehouse/material movements while three respondents suggested a medium “process level of you expect in your change” business area? to get across to employees outside the project, in an entertaining way, what the purpose of the project was and why their participation was vital. In addition, it introduced the project team to their future trainees, such that when time for training came around, individual relationships were brought into play to encourage full attendance. In Pharma Inc., the communication between stream leads was very good, but the communication with the core team was very uneven, seemingly more dependent on individuals’ willingness to communicate than on any pre-defined scheme. In fact, there were even some “incidents” between members of the local team and members of the core team when local staff were able to demonstrate that the understanding that core team members had of the local processes was not sufficient. In any case, the nomination of a well respected and experienced logistics director to the role of implementation site leader ensured that the project team was given recognised status and authority in the eyes of local employees, and a direct line of communication was opened between the project team and the general manager of the plant. Crucially, the political strength of the project leadership gave vital support and encouragement to the project team in its relations with the implementation core team. At a critical point in the implementation analysis phase, the site leader threatened to pull his entire team out of the project unless the core team accorded sufficient respect to his stream leads. The affirmation of such “clout” at a vital early point in the collaboration between stream leads and core team, laid the cornerstone for what was to become a much better working relationship, as acknowledged by both sides, and contributed certainly to the success of the project. 4.3 Project scope management Again, this aspect of ERP projects pertains to how well organisations are prepared when they embark on their implementations. Davenport (1998) states that the single biggest reason that ERP projects fail is because companies are unable to reconcile the technological necessities of the system with their own business needs. A lack of understanding of the scope of the system may result in a conflict between the logic of
  13. 13. IJMPB the system and the logic of the business. In complex organisations such as MNCs, this 1,1 requires a preliminary determination of what configuration will be rolled out in the different sites – the template. At Pharma Inc. the global template had been designed around corporate best practice. So the parameters and options that were available to the implementing site were not a question of SAP options, but rather a question of choices available under the corporate best practice template – the global standard 118 operating procedures or GSOP’s. It became clear that in order to negotiate changes to this template, with a view to accommodating local requirements, new types of skills would be required. The discussion became a three-way negotiation between the local “stream lead” or subject matter expert, the core team member who had an in depth knowledge of the GSOP, and a SAP expert recruited by the local implementation site to advise on what was, and was not, possible with SAP. On several occasions, the GSOP was lacking in basic functionality that the site required, and yet the core implementation team was unable to suggest the solution because their experience was limited to the global best practice template. For example, core team members were unable to understand the limitations of a bulk chemical dispensing parameter that did not have the required number of decimal places to record the actual readings from the scales in use in the plant (the template having been designed for tablets, not bulk chemical). The response of the core team, unacceptable to the local implementation team, was to use the parameter as it was defined and lose the data granularity! The clash between the two cultures inherent in Pharma Inc., the primary sites and their non-discrete processes and the secondary or tabletting plants and their discrete processes, was the source of such problems. Thus, the scope of the implementation needed to be re-examined to fit with the operations of the local plant, and this necessitated the availability of advanced SAP knowledge to be able to suggest workarounds. In this case study the scope was very broad (warehouse, engineering, finance, procurement, production planning, production execution, quality, sales and distribution and NPI/R&D). All of these modules were integrated in the new global process model, so it was not an option to implement a subset. During the project, two elements of the scope of the project emerged that were not anticipated in advance: (1) the amount of work that would be required in collecting, cleaning up and converting legacy data into a format suitable for the new system; and (2) the changes that would be required to the physical organisation of the warehouse function when the system was used to dispense material (primary sites are characterised by non-discrete activities, the core of which is “weighting and dispensing” which is critical for an ERP application). Data cleansing became a huge issue for the project team, and a dedicated data maintenance team of 17 full time equivalent’s ensured that data going into the new system was clean, valid and in the right format. 4.4 Project time management/project cost management Depending on the size of the organisation and the scope of the project, implementing an ERP system may take years because of the need to be rolled out across multiple sites, lines of business and countries. In the case of global roll-outs at MNCs, project time management is critical during the chartering, project and shakedown phases.
  14. 14. At Pharma Inc., the four waves of the implementation programme ran over a period of Project over five years. In fact the timescale of the global roll-out was so long that by the time management the last site was up and running, the implementation team had to re-start the whole cycle again in order to upgrade the version of the system used by the original sites. Evidently, the length of implementation is greatly affected by the scope of the project, i.e. more activity regarding modules, sites and functions means a longer process. A large proportion of the implementation time is consumed by customising the 119 package, so the length of time could be substantially reduced by keeping the system “plain vanilla” and reducing the number of packages that require customisation in order to be bolted on to it (Bingi et al., 1999), which has led software vendors and consultants to recommend a zero modification approach that has nowadays become a de facto standard. This aspect of the implementation represented a “lose-lose” situation for the implementing site in our case study: on the one hand, to facilitate tight timelines, the number of specific requirements that could be taken into account was non-existent. On the other hand, the time it would have taken to analyse the new proposed business process to understand their impact on the local organisation was not sufficient, so stream leads found themselves in the unenviable position of having to accept process changes without really having time to validate them properly against local operations. Thus, the focus on deadlines (that were defined externally to the project team) meant that team leaders had to focus acutely on being on time at all stages. This sometimes resulted in critical tasks being left behind for the sake of being on time. It seems that a proper balance must be found between being on time for the sake of it and keeping all areas of the project as tight as possible. Another aspect of the timing of large multi-site global roll-outs is the learning that can occur from each site and the core team’s ability to take on board this knowledge in a way that would make it meaningful for subsequent implementations. However, the learning process whereby sites within the same organisation can improve the template based on their own implementation experience, such that subsequent sites might benefit, is very difficult to put in place without losing control over the overall duration of the project. This leads MNCs to sometimes sacrifice this aspect in the name of standardisation and expediency (Bingi et al., 1999). This might explain why the local implementation team did not regard project management as important initially. At the beginning, the team perceived the required skills for the project to be knowledge of SAP (38 per cent), process knowledge (27 per cent), existing systems knowledge (23 per cent) and project management (14 per cent). This perception developed over time however, and the importance of project management skills began to grow as the project approached go-live. It needs to be remembered that none of the team members were “project managers” per se, and that there was no systems integrator on board to carry the can for meeting deadlines. Figure 1 shows how the perception of skills changed over time (in December 2003 and nine months after go-live in September 2004). The increased importance of “Project Management” “SAP Knowledge” and the continued importance of the “Process Knowledge” skill sets is evident. On the other hand, “Existing Systems Knowledge” and “Data Knowledge” is perceived to be less important. Like most software, ERPs are priced on the functionality of the system and the number of users who will access it. Organisations are also required to invest in
  15. 15. IJMPB December 2003 1,1 6% 0% Process Knowledge 17% 32% Existing Systems Knowledge 120 Data Knowledge 28% 17% Knowledge of SAP Project Management September 2004 11% 0% Other 32% 24% Figure 1. What skills are most important in this ERP project? (December 2003 vs September 2004) 14% 19% migrating data, modifying existing systems and overhauling hardware and network infrastructure. With the global roll-out of a corporate template the cost equation is a little more complex with the local per user license fee probably being managed through a global contract with the corporation. The costs of the core team are, in addition sunk in the corporate project budget. On the other hand, the local site manager of the project had to fund the local resource bill for the project: secondment (and back-filling) of his stream leads for 12 months, the hiring of additional resources for data cleansing and the hiring of SAP. In addition, the infrastructural costs to set the team up were considerable. This does not include training, travel and administrative costs. In the case study, the project budget was externally decided, which did not prevent some of the local teams to come in under their allocations. The organisation minimised training costs by training “super-users” some of which came from the data maintenance team, who were then used to train the rest of the local site workforce. An extensive training programme was put in place to ensure that all staff were provided with training, no matter what shift pattern they worked. It was perceived as vital for the success of the project that training was undertaken by internal resources. Extra care went into planning for this, with mobile modular space being rented and set up in a corner of the car park to create a temporary dedicated “training centre”. 4.5 Project human resource management An ERP implementation is a major undertaking, which requires management to assemble the best possible team to plan, execute and control the project. This implies reassigning the few people who are most likely to be missed from their duties to the ERP project team on a full time basis (Maher, 1999). It is not rare to find functional areas reluctant to sacrifice their best resources to the project. However, this is a
  16. 16. difficulty which must be overcome (Bingi et al., 1999). The fact that teams must be Project cross-functional is an added difficulty especially in organisations with no culture of management working across functional areas and no experience of such large projects. Frequently, companies do not fully comprehend the impact of choosing the internal employees with the correct skill set. The right employees for the team should not only be experts in the company’s processes but also be knowledgeable of the best business practices in the industry. At Pharma Inc., following the nomination of a high profile site 121 manager, selecting and obtaining competent stream leads was the next key element of what was to be a winning combination. From the outset, the scale of the undertaking was appreciated and the calibre of the team members was commensurate with the seriousness of the task ahead. All team members were reasonably senior with on average 10-15 years experience in the business. All team members were full time on the project whether for the entire duration of the project or for shorter periods. At key times in the project, staff were added to the team for specialised tasks such as data conversion, training or desktop deployment, such that the team grew to more than 100 at certain times. Although no external consultants were used, an important “cross functional” advantage emerged from the mix of people engaged on the team. As the stream leads were “old hands” in the business, not only were they acquainted with one another, but they also had an intuitive grasp of the complexities in areas of the business other than their own particular domain. With systems as integrated as ERP, project team members have to always bear in mind the upstream and downstream effects of choices and configuration options they make as the project progresses. One of the key success factors of the project was the team’s ability to work together, and to draw on the individual experience and authority across different functions in making key design decisions. The inclusion of an “integration specialist” charged with anticipated the impact in other areas of decisions made in each area was another key aspect. Another unique element of the constitution of the local project team was the pre-meditated pairing of, as one team member out it, “experience and energy” in each of the process streams. Stream leads were allocated graduate level resources to work on data cleansing in each functional area, and this combination obviated the need to hire in expensive consultants, and created a pool of enthusiastic resources highly suitable to the task of training users when that time came closer to go-live. Bingi et al. (1999) add a final point, stating that team morale is a vital component for the success of the project. It was no coincidence that the team in our case study functioned in a harmonious manner: the site manager was at all stages attentive to the “spirit” of the team, monitoring formally and informally the morale of the troops, such that, even if the timeline was punishing, team members felt they were recognised for their efforts and could let off steam whenever the stress became too much. Team members were accorded “duvet days” if it was felt that the unforgiving schedule was beginning to impact negatively on performance. It would be the researchers’ view that this factor is more in line with a personal style of management than an ERP success factor. Getting the best out of a team of volunteers is a challenge in many walks of life, and good leadership will always pay off in the end. 4.6 Project risk management/project procurement management Implementing an ERP system requires a radical change in the business processes of organisations, radical change means risks and risks mean more time and money.
  17. 17. IJMPB ERP systems are complex and they require reliance on many different types of 1,1 expertise, which may also need to be sourced outside the organisation. Good, experienced consultants are difficult to find, thus employing a consultancy firm is no guarantee that the project will be a success. Organisations, which have trained their employees in the art of ERP implementation, stand a great risk of loosing their investment because personnel with such experience are in great demand by consulting 122 agencies. Our case study showed a unique willingness to “go it alone” with respect to integration partners. There were no consultants employed in the local implementation team. SAP were hired into the team on contracts to bolster the team without the exorbitant expense of paying consultants day rates. The net effect was that costs were minimised and control was optimised. Another consequence was that there was no one else to blame in case something went wrong. In the opinions of the interviewees, this was actually an added benefit that all responsibility for the implementation of the package was internal, making the site autonomous and better able to validate the quality of what would ultimately be delivered. 5. Conclusion Our investigation into the project management strategy adopted in the Pharma Inc. case under the nine headings of the PMBOK framework illustrates one vision of what could be termed “best practice” in terms of ERP implementation. In particular, it shows the importance of project governance and the need for a multi-level structure spanning both the corporate and local levels. Indeed, these governance structures ensured that the ERP project maintained focus in terms of direction, reduced the possibility of delays and rework due to the fact that timely problem resolution could be carried out. Overall, these structures supported timely decision making in an effort to minimise the impact, or avoid the possibility, of risks on the project. It also shows the crucial importance of the proper selection of team members and the need for a high profile team leader even at the local level. Being able to call on specific local skills at different points in the project, whether they were application focused or business focused, was a strong factor in the success of the implementation. On a more technical basis, it suggests that a dual cycle of exploration/negotiation leading to a stable corporate template on the one hand and execution/roll-out on the other hand could greatly boost the success rate of ERP projects. In relating the areas of ERP project management to specific stages of the ERP development lifecycle, attention is drawn to specific areas that need to be emphasised at different times. Project managers need to be persuaded that any unclear area not resolved in the exploration cycle will need to be tackled in the implementation stage or else there is a risk that it might get left behind and only re-emerge post go-live with disastrous consequences. In relation to the creation of the template of the ERP, it is certain that differences in expertise and cultures within MNCs (e.g. primary vs secondary sites in our case study) cause many additional problems which require substantial re-works and workarounds. However, even in this very positive case, some aspects remain open to criticism. In particular, the need for balance between attention to local specificities and the need to standardise business processes and stay on schedule seems to be very difficult to find. In a MNC, the corporate level is strong enough to impose its rules but the cost at local level in terms of motivation lost and inefficiencies must be understood. Also, the
  18. 18. need to preserve learning in each roll-out so it can benefit to all sites, but also in the Project following phases of the roll out is critical and was neglected in Pharma Inc. management This research brings us closer to an ERP-specific project management for large organisations. It also suggests a novel approach to using the perceived strengths of the organisation as a barometer for the impact of such transformational systems, such as ERP. Further, case studies are planned to assemble a complete set of best practice recommendations for future ERP project managers. However, a potential weakness in 123 the current methodology is that the pharmaceutical sector is highly regulated; therefore business functions are very familiar with the bureaucratic constraints imposed by external bodies in terms of quality, safety, traceability and transactional integrity. “90 per cent of the errors in batch manufacturing are around documentation” is how it was described by one corporate manager. This puts the organisation at an advantage when implementing a highly integrated suite of applications where new control processes will perhaps find acceptance more quickly than in a less regulated manufacturing environment. In fact, looking at a sample of such implementations in a less regulated organisational environment, through the lens of the PMBOK framework, would constitute a further step in validating the findings of this study. References Bingi, P., Sharma, M. and Godla, J. (1999), “Critical issues affecting an ERP implementation”, Information Systems Management, Summer, pp. 7-14. Davenport, T.H. (1998), “Putting the enterprise into the enterprise system”, Havard Business Review, July/August, pp. 121-31. Davenport, T.H. (2000), Mission Critical – Realizing the Promise of Enterprise Systems, Harvard Business School Press, Boston, MA. Finney, S. and Corbett, M. (2007), “ERP implementation: a compilation and analysis of critical success factors”, Business Process Management Journal, Vol. 13 No. 3, pp. 329-47. Holland, C.P., Light, B. and Gibson, N. (1999), “A critical success factors model for enterprise resource planning implementation”, Proceedings of the 7th European Conference on Information Systems, Copenhagen Business School, Copenhagen, pp. 273-87. Lam, W. (2005), “Investigating success factors in enterprise application integration: a case-drive analysis”, European Journal of Information Systems, Vol. 14 No. 2, pp. 175-87. Maher, J. (1999), “ERP in industry: automate and integrate”, The Engineers’ Journal, November. Markus, M.L., Axline, S., Petrie, D. and Tanis, C. (2000), “Learning from adopters’ experiences with ERP: problems encountered and success achieved”, Journal of Information Technology, Vol. 15 No. 4, pp. 245-65. Minahan, T. (1998), “Enterprise resource planning”, Purchasing, 16 July. Murphy, K.E. and Simon, S.J. (2002), “Intangible benefits valuation in ERP projects”, Information Systems Journal, Vol. 12 No. 4, pp. 301-20. Parr, A. and Shanks, G. (2000), “A model of ERP project implementation”, Journal of Information Technology, Vol. 15 No. 4, pp. 289-303. Patton, M. (1990), Qualitative Evaluation and Research Methods, Sage, Newbury Park, CA. PMI (2000), A Guide to the Project Management Body of Knowledge, PMI Publishing Division, The Project Management Institute, Sylva, NC. Saint-Leger, G. and Savall, H. (2001), “L’apres project ERP: Retour d’experience sur un changement qui n’a pas eu lieu” (“Post-ERP phase: feedback from experience regarding a
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