Seminar: Installation


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • This PPT describes implementation of an ERP by FoxMeyer Drug. It is a student project done by Jason Donalson, June Seibold, Matthew Welch, and Sok Woo Yoon in the INFO Department, Texas A&M University, Spring 1999.
  • Seminar: Installation

    1. 1. Hour 5: ERP System Installation Special IS Project In-house: massive IS project, heavy system design features
    2. 2. ERP Implementation Project <ul><li>If vendor system </li></ul><ul><ul><li>Much less system design than otherwise </li></ul></ul><ul><ul><li>Vendor software already programmed </li></ul></ul><ul><ul><ul><li>Only need interfaces </li></ul></ul></ul><ul><ul><li>Have help from vendor, consultants </li></ul></ul><ul><ul><li>Opportunities to outsource </li></ul></ul>
    3. 3. ERP as an IS Project <ul><li>At least 7 optional ways to implement ERP </li></ul><ul><li>Outsourcing (ASP) the easiest </li></ul><ul><ul><li>But risky </li></ul></ul><ul><li>Next easiest is single vendor source without modifications </li></ul><ul><ul><li>Not necessarily least expensive, nor greatest benefits </li></ul></ul><ul><li>All others involve significant IS project </li></ul>
    4. 4. Relative Use of ERP Implementation Strategies Mabert et al. [2000] 0.5 Total in-house development 1 In-house plus special packages 4 Best-of-Breed 5 Vendor packages-internal modifications 40 Single vendor package 50 Single vendor package-internal modifications % Strategy
    5. 5. Implementation Strategy Use <ul><li>Dominant strategy in manufacturing: </li></ul><ul><ul><li>Single vendor </li></ul></ul><ul><ul><li>Over half added internal modifications </li></ul></ul><ul><li>Very few best-of-breed </li></ul><ul><li>Almost none developed totally in-house </li></ul>
    6. 6. IS/IT Project Management Results <ul><li>Conventional IS/IT projects have trouble with time, budget, functionality </li></ul><ul><li>ERP projects have slightly more structure, but still face problems </li></ul><ul><ul><li>Underestimation of required time common </li></ul></ul><ul><ul><li>Vendors have made easier & faster </li></ul></ul><ul><ul><li>Enhancement of systems another trend </li></ul></ul><ul><ul><ul><li>Reintroduces time problem </li></ul></ul></ul>
    7. 7. Systems Failure Method <ul><li>systematic method for analysis of failure </li></ul><ul><li>successfully applied - wide variety of situations </li></ul><ul><li>by reviewing past failures, avoid future failure </li></ul><ul><li>as organizations rely more on computers, there is a corresponding increase in significant business interruptions </li></ul><ul><li>yet of 300,000 large & mid-sized computer system installations, <3% had disaster recovery plans </li></ul>
    8. 8. Failures in Planning <ul><li>negative disasters : decision culminating in physical result, later substantially modified, reversed or abandoned after heavy resource commitment </li></ul><ul><ul><li>power generation facility on campus </li></ul></ul><ul><li>positive disasters : decision culminating in physical results implemented despite heavy criticism, subsequently felt by many informed people to have been a mistake </li></ul><ul><ul><li>Anglo-French SST; BART in San Francisco </li></ul></ul>
    9. 9. Failures of Projects <ul><li>information technology </li></ul><ul><li>1992 - London Ambulance Service </li></ul><ul><ul><li>1.5 million pound system on line 26 Oct 1992 </li></ul></ul><ul><ul><li>immediately lost ambulances </li></ul></ul><ul><ul><li><20% of dispatched ambulances reached destinations within 15 minutes of summons </li></ul></ul><ul><ul><li>(before system, 65% met 15 minute standard) </li></ul></ul>
    10. 10. Failures of Projects <ul><li>Some never work </li></ul><ul><li>others over budget, very late, or both </li></ul><ul><li>others perform less than design </li></ul><ul><li>others meet design specifications, but maintenance & enhancement nightmares </li></ul>
    11. 11. System Failure Method <ul><li>failure is regarded as an output </li></ul><ul><li>of transformation processed from system </li></ul><ul><li>place trial system boundaries around situation </li></ul><ul><ul><li>experiment with various configurations </li></ul></ul><ul><ul><li>reach conclusion about system </li></ul></ul><ul><ul><li>need to model system in some detail </li></ul></ul><ul><ul><ul><li>at different levels </li></ul></ul></ul><ul><ul><ul><li>be careful not to make too fine, lose important inter-relationships </li></ul></ul></ul>
    12. 12. common results <ul><li>failure commonly a result of </li></ul><ul><li>organizational structure deficiencies </li></ul><ul><ul><li>lack of performance-measuring, control </li></ul></ul><ul><li>no clear statements of purpose </li></ul><ul><li>subsystem deficiencies </li></ul><ul><li>lack of effective communication between subsystems </li></ul><ul><li>inadequate design </li></ul><ul><li>insufficient consideration of environment; insufficient resources </li></ul><ul><li>imbalance of resources production quantity; test quality </li></ul>
    13. 13. FoxMeyer Drug Large drug distributor Wanted to implement ERP
    14. 14. FoxMeyer Corp <ul><li>Holding company in health care services </li></ul><ul><li>wholesale distribution of drugs & beauty aids </li></ul><ul><li>served drug stores, chains, hospitals, care facilities </li></ul><ul><li>US: 23 distribution centers </li></ul><ul><li>Sought market niches, such as home health care </li></ul>
    15. 15. FoxMeyer <ul><li>Due to aging population & growth in health care, expected high growth </li></ul><ul><li>Market had extreme price competition, threatening margins </li></ul><ul><li>Long-term strategies: </li></ul><ul><ul><li>efficiently manage inventory </li></ul></ul><ul><ul><li>lower operating expenses </li></ul></ul><ul><ul><li>strengthen sales & marketing </li></ul></ul><ul><ul><li>expand services </li></ul></ul>
    16. 16. Prior FoxMeyer IS <ul><li>3 data processing centers, linked </li></ul><ul><li>included electronic order entry, invoice preparation, inventory tracking </li></ul><ul><li>1992 began migration of core systems </li></ul><ul><li>Benefits not realized until system fully integrated </li></ul>
    17. 17. FoxMeyer Process <ul><li>Customer fills out electronic order </li></ul><ul><li>Order sent to 1 of the 3 data processing centers </li></ul><ul><li>Orders sent to the appropriate distribution center (within 24 hours) </li></ul><ul><li>Orders filled manually and packaged </li></ul><ul><li>Had just completed national distribution center with multiple carousels & automated picking </li></ul><ul><li>Could track inventory to secondary locations </li></ul>
    18. 18. New System <ul><li>Needed new distribution processes & IS to capitalize on growth </li></ul><ul><li>Wanted to be able to undercut competitors </li></ul><ul><li>Replacing aging IS key </li></ul><ul><li>PROJECT : 1994 - hoped to save $40 million annually (estimated cost $65 million) </li></ul><ul><ul><li>complete ERP installation & warehouse automation system (another $18 million) </li></ul></ul>
    19. 19. FoxMeyer Project <ul><li>Select ERP </li></ul><ul><ul><li>hundreds of thousands of transactions </li></ul></ul><ul><ul><li>meet DEA & FDA regulations </li></ul></ul><ul><ul><li>benchmarked & tested for months </li></ul></ul><ul><ul><li>picked SAP R/3 </li></ul></ul><ul><ul><li>hired Andersen Consulting to integrate </li></ul></ul><ul><ul><li>hired Pinnacle Automation for warehouse automation system </li></ul></ul>
    20. 20. Operations <ul><li>FoxMeyer expected the new systems to improve operational efficiency </li></ul><ul><li>Signed several giant contracts </li></ul><ul><ul><li>counted on savings, underbid competitors </li></ul></ul><ul><li>Counted on being up and running in 18 months </li></ul>
    21. 21. Problems <ul><li>SAP & warehouse automation system integration </li></ul><ul><ul><li>two sources, two installers - coordination problems </li></ul></ul><ul><li>New contracts forced change in system requirements after testing & development underway </li></ul><ul><li>Late, Over budget </li></ul><ul><ul><li>SAP successfully implemented </li></ul></ul>
    22. 22. Outcomes <ul><li>Lost key customer - 15% of sales </li></ul><ul><li>To recoup, signed new customer, expected $40 million benefit from ERP immediately - pushed ERP project deadline ahead 90 days, no time to reengineer </li></ul><ul><li>Warehouse system consistently failed </li></ul><ul><ul><li>late orders, incorrect shipment, lost shipments </li></ul></ul><ul><ul><li>losses of over $15 million </li></ul></ul><ul><li>August 1996 filed for Chapter 11 </li></ul><ul><ul><li>McKesson bought </li></ul></ul>
    23. 23. McKesson Followup <ul><li>Mid-1990s started implementation of SAP R/3 </li></ul><ul><ul><li>Cancelled project in 1996 after spending $15 million </li></ul></ul><ul><li>1997 acquired FoxMeyer </li></ul><ul><ul><li>Carefully designed new R/3 implementation </li></ul></ul><ul><ul><li>Dropped a number of modules </li></ul></ul><ul><ul><li>Implemented modules one at a time </li></ul></ul><ul><ul><li>Cautious rollout schedule, rigorously followed </li></ul></ul><ul><ul><li>Separate testing group formed </li></ul></ul><ul><ul><li>At last report $50 million system on time, in budget </li></ul></ul>
    24. 24. McKesson <ul><li>Massive changes in 3,000 end user jobs </li></ul><ul><li>Careful analysis of changes </li></ul><ul><ul><li>Surveys </li></ul></ul><ul><ul><li>Focus groups </li></ul></ul><ul><ul><li>Demonstrations </li></ul></ul><ul><ul><li>Computer-based training </li></ul></ul>
    25. 25. Lesson <ul><li>Implementing ERP a major undertaking </li></ul><ul><li>Can easily bankrupt a company </li></ul><ul><li>However, it can also be done </li></ul><ul><ul><li>Opportunity for great benefits </li></ul></ul>
    26. 26. System Architecture & ERP <ul><li>System architecture displays computer systems used to support organization </li></ul><ul><li>Open systems architecture allows greater integration possibilities </li></ul><ul><ul><li>Important in supply chains, e-business </li></ul></ul><ul><li>ERP systems initially quite closed </li></ul>
    27. 27. Open Architecture <ul><li>Many external systems being added to ERP </li></ul><ul><ul><li>CRM </li></ul></ul><ul><ul><li>Supply chain </li></ul></ul><ul><ul><li>Internet for e-business </li></ul></ul><ul><li>Need to integrate independent ERPs across organizations </li></ul><ul><ul><li>Messaging services used </li></ul></ul>
    28. 28. Analysis & Design Control Frameworks <ul><li>Traditional standards for application development </li></ul><ul><li>ERP implementation usually involves installation of vendor software </li></ul><ul><ul><li>Still need for treatment as installation project </li></ul></ul><ul><li>Early in project, extensive customization needed </li></ul><ul><ul><li>The more system flexibility, the more difficulties in implementation </li></ul></ul><ul><ul><li>Object-oriented framework benefits extension, tailorability, customizability </li></ul></ul>
    29. 29. Application Service Providers <ul><li>Outsource ERP </li></ul><ul><li>Popular </li></ul><ul><ul><li>Unocal pared IT staff 40% in two years </li></ul></ul><ul><ul><li>Focus on core competencies, shed cost centers </li></ul></ul><ul><li>Many specific functions can be outsourced </li></ul><ul><li>Outsourcing benefits </li></ul><ul><ul><li>Speed </li></ul></ul><ul><ul><li>Organization lacks IT skills </li></ul></ul><ul><li>ASP the most popular way to outsource </li></ul>
    30. 30. ASP Risks <ul><li>Your applications and data are controlled by others </li></ul><ul><li>Service failures out of your control </li></ul><ul><li>Confidentiality failure a possibility </li></ul><ul><li>Performance issues possible </li></ul>
    31. 31. Relative Implementation Effort To select None Light Application Service Provider Maybe Moderate Painful Total in-house development Maybe None Excruciating In-house plus special packages Heavy + Moderate Significant ++ Best-of-Breed Heavy + Moderate Significant+ Vendor packages-internal modifications Heavy + Heavy Significant+ Single vendor package Heavy Heavy Significant Single vendor package-internal modifications Consultant Vendor In-House Method
    32. 32. Implementation Effort <ul><li>Implementing ERP places strain on in-house information systems groups </li></ul><ul><li>Consultants are expensive </li></ul><ul><ul><li>Sometimes need special expertise </li></ul></ul><ul><li>Tradeoff: control vs. time & cost </li></ul>
    33. 33. Summary <ul><li>ERP driven by idea of quality software support </li></ul><ul><li>Software quality has long been important </li></ul><ul><li>Many ERP implementation strategies available </li></ul><ul><li>Tradeoff in control vs. time & cost </li></ul>