A perspective on selecting and implementing ERP software

1. John Carne
https://www.linkedin.com/in/johncarne/
The ERP EXPERIENCE

2. The Real World
(Thank you Scott Adams)

3. The Real World

4. The Real World

5. Enterprise Resource Planning (ERP) is an integrated set of core
applications
• ERP’s run on a common database with standard reporting and
messaging
Product Planning &
Manufacturing
Procurement &
Inventory
Management
Finance
Human
Resources
Data Analysis
Warehouse
Management
Transaction Engine
Core software that manages the flow of
transactions among applications and handles
tasks such as security, data integrity and data
management
Order
Management

6. Standard ERP packages can serve as a platform upon which
more specialized functionality can be built
• Core Functionality ▪ Functionality Extensions
• Marketing ▪ Customer Relationship Management
• Forecasting ▪ Third Party Collaboration
• Order Entry ▪ Maintenance Management
• Procurement ▪ Service Management
• Inventory Management ▪ Advanced Planning And Scheduling
• Production Planning ▪ Transportation Management
• Shop Floor Control ▪ Product Data Management
• Shipping ▪ Data Warehouse
• Warehouse Management ▪ Telemarketing / Call Center Management
• Quality Management ▪ Business Intelligence
• Project Management ▪ Sales Force Automation
• Finance And Accounting ▪ Self Service HR
• Fixed Assets ▪ E-business
• Payroll
• Human Resources

7. ERP package pricing negotiations are typically a multi-stage
process and include many pricing components
• Focus on total cost of ownership not only software costs
• Review multiple vendors pricing for most competitive costs results
• Include pricing structure for future modules and functionality
• A critical and often overlooked part of the selection process is the
“vendors ecosystem”

8. A collaborative decision making process will assure that the key
factors have been evaluated
• Decide what counts:
•Functional
•Technical
•Operational
•Cost
•Vendor
• Determine the weighting of each 5 factors
• Consider resources, expected timelines, external factors
• Evaluate budget vs. costs
• Assess vendor partnership potential
•Strategy
•Alignment
• Evaluate functionality for today and future

9. Key factors in the vendor selection processes are functional,
technical, operational, cost and vendor specific
• Functional – the specific product functionality being sought based on
business requirements
• Vendor ability to meet high level requirements
• Technical
• Flexibility of product offering (e.g. module configuration, upgrades)
• Architecture conformance
• Operational
• Workflow & report writing
• Cost of Ownership – evaluates total cost of ownership including
acquisition, maintenance, support, integration services, skills, infrastructure
and de-acquisition costs
• Vendor – measures the ability of the vendor to support their offering, survive
in the marketplace, and keep up with changing technologies.
• Size and strength of company
• Reputation based on Consumer Packaged Goods distribution
experience/references
• Product direction, R&D capability

10. Typical ERP project pricing includes multiple components, one
time investments and recurring costs
• Software costs – application licensing fees
•License and maintenance fees
• Implementation support costs
•External: consulting fees
•Internal software support
•Configuration / customization
•Data conversion
•Interface development
•Database development
• Hardware and networking costs
•Ownership costs or outsourcing fees
•Application maintenance and support
• Education / Training
• Ongoing maintenance and support

11. The real payoff comes from business change rather than
technology change
• The key factor to effectively leverage ERP is the business change
required to create operational effectiveness.
• Behavioral change requires shifts in thinking, compensation,
accountability and authority
 The people behavior constitutes the fundamental building blocks of the organization
• Changing the processes requires a change in people’s behavior, which is often the most
difficult challenge to the project during the implementation
• “The technical problems are the easy problems”
• An ERP system demands enterprise wide thinking, integration of
processes and cross functional teaming.
 Scale and complexity
• Integration intensifies interdependencies

12. A successful transformation requires a holistic approach
• Focuses on organizational efficiencies and flow
• Looks at logical way of doing the task, not the historical
• Reshapes functions, responsibilities and organizations
• Requires distribution of decision making
• Develops new business processes
• Requires the organization to think as the whole, not the individual
components
• Requires standardized processes and roles
• Set limits to authority and develop escalation processes
• Set time boundaries for actions and non-actions
• Agree upon standardized reporting data and format
• Develop common metrics and measurements for
performance
• Develop standardized chart of accounts

13. The implementation of an ERP will impact the business
processes, people and technology of a company
• Process, People, Technology
While an integrated package will have a direct impact on the technological aspects of
the company, the package alone does not address the people or process issues
associated with a change of this magnitude. In these two areas it is the redesign
effort which must address the majority of issues
People
Process Technology
Addressed Primarily
By Organizational Change
Management
Addressed Primarily by
Business Process
Redesign
Addressed
Primarily by the
Standard
Package(s)

14. ERP standard functionality provides for rapid implementation to
gain significant business advantages
• Opportunity to fundamentally change the way the organization conducts
business
• Rapid acquisition of increased functionality to meet/beat the competition
• Opportunity to acquire imbedded best practices inherent in the software
capabilities or workflow
• Lower long term cost of maintenance and ownership
• Elimination of multiple sources of redundant data
• Facilitates migration to and leverage of new technical infrastructures
• Accelerates the movement from data to information to decision support

15. Companies’ processes (internal and external) benefit from ERP
implementation
• Internal
• Better access to data, more accurate data, one source of data
• Standardized reporting without reformatting
• Complete customer file and action visibility
• Vendor performance data for negotiations
• Workflow routing to overcome blockages and backlogs
• Standardized training in all modules
• End user customization of screen presentation
• Reduced overtime / casual time
• External – Customers and Suppliers
• Receive firm shipping dates and order confirmations
• Obtain promise date when order is placed
• Suppliers can see internal demand and changes
• Instantaneous messaging on order status changes
• Improved planning horizon and accuracy

16. The ERP EXPERIENCE
Machiavelli - Words of Wisdom
“It must be remembered that there is
nothing more difficult to plan, more
doubtful of success, nor more
dangerous to manage, than the
creation of a new system.”
“For the initiator has the enmity of all
who would profit by the preservation
of the old institutions and merely
lukewarm defenders in those who
would gain by the new ones.”

17. Companies who are successful implementing ERP recognize the
importance of strong change management and project
management
Why implementations fail:
42% Leadership
27% Organizational and
Culture Issues
23% People Issues
4% Technology Issues
Other – 4%
Source: Organization Dynamics,
Jim Markowsky
Change
Management
Focus
92% of implementations fail due to
poor change management .
Only 8% fail due to technology and
other issues
Organization
(people)
Info Driven
Organization
Process
Centric
Organization
Design
Change
Management
Process
IT enabled
processes

18. The ERP EXPERIENCE
Success factors
 “ The best is the enemy of the good”.
 “ Implementation is the start of Spiral Improvement Process”.
 “Encouraged” the customer to own the change process.
 We directed & used tactical SAP consultants as we needed.
 “Pushed” the Steering Committee to support the process.
 Had highly qualified end users to lead the project.
 “This is a process project – not a systems project”
 Reporting & reward system that encouraged team work.
 Enforced team accountability via RAPP sessions
 Established and hit aggressive due dates - “Faster is really better”.
 Scope & package discipline is critical - minimal SAP changes.
 Eliminated interfaces ASAP - minimize the number of systems.
 Established a policy of keeping up with SAP releases.
 Train before, during & continuously after the implementation.
 “Best of Breed” excursions are subjected to rigorous value review
 “If you are not having fun – go home!”

19. The ERP EXPERIENCE
The Project Team arrives
(Thank you – Gary Larson – Far Side)
Yeeeeehaaaaaa!!!!!!

20. The ERP EXPERIENCE
Design Process (see re-engineering section)
Define the scope of the
project
Document "AS-IS"
Do we need the process
Prototype
Implementation
Other Processes
Expected Benefits
and Costs
"AS-IS"
Documentation
Flow/Problems/Tools
Policies and
Procedures
Updated
Documentation
Flow/Problems/Tools
Scope
COMBINE NO
YES
Updated
Documentation
Flow/Problems/Tools
Revised Benefits
and Costs
Blue Sky
Continuous Improvement Process
Benchmark companies
QUICK FIX

21. The ERP EXPERIENCE
Life after being SAP’d
 Start-up - most go screaming & kicking - team accountability is critical
 6 months - grudging acceptance
 1 year - many enthusiastic users - continuous training payoff
 Continuous learning & improvement

22. Companies typically derive strategic and economic benefits from
implementing and ERP solution
Strategic Benefits:
• Enterprise integration and process
improvements
• New application infrastructure
• Customer responsiveness
• Information quality, access and use
• Reduced costs, increased productivity Economic Benefits:
• Financial management
• Personnel
• IT Costs
• Inventory
• Order management
• Supplier management
<< Support growth and
acquisition initiatives

23. The ERP EXPERIENCE
Accomplishments - Sampler
BEFORE AFTER
17 days to close books We choose to close in 2 days
Field material & assets not tracked  Brazil saves $2.5M in consumables/year
 US spare parts reduced $1.5M/year
 US equipment tracked
On time - Order fill rate – 75%.
Penalties $10+M
Order Fill rate – 98+%
Penalties > $6M
Sales Order failures – 500 lines/day > 10 lines/day with 25% increase
Central systems and communication
equipment not tracked and planned
$200M/year of capital purchases
controlled within SAP
17,000 Journal Vouchers/month Less than 1,000 Journal Vouchers/month
58 Accountants needed to support
$500M business
40 Accountants needed to support $1B
business

24. The ERP EXPERIENCE
Life after being SAP’d
Business Systems
 Focus shifted from traditional “programming” to business problem solving
 Support more functionality with less staff
 Staffing ratio changed from 1 analyst to 3 programmers to 2:1
 SAP becomes “partial” outsourcer
 Employees skill upgrade has led to corresponding pay increases
 Pay particular to licensing arrangements
 Stable client/server infrastructure is vital to success
(Thank you Scott Adams)

25. The ERP EXPERIENCE
Life after being SAP’d – Team Motto
(Thank you – Gary Larson – Far Side)
If we pull this off - we will eat like kings