What can ERP do for the SME? Management can act confidently Improve operational efficiency Give the enterprise the edge it needs to succeed Even small and medium business (SMB) units are using ERP software to achieve a competitive advantage.
Better control & Higher profits ERP compels the staff to be organized and disciplined, as it does not accept any shortcuts Thus, it can provide online MIS for the management to know the exact status of the business at a click of the mouse and enables it to take timely business decisions Cost control and cost reduction at every stage and improvement in profitability.
Efficiency is improved Reduce manual work No more inefficient paper-based business processes ERP makes the organization paperless, or shall we say less-and less paper. Thus becoming more efficient.
What is the benefit of the supply chain management module in ERP? By deploying ERP, companies have been able to closely integrate their business processes with those of their trading partners Faster order processing. Extending the market reach. Increase sales. Better tracking of inventories. More accurate order fulfillment. Better customer service. Vendor relationship management (VRM)
FG inventory control ERP has resulted in a faster response / delivery time. For example, in the legacy system the Invoice preparing was cumbersome and was taking lot of time In ERP, now users are making CCI (Challan-cum-Invoice), in a very efficient manner, which is not only faster but also ensures accuracy Stock is updated automatically when the item is purchased and sold. This results in ensuring that the stock figures are always up-to-date. Correct response to customer about delivery commitment is now possible.
Pre-sales Quotation Automation has resulted in proper costing and capturing overheads The Sales Order is automatically created after the quotation approval and subsequently the Work Order is printed for the Production giving information about the proper raw material (or child items) requirement.
BOM The Bill Of Material (BOM) master is automatically updated in the Sales Order stage resulting into greater accuracy of Item Master and very useful for MRP – Material Requirement Planning.
Smart business operations The Inspection Report is automatically printed after the Invoice saving lot of time in documentation, which in turn assures high Quality standards and customer satisfaction. Better customer reach has resulted into increased revenue . Customer master data and actual sales data are now available online. Purchase is entered online which gives the vendor wise purchase information Serial number or batch number tracking keeps track of the raw material. The Digital Nervous System provides top management, the automated paper-less flow of information between departments. Affordable client / server software eliminates data corruption and RDBMS (e.g. MS SQL Server) increases the reliability of data.
ERP Implementation How and why of ERP failure & tips for successful implementation
Education Not understanding what the new 'system' is designed to achieve). At least 100 hrs of training is required for key users. Preparing masters / transaction on practice databases to get the comfort level and singing off is highly recommended. The CEO can make this happen, if he / she personally take interest, otherwise if left to users, the quality training does not happen and then chances of success are reduced • In one company, the training was given after the system was ‘live’. Users were busy with ISO implementation and most people saw the data entry screen for the first time when the legacy was removed.
Lack of Top Management commitment (management being involved but not dedicated). If the owner is not spending enough quality time, then the ERP project is likely to be unsuccessful In one organization, the MD hardly took part in the discussion with ERP vendor and delegated the task to the General Manager, who in turn never wanted the ERP system, so he created all the roadblocks, and the vendor got frustrated and finally left
SRS Inadequate SRS or System Requirements Specification: Current processes are not adequately addressed. User must write down the requirements , which means taking out time and extra effort. The user usually explains casually, verbally, and hurriedly, then how the ERP can succeed? If sufficient time is not given for preparing the SRS, ERP is likely fail Chopping and changing of program codes after the ERP goes Live is observed, if SRS exercise is not done properly
Select ERP Package carefully Invest lot of time in the ERP selection process. It is not like buying a mobile. If you do not like a cell phone, you can discard, and buy new one. ERP is like a long-term partnership (marriage, shall we say). There are going to be difference of opinion with the spouse. This can be sorted out. Similarly, one cannot keep on changing ERP The package does not address the basic business functions of the client The package should be totally integrated, including accounts Some organizations are so comfortable with their Rs. 10,000/- wala account-centric package that they do inventory and other functions in ERP but ask for data transfer from ERP to such accounting package! Please do not connect bullocks to the car!!
Internal Resistance Resistance to changing the 'old' processes. This is perhaps human nature Unless proper confidence building is done (during training) the user will still want to use the old method (or the legacy way) One ERP user (in a company) was so adamant that the MD had to ask him to resign (and he was the works manager who was expert in fire fighting, but MD wanted to prevent fire altogether).
Give me moon Unrealistic Expectations of the Benefits A user starts expecting moon One must draw a line, be satisfied, at least in the first phase, and let the system take off.
Return on investment. ROI? Unrealistic Expectations of the ROI. People forget to quantify the intangible benefit or they simply expect returns overnight Most users do not know even, what the ROI is For example • ROI can be reducing inventory level by x percentage • or ROI can be preparing of Excise (TAX) Invoice quickly and accurately • or ROI is to get the correct material requirement planning.
Time Frame Unrealistic Time Frame Expectations. ERP is like changing the wall itself (and not changing merely the paint of the wall) CEO / CFO expect things to happen overnight when they have not taken trouble to define (in writing); to what extent customization will be allowed One has to learn to put a full stop to chopping and changing .
TCO - Money Total Cost of Ownership is not understood ERP vendor money is not paid in time The ERP implementing company is treated like any other supplier and ERP project goes into a kind of negative cycle E.g., Think of a mobile phone: • When the SIM card charge is over it stops working and needs to be charged by paying additional amount.
Budget is not sanctioned. In one company (Rs.40 Crore turnover), the MD was from old school. He never sanctioned the money required for the Server, etc. for nine months even after ‘going live’. His vice president was keen, but project did not take off, because MD was not convinced TCO of ERP (Total Cost of Ownership) is not understood.
“… .By-the-way we will do ERP also…. “ User / top management safely assume that certain procedure should be present in ERP. If the procedure is not explained in the beginning, legacy is not given which it may not reflect in the Business Blueprint (these reference guidelines) or in the POC If it is not in the Business Blueprint, it will not be there in ERP program ERP project is taken as ‘by-the-way’ project; whereas in true sense it should be the only priority during implementation phase. • Do not take ERP casually
A Bottom-Up approach is employed (the Process is not viewed as a Top management priority). In other words if architect has not shown the door and window, the room will not have them. Due importance to these documents should be given. For instance, ERP has many different types of sales invoice and several types of purchase vouchers, but which one is applicable in a particular business is known to that businessperson only. Some time should be spent in the test run known as CRP run. Later, modification will not only cost in term of money but also time. Moreover, that time blame game starts and project suffers. It is strongly recommended that all key users take the POC (Proof of Concept) seriously System Requirement Specification (SRS) should be reflected in the reference guidelines. Every page of this Business Blueprint document should be signed.
ERP is long term investment Another reason of ERP failure is that user ignores the long-term business goals to be achieved and only focuses on the immediate needs. As a result asks for unnecessary customizations. For example, it is necessary to enter correct opening stock for each item for each location (including third party inventory) However, user takes a unilateral decision that this can be done later. Users will start entering various transactions and goes live. Even asks to remove the negative issue lock from the system
Tight linking (integration) is good Another example, one user from marketing, did not appreciate the link of quotation and the sales order • He asked implementer to remove the link. Later, after six months, he realized his mistake and asked to provide for the link Sometime Director or CEO of the company does not share his or her long-term vision of the company, with the middle management or lower management.
It is necessary to identify yourself and map the same with the scope of ERP modules. • Follow the checklist given below: • What vertical (s) are you involved in? List them. E.g., Make to stock or make to order. E.g. Continuous process production or discreet production • What ERP modules are you looking for? Write it down from the scope list of ERP modules given by ERP vendor. • Are you planning on replacing legacy software applications? Within the next 3 years? Which ones? Make list and plan to phase out ‘out-dated’ software ASAP.
What is the big picture? Write your expectations - all of them. What objectives that you wish to achieve by deploying ERP? List them out in detail and discuss with users. Make department wise list of reports expected from ERP. Once the list is ready, share with the ERP vendor ERP vendor should meet more then 80% of your essential requirements. Be informed that rarely ERP will meet 100% of your wish list There are some areas, which are not automated and will have to be done manually May be in second phase, after one or two years, you can plan to automate some additional business processes.
Information Technology and IT infrastructure What databases and operating systems do we have expertise? What will the IT department agree to and what is the long-term plan? List them If you are not sure, consult I. T. expert. For instance, in one corporate company EDP manager was asked to select ERP. She was trained by Red Hat on Linux. She insisted that ERP should be on Linux platform. During the ERP deployment, seven moths down the line, she left the organization for greener pasture . Nobody knew anything about Linux. ERP project was abandoned • One year later the company deployed ERP on Microsoft platform.
Look at all of your options In the implementation phase, we must educate users not to become greedy and ask for everything. Because this will effect his or her satisfaction level! What is the impact of ERP on your organization? • The impact is tremendous. It is like using a car instead of bullock cart. A poor implementation could end up with major delays in outbound shipments or even stoppages • An excellent implementation on the other hand is a blessing. However, this comes only when all stakeholders (users) and ERP implementation team follows proper implementation methodology.
Learn about Technology Technology has advanced, therefore the selection team members will need to learn about workflow, TCP/IP, and many other issues involved. ERP coordinator should be trained in the following areas: basics of SQL. ERP can give intelligent alerts automatically by email. It is expected that ERP coordinator or I. T. support person knows about networking of computers (LAN) If necessary, plan a separate training for the Information Technology and new techniques that are akin with ERP. E.g., UPS can be connected to Server computer to give messages to users, automatically, that battery backup is low, so users can logout and shutdown properly E.g., Embrace technology with both hands. Do not be afraid of using new technology. May be attending seminars and train people continuously
DAILY BACKUP Make a disaster management plan. Nobody wishes that accident should happen. Nevertheless, it is necessary to have a written document in place. Especially, mention about the backup and restore procedure. Do a rehearsal exercises. Keep backup CD (or DVD) in physically separate location, e.g. take to another office or another building (safe deposit locker) User may have to enter data all over again in case of server breakdown
DO YOUR HOME WORK WELL. COMPARE ERP MODULES OFFERED BY VARIOUS ERP COMPANIES Do not get carried away by impressive PowerPoint presentations. Marketing people are trained to give ‘Rosy’ picture. The chief of ERP (main sponsor) should know the limitation of ERP and its customization ERP implementers cannot deliver Moon. Although sales team will promise Moon and Jupiter also.
ERP is not bed of roses. Business transformation is a painful process. Do not underestimate. It is like that scene of ‘Jurassic Park II’ movie. She is amused when she is looking at the Dinosaurs for the first time. She is told that in beginning, it is always ‘ wah wah’ but it ends up in screaming!
I t is said that ERP implementation is a journey and not the final destination