ERP (ENTERPRICE RESOURCE PLANNING)“An accounting-oriented information systemfor identifying and planning the enterprise-wideresources needed to take, make, ship, and account forcustomer orders”
BENEFITS OF ERP ERP eliminates redundant efforts and duplicated data;can generate savings in operations expense ERP system can help produce goods and servicesmore quickly Company that doesn’t implement an ERP systemmight be forced out of business by competitors thathave an ERP system Smoothly running ERP system can save a company’spersonnel, suppliers, distributors, and customers muchfrustration ERP systems provide real-time dataImprove external customer communications
REASONS FOR IMPLEMENTING ERP Achieve economies of scale Support global business operations Reduce extraneous workforce Improve data integrity $60MM over 5 years
DIFFERENT PHASES OF ERP Pre Evaluation Screening Evaluation Package Project Planning GAP analysis Reengineering Team training Testing Post implementation
1.PRE EVALUATION SCREENINGDecision for perfect package Number of ERP vendor Screening eliminates the packages that are not at allsuitable for the company’s business processes. Selection is done on best few package available.
2.EVALUATION PACKAGE Package is selected on the basis of different parameter. Test and certify the package and also check thecoordination with different department Selected package will determine the success or failureof the project. Package must be user friendly. Regular up gradation should available. Cost
3.PROJECT PLANNING Designs the implementation process. Resources are identified. Implementation team is selected and task allocated. Special arrangement for contingencies.
4. GAPANALYSIS Most crucial phase. Process through which company can create a model ofwhere they are standing now and where they want togo. Model help the company to cover the functional gap
5.REENGINEERING Implementation is going to involve a significantchange in number of employees and their jobresponsibilities. Process become more automated and efficient.
6.TEAM TRAININGTakes place along with the process ofimplementation. Company trains its employees to implementand later, run the system.Employee become self sufficient toimplement the software after the vendors andconsultant have left.
7.TESTING This phase is performed to find the weak link so thatit can be rectified before its implementation.
8.POST IMPLEMENTATION The work is complete, data conversion is done,databases are up and running, the configuration iscomplete & testing is done. The system is officially proclaimed. Once the system is live the old system is removed
IS ERP FOR EVERYONE.. A business must analyse its own business strategy,organization, culture and operations before choosing anERP approach. A company may be ready to implement ERP. The company’s business processes may not be welldefined or managed. If a company is not prepared to make its processes moreefficient, then it will not gain the benefits an ERP systemcan provide.
“The decision to implement an ERP system is a businessinvestment decision, similar to the decision to build a newwarehouse, hire a new executive, or invest in a trainingprogram. As such, the ERP investment decision mustcreate measurable business benefits that justify theacquisition costs and the costs of system implementation”
IT INVESTMENT IN ERPBusiness Process Re-engineering (BPR), DataWarehousing, Enterprise Resource Planning(ERP),has elevated the importance of investingstrategically in IT. Numerous reports have highlightedthat ERP projects have occupied a dominant space in ITinvestment over the last decade. Traditional approaches’to IT investment evaluation are limited and inadequate.
Investing in an ERP application is a long-terminvestment for the whole business. Todays buyerunderstands that this is an investment not only for thepresent, but also for the next 15 to 20 years.Here are a few items to consider when selecting a Vendor: Vendor financial viability. Product upgrade cycles and maintenance . Out-of-box functionality of the product versuscustomization or personalization . Support for industry-specific business requirements. Ease of use to drive organizational buy-in and promoteusage of the application.
A FRAMEWORK FOR IT INVESTMENT According to Ross and Beath (2002, p.53)“To address both dimensions companies need tomake four distinct types of investment: Transformation, Renewal, Process Improvement, Experiments”.
1. TRANSFORMATIONA core infrastructure that is currently Inadequate fordesired business model.Sample Initiatives:ERP implementations.Building Data Warehouses.Standardizing Desktop technologies.Middleware for Web environments.
2.RENEWALOpportunity to reduce cost of maintenance of existingIT, or raise quality of IT services in general. Renewalinitiatives may be driven by a vendor’s decision towithdraw support for older products.Sample Initiatives:Facilitating access to existing data.Upgrading technology standards.Retiring outdated systems and technologies.
3.PROCESS IMPROVEMENTOpportunity to improve operational performance.These investments should be low-risk, unliketransformation initiatives; the focus is on operationaloutcomes of existing processes. Process Improvementsmust build on existing IT infrastructure to ensure a levelof predictability.Sample Initiatives:Shifting customer services to lower cost channel.Shifting data capture to customers.Eliminating costs of printing and mailing paper reportsor bills.
4.EXPERIMENTSNew technologies, new ideas for products orprocesses, new business models. Successfulexperiments can lead to major organizational changewith accompanying infrastructure changes or to moreincremental process improvement initiatives.Sample Initiatives: Testing demand for new product. Learning if customers can self-serve. Testing new pricing strategy. Assessing cost of new channels
COST OF ERPIMPLEMENTATIONThe following costs are to be considered:ERP package costConsultant costCost of Data conversionCost of trainingCost of testingCost of Post-Implementation support