John Carne

The ERP EXPERIENCE

The Real World

The Real World

The Real World

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 AnalysisWarehouse

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

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

ERP package pricing negotiations are typically a multi-stage process and include many pricing components

• Software providers usually give up more when negotiating an international deal

• Focus on total cost of ownership not only software costs

• Review multiple vendors pricing for most competitive costs results

• Include pricing structure or approach for future modules or functionality

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

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

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

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

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

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)

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

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

The ERP EXPERIENCE

Machiavelli - Words of Wisdom

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

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

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!”

The ERP EXPERIENCE

Yeeeeehaaaaaa!!!!!!

The ERP EXPERIENCE Design Process (see re-engineering section)

D efine the scope of thepro jec t

D ocum ent "A S -IS "

D o w e need the process

P roto type

Im plem entation

O ther P rocesses

E xpected B enefitsand C osts

"A S -IS "D ocum entation

F low /P rob lem s/Tools

P o lic ies andP rocedures

U pdatedD ocum entation

F low /P rob lem s/Tools

S cope

C O M B IN E N O

Y E S

U pdatedD ocum entation

F low /P rob lem s/Tools

R ev ised B enefitsand C osts

B lue S ky

C ontinuous Im provem ent P rocess

B enchm ark com panies

Q U IC K F IX

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

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

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

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

The ERP EXPERIENCE Life after being SAP’d – Team Motto

If we pull this off - we will eat like kings