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Unit topics:Unit topics:--

Unit 2:Unit 2:-- Building Business cases for ERPBuilding Business cases for ERP

Roles of ERPRoles of ERP

Need for ERPNeed for ERP

Gap analysis, Competitive EnvironmentGap analysis, Competitive Environment

analysisanalysis

Strategic needs analysis,Strategic needs analysis, Feasibility analysisFeasibility analysis

ERP Project life CycleERP Project life Cycle

Cost elementsCost elements

Reference Book:Reference Book:

01. Enterprise Resource Planning01. Enterprise Resource Planning MahadevMahadev

Jaiswal and Ganesh Vanapalli (Macmillan)Jaiswal and Ganesh Vanapalli (Macmillan)

02. ERP02. ERP Ellen Monk and Bret Wagner,Ellen Monk and Bret Wagner,

ThomsonThomson

03. ERP03. ERP Alexis Leon,Alexis Leon, Leon PublishersLeon Publishers


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REVIEW..CONCEPTREVIEW..CONCEPT


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DEFINITION OF ERP (Enterprise Resource Planning)DEFINITION OF ERP (Enterprise Resource Planning)

Tool to integrate enterprise across itsTool to integrate enterprise across itsbusiness functions as well as withbusiness functions as well as with

outside business partners to manageoutside business partners to managethe enterprise resources efficiently.the enterprise resources efficiently.

Vendors Enterprise

. Dept1

. Dept2.

Customers


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ERP (Enterprise Resource Planning)ERP (Enterprise Resource Planning)

Mfg Sales Financial

AccountingCap

plng

Demand

plng

Controlling

HRMM

Vendors

Customers


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33--Tier ClientTier Client--ServerServerArchitectureArchitecture

Presentation Server

(SAP GUI, Web interface)

Application Server

(Application Programs/Processes)

Database Server(RDBMS like Oracle)


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SD -Sales &

Distribution

MM -

Materials Mgt

PP - ProductionPlanning

QM - Quality

Management

PM -Plant

Maintenance

HR -Human

Resources

FI -Financial

Accounting

CO -

Controlling

AM -AssetManagement

PS - Project

System

WF -Work

Flow

IS -Industry

Solution

R/3

Client/Server

ABAP/4

R/3 Integration ModelR/3 Integration Model

SD -Sales &

Distribution

MM -

Materials Mgt

PP - ProductionPlanning

QM - Quality

Management

PM -Plant

Maintenance

HR -Human

Resources

FI -Financial

Accounting

CO -

Controlling

AM -AssetManagement

PS - Project

System

WF -Work

Flow

IS -Industry

Solution

R/3

Client/Server

ABAP/4


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System LandscapeSystem Landscape

Development

System

Test /QA

System

Production

System

Transport


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33--Tier ClientTier Client--ServerServerArchitectureArchitecture

Presentation Layer: Collects user input and creates

process requests and presents the results back to the

user. Systems capable ofproviding GUI are used.

Application Layer: Uses the application logic ofSAP

programs to collect and process the process requests.

Servers providingan optimal processing env are used.

Database Layer: Stores and manages the retrieval of

the data. Servers with verylarge and fast storage

space are used.


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SAP R/3 BASISSYSTEMSAP R/3 BASISSYSTEM

SAP

R/3 Basis

System

Hardware

Logical Collection of R/3

software components


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ROLE OF ERPROLE OF ERP


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Enterprise Resource PlanningEnterprise Resource Planning

SalesDistribution,

Order

Management

Accounting

and Finance

Production

Planning

Human

Resources

Integrated

Logistics

Customer/

Employee


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Enterprise Resource PlanningEnterprise Resource Planning

Enterprise resource planning (ERP) is aEnterprise resource planning (ERP) is acrosscross--functional enterprise system thatfunctional enterprise system thatserves as a framework toserves as a framework to integrate andintegrate andautomate many of the businessautomate many of the business

processesprocesses that must be accomplishedthat must be accomplishedwithin the manufacturing, logistics,within the manufacturing, logistics,distribution, accounting, finance, humandistribution, accounting, finance, humanresource functions of a business.resource functions of a business.

ERP software is aERP software is a family of softwarefamily of softwaremodulesmodules that supports the businessthat supports the businessactivities involved in theseactivities involved in these vital backvital backofficeoffice processes.processes.


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Enterprise Resource PlanningEnterprise Resource PlanningERP is being recognized as a necessaryERP is being recognized as a necessaryingredient for theingredient for the efficiency, agility, andefficiency, agility, and

responsivenessresponsiveness to customers and suppliersto customers and suppliersthat an ethat an e--business enterprise needs to succeedbusiness enterprise needs to succeedin the dynamic world of ein the dynamic world of e--commerce.commerce.Companies are findingCompanies are finding major business valuemajor business value inininstalling ERP software in two major ways:installing ERP software in two major ways:1. ERP creates a1. ERP creates a framework for integratingframework for integratingand improving???and improving???theirtheirbackback--office systemsoffice systems that results in majorthat results in majorimprovements in customer service, production,improvements in customer service, production,

and distribution efficiency.and distribution efficiency.2. ERP provides2. ERP provides vital crossvital cross--functionalfunctionalbusinessbusiness processes and supplier andprocesses and supplier andcustomer.???customer.???Information flows.Information flows.


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How is ERP Different?How is ERP Different?Types of Data MaintainedTypes of Data Maintained Maintain Financial and NonMaintain Financial and Non--Financial data about a wide range ofFinancial data about a wide range of

activitiesactivities Events Orientation -- Record events other than financial

accounting events; record additional, non-financial information

about accounting eventsMethod of Data and Program OrganizationMethod of Data and Program Organization Organize information more efficiently and provide tools to makeOrganize information more efficiently and provide tools to make

information accessible to a wide variety of individuals/applicationsinformation accessible to a wide variety of individuals/applications Database Organization -- All data is stored separately from the

programs that manage it. This allows for (but does not assure)

more seamless integration of subsystems and easierdevelopment of systems and processes that use cross-functionaldata (as compared to file-based organization see Murthy Ch 1)

Level of EnterpriseLevel of Enterprise--wide Integrationwide Integration Integrate and link information from a wide variety of subsystemsIntegrate and link information from a wide variety of subsystems Enterprise-Wide Integration -- Across subsystems and

transaction cycles and across financial and non-financial lines


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Systems IntegrationSystems IntegrationNote: All systems are divided into subsystems, eitherNote: All systems are divided into subsystems, eitherconceptually or physically to facilitate ease ofconceptually or physically to facilitate ease ofunderstanding and maintenance. These subsystems areunderstanding and maintenance. These subsystems areoften dividedoften divided Along transaction cycle lines (revenue/expenditure)Along transaction cycle lines (revenue/expenditure) Along financial/operational lines (sales management, A/R)Along financial/operational lines (sales management, A/R)

No integrationNo integration Data is physically separate, must beData is physically separate, must beseparately keyed into different subsystemsseparately keyed into different subsystems

InterfacesInterfaces Data is physically separate and isData is physically separate and istransferred, using a special program, from one system totransferred, using a special program, from one system toanotheranother Transferred by directly populating data tablesTransferred by directly populating data tables

Transferred by creating transactions which are then processedTransferred by creating transactions which are then processedautomatically into the other systemautomatically into the other system

IntegrationIntegration All programs utilize the same set of dataAll programs utilize the same set of data

an subsystem divisions are conceptual onlyan subsystem divisions are conceptual only


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DEFINITION:DEFINITION:

Software solution that addresses the

Software solution that addresses theenterprise needs taking the process view ofenterprise needs taking the process view of

the organization to meet its goals bythe organization to meet its goals byintegrating all functions of an enterprise.integrating all functions of an enterprise.


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ERP POTENTIALERP POTENTIAL

Software solution that addresses the enterpriseSoftware solution that addresses the enterpriseneeds taking the process view of theneeds taking the process view of theorganization to meet its goals by integrating allorganization to meet its goals by integrating allfunctions of an enterprise.functions of an enterprise.

Characteristics:Characteristics: FlexibilityFlexibility ModularModular Open architectureOpen architecture

ComprehensiveComprehensive Beyond the orgBeyond the org best business practicesbest business practices SimulationSimulation


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UNIT02UNIT02

DEMAND OF ERPDEMAND OF ERP


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ERP SystemERP System -- a necessity ?a necessity ??? Imagin a typical business situation of a salesImagin a typical business situation of a sales

orderorder without ERPwithout ERP && its disadvantagesits disadvantages..

ERP solution and its advantages.ERP solution and its advantages.

AccountabilityAccountability

ResponsibilityResponsibility Effective communicationEffective communication

Information flowInformation flow

Standard processesStandard processes Less redundancyLess redundancy

Improved man power utilizationImproved man power utilization

More decision support toolsMore decision support tools


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ContdContd

ChallengeChallenge for mfg. (global, distributed,for mfg. (global, distributed,new product)new product)

AggressiveAggressive cost controlcost control initiativesinitiatives

Need toNeed to analyze costs/revanalyze costs/rev

Flexibility to respond toFlexibility to respond to chg buschg busrequirementsrequirements

MoreMore informedinformed management decisionmanagement decision

making.making. Mergers/AcquisitionsMergers/Acquisitions..

NeedNeed accurate and timely informationaccurate and timely informationnot just DATA.not just DATA.


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Proper ERP ImplementationProper ERP Implementation

Process Can Yield SuccessfulProcess Can Yield Successful

OutputOutput


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NEED FOR ERP.NEED FOR ERP.


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Knapp Associates 25

FourSteps to Conducting aFourSteps to Conducting aNeeds AssessmentNeeds Assessment

Step 1. Perform a "gap" analysis.Step 1. Perform a "gap" analysis.

Step 2. Identify priorities and importance.Step 2. Identify priorities and importance.

Step 3. Identify causes of performanceStep 3. Identify causes of performanceproblems and/or opportunities.problems and/or opportunities.

Step 4. Identify possible solutions andStep 4. Identify possible solutions and

growth opportunities.growth opportunities.


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Knapp Associates 26

Perform a "gap" analysisPerform a "gap" analysis

Compare the actual performance of yourCompare the actual performance of yourorganizations to existing standards, or toorganizations to existing standards, or toset new standards.set new standards.

TheThe difference or the "gap" between thedifference or the "gap" between thecurrent and the necessary will identifycurrent and the necessary will identify

our needsour needs, purposes, and objectives of, purposes, and objectives of

selecting new MRP/ERP Softwareselecting new MRP/ERP Software


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Knapp Associates 27

Identify priorities & importanceIdentify priorities & importance

Specify their importance and urgency inSpecify their importance and urgency inview of your organizational needs andview of your organizational needs andrequirementsrequirements Executive pressure:Executive pressure: Does top managementDoes top management

expect a solution?expect a solution?

Customers:Customers: What influence is generated byWhat influence is generated bycustomer specifications and expectations?customer specifications and expectations?

CostCost--effectiveness:effectiveness: How does the cost of theHow does the cost of theproblem compare to the cost of implementingproblem compare to the cost of implementinga solution?a solution?


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Knapp Associates 28

Identify causes of performanceIdentify causes of performanceproblems and/or opportunitiesproblems and/or opportunities

Prioritize and focus on criticalPrioritize and focus on criticalorganizational and personal needsorganizational and personal needs

Identify specific problem areas andIdentify specific problem areas andopportunities in your organizationopportunities in your organization


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Knapp Associates 29

Identify possible solutions andIdentify possible solutions andgrowth opportunitiesgrowth opportunities

Determine what are the gaps the businessDetermine what are the gaps the businessis trying to fillis trying to fill

Establish what functions the software mustEstablish what functions the software mustprovide to fill these gapsprovide to fill these gapsDetermine what reDetermine what re--engineer is required toengineer is required tothe existing process to remove/minimizethe existing process to remove/minimize

any functional weaknesses.any functional weaknesses.Determine how the benefits provideDetermine how the benefits providegrowth opportunitiesgrowth opportunities


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IMPLEMENTATIONIMPLEMENTATION


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PrePre--screening of the chosen packagesscreening of the chosen packages

Preparing for the venturePreparing for the ventureProject PlanningProject Planning

AnalysisAnalysis

a) GAP Analysisa) GAP Analysis

b) Competitive environment analysisb) Competitive environment analysisc) Strategic Need Analysisc) Strategic Need Analysisd) Feasibility analysisd) Feasibility analysis

Designing the SystemDesigning the System

ReengineeringReengineeringTeam trainingTeam training

TestingTesting

Post implementationPost implementation


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UNIT02UNIT02

GAP ANALYSISGAP ANALYSIS

How it differs with MIS analysis.?How it differs with MIS analysis.?


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In Systems Investigation ofIn Systems Investigation ofMIS.MIS.

Organizational

Feasibility

Is it a ood fit?

OperationalFeasibility

Will it be accepted?

Economic

Feasibility

an we afford it?

TechnicalFeasibility

oes the

capability exist?


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Systems Investigation(Contd)Systems Investigation(Contd)

ConsiderConsider Traditional Systems Development LifeTraditional Systems Development LifeCycleCycle

As pointed out earlier, all application developmentAs pointed out earlier, all application developmentmethodologies share certain common activities. Duringmethodologies share certain common activities. During

the remainder of this lecture we will discuss thesethe remainder of this lecture we will discuss theseactivities. We will begin by discussing systemsactivities. We will begin by discussing systemsinvestigation.investigation.The Investigation PhaseThe Investigation Phase begins the preliminary studybegins the preliminary studyof the proposed information system solution to meet theof the proposed information system solution to meet theee--business needs. Its focus is to seek to answer thebusiness needs. Its focus is to seek to answer the

questions: What are our opportunities, what are ourquestions: What are our opportunities, what are ourpriorities, and can IS be used to address these needs?priorities, and can IS be used to address these needs?Because the process of application development can beBecause the process of application development can becostly both in time and resources, the systemcostly both in time and resources, the systeminvestigation phase begins with ainvestigation phase begins with a Feasibility StudyFeasibility Study..

The goal of feasibility studies is to evaluate alternativeThe goal of feasibility studies is to evaluate alternativesystems and to propose the most feasible and desirablesystems and to propose the most feasible and desirable


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Organizational FeasibilityOrganizational Feasibility. This focuses on how. This focuses on howwell a proposed information system supports thewell a proposed information system supports theobjectives of the organization.objectives of the organization.

Technical FeasibilityTechnical Feasibility. This ascertains whether. This ascertains whetherreliable hardware and software capable ofreliable hardware and software capable ofmeeting the needs of the proposed system canmeeting the needs of the proposed system canbe acquired or developed.be acquired or developed.

Operational FeasibilityOperational Feasibility. This refers to the. This refers to thewillingness and ability of the management,willingness and ability of the management,employees, customers, suppliers, and others toemployees, customers, suppliers, and others to

operate, use, and support a proposed system.operate, use, and support a proposed system.


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Economic FeasibilityEconomic Feasibility..

This is concerned with whether the proposed IS benefitsThis is concerned with whether the proposed IS benefits

are greater than its costs. This area is particularlyare greater than its costs. This area is particularlyconcerned with financial affordabilityconcerned with financial affordability ---- whether the firmwhether the firmcan paycan pay to develop the system.to develop the system.

AA cost/benefit analysiscost/benefit analysis is used to weigh theis used to weigh the total coststotal costsa new system is likely to incura new system is likely to incuragainst the totalagainst the total

anticipated benefitsanticipated benefits to be gained.to be gained.This includes determiningThis includes determining

tan ibletan ible costscosts (such as hardware and software(such as hardware and softwarepurchases and employee salaries) andpurchases and employee salaries) and

intan ibleintan ible costscosts such as effects on employee moralesuch as effects on employee moraleand disruptions in productivity during the installation ofand disruptions in productivity during the installation ofthe new system.the new system.

Benefits too can be either tangible (such as reducedBenefits too can be either tangible (such as reducedinventory and carrying costs) or intangible (higherinventory and carrying costs) or intangible (higher

customer satisfaction).customer satisfaction).


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Process MappingProcess Mapping

1960.1960.

Flow ChartFlow Chart--

GraphicalGraphical representation of therepresentation of the

movement and flow ofmovement and flow ofConcrete orConcrete or

abstract item.abstract item.

FOR WhatFOR What

a) Workflowsa) Workflows

b) Tob) To fixfix Functional responsibilities.Functional responsibilities.


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Process Mapping(Contd)Process Mapping(Contd)

TodayToday

Process MappingProcess Mapping

Specifically Targets theSpecifically Targets the activitiesactivities

ocuring within an existing businessocuring within an existing businessprocess.process.

This process does whatThis process does what

Develops anDevelops an asas--isis representation ofrepresentation of

process with goal ofprocess with goal ofexposing weaknessesexposing weaknesses

that need to be addressed.that need to be addressed.

This facilitates what.This facilitates what.

GAP ANALYSISGAP ANALYSIS


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a) Gap Analysisa) Gap Analysis

This is a stage in which the companyThis is a stage in which the companyidentifies the gaps that needs to beidentifies the gaps that needs to betraversed to make the company'straversed to make the company's

practicepractice in sync with ERP environmentin sync with ERP environment..

A major success of ERP lies in thisA major success of ERP lies in this

most IMPORTANT stage.most IMPORTANT stage.


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ORACLEORACLE--Steps in GapSteps in Gap

analysis.analysis.


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The primary step will be to make a note of theThe primary step will be to make a note of theexistingexisting business system and list out the flaws andbusiness system and list out the flaws andpositive aspects. This is an attempt to have anpositive aspects. This is an attempt to have an

idea of what isidea of what is currently happeningcurrently happening given thegiven thescenario in question so as to help in ERPscenario in question so as to help in ERPimplementation.implementation.

Evaluate and decide the additionsEvaluate and decide the additions that need tothat need tobe made to the business in view of ERPbe made to the business in view of ERPimplementation. The aim is to make sure that thereimplementation. The aim is to make sure that thereis not even a thin line of difference between ERPis not even a thin line of difference between ERPand the organizations commercial activities. It willand the organizations commercial activities. It will

be oriented to ERP function.be oriented to ERP function.

Rating the existing level of performanceRating the existing level of performance to set ato set abenchmark or standards for the business as onbenchmark or standards for the business as on

date. This will help in finding out the benefit of ERP.date. This will help in finding out the benefit of ERP.


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Having an inHaving an in--depth study of the regulations anddepth study of the regulations andstatements in the organizations andstatements in the organizations and suggestingsuggesting

modificationsmodifications. This also will decide ERP. This also will decide ERPimplementation.implementation.

ClearlyClearly defining the roles of individualsdefining the roles of individuals in thein theorganization so that the priorities are met andorganization so that the priorities are met and

the structure remains undisturbed. This is tothe structure remains undisturbed. This is tomake things clear for ERP function.make things clear for ERP function.

Checking if the objective inChecking if the objective in discharging dutiesdischarging duties

are metare met because it is the ultimate solution to anybecause it is the ultimate solution to anyissue. If they are not met the gaps should beissue. If they are not met the gaps should bemade known and corrected. Only then themade known and corrected. Only then theorganization can achieve the benefit of ERP.organization can achieve the benefit of ERP.


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Ensuring that functions are executedEnsuring that functions are executedproperlyproperly and if need be personnel can beand if need be personnel can be

rewarded to boost up and encouragerewarded to boost up and encourageperformance.performance.

SimilarlySimilarly comparisonscomparisons are to be made forare to be made foreveryevery

other factorother factorthat draws relation in one way orthat draws relation in one way orother. These results are to be complied for ERPother. These results are to be complied for ERPgap analysis.gap analysis.

TheThe gap analysis takes into accountgap analysis takes into account all theall thefactorsfactors of study and gives the results. It eitherof study and gives the results. It eitherrecommends the implementation of an ERPrecommends the implementation of an ERPsystem or rejects the idea in totality.system or rejects the idea in totality.


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b) Competitive Environment Analysis.b) Competitive Environment Analysis.

Putting organization itself in competitive disadvantage..?Putting organization itself in competitive disadvantage..?By not having an ERP in its place while competitorsBy not having an ERP in its place while competitors

dodo

An ERP package built upon the reengineering ofAn ERP package built upon the reengineering ofbusiness processes around best practices and providesbusiness processes around best practices and providesadvantage of data integration andadvantage of data integration andstandardizationgives better competitive environment.standardizationgives better competitive environment.

By implementing an ERP an organization can keep upBy implementing an ERP an organization can keep upwith competitors.with competitors.


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c) Strategic needs analysis.c) Strategic needs analysis.

Why a Strategic View..Why a Strategic View..

Its How You use itIts How You use it StupidStupid

It not whether a company has an ERP systemIt not whether a company has an ERP system Not the cost or time spent implementingNot the cost or time spent implementing

Not if its a vanilla or customized systemNot if its a vanilla or customized system

It how a company benefits from theIt how a company benefits from theimplementationimplementation


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Knapp Associates 46

How an ERP System SupportsHow an ERP System Supports

Strategic AlignmentStrategic Alignment

A ERP system can provide the visibilityA ERP system can provide the visibilitynecessary to ensure that departmentalnecessary to ensure that departmentalactivities are in line with the overallactivities are in line with the overall

corporate strategy.corporate strategy.Analysis & reporting tools can be used toAnalysis & reporting tools can be used toprovide a centralized, unified view of allprovide a centralized, unified view of allthe companys critical informationthe companys critical information

Provide the visibility necessary to ensureProvide the visibility necessary to ensurethat departmental activities are in line withthat departmental activities are in line withthe overall corporate strategythe overall corporate strategy


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Knapp Associates 47

Strategic View of MRP/ERPStrategic View of MRP/ERP


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Knapp Associates 48

Determining Strategic ViewDetermining Strategic View

Analyze companys requirementsAnalyze companys requirements

Review existing business systemsReview existing business systems

Prepare a Gap analysis that highlights thePrepare a Gap analysis that highlights thepresent weaknesses of the existingpresent weaknesses of the existingsoftware.software.

Prepare a Needs analysis that definesPrepare a Needs analysis that defineswhat Gaps the business is trying to fill & iswhat Gaps the business is trying to fill & isrequired from a new software system.required from a new software system.


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Knapp Associates 49

Align business activities with corporateAlign business activities with corporatestrategystrategy

Business activity alignment is the ability to take theBusiness activity alignment is the ability to take thestrategic plan & translate it into tactical steps usingstrategic plan & translate it into tactical steps usingan ERP systems data.an ERP systems data.Respond faster and smarter to market challengesRespond faster and smarter to market challenges

with better decisionwith better decision--making capabilitiesmaking capabilitiesAdjust daily activities and long term strategyAdjust daily activities and long term strategytogether, as required by the business plan andtogether, as required by the business plan andshifting market conditionsshifting market conditionsAchieve a balance between cost & investment inAchieve a balance between cost & investment insatisfying organizational goalssatisfying organizational goalsEnhance collaboration for better decisions &Enhance collaboration for better decisions &departmental alignmentdepartmental alignment


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Knapp Associates 50

Strategic GoalsStrategic Goals

1.1. Place emphasis on three critical factorsPlace emphasis on three critical factorsfor driving improved business value fromfor driving improved business value fromenterprise systemsenterprise systems

Integrating the organizationIntegrating the organization Optimizing business processesOptimizing business processes

Using and analyzing system data to improveUsing and analyzing system data to improvedecision makingdecision making

2.2. Aggressively use information andAggressively use information andanalytics to improve decision making andanalytics to improve decision making andbusiness performancebusiness performance

U i iU i i


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Unit 2:Unit 2:-- Building Business cases forBuilding Business cases for

ERPERP

Feasibility analysisFeasibility analysis

I S t I ti ti fI S t I ti ti f


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In Systems Investigation ofIn Systems Investigation ofMIS.MIS.

Organizational

Feasibility

Is it a ood fit?

OperationalFeasibility

Will it be accepted?

Economic

Feasibility

an we afford it?

TechnicalFeasibility

oes the

capability exist?


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Systems Investigation(Contd)Systems Investigation(Contd)ConsiderConsider Traditional Systems Development LifeTraditional Systems Development LifeCycleCycle

As pointed out earlier, all application developmentAs pointed out earlier, all application developmentmethodologies share certain common activities. Duringmethodologies share certain common activities. Duringthe remainder of this lecture we will discuss thesethe remainder of this lecture we will discuss theseactivities. We will begin by discussing systemsactivities. We will begin by discussing systemsinvestigation.investigation.

The Investigation PhaseThe Investigation Phase begins the preliminary studybegins the preliminary studyof the proposed information system solution to meet theof the proposed information system solution to meet theee--business needs. Its focus is to seek to answer thebusiness needs. Its focus is to seek to answer thequestions: What are our opportunities, what are ourquestions: What are our opportunities, what are ourpriorities, and can IS be used to address these needs?priorities, and can IS be used to address these needs?

Because the process of application development can beBecause the process of application development can becostly both in time and resources, the systemcostly both in time and resources, the systeminvestigation phase begins with ainvestigation phase begins with a Feasibility StudyFeasibility Study..The goal of feasibility studies is to evaluate alternativeThe goal of feasibility studies is to evaluate alternativesystems and to propose the most feasible and desirablesystems and to propose the most feasible and desirablesystems. Feasibility is assessed across four majorsystems. Feasibility is assessed across four major

categories:categories:


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Organizational FeasibilityOrganizational Feasibility. This focuses on how. This focuses on howwell a proposed information system supports thewell a proposed information system supports theobjectives of the organization.objectives of the organization.

Technical FeasibilityTechnical Feasibility. This ascertains whether. This ascertains whetherreliable hardware and software capable ofreliable hardware and software capable ofmeeting the needs of the proposed system canmeeting the needs of the proposed system canbe acquired or developed.be acquired or developed.

Operational FeasibilityOperational Feasibility. This refers to the. This refers to thewillingness and ability of the management,willingness and ability of the management,employees, customers, suppliers, and others toemployees, customers, suppliers, and others to

operate, use, and support a proposed system.operate, use, and support a proposed system.

Systems Investigation(Contd )Systems Investigation(Contd )


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Economic FeasibilityEconomic Feasibility..

This is concerned with whether the proposed IS benefitsThis is concerned with whether the proposed IS benefits

are greater than its costs. This area is particularlyare greater than its costs. This area is particularlyconcerned with financial affordabilityconcerned with financial affordability ---- whether the firmwhether the firmcan paycan pay to develop the system.to develop the system.

AA cost/benefit analysiscost/benefit analysis is used to weigh theis used to weigh the total coststotal costsa new system is likely to incura new system is likely to incuragainst the totalagainst the total

anticipated benefitsanticipated benefits to be gained.to be gained.This includes determiningThis includes determining

tan ibletan ible costscosts (such as hardware and software(such as hardware and softwarepurchases and employee salaries) andpurchases and employee salaries) and

intan ibleintan ible costscosts such as effects on employee moralesuch as effects on employee moraleand disruptions in productivity during the installation ofand disruptions in productivity during the installation ofthe new system.the new system.

Benefits too can be either tangible (such as reducedBenefits too can be either tangible (such as reducedinventory and carrying costs) or intangible (higherinventory and carrying costs) or intangible (higher

customer satisfaction).customer satisfaction).

U it t iU it t i


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ERPERP

ERP Project life CycleERP Project life Cycle


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Some facts on transformation.Some facts on transformation.

Booz Allen & Hamilton studyon timeBooz Allen & Hamilton studyon time1. On time & within budget 10%1. On time & within budget 10%2. Cancelled after taking off 35%2. Cancelled after taking off 35%3. Over run on time and cost 55%3. Over run on time and cost 55%

Mckinsey & co studyon costMckinsey & co studyon cost

1.H

/W 10%1.H

/W 10%2. S/W 10%2. S/W 10%3. Transformation 80%3. Transformation 80%

ApproachesApproaches1. Cross functional Integration1. Cross functional Integration2. Functional Automation2. Functional Automation3. Technology enabled reengineering3. Technology enabled reengineering4. Clean state reengineering4. Clean state reengineering( ForStudent to place in quadrantsX( ForStudent to place in quadrantsX-- Process ChangeProcess Change

YY-- ERP change(customization)ERP change(customization)

System Design Traditional ApproachSystem Design Traditional Approach


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System Design Traditional ApproachSystem Design Traditional ApproachStepsSteps ActivitiesActivities Tools & TechniqueTools & Technique

ProblmDeftn. Identify with current system Interviewing & data collectingProblmDeftn. Identify with current system Interviewing & data collecting

Feasibility study Tech.,economic & managing fsblty Preliminary cost analysisFeasibility study Tech.,economic & managing fsblty Preliminary cost analysis

Systems analysis Detailed analysis of current system Logical process model, LogicalSystems analysis Detailed analysis of current system Logical process model, Logical

data model,Organisation chartsdata model,Organisation charts

Systems design Reengineering process & informatn.Systems design Reengineering process & informatn. ----SameSame

Detailed design Design of present sys.specicationDetailed design Design of present sys.specication ----SameSame

Implementation Software design & conversion Program design specificationsImplementation Software design & conversion Program design specifications

Output/Input design, DB designOutput/Input design, DB design

Maintenance Ongoing technical support,Maintenance Ongoing technical support,

Upgrade and enhancementUpgrade and enhancement

System Design ERP ApproachSystem Design ERP Approach


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System Design ERP ApproachSystem Design ERP ApproachStepsSteps ActivitiesActivities Tools & TechniqueTools & Technique

Planning . Conduct a need assesment, provide Interviewing, Cost justificationPlanning . Conduct a need assesment, provide Interviewing, Cost justification

a business justificationa business justification

Requirement Analyse current process & specify Use best practices modelsRequirement Analyse current process & specify Use best practices modelsanalysis process to be supported.. Justifying what company cananalysis process to be supported.. Justifying what company can

Selection of ERP system gain by implementing the new.Selection of ERP system gain by implementing the new.

Design Reegineer business processes Interactive prototypingDesign Reegineer business processes Interactive prototyping

around the best practices modelaround the best practices model

or customise the softwareor customise the software

Implementation Configure the system, migrate Work with vendors for any bugsImplementation Configure the system, migrate Work with vendors for any bugs

data from old to new system & in the S/W, Clean processesdata from old to new system & in the S/W, Clean processes

develop interfaces. And data, use reporting toolsdevelop interfaces. And data, use reporting tools

Also, implement report systemAlso, implement report systemconduct testing, implement control,conduct testing, implement control,

security & train end user.security & train end user.

Maintenance Ongoing technical support, Add enhanced frunctionalityMaintenance Ongoing technical support, Add enhanced frunctionality

& Improvement Upgrade and enhancement to existing model& Improvement Upgrade and enhancement to existing model


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Designing the SystemDesigning the System

In this stage, a lot ofIn this stage, a lot ofmicroscopicmicroscopicplanningplanning and deliberate action are carriedand deliberate action are carriedout.out.

The step helps to decide and resolveThe step helps to decide and resolvewhichwhich areasareas isis important forimportant forrestructuringrestructuring..

It is chosen from the ERP..It is chosen from the ERP..implementation models.implementation models.


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Installation Conversion MethodsInstallation Conversion Methods

Old System New System

Old System

New System

Old System


New System


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Old System

New System

Old System


New System

Parallel

Installation ConversionInstallation Conversion


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Installation ConversionInstallation ConversionMethods(Contd..)Methods(Contd..)

When the development of a system will replaceWhen the development of a system will replaceor improve a current system, a conversionor improve a current system, a conversionprocess will be needed. Conversion methodsprocess will be needed. Conversion methodsare used for managing system change andare used for managing system change and

managing both the cost and risk associated withmanaging both the cost and risk associated witha failure of the new system..a failure of the new system..

Four major forms of system conversion areFour major forms of system conversion arecommon:common:

ParallelParallel. This involves operating both the old. This involves operating both the oldand the new system at the same time for someand the new system at the same time for someperiod until the project development team andperiod until the project development team andend user management agree to switch overend user management agree to switch overcompletely to the new system. This is the leastcompletely to the new system. This is the leastrisky approach but the most costly, sincerisky approach but the most costly, since


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Methods(Contd..)Methods(Contd..)PilotPilot..Here one department or often an offHere one department or often an off--sitesiteoffice gives the new system aoffice gives the new system a trial runtrial run totosee how it works and to catch any problemssee how it works and to catch any problemsbefore the system is implemented companybefore the system is implemented company--wide.wide.

This is aThis is a less costlyless costly approach.approach.

Risk ofRisk offailure is isolatedfailure is isolated to the departmentto the departmentor office which receives the new system.or office which receives the new system.


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Old System

New System

Old System


New System

Parallel

Pilot

Phased


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Methods(Contd..)Methods(Contd..)PhasedPhased..Here the new system is implementedHere the new system is implementedgraduallygradually throughout the organizationthroughout the organizationaccording to some diffusion plan, such asaccording to some diffusion plan, such asdepartment by departmentdepartment by department, section by, section bysection, or even floor by floor.section, or even floor by floor.

This approach exposes the organization toThis approach exposes the organization to

more risk, but ismore risk, but is less costlyless costly..


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Old System

New System

Old System


New System

Parallel

Pilot

Phased

Plunge

I t ll ti C iI t ll ti C i


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Installation ConversionInstallation ConversionMethods(Contd..)Methods(Contd..)

PlungePlunge..

ThisThis "cold turkey""cold turkey" approach ends use ofapproach ends use of

the old system and begins use of the newthe old system and begins use of the newsystem all at once.system all at once.

This approach has theThis approach has the highest riskhighest risk, but is, but is

the least costly to implement.the least costly to implement.Can be considered forCan be considered fornonnon--criticalcriticalapplicationsapplications, or application improvements, or application improvements

that are marginal.that are marginal.


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Old System

New System

Old System


New System

Parallel

Pilot

Phased

Plunge

When the development of a system will replaceWhen the development of a system will replace


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When the development of a system will replaceWhen the development of a system will replaceor improve a current system, a conversionor improve a current system, a conversionprocess will be needed. Conversion methodsprocess will be needed. Conversion methods

are used for managing system change andare used for managing system change andmanaging both the cost and risk associated withmanaging both the cost and risk associated witha failure of the new system..a failure of the new system..

Four major forms of system conversion areFour major forms of system conversion arecommon:common:

ParallelParallel. This involves operating both the old. This involves operating both the oldand the new system at the same time for someand the new system at the same time for someperiod until the project development team andperiod until the project development team andend user management agree to switch overend user management agree to switch over

completely to the new system. This is the leastcompletely to the new system. This is the leastrisky approach but the most costly, sincerisky approach but the most costly, sinceresources must be used to keep both the newresources must be used to keep both the newand old system operational.and old system operational.


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PilotPilot. Here one department or often an off. Here one department or often an off--site officesite officegives the new system a trial run to see how it works andgives the new system a trial run to see how it works andto catch any problems before the system is implementedto catch any problems before the system is implemented

companycompany--wide. This is a less costly approach. Risk ofwide. This is a less costly approach. Risk offailure is isolated to the department or office whichfailure is isolated to the department or office which

receives the new system.receives the new system.

PhasedPhased. Here the new system is implemented gradually. Here the new system is implemented graduallythroughout the organization according to some diffusionthroughout the organization according to some diffusionplan, such as department by department, section byplan, such as department by department, section bysection, or even floor by floor. This approach exposessection, or even floor by floor. This approach exposesthe organization to more risk, but is less costly.the organization to more risk, but is less costly.

PlungePlunge. This "cold turkey" approach ends use of the old. This "cold turkey" approach ends use of the oldsystem and begins use of the new system all at once.system and begins use of the new system all at once.This approach has the highest risk, but is the least costlyThis approach has the highest risk, but is the least costlyto implement. Can be considered for nonto implement. Can be considered for non--criticalcriticalapplications, or application improvements that areapplications, or application improvements that aremarginal.marginal.


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RedesigningRedesigning

ERP implementation involves an evidentERP implementation involves an evidentchange in the number of employees andchange in the number of employees andtheir job responsibilities, which results duetheir job responsibilities, which results due

to a more automated and efficient system.to a more automated and efficient system.The human factors are taken into accountThe human factors are taken into accountin this stage.in this stage.


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TrainingTraining

This stage is all about preparing theThis stage is all about preparing theemployees to use ERP. The employees inemployees to use ERP. The employees inthe organization are trained to handle thethe organization are trained to handle the

system on daily and regular basis.system on daily and regular basis.


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TestingTesting

The phase is marked by attempts to breakThe phase is marked by attempts to breakthe system. At this point, the companythe system. At this point, the companytests the real case scenarios.. This phasetests the real case scenarios.. This phase

is performed to find the weak links, whichis performed to find the weak links, whichcould be rectified before implementation.could be rectified before implementation.


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Post ImplementationPost Implementation

Finally, the process of implementationFinally, the process of implementationwould be complete when there is a regularwould be complete when there is a regularfollow up and proper instruction flowfollow up and proper instruction flow

thereafter and along the lifetime of ERP.thereafter and along the lifetime of ERP.This involves the entire efforts andThis involves the entire efforts andmeasures taken to update and attainmeasures taken to update and attain

better benefits, after the system isbetter benefits, after the system isimplemented..implemented..


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PITFALLSPITFALLS

1.Modifying ERP Software Prior to Pilot1.Modifying ERP Software Prior to PilotTestingTesting

2. Inadequate Training2. Inadequate Training

3. Insufficient Implementation Support3. Insufficient Implementation Support



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ERPERP

Cost elementsCost elements


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Reengineering and ERPReengineering and ERP Whole is more than sum of the parts, synergy.Whole is more than sum of the parts, synergy.

Reengg is the precursor to ERP implementation.Reengg is the precursor to ERP implementation.

Study of current system and processesStudy of current system and processes Design and develop new systemsDesign and develop new systems

Define process, org structure, procedures.Define process, org structure, procedures.

Train people, implement new systemTrain people, implement new system

ERP with reERP with re--engineering through all cycles.engineering through all cycles.


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BENEFITS OF ERPBENEFITS OF ERP


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Customization and ERPCustomization and ERP

ERP requires a matching of business processes andERP requires a matching of business processes andinformation processes with those embedded in ERPinformation processes with those embedded in ERP

Change your business processesChange your business processes -- ReengineeringReengineering BenefitBenefit matches to best practices embedded in the ERPmatches to best practices embedded in the ERP

(which can be a major benefit of ERP implementation)(which can be a major benefit of ERP implementation) CostCost May not lose strategic advantageMay not lose strategic advantage

Customize ERPCustomize ERP BenefitBenefit reduces business process change, maintains anyreduces business process change, maintains any

strategic advantages from unique processesstrategic advantages from unique processes

CostCost takes time; reduces ease of upgradetakes time; reduces ease of upgrade Even if they customize, companies will probably reengineer theirEven if they customize, companies will probably reengineer their

processesprocesses

Single Vendor versus Best ofSingle Vendor versus Best of


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Single Vendor versus Best ofSingle Vendor versus Best ofBreedBreed

ERPs can be implemented using all modulesERPs can be implemented using all modulesfrom one vendor, or by selecting individualfrom one vendor, or by selecting individualmodules from different vendorsmodules from different vendors

Best of BreedBest of Breed Select modules from differentSelect modules from differentERP vendors (as well as nonERP vendors (as well as non--ERP systems) thatERP systems) thatmeet specific needs in each area and integratemeet specific needs in each area and integrate

Would have once been impossible, but vendorsWould have once been impossible, but vendorsare developing excellent integration solutionsare developing excellent integration solutions

WeaknessWeakness Time consuming to develop andTime consuming to develop andupdateupdate

StrengthStrength Strategic valueStrategic value


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BENEFITS..A CASEBENEFITS..A CASE


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Construct Technology Infrastructure

Support Globalization

Support Supply/Demand Chain Processes

Reduce Cost or Improve Productivity

Achieve Year 2000 Compliance

Improve CustomerResponsiveness

Standardize Info Systems/Platform

Improve Business Processes

Integrate Business Processes orSystemsImprove Quality/Visibility ofData

15%

17%

20%

24%

25%

29%

31%

37%

37%

70%

0% 10% 20% 30% 40% 50% 60% 70% 80%

%Respondents

Source: Deloitte Consultingand BenchmarkingPartners

(Based on a study of62 companies that have gone live with an ERP system) Note: Based on multiple answers per respondent

Companies expectthat implementing

ERP will improve

the quality and

visibility of data

ERP Capabilities ExpectedERP Capabilities Expected

Laura Hotzler, Deloitte Consulting


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Maximizing the Benefit of ERPMaximizing the Benefit of ERP


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Maximizing the Benefit of ERPMaximizing the Benefit of ERP Reengineering (Hammer)Reengineering (Hammer)

Technology investments like do not yieldTechnology investments like do not yielddesired results if companies mechanizedesired results if companies mechanizeold ways of doing thingsold ways of doing things ReengineeringReengineering

must happenmust happenIneffective approachIneffective approach efficiency andefficiency andcontrol (unskilled workers)control (unskilled workers)

Effective approachEffective approach innovation, speed,innovation, speed,service and quality (knowledge workers)service and quality (knowledge workers)


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Reengineering is (Hammer)Reengineering is (Hammer)

Fundamental rethinking and radicalFundamental rethinking and radicalredesign of business processesredesign of business processes

Fundamental improvements in cost, timeFundamental improvements in cost, time(speed), defects (service, quality)(speed), defects (service, quality)

Focus on why things are done, not howFocus on why things are done, not howthey are done (core economic events)they are done (core economic events)

ERP Benefits: Overcomes inefficiencies ofERP Benefits: Overcomes inefficiencies of


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independent systems (Sumner)independent systems (Sumner)


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ERPOutcomes(Sumner)


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ERP Benefits (Summary)ERP Benefits (Summary)

TangibleTangible Inventory reductionInventory reduction

Personnel reductionPersonnel reduction

Productivity improvementProductivity improvement

Order managementOrder managementimprovementimprovement

Financial close cycleFinancial close cyclereductionreduction

IT cost reductionIT cost reduction

Procurement cost reductionProcurement cost reduction

Cash managementCash managementimprovementimprovement

IntangibleIntangible Information/visibilityInformation/visibility

New/improved processesNew/improved processes

Customer responsivenessCustomer responsiveness

IntegrationIntegration StandardizationStandardization

FlexibilityFlexibility

GlobalizationGlobalization

Supply/demand chainSupply/demand chainmanagementmanagement

Reengineering ChallengesReengineering Challenges


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Reengineering ChallengesReengineering Challenges(Romney)(Romney)

ResistanceResistance Dislike for changeDislike for change Concern about job lossesConcern about job losses Tradition and cultureTradition and culture SkepticismSkepticism Poor retrainingPoor retraining

CostCost FinancialFinancial Time RequirementsTime Requirements

Lack of Management SupportLack of Management Support ResistanceResistance CostsCosts Risks to Managers of FailureRisks to Managers of Failure


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SELECTIONSELECTION


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ERPS

election and Vendors ListERPS

election and Vendors List Functional aspects of business and gap analysisFunctional aspects of business and gap analysis

ee--commerce compatability and complexity.commerce compatability and complexity.

Customizing and implementationCustomizing and implementation

Cost and ROI.Cost and ROI.

Short ListShort List

SAPR/3SAPR/3

OracleOracle BAAN, People Soft etc.BAAN, People Soft etc.

Small List of IndustriesSmall List of Industries


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Small List of IndustriesSmall List of Industriessupported by SAP R/3supported by SAP R/3

aerospace, defense, chemical andaerospace, defense, chemical andprocess, consumer goods, healthcare,process, consumer goods, healthcare,

pharma, banking, automotive, services,pharma, banking, automotive, services,public sector, retail, IS.public sector, retail, IS.


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Implementation of EnterpriseImplementation of Enterprise


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Implementation of EnterpriseImplementation of EnterpriseSystemsSystems

Major investmentMajor investment Cost between $50,000 and $100,000,000+Cost between $50,000 and $100,000,000+

Take 3 months to 5 years to implementTake 3 months to 5 years to implement

Requires careful project management and involves manyRequires careful project management and involves many

people across organization; may use consultantspeople across organization; may use consultantsCompanies may choose to implement all modules fromCompanies may choose to implement all modules fromone vendor or select modules from different vendors andone vendor or select modules from different vendors andintegrate (best of breed)integrate (best of breed)

Companies must choose whether to customize the ERPCompanies must choose whether to customize the ERP

to their needs or adopt the ERP as isto their needs or adopt the ERP as isBoltBolt--OnsOns Additions to ERP offered by thirdAdditions to ERP offered by third--partypartyvendors for specialized functionalityvendors for specialized functionality


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ERP ChallengesERP Challenges

OnOn--time, ontime, on--budget implementations (90% are overbudget implementations (90% are overbudget)budget)Realization of benefitsRealization of benefits takes time, usually requirestakes time, usually requiresimplementation of advanced modulesimplementation of advanced modules

1.1. Productivity declineProductivity decline

Jobs redefined, new procedures established, ERP fine tuned,Jobs redefined, new procedures established, ERP fine tuned,organization learns to process new information streams (3organization learns to process new information streams (3--99months)months)

2.2. Productivity gainProductivity gain Develop new skills, structural changes, process integration, addDevelop new skills, structural changes, process integration, add

boltbolt--ons/advanced modulesons/advanced modules

3.3.

PayoffPayoffTransform organizational operations to efficient levelTransform organizational operations to efficient level

TestingTesting Massive amounts of testing needed toMassive amounts of testing needed toexamine every function, different data combinations,examine every function, different data combinations,appropriate data loadappropriate data load

CC


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ERP ConceptsERP ConceptsCompany DataCompany Data Organizational structureOrganizational structure

Setup DataSetup Data Default processing, default GL accounts,Default processing, default GL accounts,access controlaccess controlMasterDataMasterData Customers, Vendors, Inventory items,Customers, Vendors, Inventory items,Cash Accounts; Basic data for recording transactions,Cash Accounts; Basic data for recording transactions,historical data trackinghistorical data tracking

Transaction DataTransaction DataTransaction CaptureTransaction Capture Different methods for capturingDifferent methods for capturingthe same transaction, i.e. data entry screen, ethe same transaction, i.e. data entry screen, e--commerce entry, automatic interfaces (i.e. with vendor),commerce entry, automatic interfaces (i.e. with vendor),point of sale scanpoint of sale scan

WorkflowWorkflow Specify the sequence of the businessSpecify the sequence of the businessprocess, set rules to trigger appropriate informationprocess, set rules to trigger appropriate informationprocesses (recording, maintenance, control) andprocesses (recording, maintenance, control) andfacilitate short cycle time by triggering business processfacilitate short cycle time by triggering business processInquiry/ReportingInquiry/Reporting Standard inquiries and reports,Standard inquiries and reports,customized report writing by end user, by programmerscustomized report writing by end user, by programmers


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