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7/31/2019 ERP for Small Businesses 2
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Copyright2011 e-AccountingTecknowledge. All Rights Reserved
Successfully Implementing ERP Systems inSMEs
Accounting & Audit
Technology Conference andExhibition 2011
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Copyright 2011 e-Tecknowledge All Rights Reserved.
Successfully Implementing ERP Systems in SMEs
Outline
2
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion
Change management
Executive Support
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Successfully Implementing ERP Systems in SMEs
Background
A general definition of SMEs using size and scale of operation is not
easy, but within the fixed co-ordinates of national boundaries, we
will apply the definitions given at the 13th Council meeting of the
National Council on Industry held in July, 2001
Small-Scale Industry: An industry with a labour size of 11-100
workers or a total cost of not more than N50 million, including
working capital but excluding cost of land.
Medium Scale Industry: An industry with a labour size of between
101-300 workers or a total cost of over N50 million but not more
than N200 million, including working capital but excluding cost of
land.
3
Common features of SMEs are that they are either sole proprietorships or partnerships, and most have labour
intensive production processes and centralised management
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Successfully Implementing ERP Systems in SMEs
Background
ERP (Enterprise Resource Planning ) system is an integrated information management
system that manages the flow of information among different functional modules in an
enterprise.
4
Manufacturing
Finance
Engineering
Sales andMarketing
HumanResources
Manufacturing
MRP
Production
Planning
Scheduling& ActivityControl
Finance
Manufacturing
MaterialsandComponents
Quantities
Time
ERP
MRPII
MRP
InventoryControl
1960 1970 1980 1990
Planning &Inventory Control
MaterialsManagement
ManufacturingResourcePlanning
EnterpriseResourcePlanning
ERP combines all the business functions together into one single
integrated system with a single central database.
This system serves the information needs of all the departments
across geographies, while allowing them to communicate with eachother
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Successfully Implementing ERP Systems in SMEs
Background
SMEs are the backbone of any economy and are today faced with global competition. In order to respond to
the needs of the dynamic markets, SMEs are looking towards ERP systems.
A successfully implemented ERP system has proven to be provide the following key benefits:
Reduced Planning cycle time,
Reduced manufacturing cycle time,
Reduced inventory,
Reduced error in ordering,
Reduced requirement of manpower,
Enables faster response to changing market situations,
Better utilization of resources,
Increased customer satisfaction,
Enables global outreach
However ERP implementation is tough job for the organizations, especially for SMEs and there are many
challenges that an organization has to overcome before they can start reaping the benefits of an ERP system.
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Successfully Implementing ERP Systems in SMEs
Outline
6
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion
Change management
Executive Support
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Successfully Implementing ERP Systems in SMEs
ERP Implementation Readiness Check
Because of the benefits that ERP can bring, and the long period during which those
benefits may manifest themselves, ERP implementation is always a strategicinvestment for an organization.
Thus, the first and foremost thing is to identify whether your organization needs an
ERP solution at all. If an organization is experiencing one or more of the following
business conditions, it is time to seriously consider implementing an ERP solution or
replacing the current one:
Fast and uncontrolled growth: Is your organization growing at a very fast pace?
Your organization has recently opened multiple operational units/offices in
multiple locations. There is significant increase in volumes of production,
processes, and work force.
Lack of sufficient and accurate information on your companys performance: You are facing problems in capturing exact figures or are receiving mismatched
data on your companys performance indicators.
Consistent mismatch between inventories and production management:
There is a lack of coordination between sales order processing and inventory
management in your organization.
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Successfully Implementing ERP Systems in SMEs
ERP Implementation Readiness Check
Duplication of effort: The finance and HR departments store and maintain employee details
separately. Similar other instances of duplication exist in your company.
The right information is not accessible at the right time:
You are not able to access accurate data on stock in inventory, month-end sales
figures, orders in transit and other required information on time.
Little or no ability to forecast and plan:
Your organizations strategic and planning division is not equipped to forecast
and often relies on conventional methods for future projections.
Your current system is becoming obsolete:
The existing enterprise system in your organization is no longer efficiently
supporting your day-to-day processes and is negatively impacting the
organizations growth.
Need to Increase visibility and transparency into operations and finances
Need to Improve coordination and information sharing across different parts of
the organization
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Successfully Implementing ERP Systems in SMEs
Outline
9
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion
Change management
Executive Support
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Successfully Implementing ERP Systems in SMEs
Software/Vendor Selection
The root cause of many failed business software implementation projects can be traced back to
an incomplete evaluation and hasty selection process.
The four cornerstones of a good software selection process are;
Product Fit,
Implementation and Support Approach,
Risk Mitigation and
Optimize Price/TCO.
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Software
Product Fit
Solution
Provider Approach
Optimize TCOMitigate Predictable
Risk
Success!
The
What
How Much
The How
Avoid
Surprises
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Successfully Implementing ERP Systems in SMEs
Product Solution Fit
The first stumbling block for many failed implementations is a severe misalignment
between software functionality and business needs.
There are hundreds of enterprise software options in the marketplace, so it is important to
navigate carefully and find the product with the right fit.
Functional Fit
A high fit to your business functional requirements is critical for any solution to be viable. Need
to define your key high-level application requirements for evaluation purposes and if the vanillasolution does not provide complete fitness, how customizable is the solution to meet your
business requirements
Usability Fit
Ease of use is essential for user adoption and proficiency. It includes assessing the user interface
and the ability to easily getdata in and out of the system (without relying on IT) Compliance Management Fit
Includes IT controls, audit trails, electronic signatures, appropriate reporting and documentation,
and segregation of duties through roles and access rights
Technical Fit
Assesses how well a solution aligns with your IT plan requirements (defined previously) around
scalability, use of standard technologies (required skill sets, programming language, DBMS,
operating system), interoperability, and open interfaces.
Deployment Model Fit
Is alignment with your preferred IT architecture model (i.e. SaaS, Cloud, Hosted, or On-premise)
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Successfully Implementing ERP Systems in SMEs
Solution Provider Approach
Evaluate each solution vendors implementation approach to validate
how well they understand your business requirements and environment
Use of a defined implementation methodology
Ability to Meet Project Timelines
Evaluate their ability to execute the project considering
Breadth and depth of capabilities
Breadth and depth of related services
Evaluate their post go-live support approach
How does it work
What services do they provide
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Successfully Implementing ERP Systems in SMEs
Mitigate Predictable Risk
Aligned with your initial risk assessment , the third cornerstone is to mitigate
the predictable risks associated with each solution option.
When solutions rate similarly in other ways, this is the area that often clearly
differentiates between them;
Risk Management Approach
Business Risk Pricing/Contract Structure Risk
Change Management Risk
Compliance Risk
Product Risk
Project Delivery Risk
Operations Risk
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Successfully Implementing ERP Systems in SMEs
Optimize TCO
ERP systems have many hidden costs, thus Calculating TCO is essential for
making a fair comparison of different proposals.
TCO should include all anticipated costs in the first three years of ownership.
Life-Cycle Costs: and should be analysed along the following components
Acquisition
Deployment
Training
Maintenance
Services.
The identification and measurement ofdirect and indirect costs is a critical
requirement of TCO analysis.
Direct or budgeted costs include all expenditures related to hardware, license
fee and tangible resources.
Indirect or non-budgeted costs include downtime and services to end users.
These costs often are hidden and difficult to identify or measure.
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Outline
15
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion
Change management
Executive Support
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Successfully Implementing ERP Systems in SMEs
Project Management
Select a project management methodology that provides a roadmap for managing projects
and a checklist of key deliverables and activities to avoid missing key tasks tExampl;PMI,
Prince2
The project manager and the project management team should be experienced to be
able to plan out the requirements.
The project management knowledge dimension consists of the following components: Project Definition
Project Planning
People/Resources
Time
Cost
Risk\Issue
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ProjectManagement Knowledge
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Successfully Implementing ERP Systems in SMEs
Project Management and Team Structure
The implementation of an ERP system in an organization is an entire projectby itself and requires project management.. Project Management involvesplanning, organizing and
The project management knowledge dimension consists of the followingcomponents:
Project Definition
Project Planning
People/Resources
Time
Cost
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ProjectManagementKnowledge
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Project Management and Team Structure
Three dimensions of knowledge are required for the successful implementation of an ERP
system and should form the basis for the composition of ERP implementation project team.
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ProjectManagementKnowledge
Business andManagementKnowledge
TechnicalKnowledge
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ProjectManagementKnowledge
Business andManagementKnowledge
TechnicalKnowledge
Successfully Implementing ERP for SMEs
Project Management and Team Structure
The implementation of an ERP system in an organization is an entire project by itself and requires
project management. A structured approach should be used to plan and manage an implementation
project
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Business andManagementKnowledge
Successfully Implementing ERP for SMEs
Project Management and Team Structure
Three dimensions of knowledge are required for the successful implementation of an ERP
system and should form the basis for the composition of ERP implementation project team.
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Successfully Implementing ERP for SMEs
Project Management and Team Structure
Three dimensions of knowledge are required for the successful implementation of an ERP system and
should form the basis for the composition of ERP implementation project team.
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TechnicalKnowledge
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Outline
22
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion
Change management
Executive Support
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Implementation Strategy
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ERP transition technique focuses on how to make the transition from a legacysystem to a new ERP system. The selection of a transition technique that is best
suited for an organisation is crucial as a wrong technique can result in a failed or
flawed implementation.
Understanding the relationships of ERP transition techniques between the process,
people and technology will assist the ERP implementers to better understand what
type or combination of types of ERP transition technique is best.
The following ERP transition techniques can be considered for a successful
implementation;
Big Bang
Phased
Parallel
Process Line
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Implementation Strategy Big bang
Implementation happens in a single instance. All modules are installed across the entireorganization all at once, more or less.
All users move to the new system on a given date.
Advantages of Big Bang approach are low overall implementation cost, faster return on
investment, elimination of complex integration issues etc.
Drawbacks of this strategy are high amount of time and effort for pre-implementation planning,
high failure rate, do-it-right-the-first-time nature etc
Phased rollout (module/site/business unit )
Changeover occurs in phases over an extended period of time. Users move onto new system in
a series of steps.
A more cautious approach with a few modules such as the financial modules while linking
them back to the legacy system.
This usually takes more work to integrate because of development of interface programs and it
usually costs more in terms of consulting and internal team hours.
Parallel adoption
Both the legacy and new ERP system run at the same time. Users learn the new system while
working on the old.
It is often very difficult as the two systems usually take a different approach to gathering and
summarizing the data.
The parallel approach consumes considerably more resources than other techniques during the
transition as all functional interactions with the legacy system must also be duplicated exactly
in the new ERP system24
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Which Strategy? There certainly is no one-size-fits-all when it comes to implementing an ERP system.
Every company has unique goals, and an implementation requires careful planning andanalysis
Big bang approach is ideal in situations where an immediate ERP solution is needed.
This is better suited for SMEs where all the critical resources of the project can fall
within the immediate control of a project manager. It is also suited to any situation
where a limited amount of time is available combined with an immovable go-live date
The Phased approach suits companies that do not share many common processes across
departments or business units
The parallel approach is ideally situated for a mission critical situations that cannot
survive a major malfunction of an ERP system. It also works well for business
environments that require the utmost in stability of an ERP system such as financial,
pharmaceutical or medical companies
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Outline
26
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion
Change management
Executive Support
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Successfully Implementing ERP for SMEs
Data Migration Data migration is the transfer of data from an old information systems (Legacy) to the new
system that is replacing it (ERP)
In order to have a successful ERP implementation, the ERP application must run on top of a
solid foundation of data. Poor levels of data quality within ERP system will cause a high level
of errors in transaction processing, which is a costly business proposition.
Data migration process should be executed along the following phases:
Pre MigrationAnalyzing, Mapping, Normalizing/Transforming, Testing, Backup
Migration
Post Migration Quality Control, Cleanup, Update Cataloguing Guidelines
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Data Migration Strategy Data migration strategy provides a roadmap for performing the conversion of data from the legacy
system to the new ERP system. Data migration strategy defines what is to be migrated, how andwhen it will be done.
The strategy should cover both depth and breath of scopewhat entities are to be migrated and
how much data. It should ideally consist of the following:
The data to be migrated - Configuration data, Master data, Transaction data
Timing of data loaddifferent data objects might follow different time line. Every load of the master data should be used totest the tools and the templates in addition to the data itself.
Templates to be used - it is best to freeze the template at the initial phase of the project and test its utility at different phasesof the project. This will help in identifying missing data requirements long before the final go live date.
Tools to be used - tools need to be evaluated from the perspective of speed, scope of errors and data volume.
Roles and ResponsibilityClear definition of roles and responsibilities of data migration team resources
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Best practices included the following:
Designating a central group to manage the data and policies
Delegating responsibility for various data items based on function, business unit, and geography
Implementing some workflow technology to ensure updates were made in a timely manner and did not slow down sales or
new product introductions
Cleaning up data on the old system prior to merging a unit into the common instance; this includes both
consistency and tagging records to be converted with enough information to be connected to the appropriate master data in
the consolidated system
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Data Migration Team Building a data migration team with the appropriate skills to your project, will to a large extent
determine the success and failure of the project.
Key roles to be considered for data migration team are likely to include:
Project manager/Lead should ideally be experienced in data migration and ERP as well as project management
Data object (business) ownersKey business stakeholders will be required to sign off various stages of datamigration process
Business Analyst/Process LeadsERP process leads should be involved at various stages of data migration process,from definition of data fields to be migrated to testing and validation
Data migration analyst
A Legacy Expert
Data subject matter expert
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Data Migration Risk Management
One of the project tasks which can be a wild card for both costs and timeline during
an ERP implementation is data migration. The following 4 key things can be done to
minimize your costs and risks associated with this important aspect of implementing
your new ERP solution
Be smart about what you migrate
The most important consideration is what to migrate. This should be carefully discussed
with your implementation partner during the sales process and incorporated into the
statement of work.
Key considerations are:
avoid high-risk sets of data,
Focus on what is critical to have.
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Scrub and test the data yourself
Ensure your implementation partner gives you specific templates and data specifications, then take the time internally to do the
cleanup of your old data. Work with your partner to understand how to test and validate the imported data so you can also do that
Have your team keep paper records of the final migrated data comparing old and new for audit purposes and troubleshooting later
Be OK with less-than-perfect data when possible
Obviously, most of your migrated data needs to tie out exactly with your old system. But in some cases it may not. Decide early
why you need each set of data and let that drive your requirements.
Be vigilant in monitoring status of the migration effort
Planning from the start, discussing your options with your partner and continual monitoring will reduce your risks substantially.
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Outline
31
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion Strategy
Change management
Executive Support
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Change management
Organizational Change Management is a process of aligning the organization's people and
culture with the changes in business strategy, structure, technology and business
processes.
One major factor for failure is considering ERP implementation to be a mere automation
project instead of a project involving change management. It is a business solution rather
than an IT solution, as is perceived by most organizations
The 4 main organisational change management activities in an ERP implementation:
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OrganisationalAlignment:
Managing impacts toemployees
Learning andDevelopment:
Providing the skills you need
StakeholderManagement
Ensuring businessreadiness
Communications:
Providing the informationyou need
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A model of successful ERP adoption To overcome users resistance to change, top management has to:
study the structure and needs of the users and the causes of potential resistance among them;
deal with the situation by using the appropriate strategies and techniques in order to introduce ERP successfully; and
evaluate the status of change management efforts.
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-Communicating ERP benefits
-Communicating ERP general
Operations
-Minimizing adoption cost
-Involving individual and groups
-Enhancing ERP interface quality
-Hands on training
- Securing support of opinion
leaders
-Timing ERP introduction
-Top Management and
Commitment Support
-Favourable
awareness response
-Favourablefeelings response
-Favourable adoption
Intension response
-Actual ERP Adoption
S f ll I l i ERP f SME
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Successfully Implementing ERP for SMEs
Outline
34
Background
ERP Implementation Readiness Check
Software/Vendor Selection
Project Management and Project Team Structure
Implementation Strategy
Data Conversion Strategy
Change management
Executive Support
S f ll I l ti ERP f SME
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Executive Support
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Change Management Dimension- Process-oriented vision
- Commitment to change management
- Commitment along the whole project
- Definition and monitoring of the change plan
Process Dimension- Align ERP project with organization strategy
- Involvement in requirements analysis
People Dimension
- Process-oriented vision
- Commitment to change management
- Commitment along the whole project
- Definition and monitoring of the change plan
Project Dimension
- Attendance at project meetings
- Involvement in decision-making
- Resources funding
- Support project manager
- Project monitoring and control
- Awareness of ERP project complexity
Top Management
Support
Commitment
A critical success factor for ERP implementation is sustained management support and
commitment, both at top and middle levels during the implementation, in terms of their owninvolvement and the willingness to allocate valuable organizational resources
Only top managers are equipped to act as the mediator between the imperative of the technology
and the imperative of the organization. Top management support during ERP implementation
projects can be viewed four dimensions: change management, process, people and project
dimensions.
S f ll I l ti ERP f SME
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Successfully Implementing ERP for SMEs
Outline
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S f ll I l ti ERP f SME
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References
1. Measuring Sustained Management Support in ERP Implementation Projects: A GQM Approach (Jos Esteves, Joan Pastor, JosepCasanovas)