ERP: Why, What, Which, How

Barry M. Cole, Interim Change and Transformation Managementcxo@gate.net

Do We Have Answers

So we are thinking about ERP. And, we understand that it will alter the way we do business for the next 10 to 20 years. So…

1. Why are thinking about ERP?

2. What does ERP mean?

a. To the business?

b. To the People?

c. To our customers?

3. Which ERP framework?

4. How do we start?

Successfully implementing Enterprise Resource Planning requires understanding “WHY” at an organizational level.

1. Is our senior technology manager saying: “the systems are twenty years old and new technology will put us where we need to be”?

2. Are the ERP vendors saying: “out of the box; we have all the bells and whistles to make your life wonderful… And, here is our TCO white paper”?

3. Are employees saying: “it looks old… The screens aren’t easy”?

4. Or, is the business asking: “How can we more agile, increase innovation, and have more vitality in the marketplace”?

5. All of the above? None of the Above?

Why Are We Thinking ERP?

A key to successfully implementing Enterprise Resource Planning is understanding that it not about technology. It is about managing Fundamental Change effecting:

1. Business Processes (running the business)

2. Financial and Regulatory Constraints

3. People: Producers and Users of Company Information

4. External Relationships: Customers, Trading Partners, Financial Partners, Suppliers, Investors…

What ERP Means

Up to 80% all ERP implementations are judged to have failed to fully meet expectations. How would the below impact our business?

Why This Discussion Is Important

Only 68% of executives and 61% of employees are at least somewhat satisfied with their implemented ERP solution (Panorama study, 2009).

Took longer than expected

Duration exceeded planned timelines

Implementation exceeded planned budget

Increase in total implementation costs as a percentage of total revenues

Increases in expected implementation costs

Organizational resistance and learning curves

Major operational disruptions with go-live

Selection Criteria: Which

Analyze the magnitude of the change?1. What should our operating environment look like when this

new ERP is in place?

2. What will our organization look like?

3. How will the constraints inherent in each of the considered ERP’s influence the “how” of questions 1 and 2 above.

4. Can the new process, execution, and technology skills demanded by each considered ERP be developed or if they must be recruited; can they be easily found?

Selection Criteria: Which

Does the ERP vendor understand my sector and business model?

1. Financials including valuations

2. Product Management life-cycle

3. Supply Chain

4. Production Modes

5. Servicing and Customer Support Models

6. Fulfillment

Note: ERP platform modules are often highly configurable… These same questions should be asked

when selecting an implementation partner for the chosen platform.

The perfect platform with the wrong partner adds very major risks to a successful implementation.

Selection Criteria: Which

Does ERP platform X meet our unique company needs?1. Multi-company/Multi-national operations

2. Volatile marketplace

3. Varying order and production handling modes

4. Regulatory compliance and reporting

5. Product life-cycle management

6. Sales and customer communications and support

7. Financial reporting agility (internal & external)

Always remember that ERP is about managing the business.

1. ERP as fundamental enterprise change requires continuing buy-in and involvement of the entire executive team. Throughout the entire process; decision makers must be, involved, available, and willing to make decisions.

2. Viewing an ERP as implementation of technology is a major project risk!

3. Business complexity and volatility will significantly impact the implementation budget and continuing TCM (total cost of maintenance).

a) How able are we to look out to a 18 or 24 month horizon?

b) How able are we to “freeze” our business model for an extended period?

c) Do we understand the effects of interim business changes on an ERP implementation? (Platform vendors will often make “out-of-the box” product representations that are generally true under only the simplest business models).

ERP Project Management

ERP project management is about movement toward the business “to-be”. The LEADER of the ERP project should have:

1. In-depth conceptual knowledge of each operating area of the business to be effected by the new ERP value stream. Knowledge of process modeling, best practices, and financials is very helpful. (The implementation partner should bring real sector specific to the project)

2. Strong conceptual knowledge (not expertise) of technology infrastructure and programming needed to guide technology team. (in more larger and complex

implementations, a separate project manager for the IT sub-project may be appropriate)

3. Significant matrix management experience and relationship skills. Strong oral, written, and presentation skills. Able to communicate effectively with the executive suite, process management, the financial team, or the plant floor.

Risk Consideration: (The right project manager positioned incorrectly will add significant risk - Choose someone capable of acting as a trusted advisor to the President ) Organizational dynamics must be considered since this is ENTERPRISE level business change. This role should be positioned as a part of senior management. Ideally position the ERP Project Manager as a direct or dotted line report to the President.

KEY DECISION: ERP Project Manager

1. Name an qualified internal project manager to coordinate and guide subsequent steps.

2. Create detailed gap analysis of as-is and the defined to-be.A. Identify and resolve intermediate steps.

B. Identify and begin staffing process for new functional areas.

3. Develop a project charter, scope document, and preliminary budget.

4. Identify and negotiate the ERP platform and implementation partner.

5. Approve project planned budget. ((3E +2W +1B )/6)

6. Project kickoff and core team commissioning.

7. Formal project plan.

Suggested ERP Startup Steps

Can the Organization meet theContinuing Time Commitment?

Resource Schedule * Role

Steering

Committee

5%

Monthly Meetings

Senior Management (executive level) Team: Define and drive organization support of the ERP

Charter and implementation. Address identified road blocks. Approve all changes to project scope

and budget impacts.

Internal Project

Manager

100%

Manages day to day activities. Guides the overall project functional & technical decision making

and execution. Manages project performance of the consulting teams and their interaction with the

core project team. Directs change control and risk management processes.

Core Team

5% - 40%

heaviest at

milestones

Functional decision makers and process owners: Responsible for developing application

knowledge, working with the implementation partner to transfer functional knowledge, develop the

to-be design, proof the design, and lead the implementation within their functional area.

IT Team 20 % to 90%

Application development and infrastructure support: Support implementation partner in executing

specifications, assisting early users, testing, data migration and loads, and develops modifications

and reporting requirements. Increasing need at phase ends, during testing, and near 100% at go-

live.

Key User

Community

10% - 30%

heaviest at

milestones

Key end users with responsibility and operational knowledge within covered functions:

Responsible for input during the design and testing. Gain knowledge required for use of the system

and transmittal to process area peers.

Project

Sponsor

5% -10%

Represents the Executive Team to the project and provides continuing oversight. Assists the

internal project manager as required. Manages organizational conflicts requiring executive

resolution.

* This is time required above existing demands and represents a risk to be resolved.

Discussion