ERP LECTURE 1 LEARNINGS

Decision making in an organization

Motives of Organization
 The fundamental motive of any
organization is creating more customers
and manage them . For this company
wants to :
 Be scalable
 Be agile
 Grow using opportunities
Three As
 Attitude towards the project
 and Approach taken to achieve project
 will determine your Altitude at the project.
Introduction to ERP
What is Enterprise Resource Planning?

Enterprise Resource Planning (ERP) is an integrated computer-based system used to manage

internal and external resources, including tangible assets, financial resources, materials, and
human resources. Its purpose is to facilitate the flow of information between all business
functions inside the boundaries of the organization and manage the connections to outside
stakeholders. Built on a centralized database and normally utilizing a common computing
platform, ERP systems consolidate all business operations into a uniform and enterprise-wide
system environment.
Why ERP System is used in
Organizations?
ERP System is used in an organization due to the following reasons:
 It Integrates various business functions .
 It leads to effective utilization of resources.
 It Enables data simplification.
 It helps in strategy building based on centralized data.
 It leads to Single centralized data.
 Integrates different functions of business.
 Balances systems, process and people.
 Helps to create and retain customers.
 Helps organization to be agile and flexible.
 Helps acquire a competitive advantage.
Principles for implementation of ERP
Systems
Principles for Implementation of an ERP system are as follows:
 Know about the organization.
 Know the growth parameters of the organization.
 Know the competitive advantage or the differentiation of the company from its competitors.
 Work towards strengthening the core competencies of the organization.
 Create and work as a team.
 Understand the country and the laws, regulations, compliances etc. prevalent in that country.
 Understand the Industry in which the company is operating.
 Know the current systems in place
 Know the purpose for ERP implementation
 Understand the concerns and challenges of implementation
Advantages of implementing an ERP
System in an Organization

ERP system in an organization facilitates the following:

 Readymade solutions for most of the Problems.
 Integration of all functions ensured.
 Easy enterprise wide information sharing.
 Suppliers and Customers communication can be on-line.
 Automatic adaptation to new technology.
Drawbacks of Implementing ERP
Systems in an Organization

Implementing an ERP System in an organization has the following drawbacks:

 Success depends on the skill and experience of the workforce, including training.
 Customization of the ERP software is limited. This may involve changing of the ERP
software structure.
 ERP systems can be very expensive to install.
 Systems are too restrictive and do not allow much flexibility in implementation and usage.
Why ERP projects fail?
 Lack of understanding purpose of implementation.Inadequate requirements definition
 Being solution oriented rather than problem oriented
 Lack of top management commitment
 Package does not address the basic business functions of the client
 Inadequate resources employed by the client
 Internal resistance to changing the 'old' processes
 Unrealistic expectations of the benefits
 Inadequate training
 Unrealistic time frame expectations
ERP implementation a Situation
A company wants to set-up a new ERP system in entities in 7 different countries. There is a
specific time constraint for this to be completed and also the company has to adhere to the
country laws, the specific company policies and industry standards in each country.
The following options are available

Option 1
Go to each country and study the requirements individually.

Option 2
Study the system required in one country and develop a basic framework. Make the design
for the required ERP system in other countries on the basis of this framework.

Option 3
Make assumptions about the possible system in each country and implement the same.

Option 4
Involve people working in the specific entities in different countries in a ‘Conference Room
Discussion’ and understand the system requirements of each country.
Evaluating the options

The first option is too time consuming and given the condition that we have time constraints
this option cannot be considered. The second and third option rely heavily on assumptions
and given that every country has different laws and industry standards it would be incorrect
to rely on assumptions. The fourth option is based on developing a system on the basis of
discussion with team members across all countries. This is the best option as it satisfies all
the given constraints. This also establishes the importance of creating a good team to
accomplish any given task.
Order fulfillment before ERP : An
example
Problems

The various problems in the above System which was implemented before ERP Systems
came are as follows:

 Delays
 Lost Orders
 Keying into different computer systems invites errors
Order Fulfillment after ERP an
example
ERP vendors
 SAP - Systems Applications Products in Data
Processing
29% market share - Honda, IBM, Bank of Canada ,
P &G

 BAAN - Dutch - 5% - Russell Stover Candy, Mercedes

Benz, Boeing, Nortel

 Peoplesoft - California - 6% - NBA, Adidas, Anderson

Consulting, Hilton Hotels, NYNEX
 Oracle - California - 10% - USPS, CBS, Nike, Kodak,
Toronto Dominion Bank

 J.D. Edwards - Colorado - 7% - Harley Davidson, Saab

Automobile, BellSouth Cellular Corporation, Holiday
Inns, Fox Television Stations
ERP Success Stories : TISCO
 The company decided to implement SAP ERP 3 after careful consideration for they
matched best with their requirements. In addition the company also forecasted on
what would happen to their operations in the future while making this choice .This
anticipation helped them to obtain the proper solution at the right point of time. The
implementation process took a long span of about a year owing to the volume of
operations and the major steps to be taken.

The company never got bogged down by the reported failure rate of ERP
implementations especially in bigger units and kept continuing their endeavors with
vigor to get the best and make the whole process learning cum experimental one.
The net result brought substantial increase in profits.
WinMan ERP in Athena controls
 This company is a concrete example and a living proof to substantiate the fact
regarding the steps that a company needs to take and in not believing that a more
implementation of ERP will give the necessary impetus for success in the
organization.

The basic factor for success in this company is backed by the fact that they believed
software to be a tool and not the solution to the enterprise problems. This is backed
up by the fact that the company successfully combined the business practices with
the nuances of the software.
 The facts and figures were amazing and would not have happened if the company
had not used the circumstance like a platform for doing their best and understanding
the fundamental mistake of not aligning software with business process.
Jada precisions Plastics co INC
and IQMS ERP software
 The manufacturing Company Jada Precisions Plastics INC was not happy within the
initial ERP systems. software definitely helped them to reduce the complexity of the
labor but it was not the ultimate answer.Then they changed the ERP software.
 Upon analysis it was found that the former ERP systems tried to give ready made
solutions to their problems in the form of packaged solutions while the later
facilitated tin creating an automatic system for data transfer. This resulted in ERP
success.
ERP Horror Stories : Nike
 The company said that the failure in the supply chain software installation by i2
Technologies was the cause of this revenue shortfall.
 Analysts pointed to lapses in project management, too much customization and an
over reliance on demand forecasting software. Nike insiders raised doubts about the
Single Instance Strategy being followed by Nike.
 Single Instance Strategy refers to one ERP application with one data store that
serves the entire company. Everything a company needs from financials, order
entry, supply chain to CRM comes from a single vendor
 By 2004, the company had successfully implemented its Nike Supply Chain (NSC)
project, indicating that its centralized planning, production and delivery processes
were right for the Single Instance Strategy. With this success, Nike's Single Instance
Strategy became the desired approach for many companies implementing ERP
software. Nike used SAP for 95% of its global business.
ERP Horror Stories
 FoxMeyer Drug – software helped drive the company
into bankruptcy
 Dell computer – software will not fit its decentralized
management model
 Applied Materials – overwhelmed by the organizational
changes involved
 Dow Chemicals – spent seven years and 500 million
dollars on R/2 – now starting again with R/3
Conclusion

Thus,

“ERP is a Software solution that addresses the Enterprise needs, taking a process view of the
overall organization to meet the goals, by tightly integrating all the functions under a
common software platform.”

Software logic and the company strategy may not match! : Thus proper consideration
has to take place before implementation.
GE Workout Model
How does it work?
Infuses entrepreneurial spirit
Creates ownership
Quick and critical discussion
of ideas
Promotes lateral thinking
Actions begin immediately
because

 Leadershipdecides “live “ on the

recommendations
 Teams are empowered to implement their
solutions
 Recommendations must be completed in
90 days
Workout involves everyone
Pay off matrix for a critical idea
analysis
Easy to Tough to
implement implement

Small pay Off

Big pay off

Conducting a workout
 Introduction
 Brain-storming within small teams
 Presenting the ideas
 Developing the top 4 business ideas
 Decision making by the key decision manager
Workout aims to..

 Create forum for dialogue

 Eliminate bureaucracies and barriers
 Cultivate grass root solutions