Chapter 5: ERP Life Cycle: Planning and Package ... - Modern ERP

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Dec 2, 2013 (3 years and 6 months ago)

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SELECT, IMPLEMENT & USE TODAY’S
ADVANCED BUSINESS SYSTEMS

MODERN ERP

Second Edition

Chapter
5: ERP Life Cycle: Planning and Package Selection

Why Change Information Systems


Obsolescence


High operational costs


Lack of vendor support


Lack of compliance


Changing business model


Different or enhanced functionality


Lack of scalability


Too many business problems and unanswered questions


More

The ERP Life Cycle


Planning
(Chapter 5)


Package Selection
(Chapter 5)


Implementation
(Chapter 6)


Maintenance
(Chapter 6)

ERP Life Cycle: Planning


Need a rationale grounded in a
business case
(high level reason
why a company undertakes an ERP implementation)


Types of rationales:


Technology rationale



IS are failing, desperately need new
technology.


Too expensive to patch and maintain old, outdated systems, need better visibility of
data.


Competitive rationale



adopting a system because the
competition has it, need to keep up


Strategic rationale



reasons why ERP is needed to support the
organization’s strategic direction


Drive growth, support mergers and acquisitions, market diversification,
globalization


Business process rationale



benefits in key processes (KPIs)


Attain targeted, specific, and measureable performance improvements


ERP Life Cycle: Planning


Executive Leadership


rally support, distribute resources, and
delegate management of implementation to team


CEO, CFO, or other high level sponsor should take ownership of the
project and be actively involved in its activities .


This is not a technical project, so CIO not the top sponsor.



Project Scope


project team should determine the scope and the
procedures to enforce against the “never ending project” syndrome


Project scope includes: business processes that will be included in the
implementation, the ERP functionality that will support these business
processes, the divisions or business units that will be included in the
roll
-
out, and the technical infrastructures that will be replaced


Scope management



define and control what is and what is not
included in the project; guard against
s
cope creep



changes to the
scope of the project.

ERP Life Cycle: Planning


Project Team


Given the discretion to make all important decisions regarding the
implementation


Consists of key process owners, end users, managers,
IT people, and
executives who span functional boundaries, business units, and
organizational levels




Project Manager


Understand both technology and business processes


Knowledge of the effect of ERP on the business


Work with professionals to organize a smooth transition from the “as is”
state to the “to be” state


Envision the end results and make tough decisions

ERP Costs


Total cost of ownership (TCO)



total costs that will likely be
incurred throughout the system’s life cycle that are influenced by:


Transaction volume


Number of users


Functionality


Application license


govern the software’s use


Named users



company identifies the total number of users who will
access the system


Site license



blanket contract covering the use of the ERP system at a
particular location


Concurrent users



maximum number of users who would
potentially access the system at a given time


Heavy users



those who use more of the systems functionality and
may be charged a higher license fee than
casual users
who may only
view reports or run occasional queries

ERP Costs


Database License


based on the number of simultaneous users that will
log into the system or the number/type of database servers required


Hardware


varies depending on the scope of implementation and
platforms


Will need database and application servers, storage systems, network
components, wiring, power, user workstations, and redundancy


Implementation Services


often a multiplier of software license costs


Ratio of services to software costs provides an indication of a system’s ease
of implementation or support for more advanced or custom functionality


Internal HR Costs


varies among companies and projects


Full time equivalents


Ongoing Maintenance


typically 20


30% of the software license costs
per year


Hidden Costs


scope creep, training, customization, data conversion,
and developing interfaces between the ERP system and other systems

ERP Benefits


Integrate financial information


creates one version of the truth, which
can not be questioned because everyone uses the same system


Integrate customer order information


customer order travels from the
salesperson through credit, picking, packing, shipping, invoicing and cash
receipt


Standardize and speed up manufacturing processes


Reduce inventory


help manufacturing process flow more smoothly,
improving visibility of the order fulfillment process


Standardize human resource information


consolidates employee
information into a single system and provides self
-
service accessibility to
manages and employees

ERP Life Cycle: Package Selection


Package selection presumes
that a high
-
level organizational
group has approved funding
based on the business case
outlined by the project team


Choosing the “best” application
for a company is based on:
functionality, affordability, user
-
friendliness, customizability,
and vendor support




Key steps in selecting an ERP
system:


Market Survey


Request for Information


Narrowing Down the Choices


Site Survey


Requirements Analysis


Request for Proposal


Demo Days


Reference Visits


Fit
-
Gap Analysis


Implementation

Methodology
Discussion


Proposal


Decision and Negotiations

ERP Life Cycle: Package Selection


Market Survey



to determine which vendors’ systems might be
potential alternatives


Websites, industry magazines, trade exhibits, suppliers, competitors, etc.


Request for Information



issue a request for information to the
vendors indentified in the market survey


Request for information (
RFI
)



vendors supply written information
about the capabilities of their solutions and the skills they offer


Narrowing Down the Choices



project team should narrow down the
ERP vendor candidates based on criteria important to them

ERP Life Cycle: Package Selection


Site Survey



invitation for each of the prospective vendors to meet with
the project team on
-
site so that the vendor’s sales team can better
understand the buyer’s functional requirements and the peculiarities of
their business


Requirements Analysis



detailed analysis to determine all the
functionalities they need and desire


Request for Proposal



formal document developed by the potential
buyer that details requirements in order to seek vendor offerings


Enables the requestor to evaluate and compare various proposal fairly

ERP Life Cycle: Package Selection


Demo Days



vendor must “walk the walk” and “talk the talk”


Must be detailed, showing how key business process work using the prospective
customer’s own data

Figure 5
-
2:
ERP Weighted Score Sheet





Vendor





A

B

C

ERP Selection Criteria

Importance (1
-
3)

Rating (1
-
10)

Weighted Rating

Rating (1
-
10)

Weighted Rating

Rating (1
-
10)

Weighted Rating

Manufacturing Functionality

3

8

24

10

30

7

21

Planning Functionality

2

6

12

7

14

8

16

Distribution Functionality

2

6

12

5

10

4

8

Financials Functionality

3

4

12

7

21

6

18

Ease of use

3

6

18

9

27

3

9

Customizability

1

5

5

9

9

6

6

Compatibility with Existing Applications

2

6

12

7

14

8

16

Matched to Our Growth

3

4

12

6

18

5

15

Pricing Structure

2

6

12

5

10

4

8

Implementation Costs & Time

3

2

6

8

24

6

18

Single Source
-

Total Solution

2

6

12

7

14

8

16

Integration with Third Party Applications

1

4

4

6

6

8

8

Commonly Used in Our Industry

2

8

16

5

10

3

6

Quality, Accessibility & Cost of Support

3

3

9

5

15

7

21

Partnership Potential

1

3

3

8

8

10

10

Understands Our Business

3

7

21

7

21

2

6

Understands Our Processes

3

5

15

9

27

4

12

Business Stability

2

5

10

8

16

9

18

R & D Resources

1

5

5

8

8

7

7

Implementation & Training Resources

3

4

12

8

24

10

30

Totals:

232



326



269

Table 5
-
2:

10 Rules to Make an ERP Demo as Smooth as
Possible

Use the same team to view all vendor demonstrations

Agree the agenda with vendor well in advance and stick to it

Confirm the “must haves” first and then the “nice to haves” and lastly the
“bells and whistles”

Compare fits and identify gaps

Focus on the system’s operation avoiding the influence of freebies, a
flashy appearance, and slick suits

Notice their culture

Allow the vendors to share their new ideas

Leave enough time for a post
-
demo Q&A

Use a weighted score sheet for scoring and ranking vendors

Cover implementation and support/maintenance separately

ERP Life Cycle: Package Selection


Reference Visits



visit to a “like” customer site of the final short
-
lived
vendors


Before making a decision the project team should visit one or more of the
vendor’s customer sites to observe how the ERP system works in real life


Issues to discuss with “like” customers include:


Satisfaction with functionality and performance


Satisfaction with look and feel of the system


Implementation time and cost


Impression of the vendor as an implementation partner


Local vendor support


Lessons learned from issues that were not anticipated but arose after the
implementation began



Fit
-
Gap Analysis



used to compare the company’s requirements with
what the ERP systems under consideration offer


The more functionality “gaps” the less attractive a system is to the customer;
however
process

gaps are opportunities to reengineer to best practices

ERP Life Cycle: Package Selection


Implementation Methodology Discussion



discussion of the
understanding of implementation needs



Project and implementation teams should agree on project scope, roles and
responsibilities of customer and implementation team, implementation
methodology and defined deliverables that will be used to guide the project
and gauge its success


Proposal



includes the recommended modules for the defined scope,
annual fees for support and software assurance, a high level project plan,
and the defined hardware, network, and software requirements
necessary to support the new ERP systems


Decision and Negotiations



the team should discuss all critical
information obtained from demos and reference visits, then rate each
vendor, a selection is made, and a contract is signed
by both parties