erp2 radm building business

8/2/2019 Erp2 Radm Building Business

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Christ University RADM ERP Jan 2012 1-1

Enterprise Resource Planning

UNIT II BUILDING BUSINESS

CASES FOR ERP


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Objectives of Unit II

Roles and Need for ERP.

Gap Analysis,

Competitive Environment Analysis Strategic Needs Analysis

Feasibility Analysis

ERP Project life cycles and Costelements.


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Roles and Need for ERP?

ROLES OF ERP

- Managing multiple configurations that the customerdemands for the multiple options. ERP allow management

of multiple configurations.- Customer expects Innovative products with modified

versions with various new features which demandscontinuous product development with reduced cycle fordevelopment. NPI feature will help in promoting concurrentEngineering.

- Efficient Supply chain is very important to ensure firms havecompetitive edge over others. Principles of JIT, Lean Mnfgthat the application supports aids in improving theefficiency.


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ROLES OF ERP

- Pressure of reduced delivery time and cost and bestQuality. QM module support this.

- In a Make to Order scenario which require CTO(configuredto Order) and is geared to handle any complexity and canautomatically convert the requirement into BOQ androuting.

- Challenge of delivering customer specific products at shortnotices. ERP facilitates quicker cycles through MTO to MTS

a balancing act.

- Spares management for Equipment suppliers and aftersales service demands. ERP helps in scheduling theservice requirements, quick diagnosis and rectification offaults and managing the after sales contracts.


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ROLES OF ERP

- Spares management especially for Equipment suppliersand after sales service demands. ERP helps in scheduling

the service requirements, quick diagnosis and rectificationof faults and managing the after sales contracts withcustomers.

- For the Equipment supplies, each transaction turns out tobe a project which Projects Systems in ERP can support.

- Managing inbound and outbound logistics especially forFMCG /fertilizer industries ensuring no stock-outs.

- TPM for Maintenance of equipment to achieve zero defectand zero breakdown and able to predict the health of plantand machinery.


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ROLES OF ERP

- For batch processing industries, monitoring traceability,identification and shelf life management is key and ERP

modules highly effective and ensures fault free transactions.- Project Engineering (Engineer to Order ETO) demand end-

to end ERP solutions to facilitate inerface and integration ofvarious functions. Projects are complex and estimation ofcost / time is a challenge and ERP assists reducing theassociated risks through Exception based budgeting.

In nutshell, the business application should ensure thecost, delivery and cycle times are reduced and the qualityand features offered improved on a continually.


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NEED OF ERP

1. Cost and quality improvement through coordinated operations JIT / TQM, concurrent Engg.

2. Reduce the cycle time between order to delivery3. High level of after sales customer support for maintenance,

spares parts availability and technical sales service team

4. Upstream and downstreaming the trade partners and makingthe business partners to become more competitive.

5. A repertoire of standardized business process to supportmanagement initiatives such as BPR, SCM, activity basedcosting etc.

6. Real time analysis of MIS to generate required output datawith decisions enhancing the corporate image and buildingmarket capital value.




NEED OF ERP

7. ERP enforces Best Practices in the organization at the sametime it supports each organizations unique requirements and

environment. It will enable distilling the lengthy, multi stepprocesses into fewest number of steps.

8. ERP package adopted required software to change over toClient server computing instead of mainframe platform whichenabled many companies to afford ERP.

9. Enables Organizational standardization, allows simultaneousaccess to data for planning and control, facilitates intra-organization communication and collaboration.

10. Brings in efficiency, cost reduction and elimination ofinefficiencies in the system and processes.



Gap Analysis

GAP ANALYSIS AS IS MAPPING

Understand the new requirements functional requirement,system requirement and Information flow(MIS) and decisionpoints/levels.

Conduct study and Generate AS IS report to assess presentlevel of automation of transactions.

Analyse the gaps and prepare the Gap analysis report for finalreview and sign off. The gaps so generated could be intransactional system, automated system, Geographical systemand analytical system. Finally the end result is of achieving theintegration of all functions and real time sharing of informationfor relevant department / personnel.

List the MIS and summary reports required to be generatedand posted to various users / decision makers and sign off.

Tracking system / approval systems to be finalised.


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FEASIBILITY ANALYSIS is taken up to determinewhether to go ahead with the ERP project or notbased on the business needs, requirements and the

business value that it brings.

1. Technical Feasibility :

Familiarity with application

Familiarity with technology

Project size.

Compatibility with system and business transactions


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2. Organizational Feasibility : To ensure that theproject will be well adopted and well received.

Support from top management,

Senior person available for influencing the process Dedicated personnel for implementation and

adaptation of users to this new technology

Compliance with other stakeholders like customer/

vendors and government. Review for strategic alignment with companys

goals and mission

Committed cooperation from all users without anydisruptive motives.


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3. Schedule Assess whether the project can beimplemented by a specific date :

Time dimension of the project monitored

Implement Project Management techniques toreview ERP implementation to see it is on on track

Time of the year to be decided to ensure financialresults which are to be declared for the externalagencies, not get affected.


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4. Risk

Time delays / cost over-run / implications ondeclaring the financial results

Impact on operations / competition

Commitment from implementation team and

associated delays or affecting other works.

Effective use and reaping the benefits


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5. Other Issues

Security

Reliability

Resource commitment

ROI(Cost benefits)


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Competitive Environment Analysis

Objective is to review the influence of externalenvironmental forces on the industry to ensure that

the organization remains competitive and profitable.This is one of the deciding factor for the strategicplan and policies of the company.

External environment takes into account the

influence of government policies and regulations,national and International economics, Competitorsstrategies, industry specific developments, materialavailability/price fluctuations and market scenerios.


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The various factors influencing the decision are the :

Entry Barriers

Cost Benefit / ROI Resources requirement / Commitment

Economies of scale

Expected retaliation / resistance to change /

transparent Access to inputs

Government Policy

Being competitive


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Threat of Substitutes

Switching Cost

Upgradations of the modules from time to time Hardware related up-gradations / new platforms

necessitating further investments

Low priced Substitutes replacing existing system

which affects being competitive Obsolescence

Additional requirements demanding furtherintegrations.


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Bargaining power of Buyers

Bargaining leverage and Buyer Volume

Buyers access to information on the productsavailability / competitors offerings leading to pricesensitivity

Threat of Backward integration

Substitutes available

Buyers incentives

Brand identity and product differentiation


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Bargaining power of Suppliers

Importance of Volume & Supplier concentration

Differentiation of inputs and its impact on cost Threat of forward integration

Inputs Substitutes available

Cost relative to total purchase in industry


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AS IS STUDY OF THE ORGANIZATION IS DONE

TO :

Identify gaps and competitors Asses competitors strength and

weaknesses(SWOT)

Intensity of competition

Favourability of environment Influencing power of both buyers and suppliers

Competitive pressure is the major factor inimplementation of ERP in the company.


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Design Alternatives

Complete implementation Complete vendor package

Benefits

Total integration across all functional areas

Re-engineering of all business processes

Deficits

Expensive

Time-consuming

Selected ERP modules Benefits

Less costly and time-consuming

Deficits

Lacks total integration of data

Limited applicability and use


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Design Alternatives, continued

Build in-house Benefits

Can create system based on its needs

Competitors will not have access to similar system

Deficits Time- and resource-consuming

Expensive

Risky

May not provide competitive advantage

Maintain concurrent legacy systems Benefits

Familiarity

Deficits

May be a competitive disadvantage


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Cost-Benefit Analysis

Net Present Value Time value of money

5-year timeframe forERP

Non-recurring costs: Hardware, software,

consulting, training,Staff and systemintegration &implementation cost

Recurring expenses:

Licenses,maintenance AMCs,consulting, teams


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Cost Elements

The returns in terms cost benefits tothe company is assessed through

performance of following parameters : Working Capital and Fixed Assets Turnover ratio

Reduction in Inventory carrying cost

Manpower and Equipment utilization / efficiency

Finished Goods inventory

Business process lead times / OTD

Drastic benefits out of BPR.


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Cost Elements

The global benchmarks for benefits ofERP driven business process are

30-35 % reduction in cost of sales

65-70 % in cost of Quality

75-80 % reduction of delivery time

35-40 % reduction in manpower

60-80 % reduction in inventory

Actual benefit depends on current level of performance andpotential improvements.


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Cost Elements

INVESTMENTS COST ELEMENTS

Network Infrasturcture LAN / VSAT Rs. 20K to 40 Lakhs

Hardware database incl nodes / Operation system - 4- 40 L

Database (Memory) 35 K to 3-4 Crores

Licence for business applicationno. of users 3-4 Crores

Implementation of Business application 10L to 2.5 Crore

Consultants 1- 50 L Maintenance (AMC) 2 L to 2 Crore

Total 30 L to 500 Crore(depending on scale/ divisions )

Running Cost 2 L to 50 L


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Cost Elements

INVESTMENTS COST ELEMENTS

Network Infrasturcture LAN / VSAT Rs. 20K to 40 Lakhs

Hardware database incl nodes / Operation system - 4- 40 L

Database (Memory) 35 K to 3-4 Crores

Licence for business applicationno. of users 3-4 Crores

Implementation of Business application 10L to 2.5 Crore

Consultants 1- 50 L Total 30 L to 500 Crore(depending on scale/ divisions )

Running Cost 2 L to 50 L


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Strategic Needs Analysis

From the Corporate perspective,analyze the requirement

Authentication of reports and MIS forthe board and external stake holders

Competitive advantage, image building

Essential for global business / exports

Scales of operation / expansion /integration of different units


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ERP Project Life Cycle

Basically ERP implementation asproject will have 3 stages namely ;

Stage 1 Pre-Implementation Stage

Stage 2 Implementation Stage

Stage 3 Post-Implementation Stage


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Understand the need and the role of ERPand conduct the gap analysis

Determine the requirements

Develop Business case for ERP including

the feasibility and the cost benefit analysis. Justification and approval for the project

Send RFP to various Vendors and get

quotes


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Develop Evaluation criteria forselection of suitable vendor

Have final round of technical andcommercial discussion, finalise thespecs/requirements, negotiate and

award the contract.


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Consider ERP implementation as aProject by itself, create project teamwith a project manager as in-charge ofthe team. Ensure representation from

all sections/departments

Develop and establish the Project Plan

Plan and position required resources


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Make necessary arrangements for thevendor team systems / spaceavailability, separate project room /individual personnel from each deptt

responsible for co-ordination for thedeptt.


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Vendor Preparation : Finalizing the requirements with the

user deptt and signing off with theDeptt Head.

Developing the templates for capturingthe existing data and creation ofpertinent fields


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Vendor Preparation :

Suiting the ERP to the requirements anddeveloping the data files and variousapplication modules.

Sign off on MIS requirments and developing

suitable Templates. Training at various levels.

Implement the ERP GO LIVE and attendto various problems during this phase.


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Buyer Preparation : Finalizing the scope of the ERP,transactional requirements and MIS andsigning off.

Providing the data as required to the vendor

Approvals at various stages to move to nextlevel


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Buyer Preparation :

Conducting reviews as per the schedule/contingency and take appropriate measures/actions

Provide all the necessary support /

resources to the vendor Go Live and monitor the implementation

Check the reliability and integration withvarious other functions.


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Stage 3 Post -Implementation Stage

Conduct audit / survey to assess the efficacy

and the benefits.

Extend the scope if reqd to add any newrequirements.

Employ corrective measures to removecertain inefficiencies in the system.

Assess overall Business Performance andcompetitiveness.


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Implementation Challenges

Inadequate Requirements Definition

To be decided before getting the proposal

To sign off the requirements beforecommencement of the implementation

Assist in finalizing the best suitable ERP andcustomization

Failure chances high if this is addressed by themanagement


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Resistance to Change

Users being skeptical

ERP being transparent exposes the inefficienciesof each operation

Co-operation is absolutely necessary

Users be convinced before implementation andnot forcing them to adopt

Misconceptions / ignorance need to beaddressed.


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Inability to Achieve Organizational

Understanding

Understanding the new requirements of

ERP, technical as well as system isessential for successful implementation.

Training the relevant people is essential.


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Inadequate Resources

Extremely important to provide the necessaryresources manpower, infrastructure, IT support

Getting right people to man the project anddedicate time for the project

Otherwise this will affect the schedule drastically


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Lack of commitment from Top Management

Support and commitment from Top Managementproviding required resources and direction to theteam is very crucial.

Top Management need to conduct reviews from

time to time to assess the status and provideadditional resources if required.

Set reasonable goal and take appropriatedecisions when required.


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Not Ready yet ?

Preparedness of the organization to take up theproject and the will to take off at the stipulateddate/time commencing the implementation( GoLive ).

Provisioning for the resources including fundallocations and making sure these are availableas per the requirement.


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Inadequate Training & Education

Lack of training the users will delay the processof implementation

Initial 3- 5 months learning curve during theimplementation phase expected and trainersshould be available during the initial phase ofimplementation.


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Inaccurate Expectations

Expectations of a company may exceed thecapabilities of the system. (Vendor oversold)

Organization not trained how effectively to usethe system.

While cost and time are underestimated, thescope is routinely overestimated(Performance)


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Poor Package selection

Analyse the capability and assess that theprovider has the capability and expertise to

provide you the good solution. Choice Budget, time frames, goals and

deliverables.


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Poor Project Management

Project team members are competent, adaptableand with good inter-personal skills.

Defined the scope, timeframes and budget andplanned all the activities.

Monitoring and control through reviews, feedbackmechanism.

Initiate suitable corrective measures to put ontrack.


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Customization Issue

Modify the ERP to match the organizationalprocesses or data structure

Modify organizational processes to match that ofERP

Finalization of all the requirements includingMISs.


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Implementation Challenges :

Poor Communication and co-operation

Communication is the key for successfulimplementation.

Corporate culture / systems and processes playa vital role.

Value of trust between partners, employees andother stakeholders.

Co-operation of all involved is critical.


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Quality and reliability of Data

During data entry, accurate date entry isimportant. Create checks to screen the data.

Wrong / bad quality data affect the performance.

Reliability checks are carried out to establish the

system and validate the data.


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Improper Integration and use

ERP effective only when all Information systemand modules are integrated. Success of ERP isnothing but success of integration.

Critical challenge is the optimal utilization of the

ERP solution to its best potential and reapbenefits. ERP can create dramatic changes inbusiness performance.

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