Capturing and Sustaining Value Opportunities in Trade Promotion

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Enterprise Resource Planning Dan AsahlPaul
BryantTammy McEntire
November 10, 2001
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What Is Enterprise Resource Planning (ERP)?
Enterprise Resource Planning

• Definition
• A software solution that integrates information
  and business processes to enable information
  entered once into the system to be shared
  throughout the organization. (Swartz Orgill)
• Purpose
• Ultimately integrate all departments and
  functions across a company onto a single computer
  system that can serve all the different
  departments needs. (Koch, Slater Baatz)

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The Anatomy of An Enterprise System - Thomas
Davenport Model
Enterprise Resource Planning
MANAGER STAKEHOLDERS
Reporting Applications
Financial Applications
Sales Delivery Applications
CENTRAL DATABASE
Manufacturing Applications
SUPPLIERS
CUSTOMERS
Service Applications
Inventory Supply Applications
Human Resource Applications
EMPLOYEES
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The Functionality of Each Department Makes
Integration Difficult
Enterprise Resource Planning
MANAGER STAKEHOLDERS
FINANCIAL APPLICATIONS PROCESSES
Reporting Applications
Financial Applications

• ACCOUNTS PAYABLE
• Vendor Maintenance
• Invoice Processing
• Recurring Payables
• Check Writing
• Funds Transfers
• Bank Reconciliation
• Three-way Matching
• EDI Invoicing

• ACCOUNTS RECEIVABLE
• Customer Management
• Invoicing
• Credit Management
• Statements
• Aging
• Dunning

Sales Delivery Applications
CENTRAL DATABASE
Manufacturing Applications
SUPPLIERS
CUSTOMERS
Service Applications

• GENERAL LEDGER
• Account Maintenance
• Extended Account Maintenance
• Reversing Entries
• Profit Loss Statement
• Trial Balance
• Recurring Entries
• Budgeting
• Financial Stmt Generator
• Revenue Accounting
• Cost Accounting

• ASSET MANAGEMENT
• Asset Maintenance
• Capital Budgets
• Fixed Asset Accounting
• Fixed Asset Inventory
• Depreciation Similar
• Leasing

Inventory Supply Applications
Human Resource Applications
EMPLOYEES
Source Siebel Systems ERP Modules
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The Functionality of Each Department Makes
Integration Difficult
Enterprise Resource Planning
MANAGER STAKEHOLDERS
SALES DISTRIBUTION APPLICATIONS PROCESSES
Reporting Applications
Financial Applications
Sales Delivery Applications

• Sales Order Management
• Quotations
• Contracts
• Customer Management
• Pricing
• Promotions Management
• Product Configuration
• Shipping
• Picking Packing
• Invoicing
• Sales Analysis
• EDI Orders

CENTRAL DATABASE
Manufacturing Applications
SUPPLIERS
CUSTOMERS
Service Applications
Inventory Supply Applications
Human Resource Applications
EMPLOYEES
Source Siebel Systems ERP Modules
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Why is ERP Important to General Managers?
Enterprise Resource Planning

• Strategic - (Davenport)
• Compatible information systems
• Consistent operating practices
• Universal, real-time access to operational and
  financial data
• Streamline process flow to cut costs and create
  efficiencies
• Create interdepartmental coordination to achieve
  global production efficiencies
• Seamless communication between multiple
  organizational systems
• Consolidation of terminology
• Organizational - (Davenport)
• Flatter, more flexible, more democratic
• Centralization of information control
• Standardization of processes
• Technical - (Hagman)
• Consistent application logic, information and
  interface
• Single System
• Minimize need for custom-built integrated systems

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The Big Five
Enterprise Resource Planning

• Baan
• J.D. Edwards
• Oracle
• PeopleSoft
• SAP

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ERP Vendor Viability Chart
Enterprise Resource Planning
1 - P/E Ratio is an indicator of a stock's
value related to earnings. High P/Es typically
indicate growth stocks, while low P/Es are
sometimes considered overlooked value stocks. 2
- Earnings Per Share is an indicator of growth
and profitability. 3 - Market Cap is the total
number of company shares multiplied by the
current price per share. 4 - Source
CBS.Marketwatch.com as of 10-25-2001 5 -
Source Hoovers.com for year ending 12-31-2000
6 - Source CBS.Marketwatch.com for year ending
05-31-2001 7 - Source CBS.Marketwatch.com for
year ending 10-31-2000 8 - Source
CBS.Marketwatch.com for year ending 12-31-2000
9 - Source PeopleSoft Corporate Report 2000 10
- Source Baan.com 11 - Source JDEdwards.com
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How Much Does It Cost?
Enterprise Resource Planning

• N 140
• Less than 5MM - 58
• 5MM to 15 MM - 4
• Greater than 15MM - 10
• Note 28 did not answer question

• N ?
• Less than 5MM - 79
• 5MM to 10 MM - 10
• Greater than 10MM - 11

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Meta Group Study - Reference by Koch, Slater
Baatz
Enterprise Resource Planning

• N 63 (small, medium and large across all
  industries
• Average implementation cost 15,000,000
• Range implementation cost 400,000 to
  300,000,000
• Per user fee 53,320
• Median annual savings 1,600,000 (90 due to
  cost reductions)
• Average implementation time 23 months

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How Long Does Implementation Usually Take?
Enterprise Resource Planning

• N 140
• Less than 1 year - 23
• 1 to 3 years - 38
• 3 to 5 years - 9
• More than 5 years - 2
• Note 28 did not answer question

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Del Monte Case Study 1
Enterprise Resource Planning
Ticker Symbol DLM Web Site www.delmonte.com
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Del Monte - Outline
Enterprise Resource Planning

• Del Monte Background Information
• Sales and Profits
• Products
• Organizational Chart
• IT Budget
• Del Monte Capability Improvement Project
• Core Capabilities
• Project Background
• Current and Future State of Del Monte
• Process to complete project
• Phases of Implementation
• Gantt Chart
• Del Monte Lessons Learned

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Del Monte - Background Information
Enterprise Resource Planning

• Del Monte Foods is the largest producer of canned
  fruits and vegetables in the United States, with
  net sales of 1.5 billion in fiscal 2000
• Del Monte sells its products through national
  grocery chains and independent grocery stores. 
  Del Monte also sells to warehouse club stores and
  mass merchandisers, such as Wal-Mart and Kmart.
• Del Monte also sells its products to the
  foodservice industry, food processors, the U.S.
  military and in certain export markets.

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Del Monte - Background Information
Enterprise Resource Planning

• Del Monte has several products including
• Fruits
• Peaches, Pears, Fruit Cocktail, Pineapple
• Vegetables
• Corn, Green Beans, Peas, Carrots
• Tomatoes
• Crushed, Diced, Paste, Juice
• SunFresh
• Orchard Select

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Del Monte - Background Information
Enterprise Resource Planning

• Del Monte performs business with approximately
  100 IT employees. (10 Internal, 75 EDS, 15
  Accenture)
• There are approx. 4000-5000 DM employees during
  pack season(June Oct.) and 1500-2000 employees
  year around.
• DM is a Total Outsource Organization with greater
  than 80 of IT budget outsourced.
• Approx. IT Budget 25 million per year
• Capability Improvement Project Approx. 30
  million over 3 years

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Del Monte - Capability Improvement Project
Enterprise Resource Planning
EFFICIENT CORE CAPABILITY DEFINITION
Building an efficient and effective core business
foundation will be critical to positioning Del
Monte Foods for rapid growth and exploiting
synergies offered by strategic acquisitions. It
will also offer Del Monte Foods bottom-line cost
reduction opportunities.
Objectives

• Integrate and automate core transaction services
  for efficient operations and cost reduction for
• Distribution Center Operations
• Core Financial Processes
• Enterprise Reporting
• Supply Chain Operations
• Purchasing Process
• Position Del Monte to achieve synergies offered
  by strategic acquisitions
• Build an adaptable and scalable process and
  information systems architecture

Enabling Information Systems

• Enterprise Resource Planning (ERP) Modules
• Financials (AR/AP/GL)
• Order Management
• Purchasing/Accounts Payable
• Transportation and Warehouse Management

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Del Monte - Capability Improvement Project
Enterprise Resource Planning
Capabilities will be built over a three year
period that began in June, 2000. They will be
delivered in seven distinct releases
Business Capabilities

• i2 Releases Delivery
• Demand Planning Dec. 2000
• Master Production Distribution Planning Nov.
  2001
• Demand Fulfillment/Deployment Feb. 2002

• Advanced Demand Management (ADM)
• Demand Planning/Forecasting
• Integrated Supply Chain Planning
• Sales Operations Planning
• Integrated Order Management
• Integrated Purchasing

• JD Edwards Releases Delivery
• ERP Advance Prototype Oct. 2000
• Financials (GL/FA/CM-P) Nov. 2001
• Purchase-to-Pay/Cost Mgmt Actuals Jul. 2002
• Order-to-Cash / Purchase-to-Pay Oct. 2002
• Warehouse Management July 2003

• Core Foundation Efficiency (CFE)
• Financial Management
• Warehouse Management

• OTC / PTP / CM-A
• Distribution
• Sales order management, Advanced pricing, EDI,
  Enterprise Profitability, Inventory Mgmt, Stock
  Valuation, Procurement
• Financials
• Accounts Payable, Accounts Receivable

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Enterprise Resource Planning
Del Monte - Capability Improvement Project
Provider
Description
Capability/Release Name
Implementation Dates
(In order of project start)
New processes to automate and integrate financial
and accounting functions New processes and
systems to integrate and drive efficiencies in
order management, invoicing, receivables,
purchasing, and payables processing includes Cost
Management Actuals. New processes, systems and
organization to reduce overall inventory levels
and improve asset utilization while improving
customer service levels by integrating all supply
chain planning activities (constrained
requirements planning)
CFE - Financials JDE ADM - Order-to-Cash
/ JDE Purchase-to-Pay ADM - Master Production
i2 Distribution Planning
11/00 - 11/01 07/01 -10/02 07/01 - 11/01
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Del Monte - Capability Improvement Project
Enterprise Resource Planning
The OTC-PTP Release includes process and system
changes that will drive efficiencies in the order
management, invoicing, purchasing, and payables
processes. This is a key release that will
capture transactional data to improve data
visibility and create a single data source to
enable better data analysis and support
forecasting. In addition to supporting the
single view of data, the OTC-PTP release will
include the following changes
Del Monte Products
CURRENT STATE
FUTURE STATE

• Reduced transaction costs for purchasing.
  Automated approval and capability to email
  purchase orders.
• Improved pricing and supplier analysis due to
  data quality
• Purchasing will work with I2 and MRP to properly
  forecast Material and Supplies needed thus
  reducing write-offs.

• Purchasing Process involves manual steps. All
  approval is paper signature. All purchase
  orders are manually faxed/mailed.
• Analysis of suppliers and price is time consuming
  as data is not readily available.
• Material and Supplies purchased are written off
  due to age could have been prevented with advance
  warning of product changes and knowledge
  inventory levels.

• Automating key process will provide a single
  point of access for all account related data
• A/R clerks will focus on issue resolution and
  utilize exception based problem management
• Collection follow-up activities will be automated

• The majority of invoices require manual handling
• Collection follow-up is done manually

• Ensuring invoice accuracy is a labor-intensive
  process

• Customer satisfaction will improve based on
  improvements in the order fulfillment process
• Enhanced reporting capability will lead to
  improved breadth and depth of analysis enabling
  meaningful customer and product profitability
  analysis.

• In a stock-out, customers may begin to place
  orders with alternate suppliers
• No customer segmentation or profitability
  analysis is performed

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Del Monte - Capability Improvement Project
Enterprise Resource Planning
Project Management

• Prepare Detailed Work Plan
• Time Reporting
• Weekly Status

Build and Test
Deploy
Design

• Design Business Processes
• Design and Configure JD Edwards
• Design Applications
• Design System Tests
• Design Technical Infrastructure
• RICE Designs

• Build Applications
• Build RICE components
• Execute Data Conversions
• Execute System Tests
• Fix Applications
• Develop Policies and Procedures
• Develop Training
• Build and Test Technical Infrastructure

• Execute Final System Test
• Perform Training
• Implement New Processes, Policies, and Procedures
• Deploy Technical Infrastructure

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Del Monte - Capability Improvement Project
Enterprise Resource Planning
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Enterprise Resource Planning
Del Monte - Capability Improvement Project
Release Scope and Goals
Major Processes Delivered

• Manage supplier performance
• Manage supplier data
• Manage supplier agreements
• Manage supplier invoices
• Manage inventory transfers
• Manage inventory reports
• Design/Implement pricing strategy
• Manage customer data
• Manage customer agreements
• Perform credit management

• Manage customer orders
• Bill and invoice customer
• Manage customer invoices
• Manage sales quality
• Process customer returns
• Perform collections
• Identify opportunities
• Process inquiries quotations
• Create proposals
• Purchase items and services

New processes and systems to integrate and drive
efficiencies in order management, invoicing,
purchasing, and payables processes.
Effort
Workdays (Total) 6080 Del Monte Foods
Workdays 1800 Accenture Workdays 1320 EDS
Workdays 2220 JD Edwards Workdays 740 Start
Date July 2001 End Date October 2002
Resource Requirements
DMF/EDS Information Systems
DMF Business
ACN
JDE
Role Release Managers 1 Team
Lead 2 1 1 Process Developers .5 1.9 1.4 .9 Custom
Development Programmers 3 .6 EDI
Programmers 1.5 1 Human Performance
Analysts 1 1 Business Analysts 2.5 6 7.4 4.4 2
.5
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Del Monte Lessons Learned
Enterprise Resource Planning

• Training There are 2 lessons learned in
  training.
• Extensive training to be provided to Del Monte
  Business Users. In the past, projects focused
  less on business user training and the software
  application was not used.
• Improving the skill set of development.
  Developers were expert mainframe and customer
  service support. Developers needed to gain
  Client/Server and JD Edwards technical training.
  
• Physical workplace location. Accenture and EDS
  were separated physically by different floors of
  the building. Accenture involved in the Process
  Design/Configuration, Testing, and Training
  whereas EDS involved in Development and Tech
  Architecture. Lack of communication in key areas
  resulted in unnecessary overtime.

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Solutia Case Study 2
Enterprise Resource Planning
Ticker Symbol SOI Web Site www.solutia.com
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Solutia Case Study 2
Enterprise Resource Planning

• Solutia Background Information
• Sales and Profits
• Organizational Chart
• Products
• Solutia SAP Project
• SAP Implementation Background
• Project Teams
• Vendor Payment Task Force
• Approach
• Gantt Chart
• Solutia Lessons Learned
• Consultants
• Processes/Use
• Implementation
• Upgrades

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Solutia Company Background
Enterprise Resource Planning
Overview Of Solutia

• Created Sept. 1, 1997 from applied chemistry
  businesses of Monsanto
• 3.2 billion in annual sales, 3.6 billion in
  assets
• Products No. 1 or No. 2 in target markets
• 3 business platforms 3 major JVs
• 10,200 worldwide employees
• World Headquarters St. Louis, Missouri,
• Global sales manufacturing presence
• 34 manufacturing sites in 13 countries (including
  guest operations, excluding JVs)

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Solutia Organization Chart
Enterprise Resource Planning
Chairman of the Board CEO John Hunter
Vice Chairman Mike Miller
CFO Bob Clausen
General Counsel Karl Barnickol
CIO Johnnie Foster
Leadership Team
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Solutia Organization Chart
Enterprise Resource Planning

• Annual IT Budget is 100 million
• Approx. 310 IT employees

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Solutia - Products
Enterprise Resource Planning
Saflex, Saflex Inside, KeepSafe, KeepSafe
Maximum, EPG, CPFilms Resins Additives,
Pharmaceutical Services, Plastic Products,
Industrial Products Acrilan Fiber, Carpet
Industrial Nylon Fibers, Nylon Intermediates, Nylo
n Plastics Polymers
Performance Films
Specialty Products
Integrated Nylon
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Solutia SAP Project
Enterprise Resource Planning
SAP Implementation

• Scope Module type implementation
• Start with Finance then add modules
• Time Cutover US within 2 years
• When US is functional add other world areas - 5
  to 7 years
• Cost Project cap at 40 million
• Still implementing

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Solutia SAP Project
Enterprise Resource Planning
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Solutia SAP Project
Enterprise Resource Planning

• Form Task Force Teams after Start-Up
• Streamline Processes
• One to two years out
• Vendor Payment Task Force (VPTF)
• VPTF was chartered to streamline the purchasing
  and payables process.
• Established to sustain process improvements due
  to numerous shortfalls in the purchasing process.
  Vendors were consistently not being paid on the
  agreed payment terms. This caused many problems
  with vendors and Solutia employees.

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Solutia SAP Project
Enterprise Resource Planning

• Developed detailed work flows (maps)
• Identified bottlenecks and gaps 36
  opportunities
• Grouped gaps into categories
• Divided into sub-teams to develop recommendations
  and action plans to close the gaps
• Reviewed and worked recommendations as a total
  team

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Solutia SAP Project
Enterprise Resource Planning
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Solutia SAP Project
Enterprise Resource Planning

• Critical Success Factors
• Solutia feels their implementation has an overall
  grade of Good. They believe this is due to their
  approach
• Use of Consultants
• Given a finite task and time
• Utilized Solutia people 100 of the time along
  with the consultants these people became the
  power users
• Diminished outside consultants on future Upgrades
• Streamline processes and force use
• Aggressively identify manual processes and change
  so employees are utilizing SAP

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Enterprise Resource Planning
Solutia SAP Project (contd)

• Critical Success Factors - contd.
• Implementation
• Start with one or two modules and then work
  outwards this will help employees gain
  knowledge without overload.
• Upgrades and new releases
• Stay current on releases this usually helps
  with design issues within SAP

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Solutia SAP Project
Enterprise Resource Planning

• The Solutia study gained information found within
  the Solutia internal website and an interview
  with Eric Nichols, Director of IT for Core
  Operations.
• Mr. Nichols stated, Dont expect a great return
  right after implementation this will occur a
  few years out.

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Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
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Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
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STEP 1 Evaluate Business Strategies
Enterprise Resource Planning
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STEP 1 Evaluate Business Strategies
Enterprise Resource Planning

• Consider FULL business implications - both
  STRATEGIC and ORGANIZATIONAL - (Davenport)
• Evaluate Business Needs
• Common Platform
• Process Improvement
• Data Visibility
• Operational Cost Reductions
• Increased Customer Responsiveness
• Improved Strategic Decision-Making (Business
  Intelligence)
• Questions Executives, Senior Managers and General
  Managers Need to Answer - (Davenport)
• How will an Enterprise System (ES) strengthen our
  competitive advantage?
• How might it erode them?
• What will be the systems effect on our
  organization and culture?
• Which business functions would gain the most
  benefit?

43
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
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STEP 2 Determine Feasibility of ERP as Solution
(Burleson)
Enterprise Resource Planning
Alternative
Be Careful!!!
UNIQUE
Weigh
ES
COMPETITIVE CONSIDERATIONS
MODERATE
ES
ES
NONE
YES
NO
FLEXIBILITY CONSIDERATIONS
NOTE Compare this matrix to Balancing
Flexibility and IT Standardization - Donald A.
Marchand
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STEP 2 Determine Feasibility of ERP as Solution
(Davenport)
Enterprise Resource Planning
ES
Be Careful!!!
COINCIDE
BUSINESS IMPERATIVES
Alternative
Alternative
CONFLICT
CONFLICT
COINCIDE
TECHNOLOGICAL IMPERATIVES
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Enterprise Resource Planning
STEP 2 Determine Feasibility of ERP as Solution

• ES No-Brainers
• Functionality providing no competitive advantage
  AND needing little flexibility generally easily
  integrated
• No-to-moderate competitive advantage
• Functionality anticipates evolving changes
  needing flexibility
• Business imperatives coincide with technological
  imperatives
• Weigh Threats/Benefits
• Moderate competitive advantage
• Little flexibility needed
• Business imperatives coincide with technological
  imperatives
• Be Vewy, Vewy Careful
• Functionality provides a unique competitive
  advantage, yet desires flexibility for evolving
  changes
• Technological imperatives conflict with business
  imperatives
• Best-of-breed may be more suitable solution
• Seek Alternative Solution
• Proprietary competitive advantage where little
  flexibility is needed
• Business imperatives and technological
  imperatives conflict

47
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
48
Enterprise Resource Planning
STEP 3 Setup Internal Organizational Structure
of Project Team

• CEO/President and senior management MUST be
  involved to be successful
• Senior manager appointed to champion the project
  - (Feeny Willcocks)
• Communicates vision, maintains motivation, and
  mitigates functional and technical battles
• Reports to CEO
• Project Management (Swartz Orgill)
• Two project managers - one functional and one
  technical
• Internal employees with loyalty to the
  organization
• Experienced professionals with demonstrated
  ability manage large projects efficiently and
  effectively using standard project methodology to
  provide guidance and structure
• Team Members
• Include both business analysts and information
  technologists - (Davenport)
• Choose members motivated to make valuable
  contributions to direction and goals - (Romeo)
• Best if business members are savvy in network
  operations - (Romeo)

49
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
50
Enterprise Resource Planning
STEP 4 Vendor Selection - (Golden Scaiano)

• Identify vertical markets vendor specializes in
• Identify best-of-breed vendors to specific
  industries
• Develop specific questions and scenarios
  addressing key concerns and unique needs
• Review financials
• For private companies, require disclosure of
  financial information in the RFP
• Determine percentage of revenue allocated to RD
• Identifies commitment to products
• Determine system specifications

51
Vendor Selection Evaluate Technology Platforms
Enterprise Resource Planning
Source Network Computing
52
Enterprise Resource Planning
STEP 4 Vendor Selection - (Golden Scaiano)

• Identify vertical markets vendor specializes in
• Identify best-of-breed vendors to specific
  industries
• Develop specific questions and scenarios
  addressing key concerns and unique needs
• Review financials
• For private companies, require disclosure of
  financial information in the RFP
• Determine percentage of revenue allocated to RD
• Identifies commitment to products
• Determine system specifications
• Evaluate customer-support capabilities
• Evaluate softwares look and feel
• Require multiple scripted demonstrations
  customized to unique business functionality
• STRONGLY CONSIDER PRODUCTS MINIMIZING
  CUSTOMIZATIONS

53
Enterprise Resource Planning
STEP 4 Vendor Selection - (Golden Scaiano) -
contd.

• Compare Total Cost of Ownership
• Software
• Infrastructure
• Third-party products and tools
• External resources
• Additional employees needed to maintain the
  application
• Annual maintenance fees
• Future upgrade fees
• Frequency of future upgrades
• Consider scalability of product in relation to
  anticipated organizational growth
• Contract Specifications - (Swartz Orgill)
• Write FIXED-COST contract for all implementation
  costs - (Burleson)
• For Time-and-materials contracts, set clear
  milestones and performance benchmarks to insure
  best use of resources
• Allow for changing technology as new
  functionality and modules may come available
  during implementation period
• Be skeptical of promises - GET EVERYTHING IN
  WRITING!
• Use contract to manage scope creep, especially
  in TM contracts

54
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
55
Enterprise Resource Planning
STEP 4 Vendor Selection - contd.
56
STEP 5 Consultant Selection
Enterprise Resource Planning

• Balance internal and external
• Maximize knowledge transfer - too many external
  limits knowledge transfer - (Swartz Orgill)
• Assess internal skills and abilities measured
  against skills necessary to successful
  implementation - (Romeo)
• Determine experience with the companys
  architecture, network and applications - (Romeo)
• Evaluate track record of overcoming
  implementation obstacles - (Romeo)
• Determine ability to effectively transfer
  knowledge to internal members - (Romeo)
• Identify vendor partners - (Golden Scaiano)
• Use multiple resources - (Swartz Orgill)
• Reduces leverage utilized by just one consulting
  group
• Utilize high-dollar consultants for tasks
  requiring intimate product knowledge
• Utilize cost-efficient consultants for
  run-of-the-mill programming and similar tasks
• Plan exit strategy to disengage upon completion
  of specific objectives - (Swartz Orgill)
• Include right of refusal clause over any
  individual not performing to expectations -
  (Swartz Orgill)
• Integrate selected consultants with internal team
  to create a single-team environment - (Swartz
  Orgill)

57
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
58
STEP 6 Business Process Re-engineering
Enterprise Resource Planning

• Map business processes (flow-charts)
• Define term, functions and processes consistently
  across the enterprise
• Identify gaps needing bridges between ERP modules
  and company systems - (Burleson)
• Define ERP software configuration
• Build ERP software modifications and
  customizations
• Minimizing customizations is critical
• Convert data to be read by ERP software

59
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
60
STEP 7 Implementation
Enterprise Resource Planning

• Create launch plan
• Big Bang - (Koch, Slater Baatz)
• Entire company mobilizes simultaneously
• Adversarial in nature - little compromise at the
  expense of user buy-in
• Lead to many failures in 1990s
• Franchising Strategy (guinea-pig approach) -
  (Koch, Slater Baatz)
• Suits large or diverse companies not sharing
  common processes across business units
• Install independent ES in each unit, and link
  common processes across the enterprise
• Pilot installation in open-minded business unit
  where core business is not disrupted
• Gain buy-in across functions and continue
  installation unit-by-unit
• Slam-Dunk (Quick-Hit) - (Koch, Slater Baatz)
• ES dictates process design
• Focus just on a few common processes
• Fits small companies expecting to grow into ERP
• Use it as an infrastructure to support more
  diligent installations in the future

61
Justifies Popularity of Phased Approach
Enterprise Resource Planning
62
STEP 7 Implementation - contd.
Enterprise Resource Planning

• Create launch documentation
• Integrate applications
• Test modifications and customizations
• Build test cases around user requirements -
  (Romeo)
• Conduct actual load testing and functional
  testing from end-user perspective - (Romeo)
• KEY - emulate user behavior as much as possible
  during testing process - (Romeo)

63
STEP 7 Implementation - contd.
Enterprise Resource Planning
64
STEP 7 Implementation - contd.
Enterprise Resource Planning
65
STEP 7 Implementation - contd.
Enterprise Resource Planning

• Train users

66
Training Misperception Shown by
StatisticsWouldnt Quality Training Would Help
Minimize Disruption?
Enterprise Resource Planning
67
Training Misperception Shown by
StatisticsWouldnt Quality Training Would Help
Minimize End-User Adoption Issues?
Enterprise Resource Planning
68
STEP 7 Implementation - contd.
Enterprise Resource Planning

• Train users
• Quality of training will reflect success of
  entire implementation - (Wheatley)
• Technical training to users is worthless
  understanding of process and information flow is
  critical to success - (Wheatley)
• Broken down into two categories (Wheatley -
  citing Purina Mills success)
• Education - why, who and where
• Gains user buy-in and intimacy with process and
  system
• Emphasizes dependence of data accuracy for
  cross-unit or multi-process functionality
• Training - how
• Simply teaches users how to use the system
• DO NOT HIRE THIRD-PARTY THAT DOESNT INTIMATELY
  UNDERSTAND THE COMPANIES BUSINESS PROCESSES
  (Wheatley - citing Purina Mills stumble)
• Hire ONLY outside training firm with specific
  teaching skills - (Romeo)

69
STEP 7 Implementation - contd.
Enterprise Resource Planning
70
STEP 7 Implementation - contd.
Enterprise Resource Planning

• Training Budget
• Most likely to result in budget overrun - (Koch,
  Slater Baatz)
• Benchmarking Partners Study - (Wheatley)
• Training budget ranged from 1-30
• Average 8
• Employers budgeting near the average severely
  undercut training costs
• DA Consulting Group - (Wheatley)
• 1998 - training budgets averaged 5
• 2000 - training budgets averaged 11
• Gartner Study on SAP end-user training -
  (Burleson)
• Training budgets should be 17 of total costs
• Companies budgeting below 13 underestimated time
  and costs

71
Best-Practice ERP Implementation Model
Enterprise Resource Planning
STEP 3 Setup Project Team
STEP 4 Select Vendor
STEP 1 Evaluate Business Strategies
STEP 2 Determine Solutions to Needs
STEP 5 Select External Resources
STEP 7 Implementation
STEP 6 Business Process Re-engineering
STEP 8 Launch Go, Go, Go!
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STEP 8 Launch and Go, Go, Go!
Enterprise Resource Planning

• 30-Day Plan
• Monitor
• Report
• Revise
• Continue to EDUCATE as learning curve steepens
• Control expectations
• Companies expect to gain value immediately after
  installation - (Koch, Slater Baatz)
• Learning curve still rising as users become more
  intimate with changes in processes and functions
• ROI not a valid measurement in the short-term
• Deloitte Consulting Study
• 64 Fortune-500 companies
• 25 suffered loss in performance when ERP systems
  went live

73
STEP 8 Launch and Go, Go, Go!
Enterprise Resource Planning
74
The Six Deadly ERP Sins - (Manoeuvre - Cited by
Baldwin)
Enterprise Resource Planning

• Sin 1 Not understanding the true significance
  of what you have taken on
• Sin 2 Not committing the right resources to the
  project
• Sin3 Not managing the change effectively
• Sin 4 Not managing benefits
• Sin 5 Not embracing integration
• Sin 6 Not planning for the end of the project
  before you start

75
Best-Practice Summary
Enterprise Resource Planning

• The alpha wolf MUST lead the pack!
• CEO and top management involvement is mandatory
• The best plan is a well-planned plan!
• Preparation, organization and structure is key
• Limit the seasonings added to your food!
• Customizations can and will be detrimental
• Take small bites and chew it up!
• Implement in phases and improve each step of the
  way
• Sponge off of the experts!
• Maximize knowledge transfer
• Give a man a fish, he eats for a day. Teach a
  man to fish, he eats for a lifetime!
• Educate, educate, educate

76
References Cited
Enterprise Resource Planning

• Baldwin, Paul. Know the Six Deadly Sins.
  TechRepublic. 16 May 2001. http//www.techrepub
  lic.com/article.jhtml?src-searchidr00520010516ba
  l02.htm
• Burleson, Donald. Selecting and ERP System
  Build or Buy? TechRepublic. 06 Aug
  2001. http//www.techrepublic.com/article.jhtml?
  srcsearchidr00620010806brl03.htm
• Burleson, Donald. Four Factors That Shape the
  Cost of ERP. TechRepublic. 16 Aug
  2001. http//www.techrepublic.com/article.jhtml?
  srcsearchidr006200108016brl01.htm
• Burleson, Donald. An Insiders View of
  Selecting an ERP Vendor. TechRepublic. 05 Sep
  2001. http//www.techrepublic.com/article.jhtml?
  idr00620010905brl01.htm
• Davenport, Thomas H. Putting the Enterprise into
  the Enterprise System. Harvard Business Review.
  July-August 1998. http//www.hbsp.harvard.edu/pro
  ducts/hbr/julaug98/98401.html.
• E-Poll Results ERP. Network Computing. 17
  Sep 2001. http//www.networkcomputing.com/1219/121
  9f25.html.
• Enterprise Resource Planning. ERP Fans.
  http//www.erpfans.com/erpfans/erpca.htm
• Feeny, David F. and Leslie P. Willcocks.
  Transforming IT-Based Innovation Into Business
  Payoff. Mastering Information Management.
  p.304.
• Golden, Adam and Dawn Scaiano. Evaluating ERP
  Software Vendors. TechRepublic. 29 Jun 2001.
  http//www.techrepublic.com/article.jhtml?src-s
  earchidr00620010629gcn01.htm
• Hagman, Anders. What Will Be of ERP? ERP IT
  Toolbox. 30 Oct 2000. http//erp.ittoolbox.c
  om/browse.asp?cERPPeerPublishingr2Fpub2Fwhate
  rp2Epdf
• Koch, Christopher and Derek Slater and E. Baatz.
  The ABCs of ERP. CIO. http//www.cio.com/re
  search/erp/edit/122299_erp.html.
• Romeo, Jim. Less Pain, More Gain in ERP
  Rollouts. Network Computing. 17 Sep 2001.
  http//www.networkcomputing.com/1219/1219f2.ht
  ml.

77
References Cited
Enterprise Resource Planning

• Swartz, Dave and Ken Orgill. Higher Education
  ERP Lessons Learned. 11 Oct 2000.
  http//www.gwu.edu/cio/presentations/erp.html
  .
• Technology Platforms for Major ERP Vendors.
  Network Computing. http//img.cmpnet.com/nc/1
  219/graphics/1219f2_chart1.pdf
• The Cost of ERP Implementation. TechRepublic.
  20 Feb 2000. http//www.techrepublic.com/article.j
  html?srcsearchidr00120000220kim99.htmadSiteNam
  eOverridebcadPageNameOverrideEnterpriseApplica
  tions
• Wheatley, Malcolm. ERP Training Stinks. CIO.
  01 Jun 2000. Http//www.cio.com/archive/.