Five steps to an ERP solution: ThePost.ie


TCH Archives > Sunday Business Post > 2005/06/05 > Five steps to an ERP solution

Five steps to an ERP solution
Sunday, June 05, 2005 - By Murray Kercheval
The successful implementation of an ERP solution pivots around five main 'work-streams': project and quality management, change management, business processes, application development and technical infrastructure. Once an enterprise has evaluated its needs and tendered and selected an ERP vendor, the enterprise must go through five stages.

Preparation

This should set out a highly detailed charter for the project roll-out, including timescale, scope, division of responsibilities, deliverables and so on.

Design and validation

This phase takes the pre-configured ERP solution and reviews it with the project team, usually in a workshop environment. This is the first phase of testing and is known as unit testing. This involves application development and the design of data conversion programmes for compatibility with the new system. In most cases, the system will automate data transfer, although it is often easier to enter small volumes of data manually.

To prevent scope creep, any major changes must be detected at this stage, rather than later in the project. The core team looks at how the package will deliver in its specific environment and acquires valuable hands-on knowledge of the package, which it will later transfer to end users.

Simulation

In this phase, a pilot version of the system is run at conference-room-level and integrated testing takes place. A management plan for end-user training and any other issues with the software are ironed out before the pilot is run again. In most cases, the simulation phase will be repeated twice before the team proceeds.

Deployment

The third part of the testing process is “user-acceptance'‘ testing. The project team decides how best to “cut over'‘ from the old system to the new.

End-user training also begins, based on an evolved training curriculum for individual role-based training. It is also vital that end users are made aware of their own role in the overall organisational chain. With all of the relevant boxes checked, the new ERP system can finally go live.

Support

This phase makes key people available, often at month's end, to ensure that end users are properly adapting to the system and performing within adequate response times.

Typically, the organisation will require heavy consulting support in the first month, dropping to about 50 per cent by the second month and gradually phasing out external support three months in.

In the support phase, businesses tend to reap the benefits of time spent on training and knowledge transfer earlier in the roll-out process.

ERP implementation is often viewed as a standalone project with a clear beginning, middle and end, but it requires ongoing commitment.

Companies can release further value from existing ERP systems by opting for clever upgrade options. Application management is central to the success of ERP and can help companies to leverage ERP to its full strategic potential.

ERP implementations require IT departments to spend the vast majority of their time and budgets on the initial implementation. But this represents just 10 per cent of the total ERP application life-cycle. The remaining 90 per cent is taken up with ongoing “post-go-live'‘ management and it is the post-implementation ERP optimisation plan that will decide whether or not the project is a success.

The key opportunity for business is to make sure one can reduce what it takes to operate and manage one's ERP and release some of that value so it can deliver better value for business. Managing costs and optimising the value of an ERP investment better releases money from the operating side to allow an increase in the business value of ERP.

Research carried out by Cap Gemini Ernst and Young indicates that, over the past ten years, ERP support and upgrade costs have doubled.

“Where once, this might have been at 15 to 20 per cent of the total budget, it's now at least 30 per cent,” said a spokesman.

“So the trick is to reduce that by being smart about it - releasing the value into your business without necessarily increasing your total spend.”

In order to get the balance right, companies should plan and carry out support and upgrade work with the same diligence and attention to detail as they did the initial implementation.

Once the system goes live, companies should focus on three core areas - technology effectiveness, service effectiveness and business value.

Companies that adopt best practice for their ‘go live' support model will typically save 10 per cent of their total cost.

Companies that look at integration can also save 10 per cent.

A large proportion of a company's total cost of ownership is typically locked up in the investment in IT infrastructure. Once the money's been spent, its value is frozen.

But companies can squeeze additional value out of the system by following a few simple steps. These might include looking at the possibility of replatforming, the consolidation of servers, moving the database and even changing the operating system from Windows to Linux.

The ever-increasing breadth of ERP functionality is another important way in which companies are able to better optimise their ERP environment. For example, customer relationship management (CRM) can help organisations to organise and manage customer relationships. Software vendors are increasing the breadth of what they can provide.

A lot if it is around CRM and there is the focus on supplier relationship management, which encourages companies to operate in a collaborative environment with their suppliers.

Ten or 15 years ago, all of the major automotive companies in operation adhered to leading edge supplier collaboration practices to make their businesses lean and to save money.

For other companies, CRM can bring functionality to companies with ERP systems already in place. It allows them to more easily implement CRM, where previously it might have been beyond them.

The crux of a successful ERP implementation lies in the return on investment (ROI) argument. Many experts say that companies who invest in ERP have so far failed to secure the return on investment they expected.

Case study

One of Ireland's biggest print management and logistics companies was looking for an ERP solution. Spectrum Print Management, which employs 50 people, had three disparate systems, each with different databases.

This meant staff within its warehousing, sales and finance departments did not have access to the same information at the same time. It needed to move to a single integrated solution, where all parties have access to real-time information from across the company.

What it wanted was a system that increased the speed at which the business can operate, where previously manual processes were automated, and stock management, financial accounting and enquiry management systems were streamlined.

The company eventually decided on SAP's Enterprise Resource Planning package, My SAP ERP. Implemented in four months by Client Solutions, the new system has changed Spectrum Print Management's business operations. According to the printing company's bosses, it has delivered bigger efficiencies throughout its customer facing and internal office functions.

“By having one view of our company information, we reduce errors and increase the confidence everyone has in the data they have in front of them,” said Ray Butler, managing director of Spectrum Print Management.

Partner systems are linked to the system, removing the need to duplicate data entry when placing orders or checking product availability. Suppliers are alerted automatically when stocks are low, making the process much more efficient.

Linking its warehouse management system to the My SAP ERP solution means they are able to speed up the picking, packing, sorting and distribution of its products. The integration of its financial and material resource planning will also aid in the company's forecasting and analysis procedures.

A future initiative will enable customers to order the stock in real-time through the Spectrum Print Management website, which will be fully integrated with my SAP ERP.

“Focusing on the logistics and distribution sector enables us to deliver My SAP ERP implementations in an accelerated fashion,” said Gerry Power, SAP development manager of Client Solutions.

“For companies like Spectrum Print Management making this kind of enterprise software available on a SME budget is key.”

Fiona Walsh, partner manager of SAP Ireland said: “As Spectrum Print Management demonstrates, you don't have to be a large organisation to feel the pressure to do things more efficiently or to benefit from the world leader in ERP and e-business solutions.”

“Companies in all industries, and of all sizes, are looking to improve internal processes to deliver greater efficiencies and improved customer services.”