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Important tips to implement ERP
successfully.
Management Guru
Late Mr. PETER
DRUCKER was asked: “What is the most important impact of Information Technology
on business?” He replied: “Information technology forces you to organize your
business processes more logically. The computer can handle only things to which the
answer is yes or no. It cannot handle maybe. It is not the computerization
that is important; it is the discipline that it brings to your business processes.”
ERP is actually
"E" only:
Enterprise resource planning software,
most of the times does not live up to its
acronym. Few companies have been able to achieve online inventory
that is necessary for true planning. The enterprise part is the most
important part of ERP. This is
ERP's true ambition. It attempts to integrate all departments and
functions across a company onto a single computer system (called ERP
Server) that can serve
all those different departments' particular needs.
That integrated approach can have a tremendous payback if companies
install the software correctly.
Take a customer order, for example. Typically, when a customer places an
order, that order begins a mostly paper-based journey from in-basket to
out-basket around the company, often being keyed and re-keyed into
different departments' computer systems along the way. All that lounging
around in in-baskets causes delays and lost orders and all the keying into
different computer systems invites errors. Meanwhile, no one in the
company truly knows what the status of the order is at any given point
because there is no way for the finance department, for example, to get
into the Finished Goods Stores computer system to see whether the item has been
shipped. "You'll have to call the F. G. Stores," is the familiar
refrain heard by frustrated customers.
Dream of ERP. The reality is much harsher:
ERP automates the tasks involved in performing a business process such as
order fulfillment, which involves taking an order from a customer,
shipping it and billing for it. With ERP, when a customer service
representative takes an order from a customer, he or she has all the
information necessary to complete the order. This document is called
'ORI' or Order Receipt Information. Everyone else in the company sees the same computer
screen and has access to the single database that holds the customer's new
ORI. Also known as Dispatch Order or Sales Order. The ORI register
will automatically show whether the sales invoice is prepared or not. The order process moves like a bolt of lightning through
the organization, and customers get their orders faster and with fewer
errors than before. ERP can apply that same magic to the other major
business processes, such as purchase order processing or financial reporting.
Let us go back to those inboxes for a minute. That process may not have
been efficient, but it was simple. Finance did its job, the stores did
its job, and if anything went wrong outside of the department's walls, it
was somebody else's problem. Not anymore. With ERP, the sales person is no longer just typists entering someone's name into a
computer and hitting the return key. The ERP screen makes them business
people. It flickers with the customer's debtor's position from the finance
department and the product inventory levels from the F. G. Stores. Will we be able to ship the order on time?
Is the invoice prepared correctly? These are
decisions that customer service representatives have never had to make
before and which affect the customer and every other department in the
company. However, it is not just the customer service representatives who
have to wake up. People in the stores who used to keep inventory in
their heads or on scraps of paper now need to put that information online.
If they do not, customer service will see low inventory levels on their
screens and tell customers that their requested item is not in stock.
Unfortunately popular 'finance-centric' software packages available in the
market allows even editing of an entry or even allow back dated
entry.
Accountability, responsibility and communication have never been tested
like this before: In other words there is NO NO to 'Chalega' attitude !!
How long will an ERP project take?
Companies that install ERP do not have an easy time of it. Do not
get carried away when ERP vendors tell you about a five or six-month average
implementation time. Those short (that's right, six months is short)
implementations all have a catch of one kind or another. ERP implementers
may actually do their job in six months time, but users may take even longer
to adapt to the new way of working.
To do ERP right, the ways you do business will need to change and
the ways people do their jobs will need to change too. And that kind of
change doesn't come without pain. Unless, of course, your ways of doing
business are working extremely well (orders all shipped on time,
productivity higher than all your competitors, customers completely
satisfied), in which case there is no reason to even consider ERP.
Click here to see a note on Business
Process Reengineering or BPR.
The important thing is not to worry about on how long it will take real
transformational, but rather to understand why you need it and how you will use it to
improve your business. ERP efforts usually run between one to three
years on
average. Too much customization also delays the ERP implementation.
Will
ERP fit the ways I do business?
It is critical for companies to figure out if their ways of doing business
will fit within ERP package before the checks are signed and
the implementation begins. If in doubt, ask your IT consultant. It is
wiser to pay his / her consultancy fees.
The most common reason that companies walk away from expensive (sometimes
in Lacs of Rupees) ERP projects is that they discover that the software
does not support one of their important business processes. At that point
there are two things they can do: They can change the business process to
accommodate the software, which will mean deep changes in long-established
ways of doing business (that often provide competitive advantage) and
shake up important peoples' roles and responsibilities (something that few
companies have the stomach for). Or they can modify the software to fit
the process, which will slow down the project, introduce dangerous bugs
into the system and make upgrading the software to the ERP vendor's next
release excruciatingly difficult, because the customizations will need to
be torn apart and rewritten to fit with the new avatar (version).
The move to ERP, is a project of breathtaking scope. In
addition to budgeting for software costs, financial executives should plan
to write checks to cover consulting, process rework, integration testing
and a long laundry list of other expenses before the benefits of ERP start
to manifest themselves. Click here to get a checklist of TCO.
Underestimate the cost of ERP can lead to a rude shock down the line. A few oversights in the
budgeting and planning stage can send ERP costs spiraling out of control
faster than oversights in planning almost any other information system
undertaking.
The
Hidden Costs of ERP:
Although different companies will find different land mines in the
budgeting process, those who have implemented ERP packages agree that
certain costs are more commonly overlooked or underestimated than others.
I think the following areas as most likely to result in budget overrun.
Training
Training is the near-unanimous choice of experienced ERP implementers as
the most elusive budget item. It is not so much that this cost is
completely overlooked, as it is consistently underestimated. Training
expenses are high because users almost invariably have to learn a new
set of processes, not just a new software interface.
Integration and Testing
As with training, testing ERP integration has to be done from a
process-oriented perspective. Instead of plugging in dummy data and moving
it from one application to the next, veterans recommend running a real
purchase order through the system, from sales order entry through shipping and
receipt of payment- the whole order-to-money receipt processes. Preferably with the
participation of the actual users who will eventually do those tasks in
ERP.
Master Data Preparation
It costs money to enter corporate information, such as customer and
supplier records, BOM (Bill of Material) data and the like, from old systems to
new ERP homes. Although few EDP managers will admit it, most data in most
legacy systems is of little use. Companies often deny their data is dirty
until they actually have to move it to the new client / server setups, that
true ERP packages require. Consequently, those companies are more
likely to underestimate the cost of the move. Nevertheless, even clean
data may demand some overhaul to match process modifications necessitated
or inspired by the ERP implementation.
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