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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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Christ University RADM ERP Jan 2012 1-4
Roles and Need for ERP?
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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Christ University RADM ERP Jan 2012 1-5
Roles and Need for ERP?
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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Christ University RADM ERP Jan 2012 1-6
Roles and Need for ERP?
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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Roles and Need for ERP?
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.
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Roles and Need for ERP?
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.
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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
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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Feasibility Analysis
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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Christ University RADM ERP Jan 2012 1-12
Feasibility Analysis
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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Christ University RADM ERP Jan 2012 1-13
Feasibility Analysis
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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Feasibility Analysis
5. Other Issues
Security
Reliability
Resource commitment
ROI(Cost benefits)
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Christ University RADM ERP Jan 2012 1-15
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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Competitive Environment Analysis
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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Competitive Environment Analysis
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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Christ University RADM ERP Jan 2012 1-18
Competitive Environment Analysis
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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Competitive Environment Analysis
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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Competitive Environment Analysis
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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Christ University RADM ERP Jan 2012 1-21
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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Christ University RADM ERP Jan 2012 1-27
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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ERP Project Life Cycle
Stage 1 Pre-Implementation Stage
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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ERP Project Life Cycle
Stage 1 Pre-Implementation Stage
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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ERP Project Life Cycle
Stage 2 Implementation Stage
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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ERP Project Life Cycle
Stage 2 Implementation Stage
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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ERP Project Life Cycle
Stage 2 Implementation Stage
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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ERP Project Life Cycle
Stage 2 Implementation Stage
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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ERP Project Life Cycle
Stage 2 Implementation Stage
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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ERP Project Life Cycle
Stage 2 Implementation Stage
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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ERP Project Life Cycle
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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Christ University RADM ERP Jan 2012 1-39
ERP Project Life Cycle
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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ERP Project Life Cycle
Implementation Challenges
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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ERP Project Life Cycle
Implementation Challenges
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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ERP Project Life Cycle
Implementation Challenges
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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ERP Project Life Cycle
Implementation Challenges
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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Christ University RADM ERP Jan 2012 1-44
ERP Project Life Cycle
Implementation Challenges
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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Christ University RADM ERP Jan 2012 1-45
ERP Project Life Cycle
Implementation Challenges
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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Christ University RADM ERP Jan 2012 1-46
ERP Project Life Cycle
Implementation Challenges
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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Christ University RADM ERP Jan 2012 1-47
ERP Project Life Cycle
Implementation Challenges
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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ERP Project Life Cycle
Implementation Challenges
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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ERP Project Life Cycle
Implementation Challenges
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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ERP Project Life Cycle
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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ERP Project Life Cycle
Implementation Challenges :
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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ERP Project Life Cycle
Implementation Challenges :
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.