UNIT-1
Introduction to ERP
Introduction of ERP:
In any industry, some of the demands managers face is to be cost effective. In
addition to that, they are also faced with challenges such as to analyze costs
and profits on a product or consumer basis, to be flexible to face ever altering
business requirements, and to be informed of management decision making
processes and changes in ways of doing business.
However, some of the challenges holding managers back include the difficulty
in attaining accurate information, lack of applications that mimic existing
business practices and bad interfaces. When some challengers are holding a
manager back, that is where Enterprise Resource Planning (ERP) comes into
play.
Over the years business applications have evolved from Management
Information Systems with no decision support to Corporate Information
Systems, which offer some decision support to Enterprise Resource Planning.
Enterprise Resource Planning is a software solution that tackles the needs of
an organization, taking into account the process view to meet an organization's
goals while incorporating all the functions of an organization.
Its purpose is to make easy the information flow between all business
functions within the boundaries of the organization and manage the
organization's connections with its outside stakeholders.
In a nutshell, the Enterprise Resource Planning software tries to integrate all
the different departments and functions of an organization into a single
computer system to serve the various needs of these departments.
The task at hand, of implementing one software program that looks after the
needs of the Finance Department together with the needs of the Human
Resource Department and the Warehouse, seems impossible. These different
departments usually have an individual software program that is optimized in
the way each department works.
However, if installed correctly this integrated approach can be very cost
effective for an organization. With an integrated solution, different
departments can easily share information and communicate with one another.
The following diagram illustrates the differences between non-integrated
systems versus an integrated system for enterprise resource planning.
The Driving Force behind ERP
There are two main driving forces behind Enterprise Resource Planning for a
business organization.
In a business sense, Enterprise Resource Planning ensures customer
satisfaction, as it leads to business development that is development of
new areas, new products and new services.
Also, it allows businesses to face competition for implementing
Enterprise Resource Planning, and it ensures efficient processes that
push the company into top gear.
In an IT sense: Most softwares does not meet business needs wholly
and the legacy systems today are hard to maintain. In addition, outdated
hardware and software is hard to maintain.
Hence, for the above reasons, Enterprise Resource Planning is necessary for
management in today's business world. ERP is single software, which tackles
problems such as material shortages, customer service, finances management,
quality issues and inventory problems. An ERP system can be the dashboard of
the modern era managers.
Implementing ERP System
Producing Enterprise Resource Planning (ERP) software is complex and also has
many significant implications for staff work practice. Implementing the
software is a difficult task too and one that 'in-house' IT specialists cannot
handle. Hence to implement ERP software, organizations hire third party
consulting companies or an ERP vendor.
This is the most cost effective way. The time taken to implement an ERP system
depends on the size of the business, the number of departments involved, the
degree of customization involved, the magnitude of the change and the
cooperation of customers to the project.
Advantages of ERP System
With Enterprise Resource Planning (ERP) software, accurate forecasting
can be done. When accurate forecasting inventory levels are kept at
maximum efficiency, this allows for the organization to be profitable.
Integration of the various departments ensures communication,
productivity and efficiency.
Adopting ERP software eradicates the problem of coordinating changes
between many systems.
ERP software provides a top-down view of an organization, so
information is available to make decisions at anytime, anywhere.
Disadvantages of ERP System
Adopting ERP systems can be expensive.
The lack of boundaries created by ERP software in a company can cause
problems of who takes the blame, lines of responsibility and employee
morale.
Conclusion
While employing an ERP system may be expensive, it offers organizations a
cost efficient system in the long run.
ERP software works by integrating all the different departments in on
organization into one computer system allowing for efficient communication
between these departments and hence enhances productivity.
The organizations should take extra precautions when it comes to choosing the
correct ERP system for them. There have been many cases that organizations
have lost a lot of money due to selecting the 'wrong' ERP solution and a service
provider for them.
CRM
This is a simple definition of CRM.
When people talk about CRM, they are usually referring to a CRM system, a
tool that helps with contact management, sales management, productivity,
and more.
With visibility and easy access to data, it's easier to collaborate and increase
productivity. Everyone in your company can see how customers have been
communicated with, what they’ve bought, when they last purchased, what
they paid, and so much more. CRM can help companies of all sizes drive
business growth, and it can be especially beneficial to a small business, where
teams often need to find ways to do more with less.
Here’s why CRM matters to your business.
Gartner predicts that by 2021, CRM will be the single largest revenue area of
spending in enterprise software. If your business is going to last, you know that
you need a strategy for the future. You have targets for sales, business
objectives, and profitability. But getting up-to-date, reliable information on
your progress can be tricky. How do you translate the many streams of data
coming in from sales, customer service, marketing, and social media
monitoring into useful business information?
A CRM system can give you a clear overview of your customers. You can see
everything in one place — a simple, customizable dashboard that can tell you a
customer’s previous history with you, the status of their orders, any
outstanding customer service issues, and more.
You can even choose to include information from their public social media
activity — their likes and dislikes, what they are saying and sharing about you
or your competitors. Marketers can use a CRM solution to better understand
the pipeline of sales or prospects coming in, making forecasting simpler and
more accurate. You’ll have clear visibility of every opportunity or lead, showing
you a clear path from inquiries to sales. Some of the biggest gains in
productivity can come from moving beyond CRM as a sales and marketing tool,
and embedding it in your business – from HR to customer services and supply-
chain management.
Though CRM systems have traditionally been used as sales and marketing
tools, customer service teams are seeing great benefits in using them. Today’s
customer might raise an issue in one channel — say, Twitter — and then switch
to email or telephone to resolve it in private. A CRM platform lets you manage
the inquiry across channels without losing track, and gives sales, service, and
marketing a single view of the customer.
Running a business without CRM can cost you real money.
More administration means less time for everything else. An active sales team
can generate a flood of data. Reps are out on the road talking to customers,
meeting prospects, and finding out valuable information – but all too often this
information gets stored in handwritten notes, laptops, or inside the heads of
your salespeople.
Details can get lost, meetings are not followed up on promptly, and prioritizing
customers can be a matter of guesswork rather than a rigorous exercise based
on fact. And it can all be compounded if a key salesperson moves on. But it's
not just sales that suffers without CRM.
Your customers may be contacting you on a range of different platforms
including phone, email, or social media — asking questions, following up on
orders, or contacting you about an issue. Without a common platform for
customer interactions, communications can be missed or lost in the flood of
information — leading to a slow or unsatisfactory response.
Even if you do successfully collect all this data, you’re faced with the challenge
of making sense of it. It can be difficult to extract intelligence. Reports can be
hard to create and they can waste valuable selling time. Managers can lose
sight of what their teams are up to, which means that they can’t offer the right
support at the right time – while a lack of oversight can also result in a lack of
accountability from the team.
What does a CRM system do?
A CRM platform can also connect to other business apps that help you to
develop customer relationships. CRM solutions today are more open and can
integrate with your favorite business tools, such as document signing,
accounting and billing, and surveys, so that information flows both ways to
give you a true 360-degree view of your customer.
And a new generation of CRM goes one step further: Built-in intelligence
automates administrative tasks, like data entry and lead or service case
routing, so you can free up time for more valuable activities. Automatically
generated insights help you understand your customers better, even predicting
how they will feel and act so that you can prepare the right outreach.
Here’s how a CRM system can help your business today.
Introducing a CRM platform has been shown to produce real results – including
direct improvements to the bottom line. CRM applications have a proven track
record of increasing
With better visibility, you’ll also be able to keep your customers happy with
better service. Happy customers are likely to become repeat customers, and
repeat customers spend more — up to 33% more according to some studies.
A good CRM system will gather information from a huge variety of sources
across your business and beyond. This gives you unprecedented insights into
how your customers feel and what they are saying about your organization —
so you can improve what you offer, spot problems early, and identify gaps.
Here’s what cloud-based CRM offers your business.
CRM and the cloud computing revolution have changed everything. Perhaps
the most significant recent development in CRM systems has been the move
into the cloud from on-premises CRM software. Freed from the need to install
software on hundreds or thousands of desktop computers and mobile devices,
organizations worldwide are discovering the benefits of moving data, software,
and services into a secure online environment.
REDUCE COSTS.
CRM can be quick and easy to implement. A cloud-based system doesn’t need
special installation, and there’s no hardware to set up, keeping IT costs low and
removing the headache of version control and update schedules.
Generally, cloud-based CRM systems are priced on the number of users who
access the system and the kinds of features you need. This can be very cost-
effective in terms of capital outlay, and is also extremely flexible — enabling
you to scale up and add more people as your business grows. Salesforce is
flexible in terms of functionality, too — you’re not paying for any features that
are not useful to you.
Increased collaboration
Name
Title
Company
Email address
Telephone number
Fax number
Date of birth
Items purchased
Purchase date
Inquiry history
Contact history
Invoice history
Payment history
Returns
Events attended
When you have a comprehensive customer database with key information, you
are able to leverage that information for marketing purposes. For example,
with a quality CRM system, you can pull a report that shows contact
information for every person who inquired about a particular product within a
certain time frame but did not purchase. This list can be used to make follow
up sales calls and to gather information about unfavorable purchase decisions.
A good CRM system will allow you to access a great deal of information about
your customers quickly and efficiently. Rather than digging through paper files
or seemingly endless spreadsheets to find out the last time a certain customer
made a purchase or to identify who inquired about a particular product last,
CRM technology allows you to access the information you need with just the
touch of a few keyboard buttons.
AIM crm
Commence
Microsoft Dynamics
Prophet
Sage Act!
Salesforce.com
Soffront CRM
(b) Implementation
Implementation comprises the second stage of the ERP systems’ life cycle,
although the term is also used to represent the full life cycle. The
implementation of an ERP system may be defined as the process by which the
system’s modules are put into operation within a company. Implementation
entails adjustment of the business process to the system, eventual customizing
of the system, the loading or conversion of initial data, hardware and software
configuration, training of the users and managers and the offer for support and
help. This stage encompasses the tasks ranging from the end of
implementation plan’s concept to the beginning of the operation.
The implementation stage is reported to be the most critical ofall (Bingi,
Sharma & Godla, 1999). Difficulties are mainly due to the organizational
changes that imply in changes of the tasks and responsibilities of individuals
and departments and transformations in the relationships among the different
departments. In an ERP system implementation it is generally pursued the
optimization of the global processes of the company, which may cause as a
counterpart changes in the activities in most of the departments involved. The
need of intense participation and commitment of the company’s top
management and the requirement of permanent communication among the
involved units is brought about by the size and complexity of this change and
of the conflicts it may generate among those involved.
The process of adjustment of the ERP system to the company’s processes is
part of the implementation stage and is achieved by the adjustment of
parameters or software customizing (development of programs to modify or
complement the existing functions). At the implementation stage, the decision
on how the start of the operation of the ERP system (the “go-live”) will take
place is also important. All modules may start operating: in all divisions or
plants of the company simultaneously (big bang) or in one division or plant
after the other (small bangs). The start may also occur in phases (one or some
modules start operating in one division or plant after the other, also called roll-
out). The approach used to implement an ERP system is an important decision
in its implementation project as it greatly affects the configuration of the
system, the allocation of resources, and the management of the project and its
risks. It will also play a decisive role at all the stages of the ERP system’s life
cycle.
The integration of processes pursued by ERP systems entails difficulties for the
implementation stage. These difficulties are related to three types of changes
in the way people do their work (Souza & Zwicker, 2001):
1) The integration aspect transfers to departments that produce the
information the responsibility to insert it properly. This includes data used by
other departments only (for instance, typing of an accounting bill in a
production entry) and as a consequence, the users feel that their tasks are
increased.
2) Information must be recorded into the system at the best-suited moment
for the process and not at the best-suited moment for a specific department.
Thus, there is a need to change the order and form in which tasks are carried
out and other departments begin to demand the information they rely upon.
3) The activities of a department become transparent to all others and this has
the inconvenience to require “explanations” for everything it does.
However, once these shortcomings are overcome, many users feel that they
grew as professionals, since they start to have a broader view of the company’s
activities and to have a clearer perception of their role and importance in
business processes. Training of end users for the work at an integrated system,
taking into account the quoted aspects, is an important consideration for the
success of the implementation process.
(c) Stabilization
In the first moments after the beginning of the ERP system operation there is a
critical stage for the project’s success: the stabilization. At this moment, the
ERP system, that until then was only an abstraction, gains reality and starts to
be part of the company and of the people’s daily life. This is when the highest
amount of energy, be it managerial or technical, is required. It is a stage in
which problems, that could not have been easily detected at the
implementation stage, become apparent. This is a particularly critical stage, as
the company is already relying upon the system for its activities and which
causes major pressure for the speedy solution of problems. The length of this
period depends on the company and takes about eight weeks (Zwicker &
Souza, 2004).
Two critical aspects may be highlighted at this stage: difficulties of the end
users and problems of the ERP system (in programs and their adjustment to
the company). Regardless of the fact that users have been trained in functions
of the new system, they operate slowly in the early moments as they have
doubts and feel insecure about the appropriateness of their actions. Besides
the difficulties of adjustment to the functions of the new system, there is the
issue of the cultural adjustment of people to the requirements of work in an
integrated environment. While users face these difficulties, the detection of
errors in customized programs and parameter settings also take place,
hindering the normal operation. The simultaneous occurrence of use
difficulties and system faults, associated with the recent familiarity of the
project team to the new system, make the identification of the problems real
causes even more difficult at this stage.
The exact characterization of this stage is related to the operation-starting
mode chosen by the company. If operation of the ERP system started by means
of a big bang, the stage of stabilization can be clearly distinguished from those
of implementation and utilization. However, in companies that implement the
modules in phases, or even in small-bangs, the stabilization stage is less
characterized and merges with the implementation stage of the remaining
modules. It can be stated that the stabilization stage in the case of
implementation by phases starts with the operation of the first module and
ends only when the last module implemented, in the last locality of the
company, becomes stabilized. This longer implementation and stabilization
time in general entails loss of focus of the project and may be viewed as a risk
factor for the implementation in phases (for further details on the influence of
ERP go-live approach on its life cycle, see Zwicker & Souza, 2004).
(d) Utilization
Finally, at the fourth stage the system starts to belong to the day-by-day
operations. This does not mean that all its possibilities of usage are known, or
that they are properly equated. Orlikovski & Hofman (1997) report on the
difficulty within a company to know, beforehand, all use possibilities of the
new information technologies. This knowledge is only achieved after a certain
period of continued use of the technology, through the ideas that emerge
during the utilization process. Therefore, the stage of utilization feeds back the
stage of implementation with new possibilities and needs that may be solved
through new modules, parameter adjustments, or software customizing. In the
case of implementation in phases, the already implemented modules may
impose restrictions upon new modules caused by already defined parameters
or customizations. Indeed, new modules should not imply in changes of
already configured and operational modules, usually a difficult task.
It is also observed that some time after the beginning of the operation, the
implementation of customizations or new modules becomes more difficult.
New modules not included in the original plans or improvements in the ERP
system exhibit difficulties, characterizing that the new situation is decidedly
refrozen. As a rule, these difficulties are associated to changes in priorities of
the company and of the IT department, to the appearance of new projects and
to the difficulty to bring together again, all departments and users needed for
the implementation of the wished changes. Therefore, there are implicit
difficulties for the realization of the continued adjustment recommended by
the above referenced authors. According to the authors’ model, knowledge of
the possibilities and functionalities of ERP systems is only consolidated after
the operation start, however, it was noted that companies have difficulties to
implement new ideas and solutions at that stage. A possible explanation for
this discrepancy may be the fact that the case analyzed by the authors dealt
with a collaborative computer system that, although of great importance for
the company under study, had less functional scope than an ERP system.
Apparently, the high functionality of ERP systems and the impact they cause on
the organization constitute inflexible barriers against the continued adjustment
stage.
Markus and Tanis (2000) point out that it is only in this stage that the
organization is finally able to ascertain the benefits (if any) of its investment in
the ERP system, due to continuous business improvement, additional user skill
building, and post-implementation benefits assessment. Esteves and Pastor
(1999) also point out an interesting phase of the life cycle, the “retirement”
stage, in which the ERP system would be substituted for other solution or
solutions. What is being observed is that companies go through great efforts
and costs each time a new version upgrade is needed (McMahon, 2004). Every
time the decision to upgrade or not is posed to the organization it is also an
opportunity to analyzing other ERP vendors or technologies (Kremers & van
Dissel, 2000).
FUTURE TRENDS
The introduction of an ERP system changes the focus of the IT area. Normally
the area evolves from a technical approach to a business processes approach.
It is also apparent that the role of the users in the management of an ERP
system is much more important and fundamental than in the case of internally
developed systems.
There are also new challenges at the day-by-day management of IT in an ERP
system context. For instance, maybe there are relationship problems with the
supplier that demand the attention of the IT manager. Some of this type of
difficulties apparently stem from the continued need of system updating that
cannot always be strictly accomplished when the supplier sends new patches
and releases. Indeed, the IT areas adopt alternative procedures to keep their
updating efforts at levels consistent with their possibilities. Apparently,
companies that possess ERP systems continue to be subject to the need of
carrying out substantial upgrades requiring time and significant resources. At
the time of internally developed systems, those aspects possibly were much
less significant (Zwicker & Souza, 2004). A more detailed contextual analysis of
this myriad of details opens an interesting possibility for future research in the
ambit of the ERP utilization stage.
CONCLUSION
During the second half of the nineties, the implementation of ERP systems was
one of the central points of attention regarding IT utilization in companies.
History shows that implementation of ERP systems is not a simple matter since
there are some reported failures (see Jesitus, 1997; Barker & Frolick, 2003).
Research on the subject, developed as from the end of the last decade, studied
mainly the factors governing successful implementation and showed that a
process of cultural change is involved. One critical factor for success is to avoid
that the endeavor be handled as an information technology project (Willcocks
& Sykes, 2000). Dedication and involvement of top management, strong
participation of users and change management were aspects considered
essential for the success of these implementation projects (Bingi, Sharma, &
Godla, 1999).
This chapter presented a model for ERP systems life cycle that tries to
encompass the complexities involved in implementing ERP systems in
companies. To achieve this purpose, several aspects relating to the decision
and selection, implementation, stabilization and utilization stages were
presented.
The recommendation for companies that are deciding for ERP systems
utilization and for companies that are already in the implementation stage is
the careful analysis of the difficulties associated which each ERP systems’ life
cycle stage. With a better knowledge about these difficulties, the process can
be improved though better planning and better action on the inherent
difficulties of such an organizational change.
KEY TERMS
Big-Bang Approach: Implementing all modules of an ERP system in all locations
or plants of the company simultaneously.
ERP Decision and Selection Stage: Stage at which the company decides to
implement an ERP system and chooses the supplier.
ERP Implementation Stage: Stage of an ERP project at which the ERP system’s
modules are put into operation.
ERP Stabilization Stage: The first weeks after the beginning of an ERP system
operation in the company.
ERP Systems: Integrated information systems purchased as commercial
software packages with the aim of supporting most operations of a company.
ERP Systems’ Life Cycle: The various stages through which a project of
introducing an ERP system in a company passes through.
ERP Utilization Stage: Stage of an ERP project at which the system starts to
belong to the day-by-day operations of the company.
Phased Approach: Implementing the modules on an ERP system in sequential
steps, comprising one or more modules in one or more locations or plants,
until the system is completely installed. Also called roll out.
System Development Life Cycle: The various stages through which a project of
development and utilization of information systems passes.
3. Mobile users
Access to the ERP system from desktops only is no longer an option as mobile
workforces are increasing across all industries. When selecting an ERP system,
you need to make sure it can allow users to access it remotely and securely.
4. References
Your potential vendor should provide a number of happy customers they have
worked with – within your industry and geography. Customer Satisfaction
Scores and talking to the reference customers yourself can help you improve
the probability of selecting the right vendor – and reduce the risk of project
failure.
5. To customize or not
A highly customized ERP system comes with a higher price tag and you need to
consider the amount of customization required. You should consider turnkey
solutions provided by vendors since they can help you save time and money on
customization. In general, most organizations have similar business processes
(invoice payments, revenue collection, etc) and they can benefit from first in
class processes that are the reason ERP was built in the first place.
As you look to either upgrade your legacy system or implement a new ERP
system, there are numerous ROI and long-term benefits. This type of
structured approach ensures that your ERP system will meet both your current
and future business needs.
ERP Implementation Methodology
What is ERP implementation methodology?
ERP can make a business more efficient than ever but many ERP
implementation process fails due to improper ERP implementation
methodology.
There’s no denying the fact that ERP deployment is a major undertaking but it
doesn’t need to be painful. With proper planning and execution implementing
an ERP should be a smooth process. This planning and execution for successful
ERP implementation is called ERP implementation methodology or ERP
implementation lifecycle.
ERP Implementation Steps
For a successful ERP implementation various steps should be followed. These
steps are:-
1.) ERP implementation project kickoff and team Forming
The first step for ERP implementation process is Project kickoff and team
forming. It consists:-
Identification of Project objective
Appointment of project coordinator and key user identification
Project kickoff meeting with steering committee
Auditing of infrastructure
2.) Requirement gathering and submission of proposal
The second step in ERP implementation methodology is identifying what the
business needs and submit a proposal on how ERP can help. This step
consists:-
Identification of department level objective
Preparation of current state of business practice within the organization
Identification of key pain areas
Assertion of performance and acceptance criteria
Final design submission
Determination of checkpoints and milestones
3.) Business Process Reengineering (BPR)
The third step in ERP implementation life cycle is business process
reengineering.
Analysis and redesigning workflows
Optimize end-to-end processes
Automate non-value adding tasks
4.) Project Customization
The forth step in the process of ERP implementation is determining how much
customization is needed in the original ERP so that it can fulfill the objective of
a particular business. This contains:-
Gap analysis preparation
Size and effort estimation for customization
Planning
Customization of product
Testing
Release the customized solution
5.) Training and Knowledge transfer
After the release of customized solution the employees must be taught on how
to use the ERP effectively, this bring us to our fifth step in ERP implementation
methodology. This step consists:-
Function area identification for knowledge transfer
Live workshop on key functional area by functional experts
Detailed training, schedule preparation and finalization of go live date
with consent of project coordinator and key user.
Execution of training program per schedule for Hands-On experience
6.) Reviews and Feedbacks
The sixth step in the process of ERP implementation is reviews and feedbacks.
This consist of the reviews that the business give to ERP providers on how ERP
is doing and are there and changes necessary. This step consists:-
Frequent review meeting
Progress sheet preparation
Evaluation of implementation process
Feedbacks on current status of the project to the management
User feedback system(effective gathering of feedback)
7.) Project Acceptance
The seventh step in ERP implementation process is project acceptance; this is
the step where management has accepted the ERP system from the providers.
This step consists:-
User feedback gathering on specific KPAs such as concept clarity,
Reliability, Validation, Print format, Data entry speed, Performance,
function requirement etc.
Approval from key users and HOD
Acceptance certification from management
8.) Post implementation
The final step in the ERP implementation life cycle is the post implementation
step, this step consists:
Keeping tabs on how ERP is working to avoid aberrations or glitches
Periodic maintenance to smooth working
Training employees to fix occasional small glitches
This completes the ERP implementation methodology
Hasting towards implementing ERP can result in wastage of both time and
effort. A proper roadmap to the final objective can ensure a smooth ERP
implementation. Setting clear goals, objectives and milestones and following
proper ERP implementation methodology is the key for a successful ERP
implementation.
Process Definition
Enterprise resource planning (ERP) is business
processmanagement software that allows an organization to use a system
of integrated applications to manage the business and automate many back
office functions related to technology, services and human resources.
ERP software typically integrates all facets of an operation — including product
planning, development, manufacturing, sales and marketing — in a single
database, application and user interface.
ERP is an Enterprise Application
ERP software is considered to be a type of enterprise application, that is
software designed to be used by larger businesses and often requires
dedicated teams to customize and analyze the data and to handle upgrades
and deployment. In contrast, Small business ERP applications are lightweight
business management software solutions, often customized for a specific
business industry or vertical.
Today most organizations implement ERP systems to replace legacy software or
to incorporate ERP applications because no system currently exists. In fact, a
2016 study by Panorama Consulting Solutions, LLC., indicates that
organizations implement ERP for the following reasons:
To replace out-of-date ERP software (49%)
To replace homegrown systems (16%)
To replace accounting software (15%)
To replace other non-ERP systems / had no system (20%)
Use Education and Training to Overcome Resistance to Change
What is the biggest hurdle when trying to implement a reliability or lubrication
program? Is it funding or obtaining approval from upper management? Or
maybe it’s that you have no idea where to even start?
For example, in my experience, if the ERP implementation was led by IT, the
business leaders would blame IT’s lack of business knowledge on any issues
that arose – regardless of whether they could have prevented them. Instead, if
the business functions led the implementation, they brought up the business
issues in advance. In those cases, if IT wasn’t integral, the issues were typically
not addressed successfully – or in the most cost effective and efficient manner.
Thus, the optimal solution occurred when it was a collaboration.
4.Change management: Implementing a new system is one of the most
significant change management initiatives a company can embark upon.
People’s jobs change, processes are redefined, and the system is changed – not
much stays the same. Thus, change management is vital to success.
1.Project Startup
2.Management Commitment
3.Project Scope
4.Project Team
5.Change Management, Communication and Training
6.Customizations/Modifications
7.Budget
8.Project Closure
1. Project Startup
Perform the due diligence of getting the project on the right track by preparing
personnel.
Recommendations:
Prepare the organization for process changes and the new system by
2. Management Commitment
An ERP implementation is going to impact how a company operates by
be the only area responsible for the project. Senior managers and mid-level
Recommendations:
3. Project Scope
The core ERP system will most likely not satisfy all the needs of the
organization. Develop the ERP strategy and understand the components of the
ERP, and how it will fit with other systems and tools. Define your project scope
include.
Recommendations:
Understand the business requirements and plan how they are going to be
satisfied.
The ERP will satisfy some of your business requirements. Put together a plan
4. Project Team
The core project team should be composed of full-time personnel, including a
project manager and others representing the core areas of the business. If a
consulting integrator is used, the core project team needs to have a good and
resources from the various areas of the business to provide subject matter
expertise.
Recommendations:
communication.
Identify subject matter experts (SMEs) from pertinent areas across the
organization.
organization to deal with the impact. The size of the team will vary depending
on the size of the project and amount of changes. Training falls under change
Normally the software vendors or the consulting integrators will train the
trainers, who are employees in the organization. This approach is most helpful,
because the organization will end up with the trained professionals on its staff.
Recommendations:
organization as a whole.
Key users should be involved with the project and its progress, as this will aid
Create a business case that shows the changes to processes and system
functionality, and also the benefits brought about with the changes. Share the
Be prepared to train during the project and after the post go-live date.
6. Customizations/Modifications
Most ERPs are built with embedded best practices. An organization must keep
the best practices. These modifications may result in an increase in scope and
budget as well.
Recommendations:
Study other ERP implementations in the industry and see what
customization.
7. Budget
Organizations must create a realistic budget to include all costs for the
ROI. The areas most commonly reduced are change management, training and
project management.
Recommendations:
Create a good estimate of your implementation costs and keep tight control
of the costs.
Do not cut costs in change management, training and project management.
8. Project Closure
Having good project closure is just as important as the project start up.
system is going live and when the legacy system is being decommissioned. This
Recommendations:
Communicate clearly when the new system is going live and when the old
Communicate when new business processes will go into effect and old
Audit processes and system transactions to make sure they are working as
planned.
Summary
Organizations exploring an ERP implementation must take into account these
key success factors and recommendations to achieve greater success with their
ERP implementations. These drivers are common areas that most system
UNIT-3
Post ERP implementation
Change management
Change Management: The Key to a Successful ERP System Implementation
Simply put, widespread organizational change management (OCM) is critical
to ERP system implementation success because an ERP system – and the
changes it necessitates – affects every aspect of an organization. As a result,
end-users across the spectrum are often overwhelmed with all the changes to
their jobs, including new business processes, new data, new systems and new
ways of interacting with all of the above. And since people tend to fear change,
stress levels run high and emotions rule the day.
So what’s an organization to do? Yeah, yeah, OCM this and OCM that but how
should it really manage change to ensure the best ERP implementation
possible?
Well, here’s a start . . .
1. Present Information and Share Knowledge
Employees need more than training to understand the need for (and
importance of) the new ERP system. At minimum, organizations must make
efforts to communicate:
Why the organization is implementing the ERP system
How and when the ERP system will affect their jobs
How the ERP system will improve their jobs
How the ERP system will improve the company overall
2. Train and Educate
In our experience, organizations almost always underestimate the amount of
education and training needed before, during and after implementation. It’s
obvious that ERP-related training is crucial to ensure employees learn the new
software but it’s also crucial to ensure they learn the new business processes.
These changes in business processes, which are inherent in any successful ERP
implementation, create changes in corporate culture and climate. Though less
obvious, perhaps, than changes in job functions, these subtle shifts will be very
important to your staff and must be managed to avoid resentment, fear and
anxiety.
3. Show Support and Commitment From Senior Management
One of the best ways to rally the troops is to present a unified front. From the
C-level down through the top management tiers, executives should be on point
about the reasons behind and benefits of the ERP implementation. A lack of
management buy-in is often a key reason behind ERP implementation failures
and resistance to change; do not think that an executive’s disengagement or
recalcitrance will go unnoticed by employees.
These are just a few of the ways an organization should, as David Bowie sang,
“turn and face the strange changes” wrought by its new ERP system. For more
information, please reference our organizational change management page or
call 720-515-1ERP to schedule a meeting.
Step 1: Communication
This step will define who will be affected by the ERP implementation. Analysis
will help know the level of involvement of each stakeholder and will determine
the amount of training they will require.
This analysis will help document the roles and responsibilities of each
stakeholder. The roles that will be defined at this stage are:
Leader – Provides direction and alignment
Super Users – SMEs within departments, understand the business process of
their departments
Power Users – Users with advanced knowledge of certain applications who
will monitor the day-to-day transactions of end users
End Users – Everyone who uses the system, they feed the system with data
In this stage, the perceived advantages and disadvantages, job roles, and
responsibilities for each stakeholder after the restructuring of the organization
will be analyzed. To enable stakeholders commit and own the change, an
assessment of each one’s level of involvement is necessary. The results of the
stakeholder analysis are used to identify the training requirements.
Step 3: End-User Training
Training requires an investment of time, money, and effort, but the results are
worth it because it will help employees learn about their roles, and
consequently reduce their resistance to the change. In fact, a report on how
top organizations deploy ERP training by The Aberdeen Group published in
2014 says that Best-in Class organizations (top 20% of companies based on
performance) are likely to combine ERP training with day-to-day business
processes so that they learn as they work. (Source: Aberdeen)
End user training will provide employees the knowledge of the software
fundamentals and the benefits it will provide. Organization-wide training is
necessary for this – from management to executive teams, IT project teams to
end users.
End user training must be ongoing and should include classes, workshops, and
practical sessions right through the implementation process. It should not be a
‘one and done’ program but a continuous process. Employees typically will not
be able to remember all the different tasks involved in using the new software.
So a combination of classroom training and online learning will work best.
As the above image shows, the process of change management involving the
above three steps should ideally provide employees the skills and knowledge
(through end user training) so that they enter a state of readiness that will
convert them into high-performance end users.
The change management strategy will ensure employees adopt change quickly
so that organizations can adopt the new technology faster with the least
impact on productivity.
Post-Implementation Review
What Is Post-Implementation Review?
What are you going to do when the project’s over? Have a little celebration
and move on to the next one, right? The project might be over, but the process
continues.
That means that if you delivered a product or a service, the project might be
completed, but you still need to check on the viability of the product or
service. You might have achieved the goals you set out for the project, but
what about the business needs that product or service was responding to?
Think of it as an ongoing step in your project closure process. It’s a post-project
review or post-implementation review, which is part of your project
management responsibilities. It’s also a great way to identify project successes,
deliverables, achievements and learn lessons from those parts of the project
that didn’t work out as planned.
How do you practically apply a post-implementation review? How can you be
sure that the project solved the problems it was created to address? Are there
more benefits that can be unpacked from the project? What are the lessoned
learned? To answer those and more questions, you need to follow a process.
within a business. Just like how a first-time car owner needs to learn how to
properly care for their vehicle, businesses need to know how to care for their
ERP software.
Here are 7 things that every business should know when it comes to the
Start by educating yourself about the ERP software that your business uses.
Read the manuals provided, know the software house that developed it,
research the business who implemented the system for you, and which other
This way you’ll have an overall feel of where the ERP fits in the marketplace
You will also learn about any limitations or related software, allowing you to
Some businesses have ERP specialists within their IT department. Some do not.
Get an idea of whether or not your in-house staff can handle the ERP
maintenance duties.
consultant, or if your business will pay for an ERP vendor’s maintenance plan.
Choosing how to handle ERP maintenance and who to utilize for those services
maintenance plan and see if it fits in to their general technology plans. More
often than not, businesses find they can leverage better value and level of
If you are unsure how to make the call, remember this: Your maintenance plan
should stay in line with the pace that your IT department implements and
supports system-wide changes. Don’t overestimate the speed at which your
An SLA typically defines various tiers of severity for when problems arise. The
level of problem dictates how quickly your service provider will respond and
For example, the most urgent problem may be defined as a complete system
A problem with less urgency, such as a minor system bug that doesn’t affect
wait until the next scheduled service check. SLAs protect the maintenance
service from being at a businesses’ beck and call, although it also protects
Having clear urgency definitions will help remove confusion and frustration
How long will you go before upgrades? What is the intended life cycle of the
platform?
Every five years the life cycle should be reevaluated so that maintenance
For example, if you decide to try a new platform, maintenance contracts can be
6. Security
restorations.
Installing patches as soon as they arrive from the vendor will help your
7. Systems review
periodically to assess the functionality of the system and address any issues
Updates or upgrades are evaluated, with your business gaining a clearer vision
By following these tips, you will keep your system in top functional shape. The
board will be happy that you are staying within your software budget, and all
of the staff will be on the same page with a clear roadmap for managing the
Ready, Steady & Flow with Raybiztech’s ERP Maintenance & Maneuvering
Onboarding our Customized Service Delivery Model will offer you with the
lucrative library of facilities. If our functional service catalogue runs to support
your Logistics, SCM, HCM, Analytics, Financial & Controlling, our technical
menu is marked to provide you with Security, Identity Management, Custom
Development, Application Integration, Mobility Migration, Data Quality,
Support & Administration services with loyalty. So, by engaging with us you will
avail all-inclusive ERP support of sterling quality.
Let’s Take a Glance of the Collected ERP Support & Service Highlighted Below:
ERP Assessment & Optimization
Error Check & Health Diagnostics
Hosting
Fast Fusion Assessment
SOA Boot Camp & Visioning
Hot Staging
Configuration & Change Management
Upgrade & Migration
User-intensive Training
Hardware Aid
Patch Transport
DB Administration & Compliance Audit
Patch Transport Management
Customization & Software Updates
Project Governance
Testing & Validation
Code Optimization
Delayed Updates
How to Avoid: If you’re finding you’re often lagging behind when it comes to
installing ERP updates, then it might be worth looking into an automatic
updater which applies any software updates when available.
Full Access Rights
The biggest threat to businesses undoubtedly comes from external sources,
but that doesn’t mean we can sit back and ignore potential in-house risks. Full
access rights shouldn’t come as default; instead, it’s important to look at who
has access to what data. For example, in most cases, a software developer
wouldn’t require access to employee salary information. It’s also worth looking
into which employees have permissions to make changes to the system. Access
rights and permissions will largely depend upon the needs and requirements of
your business, but as a general rule, it should be a ‘need to know’ basis.
How to Avoid: It’s important to maintain audit logs to track any changes. It’s
also worth adding ‘authorizations’ to checklists for new hires, promotions, and
any role change documentation.
Inadequate Training
Following on from the above, it is certainly worth considering the security risk
posed by internal sources in more detail. In some cases, the risk may be
intended and malicious, but in most cases, it is more likely to be the result of a
lack of understanding. This could be a lack of understanding of the ERP system
as a whole, or it could be a lack of understanding of what is expected by the
organisation in terms of security. This is especially true for new hires who do
not have an in-depth knowledge of internal processes. While any errors may be
classed as ‘innocent mistakes’, it still leaves your business open to security
risks.
How to Avoid: Ask your ERP provider if system training is including as standard,
nominate staff to train new hires, and ensure business protocols are widely
available and easily accessible to all employees.
Failure to Comply
If your ERP system is being used to store confidential sales information,
including personal details and payment details, then it’s essential that the
system meets local security standards requirements. This could include PCI DSS
requirements if credit card data is involved. The system itself should store
details in encrypted form only, without retaining the 3-digit security code, and
there are also requirements for the business, too. You’ll be required to
maintain secure passwords, restrict access to ‘need to know’, and track access
to the data that you keep. You may also need to comply with regulations within
your sector.
How to Avoid: Choose an ERP system that’s designed to comply with necessary
regulations. It’s also important to change your vendor-issued password and
adhere to good security practices at all times.
The whole point of ERP is integration; to remove the need for what is known as
‘Frankensteining’. Frankensteining happens when multiple software programs
are used simultaneously to achieve a single goal, such as maintaining sales
data on an ERP but running reports using Excel. This practices still takes places
across many businesses, even if it is not office protocol. It mostly comes down
to familiarity and preference for a specific application, and ease of use. This
means that data could exist within a number of different programs at the same
time, where it is not adequately maintained, updated, or secure.
How to Avoid: Firstly, look into preventing data export unless absolutely
required. Secondly, if your ERP system isn’t doing everything you need it to,
then perhaps it’s time to upgrade to a new system.
Automatic Trust
Cloud ERP systems are becoming increasingly popular. This means that any
data that you choose to enter into the system isn’t stored locally, but is instead
stored by a third party cloud hosting service. There are a number of
advantages to cloud ERP; they can mean much less work for your IT
department, freeing them up for more profitable tasks, they can save you
money, and it’s less drain on your internal networks. However, there is a slight
downside, and that’s the need to place 100 percent of our ERP system security
into someone else’s hands. Businesses need to have peace of mind that their
data is safe.
How to Avoid: Consider your cloud provider very carefully, paying particular
attention to their security processes and their data regulations. Ask around,
read reviews, and don’t be afraid to ask questions.
Single Authentication
As ERP systems have evolved, they’ve become capable of handling not only a
much wider range of information but also more sensitive information as well.
Single authentication — passwords, for example — is standard, but we have to
ask ourselves whether 1FA (one-factor authentication) is enough for modern
ERP systems. Password cracking is one of the simplest and most common
forms of hacking, so it really doesn’t make sense to protect our most
important, sensitive, and confidential business data through the use of
passwords alone which can be stolen or even guessed relatively easily by
experts.
How to Avoid: The obvious solution is 2FA. The good news is that the 2FA
industry has changed in recent years and there is no longer a need for a
physical device. Instead, a code can be sent to an email address.
Who can access and edit data within your ERP system is another security
concern that stems from authentication. Full access rights are usually a default
when it comes to software, but it’s important to manage who has access to
what data. Access rights and/or permissions depend on the needs and
requirements of your business, so definitely keep this in mind when giving your
employees important information on how to access data within the ERP –
maybe maintain audit logs to track any changes or add authorizations to keep
track of who is looking at what.
A good ERP system can be the difference between falture and success. So
making sure the data stored in it is secure and protected from cyber breaches
and hackers. If you’re looking for more information, we suggest downloading
our free buyers guide in order to look over the top ERP software vendors and
some extremely important questions to ask before you choose one.
departments & functions through the centralized application. We can make all
There are many vendors in the market which are providing traditional ERP
technologies are different, there are common & basic modules of ERP which
components are integrated & customized ERP system is formed. All the below-
Human Resource
Inventory
Engineering/ Production
Inventory Module:
Inventory module can be used to track the stock of items. Items can be
system can keep track of item and trace its current location in the organization.
e.g. you have purchased 100 hard disks, so using inventory system you can
track how many hard disks are installed, where they are installed, how many
module of ERP.
Sales Module :
Typical sales process includes processes like Sales queries & inquiry analysis &
pending sales order. All these sales transactions are managed by the sales
module of ERP. CRM module can take the help of the Sales module for future
are part of the procurement of items or raw materials that are required for the
listing, supplier & item linking, sending quotation request to vendors, receiving
tracking the purchase items, preparing GRNs(Good Receipt Notes) & updating
stocks & various reports. Purchase module is integrated with Inventory module
tax management etc. Financial reporting is an easy task for this module of ERP.
Any Financial data that is required for running the business is available on one
customer service & establishing a healthy relationship with customers. All the
CRM module helps to manage & track detailed information of the customer
the product.
distributors, retailers etc. SCM involves demand & supply management, sales
Today many SMBs face challenges in their process automation. ERP is a great
help for such organizations. ERP can efficiently streamline the business
requirements.
SAP
• Sap
is Systems Applications and Products in Data processing.
• Founded in 1972 by a group of former IBM employees
• SAP is the world’s leading provider of business software, SAP delivers
products and services that help accelerate business innovation for their
customers.
• Today, more than 82,000 customers in more than 120 countries run SAP
applications – from distinct solutions addressing the needs of small
businesses and midsize companies to suite offeringsSAP serves as a
standard in the industries like chemicals, customer products & oil.
• The SAP group has offices in more than 50 countries worldwide & employs
a workforce of over 19300.
• SAP’s ERP package comes in 2 versions i.e. mainframe version (SAP R/1
,SAP R/2) & client server version (SAP R/3).(R-Real)
• With SAP, customers can install the core system & one or more of the
fundamental components, or purchase the software as a complete package.
for global organizations.
• SAP has developed extensive library of more than 800 predefined business
processes.
• These processes may be selected from SAP library & can be included
within installed SAP application solution to suit the user exact requirements.
Oracle
• Oracle is direct competition of SAP and is intent
on snaring the lead from SAP.
• The latest moves of the software giant that include the acquisition of
PeopleSoft and Siebel Systems allowed for Oracle to position its software
well.
• This software is known for the flexibility it offers
to customers.
• ORACLE software runs on the network computers, work stations & micro
computers, mini computers, etc.
• ORACLE 8i is the leading database for internet computing.
• ORACLE database ALLOWS the corporation to access on any data, on any
service, over any network, from any client device
▫ Oracle application consists of 45 plus software modules which are divided
into following categories
– Oracle Financials
– Oracle Human Resource
– Oracle Projects
– Oracle Manufacturing
– Oracle Supply Chain
– Oracle Front Office
Microsoft Dynamics
• This is another solid player when it comes to ERP and serves more than
80,000 customers.
• This ERP provider offers its end users with the Customer Relations
Management software and the business solutions tools that can help
facilitate the flow of communications from one business to the next or from
a business to its captive consumers.
• If SAP is high end, then Microsoft ERP is packaged just a few levels below
when it comes to cost.
ERP Scenario in Indian Market
• In India, the small and medium-sized businesses are the major force that
pushes the growth.
• There is greater demand for componentized solutions with standard
modules and specific functionality to address the unique processes.
• There is demand for customized solutions for sales and operations
planning, tactical planning, demand management which are not served by
traditional ERP systems.
• The major Indian ERP vendors are Ramco Systems, 3i Infotech, Godrej
Infotech, Eastern Software Systems and Base Information, etc.
• The USPs of the Indian ERP vendors are competitive price points and
higher return on investments. Indian players have products that are cheap,
can be implemented quickly, are flexible and need lower IT dependence and
support.
• Indian ERP vendors have a better understanding of the local landscape
and are in a better position to provide solutions with the right mix of
functionality, technology and pricing for the Indian customer.
• Some of the first Indian companies to have adopted ERP practices are HLL,
ONGC,ESSAR, Godrej Soaps, Cadburys, BASF, Telco, Maruti Udyog Ltd.,
Century Rayon, Citibank, ACC, ANZ Grindlays, German Remedies, Blue Star,
Mahindra & Mahindra, Rallis India, Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford
Motors, Kirloskar, Knoll Pharmaceuticals, and Glaxo .
ERP Functional Modules
All ERP packages contain many modules. The common modules which are
available in almost all ERP software packages are as following:
• Finance
• Manufacturing & Production Planning
• Sales & Distribution
• Plant Maintenance
• Quality Management
• Material Management
What are the I/o ?
• Input for A/F include:
▫ Payments from customers
▫ Account receivable data
▫ Account payable data
▫ Sales data
▫ Production and inventory data
▫ Payroll and expense data
• Output for A/F include:
▫ Payments to suppliers
▫ Financial reports
▫ Customer credit data
The finance module of most ERP systems will have the following sub
systems
1. Financial Accounting
• for company wide control and integration of financial information that is
essential to strategic decision making.
• It provides ability to centrally track financial accounting within an
international framework of multiple companies, languages, currencies and
charts of accounts.
2. General Ledger
• The GL is essential both to financial accounting system and to strategic
decision making.
• The GL supports all the functions needed in a financial accounting system.
• This includes flexible structuring of the chart of accounts at group and
company level, distributed application scenarios, real time simultaneous
update of sub ledgers and the GL, elimination of time consuming, and
parallel views of data in both GL and managerial accounting applications.
3. Accounts Receivables
• records all account postings generated as a result of Customer sales
activity.
• These postings are automatically updated in the General Ledger .
• The Accounts Receivable Module also integrates with the General ledger,
Sales and Distribution, and Cash Management Modules.
4.Account Payable
• records account postings generated as a result of Vendor purchasing
activity.
• Automatic postings are generated in the General Ledger as well.
• Payment programs within SAP enables the payment of payable documents
by check, EDI(Electronic Data Interchange), or transfers.
5. Asset Accounting
• for company’s fixed assets management.
• It is sub ledger to GL, providing detailed information on asset related
transactions.
• SAP allows you to categorize assets and to set values for depreciation
calculations in each asset class.
• Asset accounting also provides integration with plant maintenance for
management of machinery and equipment, management of leased assets
and assets under construction, and interactive reporting
6. Legal Consolidation
• Using different valuation methods , company can plan balance sheet
strategies to suit its requirements.
• The sub system is closely linked to the financial accounting system,
permitting direct data transfer from individual statements into the
consolidated statements required by the law
• These statements provide an overview of the financial position of the
company as a whole
7. Controlling
• controlling system gathers the functions required for effective internal
cost accounting.
• It offers a versatile information system with standard reports and analysis
path for the most common questions.
• In addition there are features for creating custom reports to supplement
standard reports
SAP ERP financial business benefits
• Improve financial and managerial reporting:
▫ SAP ERP Financials gives you the flexibility to report performance by
business unit, organization, or cost center.
• Improve corporate performance:
▫ SAP ERP Financials provides the foundation to quickly read, evaluate, and
respond to changing business conditions with accurate, reconciled and
timely financial data.
• Achieve faster closes:
▫ With SAP ERP Financials, you can streamline accounting, consolidation,
process scheduling, workflow, and collaboration.
• Improve corporate governance and transparency:
▫ SAP ERP Financials provides broader support of accounting standards,
federal regulations, and improved administration of internal controls.
• Improve cash flow and liquidity:
▫ SAP ERP Financials automates dispute, credit, and collections management
– and offers electronic invoicing and payment capabilities that supplement
traditional accounts receivable and accounts payable functions to accelerate
and manage cash flow.
• Optimize global cash management:
▫ With SAP ERP Financials, you can report, analyze, and allocate cash in real
time, and establish in-house banks or payment center.
• Improve process integration between finance and treasury:
▫ With SAP ERP Financials, you can integrate risk and treasury transactions
with core accounting and financial reporting processes.
• Reduce overall finance costs:
▫ SAP ERP Financials helps you operate effective shared-services, collaborate
with customers or suppliers, and streamline operations to reduce costs and
resource demands.
Companies with financial ERP modules
◦ SAP
◦ Oracle E-Business suite
◦ Microsoft Dynamics
◦ JD Edwards
ORACLE 11 I E - BUSINESS SUITE MODULE INCLUDES FOLLOWING SUB
MODULES
◦ Account Receivable
◦ Account Payable
◦ General Ledger
◦ Fixed Asset
◦ Procurement(Purchasing)
◦ Order Management
◦ Financial Analysis
◦ Inventory Management
◦ Reporting an using the DB
UNIT-4
ERP System Options and Selection Methods
Answering this question for the first area leads to investment projects; for the
second area it leads to customer projects.
All these projects need resources partially or fully provided by the organization
itself. Since these resources are limited not all of the projects we would like to
pursue can be staffed or funded adequately. So, projects in different areas will
compete with each other in order to get support of the organization in terms
of staffing and funding.
The generic process of project selection looks as follows.
The first step of this process, identification, requires a clearly defined and
communicated strategy. The best option would be to set up a strategy
development process that contains project identification and project selection
as an integral part (cf. "How to Find the Right Projects" in sub-section White
Papers). In fact, we observe that most organizations identify investment
projects within their strategy development process, but delegate the
identification of customer projects to their key account and sales departments.
Example 1 (intuitive identification): The family who owns our company wants
to add a new product to our portfolio. Therefore, they tell our CEO to start a
development project for this new product.
The Net Present Value (NPV) of a project is defined as the difference between
present value of cash inflow (revenue, PV in) and present value of cash outflow
(cost, PV out) of that project over the project life cycle time. Here is the
formula to calculate the present value (PV) for given future value (FV), interest
rate (r), and number of accounting periods (n):
Project Selection, Example 1:
Investment project "Blue": development of a new version of product "Blue
Dolphin". The cost for development is $100,000.-- this year. Next year, we
will be able to sell the first batch for $70,000.--, in two years the second
batch for $50,000.--. Given an interest rate of 10%, what is the net present
value of that project?
Project
Selection, Example 2:
Investment project "Red": development of a new version of product "Red
Shark". The cost for development is $150,000.-- this year. Next year, we will be
able to sell the first batch for $90,000.--, in two years the second batch for
$85,000.--. Given an interest rate of 10%, what is the net present value of that
project?
Another evaluation method uses the concept of Internal Rate of Return (IRR).
The internal rate of return of a project is defined as the interest rate at which
the net present value of that project equals zero. Here, we spare you the
mathematical details of calculating IRR's, and give you the results for the two
examples, projects "Blue" and "Red", obtained by trial and error with a simple
MS Excel sheet.
Again, we choose project "Blue", the one with the higher IRR.
In project selection, we usually account for an overall view of benefits and
costs of proposed projects, trying to express all benefits and all costs in
monetary terms of present values at given interest rates. This is the concept of
the benefit cost ratio (BCR). Here is the formula:
If we only consider cash inflow as benefits and cash outflow as costs we end up
with our familiar decision to choose project "Blue".
With the concept of opportunity cost (OC) we consider that choosing one
option means to give up other options we might have. In our example, we
choose project "Blue" (because of the higher NPV or IRR or BCR) and give up
project "Red", at an opportunity cost of NPV = $2,066.--.
Using the method of payback period (PP) gives us the simplest approach. We
have the following formula.
In our examples, we obtain as payback period for
1. Project "Blue": PP = 100,000 / 40,000 = 2.50 (years)
2. Project "Red": BCR = 150,000 / 58,333 = 2.57 (years)
(rounded to 2 decimal digits.)
We decide in favor of the project with the shorter payback period, and our
choice would be project "Blue". Notice that we do not apply present values
explicitly.
In general, we emphasize that the methods using Net Present Value (NPV),
Internal Rate of Return (IRR), Benefit / Cost Ratio (BCR), or Opportunity Cost
(OC), are all based upon the calculation of present values of estimated future
cash inflows and outflows. In a mathematical sense, they usually lead us to the
same project selection results. Typically, application of one of these methods is
enough. In sub-section Free Project Management Tools, we offer a template
with some more examples filled in.
If available, we can take initial risk assessments into consideration of the
evaluation of project proposals. The following chart shows an example of this
comparative analysis.
We represent each project by a bubble with the size of the bubble indicating
the project volume. Those with high NPV and low risk value we should choose,
those with low NPV and high risk value avoid. For the others we need to
consider other criteria like estimated profit, payback period, etc. We find our
two projects, "Blue" and "Red", but now, the picture does not immediately
lead to the selection of "Blue" since it seems to have a much higher risk value
than "Red".
Remarks:
The examples we used above are rather simple and therefore, the
corresponding results suggest equivalent selection decisions. In sub-section A
Project Selection Case, we describe a more realistic situation where the
"mathematical" results do not match our intuitive evaluation.
We do not recommend integrating those risk values into the interest rates for
any of the PV based calculations. Rather consider them being independent of
other parameters.
(3) Selection and Initiation of Projects
Project selection and initiation is the step that naturally follows evaluation and
prioritization. A particularly delicate step of project initiation turns out to be
the staffing of project teams. As mentioned earlier, resources are scarce, and in
most organizations appear to be the most limiting factor in project selection. If
we take in too many projects we overload our resources, if we do not take in
enough we do not utilize them economically enough. As discussed in the sub-
section Multi Project Management, having too many staff members working in
multi-tasking mode, i.e. on two or more projects at the same time, decreases
overall productivity of the organization. On a medium / long term scale, it
seems to be the better option to initiate projects in a way so that the teams
can focus and work on one project at a time, thus, avoiding disturbances of
one project by the others. Of course, that needs clear prioritization of the
selected projects, based on evaluation done in the previous step.
(4) Review of Projects
After project selection we need to regularly review projects that are under way
in order to find out if they are still in-line with our strategy. Thus, the first way
of checking them is repeating the initial evaluation with more accurate
estimates as they become available; the second way is holding regular project
management review meetings in order to identify major problems on a per-
project basis, via project status reports. In our view, the minimum
requirements of project management reviews along each project's life cycle
are as follows.
From the perspective of a project owner (for an internal project the
organization is the project owner as well, and partially even the supplier):
Acceptance of feasibility studies
Request for proposal (RFP) or request for quotation (RFQ)
Vendor selection / signature of contract
Design freeze / approval of detailed planning documents
Preliminary acceptance
Final acceptance
projects are to be proposed and selected. Standardized practices set the stage
through pre-defined steps and related “viability criteria” - forming the basis
which all proposals are evaluated and measured. This paves the way to
consistent, informed and timely decision making (a.k.a the ultimate goal).
What is a project proposal? The project proposal is the initiating trigger of the
project selection process. Whether it comes in the form of a verbal proposal,
simple project request form, or documented business case, the project
proposal is the vehicle by which the initial project "concept" is presented.
Getting Started: Making "Selection" Work
Every project begins with a proposal, but not every proposal can or should
Not every project has viability. And, amongst those that do, any limited
Valuable resources can be "used up" before projects are completed and
finalized.
Resources might be used less effectively through assignment to projects
of lesser value and priority.
Credibility and influence can be lost as perceived project failures pile up.
Project Selection Focuses on Viability
sense, project viability is the degree to which a given project will provide the
variables:
In order to develop selection practices that are fully “defined, aligned and
ability to deliver on time, on budget projects. Selection steps kick things off,
providing the basis for all of the planning and decision making that lies ahead.
university that:
(MER) activity.
For Example:
a general patch update or interim version upgrade (i.e. 3.2 to 3.25, 3.2.2 or
migrating to a new version of an application (i.e. 3.x to 4.x, etc) would also be
Requirement:
within the university, these steps also assist the university in meeting
Process:
business days regarding further analysis of the project. IT will work with the
the classification, IT will advise the initiator of the approvals and other project
technology projects varies with the cost and complexity of the project. For this
various complexity.
a. for which the costs, from project initiation to project closeout (generally
operational production go-live), are greater than $1M. These costs are to
include all hardware and software costs Salaries for technical and functional
expense.
OR
“statewide application”.
that have an estimated total project cost of less than or equal to $1 million and
statewide application.
specific department or unit need and impact only the department or unit
reside on microcomputers within the departmental work area and may include
vendor.
Regardless of project cost, there are some identifying characteristics that
Viking, etc.);
c. collect, process or store sensitive data (e.g. personal data such as SSN, birth
etc.); or
planning feedback. Depending on its cost and complexity, the project will be
authority for the university and at his discretion, may demand review or
5. As the initial analysis is completed and the project selection is approved IT,
assign a final project classification and outline more specifically the project
change.
Project Charter:
initiator and submitted to IT as the basis for preliminary analysis and project
classification.
Project Initiator:
technology project.
Project Manager:
the project.
We’ve tried to alleviate some of the challenge by building you this practical
list of ERP evaluation criteria based on our extensive research and real user
data with ERP selection projects in our technology selection management
(TSM) platform.
Take advantage of the key ERP evaluation criteria and functionality checklist on
this page to help you get off on the right foot with your ERP research.
Use this template once you’re ready to start prioritizing the your specific
requirements for an ERP implementation. As a bonus, you get an amazing
requirements management tool for free to manage your complete ERP
requirements and evaluation process.
See the full list of key ERP evaluation and functionality criteria:
Bank Reconciliation
Your potential ERP solution needs a Bank Reconciliation feature to help your
organization reconcile bank statement balances with the General Ledger cash
accounts amount.
Benefits Administration
Your ERP needs a system for to manage and track participation in benefits
programs, including insurance, compensation, profit sharing and retirement
programs.
Logistics Management
Since logistics management is essential to all of your organization’s planning
and execution, having logistics management in your ERP is a core feature. I
don’t think an ERP qualifies without logistics management as an integral
feature.
BI (Business Intelligence)
We’ve touched on business intelligence requirements before – with many of
the top BI solutions being stand alone products. However, BI can also be part
of your ERP as well. It’s a matter of organizational preference whether you
harness the BI tools in your ERP or select a stand-alone, best in class BI tool.
Email tools come in many different platforms. Being part of essential CRM
requirements, you’ll likely already have them if you’ve deployed a separate
CRM. However, if your ERP is also your core CRM (as listed above), make sure
that robust email tools are part of the product feature set.
B2C Commerce
Here again is a choice of organizational preference whether your ERP acts as
your point of commerce or you select a stand-alone commerce platform.
Advanced Allocations
If you want help improving overall efficiency, accuracy of financial reporting,
and shortening close cycles, having advanced allocations functionality in your
ERP is critical.
Available-To-Promise (ATP)
ATP software module gives manufacturers better visibility into completion
through all levels and across the entire supply chain. This may functionality
may be optional to your organization but is something many organizations
need to have come standard in their ERP.
Lean Manufacturing
If in manufacturing, you need tools that support lean manufacturing and flow
scheduling practices for production, replenishment and inventory.
Module/API Integration
Your selected ERP package needs integration between modules and optionally
(but often necessary) other 3rd party platform APIs, so that all of the core
business functions are connected. Information should flow across the
organization so that BI reports on organization-wide results.
Installation Type
You’ll likely be selecting from either a SaaS or On-Premise ERP Installation.
Both have their pros and cons so make sure you evaluate your organization’s
preference extensively. Part of the evaluation you are consider should include
what are the Implementation Services available, what are the Maintenance
Contracts/On-site maintenance availability, etc.
Support
Any good ERP should include the following support channels:
Forum/Community Support, Phone & Email, Chat & Instant Message. Great
Support would include 24×7 availability considering how critical their ERP
system is to your organization functioning at it’s best. Further, support should
include extensive end-user training development tools, as well.
Training
Obviously ERP is an advanced technology with many different potential
modules you’ll want to utilize. Make sure that upfront and ongoing training
comes standard from your list of potential ERP vendors.
Financial Stability
As we’ve recommended before in our CRM checklist, be sure to check out
financially stability/status using services like Dun & Bradstreet. Check for
funding history (including most recent funding), count of employees, and other
indicators that the selection of ERP vendors you’re evaluating are in good
shape fiscally.
Performance Testing—this type of testing examines how well the ERP solution
runs as it communicates with the various systems it is designed to integrate
with (e.g., financials, sales order processing, inventory, etc.). Testing should
reflect demanding, high data flow transactions such as those that might occur
under the highest potential peak demands, or preferably even beyond that, to
ensure the system, as implemented, is sufficiently robust.
Integration Testing—as the name implies, this testing verifies that the ERP
system has fully integrated the various processes it is meant to run. It tests the
individual modules or components within your ERP as a group—just like the
software will be doing once implementation is complete. This type of testing
uses real-world scenarios wherein actual users run typical scenarios that they
encounter in their work activities. So you are testing ahead of time how the
ERP system can address real-world issues your organization encounters during
the course of running its business—to make sure that all the components or
modules within your ERP systems are operating smoothly.
As ERP testing during implementation involves users from the different user
groups (i.e., stakeholders) who will be using the new ERP solution, the
procedure plays a key role in training.
Remember that training users plays a huge role in how readily the intended
users will adopt the new ERP software. During the tests involving users from
the various stakeholder groups, a lot of data and documentation can
accumulate that will help with training others down the line.
Also, the actual users or testers will be enjoying hands-on training, which they
can later draw on when they sit down with others in their user groups and
show them how to use the new ERP for the daily processes that concern their
group.
In short, automated testing might seem to some like “busy work,” but
exercising patience is beyond any doubt the wisest course of action. By
carefully following through on each aspect of the testing phase, you can
ultimately save your organization both time and money. You will also ensure
that your implementation stays focused on getting the new ERP solution fully
integrated and up and running as soon as possible.
UNIT-5
ERP present and future
Turbo charge the ERP system
Turbo Charging ERP with BI and CPM
Business Intelligence (BI) - An ERP product provides hundreds of standard
reports, generated weekly or monthly or year end basis which acted as a
hardcopy dashboards within the organization. In order to improve report
generation functionality, an ERP system provides various report writing tools
(such as crystal report writer, safari report writer) as well as SQL query
functions. A few ERP vendors also attempted to provide hyper relational
interface to provide direct logical link to database. But these functionalities are
having limited utilization due to complexities of their usability. The user has to
still depend on IT department for generation of custom built reports. As a
consequence, the “export to excel” is still the most popular mode of creating a
customized report from an ERP system.
The need for corporate management is for an analytics which provides an
insight to current trend and future direction of the organization, assisting
proactive and predictive business management. For the common user, getting
simple drag and drop reports, which supports their current decision making
process on operational issues, without the help of IT department, is also an
imperative.
ERP stands for Enterprise Resource & Planning. This is software that is used
to automate your business processes with a view to becoming more
efficient and more profitable. Common ERPs include Microsoft
DynamicsNAV/AX, Epicor, SAP, Netsuite etc.
Evolution
World Wide Web was created by Timothy Berners Lee in 1989
at CERN in Geneva.World Wide Web came into existence as a proposal by him,
to allow researchers to work together effectively and efficiently
at CERN. Eventually it became World Wide Web.
The following diagram briefly defines evolution of World Wide Web:
WWW Architecture
WWW architecture is divided into several layers as shown in the following
diagram:
Identifiers and Character Set
Uniform Resource Identifier (URI) is used to uniquely identify resources on the
web and UNICODE makes it possible to built web pages that can be read and
write in human languages.
Syntax
XML (Extensible Markup Language) helps to define common syntax in
semantic web.
Data Interchange
Resource Description Framework (RDF) framework helps in defining core
representation of data for web. RDF represents data about resource in graph
form.
Taxonomies
RDF Schema (RDFS) allows more standardized description of taxonomies and
other ontological constructs.
Ontologies
Web Ontology Language (OWL) offers more constructs over RDFS. It comes in
following three versions:
OWL Lite for taxonomies and simple constraints.
OWL DL for full description logic support.
OWL for more syntactic freedom of RDF
Rules
RIF and SWRL offers rules beyond the constructs that are available
from RDFs and OWL. Simple Protocol and RDF Query Language (SPARQL) is
SQL like language used for querying RDF data and OWL Ontologies.
Proof
All semantic and rules that are executed at layers below Proof and their result
will be used to prove deductions.
Cryptography
Cryptography means such as digital signature for verification of the origin of
sources is used.
User Interface and Applications
On the top of layer User interface and Applications layer is built for user
interaction.
WWW Operation
WWW works on client- server approach. Following steps explains how the web
works:
1.User enters the URL (say, http://www.tutorialspoint.com) of the web
page in the address bar of web browser.
2.Then browser requests the Domain Name Server for the IP address
corresponding to www.tutorialspoint.com.
3.After receiving IP address, browser sends the request for web page to
the web server using HTTP protocol which specifies the way the browser
and web server communicates.
4.Then web server receives request using HTTP protocol and checks its
search for the requested web page. If found it returns it back to the web
browser and close the HTTP connection.
5.Now the web browser receives the web page, It interprets it and
display the contents of web page in web browser’s window.
Future
There had been a rapid development in field of web. It has its impact in almost
every area such as education, research, technology, commerce, marketing etc.
So the future of web is almost unpredictable.
Apart from huge development in field of WWW, there are also some technical
issues that W3 consortium has to cope up with.
User Interface
Work on higher quality presentation of 3-D information is under deveopment.
The W3 Consortium is also looking forward to enhance the web to full fill
requirements of global communities which would include all regional
languages and writing systems.
Technology
Work on privacy and security is under way. This would include hiding
information, accounting, access control, integrity and risk management.
Architecture
There has been huge growth in field of web which may lead to overload the
internet and degrade its performance. Hence more better protocol are
required to be developed.
Internet Overview
Internet
Internet is defined as an Information super Highway, to access information
over the web. However, It can be defined in many ways as follows:
Internet is a world-wide global system of interconnected computer
networks.
Internet uses the standard Internet Protocol (TCP/IP).
Every computer in internet is identified by a unique IP address.
IP Address is a unique set of numbers (such as 110.22.33.114) which
identifies a computer location.
A special computer DNS (Domain Name Server) is used to give name to
the IP Address so that user can locate a computer by a name.
For example, a DNS server will resolve a
name http://www.tutorialspoint.comto a particular IP address to
uniquely identify the computer on which this website is hosted.
Internet is accessible to every user all over the world.
Evolution
The concept of Internet was originated in 1969 and has undergone several
technological & Infrastructural changes as discussed below:
The origin of Internet devised from the concept of Advanced Research
Project Agency Network (ARPANET).
ARPANET was developed by United States Department of Defense.
Basic purpose of ARPANET was to provide communication among the
various bodies of government.
Initially, there were only four nodes, formally called Hosts.
In 1972, the ARPANET spread over the globe with 23 nodes located at
different countries and thus became known as Internet.
By the time, with invention of new technologies such as TCP/IP
protocols, DNS, WWW, browsers, scripting languages etc.,Internet
provided a medium to publish and access information over the web.
Advantages
Internet covers almost every aspect of life, one can think of. Here, we will
discuss some of the advantages of Internet:
The only thing constant is change & more so in the high speed world of
technical innovations the question to be asked is whether these changes can
affect the ERP market ?
The new cutting edge technologies like Internet commerce & EDI ( electronic
date interchange ) & the new business practices involving supply chain &
customer self service provide a fresh threat to the ERP technology
New Markets
As large enterprises become saturated with new generation client/server ERP
systems , vendors are being forced to find new markets for their products .
What they would be doing is
Supplementing their direct sales force with reseller channels
Lowering the entry price point of their soft ware to make it financially viable
Porting their products on platforms such as Microsoft Windows NT
New channels
Vendors such as SAP AG inc , Oracle Corporation , & Baan co have been
building reseller channels – both in us & world wide –
This is because the future targets for this companies will be the smaller
businesses that are looking for the complete –one – stop shopping for their
ERP solutions
Traditional ERP apps are stored on your servers, which means you're
responsible for upfront hardware costs, long-term hardware maintenance and
expansion, and data backup and recovery. SaaS-based apps are stored on
cloud-based servers, which are much less expensive, much quicker to update
and scale, and don't take up any valuable office space with clunky servers. The
hardware difference alone can mean a savings in the tens of thousands of
dollars in terms of total cost of ownership (TCO), facilities management, and
per-seat licensing costs.
In several other business app sectors, including CRM, HR, and talent and
procurement, SaaS has become the default deployment model for new
implementations, according to Forrester Research's "Vendor Landscape: SaaS
ERP Applications, 2017" report. For ERP systems, the report says, "the shift to
SaaS will accelerate over the next three years and become the preferred
deployment option for many types of businesses. For large enterprises,
adoption will be more restrained near-term, but solutions are maturing quickly,
and we will see significant adoption at scale for complex businesses within five
years."
If you've already heavily invested in your vendor's on-premises ERP tool, then
don't immediately jump ship to the same vendor's SaaS product. Your
incumbent on-premises ERP vendor may offer an attractive migration path to
SaaS, and also remember that ERP isn't an on-premises or off-premises
decision. Hybrid ERP systems aren't just possible: they're becoming popular in
some segments as long-time ERP customers enjoy the ability to move certain
ERP functions to the cloud while maintaining tighter, on-premises control over
other facets, especially those most vulnerable to compliance regulation.
3. Adding Social Media and Digital Marketing
Accept it: The Internet of Things (IoT) is here and it's going to stay. As more
devices and products become connected to the internet, more data can be
automatically funneled into the ERP system, and that's imply too valuable an
advantage to ignore. This trend gives you better oversight over things such as
the supply chain, your shipping partners, and appliance performance, and it
also provides more data to your overall data pool for better overall decision
making.
That's exactly where it bumps hard into ERP, which is a software philosophy
that shares the same goal. Harnessing this data could prove beneficial across
any industry. From health care sensors that inform electronic medical
records(EMR) management to robotic sensors on the factory floorm and even
to data monitoring devices mounted in delivery trucks sending information
back to fleet management software, IoT devices are becoming indispensible to
competitive operation.
Where this complicates things for ERP is, unfortunately, across the entire stack.
From an ERP platform's back-end database on up to its most forward-facing
features, especially reporting and data visualization, incorporating IoT
capabilities efectively can have enormous impact. To stay on top of this trend,
businesses need to stay conscious of the IoT technologies they have, and more
importantly, intend to deploy in the near future. They need to know what kinds
of data they're expecting back from that deployment and how they intend to
use it to improve operations. Only with a very clear understanding of these
fundamentals will ERP purchasers be able to intelligently distinguish between
the slew of new IoT features that ERP makers such as Microsoft or SAP are
bringing to market.
Custom color schemes and even company logos may also be added into the
software platform to create a fully branded user experience. The system is
tested multiple times during development to catch any bugs or other problems
that would inhibit usability before it is finalized and sent out to the end users.
This process usually takes several weeks to ensure full functionality.
It should hardly be surprising that there will be a few bumps along the way as
your team begins to adapt to your new ERP software. Depending on how many
people will be using the software, it can be helpful to have one staff member
(or a small team) serve as an on-site specialist who can help others understand
the ins and outs of the new platform. Thankfully, the user friendly nature of
modern ERP systems should allow your team to adapt in a relatively short
amount of time.
Conclusion
Most companies operate in multiple segments. All large companies have tons
of different segments. Take Apple for example. Apple originally started out as a
personal computer manufacturer. They have almost always created software,
but that was largely to support their hardware operations.
Today, Apple manufactures computers, tablets, phones, headphones, music
players and more. Management at Apple can divide the overall company
performance into smaller segments based on these products to measure
where the company is succeeding. Without this type of segmentation, you
might thing Apple’s steady profits are from the iPad because its one of the
newest products to be release. In fact, the Apple tablet segment’s sales have
slowed down in recent quarters because consumer demand has decreased.
Apple’s steady profits are still attributed to the continued success of its phone
segment.
With this information, management at Apple can choice what direction the
company needs to take to improve areas or stop production of products
altogether.
As you can see, separating a company into distinct business segments helps
management analyze not only the current structure of the company, but it also
helps them evaluate performance based on products, customers, and market
locations.
Trends in Security
1. Operationalizing GDPR
The EU's general data protection regulation (GDPR) requires every business
operating in the EU to protect the privacy and personal data of EU citizens. The
penalties for non-compliance are high, and the GDPR takes a broad view of
what constitutes personal data, making this a potentially onerous duty. An
Ovum reporton data privacy laws from July 2018 suggested that two-thirds of
businesses consider they will have to adapt their own procedures in order to
become compliant, and over half fear they are likely to be fined for non-
compliance. A proactive approach to data privacy is also beneficial for
enterprises trading solely in the U.S. Will 2019 be the year we see the adoption
of a comprehensive federal privacy law in the U.S.?
As the number and range of mobile devices (both managed and unmanaged)
employed by users continues to grow, enterprise networks have had an uphill
struggle to mitigate the risks involved. The IoT has linked numerous connected
devices, many of which have little or no built-in security, to previously secure
networks resulting in an exponential rise in exploitable endpoints. The
enterprise needs to come to grips with this trend and assert some control over
the use of unmanaged devices and establish clear protocols for managed
devices.
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