INTRODUCTION TO BPR & ERP

What is BPR
 The fundamental rethinking and radically redesign of business

processes to achieve dramatic improvement in critical, contemporary measures of performance such as cost, quality, service and speed.
 The implementation of deliberate and fundamental change in

business processes to achieve breakthrough improvements in performance.

 Enabled by IT  Also known as Reengineering or Process Innovation is offered

as an enabler of organizational transformation.

BPR Objectives:
To dramatically reduce cost Reduce time To dramatically improve customer services or to improve employee quality of life To reinvent the basic rules of the business e.g.

the airline industry

Customer satisfaction Organizational learning

BPR
 Change:
To transform an organization, a deep change must occur in the key behavior levels of the organization: jobs, skills, structure, shared values, measurement systems and information technology.

 Role of IT
BPR is commonly facilitated by IT e.g. Organizational efficiency Effectiveness Transformation

BPR
 Transformation
Applications in the transformation category change the basic ways that people and departments work and may even change the very nature of the business enterprise itself. A major change in the organization, including structure, culture, and compensation schemes

 Efficiency
Applications in the efficiency category allow users to work faster and often at measurable lower cost

Mere automation of manual tasks, resulting in efficiency gains

 Effectiveness
Applications in the effectiveness category allow users to work better and often to produce higher quality work.

Requires changes not only in technology, but in skills, job roles, and work flow (deeper).

Process
A process is set of logically related tasks performed to achieve a defined business outcome A collection of activities that, taken together, create value for customer e.g. new product for customer. This tasks are inter-related tasks

How can Companies Identify their Business Processes.

Manufacturing: As the procurement-to-shipment process Product development as the concept-to-prototype process Sales as the prospect-to-order process Order fulfillment as the the order-to-payment process Service as the inquiry-to-resolution process

Identify the need - consultant

 Simple Rules
Start with a clean sheet of paper.

With my current experience what can I do today If I were to re-create this company today, given what I know and current technology, what would it look like. How will I be focusing, organizing and managing the company?

Simple Rules - Consultant

Listen to customer Enhance those things that bring value to the customer or eliminate those that don t Be ambitious, focus your commitment to radical change on the process

What is an enterprise
 An enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve this goal.

(ERP Alexis Leon)

What is ERP
 Enterprise resource planning software, or ERP, doesn't live up to its acronym. Forget about planning it doesn't do that and forget about resource, a throwaway term. But remember the enterprise part. This is ERP's true ambition. It attempts to integrate all departments and functions across a company onto a single computer system From the Darwin Executive Guide reading

Basic Idea
Unification of all key operational systems Integration is 
Geographic (multiple sites in USA, Europe & Asia for many large firms) Functional, with modules for 
Logistics 
Financial 
Human Resources 
And more specialized areas, such as real estate

Problems: Delays, lost orders, keying into different computer systems invites errors

Major Suppliers

SAP 
Oracle 
J.D Edwards 
PeopleSoft 
Siebel Systems

Advantages

Lower cost 
Data entered only once, used by all processes and departments 
Better customer service 
Current data accessible to all participants

E.g. customer service rep can see stock levels in other divisions, progress on order, etc. 
Allows management of processes across organizational boundaries

Issues
 Project cost is 2 to 10 times software price  High profile implementation failures  Inflexibility
Can t find better ways to do things Loss of supports for distinctive culture

 Inherent complexity of global project

Training costs for users easy to underestimate.

Issues
 Integration
When doesn t work well in one area Problems in integrating into other systems

 Dependence
How to deal with things it won t support?

 Upgrade
Like all software, frequent new releases can cause major disruption

Latest Trends
 Increased Modularization of suites  Shift to web based front ends  Broadening to focus corporate portals, external links.

ERP History
 MRP
Began its life in 1970 MRP asks the following
What products are we going to make What are the materials needed to make these products What are the materials that are presently available in stock What are the items that are need to be purchased

 Closed Loop MRP

Planning of sales and Production levels Development of production schedules Forecasting sales planning Capacity planning and order processing

 MRP II
Sales and Operational Planning Financial interface and simulation capabilities (Decision Making)

ERP Myths
 MYTH: Our project is not progressing as

planned because it lacks management commitment  FACT: Progress is often not achieved because of management burn-out. People involved can be disillusioned by promises made and expectations that were built-up by overzealous vendor reps, consultants who collect exorbitant fees as the project lingers and IT personnel who were looking for big budgets and the opportunity to rub shoulders with the big boys.

 MYTH: Our system went live in just a few months  FACT: It is more likely that the financial part of the ERP went live in a few months rather than the whole system. Corporate financials are fairly straight forward to implement

 MYTH: Once we finished getting our ERP system

up and running, our expenses went down drastically.  FACT: Outside consulting fees may have been reduced and the initial costs for setting up the system are paid off, but companies often fail to take ongoing internal implementation investment into consideration. In the words of one CIO, we planned for $600,000 and a 6 months project; we reached both and then stopped counting. An ERP implementation extends over long periods of time, and any worth its salt will take years, not months

 MYTH: Consultants are professionals who can guide the selection process and manage the project while maintaining an objective stance.  FACT: Its all

 Myth: You Must Use Only the Latest ERP Technology  Fact: Although the latest ERP integration technologies offer many advantages to small business owners, they have their own share of problems. The biggest problem is the integration of new technology to the old. In some systems, you will find that retaining older applications may be more useful than overhauling it completely

 Myth: Installing ERP System Means That You Can Keep Fewer IT Staff  Fact: The ERP system is not meant to replace your IT staff, it is there to help them with dayto-day problems related to maintenance and troubleshooting.

ERP and Related Technologies

        

BPR Dataware Housing Data Mining OLAP Product Life Cycle Management Supply Chain Management CRM GIS Intranets and Extranes

Dataware Housing
 Data warehouse is a repository of an organization's electronically stored data. Data warehouses are designed to facilitate reporting and analysis.

Data Mining
 Data mining is the process of extracting hidden patterns from data. As more data are gathered, with the amount of data doubling every three years, data mining is becoming an increasingly important tool to transform this data into information

OLAP
 is an approach to quickly answer multidimensional analytical queries  OLAP is part of the broader category of business intelligence, which also encompasses relational reporting and data mining

Product Life Cycle Mgmt

 The product life cycle goes through many phases,

involves many professional disciplines, and requires many skills, tools and processes.  Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures;  whereas product lifecycle management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view. To say that a product has a life cycle is to assert four things: 1) that products have a limited life

Supply Chain Management

 Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-ofconsumption (supply chain).

GIS
 A geographic information system (GIS) captures, stores, analyzes, manages, and presents data that refers to or is linked to location.  In the strictest sense, the term describes any information system that integrates, stores, edits, analyzes, shares, and displays geographic information

CRM
 Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with its current and prospective customers.

Security and ERP

 Data Security:
Computer owners and administrator use a variety of security techniques like low-tech locks to hightech software scrambling Passwords, use of firewalls, encryption of audits, creating backups, etc

 Physical Security:
Physical protection could be of human access to buildings and information stored in critical rooms, in much the same way a bank are secured.

Crime and Security

 A Dismissed employeee  Employee with over all access  Unauthorised access by a criminial(hacking)  Virus
Worms, trojans etc.

ERP Modules
 Technical Modules
Basis ( SAP Administration) ABAP ( SAP Coding)

 Functional Modules
Finance Module Manufacturing Modules HR Module Materials Management Production Planning Plant Maintenance Quality Management Module Purchasing module Marketing Module Sales and Distribution module

Finance Module
 Gather Financial Data from different departments  Generates valuable financial reports such balance sheet, general ledger, trail balance, and quarterly financial statements.

 Sub-Systems
Financial Management ( general ledger, accounts receivable/payable, special ledger, fixed asset accounting, Legal consolidation) Investment Management ( Investment Planning/budgeting/controlling, depreciation forecast/forecast. Controlling( Overhead cost controlling, activity based costing, product cost accounting, profit ability analysis) Treasury ( Cash management, treasury management) Enterprise controlling ( business planning and budgeting)

Manufacturing Module
 It Provides the information base upon which the

entire operation should be run.  It contains the necessary business rules to manage the entire supply chain process.  Sub-Systems
Material and capacity Planning Shop floor control Quality management JIT/Repetetive management Engineering data management Engineering change control Configuration management

HR Module
 Streamlines the management of human resources and human capitals.  Maintain complete employee database  Sub-systems
Personnel Management Organizational Management Payroll accounting Time management Personnel development

Materials Management
 Maintains the appropriate level of stock in a ware house.  Activities
Identifying inventory requirement Monitoring item usages Reporting inventory status Integrating inventory control to sales , purchase and finance modules and generate executive level reports.

Production planning Module

 Optimizes the utilization of
manufacturing capacity, parts, components material resourcing using historical production data and sales forecasting.

Plant maintenance module

 Provides technical and business reports and various presentation options
Eg: organization unit, location, execution period for the tasks. This info helps to reduce the duration and costs of plant down times Subsystems
Preventive maintenance control Equipment tracking Component tracking etc.

Quality Management Module

 Supports different quality management Modules
Quality Planning Quality Inspection Quality Control

Purchasing Module
 Streamlines the procurement of required raw materials.  Automates the processes of identifying potential suppliers  Negotiating price  Awarding the purchase orders to the supplier  Billing process.

Marketing module
 Maximize the efficiencies of marketing resources  Empowers marketers to acquire and develop

long term customer relation ship.

Marketing resource management Segment management Campaign management Email marketing Trade promotion management Lead management Marketing analytics Web based marketing surveys

Sales and Distribution

 Implements functions of
Order placement Order scheduling Shipping and invoicing

 Closely integrate with the ecommerce websites

 Sales related business transaction

Sales queries such as inquiries and quotations Sales orders Outline agreements ( Contracts and scheduling aggmnts) Delivery/shipment Invoicing/billing After sales support

 Basic Functions
Inquiry handling Quotation preparation and processing Contract and contact management Monitoring the sales transactions Checking the availability Transferring requirements to material planning Scheduling the delivery Calculating prices/taxes Checking credit limits invoicing/billing Printing/edocuments

Phases of ERP Implementation

         

Pre Evaluation screening Package evaluation Project Planning Phase GAP Analysis Re-engineering Customization Implementation team training Going Live End user training Post-implementation

Transition strategies
 Big bang strategy  Phased  Parallel  Process line  Hybrid

Big Bang Strategy

 Installation of all modules will happen at once  Promised to reduce the implementation cost  Higher failure rate  Not many organizations dare to attempt anymore  Requires careful preparation and sound planning

 Advantages
Overall cost of implementation is less ( No interface app) Eliminates all the sequencing and decision making of implementing one module at a time Well designed for rapid implementations Avoid complex integration issues

 Disadvantages
Amount and cost of planning and preparation is high Bottlenecks are high ( Lack of funds and resources etc) Recovery process is very difficult if something goes wrong Consequences of failed implementations are huge may lead to shut down of business itself

Variants in big bang

 Mini big bang
Takes single big bang approach and break into multiple sections ( based on few modules)

 Mega big bang

With multiple sites, all going live at a time Do or die situation

 Multi mega big bang

Multiple big bangs for multiple geographical locations For large companies which are located in different geographical locations

Phased implementation
 Implements one module at a time  Limits scope for one functional department at a time  Suits to companies that do not share many common processes across departments and units  Integration will be done later part  Reduces the risk of implementation, customization and operation of system

 Advantages
Allows to implement module at time Risk of implementation failure is less Total number of resources required is less at a time Scheduling of people is convenient

 Disadvantages
Large number of resources required , because of conversion and interface problems. Overall and cost of implementation is high High turn over rate because of the length of duration.

Parallel Implementation
 Keeps both the legacy system and new system simultaneously active for some time  Have good recovery options in case something goes wrong  Gives good psychological cushion as both the systems running parallel

 Advantages
Ideally suited for mission critical situations that cannot survive major malfunctions Advantageous for the business environments which require utmost stability like finance, pharma, insurance etc

 Disadvantages
But requires more resources Confusion may erupt when people don t interact with the both the systems Not suitable for which the legacy system has an expiration date ( y2k issue)

Process Line Transition Strategy

 Conceptually similar to mini big bang  But breaks implementation strategy to manage parallel business flows and product lines  Mainly utilized by small and mid sized companies which have less critical processes  The smaller process lines, which pose less risk and have a higher probability of success, usually go first. Increasing its overall probability of success.

Hybrid Transition strategy

 Combination of process line, phasing and parallel implementation.  Tend to evolve into the needed configuration as ERP team members learn and analyze information.  Small single site ERP implementations tend to have a simple hybrid strategies  Flexible in adapting to the specific needs of the situation.

Choosing a strategy
 Technical resource availability  Number of users  Consultant availability  Structure of erp team  Deadlines  Reliability  Hardware resources

ERP Implementation Process

 Before you leap consider
How do we want to run our business? What problems need to be resolved? Do we know and understand our priorities? Have we defined an action plan for pre-implemntation activities What tasks will be accomplished and by what dates? What are the missing links in our software of choice? What are real costs, benefits, and timetable Do you have an executive level ERP champion that provides link to top management Who will implement ERP and make it work?

Pre-implementation planning session

             

Assembling the participants stakeholders Need analysis review Project vision and mission statements creation Determination of organization structure Determination of modules to be implemented Creating the core team Establishing the training needs Establishing the data conversion strategy Establishing interface Determining work estimates Cost of consultants Calculation of implementation time Identifying constraints Establishing policies and guidelines

Implementation Methodologies
 Adoption decision  Acquisition  Implementation  Use and maintenance  Evolution  Retirement

Organization of the project team

 CEO  Steering committee  Project Manager  Project team  Consultants  Vendors

Implementation strategy
 Speed or urgency of implementation  Availability of people for carrying out the implementation tasks  Availability of time for training all users  Cost  Confidence in the new system  Disruption to operations  Total timescale

ERP implementation plan

Risk Assessment

Budget

Cost
         

Hardware Operating system Database license fee Core software license fee Additional module license fee Additional seat license fee Third party software license fee Integration of third party software Software customization Project Management

Cost
 Consultancy  Training  Living and travel expenses  Software maintenance or warranty renewal  upgrades

Performance measurement
 Performance Related Measures
Costs, time and benefits, deliverables Objectives vs actual Asses the variation Learn Apply in further phases

Problem Resolution
 Issues which are raised and which will require resolution  Agreed procedure to resolve issues and their resolution  Keep the track of problems  Close the issues which are resolved.

System Issues
 How does the system perform when the erp app is      

under heavy use? How quickly will space be consumed when the system is live What is the backup procedure Can production server be maintained? What happens when two persons try retrieve the same data Does the system locked, if so, how it can be unlocked Do the locations of pcs and printers required to be changed

 How secure the system  How will be the user access be selectively restricted  How are passwords managed  Automated logout facility  Disaster recovery procedure

Implementation methodologies by vendors and consulting firms

 Methodology is a road map to implementation  Diff vendors have diff methods  Mainly used for marketing purposes  Now methods used in implementation based on their experience.

Hidden Costs
 Eights areas most likely result in budget overruns
Training Customization Integration and testing Data conversion Data analysis Consultants Employee turnover Continuing maintenance

Training and education

 Define Learning Objectives  Determine Content  Plan  Deliver  Asses Learner  Review effectiveness of the training program

Data migration
 Translating data from one format to another  Good data migration solution
Reduce risk Low operational expenses Improve data quality