ERP ERP –– A competitive advantageA competitive advantageConcepts – Session II9:00 am – 10:15amICFAI Business School – Executive MBA

Subhajit MazumderEmail: subhajit.mazumder@gmail.com

Views expressed are personal and do not include any point of view of the speaker’s organization

AgendaAgenda

� Summary of Session I� Concepts of integration� Implementation aspects� Competitive Advantage

Lets summarizeLets summarize

� Enterprise Resource Planning◦ Understanding of ‘enterprise’◦ Understanding of ‘resources’◦ Understanding of ‘planning’

� Traditional vs. ERP paradigms� Understanding of business modeling� Implementation lifecycle highlights� Some aspects of competitive advantage

ERP functional blocksERP functional blocks� Any ERP has more or less standard

functional coverage◦ Finance & Accounts◦ Materials mgmt. / Purchase / Inv. Mgmt.◦ Sales / Distribution◦ Production planning / Manufacturing◦ Maintenance / Service management◦ Quality mgmt.◦ HR / Payroll◦ Projects management◦ SRM / CRM◦ APS

ERP functional blocksERP functional blocks

Finance

Purchase / Inventory / Materials mgmt.Sales / Distribution

Production planning / operations

Maintenance / Service

CRM

SRM

HR / PayrollAPS

Concepts of integrationConcepts of integration� General Ledger (Financials module)

◦ Book of accounts◦ Principles of accounting like double entry,

going concern etc.� Concept of sub-ledgers

◦ Vendor / Creditors sub-ledger◦ Customer / Debtors sub-ledger◦ Item sub-ledger◦ Employee sub-ledger◦ Project sub-ledger◦ Asset sub-ledger etc.

Concepts of integrationConcepts of integration� Business event

◦ Translates into a business transaction◦ Could have financial implication or non-

financial implication◦ E.g. sales invoicing (billing)� Customer ledger impact� Financial ledger impact� Impact on item ledger (material valuation)

◦ E.g. new material configuration� Impact in material master� Impact in quality checking attributes

Concepts of integrationConcepts of integration

� All functional impacts◦ Have a cascading effect◦ Thus all functional requirements are

orchestrated◦ Including business event reversals◦ E.g. Credit memo� Impact on Customer ledger� Impact on Financial ledger� Impact on Item ledger

Typical ERP implementation Typical ERP implementation � Pre-Implementation stage

◦ Top management vision◦ Assessment of systems and processes◦ Decision to implement ERP◦ Decision to select appropriate ERP solution◦ Decision to select implementation approach◦ Decision to select implementation partner◦ Decision on scope of ERP◦ Budgetary sanction◦ Organizational commitment to the project

Typical ERP implementationTypical ERP implementation� Implementation

◦ Formation of cross-functional Core team◦ Setting project objectives, charter◦ Business process study: As-Is and To-Be◦ Configuration and Customization◦ CRP, UT, SIT, UAT◦ Data conversion and Opening balances

preparation◦ Training◦ Go-live

Typical ERP ImplementationTypical ERP Implementation

� Post implementation◦ Post go-live support◦ Data migration of historical data◦ ERP audits for risk & control◦ ERP implementation effectiveness audits◦ Rollouts◦ Upgrades

Implementation methodologiesImplementation methodologies

� ERP implementation methodologies◦ ERP product specific� E.g. for SAP its ValueSAP or ASAP

◦ ERP product – IP specific� E.g. for Accenture SAP delivery its ADM� For IBM SAP delivery its Ascendant

◦ Implementation methodology� Guides activities of the implementation� Directs the implementation plan and charter� Could be a critical success factor

ASAP methodologyASAP methodology

� Optimize SAP implementation� Templates, tools and methods drawn from

thousands of implementations

ASAP methodologyASAP methodology� Goal setting

◦ Project goals and objectives◦ Project charter

� Implementation Strategy◦ Finalize scope of work◦ Establish project organization◦ Assign resources

� Implementation sequence◦ Define project activities and sequence in detail

� Joint Team◦ Core team + Project team + Consultant team

� Sign-off

ASAP methodologyASAP methodology� Scope document� As Is business process study

◦ Workshops, Discussions

◦ Field study

◦ Identification of existing systems / data structures

� Business Blueprinting◦ Mapping business processes to SAP

� Gap Analysis◦ Gap analysis mutually resolved

� Core User Training� Sign-off

ASAP methodologyASAP methodology� Implement� As Is business process study

◦ Implement as per BBP

◦ Configuration and Customization

� CRP◦ Iterations of CRP

◦ Obtain feedback

� Sign-off

ASAP methodologyASAP methodology� Unit Testing

◦ Test within each business process

� System Integration Testing◦ Test the system cross-functionally

� User Acceptance Testing◦ Combined testing of all modules by end users◦ ATP and ATC

� End User Training� Cut Over Strategy & Opening balances upload

◦ Cut-over date◦ Opening balances preparation

� Sign-off

ASAP methodologyASAP methodology� Go live

◦ New system starts getting used

◦ Live transactions

� Continuous Change◦ Initial turbulence

◦ 24x7 helpdesk support

◦ SLA monitoring

◦ Stabilization period and Stabilization tests

◦ Post implementation reviews

◦ Upgrades

◦ Roll-outs

Implementation ChallengesImplementation Challenges� Project objectives and charter

◦ Unclear objectives of implementation◦ Unclear scoping / functional scope / geographical

scope� Team formation

◦ Client core team / business team◦ IP team ◦ Availability

� Training needs assessment ◦ Systems and ERP awareness◦ Adequacy / Appropriateness

Implementation ChallengesImplementation Challenges� Project management

◦ Client project management◦ IP project management◦ Independent program management� Change management

◦ New business process◦ New documents / new formats◦ New role◦ Communication needs throughout the project◦ Physical changes in business processes

Implementation ChallengesImplementation Challenges� Project management

◦ Client project management◦ IP project management◦ Independent program management� Change management

◦ New business process◦ New documents / new formats◦ New role◦ Communication needs throughout the project◦ Physical changes in business processes

Managing changeManaging change

ManufacturingManufacturing

As Is Business Scenario To Be Business Scenario- Conversant with As Is business

processes – the way they are carried out now

- Lack of systems / computerization – leads to manual activities, data entry into offline systems, duplication of work, process redundancies

- Lack of integration across departments and sections – lot of documents get generated to provide information linkage

- Need for change is felt by the end users themselves

- The concept of ERP (integration of business processes) with its underlying principles is already embedded

- The emphasis is on business processes and not IT systems

- The product is already ready for operation on Day 1, there is no need for “developing the system”

- There would be organizational changes – in roles and activities

- The implementation needs a joint team to be a success (Core Team + Project Team + Consultant Team)

Competitive AdvantageCompetitive Advantage

� Competitive advantage over others◦ To attract and retain business◦ Functional strategies are synergetic◦ Complement the corporate strategy

� Can be defined by◦ Service quality◦ Responsiveness / flexibility◦ Ability to satisfy customers’ needs and wants◦ Qualifiers vs. Order winners

Competitive AdvantageCompetitive Advantage

� Some specific examples of competitive advantage through ERP:◦ Order taking ability� Backorder visibility (online in the ERP system)� Product making capability known (product codes

and quantity structure)� Realistic delivery promise� Order costing & profitability (decision making)� Leads to greater customer satisfaction� Repeat business and assured revenue streams

Competitive AdvantageCompetitive Advantage◦ Production planning & scheduling� S&OP planning� MRP runs (regenerative and net change)� Detailed scheduling of work centers� Material flow planning� Leads to better utilization of production capacity /

facilities� Capable of re-scheduling priority orders if

necessary� Delivery reliability and speed

Competitive AdvantageCompetitive Advantage◦ Quality and Maintenance mgmt.� Quality inspection lots for incoming, WIP and

products� Maintenance leads to better quality

◦ Strategic sourcing� Advanced analysis of the procurement function� Economic Order Quantity / VMI

Thank YouThank You

subhajit.mazumder@gmail.com