Enterprise Resource Planning #04: Implementation

Topics of Discussion

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• Benefits of ERP Implementation
• ERP Implementation Constraints
• ERP System Selection

Benefits of ERP Implementation

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• The benefits of a good ERP system implementation are not limited to the company’s internal environment but can also be expanded vertically and horizontally.

• The implementation of this system requires the integration of existing data, so that the data is not just stored in the system without providing any benefits.

• ERP system implementation depends on the size of the business, the scope of changes, and the role and participation of the customers.

• Most ERP systems are offered in the form of COTS (Commercial Off The Shelf), which are business solutions in the form of integrated application packages grouped based on specific business process specializations, functions, and industries.

• COTS packages generally contain three elements, namely: a. Data, which is an integrated resource for the entire company; data entry is only done once. b. Integration, which is processing, storing, and transferring data using a single software package. c. Module functionality, which is the process of determining the program’s interaction with the database.

Data Migration

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• Data migration strategy steps that can determine the success of an ERP implementation: a. Identifying the data to be migrated b. Determining the timing of data migration c. Creating data templates d. Determining the tools for data migration e. Deciding on migration-related preparations f. Determining data archiving

ERP Implementation Constraints

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1. Technical

• Language issues and the shift from a hard copy model to a display model. a. Terminology for the same terms; terms in production, sales, etc., used must be changed to match the terms in the ERP. b. In traditional management, a Manager signs stacks of paper as a sign of approval, whereas Approval in ERP is done through that media (display model).

2. Cultural

• Technology-based ERP implementation requires changes that employees must make, including being aware of the software’s usage (e.g., always updating data).

3. Political

• Constraints originating from inside / outside the IT department.
• IT employees feel their jobs will be lost.
• Employees outside the IT department feel threatened because some work will be done by ERP software.
• Reluctance of users from other departments due to an element of “distrust” towards the IT department. Distrust arises due to the fear that confidential data or reports will be known by the IT department as the administrator.

ERP System Selection

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The ERP software selection process should be carried out through several stages of analysis as follows:

1. Business strategy analysis
2. Human resources analysis
3. Infrastructure analysis
4. Software analysis

1. Business Strategy Analysis

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• What is the level of competition in the market & what are customer expectations?
• Is there a competitive advantage to be achieved?
• What are the company’s business strategies and objectives to be achieved?
• How is the current business process running & what is the desired business process?
• Are there business processes that need to be improved?
• What and how are the existing business priorities, and is there a work plan to achieve these objectives and priorities?
• What business targets must be achieved and when?

2. Human Resources Analysis

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• How is top management’s commitment to the effort for ERP implementation?
• Who will implement the ERP and who will use it?
• How is the commitment of the implementation team?
• What do prospective users expect from ERP?
• Are there external consultants prepared to help with the preparation process?

3. Infrastructure Analysis

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• How complete is the existing infrastructure (overall networks, permanent office systems, communication systems, and auxiliary systems)?
• How big is the budget for infrastructure?
• What infrastructure must be prepared?

4. Software Analysis

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• Is the software flexible enough and easily adapted to the company’s conditions?
• Is there service support from the provider, not only technically but also for future system development needs?
• How much implementation time is available?
• Does the software have functions that can improve the company’s business processes?

ERP Implementation

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• The application of ERP in a company will support the achievement of corporate success.
• The application is supported by four technology components: humanware, technoware, organware, and infoware.
• Broadly speaking, there are three general approaches:

1. Using a complete single software package (full vendor).
2. A combination of several software packages (various vendors, best of breed).
3. Customization or building your own ERP software package.

Stages of ERP System Implementation

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In general, the stages of ERP system implementation include:

1. Planning Stage
2. Analysis Stage
3. Design Stage
4. Technical Support Stage
5. Implementation Stage

Planning Stage

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The initial step of implementation is forming a steering committee, tasked with identifying the main objectives and scope of the ERP system project to determine the Project Leader and team members in building the system.

Project Team Tasks:

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1. Define the problems to be solved by the ERP system and determine the project scope in more detail.
2. Evaluate alternative approaches to ERP, such as: customization solutions, a single unified package, integration of several software packages, or a combination of several alternatives and choose one solution.
3. Create a project schedule and budget taking into account feasibility studies and report any significant findings to the steering committee in writing or verbally.

Analysis Stage

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The steering committee has agreed to run the ERP system implementation project and has determined the approach to be taken. The team begins forming working groups and defining user requirements. External consultants can be involved only to assist the working group in carrying out this analysis activity.

Project Team Tasks

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1. Evaluate vendors that can meet the requirements and make recommendations to the steering committee, who will select the vendor, and then the team will conduct a more detailed evaluation of the selected vendor.
2. Identify business process reengineering initiatives that might be needed based on the ERP system approach and the selected package. Although not always a good alternative, the company can consider a solution to customize the package.

After that, vendor representatives and consultants can be involved in the analysis process, where the steering committee and project team will be given intensive training on the concept and operational aspects of the system by the consultants.

The final stage is that an ERP system prototype will be produced in various organizational functions to simulate and demonstrate integration between user modules and identify according to needs.

Finally, the project team will make a recommendation report to the steering committee for the approval process and verification of project continuation.

Design Stage

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Begins after the company decides on the vendor or consultant that has been selected. The level of design depends on the ERP system approach; if choosing a unified package, the interface is mostly predetermined, and customization is usually done only on minor parts.

Technical Support Stage

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To guarantee short-term and long-term system success, technical support from users is highly necessary. Although all users have received intensive training, technical support staff are still needed, especially for drastic and comprehensive system changes, for example, fixing program errors discovered by users when running the new system. If a program error occurs, a quick response from the consultant or project leader is needed to maintain user trust in the new system and to support work smoothness and effectiveness.

For this reason, system maintenance is required to keep system performance optimal. Similarly, system audits can be carried out periodically to find out whether the ERP system’s objectives have been achieved as expected.

Implementation Stage

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After the company determines the selected software package to be used and customization is carried out, the next stage is construction. For the unified package approach, the program has been designed and implemented per module. For example: purchasing, inventory, payment functions.

In the implementation stage, all business process reengineering plans are applied, because all hardware, software, data, and networks have been implemented, so only two things need to be reviewed: people and procedures.

After the modules have been configured and integrated with other components and programs, the next stages are:

1. Creating a system prototype, followed by validation through several iterations and revisions until the system is finally ready to run.
2. Verification and testing of the entire system and performing several reconfigurations to improve system performance.
3. Creating documentation for the entire system and providing training to all system users.
4. Creating a system “roll out” conversion plan, which includes the system installation schedule throughout the organization with the selected conversion strategy approach.

Anticipating Failure

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ERP failure is usually caused by:

• System integration
• Mismatch between personnel, processes, and technology