Enterprise Resource Planning #05: Implementation

Topics of Discussion

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• System Conversion
• ERP Implementation Success
• ERP Implementation Failure

System Conversion

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The goal of system conversion is to replace the old system with a new system, where the new system must be better, more user-friendly, and operate more efficiently compared to the old system.

Common methods for converting from an old system to a new system are:

1. Parallel System
2. Direct Cutover System
3. Pilot Approach System
4. Phase-In Method System

Parallel System

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This involves operating the new system and the old system simultaneously (at a specified time). Every process result is evaluated and compared. If the new system is proven to be better than the old system, then the replacement with the new system is finalized.

Advantages of a parallel system:

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1. Allows data checking on the old system.
2. Adds a sense of security for users.

Disadvantages of a parallel system:

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1. Relatively high cost issues.
2. Double labor utilization for both the old and new systems.
3. It is not easy to compare the quality of the output results of the new system against the old system.
4. The new system directly replaces the old system at a predetermined time or period.

Direct Cutover System

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This conversion system can be carried out if the following requirements are met:

1. The system has been tested extensively.
2. There is a tolerance for waiting time (time delay).
3. Users are forced to use the new system.

Risks that will arise due to the implementation of this system:

1. Long delays resulting in more errors.
2. Users are using an unfamiliar system.
3. Users do not have the opportunity to compare the old system with the new system.

Pilot Approach System (Distributed Approach)

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This conversion strategy is carried out when dealing with multiple locations or sites, such as in banking systems, franchises, restaurants, supermarkets, and others. Testing and operations are carried out at a selected site, and if the results are satisfactory, the conversion is then carried out at the other sites.

Phase-In Method System (Prototype Approach / Gradual Approach)

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This conversion strategy combines the first two types of approaches by mitigating as much risk as possible. This means that initially, a parallel run is conducted, and then in the middle of the period, the old system is gradually replaced by the new system.

Advantages:

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1. Users are involved in this conversion.
2. Can easily detect if there is a system or data error.

Disadvantages:

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1. Requires a longer time.
2. If the system is large, this strategy will be difficult to implement.

ERP Implementation Success

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Several factors that can affect the success of an ERP implementation in a company include:

1. User Focus and Technology Focus
2. Governance and HR Allocation
3. Vendor and Consultant Support
4. Training

1. User Focus Vs Technology Focus

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• User focus: Implementing an ERP system to support user business processes.
• Technology focus: Implementing ERP with the latest technology or more complex processes, thus allowing changes in user business processes.
• Ideally, the ERP system should focus on user needs; technological focus can be considered after the user focus is fulfilled.

2. Governance and HR Allocation

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• Effective ERP implementation requires support and commitment from top management.
• The team involved in the ERP implementation must be people who are experienced in their respective fields and have influence.
• An ideal team involves users, company IT specialists, people who can work across departments, and people who understand business processes well.

3. Vendor and Consultant Support

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• Ideally, the company has primary control over vendor support and ERP consulting services.
• The comprehensive use of consultants needs to be avoided, as it means consultants will delve too deep into the company’s business.

4. Training

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Poor training is one of the biggest factors in implementation failure.

Several training-related failures include: a. Providing employee training on specific software without paying attention to the business processes. b. Focusing instructions on the execution sequence without explaining why that sequence exists. c. Shortening training time. d. Solving problems using the old system’s way without seeking a solution using the new system’s way.

• Several other problems include: user diversity, system complexity, and diversity of training methods.
• Some vendors anticipate this by providing flexible training using various media: a. Web-based virtual learning b. Computer-based training c. Video course d. Self-study books e. Pop-up help screens

Anticipating Failure

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ERP failures are usually caused by:

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

Potential Failures to Anticipate

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• Users are inadequately trained.
• Not understanding how enterprise applications change the business and not being ready to follow a new discipline.
• Users are not fully aware that every action they take on the system affects company operations.
• Inadequate training results leading to a gap between training and implementation.
• Several vendors have provided anticipation strategies to achieve the ideal ERP goal (improving internal integration processes to external connectivity).
• These vendors make their products more flexible and easier to implement, for example: a. Component-based strategy b. Web-based ERP c. Modular ERP, which can be used on a per-module basis
• Implementation time and costs exceed the budget.
• Pre-implementation is not done properly.
• Operational strategy is not aligned with business process design and its development.
• People are not prepared to accept and operate with the new system.
• Lack of education during the implementation stage will cause difficulties for users, which will ultimately slow down business processes.