Implementation of ERP system Leonard Walletzký Enterprise information systems ´CRM - Customer Relationship Management ´FMS – Financial Management System ´SCM - Supply Chain Management ´MIS - Management Information System ´CMS - Content Management System ´KMS - Knowledge Management System ´DSS - Decision Support System ´GIS - Geographic Information System ´ What is ERP ´Enterprise Resource Planning, integrated system that help business to manage internal and external resources. ´Built on a centralized database and normally utilizing a common computing platform, ´ERP systems consolidate all business operations into a uniform and enterprise-wide system environment ´ERP can integrates all systems mentioned before Providing ERP ´Inventory, MRP, Production, Project, Accounting, CRM, HRM, etc. 1960 ERP 1990 2000 ERP as a Service Example Sales Order Sales Order Sales Store / Shipment Delivery note Stock card Invoice Receipt C:\Users\leonard\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\6FC0BK0U\MC900229315[1].wmf C:\Users\leonard\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\SGLE4KKS\MC900018709[1].wmf Accounting Internal documents Costing Invoicing Billing Banking ERP Basic facts ´Every (even) small economic activity produce a lot of documents ´Problems ´Managing all the documents together with their relations (metadata) ´Consistency of the documents ´Part of them is basis for the taxations ´We do not need to store data only ´We need them back! Critical situation ´When organization has not any ERP system at all ´Small or beginning companies ´When they have bad system or their system is out of date, not power enough etc. ´Growing companies ´Join ventures ´ How to recognize problem? ´Usage of Excel to manage your activity is not enough ´External accountant does not give you all data you need ´Data processing (document generating) takes more and more time, you need to control everything 2 – 3 times ´You need pen and paper for the key decision, because you are not able to get all data from your accounting ´ http://regnow.img.digitalriver.com/vendor/5833/cash_accounting.jpg How to identify out dated system? ´You need to enter data more than 1 time ´To the accounting and than to internet banking ´You are not able to use modern ways of collaboration (document sharing) ´Your system has technical problems, it freezes or crash very often ´Your system is no longer supported ´Your system is not compatible with other systems you use (e-shop) ´You need more than 30 minutes to crate report Basic modules in ERP system ´Sales – from the order to invoice ´Purchases – from order to invoice ´Banking and cash ´Warehouse ´Property and inventory ´Human resources ´Relation with customers ´Accounting ´ Outside connections to and into ERP system ´Banks and payment systems ´POS ´Trade ´Restaurants / Hotels ´Others ´Document management ´Content management system ´Web shop ´Intranet ´Other specialized systems ´DSS, MIS… ´ Features of „ideal“ ERP system ´Optimizes and simplifies the processes ´Centralize the information ´Optimizes data and document sharing ´Is accessible from everywhere ´It helps with your communication to your customers ´Accelerate report´s generating ´Gets you complete information about status of your company ´Is open for the third party product (e-shops, Office, banking and payment systems, POS) ´ Value based objectives or ERP implementation ´What are customers expecting from ERP system? ´How to validate the objectives? ´What is their structure? ´How are they organized? Fundamental objectives ´Minimize costs ´Ensure ERP benefits realization ´Enhance product and service improvement ´Maximize customer relationship effectiveness ´Based on study made by May, Dhilĺon and Caldeira ´ Minimizing costs ´One of the main objectives ´Structure of the main costs ´Start-up ´Implementation ´Maintenance ´Cost must be compared with the expected reduction of other costs of the company (return of investment) Ensure ERP benefits realization ´Depending of key areas ´Knowledgeable and proactive organization ´Proper change management control ´Minimization of adaptation constraints ´Clarity of investment objectives ´Delivery of responsibility to individuals in the organization ´ERP benefits depending on the level of customer and provider co-creation of the final value Enhance product and service improvement ´Key factors ´Support of new product development ´Any system that may be considered for adoption will support growth of existing product lines ´ERP system enables the identification of new product opportunities ´To ensure key factors ERP supplier needs to know and analyse customer´s business Maximize customer relationship effectiveness ´Key factors ´Support of the customer oriented processes ´Ability to understand customer desires ´Efficient marketing channel design ´Critical for service organizations ´Supplier needs to know the structure of customer segments, the ways of communication the customers are use to. Mean objectives ´Providing the way how the fundamental objectives can be reached ´Important is also the sequence how the objectives are reached ´Focus to objectives development is the key factor in value creation process Mean objectives ´Maximize productive working realtionships ´Maximize trust ´Maximize IT competence ´Ensure technical support ´Minimize information dispersion ´Maximize system use ´Maximize proces effectiveness ´Ensure business continuity ´Maximize compliance ´Maximize data analysis ´Maximize information richeness ´Maximize information security •Creating environment inside and outside the organization •Agreement among functional divisions •Working relationships of external consultants and project teams •Minimizing negative cultural impact •Between outside consultants / vendors and inside project teams •organization wide knowledge of ERP systém •Organization specific knowledge or competence •Competence of external consultants •Competence of ERP selection and implementation team •Organizational ability of strategic systém use •To handle any restructuralization •Key element of ensuring the success of implementation •Availability of external support •Availability of internal support •Minimazint the dependence on individual IT experts •Information tends to be dispersed in different functional areas •Information repositories must be consolidated in one place •Reliability of vendor-client business critical data must be ensured •Question of choosing proper ERP system •Easy to use? •Environment inside ithe organization promote wide systém use •Level of flexibility •Continuous system use > 13 •System processes: •ERP system processes fit organizational requirements •ERP system processes fit existing business processes •Business processes: •Administrative processes •Manufacturing processes •Maximizing performaance •Procedural redundancy is minimized > 14 ERP system does not break or alter •existing business processes •course of business • > 15 •Comformity to any proffesional standards •Conformity to legal requirements > 16 •ERP system can handle the data analysis •Data conversion •Pattern recognition capability > 18 •Real time information for given users are up-to date and correct •Ability to capture business critical data > 19 •Information will be available for appropriate users •Minimizing data redundancy •Maximizing data integrity •Unauthorized access to business critical data is minimized Mean and fundamental objectives Technical support Productive working relationships Maximize business analysis Minimize information dispersion Maximize system use Maximize information richeness Maximize organizational IT experience Maximize system process effectiveness Maximize information security Maximize trust Maximize compliance Maximize business process effectiveness Ensure business continuity Ensure ERP benefits realization Maximize product and service improvement Maximize customer realitionship effectiveness Minimize costs Important for cost calculation ´Commercial software ´Licence ´Customization can be limited ´Only certified partner ´Usually made on Microsoft platform ´Open source software ´No fees for the licence ´Customization can be done by anyone ´Problem of partner finding ´Made on Java, Python, php etc. ´ How manage the project ´How long time will it take? ´Who should participate? ´What do you expect from ERP system? ´How can management prepare themselves to this process? ´Risks of the project of ERP implementation ´ ´ Choosing Consultants and Vendors ´One person cannot fully understand a single ERP system ´Before choosing a software vendor, most companies: ´Study their needs ´Hire an external team of software consultants to help choose the right software vendor(s) and the best approach to implementing ERP ´ 24 The Significance and Benefits of ERP Software and Systems ´More efficient business processes that cost less than those in unintegrated systems ´Easier global integration ´Integrates people and data while eliminating the need to update and repair many separate computer systems ´Allows management to manage operations, not just monitor them ´Can dramatically reduce costs and improve operational efficiency 25 Questions About ERP ´How much does an ERP system cost? ´Should every business buy an ERP package? ´Is ERP software inflexible? ´What return can a company expect from its ERP investment? ´How long does it take to see a return on an ERP investment? ´Why do some companies have more success with ERP than others? 26 How Much Does an ERP System Cost? ´Size of the ERP software ´Corresponds to the size of the company it serves ´Need for new hardware that is capable of running complex ERP software ´Consultants’ and analysts’ fees ´Time for implementation ´Causes disruption of business ´Training ´Costs both time and money ´ 27 How to manage the project ´Project can take from 3 months (small companies) to more than year ´All departments involved to the work with ERP system should participate ´Not only IT Department!! ´First we must analyse company, its situation and than we look for suitable ERP system ´The best solution is to make SWOT and develop strategies What Return Can a Company Expect from Its ERP Investment? ´ERP eliminates redundant efforts and duplicated data; can generate savings in operations expense ´ERP system can help produce goods and services more quickly ´Company that doesn’t implement an ERP system might be forced out of business by competitors that have an ERP system ´Smoothly running ERP system can save a company’s personnel, suppliers, distributors, and customers much frustration 29 What Return Can a Company Expect from Its ERP Investment? ´Cost savings and increased revenues occur over many years ´Difficult to put an exact dollar figure to the amount accrued from the original ERP investment ´ERP implementations take time ´Other business factors may be affecting the company’s costs and profitability ´Difficult to isolate the impact of the ERP system alone ´ERP systems provide real-time data ´Improve external customer communications 30 How Long Does It Take to See a Return on an ERP Investment? ´Return on investment (ROI): assessment of an investment project’s value ´Calculated by dividing the value of the project’s benefits by the project’s cost ´ERP system’s ROI can be difficult to calculate ´Peerstone Research study ´63 percent of companies that performed the calculation reported a positive ROI for ERP ´Most companies felt that nonfinancial goals were the reason behind their ERP installations 31 Why Do Some Companies Have More Success with ERP Than Others? ´Usually, a bumpy rollout and low ROI are caused by people problems and misguided expectations, not computer malfunctions ´Executives blindly hoping that new software will cure fundamental business problems that are not curable by any software ´Executives and IT managers not taking enough time for a proper analysis during planning and implementation phase ´Executives and IT managers skimping on employee education and training 32 Why Do Some Companies Have More Success with ERP Than Others? ´Usually, a bumpy rollout and low ROI are caused by people problems and misguided expectations, not computer malfunctions (cont’d.) ´Companies not placing ownership or accountability for the implementation project on the personnel who will operate the system ´Unless a large project such as an ERP installation is promoted from the top down, it is doomed to fail ´ERP implementation brings a tremendous amount of change for users 33 Why Do Some Companies Have More Success with ERP Than Others? (cont’d.) ´For many users, it takes years before they can take advantage of many of an ERP system’s capabilities ´Most ERP installations do generate returns ´ 34 Conclusion ´Critical situation of ERP need ´Value of ERP for the customer ´Special position of accounting ´Basic of ERP development (customer side) ´