Evolution of Enterprise Resource Planning

BR: Business Reengineering

BPR Objective à  is significant improvement to a business process, or for radical change in, or complete replacement of, such a process.

ERP Objective à is to integrate solution for executing operations and strategic information availability to right people at right time.

BPR + ERP = BR i.e. Business Reengineering

The critical question facing the organizations is what to do first – should the processes be reengineered first and then improved processes are automated or planning to implement BPR and/ or ERP.   Select from “menu” of supposedly world class best practices offered by the ERP packages and avoid BPR altogether or reengineer them after implementing ERP.

BPR & ERP - Inseparable Twins: 

 “Reengineering Work: Don’t automate, Obliterate “, defined BPR as “use the power of modern information technology to radically redesign business processes in order to achieve dramatic improvements in their performance. “  For BPR to succeed or achieve the intended benefits information technology has a critical role to play as the key enabler of business processes.  Organisations have following options:

1. Reengineer business processes before implementing ERP 
2. Directly implement ERP and avoid reengineering 

In the first option of reengineering business processes, before implementing ERP, the organisation need to analyse current processes, identify non value adding activities, redesign the process to create value for the customer and then develop an in-house applications or modify an ERP system package to suit the organisations requirements. In this option employees will develop a good sense of process orientation and ownership. This would be a customized solution considering the organisations structure, culture, existing IT resources, employee needs and promises relatively less disruption to routine work during the change program. It is likely to have a high probability of implementation. But the reengineered process may not be the best in the class, as organisation may not reengineered process may not be the best in the class, as organisation may not have access to the world-class research and best practices.  Moreover, this may be the only chance to radically improve in near future and going for less than the best may be a costly mistake. Plus developing an in-house application/ implementing a modified ERP can take lot of time. 

In the second option of implementing ERP package with minimum deviation from the standard settings i.e. “one size fits all “. All the processes in a company should conform to the ERP model and the organisation has to amend its current work practices and switch over to what the ERP system options offers. This option offers a world-class efficient and effective process with built in measures and controls and is likely to be quickly installed (need not necessarily be quickly implemented fully). But if the employees do not have clarity of existing processes and good understanding of their internal customer needs or current processes are not well defined and documented, it is quite possible that while selecting the standard process from the ERP package, employees may not be able to perceive the difficulties likely to be encountered during implementation stage.  Employees would lack process ownership and orientation. Other than technical issues like organisation structure, culture, lack of involvement of people can lead to major implementation difficulties and full benefits of standard ERP package may not be achieved.  Situation may arise that after implementing ERP, organisation may have to reengineer its processes. This could be a very costly mistake. 

Theoretically the third option of reengineering business processes during implementation of ERP also exists. It may sound to be the best option but being an ideal situation it does not seem to be practical option and is likely to cause maximum disruption to existing working. It should not be forgotten that during BPR & ERP initiatives, routine work is still to be carried out and customers served. 

      

As we see, there are no right and easy answers. Each approach has its pros and cons. Implementing ERP system and/ or BPR is an organisational revolution process itself. Decision to embark upon BPR and/ or ERP is a strategic decision and would largely depend on the objectives the organisation has set for itself to achieve and the time and resources it is willing to commit. Prior to start it is essential for the top management to arrive at a consensus on the approach so as to fully exploit the built in potential of BPR & ERP package. 

Traps leads to a list of likely problems with an ERP system:

• The cost is likely to be underestimated
• The time and effort to implement is likely to be underestimated
• The resourcing from both the Business and IT is likely to be higher than anticipated
• The level of outside expertise required will be higher than anticipated 
• The changes required to Business Processes will be higher than expected.
• Scope control will be more difficult than expected
• Most important of all, and the single biggest failure point for ERP implementations, is the need for change management. The need for change management is not likely to be recognized until it is too late. The changes required to corporate culture are likely to be grossly underestimated.  It is going to be hard enough to cope with the technical issues without having to address major people issues as well

Traps

A. Poor Planning

Planning covers several areas such as having a strong Business Case, to the availability of Users to make decisions on configuration, to the investing in a plan that captures all the issues associated with implementing

B. Underestimating IT skills

As most people are upgrading from old technology, the skills of the staff need to be upgraded as well. The upgrade is also going to place significant demands on a team who are geared to maintain an old but stable environment.  Usually this effort is underestimated.

C. Poor Project Management

Very few organisations have the experience in house to run such a complex project as implementing a large-scale integrated solution. It usually requires outside contractors to come in and manage such a major exercise.  It can be a fine line between abdicating responsibility and sharing responsibility.  Many consulting firms do a disservice to their clients by not sharing the responsibility.

D. Technology Trials

The effort to build interfaces, change reports, customize the software and convert the data is normally underestimated. To collect new data, and clean the data being converted, will also require an effort that is beyond what is normally expected.

E. Low Executive Buy-in

Implementation projects need Senior Executive involvement to ensure the right participation mix of Business and IT, and to resolve conflicts. 

F. Underestimating Resources

Most common budget blowouts are change management and user training, integration testing, process rework, report customisation and consulting fees.

G. Insufficient Software Evaluation

This involves the surprises that come out after the software is purchased.  Organisations usually do not do enough to understand what, and how the product works before they sign on the bottom line. The Bleeding Edge ERP is so massive and integrated that reporting and linking to other systems (either your own or your customers and suppliers) can be much more difficult than you expect. Companies looking at ERP need to examine how they accept online feeds from a customer, or a customers' customer, and examine the technological enablers as well as the implications of these technologies inside of the Business.

Change Management

Change Management is about setting expectations that lessen the pain of change.  People involved in a change expect to go from A to B. Perhaps where they are actually going is to C. Change Management is about getting them used to the idea that C is the real destination.

To give an example, any new system is bound to have teething problems.  If users expect that all is not going to run smoothly on day 1, and that they may be working back late for the first week because of problems bedding in the new system, they are less likely to reject the system when it does go wrong.  On the other hand telling staff that this is going to be a great new system with no problems can only lead to disappointment and rejection when bugs appear.  As such, change management is measurable.

Corporate Culture

Corporate Culture is a combination of two things:

• The type of people who are employed by a company.  Their personal values, skills, habits etc.
• The way the organisation works. The focus, decision making process, attitude to staff, stability, etc

The Traps

ERP Implementation - The Traps

While doing Business Reengineering, considerable amount of thinking and discussion is required with Management, Managers/Engineers, and Accounts/Finance people and definitely with BPR/ERP vendor and If possible, with the organisation who has already implemented BPR/ERP.

Because of the richness of functionality, the "toy box effect" can take over. Users see all the functionality available and suddenly they want it now. The scope can grow out of control.

Users need to become more computer literate. Many see this as personally challenging - even beyond their ability - and will not cope, or leave the company.

The word "Enterprise" in ERP means that whatever happens in one area has a ripple effect in other areas. Understanding the implications of actions of one area, on other areas of the company, is not something that happens overnight. Training tends to focus on how I do my job. It should also focus on what are the impacts of my job, in other areas?

Near enough is no longer good enough.  Data integrity becomes critical.  The computer cannot make human judgements.  If stock is moved, it is no good somebody remembering where they put it. The information needs to be put into the system or there will be a domino effect.  E.g. Stock is moved from location A to location B and the information is not put into the system.  The system will tell someone to get the material from A and when it is not there, they have to go looking.  At the same time it is telling someone else to put new material in B, but B is full.  The first person finds the original material in B and logs it into the system. We now have double the quantity in the system again and it doesn't re-order.  And so it goes on and everyone is blaming the system

ERP systems tend to replace old systems. As such it is a quantum leap for all areas of the company. It is replacing the trusty Ford with a high performance Ferrari. This happens at a Technical level as well as a Business Level.  New ways need to be learnt in a very short space of time.   Things have to be done consistently. No longer are we able to do something one way in one branch and another way in another branch.  The system is going to determine how we do things in all locations. 

ERP to Lean

It concerns the desire to eliminate waste across an entire enterprise.

An overview of the most important aspects of lean

  Planned procurement to minimise unwanted stock purchases

 Just in time delivery as close to the point-of-use and time-of-use as possible

  Shorter end-to-end throughput times by elimination of waiting time

 Optimised process scheduling to minimise buffer stock

  Faster tool changes and more flexible lines for better matched batch sizes

  Configure-to-order or late configuration to minimise finished goods holding

  Improved sales forecasting in make-to-stock 

  Elimination of business processes which add no value for the customer

      Automated reporting and triggering to monitor the business in real-time

GMP: Good Manufacturing Practice

GMP refers to the Good Manufacturing Practice.  GMP require that manufacturers, processors, and packagers of drugs, medical devices, some food, and blood take proactive steps to ensure that their products are safe, pure, and effective. GMP requires a quality approach to manufacturing, enabling companies to minimize or eliminate instances of contamination, mix-ups, and errors.  This in turn, protects the consumer from purchasing a product which is not effective or even dangerous.

Case Study - Lupin scores with SAP

http://pharma.financialexpress.com/20060930/management04.shtml

Lupin scores with SAP

Lupin has virtually doubled in size in the last three years. The SAP ERP implementation done by the company in 2003 has helped the company streamline its business processes by enhancing connectivity and accessibility

Making way for SAP

Lupin, with its operations spanning across five plants and 30 depots was facing a problem of lack of connectivity within its contact points with its Foxpro based system. "They were not working online and it used to take almost ten days to get the month end sales figure collated, compiled and presented to the marketing head. At that point of time, the decision to go for ERP was taken," says Suneel Aradhye, GM, IT. The first ERP system selected had the localised versions, wherein, every location kept on verifying it as per its own requirements. However, it was due to the lack of a centralised cohesive strategy that the ERP project failed. To acquire a centralised control, in 2001-02, the company decided to go for a bigger and better ERP.

The right choice

"There are two approaches for selection. One is to pick up the best of the breed in each area and then integrate them together. Other is to pick up the overall best product available in the market," says Aradhye. Lupin opted for SAP's ERP solution based on the parameters of technical support offered by them and the degree of customisation that can be achieved in terms of complying with the current taxation requirements and accounting standards to suit Indian conditions.

The big bang

As the first step, the company implemented Lotus notes, complete VSAT network and Lotus workflows. Before the SAP ERP (version 4.6c) roll out, all disjoined systems and locations were brought online in terms of connectivity. Lupin selected the big bang approach for the implementation, where the legacies were cut off and all the functions were moved on the ERP system from day one. "While implementing in a phased manner, people still have doubts about the success of the system. Therefore, they keep working on both the systems simultaneously. Thus, it is better to cut off the old systems and straight away migrate to the new set of systems," opines Aradhye.

All the business processes from materials, production and quality management, up to sales were covered under the implementation. The discussions and debates held between the heads of all functions led to the preparation of a document of current processes. This was followed by preparation of a blue print document to map these in SAP. Approval from the core team led to configuring the system, where each of the processes was tested independently. The implementation was done by IBM. The initial investment went in the house of Rs 15 crore, which included aspects like upgradation of network, hardware installations and cost of implementation.

SAP keeps on issuing patches that take care of issues like bug fixing, any enhancement in the current products, as well as legal changes within the organisation and in the country. These changes get applied in the organisation on regular basis to keep their version up to date.

Overcoming challenges

The user training was a major challenge. When the company went live, many of the functions were not covered by any kind of computer systems at all. Thus, the training started from the basics of computers and its applications.

SAP established a help desk comprising of ten people from the core team of 50. With the help of this team, several rounds of end user trainings were held, even though the initial training was done by IBM. This was accompanied with regular interactions and discussion sessions with core users in every function. This help desk also took care of master data supervision, day to day trouble shooting and configuring new business processes coming into system. To cope up with the changes taking place in the legal environment, Lupin took the SAP support, which comprised of patches.

Benefits galore

Since the time of implementation of the ERP package, Lupin has not required additional staff in the service areas like accounting, IT, finance and HR, although the company has virtually doubled in size. "We have to give some credit to ERP, wherein, with the help of the same set of people, we are able to handle much larger volume," opines Aradhye.

The ERP implementation also enhanced accessibility to available information. For instance, contrary to the earlier situation, even a sales manager has access to real time data with respect to the inventory levels. There is also an enhancement in online connectivity through the online accounting system. This has helped in tracking the inventory levels very closely and helped in materials planning as only the required raw materials can be ordered, resulting in cost saving to a large extent.

SAP MM 2nd Revise Edition

http://sapmmbook.weebly.com/

SAP Story on Shiksha.com

What is SAP?

SAP stands for Systems, Applications and Products in Data Processing. It is a product of SAP AG, Walldorf, Germany. It is not easy to define SAP in a specific definition. It is a multidimensional product. It has to be viewed and understood through various angles and perspectives to understand it. SAP is a system, an ERP product, an IT Tool, an IT enabled System (ITeS), an enterprise application, to execute the business process through the various department of the business in an integrated manner. Examples of business processes are such as:-

1.      Procure to pay (material procurement process)

2.      Order to collection (material sales process)

Integrated process means that all the subsequent activities of the process are dependent on its predecessor. If the any activity gets blocked/stopped/unfinished, subsequent owner of next step cannot do anything. It is a natural tendency of employees to flout the rules of doing the process in the absence of any enforcement factor such as an ERP system. It ensures that employees follow the rules and predetermined set of activities to complete a process. It brings discipline in the employees to follow the defined process without any violation.

Integration also means that two departments are involved while executing a transaction and records for both the department has to be updated simultaneously to have accuracy and consistency in the transaction. Integration of financial accounting with all types of goods movement is suitable example and SAP does it automatically. In the absence of SAP, both of these departments have to work together and two employees from these two departments have to work together in tandem to complete the transaction.

SAP ERP is a transactional system while SAP BI is a reporting system (based on data from SAP ERP). SAP APO, BPC, TR are planning tool based on data from SAP ERP system.

From technological advancement point of view current version of SAP is ECC 6.0 with EP 7. ECC stands for Enterprise Central Component (i.e. ERP) and EP stands for Enhancement Pack. Having ECC 6.0 implemented is mandatory to run the business. Putting up the enhancement pack is optional but desirable to use latest features of SAP ERP system

What are its various applications across domains?

SAP an ERP product, consists of various modules, as given below:-

1.      Materials Management (MM)

2.      Sales and Distribution (SD)

3.      Plant Maintenance (PM)

4.      Project System (PS)

5.      Production Planning (PP)

6.      Quality Management (QM)

7.      Production Planning for Process Industry (PP-PI)

8.      Financial Accounting (FI)

9.      Controlling (CO)

There are other ways of defining the modules from business or process perspective:-

1.      Manage Financial Operation (MFO) – FI

2.      Manage Operation (MOP) – CO

3.      Manage Supply Sourcing (MSS) – MM

4.      Manage Logistic (MLO) – MM

5.      Fulfil Order (FOR) – SD

6.      Production Order (PRO) – PP

7.      Build and Maintain Infrastructure (BMI) – (it includes both PM and PS)

8.      Managing Total Quantity (MTQ) – QM

Advance modules of SAP (add on components) which sits on the ECC (ERP) are as follows)

1.      BI-Business Intelligence (MIS reporting system)

2.      APO – Advance Planning and optimizer (supply chain planning)

3.      TR – Treasury Module

4.      BPC – Business Planning and Consolidation

What is the eligibility to pursue a SAP course?‎

Eligibility to pursue SAP courses is not well defined but what market is looking forward is explained as follows. A fresher must have engineering degree (in mechanical, production or industrial engineering) with relevant work experience of minimum 2 years to take course in SAP MM, PM and PP module. Charted Accountant or MBA in finance is required for FI and CO module. For SD module any graduation with minimum 4 years of experience in sales and distribution or MBA in Marketing (may be combined with finance) with minimum 2 years of experience is required. PS, TR and BPC modules are suggested for experience consultant in FI&CO.

In spite of these specific qualifications, there are cases where engineers or commerce graduate are doing FICO and SD consulting. Formal education is one thing but work experience in a specific domain and inclination to learn and excel in other areas drives what module can be pursued by the individual. Moreover, one has to learn other modules during the course of SAP consulting to advance in the career. SAP career starts as Analyst, and advances as consultant, senior consultant, team lead, solution architect / principal consultant / project manager.

Hence, one may start in a specific module as per his/her qualification, work experience or inclination but end up in learning other modules as well.

What are the types of SAP courses and certifications (with the duration and fee range for each course)?

SAP courses are done for specific modules. Hence there are as many courses as the number of modules are there. Duration varies from 27 working days by SAP education partners to 60 working days by non-SAP education partners. Education partners charges hefty fees for the course and they are eligible for issuing certificates. ATOS, Lithium Genovate, NIIT, HCL and JK Technosoft, are some authorised SAP education partner. They may charge between 3-4 lakhs per module for the course and certification exam (online). Every year or two year they keep revising the fee.

Non-SAP education partner, like other institutes are spread across the metro and tire -II cities and IT HUBs like Pune, Chennai, Bangalore and Hyderabad. Comparatively they charge few thousands for the course but quality of education and learning is also doubtful. Credibility of such institute is very low and employers do not prefer such candidates. Such institutes are good for those who have the opportunity to work on SAP in their organization but in-house training is not good enough to make them a SAP consultant.

What is its career relevance, i.e. scope after pursuing a SAP (IT) course?

One should not directly take plunge into the field of SAP. It takes lot of planning, money and risk taking abilities to make career in this field.

Traditionally, SAP consultants have come from the projects. Either IT organization or the SAP client/customers groom their employees as SAP consultant. Either employees are sponsored for certified course and exam or they are trained in-house by the trainer. Such individuals are lucky to get into the field of SAP with the support of employer with hands on experience on implementation and support project without any risk.

But if someone does not get this opportunity by the employer and he/she wants to get into this field on their own then it involves lot of strategy, money and risk. One has to be very enterprising to go through the learning experience and then finding a suitable job.

To pursue the course in SAP full time one has to leave the current job. Part time courses are also there. One should be ready to do job with less pay package in small companies to gain hands on work experience. If the current job salary is very high then one can opt for certified course and exams. Certified consultants have better credibility in the job market and can be directly employed by tier-I company, but may be with less pay package than the current job.

Starting may be tough but journey is enjoyable. It may involve lot of travelling for implementation project but support projects are peaceful does not involve frequent travelling