A Case Study of ERP Implementation Issues

dr. Tom BramorskiUniversity of Wisconsin

USA

IntroductionMedium size U.S. business1,200 employeesMultiple, geographically scattered

manufacturing sites located in the Milwaukee metro area

Single finished product with a large variety of custom options

Multiple distribution centers worldwide

IntroductionBill of Materials with approximately 25

levels250 global suppliersMature product, well established brand

nameDemand consistently exceeds supplyProduction capacity shortageSAP R/3 ERP system

ERP BenefitsCross-functional process orientation

with high visibilityEnables exchange of information

throughout the supply chain in real timeReduces operations costs Reduces cycle times Facilitates bottleneck identification and

management

ERP Benefits Improved inventory management and

inventory cost reduction Improved customer service levels,

material shortages and reduced late deliveries

Standardized and normalized data and data formats

ERP BenefitsEnhanced communication across

functional boundariesEmphasis on process orientationEnhanced integration across the supply

chain and business units Expanded information access with

appropriate user rights

ERP BenefitsEnhanced empowerment of employees

through increased information sharing Improved system-wide accountability

and visibility Facilitates the implementation of do it

right the first time philosophy Improved accuracy of forecasting and

master scheduling

Specifically, ERP Benefits:Organization and it’s supplier chainManufacturing and sales functions Inventory managementProduct distribution and logistics IT function by consolidating and

standardizing diverse legacy database platforms

ERP DisadvantagesLarge dollar investments for setup,

implementation and maintenance even for small ERP projects

Painful and lengthy implementation and debugging

High level of expertise needed for implementation and debugging

ERP DisadvantagesMultiple difficulties are hidden leading

do “doubling the time and tripling the cost” estimates for the project

Difficulties amplify organizational resistance to change

Strategic benefits are hard to quantifyTargets are rarely achievedPlans are too ambitious (time and $$$)

ERP DisadvantagesExpectations are unrealisticLack of understanding of strategic

benefits of ERP implementation (follow the crowd mentality)

Superficial implementation with a lack of necessary infrastructure support

Is it really worth it?

ERP Implementation CaseSpecific Strategic Goals:

Speed-up new product development Improve customer focus (emphasis on

large accounts) Eliminate 5 independent computer systems

to improve operating system efficiency Eliminate functional silos by enhancing

communication

ERP Implementation CasePhase I: The establishment of a

“Customer First” team in order to: Identify customer expectations (for external

and internal customers) Understand the current processes Identify improvement opportunities Determine future process vision, targets,

and goals, and Develop a Vision

ERP Implementation CasePhase I implementation difficulties:

Lack of common vision (functional silo mentality) based on 220 interviews

Current processes and infrastructure could not efficiently support the requirements of increased customer demands

SAP Modules Selected for ImplementationMaterials ManagementSales and DistributionProduction PlanningWarehouse ManagementHuman ResourcesBusiness to Business

SAP Modules Selected for ImplementationAdvanced Planning Optimizer

(Forecasting Tool)Financial Accounting/ControllingCosting, andCustomer Relations Management

Implementation Schedule18 months allowed for complete system

implementationSystem simulations performed in May,

2002 using mock transactionsGo-live in July, 2002 (slow business

period) IBM consultants retained to facilitate the

implementation process

Implementation IssuesSince 7/2002 implementation there was:

Confusion and a general lack of knowledge about the new system throughout the organization

The production and inventory control department, as well as the SAP help desk, and IS department were pummeled with a lot of questions that they did not have the capacity to answer

Implementation IssuesSince 7/2002 implementation there was:

A lack of tools for generating necessary reports/ the new system wasn’t customized to the business

Lack of quantitative measures to assess implementation progresses and the fulfillment of strategic benefits

Implementation IssuesSince 7/2002 implementation there was:

A lack of knowledge regarding the forecasting module decreased forecasting accuracy

No back-up plans Unacceptable consultant turnover

produced instability

Implementation IssuesSince 7/2002 implementation there was:

Data had been inaccurate, incomplete, overlooked or was not entered into the system causing many errors (garbage-in, garbage-out)

Confidence in the system amongst internal and external customers was undermined

Implementation IssuesSince 7/2002 implementation there was:

Insufficient time and money necessary to successfully implement the project

Management pushed for a quick transition to a new system to save money on current system software licenses

Finger-pointing and blame shifting for poor system performance

4 Major Implementation Issues Always develop back up strategies and

computer infrastructure systems Review and understand your current

processes and need before defining the need for a system (Choose or design a system around your business needs)

Support and drive from executive staff to change corporate culture is a must, and

Training, Training, Training

Conclusions Develop a system exploitation strategy:

Identify projects that utilize the base infrastructure and deliver the biggest benefits

Find people who understand the business and its processes, and the technology

Conclusions Develop benefit-focused implementation

plans supporter by specific business cases

Establish recognizable benefit delivery processes