erp implementation in rllos royce
DESCRIPTION
ssTRANSCRIPT
-
Implementing Enterprise Information Systems MIS Lecture 4Prof. Dr. Juliana SutantoD-MTEC, ETH Zurich
-
Learning Targets
Important managerial decisions when implementing an enterprise information system
Challenges and critical success factors
Jsutanto 2
-
Agenda
1. Business cases 2. Packaged software selection3. Building vs. running cost4. Major challenges5. Critical success factors
Jsutanto 3
-
> 14 countries, > 1500 systems Expensive to operate and difficult to maintain Did not provide accurate, consistent and
accessible data for good and timely decision-making and performance assessment
Works were functionally orientated Legacy systems disallow establishing direct, on-
line communication with customers, partners and suppliers
Jsutanto 4
(Yusufetal.2004)
-
SAP R/3 project team composition
External outsourcing company EDS
Internal managers and staff that have knowledge of cross-functional business relationships and experience of the old internal systems
Each operational business unit has its own ERP planning team for implementing working changes and training
Jsutanto 5
(Yusufetal.2004)
-
SAP R/3 implementation issues
Cultural Business
Work practices must be adjusted to fit SAP
BPR and Vanilla SAP
Technical
Jsutanto 6
(Yusufetal.2004)
-
Jsutanto 7
(Yusufetal.2004)
-
ERP Facts (1)
Gartner: 2008 global ERP market is $22.4 billion; expect to grow to approx. $29.6 billion by 2012 at a compound annual growth rate of 8%
A successful ERP project can: Cut operating costs Improve decision making and planning Improve competitiveness
Owens Corning claims ERP software helped it save $50 million in logistics, materials management, and sourcing
Jsutanto 8
(Umble etal.2003)
-
ERP Facts (2) But, the payback may take time
Meta Group: surveyed 63 companiesranging in size from $12 million to $43 billion in corporate revenue
Average implementation cost: $10.6 million Average implementation time: 23 months Average maintenance cost over two-year period: $2.1
million
Companies showed an average ROI loss of $1.5 million over a six-year period
Jsutanto 9
(InformationWeek1999)
-
ERP Facts (3) A failed ERP project can:
Cost a fortune Lead to bankruptcy
Unisource Worldwide Inc., a $7 billion distributor of paper products, wrote off $168 million in costs related to an abandoned nationwide implementation of SAP software
FoxMeyer Drug, a former $5 billion drug distributor, went bankrupt in 1996 and filed a $500 million lawsuit against SAP
Dow Chemical, after spending 1/2 billion dollars over 7 years of implementing SAP R/2, the mainframe version, decided to start all over again on the new client/server version (R/3)
Jsutanto 10
(Bingi etal.1999,InformationWeek1998,ComputerResellerNews 1998)
-
Agenda
1. Business cases2. Packaged software selection3. Building vs. running cost4. Major challenges5. Critical success factors
Jsutanto 11
-
ERP Market LeadersWorldwide:1. SAP 2. Oracle 3. Sage Group 4. Infor5. Dassault Systemes
Jsutanto 12
(SearchSAP.com2009)
Western Europe:1. SAP 2. Oracle 3. Sage Group 4. Microsoft Business Solution 5. SSA Global (IDC2006)
-
Choosing the Software (1)
Fit Technology capabilities vs organizations existing
business processes and procedures
More than purchasing softwarebuying into vendors view of best practices
Ultimate goal: to improve the business, not to implement software
Jsutanto 13
(Umble etal.2003)
-
Jsutanto 14
(Wuetal.2007)
-
If there is(are) misfit(s)
Cancel BPR Add-on Reconfiguration
Jsutanto 15
(Wuetal.2007)
-
Jsutanto 16
(Yusufetal.2004)
-
Choosing the Software (2)
Affordability ElectricCo initially planned to purchase an ERP
system from SAP, but it gave up this plan because SAPs USD 2 million price was too high
Not long after, FurnitureCo found the maintenance fee for [SAP] system was too high to sustain
Jsutanto 17
(Xue etal.2005)
-
Jsutanto 18
-
Agenda
1. Business cases 2. Packaged software selection3. Building vs. running cost4. Major challenges5. Critical success factors
Jsutanto 19
-
(Total) Costs
Software and hardware Training (Customization) Integration and testing Data conversion Data analysis Consultants Brain drain (employee turnover) Continuing maintenance
Jsutanto 20
(FinancialExpress,2008)
-
Maintenance Cost
AMR Research (2009): cost of ERP maintenance has risen from an average 15 % of license fees 10 years ago to a whopping 22 % today
ERP vendors collected ~ > $14 billion in maintenance revenues last year
64 % of the executives surveyed were dissatisfied with their software vendors maintenance policies
Jsutanto 21
(LogisticsMagazine2009)
-
What Customer Wants from Vendors Choice
Industry-specific solutions, partner add-ons, 3rd-party maintenance services
Alternative deployment models, e.g., SaaS
Value for money Flexibility in software implementation and operating costs Buy software licenses when needed, reduce licenses
during downturns, unload shelfware maintenance fees
Predictability Maintenance fee pricing Upgrades
Jsutanto 22
(ForresterResearch2009)
-
Agenda
1. Business cases 2. Packaged software selection3. Building vs. running cost4. Major challenges5. Critical success factors
Jsutanto 23
-
Major Challenges Cultural
Resistance to change
Business BPR
Technical Customization, integration, testing, data conversion
and analysis
Dont forget the multi-site issues!!
Jsutanto 24
(Umble etal.2003)
-
CSFs: The People Executive management committee that:
is committed to enterprise integration fully supports the costs demands payback champions the project
Implementation team Top-notch people who are chosen for their skills, past
accomplishments, reputation, and flexibility
Management should constantly communicate with implementation team, and enable empowered, rapid decision making
Jsutanto 25
-
CSFs: The Implementation Project management
clear definition of objectives work and resource plans
aggressive, but achievable, schedules tracking of project progress
Data accuracy
Change management education and training must work within the system, not around it all old systems must be eliminated
Jsutanto 26
-
CSFs: Multi-Site Issues
Phased approach pilot implementation at one facility module by module department by department
Jsutanto 27
-
CSFs: The Evaluation
Management, vendors, implementation team, and users must share a clear understanding of the goal
Measures must also be designed to encourage desired user behaviors, e.g., on-time deliveries, gross profit margin, customer order-to-ship time, inventory turnovers
Must be prepared for initial decline in productivity
Jsutanto 28
-
Summary
Management should carefully weight between: BPR & customization Business process (& cultural) change & technical
change
Jsutanto 29
-
Journal References Bingi, P., Sharma, M.K., Godla, J.K., Critical issues affecting an ERP
implementation, Information Systems Management (16:3), 1999, pp. 714.
Umble, E.J., Haft, R.R, Umble, M.M. Enterprise resource planning: Implementation procedures and critical success factors, European Journal of Operational Research (146), 2003, pp. 241257
Xue, Y., Liang, H., Boulton, W.R., Snyder, C.A. ERP implementation failures in China: Case studies with implications for ERP vendors, Int. J. Production Economics (97), 2005, pp. 279295
Yusuf, Y., Gunasekaran, A., Abthorpe, M.S. Enterprise information systems project implementation: A case study of ERP in Rolls-Royce, Int. J. Production Economics (87), 2004, pp. 251266
Wu, J-H., Shin, S.S., Heng, M.S.H. A methodology for ERP misfit analysis, Information & Management (44), 2007, pp. 666680
Jsutanto 30
Implementing Enterprise Information Systems MIS Lecture 4Learning TargetsAgendaSlide Number 4Slide Number 5Slide Number 6Slide Number 7ERP Facts (1)ERP Facts (2)ERP Facts (3)AgendaERP Market LeadersChoosing the Software (1)Slide Number 14If there is(are) misfit(s) Slide Number 16Choosing the Software (2)Slide Number 18Agenda(Total) CostsMaintenance CostWhat Customer Wants from VendorsAgendaMajor ChallengesCSFs: The PeopleCSFs: The ImplementationCSFs: Multi-Site IssuesCSFs: The EvaluationSummaryJournal References