gpug ® summit 2011 november 8-11 caesars palace – las vegas, nv erp: integration, not merely...

GPUG® Summit 2011November 8-11

Caesars Palace – Las Vegas, NV

ERP: Integration, Not Merely Implementation Is

KeyJames M. Noblitt, CPIM, CIRM

GPUG Summit 2011– Las Vegas www.gpug.com2

Agenda

Overview & Definitions

The Foundation - Six Imperatives for ERP Success

The Methodology - Twelve Steps to ERP Success


Just What is ERP?

Gartner Group definition:

ERPII is a business strategy and a set of industrydomain-specific applications that build customer and shareholder value by enabling and optimizing enterprise and interenterprise collaborative, operational and financial processes.

ERP Suppliers Customers

ERP II

GPUG Summit 2011– Las Vegas www.gpug.com

ERP

CRM

QMS

e-Procurement

TMSMMS

WMS

MES

FSS

HT

TP

& X

ML APS

ED

I

Private

Exchange

Public

Exchange

HT

TP

& X

ML

Private

Exchange

Public

Exchange

ED

I

To Supplier To Customer

MRP is the core database and transaction engine.

B2BB2B

B2C

ERPMRP II DRPHR

HTTP & XML

B2E

APS = Advanced Planning SystemB2B = Business to BusinessB2C = Business to ConsumerB2E = Business to EmployeeCRM = Customer Relationship ManagementDRP = Distribution Requirements PlanningEDI = Electronic Data InterchangeERP = Enterprise Resources Planning

FSS = Field Service SystemMES = Manufacturing Execution SystemMMS = Maintenance Management SystemMRP II = Manufacturing Resources PlanningQMS = Quality Management SystemTMS = Transportation Management SystemWMS = Warehouse Management System

4


ERP – Success or Failure

Close to 90% of all ERP implementation projects fail to achieve a positive return on the money invested in them the first time around

Well over 50% of all ERP implementations never result in a positive ROI

The root cause of this phenomenon is rarely the software

Most ERP implementations were doomed to failure at the outset

There are six key imperatives that must be addressed for successful ERP


Keys to Successful ERP

Foundation Six imperatives Required

regardless of the methodology

Some overlap with the methodology

Methodology Twelve steps Used for new initial

implementations Used to remediate

existing failed implementations

6


The 6 Imperatives of ERP SuccessThe Foundation

1. The ERP initiative must have an economic justification, i.e. a tangible reason to do it

2. ERP must be integrated not just implemented3. The ERP methods and business processes must

be in alignment4. The business processes must be sound and

support the business strategy5. The ERP system must have high quality data6. Everyone must understand ERP methods as well

as the tools


1 – ERP Must Be JustifiedThe Foundation

Projects that don’t have a realistic, valid and well understood justification typically never get finished

– This is particularly true of large-scale projects of long duration such as an ERP implementation

Management support is difficult to obtain initially and especially difficult to maintain for long-term projects with little or no economic justification

– This tends to become problematic in long-term projects as they continue to accumulate costs with little or no anticipated ROI

– Management may experience fee fatigue and repurpose resources Change for the sake of change is virtually impossible to achieve

– Justification drives the WIIFM (What’s In It For Me) which is a necessary enabler for change


1 – Create the Burning PlatformThe Foundation

Using a solid financial justification, e.g. ROI and Payback, will drive the “burning platform” necessary to obtain resources, garner buy-in and enable change

– ROI – Defines what the return is for the dollars spent. It demonstrates that the expenditure in dollars and human effort are justified

– Payback – Defines how long the financial benefits (ROI) will take to recoup the investment expended to integrate ERP into the enterprise

– TTV (Time To Value) – The elapsed time from the initial expenditure until the ERP integration project begins to generate a return

Once a valid justification has been developed it can be used to define the “cost of waiting”

– For example, a project with a savings of $20K per month is “costing” the company $20K in lost savings for each month during the TTV in addition to the costs accumulating for the project


2 – ERP Must be IntegratedThe Foundation

Internal business processes must be integrated for maximum:– Effectiveness (best service)– Efficiency (lowest cost)

Customers (demand) and suppliers (supply) must be integrated for maximum:

– Effectiveness (best service)– Efficiency (lowest cost)

Implementation Integration

versus

Customers

Customers

Suppliers

Suppliers

Suppliers

Purchasing

AccountingBilling

OrderEntry

Inventory

CustomerService

Manufacturing

Customers

PurchasingQC

Receiving

ManagingCash

Shipping

Customers

Customers

Customers

Suppliers

Suppliers

Suppliers

CustomerService

OrderEntry

Inventory Purchasing

ReceivingQC

Manufacturing QC

Shipping Billing ManagingCash

Accounting

10


2 – Implementation vs. IntegrationThe Foundation

Implementation ERP implementations don’t produce a positive ROI ERP implementations typically don’t even work

– Simply implementing ERP drives shadow systems ERP implementations may actually increase costs

– Increased administrative costs to utilize the ERP system along with existing (shadow) systems

– Increased inventory costs driven by the system

Integration ERP integrations produce a positive ROI, work well and

reduce costs


2 – Integration & CollaborationThe Foundation

• Collaboration alone, without integrated processes and systems cannot produce efficient nor effective operational results

• Integration alone, without collaboration between knowledge workers, will not produce efficient nor effective operational results

• Together, a collaborative workforce enabled by integrated processes and systems, will enable the enterprise to become highly effective while, at the same time, maintaining an optimal level of efficiency

COLLABORATION + INTEGRATION = SYNERGY


2 – Collaboration Without IntegrationThe Foundation

•Data•Transactions•Reports




Un-integrated System

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

ProcessShadowSystem

ProcessShadowSystem

ProcessShadowSystem

ProcessShadowSystem

Information Flow Information Flow Information Flow

13


2 – Integration Without CollaborationThe Foundation





Sales Planning Inventory Accounting

Integrated System

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

ProcessShadowSystem

ProcessShadowSystem

ProcessShadowSystem

ProcessShadowSystem

Information Flow Information Flow Information Flow

14






Integrated System

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

Info

rma

tion

Flo

w

There are no shadow systems – everyone is using the same systems and data.

2 – Collaboration + Integration = SynergyThe Foundation

15


3 – ERP and Process AlignmentThe Foundation

The ERP system is a tool to enable business processes ERP is designed around a specific set(s) of business

processes In order to integrate ERP into the enterprise, it must be in

alignment with the company’s business processes– Manufacturing, distribution, service, health-care, retail, etc.– Make to order, assemble to order, make to stock, engineer to

order– Discrete versus repetitive or flow manufacturing– Lean Manufacturing (Pull) versus traditional Push, Kanban, etc.– Appropriate interface for users– Appropriate level or amount of automation, integration with

MES (Manufacturing Execution Systems) or POS (Point of Sale Systems)

– Appropriate or necessary BI (Business Intelligence)

16


3 – People, Process & TechnologyThe Foundation

The successful integration of an ERP system into an enterprise is driven by three key components.

Each of these components must be balanced and synchronized to ensure the ERP implementation provides a benefit to the company .

PeopleProcessTechnology

People

Process Technology

ERPMethods

YourCompany

ERPSystem

17


3 – Keep the Balance for SuccessThe Foundation

Process

People

Technology

People

Process

Technology

BOTH FORCE & DIRECTION MUST BE BALANCED

18


4 – Appropriate Business ProcessesThe Foundation

ERP is designed around a set of Leading Practices and will not support poor or outdated business practices

Companies must have sound business processes in order to leverage the benefits of ERP

Companies must CHANGE if necessary to effectively utilize the leading practices that ERP is designed to enable

Companies must have an Operating Strategy that is based upon accepted leading practices

Strategy drives Processes which drive Technology


4 – Operating Strategy Drives Processes

The Foundation

20

OPERATINGSTRATEGY

MANUFACTURING AND/OR DISTRIBUTION

MANUFACTURING METHODS

MANUFACTURING CONTROL TECHNIQUES

Single or multi-plant Single or multi-company

Make to stock Make to order Assemble to order

Engineer to order Project Manufacturing Assemble to stock

Process Repetitive

Discrete Flow

Job shop Batch

Coexistent

Each process requires a different ERP (system) as an enabler.


4 – Operating StrategyThe Foundation

Develop a written strategy:– Necessary to define what techniques will be used to manage

each functional area– Necessary to provide a basis for all business systems within

the enterprise– Necessary to ensure everyone is on the same path, going in

the same direction and not at odds with each other or out of sync with the business processes and supporting systems

Development of an Operating Strategy is a critical element of a successful ERP integration



4 – Operating Strategy Drives Processes

The Foundation

• Use the Operating Strategy to drive:– Processes– Methodologies– Techniques– ERP system

requirements

• DOCUMENT IT, PUBLISH IT, POST IT AND ABOVE ALL, FOLLOW IT!

22


5 – High Quality DataThe Foundation

The database in an ERP system is its Achilles' Heel

GIGO “GARBAGE IN - GARBAGE OUT”. It was true thirty years ago and it is still true today. The data simply must be accurate

In order to motivate people to use the system, it must be credible

In order to make it even possible to use the system, it must be accurate


5 – The Impact of 90% Data AccuracyThe Foundation

Inventory 90%BOM 90%Routing 90%Work Center 90%Customer Order Date 90%Work Order Date 90%Purchase Order Date 90%Compound Data Accuracy 48%

Although 90% data accuracy by data element may appear to be more than adequate, it could render an ERP system completely unable to support the business.

Typical Manufacturing DB @ 90%

24


5 – Poor Data and CostThe Foundation

Poor data drives: Use of shadow systems,

hence loss of integration Erroneous BI, hence bad

decisions Missed shipments and lost

sales Excessive inventory Inventory shortages Poor customer service Inefficient use of labor Lost or unused capacity Overloaded capacity

All of these drive up costs and/or reduce revenue!

25


6 – Embracing & Understanding ERPThe Foundation

The three main components of a successful ERP integration are:

– Most important People– Second most important Data– Least important Computer

Therefore, people must be educated and trained to fully embrace the ERP methods and tools


6 – Understanding ERP TechniquesThe Foundation

Level of understanding and working knowledge of ERP logic and techniques:– People cannot be expected to implement nor

utilize a methodology that they don’t have a complete working knowledge of

– People will not embrace “what is in it for them” if they don’t understand the ERP techniques well enough to embrace and believe in the benefits of managing with it


6 – Understanding ERP TechnologyThe Foundation

Level of understanding and working knowledge of the information system:– People cannot be expected to implement nor

utilize a technology (ERP system) that they don’t have a complete working knowledge of

– The implementation will not be as effective nor implemented as efficiently without a thorough understanding of the information systems functionality


6 – ERP KnowledgeThe Foundation

Insight and ability to apply the appropriate ERP techniques and systems solutions to one’s business:– Simply knowing ERP methods and the

technology isn’t enough. One must posses a creative ability and broad scope of experience within a business organization in order to successfully manipulate a large multi-functional, integrated business system such as ERP


6 – Training & EducationThe Foundation

The Role of Education & Training

Education

Training

I know Why

I know How

Working Knowledge

Understanding

Awareness I know about it

I could do it

I can apply and fix it

30


6 – Who To Educate or TrainThe Foundation

Education and Training

Initial Education

Top Management

Develop understanding of ERP and the implementation requirements

Second Level Education

Mid Management Develop a working knowledge of ERP

Software Training

Mid Management

Develop a working knowledge of the information system

General Education

75% - 100% of work force

Create awareness of ERP and the change required

Functional Training

As required Create understanding of the procedures

31


The Methodology

There are twelve key steps to successfully integrating ERP into the enterprise

They are of equal importance

Omitting even one may seriously jeopardize the chance of achieving a positive return on the investment in ERP

32


1 – Top Management CommitmentThe Methodology

Top management commitment: Ensure the ERP initiative is justified

– Ensure the justification is valid– Ensure management understands the justification– Ensure there is management consensus for the

justification Communicate direction and mission Sell the benefits of change Create a climate for change Facilitate ownership and participation Reward performance, results and success


1 – Top Management Commitment cont.

The Methodology

Top management commitment (continued): Approve objectives Formulate policies Provide resources Assign responsibilities Establish priorities Resolve conflicts Regular reviews Earnestly address the tough issues Really use ERP to manage the business


2 – Desire to ChangeThe Methodology

Desire to change: Create an economic justification Develop, document and publish the justification People need a reason to change - they need to

know what is in it for them People need management’s encouragement and

support for change It doesn’t take many non-supporters to scuttle a

project of this scope and magnitude Overcome the “not invented here syndrome”


3 – Understand ERP MethodologyThe Methodology

Level of understanding and working knowledge of ERP logic and techniques: Provide the required in-depth ERP education to

ensure that key individuals have the knowledge to match the appropriate ERP techniques with the business requirements

Provide the required general ERP education to ensure that all staff have the knowledge to utilize ERP methods on a daily basis


4 – Understand the ERP SystemThe Methodology

Level of understanding and working knowledge of the information system: Provide the required in-depth ERP systems

education to ensure that key individuals have the knowledge to align the appropriate ERP systems with the business requirements

Provide the required general ERP systems training to ensure that all staff have the knowledge to utilize ERP systems and methods on a daily basis


5 – Capability to Implement & Use ERP

The MethodologyInsight and ability to apply the appropriate ERP techniques and systems solutions to one’s business: Ensure that the individuals responsible for the

integration have the creative ability and broad scope of experience within a business organization required to successfully manipulate a large multi-functional, integrated business system such as ERP


6 – High Quality ProjectThe Methodology

Quality of the project: The project must be well thought out and

planned in sufficient detail to manage all aspects of the conversion to ERP

The project must be doable The project must be documented People must be assigned to each task Performance to the project must be tracked

– “Plan your work and then work your plan.”


7 – High Quality Project Leadership

The MethodologyQuality of the project leadership: This individual must possess the attributes

outlined in steps 3 - 5 Must have the position and ability to work

effectively with top and mid management Must have a high level of credibility Must demonstrate excellent leadership skills Must be focused and driven toward success Must be dedicated 90% - 100% to the project


8 – Clear Direction and Deliverables

The MethodologyClear definition of measurable project goals and business performance measures: The project must have specific tasks with start

and due dates. Performance to these dates must be reported, tracked and controlled in order to manage the efficiency of the conversion to ERP

Performance measurements, as previously discussed, must be defined, reported and tracked in order to manage the effectiveness of the conversion to ERP


9 – Assign ResponsibilityThe Methodology

Assigned responsibilities: The ERP project is a company wide endeavor and

requires the input, support and involvement of each department head. The accountability for the success or failure must start with these people– For completing, on time, each project task assigned– For achieving the business goals and objectives set

forth in the performance measures The project leader alone cannot be held

accountable for a company wide project


10 – Ensure Sufficient ResourcesThe Methodology

Amount (quantity) of resources that can be applied over the life of the project: The more resources applied, the quicker and

better the project will get done– The more resources applied, the more people get

involved. The more people that get involved, the more people get educated and trained, hence, the better the implementation.

The more resources applied demonstrates to everyone the urgency and importance of ERP


11 – High Quality Accurate DataThe Methodology

The database: Ensure that the database meets the accuracy

criteria necessary for the ERP system to function and provide credible and usable information

Develop and implement a formalized database maintenance and control process– Limit access to the database– Ensure that someone is responsible and takes

ownership for the database– Utilize a database coordinator or manager for

responsibility and control


12 – Stick with a Standard SystemThe Methodology

The standard system: The standard system, when implemented

properly, will produce tremendous results A non-standard system, even if perfectly

implemented, will produce non-standard results, i.e. sub-standard results

“They should look alike because they are alike. If they weren’t, they wouldn’t work.”

Oliver W. Wight


ERP System Things You Should Not Do

The MethodologyDon’t create a monster by: Taking a standard system

and making it nonstandard Making a simple system

overly complicated Trying to use all of the

system’s capabilities at once

Implementing untested software or systems

Implementing a system that no one understands

Hey! I only tweaked it a little!

46


ERP System Things You Should Not Do

The MethodologyDon’t reinvent the wheel by: Writing your own “special”

version of ERP Modifying all of the reports to

look like what you already have

Computerizing (automating) existing processes or systems that never really worked in the first place

Writing software you already have but don’t know about

47


ERP System Things You Must DoThe Methodology

Improve your chances of success by: Use a “standard system”!

– When encountering implementation issues, using the same system that successful companies are using, will tend to take the focus off of the computer and on to what is most important: solving the “real” problems.

Become an expert in your system’s functionality in order to:– Maximize the efficiency of its implementation– Maximize the effectiveness of its use


Why Is This So Difficult?

Why is ERP so difficult to embrace? No understanding of why, i.e. the justification No support or involvement from top management Deeply entrenched systems and culture Lack of performance measurements “Turf” protection Emphasis on the short term Past successes No perceived need Not invented here syndrome


ERP Integration Methodology


The core of a successful integration methodology are the initial four steps of the integration process. These four steps provide the overall business operating strategy required to drive the business processes necessary to enable the strategy. These, in turn drive the technology requirements.

The initial four steps of the methodology are:1.Conduct an executive ERP round table discussion and educational session

2.Conduct a facilitated executive strategic planning session

3.Conduct the first cut of combined, integrated ERP and Process education, custom tailored for the business/industry

4.Conduct a facilitated middle management project planning session

4321Executive

Education

Operating Strategy

&

Project

Strategy

Middle

Mgmt.

Education

Detailed Planning

50


ERP Integration Methodology

51


Do It Right the First Time

The cost of remediating a failed ERP implementation is much greater that simply doing it right the first time

It is very difficult and costly to undo the poor business process and shadow systems that result from a failed ERP implementation

However, if you didn’t do it right the first time – then do it over and get it right


If It Was Easy – Anyone Could Do It

The implementation of a successful ERP system is one of the most difficult projects a company can undertake. It is also one of the most lucrative projects, in terms of results and pay back, that a company can undertake.

“There are no gains without pains.”

Benjamin Franklin


Thank You!

NOTICE: Proprietary and Confidential

This material is proprietary to James M. Noblitt. It contains trade secrets and confidential information which is solely the property of James M. Noblitt. This material is solely for the Client’s internal use. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without the express consent of James M. Noblitt.

© 2011 James M. Noblitt. All rights reserved

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