TDEI13: Enterprise Resource Planning Systems

Group 5

Perspectives of SAP implementation: Theory and practice

Zahidul Islam Andreas Diebold Bettina Faude Kristina Lam Marina Gsell

(zahis793) (anddi060) (betfa406) (krila923) (margs782)

2012-12-07

Abstract
This report is about SAP implementation at Atos Medical AB. Atos Medical AB was established in 1986 in Hrby (Sweden) as a spin-off from Medical Rubber, an industrial rubber company. Atos Medical AB is a globally operating company which has been specialized in the development, manufacturing and marketing of products for the throat and head area. In the theoretical framework we present different theoretical background regarding SAP implementation that contributes to our analysis of the case study. Our research focuses on different organizational prospective, knowledge sharing, different kind of ERP implementation and deployment strategies. Atos Medical AB SAP implementation was very successful. The success was based on identifying risks early in the implementation, influential project leader, methodology and effective collaborations among employees. Some risks and problems were also identified, such as not meeting time requirements, prioritizing day-to-day work instead of project, having difficulties by collaborating with consultants, increase of costs and unspecified requirements.

Table of contents
1 Introduction........................................................................................................................................... 1 1.1 Purpose ............................................................................................................................................ 1 1.2 Limitations ....................................................................................................................................... 1 1.3 Methodology .................................................................................................................................... 1 1.4 Background ...................................................................................................................................... 1 1.4.1 Enterprise Resource Planning ................................................................................................... 1 1.4.2 Quick Guide of a SAP Implementation .................................................................................... 2 2 Theoretical Framework........................................................................................................................ 3 2.1 Implementation of ERP ................................................................................................................... 3 2.2 Deployment strategies ..................................................................................................................... 4 2.2.1 Big Bang ................................................................................................................................... 5 2.2.2 Roll-out ..................................................................................................................................... 5 2.2.3 Step-by-step .............................................................................................................................. 5 3 Case Study: Atos Medical AB .............................................................................................................. 6 3.1 Company Background ..................................................................................................................... 6 3.2 Identified risks ................................................................................................................................. 6 3.3 Implementing SAP........................................................................................................................... 6 3.4 Organization during the implementation ......................................................................................... 8 4 Discussion .............................................................................................................................................. 8 5 Conclusion ............................................................................................................................................. 9 6 References ............................................................................................................................................ 10 7 Appendix .............................................................................................................................................. 11

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1 Introduction
In this chapter we describe the purpose of this study, the limitations and methodology. We also present the background to this study.

1.1 Purpose
The purpose of this report is to analyze the procedure of an ERP implementation. The report refers to comparing characteristics of the SAP implementation at Atos Medical AB with the theoretical assumptions. During the analysis we will try to answer the following questions: What are ERP implementation practices in organizations? What contributes to the success of the SAP implementation at Atos Medical AB?

1.2 Limitations
This report is limited on the extent of the comparison of the SAP implementation at Atos Medical AB and the theoretical framework. The report does not cover the selection of ERP systems and observe no other systems beside SAP. Because of a restricted period of time the interview was conducted with a single manager; so the conclusions cannot be generalized.

1.3 Methodology
The theoretical framework of this report about implementation of an ERP system is based on literature review from journals and internet sources. The case study in the second part is built on an interview with the global project manager of the company Atos Medical AB. The interview was taken in Swedish, afterwards translated in English and analyzed. Finally a discussion is being presented from the results of the prior theory framework and case study and a conclusion is drawn.

1.4 Background
1.4.1 Enterprise Resource Planning ERP is a software package that attempts to integrate all departments and functions of a company onto a single computer system that can serve all different departments needs. (Botta-Genoulaz& Millet, 2006) The integration of information systems are developed in several phases. During the 1960s, along with the technical progress, the need of data processing possibilities in order to process information for managing the organization arose. So, single functions were automated. Since 1980 it was extended to the entire business principle areas like purchasing and production. Finally in 1990s there happened a significant change from a function-oriented view towards a process-oriented view. Since 2000 the networking of companies and the automation of cross-company processes have been become more important. Among other things that is supported by the Internet. The task of ERP systems ranges from the organization to the management and control of the company. The ERP systems are used to represent, support and optimize the internal business processes in different areas of the company. That includes finance, production planning, scheduling, accounting, and sales/marketing and human resources, see Figure 1. 1

Figure 1 Enterprise Resource Planning (FH Wrzburg SAP-Training)

A target of the ERP system lies in the optimization of an economically planning of resources under various conditions. In addition, companies aim the integration of important business processes in the entire system and also the handling of the whole range of business issues. ERP systems are complex computer software programs. It consists of a big amount of modules, which support the core business processes in an organization. These modules of the ERP systems are linked to each other. In this way a business process, which affects several organizational units of an organization, can be assisted continuously by the ERP system. Mostly extensive adaptions are necessary to deploy a system in a company. For many branches there are sectorial ERP systems, which can be usable almost without any additional programming work. The most popular vendors of standard software systems are SAP AG, Oracle Corp., PeopleSoft, J.D. Edwards and Baan Co., but there are still many other providers (Yusuf, Gunasekaran &Abthorpe, 2004; Botta-Genoulaz& Millet, 2006). 1.4.2 Quick Guide of a SAP Implementation

The implementation of a SAP System is a complex project, which needs a lot of resources of several departments of a company. All participants must be convinced of the goal and the need of the project to make it successful. For the implementation it is necessary to pass five steps, which are shown in Figure 2.

Project Preperation

Business Blueprint

Realization

Final Preparation

Go live & support

Figure 2 Five steps to implement SAP

In the following text a short summary will explain how a SAP implementation works and what should be considered. Project preparation: This is one of the most important steps during the implementation of the SAP system and must be done carefully. The company sets their goals and objectives during this period. Lack of clear 2

goals and objectives is a primary cause of program and project failure (Baloglu, 2009). Setting goals and objectives include the creation of a matrix with costs and benefits of the SAP implementation, the development of the project budget, determination of the project organization, the responsibilities and the activity planning of the project team, which includes the training of all team members. Business Blueprint: In this segment all business processes, relevant business cases and process steps are documented. This contains the analysis of the training plans, the technical design planning for hardware and the verification of these. It is recommended to get help from the hardware partner. After that some assessments has to be realized. For example the focused current state assessment, which includes the analyzing of the business processes to see where improvements are needed. During the next step, all required functions for the Roll-out must be determined. After this step follows the business case develop with a radical redesign of the existing processes and a cost/benefit analysis. The company will get help how to set up value driven methods. Realization: The goals of this step are the implementation of the business processes and business cases into the SAP system and build up a prototype, which will be customized later. Following is the realization of the main activities where trainings will be offered for the project team, which is very important and the training for the end user will be defined. Finally a lot of tests of the system will be realized, to see if it is ready for the next step. Final preparation: Objective of this section is to identify both the required system test before cutover and SAP support you can use for cutover and final testing (Baloglu, 2009). The end users will be trained for the use of the new SAP system with help of trainings, user manuals, training handbook and support from the responsible department. The user manual must be updated from time to time because changes will be made in the system. Also the system will be tested and prepared for the Roll-out. Schedule must be made to have a guideline, because in the implementation phase the traditional tools might be more efficient. Go live & support: During the first days of the Roll-out of the SAP system it is important to solve the occurred problems as fast as possible and after this it is important to check if all requirements are fulfilled, if not optimize the system. It is needed to document all steps of the implementation and the project can be successful, changes of the system and the requirements must be documented. Another important part of this step is the support of the system. This can be supported by the responsible department or directly from SAP. After a successful implementation the system and the business processes can be improved (Baloglu, 2009).

2 Theoretical Framework
Main section of the report covering literature studied that will be analyzed later with case study findings.

2.1 Implementation of ERP

ERP system implementation is a complex process. The fundamental problem in this process is to align the user organizations features with the ERP system. Many authors have done significant amount of investigations to find out critical success factors in ERP implementation. Implementation of ERP is the most critical process after choosing appropriate ERP system. Regardless any fundamental framework, successful ERP implementation depends on (Wei, Chien& Wang, 2005): Is our technology or the organization play main role in the business? 3

Will the organization adapt and reengineer its business processes or customize the ERP to meet organizational changes?

Critical ERP implementation success factor depends on answers of both questions. In contrast, authors (Yusuf, Gunasekaran& Abthorpe, 2004) strongly believe that organizations have to change to adapt the system rather than going towards expensive and complex ERP customizations. ERP implementation is not just only re-engineering the business process it involves lots of other considerations. Intra-organizational standardization: For large organizations when they merger and acquire new companies, it is essential to follow the basic standard practices throughout the organization. ERP implementation can help organization to achieve intra-organizational standard. The risk of non-conformance: Standardization and best practices become bottleneck for many organizations when the standard package does not support core strategic business processes, which are impossible to standardize. The power positions of individuals: In most cases, ERP implementation become complicated because of the implementation team, which consist of software engineers, implementation partners and top level management. Ignoring end users of the system in the beginning of implementation lead towards failure project. Cost: Many authors suggested that developing add-ons tended to decrease the chance of a successful implementation. Customizing ERP is expensive. So, sticking to the basic configuration saves time and money. Moreover, there is an inverse relationship between vendors support and customization (Wei, Chien& Wang, 2005). Implementation methodologies: Almost every ERP provider offers some form of rapid implementation methodology. It is used to support planning and coordination by standardization the ERP-implementation and making it easier. ASAP (Accelerated SAP) is the rapid deployment tool provided by SAP to implement SAP R/3.

Every enterprise has different software requirements. These requirements should bear in mind in order to ensure a successful implementation. Standard software cannot fulfill all expectations of the customers. There is a great demand of competent consulting, the systems are often less flexible in the case of modifications. There are also a lot of maintenance costs and software developments that are not really customer-orientated. Therefore the implementation should be accurately planned. It requires a lot of resources and time. A good and professional preparation of the SAP implementation can often avoid big problems and difficulties, which usually leads to a successful implementation. The possibilities of implementation failure increase with insufficient preparation.

2.2 Deployment strategies

One of the difficult decisions of a SAP implementation is the deployment strategy the business decides to pursue. We can distinguish between three deployment strategies: Big Bang Roll-out Step-by-step 4

Big Bang and phased rollout are key approaches, but step-by-step implementation is also a possibility of an implementation strategy. 2.2.1 Big Bang

In a Big Bang deployment all modules are implemented simultaneously, which means that all existing systems replace with the new software (Markus, Tanis & Fenema, 2000). The implementation process is very quick (Yusuf, Gunasekaran & Abthorpe, 2003). This approach is preferred by companies with too many systems with a simple organizational structure (Baloglu, 2009).
Table 1: Advantages and disadvantages of Big Bang deployment (Baloglu, 2009)

Advantages It is highly efficient, because redundant customizing is avoided Few or even no interfaces between legacy systems and the new application are needed because all modules go live at the same time There is a short throughput time The project members motivation is high There is an optimal integration of all components under considerations of the integrated business processes 2.2.2 Roll-out

Disadvantages Implementation is complex due to the increased need for coordination and integration Organizational changes must be limited in order to overcome resistance to change among employees risks It is resource intensive over a short period of time A high degree of consulting support is required All employees are subject to higher stress levels at the same time

This deployment is characterized by implementation at one site, and then rolled out to other sites. SAP roll out means reuse of existing implementation cycle and business processes at the new location. The Roll-out approach is fairly popular among a number of larger SAP customers with several companies, several locations, or multi-nationals that do business in several countries. This approach can be combined with the Big Bang and step-by-step implementation strategy (Baloglu, 2009).
Table 2: Advantages and disadvantages of Roll-out deployment (Baloglu, 2009)

Advantages There is a valuable experience gained by project members Costs are kept low because only limited resources are needed 2.2.3 Step-by-step

Disadvantages Customization must also consider company standards for subsequent implementation Site-specific requirements can be overlooked

During a step-by-step deployment are all modules implemented consecutively in small steps. At one time the implementation process is concentrated of one defined module (Baloglu, 2009).

Table 3: Advantages and disadvantages of step-by-step deployment (Baloglu, 2009)

Advantages The complexity for coordinating, controlling and organizing the project and resources is reduced The quality of the project improves because the project members increase their knowledge and skills

Disadvantages There is a longer project throughput time Integration advantages of the project can only be used step by step

3 Case Study: Atos Medical AB

In the following section we describe the implementation procedure at the Atos Medical AB.

3.1 Company Background

Atos Medical AB was established in 1986 in Hrby as a spin-off from Medical Rubber, an industrial rubber company. The founders Gert and Jan-Ove Persson started with finding new solutions for existing products as well as developing new ones for the medical device industry. Nowadays Atos Medical AB is a globally operating company, which has been specialized in the development, manufacturing and marketing of products for the throat and head area. It is headquartered in Sweden with 160 employees and has subsidiaries in the USA, UK, Germany, Spain, Netherlands, Belgium, Sweden and Switzerland and exclusive distributors in about 60 countries worldwide. It is an ENT (Ear, Nose and Throat) company with several market leading products. Atos Medical AB offers a broad range of clinical resources and products in each focus area: ear, nose and mouth and jaw. It produces scientific literature and before launching every product is continuously tested through thorough research and clinical tests. In 2006 Atos Medical AB started an implementation of a new ERP system at the mother company in Sweden. The main reason for changing ERP system was that the previous one did no longer support the business. The simplicity of the old system was insufficient.

3.2 Identified risks

Before initiating the implementation the company did a risk analysis highlighting the major risks of the project. The five major risks were identified as: 1. 2. 3. 4. 5. not meeting time requirements, prioritizing day-to-day work instead of project, having difficulties collaborating with consultants, increase of costs, and unspecified requirements.

3.3 Implementing SAP

Working with an ERP system was not an entirely new experience for the company, due to the existence of the previous system. The members of the organization were, however, not familiar with the new SAP system so the company hired consultants to guide them through the five-step implementation methodology called Accelerated SAP (ASAP). 6

The ASAP methodology contained the following steps: (1) Project preparation, (2) Business blueprint, (3) Realization, (4) Final preparation, and (5) Go live and support. During the first five weeks of project preparation common preparation was executed and there was also mapping of all processes throughout the entire company. There was no earlier mapping available because such work had never been done. The process map formed the input to the Business Blueprint phase in terms of requirements. For eight weeks the super users created user requirement specifications (URS), which contained all the requirements on the new system. One URS was created per module. The scope of the implementation was decided to include six standard modules and two additional parts. The standard modules chosen by the company were: purchasing (or materials management), logistics execution, production planning, sales and distribution, finance, and controlling

In addition to these the company chose to implement a business intelligence (BI) module and a quality assurance system (QA). When all the requirements were set up for all modules the URS were handed over to the consultants to specify the solution for each requirement. All the solutions were documented within the functional specifications (FS). For those requirements lacking solution a gap list was created. In this case there were 84 gaps and all of them were requirements outside the standard package provided by the consultancy firm. Some of them were minor requirements, such as printing setups, which needed small adjustments to fit in the package. The final decision of which requirements to redefine or not were made by the steering committee. About 15 % of the gaps were not redefined and therefore removed as a requirement. Having solutions for all desired requirements the project entered the next phase Realization, where the consultants create the system within a test environment. The entire system was tested by the consultants and documented in Design Qualifications (DQ). The system was handed over to the company, who started testing every system requirement they had set up earlier. These tests were executed by the super users and based on good manufacturing practice (GMP) for the medical industry to assure quality of the system. The system had regulations to meet, for instance many US medical regulation. About 100 requirements were tested and the entire phase lasted for eight weeks. Depending on the importance of the requirement there were three kinds of tests: high, medium, and low. Requirements of high importance were tested three times, while requirements of low importance were only tested once. These tests were documented in Operational Qualifications (OQ). The Final Preparation phase was executed within three weeks when the system was finished tested by the company. The preparations included for instance importing master data, creating roles, and setting up printers. During this phase all users had to go through training on how to use the new ERP system. The final phase Go live and Support was initiated on a weekend, where all process flows were once again tested within the actual system environment. These tests were documented in Performance Qualifications (PQ). There were no major error discoveries and the new system went live without any showstoppers. 7

After going live on Monday the project entered a change control phase where further adjustments could have been made if necessary. According to the company this usually is the case. A new system automatically causes some confusion among its users. That is why the daily users within the organization got support from super users when needed and super users had the possibility to get support from the consultants. The entire implementation was scheduled from the 13th November 2006 to 2nd may 2007. There were no delay in the project and the system went live on time.

3.4 Organization during the implementation

To run this project the company set up an organization with a project manager and a set of super users. The project manager was an experienced senior manager within the company with all authorities to reallocate resources when needed. Each module where represented by two persons, one super user and one supplementary super user working side-by-side. These super users were middle managers with the best competence within each area and working as line managers in parallel with this implementation project. This is why the company feared the risk of down prioritizing the project. The project manager however had a total control of the project and its resources. The project was also organized with a quality assurance system validating every step of the project.

4 Discussion
Atos Medical AB has a fairly complex business process. Before implementing SAP they used another information system (IS) to manage day-to-day work. It was working well but was unable to adapt new business requirements. It had less number of functionalities which raise the need for a new system. They required a system which could support all the business requirements of the organization. From the quest of a new IT system, Atos Medical AB decided to implement SAP. This was a new system for the organization but their previous experience with another ERP system makes the transition easier. Moreover, they chose to follow Accelerated SAP (ASAP) as their implementation methodology and hired consultants to help them during the implementation process. According to the literature (Yusuf et al., 2004) using ASAP is a way of convince all participants of the goal needed to make a project successful. Atos Medical AB did a risk analysis before implementing SAP. In this way Atos Medical was sensitized to potential difficulties the implementation can bring along. The risky factors could be bypassed at an early stage or the company could react faster upon evidence of an already expected problem. One challenge of implementing an ERP system is to stay within the framework of standard systems. The consultants took the requirements and created a gap list for which SAP did not provide any solution. The project sometimes wished to customize the system. However, the common opinion in the company was that it would have been easier to make the system fit into the business and not the other way around. But the project manager required and managed the organization to fit in to the standard package. This was the only way to meet cost and time requirements of the project. Atos Medical AB was able to redefine 85% of the gap list to meet package solution and rest of the requirements was dropped from URS. As described in the theoretical framework an organization must adapt to the system and not the other way around.

Detail URS helped consultants to find solutions from the existing SAP packages. The first version of the system was created in a test environment. All parts of the system were tested based on the priority of the requirements and good manufacturing practice (GMP) was followed. Atos Medical AB selected all the line managers as the super user of the ERP system and trained them by the consultants. They implement all the modules in parallel and trained the end users. After implementing SAP in test environment they choose Big Bang deployment. They deployed the entire system during one weekend and go live on Monday. Our theoretical finding says that Big Bang is a good strategy for a quick implementation (Yusuf, Gunasekaran & Abthorpe, 2003). It took only 24 weeks implement a new system and go live. Having a well-suited manager and a leader of the project was the most important success factor of this implementation project, another important factor was that Atos Medical AB followed the five steps of ASAP implementation. According to Atos Medical ABs employees, without a leader there would have been no motivation or reason for the co-workers to work hard. Some of them would have questioned the way of running the project if the project manager did not have full authority. In a new situation like this project where the working methodology is rather unfamiliar it can easily get fuzzy for the project participants. You cannot really grasp the situation you are working in, which is once again why a good project manager is necessary. Going live on time is considered unusual, so is also meeting cost requirements. The project manager had a useful methodology to follow. The implementation is described as an enormous success for the Atos Medical AB. The company now has an ERP supporting their business. The super users are the process owners of the SAP system and they are working at the same positions today as in the projects supporting set ups in the subsidiaries.

5 Conclusion
After finishing our project work about the implementation of the SAP system (ASAP) into Atos Medical AB we know many important things a company could focus on. As we see in our case study the preparation sets the direction if the implementation will be successful or failure. It is recommended to have help from professional consultants during all steps of planning and implementations, because they have the knowledge to avoid common mistakes. Many mistakes can be done during the preparation of the business cases and the setting of the modules. The question all companies must answer is if they should change or modify their business processes according to the SAP system or if they want to customize it. Often only a few changes must be done in the process in order to cover the regular requirements in SAP modules. All employees must be convinced of the need and the advantages of the new system. As we have seen, Atos Medical AB had an experienced project leader who motivated all project members to work as hard as possible to get the project successful. The well-planed schedule from Atos Medical AB helped them to implement the new system successful. The chosen Big Bang deployment of the system has been chosen perfectly from Atos Medical AB, because the work with two or more system at the same time is not as effective as the work with the new system. As we can see, the implementation process of the SAP system into Atos Medical AB reflects a lot of issues, which we found in the adequate literature. 9

6 References
Baloglu, Arzu (2009) Implementing SAP R/3 in 21 st Century: Methodology and Case study. Retrieved November 21, 2012, from http://www.tojet.net/e-book/SAPBook.pdf Botta-Genoulaz, Valrie and Pierre-Alain Millet (2006) An investigation into the use of ERP systems in the service sector. In International Journal of Production Economics 99. pp. 202221 FH Wrzburg SAP-Training. Retrieved November 21, 2012, from http://saptraining.fh-wuerzburg.de/pages/SAP_ERP.html Markus, M. Lynne; Cornelis Tanis and Paul C. van Fenema (2000) Multisite ERP implementations. Communications of the ACM, Vol. 43, No. 4 pp. 42-46. Wei, C. C., Chien, C. F., & Wang, M. J. J. (2005). An AHP-based approach to ERP system selection. International Journal of Production Economics, 96(1), 4762. Yusuf, Y., Gunasekaran, A., & Abthorpe, M. S. (2004). Enterprise information systems project implementation: A case study of ERP in Rolls-Royce. International Journal of Production Economics, 87(3), 251266.

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7 Appendix
How did you organize for the implementation?
1. Did you follow any implementation methodology? 2. Did you form a project team? Was there a core ERP implementation team? a. How did you select the member? 3. What was the project time-scale (start, end and different events in project life cycle)? 4. Did you investigate project risks before implementation? a. What were the major risks? 5. Did your implementation require any SAP consultants?

What kind of implementation?

6. Did you choose a pre-built package software or a customized ERP system? a. If customize: Did you adjust your businesses to adapt SAP or did you customize SAP to follow the business processes? How did you feel about the business process changes and information technology changes? Where you aware of the extent of all these changes from the beginning? Did you discover any new requirements of change within the organizational structure when implementing the ERP? b. If package: Why did you choose a pre-built package software? Did the software support all your business processes? 7. Was there a possibility to share knowledge with other end users or did you experienced difficulties to access knowledge and skills? 8. Which modules have been implemented and why? 9. Was the implementation a Big Bang deployment or a phased rollout?

To sum up the implementation

10. What were the difficulties/problems during the implementation process? 11. What are the benefits/success factors from implementing the ERP system? 12. Did SAP meet your expectations?

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