ERP Implementation

A Business Case for Bivia Textile Industry

Submitted by Lekshmi P Roll no: 9810036 Department of Management Studies, IIT Roorkee

Contents A) Section -A ............................................................................................................................. 4 (i)Executive Summary ............................................................................................................... 4 1. Introduction ............................................................................................................................ 5 1.1 Project Name .................................................................................................................... 5 1.2 Project Team .................................................................................................................... 5 1.3 Project Description ........................................................................................................... 5 2. Background and problem definition ...................................................................................... 6 2.1 Why ERP in Bivia? .......................................................................................................... 7 2.1.1 Market Study across Textile Industry ........................................................................ 8 2.1.2 Case of Attwools ....................................................................................................... 9 3. Measurable Organisational Value (MOV): .......................................................................... 10 3.1 Financial and Strategic Benefits:.................................................................................... 10 3.2 Operational Benefits ....................................................................................................... 10 3.4 Customer Benefits .......................................................................................................... 10 3.5 Quantifying MOV .......................................................................................................... 11 3.6 Framework for Evaluating Implementation ................................................................. 12 4. Analysis of Alternatives ....................................................................................................... 13 4.1 Total cost of Ownership ................................................................................................. 13 4.2 Total Benefits of ownership ........................................................................................... 14 4.3 Financial Analysis Used ................................................................................................. 15 4.4) SAP mySAP Business Suite R/3 4.6 and SAP R/3 Enterprise 4.7 ............................... 15 4.4.1.) Economic Analysis ................................................................................................ 15 4.4.2Cash Flow Summary Analysis ................................................................................. 16 4.4.3 Total Cost of ownership .......................................................................................... 18 4.4.4 Total Benefits of Ownership.................................................................................... 19 4.4.5Implementation Value drivers .................................................................................. 21 4.4.6 Strategic Implementation Drivers ............................................................................ 22 4.5) Comparison with other alternatives .............................................................................. 23 4.5.1) PeopleSoft Enterprise 8.8 and 8.9 and EnterpriseOne 8.11 ....................................... 23 4.5.2) Microsoft Dynamics AX 2009 ................................................................................... 23 4.5.3) Comparison of Market Shares ................................................................................... 26
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4.3 Comparison of Various ERP Packages: ......................................................................... 26 5. Recommendations ................................................................................................................ 27 B)Section B .............................................................................................................................. 28 6) Project Scope Statement ...................................................................................................... 28 7) Risk Management ................................................................................................................ 29 7.1)Risk Identification:......................................................................................................... 29 7.2 Risk Analysis.................................................................................................................. 30 7.3 Risk Planning ................................................................................................................. 31 7.4 Risk Monitoring ............................................................................................................. 31 8. Project Communication Plan ............................................................................................... 32

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A) Section -A (i)Executive Summary

ERP implementation A business case for Bivia textile industry is about the business case written for ERP implementation in the Bivia, a major textile company located across various locations of UK and USA. The firm is now running on a home grown IT application that was ahead of its time when first created. But now they have started facing various issues like corporate office and manufacturing plant operations were not integrated online, running on separate instances, customer lacking overall visibility to and reconciliation of inventory management etc. Also in the increasing competitive world, they had to maintain their market position. So all these necessitated them to think about an ERP implementation across all the locations. The business case then discussed various measurable organisation values and the time frame it will take to achieve it. The report then goes to the analysis of alternatives which are basically the analysis between SAP mySAP Business Suite R/3 4.6 and SAP R/3 Enterprise 4.7,Oracle PeopleSoft Enterprise 8.8 and 8.9 and EnterpriseOne 8.11 and

Microsoft Dynamics AX 2009 .The financial analysis of all these alternatives are done using Return on Investment and Payback method and in each case the ROI and payback is calculated and compared .Also a comparison is done based on the market share and some other qualitative attributes of each of these package. Finally the case concludes with the recommendation of which ERP package to be used

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1. Introduction
1.1 Project Name: ERP implementation for the Bivia Industry 1.2 Project Team: The team consists of basically
1) Steering committee :The members of this particular committee includes project sponsors , the SAP consulting manager and the project manager . 2) Consultants 3) Technical members/ Programmers 4) Change managers and security persons

1.3 Project Description:

The project is all about implementing ERP package across all the 4 locations of Bivia Textile industries across US and UK. The project covers various aspects like integrating the various functions across the organization in to a single system that can serve all the purpose of the functions specific needs.

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2. Background and problem definition

Bivia Industries, (Sales volume: $100 million plus) is a vertically integrated textile company, offering end to end solutions from yarns to made ups and garments. With manufacturing locations in UK and US, the company provides world class woven and knitted apparel fabrics ,home Textiles , garments and polyester yarns to manufacturer , exporters , importers and retailers including some of the worlds leading brands. The firm operated on a home grown IT application that was ahead of its time when first created. But corporate office and manufacturing plant operations were not integrated online, running on separate instances. This necessitated offline data synchronization and periodic reconciliation. Business processes across the enterprise were non-uniform, and accurate information was not always readily available. The customer lacked overall visibility to and reconciliation of inventory management. Material inventories were common for more than one legal entity within the company, making reconciliation of material consumption per entity a huge undertaking at the end of each quarter. There were few controls over intra-company material transactions, making it difficult to follow inventory or materials from one entity to another. Demand planning and forecasting was also an area lacking integration and enterprise-wide visibility. As Bivia Industries operations grew, management realized the need to migrate to a robust, integrated, stable IT platform that would scale to support its future growth plans. To do this it needed a seamless integration of business processes within the organization. It also needed to improve information flow and inventory management throughout the organization. Being able to measure performance at each stage of the production process is critical to success in the business. However, customers lack of integrated business processes and centralized information management system meant that critical information from various measurement points was neither accurate nor timely. This meant that production-related information flow to regional offices and the corporate office was unreliable, making it difficult to measure operating costs and project growth for the company. 5,000 shop-floor employees who dont have access to computers or e-mail. In the past, the majority of these employees were largely cut off from the HR information flow. Printed employee magazines and bulletin boards provided only limited remedies; key information often failed to make it down to the shop floor. Labor data, on the other hand, had to be tediously gathered by local HR departments and communicated through paper-based processes. Some of the problems the organization was facing currently included 1) No proper integration between the different functional units and
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2) Issues related to picking , packing and shipping 3) Lack of proper asset management ,book closures , accounts payable and receivable 4) Issue regarding proper activity based costing and product costing 5) Third party billing 6) Efficient management of human resources which includes payroll, training , leaves , career management etc 7) Requisition , Purchase orders , Goods receipts and BOMs 8) Regarding Planning , execution , inspection and certificates 9) Master product scheduling, capacity planning etc. 10) Better data handling So the organisation was in look for a better enterprise application which will cater the demand of the organization and gives a good ROI.

2.1 Why ERP in Bivia?

The textile industries have changed tremendously in the last few years. To sustain competitive advantage, Bivia must re-examine and fine-tune their business processes to deliver high quality goods at very low costs that too with good quality. Globalization has led to increase in competition and quality awareness and therefore it has become very important for the industry to integrate itself with latest information technology to survive. ERP is an integrated system that allows information to enter at a single point in process & updates a single shared database for all functions that directly or indirectly depend on this information. ERP system enhances information flow through various business processes like production sales, inventory planning and finance - helping Bivia to gain competitive advantage. By using ERP, the following advantages can be obtained when compared with non ERP systems . It helps in the optimal uses of manufacturing resources and reduces wastage. It helps in clubbing up the function of both Yarn and the Fibre module. Higher quality of product is obtained by using it. Controlling of the different textile mills in the different location can be made easy by this system. It vanquishes the old standalone computer system in Finance, HR, Manufacturing and Warehouse, and replaces them with a single unified software program dived into software modules and shares information enterprise wide in real time thus improving customer service and corporate integration

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 It provides software components for vertically integrated companies requiring system to cover the entire production cycle It helps in the planning for optimizing and scheduling of production orders It not only provides a user-friendly environment can be tailored to the needs of companies both large and small, but also progressively expanded, both in the ` horizontal` sense to embrace additional organizational functions, as well as `vertically to integrate other stages of the production process.

ERP enables accountability, accuracy, and transparency without breaking the existing workflow.

2.1.1 Market Study across Textile Industry

In a recent study conducted by Gartner across the textile industry worldwide , it was found out that the advantages obtained by implementing ERP systems is so high that it has out witted the NON-ERP applications . For the study 100 companies were selected across the world. Out of these 100 companies, 50 had implemented other IT packages and 50 had implemented ERP. The result is as shown below:

Textile Industry

As seen from the chart showed above the ROI for all those companies which has implemented ERP was far more(avg of 150% and 120%) when compared to the other companies .Same was the result for the customer satisfaction, increase in profitability, cost control, responsiveness of the system and in the overall improvement of process. Because it is the ability of ERP system to integrate all different functional units in a organisation to talk to each other.
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Also all the leaders in the textile industry (Attwoolls,Arville and Palmhive )who all are also the biggest competitors of Bivia has ERP Systems in their place and they have achieved strategic growth after implementing ERP in their systems . Moreover another competitor of Bivia which is the Middlesex Textile has also implemented ERP Systems which has enabled them to achieve enormous growth.

2.1.2 Case of Attwools

Attwools, the biggest Competitor of Bivia has ERP systems. The benefits they got by implementing ERP systems were: Objective Payback time Operating cost Delay in Financial close cycle Resource utilization Accuracy of sales forecast data Reduced monthly billing cycle time Outbound-shipping processing time Order-turnaround time Expired stock Change factor 18 Months Reduction by 10% Reduction by 1% Increase by 5% Increase by 5% Reduction by 4% Reduction by 7% Reduction by 1 % Reduction by 10 %

These factors have been the testimony for the fact that implementing ERP in the system increases our benefits.

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3. Measurable Organisational Value (MOV):

By implementing an ERP application, the organisation wants to integrate all functions across the organization in to a single system that can serve all the purpose of the functions specific needs. Now breaking down the benefits of implementing an ERP package will give the following benefits:

3.1 Financial and Strategic Benefits:

High payback on investment. Improved adaptability to market changes. Reduction in operating cost and thereby giving Increased Profits Achievement of company-wide consistency of information Gain greater visibility into sales order and fulfilment data Reduced time required for consolidation of accounts considerably Enhanced order fulfilment by accelerating the sales order process Standardized business processes, reports, and data for increased efficiency and control Increased business transparency to control costs and support operational decisions Compliance with international financial reporting standards Reduced time required for consolidation of accounts considerably Transformation of the terms of competition within the market Improved data accuracy and consistency via real-time monitoring for informed Decisions.

3.2 Operational Benefits

Improved spend management Improve employee productivity significantly Established greater operational efficiency via integrated processes Improved inventory management and also helps in reducing material wastage Improved asset tracking to streamline maintenance planning and tax filing. Gained better supply chain visibility and control to support negotiations and service Streamlined and standardized business processes

3.4 Customer Benefits

Transaction process will become easier for the customer
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They can track their orders Proper visibility and transparency Improved ability to meet customer commitments

3.5 Quantifying MOV

In order to calculate whether the project is successful or not it was very essential to find out a quantified targets which will be achieved with the help of this project .So in this case we have calculated the measurable organisational value for a period of 5 years and have formulated certain targets which the project is supposed to meet at the end of 5 years to become a successful project. They are: 1) The implementation of the ERP package across the organisation should give a rapid pay back, in 20 months. 2) The implementation should also provide a very good return on investment based on substantial cost savings and business value creation as compared to continuing with the legacy systems 3) In addition to the compelling economic benefits, the implementation is viewed as strategic, helping companies increase competitiveness, improve business agility and predict IT costs more accurately Now to make things in a more systematic manner we have summarised the MOV in a tabular format so that it can be verified at the end of the stipulated time period.

Objective Change factor Rapid payback time Operating cost Reduction by 10% Delay in Financial close cycle Reduction by 1% Higher resource utilization Increase by 5% Higher productivity of finance, HR, and operations FTEs Increase by 10 % Higher accuracy of sales forecast data Increase by 5% Reduced monthly billing cycle time Reduction by 5% Outbound-shipping processing time Reduction by 5% Order-turnaround time Reduction by 1 % Expired stock Reduction by 2 %
*values derived using the previous similar implementations

Time 20 months 1year 1year 1year 1year 1year 1year 1year 1year 1year

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3.6 Framework for Evaluating Implementation

An intuitive framework for evaluating the cost savings, business value and strategic benefits for implementation was developed for this case. This framework includes four key elements:

1. Implementation cost analysis

2. Post-implementation cost savings analysis

3. Post-implementation business value improvement analysis

4. Post-implementation strategic benefit analysis

Framework Cost and Benefit Drivers Now in order to carry out the above mentioned analysis it was very essential that we need to have some parameters for the analysis. The below mentioned table provides a list of the cost, cost savings, business value and strategic drivers included in this implementation business case framework and economic analysis. Implementation Cost Line Items Planning costs Operating cost Internal Implementation Implementation (3rd party) Days in inventory Training Hardware costs Financial close cycle Days sales outstanding Parts inventory Cost Savings Line Items Business Value Line Items Availability related value improvement Enhanced decision making Process or cycle time savings/ value (order entry) Strategic Benefit Line Items Competitiveness High Efficiency Overall business agility / time to market Predictability of costs Access to IT resources IT standardization / IT best practice approach Reduction in risk

OS licensing costs OS support fees DB licensing costs

Higher resource utilization Higher productivity of finance, HR, and operations FTEs Higher accuracy of sales forecast

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Travel Admin/Misc.

data Reduced monthly billing cycle time Improved profit-after-tax (PAT) margin Outbound-shipping processing time Order-turnaround time Expired stock Sales data reporting time Finished goods stock

Now based on the cost, cost savings and business value drivers in the preceding table, a comprehensive, comparative cost and benefit model to quantify the implementation return on investment (ROI) over a five-year analysis horizon was developed . The costs and benefits were based on the actual and expected costs and benefits validated in the primary and secondary research phases of the project. A discounted cash flow analysis was employed to account for the relative timing of the costs and benefits spanning the five years. The cost savings and benefits in the first year were factored down to account for the length of the implementation deployment and were factored up in years two through five to account for general growth in the ERP environment.

4. Analysis of Alternatives
Now in order to find out which ERP package can best suit the need and which can basically meet the quantified targets, i have carried out a comparative study between various ERP packages. It includes 1) SAP mySAP Business Suite R/3 4.6 and SAP R/3 Enterprise 4.7 2) Oracle PeopleSoft Enterprise 8.8 and 8.9 and EnterpriseOne 8.11 3) Microsoft Dynamics POS 2009

4.1 Total cost of Ownership

For quantifying the cost related with the project following factors are taken in to consideration for calculating the total cost of ownership The various costs that incurs during an implementation includes

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1) Planning cost: It is the cost associated with planning prior to implementation. 2) Implementation (Internal) : Internal Labour for the implementation activities including installation .configuration and testing 3) Implementation (3rd party ): 3rd party labour for the implementation activities including installation .configuration and testing 4) Training : The training investment for the new package 5) Hardware cost : Cost for the hardwares associated with new implementation 6) OS Licensing cost :Server Licensing cost and the user accounts costs 7) New Server OS support fees :On going server OS Support Cost (annual ) 8) Database licensing cost :Licensing cost for the new database associated with ERP 9) Travel: Travel cost associated with implementation
10)Admin/ misc :Admin / misc cost associated with migration

4.2 Total Benefits of ownership

These are the savings or the benefits which company will receive because of implementing ERP across the organisation. These benefits are classified into 1) Cost Saving Line items 2) Implementation Value Drivers 3) Strategic Implementation Drivers Total Benefits of Ownership Business Value Line Cost Savings Line Items Items Availability related value improvement Operating cost Enhanced decision making Parts inventory Process or cycle time savings/ value (order entry, Days in inventory Financial close cycle Days sales outstanding

Strategic Benefit Line Items Competitiveness High Efficiency Overall business agility / time to market Predictability of costs Access to IT resources IT standardization / IT best practice approach Reduction in risk

Higher resource utilization Higher productivity of finance, HR, and operations FTEs Higher accuracy of sales forecast data
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Reduced monthly billing cycle time Improved profit-after-tax (PAT) margin Outbound-shipping processing time Order-turnaround time Expired stock Sales data reporting time Finished goods stock

4.3 Financial Analysis Used

Here we are using the Return on Investment Method to calculate the ROI and from this we calculate the payback period also Project ROI = (total expected benefits total expected costs) Total expected costs Payback Period = Initial Investment Net Cash Flow

4.4) SAP mySAP Business Suite R/3 4.6 and SAP R/3 Enterprise 4.7

4.4.1.) Economic Analysis

The following analysis provides a summary of the return on investment and expected breakeven based on implementation cost/benefit analysis over five years. The results are based on the net present value (NPV) of the cost and benefit cash flows over the five year period. Based on an average five-year implementation cost of $675K, with an average implementation length of six months from initial planning to production deployment, the companies interviewed cited substantial cost savings and business value drivers, yielding a total five-year benefit of $2.65M. This results in a five-year Return on Investment (ROI) of 293% and a payback of 15 months from the completion of the migration.

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Fig : 1

Business Case Summary Implementation(Investment) Cost Savings (NPV* of Cash Flows) Business Value (NPV* of Cash Flows) Five Year Benefits (NPV*) Net Benefit (Return Less Investment) Return On Investment Estimated Payback (Months)
*Discount rate for NPV of cash flows = 10%

$675,407 $1,561,618 $1,092,458 $2,654,076 $1,978,669 293% 15

4.4.2Cash Flow Summary Analysis

The figure below illustrates the annual analysis of the implementation cost (investment), cost savings and business value for the initial year through year five. Also illustrated are the cumulative costs/investment and the cumulative economic benefits. The cumulative cost lines in the graphic illustrate the payback in the first quarter of the second year after the implementation of SAP

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Fig 2 :

Year 1 Implementation (Investment) Cost Savings Business Value Cost $675,407 $204,633 $147,787

Year 2 $18,333 $429,730 $310,353 $740,084

Year 3 $18,333 $451,217 $325,871 $777,088 $712,074 $1,869,592

Year 4 $18,333 $545,444 $342,165 $887,609

Year 5 $18,333 $497,466 $359,273 $856,739

Cost Savings + Business Value $352,421

Cumulative Investment $675,407 $693,740 Cumulative Benefit $352,421 $1,092,504 *Cash flows are actual and not discounted

$730,407 $748,740 $2,757,201 $3,613,940

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4.4.3 Total Cost of ownership

Fig 3

A few key elements of analysis from the implementation cost research are listed below: The labour costs for the implementation planning and implementation represent the majority of the cost of the migration, 56% of the total five-year cost. The primary reason for the substantial amount of cost is that the implementation includes the

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buying of the SAP application itself as well as the underlying ERP database implementation Software support fees are the next major cost element, primarily because this is a recurring annual cost of approximately $18K that amounts to about $92K over the five-year period. New hardware purchase represents 6% of the total five-year cost, with a cost of $46K. Server OS Licensing Costs represent only 3% of the total five-year cost, with a cost of $24K.
4.4.4 Total Benefits of Ownership

Now as we saw in the previous section the various costs associated with the implementation here in this section we will see what all are the savings or the benefits which we will receive because of implementing SAP across the organisation. These benefits are classified into 1)Cost Saving Line items 2) Implementation Value Drivers 3) Strategic Implementation Drivers 1) Cost saving Line items These benefits are summarised in the form of a table which is shown below. Saving Line items Operating cost Parts inventory Days in inventory Financial close cycle Days sales outstanding Higher resource utilization % reduction 14% 7% 8% 1% 7% 8% Savings $301,873 $142,393 $175,897 $25,128 $150,769 $180,923

Higher productivity of finance, HR, and operations FTEs Higher accuracy of sales forecast data
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12% 5%

$251,282 $103,193
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Reduced monthly billing cycle time Improved profit-after-tax (PAT) margin Outbound-shipping processing time Order-turnaround time Expired stock Sales data reporting time Finished goods stock

7% 11% 6% 2% 3% 8% 1%

$144,068 $238,717 $117,265 $36,855 $71,667 $175,897 $12,564

$2,128,490

Total

100%

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Fig 4

4.4.5Implementation Value drivers

The figure below presents the average migration business value drivers based on the SAP implementation project along with the percentage of the five-year benefit for each cost line item

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Business Value Line Items

% of Value

5YR Value (5YR)

Availability improvement

related

value

0.15 0.22

$477,435 $502,563

Enhanced decision making

Process or cycle time savings/ 0.19 value (order entry,

Total (actual; not NPV) 100%

$505,451
$1,485,450

Fig 5

4.4.6 Strategic Implementation Drivers

Figure presents the average rank order of the strategic implementation benefits based on the SAP implementation project. Based on the research and previous experiences, a rank was assigned to a set of six strategic migration drivers from most impact (rank 1) to least impact (rank 6). The top two ranked items competitiveness and business agility are of particular business value that spans beyond the IT organization and affects the entire organization. In addition to those listed, there were others cited by interviewees including the strategic value of collaboration

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Fig 6

4.5) Comparison with other alternatives 4.5.1) PeopleSoft Enterprise 8.8 and 8.9 and EnterpriseOne 8.11
People Soft is another leading ERP vendor. And basically these days it is always between SAP and People Soft the comparative study happens .So as a part of the business case we thought of discussing the various costs we have discussed for SAP implementation. As shown below we can see that when we use People Soft application the payback period rises to about 21 months Business Case Summary Implementation(Investment) Cost Savings (NPV* of Cash Flows) Business Value (NPV* of Cash Flows) Five Year Benefits (NPV*) Net Benefit (Return Less Investment) Return On Investment Estimated Payback (Months)
*Discount rate for NPV of cash flows = 10%

$669,633 $1,022,524 $873,966 $1,986,491 $1,226,858 183% 21

4.5.2) Microsoft Dynamics AX 2009

Microsoft Dynamics AX 2009 is a comprehensive Enterprise Resource Planning (ERP) solution for organizations that empowers people to work effectively, manage change, and compete globally. It makes it easy to operate across locations and countries by standardizing processes, providing visibility across your organization, and helping to simplify compliance.

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As shown below we can see that in the case of Microsoft Dynamics the payback period rises to 22 months Business Case Summary Implementation(Investment) Cost Savings (NPV* of Cash Flows) Business Value (NPV* of Cash Flows) Five Year Benefits (NPV*) Net Benefit (Return Less Investment) Return On Investment Estimated Payback (Months)
*Discount rate for NPV of cash flows = 10%

$775,407 $1,061,618 $1,092,458 $2,154,076 $1,378,669 177% 22

Figure 7

presents the relative advantage of implementation of SAP when compared with

People Soft and Microsoft Dynamics. Based on our research and analysis:

Implementation of SAP offers a better return on investment and a shorter payback period than a implementation of People Soft and Microsoft Dynamics, an average of 110% better ROI and a six month shorter payback, respectively.

The five-year cost for a implementation of People Soft is just slightly less (1%) than a implementation of SAP . Despite the server operating system and user access licensing costs for SAP, People Soft ongoing subscription support costs are much higher in years two through five. And in the case of Microsoft the cost itself is larger

Implementation of SAP has the potential to improve cost savings by 53% over a implementation of People Soft. The key areas where a implementation of SAP provides cost savings advantages over People Soft are Administration Labor (OS and DBMS), Database Software Support/Maintenance and Platform Leverage.

Implementation of People Soft does not offer the opportunity for savings from implementation of the underlying existing database and does not offer a significant savings in OS administration staffing cost because a implementation to People Soft does not present a significant staffing skill-level transition.

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Implementation of SAP also provides potential advantages for business value generation. Based on our analysis, a implementation of SAP can improve business value by 25% vis--vis a implementation of People Soft over five years.

Fig 7 : Comparing SAP with People Soft and Microsoft Dynamics

Implementation

Implementation Cost(Investment )

Cost Savings

Business Value

5YR ROI Potential

Expected Payback

SAP People Soft Microsoft

$675,407 $669,633 $775,407

$1,561,618 $1,022,524 $1,061,618

$1,092,458 $873,966 $1,092,458

2.93 1.83 1.77

15 Months 21 Months 22 Months

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4.5.3) Comparison of Market Shares

4.3 Comparison of Various ERP Packages:

ERP Packages* Microsoft Net Dyanmics Implementation Application installation wizard Advanced configuration Process modeler Advanced data loading and moving Process-oriented integration Pre-packaged integration between vendor applications Built-in web services integrations Task-oriented navigation Navigation configurability Task-oriented dashboards Web client Moderate Good Good Good Average Average Good Good Average Good Average Average

Oracle People soft Extremely good Good Good Good Good Good Extremely good Good Good Good Good Good

SAP my SAP Business Suite Good Extremely good Extremely good Extremely good Extremely good Extremely good Extremely good Good Extremely good Good Extremely good Good

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Integrated office productivity Diagnostic and technical support Remote and online support Performance diagnostics and tuning Patch management Automated upgrade process and toolsets User-centric performance testing Data archiving.

Good Good Average Good Average Good Average

Good Good Good Extremely good Good Extremely good Extremely good Extremely good

Extremely good Extremely good Good Good Good Good Good Good

*Ratings in the order of Extremely Good ,Good, Average, Moderate ,Bad, Extremely Poor .Ratings assigned by giving a mark between 10-0. The results derived from the survey conducted between 100 compnies which have implemented these ERP Solutions. Source : ERP wire

5. Recommendations
AS Bivia needs to integrate a large number of functional units to single application in which each unit can speak to other and also reduces the cost, the company should go for ERP implementation and that too with SAP .As discussed in the business case the advantages of SAP over the other two ERP packages which are being compared here are numerous. The return on investment for SAP implementation is better than the other two packages and also SAP is the market leader in the ERP and there have so many testimonials for the increased efficiency and customer satisfaction for SAP. As the analysis in the paper has demonstrated, the cost savings and the value generated from SAP implementation are compelling in absolute terms as well as relative to People Soft and Oracle. In addition to the economic and strategic reasons for SAP, the issue of risk mitigation is also of importance. Oracles imminent acquisition of Sun Microsystems, heading towards a potentially lengthy dispute with the European commission, presents many uncertainties as to the sun products (here the ERP platform for Oracle is sun based) and creates unnecessary risks. Taking all these points in to consideration and the other costs we strongly recommend SAP to be implemented.
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B)Section B
6) Project Scope Statement

Entity Scope: The project would be implementing SAP across all locations of Bivia Industries Geographical Scope : The SAP implementation will be done across all the existing locations of Bivia Industries which includes 3 locations in UK (Bivia Industries Birmingham,

Glasgow and Leeds) and 4 locations in United States of America(Dallas, Boston ,Atlanta and Philadelphia) . Functional Scope: The project will be to implement SAP solution of the sales and distribution(SD), Finance (FI),Materials Management (MM),Human Resources (HR) and Quality Management(QM )module across the Bivia Industries which will be helping Bivia to integrate the information across all the locations there by replacing all the stand alone systems with a single unified software program dived into software modules ,which shares information enterprise wide in real time thus improving customer service and corporate integration. After implementing the SAP solutions they will be getting daily integrated sales report , Payroll calculation , Quality check reports ,Invoice reports across all the locations Technology Scope: The project will cover all the software and upgrade hardware support needed to implement the SAP solutions. The project also covers all the licensing cost associated with implementing SAP solutions. The implementation and development of middleware connecting the SAP System and the Non SAP systems wont be under the scope of this project. Assumptions: Bivia Industries have the required infrastructure to go for a IT implementation. The project is meant only for the existing locations of Bivia. They have the enough internet connectivity and broadband needed for SAP implementation. The staff at Bivia needs to be educated and trained to make use of the functionalities which would result from the implementation of the SAP solution.

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7) Risk Management
7.1)Risk Identification:
1) Technology Risks: The existing applications may not interact with SAP system. The database used in the system cannot process as many transactions as to match with the data loading in to the SAP system SAP implemented has some bugs in it that limit its functionality like failing to generate daily report

2) People Risk

Lack of skilled resources Training required to be given to Bivia is not available Lack of role clarity between the resources People living in between the project

3) Organisational Risk Resistance from the staff at Bivia Organisational structure is restructured so that different managements are responsible for the project Organisational problems reduce the project budget

4) Requirements Risk Requirements may change once the project starts resulting in a major re work Customer fails to understand the impact of requirements change

5) Estimation Risk The time required for SAP implementation is underestimated The modules of SAP selected to integrate overall applications can be underestimated

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7.2 Risk Analysis

Risk The existing applications may Risk Category not Technology Risk Moderate Catastrophic Probability Impact Moderate Catastrophic

interact with SAP system.

The database used in the system cannot Technology process as many transactions as to match Risk with the data loading in to the SAP system SAP implemented has some bugs in it Technology that limit its functionality like failing to Risk generate daily report Lack of skilled resources People Risk

Moderate

Serious

High Moderate

Catastrophic Tolerable

Training required to be given to Bivia is People Risk not available Lack of role clarity between the People Risk

Moderate

Tolerable

resources People living in between the project Resistance from the staff at Bivia People Risk Organisational Risk Organisational structure is restructured Organisational so that different managements are Risk High Serious High Low Serious Serious

responsible for the project Organisational problems reduce the Organisational project budget Risk Moderate Serious Low Catastrophic

Requirements may change once the Requirements project starts resulting in a major re work Risk

Customer fails to understand the impact Requirements of requirements change The time required for Risk SAP Estimation Risk

Moderate

Tolerable

High

Serious

implementation is underestimated The modules of SAP selected to Estimation Risk Low Catastrophic

integrate overall applications can be underestimated

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7.3 Risk Planning

Strategy Plan the transition from the legacy The existing applications may not interact with SAP software to the new solution and keep the system. back-up options ready. The database used in the system cannot process as many transactions as to match with the data loading in to the SAP system Lack of skilled resources Lack of role clarity between the resources People living in between the project Resistance from the staff at Bivia Organisational structure is restructured so that different managements are responsible for the project Investigate the possibility of buying a higher performance database Alert customer of potential difficulties and the possibility of delays Make clear role responsibilities before the project starts Always keep role overlap Inform them about the advantages of implementing SAP Prepare a briefing document for senior management showing how the project is making a very important contribution to the goals of the company Prepare a briefing document for senior management showing how the project is making a very important contribution to the goals of the company Derive traceability information to asses the requirements change impact ,maximise information hiding in the design Prepare a briefing document tell how the project will be impacted because of requirements change Monitor the requirement gathering and standards used to arrive at the estimated time. Use program generators Risk

Organisational problems reduce the project budget

Requirements may change once the project starts resulting in a major re work Customer fails to understand the impact of requirements change The time required for SAP implementation is underestimated

7.4 Risk Monitoring

Risk Technology People Indicators calling for attention and Monitoring Many technology problems, problems in integration. Poor staff morale, threat of job retention, poor relationship among team members Organisational gossip, lack of action by strong senior management.

Organizational

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Requirement

Changes in management plan, indecisive and noncommittal response from the client and customer complaints Failure to reach the schedules delay

Estimation

8. Project Communication Plan

Stake holder Information Requirement s Business Case Type of Report/Metri c Business case Timing/Availabilit Medium or y Format

Sponsor of the project

Before the starting of project

Formal meeting ,presentation and report Formal meeting and reports.

Sponsor, project manager

Scope Definition

Project scope, requirement, boundary and budget report

At the commencement of project and after incorporating any requirement changes In the beginning and also monthly and after each milestones

Project Manger

Risk related with the project

Risk Management Report

Formal meeting, conference calls and presentation s. Formal meeting and presentation Meetings and Electronic mails.

Project Manager and Sponsor

Budget

Financial reports

Beginning of the project and at each fortnight Review weekly

Project Manager and team leaders

Work Breakdown Structure/ resource assignment.

Utilization matrices, capacity planning sheets

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Project Manager, Team leaders and members Project Manager, Team leaders, sponsor

Project Status

Project Status Reports

Weekly

Formal meetings and reports. Email followed by formal meeting.

Change request

Formal request for change in the original project plan. Evaluates the success/failur e of the project. Documentatio n and lessons from the project. Key observations Issues

As and when required.

Project members and sponsors

Project review

End of the project (a part of project closure)

Formal meetings at different levels. Informal meetings.

Project members (include manager, leader and team)

Lessons learned

End of the project (part of project closure)

Team leads and members

Issues /updates

As and when required.

Informal meetings, online.

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