Professional Documents
Culture Documents
Planning (ERP)
Group 6
1
What will we cover today?
• The Background Knowledge of ERP--Adam
• One case study of failed ERP implementation
(Raskas Foods)--Rich
• One case study of successful ERP implementation
(Cisco Systems)--John
• ERP Best Practices / Summary--Ryan
2
Background of ERP
• History of ERP
• What is ERP?
• Major ERP suppliers
• Why companies want to implement ERP
• ERP implementation procedures
3
History of ERP
• 1960's-focused on Inventory control issues
ERP
MRP II
MRP
Inventory
control
– Information Technology
– Core Processes
– Specific Business Objectives
6
Enterprise Integration
Purchase
Inventory
Sales Manufacturing
Units
ERP
HR Treasury
7
The Relationship Among Three
Components of ERP
Information
Technology integrates
with your company's
Business core business processes
management
practice
Specific
business
objectives
8
ERP Market Space
• $16 Billion Total Annual Spending (2002)
[The Steady Stream of ERP Investments Fenella Scott, Jim Shepherd AMR research August
24, 2002]
1. SAP
2. Oracle Corporation
3. Peoplesoft, Inc.
4. JD Edwards & Company
5. Baan International
11
Different Markets
for Different Providers
• 11% of the companies surveyed are still using
homegrown (legacy) applications
[The Steady Stream of ERP Investments Fenella Scott, Jim Shepherd August 26, 2002
AMR Research]
12
Leading ERP Companies
General Market Shares
40 SAP
Oracle
20
Peoplesoft
0
50 25
40 20
30 15
20 10
10 5
0 0
Manufacture Service
ERP ERP
13
Benefits of ERP
• Improve productivity
• Increase customer demand (sales)
• Increase competitive advantage
• Increase market share
• Position company for sale
14
Business Drivers for ERP
others im proving
29% productivity
31%
com petitive
custom er
advantage
16% dem and
24%
• Cost analysis
• Blueprinting of Business Processes
• Staff Training
• Integration
• Data Conversion
• “Going Live” with ERP
19
ERP:
Winner’s Legend, Loser’s
Nightmare
While 9 out of 10 ERP implementations failed in
India, the one success story produced such
spectacular results that it was enough to keep the
entire ERP market alive!
http://216.239.57.100/search?q=cache:ji6Ym4n6lLYC:www.expresscomputeronline.co
m/20020107/focus6.shtml+ERP+market+statistic&hl=en&ie=UTF-8 [2002.Jan 7]
20
Case Study #1
Failed ERP Implementation at
Raskas Foods, Inc.
21
Raskas Foods, Inc.
• One of the 150 Largest Privately held companies
in St. Louis
• Purchased by Schreiber Foods in October, 2002
24
Raskas Foods, Inc.
Four Factions to Satisfy:
• Owners
• Marketing
• Operations
• Finance
25
Owners
• Seven owners, all related
• Three were employed by Raskas
• Two had been looking to sell Raskas for over ten
years
• Wanted to position Raskas Foods for sale
26
Marketing
• Finance helped Marketing get Gross-to-Net and
Cognos BI software
• ERP wouldn’t do anything for them
• Since Finance helped Marketing get their programs,
Marketing was willing to back Finance on the ERP
project – provided that Marketing wouldn’t have to
supply any bodies to the implementation process
27
Operations
• Operations has wanted a new plant since 1994
• Operations liked their “homegrown” Excel based
system
• Operations traded support for the ERP system in
exchange for future support from Finance for a new
plant – as soon as certain production levels were
met.
28
Finance
• Finance felt about the legacy Accounting system
that “the wheels were about to come off the cart”
• Wanted an entire package…”It’s time to get into the
Big Leagues”
• Just came off successful implementation of Gross-
to-Net and Cognos for Marketing
29
The ERP Package
• Approved in early 1999
• Adage ERP package
• SCT consultants
• Budgeted $2.2 million
• Anticipated 6 months to 1 year to complete
• Waited until after the Y2K problem to implement
• Completed the Blueprint of Business Processes
• Training for IS
30
Project Personnel
• Mike Doyle (Finance), Project Manager
• Cliff Thomason (Finance), Project Facilitator
• John Lazare (IT), Project Lead
• Wayne Dixon, Director - IT, was left out
31
Problems
32
Startup-January, 2001
• No momentum restarting
• Had to upgrade the software to the latest release
• Budget increases to $3.3 million
33
Large Sales Increase
• The number two private label Cream Cheese
manufacturer develops quality and delivery
problems
• Spring 2001, Operations gets approval for a new
plant
• Operations pulls key people from ERP for new
plant startup
34
More Problems….
35
Lessons Learned
• The budget will increase when changes are made
• Senior level personnel have to stay involved
• Everyone involved in the project has to be 100%
dedicated to the project
• The people involved in the ERP project have to be
“key” employees
• ERP has to be the number one priority
36
Case Study #2
Successful ERP
Implementation at Cisco
Systems, Inc.
37
Cisco, NOT Sysco!
Just to clarify, the company I will
be talking about today is not the
food company Sysco, it is Cisco
Systems, Inc.
YES NO
38
Company Background
Corporate Overview
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online
Case Study #9-699-022 (Rev: May 6, 2002) 44
Time for a Change
• January 1993, Cisco was $500 million
company running a Unix-based legacy
software package
• CIO Pete Solvik saw the need for change
• Initially, Cisco avoided an ERP solution
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online
Case Study #9-699-022 (Rev: May 6, 2002) 45
Pete Solvik-CIO
“We wanted to grow to a $5 billion-plus company.
We were not able to make changes to the application
to meet our business needs anymore. The
application had become too customized. The
software vendor did offer an upgrade but we knew
even after the upgrades it would still be a package
for $300 million companies--and we’re a $1 billion
dollar company.”
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online
Case Study #9-699-022 (Rev: May 6, 2002) 46
Randy Pond-Dir. of Manuf.
“We knew we were in big trouble if we did not do
something. Anything we did would just run over the
legacy systems we had in place. It turned into an effort
to constantly band-aid our existing systems. None of
us were individually going to go out and buy a
package….the disruption to the business for me to go to
the board and say ‘Okay, manufacturing wants to spend
$5 or $6 million dollars to buy a package and by the
way it will take a year or more to get in….’ was too
much to justify.”
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
47
Online Case Study #9-699-022 (Rev: May 6, 2002)
The Final Straw
• System failure in January, 1994
• Company shut down for 2 days
• February, 1994 assembled team in charge of
finding a suitable replacement application
• Decided on the Big Bang implementation strategy
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
48
Online Case Study #9-699-022 (Rev: May 6, 2002)
Carl Redfield-SVP of Manuf.
“I knew we wanted to do this quickly. We were not
going to do a phased implementation, we would do it
all at once. We were not going to allow a lot of
customization either. Also, we wanted to create a
schedule that was doable and make it a priority in the
company as opposed to a second tier kind of effort.”
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
49
Online Case Study #9-699-022 (Rev: May 6, 2002)
“A Team Effort”
•Team consisted of internal resources (Cisco
employees), consultant (KPMG), and ERP software
vendor (Oracle)
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online
Case Study #9-699-022 (Rev: May 6, 2002) 50
Software Vendor Selection
• 20 person team did extensive research on ERP
providers
• 5 vendors in 2 days
• 10 days to draft RFP for vendors
• Visited vendor reference clients
• Scheduled 3 day onsite software demos
• Entire process took only 75 days!
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
51
Online Case Study #9-699-022 (Rev: May 6, 2002)
Why Oracle?
•Win-win situation for both Cisco and Oracle
Pond said, “Oracle wanted this win badly. We ended up
getting a super deal. There are, however, a lot of strings
attached. We do references, allow site visits and in
general talk to many companies that are involved in
making this decision.”
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online 52
Case Study #9-699-022 (Rev: May 6, 2002)
Project Approval
• Target timeline was 9 months
• Projected cost was $15 million
• Largest capital project ever approved by Cisco
Pond said, “Before we even get the first slide up I hear
the chairman speaking from the back of the room. He
says ‘How much?’ I said I was getting to it and he
responded: ‘I hate surprises. Just put up the slide right
now.’ After I put it up he said ‘Oh my God, there better
be a lot of good slides….”
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
53
Online Case Study #9-699-022 (Rev: May 6, 2002)
Implementation Team
• Expanded from 20 to 100 members (See slide #55)
• Steering committee at top to ensure project
visibility, sponsorship, and motivation
• Split into 5 key areas (Order Entry,
Manufacturing, Finance, Sales/Reporting, and
Technology)
• All areas consisted of internal Cisco
employees, KPMG consultants, and
Oracle consultants
Project Management
Office
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School 56
Online Case Study #9-699-022 (Rev: May 6, 2002)
List of “Red” Modifications
• Packout-custom barcoding, queues, inventory, and
shipping modifications
• Canada-separate set of books for separate currency
• Product Configurator-enables Cisco to enter
“rules” for product ordering
• OE Form-discounts, cost data, multinational
orders, etc.
• Net Change Bookings-daily log of all order
activity
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business 57
School Online Case Study #9-699-022 (Rev: May 6, 2002)
Initial Challenges
• Hardware failures
• System instability
• Software unable to handle initial volume
58
Vendor Commitment
• Team effort-overcame problems within 3 months
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
59
Online Case Study #9-699-022 (Rev: May 6, 2002)
ERP Results
• Project completed on-time (See slide #61)
• Project completed on budget
• Cisco ERP team bonus totaling $200,000
• Overall successful systems replacement
• Minimal company interference
Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School
60
Online Case Study #9-699-022 (Rev: May 6, 2002)
ERP Implementation Dates
• Project Kickoff • June 2, 1994
• Prototype Setup Complete • July 22, 1994
• Implementation Team Training • July 31, 1994
• Process, Key Data, Modification • August 31, 1994
Designs Complete
• Functional Process Approval • September 30, 1994
• Hardware Benchmark and Capacity • October 15, 1994
Plan Validated
• Critical Interfaces, Modifications • December 1, 1994
and Reports Complete
• Procedures and End-User
Documentation Complete • December 16, 1994
• CRP Pilot Complete-Go/No Go • December 22, 1994
• End-User Training Begins • January 3, 1995
• Data Conversion Complete • January 27, 1995
• Go Live! • January 30, 1995
64
Characteristics of IT Best
Practices
• Knowledge of business process and ERP is
essential to becoming an informed buyer
• Effectively Communicate company goals to the
Software Providers
• Multiple Bids/Proposals
• Effectively Evaluate and Compare Bids
• Active Leadership Role in Project
65
Knowledge is Power
• Thorough knowledge and
understanding of the entire business
process being effected
• Understand which (or all) business
divisions are to be incorporated into
your new ERP system
• Distinguish between Customized
vs. Standard ERP Software
Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, 66
Harvard Business Review, July-Aug 1998.
Multiple Bids
• Unlike most IT
functions an In-
house bid is not
normally an option
• Provide each
potential provider
with identical
information
67
Comparing Bids
• Make sure that you are
comparing Apples to Apples
Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business
Review, July-Aug 1998. 70
Customization
• Already an Industry Leader – No Major
Changes Needed
• Adapt the Software to Business Functions
– Unique Business Operations
• Less Change for Employees
• More Expensive and Complex Implementation
Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business
Review, July-Aug 1998. 71
Contract Negotiations
• Detailed
– Time Frame
– Price
• “Users are strongly
advised to require fixed
time and cost contract
commitments”
• Project Leader
• Project Champion
75
Top Management
• “The person at the top of the
organization can stop or fix
most of these problems
before they derail the
project.”
• Enthusiasm “Trickles Down”
• Top Management, “If they
know I care, they care.”
78
Strategies for ERP
Implementation
• Background Research
• Use consultant to:
– Review Business Process
– Narrow down vendors
– Evaluate proposals
• Standard Application
• Strict Contract
• Phased Implementation
• Employee Support – Starting at the Top
79
Questions?
80