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ERP frequently asked questions

1. Explain stages of IT deployment in an organization and evolutionary path of

Computer Based Information Systems

TPS: Perform routine operations (viz customer orders, purchase orders etc.) and
serve as a foundation for other systems
MIS: An MIS provides managers with information and support for effective
decision making, and provides feedback on daily operations
DSS: Offers potential to assist in solving both semi-structured and unstructured
ESS: A specialized DSS mainly used to assist senior level managers in the org.
ES: Display intelligent behavior, Draw conclusions from complex relationships,
Provide portable knowledge

Krishna : IM 12
ERP frequently asked questions

Porters Competitive five forces model & its application in
development of SIS
SIS stands for Strategic information systems. Mainly to address “competition”

Porter’s Competitive five forces

1. Threat of new entrants
1. Reduced prices
2. Decreased market share
Potential Use of IS to Combat Competitive Force
3. Better web site to reach customers and differentiate product
4. Inventory control system to lower costs and better manage excess

2. Bargaining power of suppliers
1. Reduced quality
2. Prices raised
Potential Use of IS to Combat Competitive Force
3. Use internet to establish closer electronic ties with suppliers and to
create relationships with new suppliers located far away

3. Bargaining power of buyers
1. Increased quality
2. Reduced prices
3. Demand for more services, quicker delivery, etc.
Potential Use of IS to Combat Competitive Force
4. Implement CRM system to serve customers better
5. Implement CAD/CAM system to improve product quality

4. Threat of substitute products and services
1. Losing customers for life
2. Decreased market share
Potential Use of IS to Combat Competitive Force
3. Use DSS and customer purchase database to assess trends and
customer needs better
4. Use CAD systems to redefine products

5. Rivalry among existing firms
1. Competition in price, product distribution, and service
Potential Use of IS to Combat Competitive Force
2. Implement information system to reduce costs and be able to act
and react more quickly
3. Implement web site to offer better service to customers

Krishna : IM 12
ERP frequently asked questions

ERP, definition, evolution and future trends. ERP vs ERP II
Enterprise resource planning (ERP) software places its focus on integrating an
organizations departments (i.e., finance, HR, warehousing, etc.) and functions
onto a single integrated computer system that aims to serve all those different
departmental needs.

Evolution: The concept of ERP has been around since 1960’s

It has its beginning in Materials Requirements Planning (MRP), and this later
evolved into Manufacturing Resource Planning (MRP II)

Pre 1960 Order Point
1960 MRP
1970 Closed loop MRP
1990 ERP

ERP II is an application and deployment strategy that expands out from ERP
functions to achieve integration of an enterprise’s key domain-specific, internal
and external collaborative, operational and financial processes.

Krishna : IM 12
ERP frequently asked questions

Integrated ERP system provides

Physical Adv:
Faster and more access to information
Decision Making requires less time and resources
Tasks are done correctly the first time and not redundant

Organizational Adv:
Strategies become proactive and are the main focus
An overall organization’s willingness to constantly improve and be innovative

Company Benefits:
Improved Cost Control
Better monitoring and quicker resolution of queries
Helps to achieve competitive advantage by improving its business process.

Krishna : IM 12
ERP frequently asked questions

BPR vs BE. ERP implementation approaches using BPR and BE
Business process reengineering is a management approach that examines
aspects of a business and its interactions, and attempts to improve the efficiency
of the underlying processes. The fundamental rethinking and radical redesign of
business process to bring about dramatic improvements in performance.

Business Engineering:
Method for changing the way a company works based on best business practices
and IT. A complete re-thinking and reshaping of business processes based on
structures native to IT

How does BE differ from BPR?
BE extends the use of IT by creating process models based on IT structures and
applying these models to BPR’s vision of better business processes

Ideally, BPR should define the solutions that can be implemented, the ‘how’ of it is
governed by the ERP package.
 ERP acts as technological enabler for the new business model.
 ERP package is a technological implication of a BPR exercise.
 Matured ERP packages become the most suitable option for the IT
solution required to implement the ‘to-be’ model resulting from a BPR

Krishna : IM 12
ERP frequently asked questions

Costs and risks associated with ERP implementation.
How the success of ERP implementation is assessed
The different phases of ERP implementation are given below:
• Pre Evaluation training
• Package evaluation
• Project planning phase
i. Gap Analysis
ii. Reengineering
iii. Configuration
iv. Implementation Team training
v. Testing
vi. End user Training
• Going Live
• Post Implementation

Major Cost Centers are

Training - Training is the near-unanimous choice of experienced ERP
implementers as the most underestimated budget item. Training expenses are high
because workers almost invariably have to learn a new set of processes, not just a
new software interface.

Integration and testing - Testing the links between ERP packages and other
corporate software links that have to be built on a case-by-case basis is another of
the underestimated cost.

Customization - Add-ons are only the beginning of the integration costs of ERP.
Much more costly, and something to be avoided if at all possible, is actual
customization of the core ERP software itself.

Data conversion - It costs money to move corporate information, such as
customer and supplier records, product design data and the like, from old systems
to new ERP homes.

Data analysis - Often, the data from the ERP system must be combined with data
from external systems for analysis purposes. Users with heavy analysis needs
should include the cost of a data warehouse in the ERP budget

Consultants charges - When users fail to plan for disengagement, consulting fees
run wild.

Krishna : IM 12
ERP frequently asked questions

ERP Risks

– Technical risk - risks arising due to information processing technology,
sensor technology, and telecommunication technology
– Business risk - risks deriving from models, artifacts and processes
adopted as part of ERP
• Do they match? Are they consistent? Do partners processes match
– Organizational risk - risks deriving from the environment in which the
system is placed - including personnel and organization structure

Survey results for Risks
• Organization risk is the “biggest” risk -- the most likely to be seen as
“high” or “very high”
• Business risk is the next biggest risk
• Technical risk is the smallest of the bunch, with 72.5% rated very low to
moderate. Technical risk is also the easiest to fix, e.g., just choose more

ERP: Success Factors

• Manage expectations – the why
• Know your scope – the what
• Choose the right approach – the how
• Focus on the users
• Have committed sponsors
• Avoid modifications to the package – go vanilla
• Don’t make assumptions about your own success or failure based on the
experience of others

Best Practices of ERP Implementation

A Business Strategy aligned with Business Processes
Top-Down Project Support and commitment
Change Management
Extensive Education and Training
Data Clean up and Data Integrity
Implementation is viewed as an ongoing process

Evaluate Success
• Timing
– When benefits could be realized and measured
– During the 1st or 2nd year AFTER going live
• Determining if the system meets the criteria set out for it in the
beginning (choice rationale)
• Independent measures or a weighted portfolio of measures?

Krishna : IM 12
ERP frequently asked questions

BPM ? explain ARIS frame used for managing business processes.
Business Process Management (or BPM) refers to activities performed by businesses to
optimize and adapt their processes. Business Process Management deals with the
continuity and embedding of process orientation in the organization.

ARIS-House of business engineering (HOBE) enhances the ARIS process architecture by
addressing comprehensive business process management, not only from an
organizational, but also from an IT perspective

I: Process and product models, Reference Models, Evaluation Bench Marking,
Simulation, Quality control, Warehousing
II: Monitoring, Scheduling and Capacity control, EIS
III: Work Flow Control
IV: Std Software modules, Component, business objects, object libraries, java applets,

At level 1 (process engineering), business processes are modeled in accordance with a
manufacturing work schedule. Various methods for optimizing, evaluating and ensuring
the quality of the processes are also available.

Level II (process planning and control) is where business process owners’ current
business processes are planned and controlled, with methods for scheduling and capacity,
and (activity based) cost analysis also available. Process monitoring lets process
managers keep an eye on the states of the various processes.

At level III (workflow control), objects to be processed, such as customer orders with
appropriate documents or insurance claims, are delivered from one workplace to the next.
Electronically stored documents are delivered by workflow systems.

At level IV (application system), Functions of the business process are executed using
computer-aided application systems -- ranging from simple word processing systems to
complex standard software solution modules--, business objects and java applets.

The four Levels are interdependently connected.
Information at Level II reg. the profitability of current processes is the point of departure
for continuous adjustment and improvement of the business processes at Level I.
Workflow Control is linked to Level I, because Workflow Control at Level III requires
the description of business processes. At the same time, Workflow Control reports actual
data regarding the processes to be executed (amounts, times, organizational allocation)
back to Level II.
Applications at Level IV are executed from the workflow system at Level III and
configured according to the business process models at Level I.

Krishna : IM 12
ERP frequently asked questions

Technology enabled and clean state reengineering approach
Technology Enabled Reengineering:
A particular technology (or portfolio of technologies) is chosen as a tool to
facilitate reengineering.
– Thus, reengineering choices are a function of the technologies
– The technology drives the reengineering.
• ERP provides a tool to facilitate change
• ERP helps structure complex reengineering efforts
• ERP bounds the design, limiting overload
• Designs likely are cost effective
• Designs likely can be implemented in a timely manner
• There is software available

Clean Slate Reengineering:
– Process design starts with a clean slate
– Also referred to as “starting from scratch”
– Theoretically, no limits
• Not constrained by a particular tool
• Not constrained to a limited set of processes
• Evolution is not limited by a particular technology
• Can develop a design that others cannot access

Krishna : IM 12
ERP frequently asked questions

ERP failures: Examples
Failure to find the right fit between ERP apps and the needs of the business
Is ERP even a good fit?
Understanding the business goals is essential
ERP: the marriage of business goals and IT strategy
Managers must ask:
– What business are we in? Where do we want to go?
– What are the key issues facing us today?
– What will be the key issues facing us tomorrow?

FoxMeyer Drug Bankrupt

19% drop in profit
29% increase in inventory

City of Oakland Erroneous paychecks

Miller Industries Inefficient ERP – operating loss

WW Grainger Inc Earnings dropped $11 million

How to avoid Failures

Don’t start a project with a deadline in mind.
Update your budget projection at regular intervals.
ERP isn’t only about the software.
“No major software implementation is really about the software.”
Former Nestlé CIO Jeri Dunn says, “You are challenging their principles,
their beliefs and the way have done things for many many years”
Keep the communication lines open.
Remember the integration points.

Krishna : IM 12
ERP frequently asked questions

ERP Implementation Methods
ERP Design: MAPs
• Models
– Organization models (e.g., B2C, B2B, Auctions, Centralized,
• Artifacts
– (e.g., Charts of accounts and Vendor numbering schemes…)
• Processes
– (Sales order, Customer management, Procurement…)

Implementation Methods

Big Bang:
In a full big bang, an entire suite of ERP applications is implemented in all locations
in a matter of days. Big Bang employs a three step process.
• Virtually all processes and artifacts are chosen and implemented in the
software (e.g., 8 months)
• System is tested by process and then by interfaces between processes
(e.g., 8 months)
• Old system is turned off. New system is then implemented and minor
changes made.

At the extreme, modules are implemented one at a time, possibly one location at a
– For example, one implementation did the following:
• Phase 1 - Finance, controlling, accounts receivable, accounts
payable, and purchasing (12 months)
• Phase 2 - Materials management, production planning and quality
planning (7 months)
• Phase 3 - Remainder (5 months)
– Using a phased approach, the new system is implemented in a structure of
legacy systems.

Krishna : IM 12
ERP frequently asked questions

How PP module supports the implementation of MP and E process. Explain the
integration of PP module with other functional modules of ERP

How SD module supports the implementation of Customer Order management
process. Explain the integration of SD module with other functional modules of ERP

How MM module supports the implementation of Procurement. Explain the
integration of MM module with other functional modules of ERP

Krishna : IM 12