Project Management in
Implementation
Bundit Wonglikphai
Introduction
that can be defined as customizable, standard application
software which integrates
business solutions for the core processes (e.g. product
planning and control, warehouse
management) and the main administration function (e.g.
accounting, human resource
management) of an enterprise. [1]
Why ERP is so
important
Enterprise Resource Planning provides many benefits
to business such as
1. Enhance productivity,
flexibility and customer responsiveness
By integrated core
business processes together in one single application, it helps
company maximize the efficiency of business process across
the entire
organization. Plant manufacturing can produces product faster.
Increase on time delivery,
Increase productivity, Increase ability to
forecast demand to supplies, Increase order
capacity, and improve customer service (Customer Relationship
Management (CRM)).
2. Eliminate
costs and inefficiencies
Using an ERP system to
standardize business processes can dramatically improve
company’s operation. ERP enable company to manage relationship
with vendor results in
lower cost for purchased items. Better resource management
results in more
inventory turns and decrease the level of inefficiencies. [9]
3. Data consistency
Because an ERP
system integrates all business management functions, it
decreases level of inconsistency information from different
systems. Thus, by
using ERP system, managers can gather correct information
and make a right decision.
4. Extend your business
using the Internet
By integrating all
business functions together in one system, it increases ability of
a company to use internet as part of the business
strategy. Web-enabled technology
allows you to access information, sell product, run business processes, and communicate
with customers and partners at any time and from anywhere
in the world. [2]
Project Management is the application of knowledge, skills, tools and
techniques to a broad range of activities in order to meet the
requirements of the
particular project. A project is a temporary endeavor undertaken
to achieve a particular
aim. Project management knowledge and practices are best
described in terms of their
component processes. These processes can be placed into four
Process Groups: Initiating,
Planning, Executing, and Closing. – and nine Knowledge Areas that are: [3]
[4]
Why
project management is so important in ERP implementation?
Because ERP project generally is a big and complexity
project. It requires a lot of
resource such as time, human resource, budget etc. Even though, a company has all of
the resource to implement the project, there are many
factors that can lead to project
failure such as corporate culture, user resistant to change commitment
from top
management etc. From “The Robbins-Giola Survey (2001)” 51 % of
surveyed companies
viewed their implementation as unsuccessful. [10] An example of company failure was
Nestle. Nestle
spent $200 millions contact with SAP and an additional $80 million for
consulting and maintenance, but at last the implementation was
fail. [11]
Consequently,
by having good project management can help to minimize risk for
project to fail and may help to reduce the chance for
delaying and over budget
which are big problems in ERP project implementation.
Conceptual Components of ERP
Before we begin to implement ERP system, we should to
understand the high
concept or ERP model.
The ERP model is
consists of four components which are implemented through a
methodology. All four components are
1.
The software component is the
component that is most visible part and seen as
the ERP Product which is not true. It consists of several
modules such as Finance, Human
resource, Supply chain management, supplier relationship
management, customer
relationship, and business intelligent.
2.
Process Flow is the model that
illustrates the way how information flows
among the different modules within an ERP system. By
creating this model makes it
easier to understand how ERP work. (See example of Process
Flow diagram Appendix 1)
3.
Customer mindset By implementing ERP system,
the old ways for working
which user understand and comfortable with have to be
changed and may lead to users’
resistance. Employee-raised facts, beliefs, and values are good
indicators of what may
cause their resistance to change. For example, some users
may say that they have spent
many years doing an excellence job without help from ERP
system. [7] This is the value
and belief that users have toward new ERP system. In
order to lead ERP implementation
to succeed, the company need to eliminate this kind of
negative value or belief that users
have toward new system. At Pratt & Whitney Canada, top
management not only provide
the resource, but they also formulated a clear vision of
goals that they wished to achieve
from the project. By doing so, it helped to guide employee
expectations the benefits of
new system. [20]
4.
Change Management In ERP
implementation, Change needs to be managed at
several levels
4.1 User attitude Resistance
to change is a big problem that can lead to
project failure. If the company need to success in
implementing new system, users need
to be understand what the new system is and give a
commitment to new system. By doing
so, a company need to have a good management plan and
implementation.
4.2 Business process changes when
new system is implements, the
business processes are also changed (Legacy systems are
removed). Thus, a company
should have a plan for these changes. [22]
ERP methodology refers to a systematic approach to implement an ERP system
that will ensure the proper integration of the four
components. We can refer ERP
methodology to Project life cycle.
Project Life Cycle in ERP implementation
[12]
In
project life cycle, there are four stages that a company should to follow.
1. Project Concept/Initiation This stage determines the scope of development. If this
stage is not performed well; it is unlikely that the project will be successful
in meeting the business’s needs. The key project controls needed here is an
understanding of the business environment and making sure that all necessary
controls are incorporated into the project (By using BPR (Business Process
Reengineering) [16]. Any deficiencies should be
reported and a recommendation should be made to fix them. Project Manager,
Project governance, and core project team also have been assigned in this stage.[17]
2. Project Planning in this stage of ERP implementation, Project management includes finalizing the
detailed planning process and requirements (Technology, Hardware, Software,
Data, and Functionality [5]) which involves finalizing the project scope, schedule, resource
requirements, quality and risk concerns, plus any organizational (e.g.,
centralization versus decentralization) issues. This stage should produce a
request for proposal (RFP) to be sent to potential vendors. When sending out
the RFP, project planners should address an evaluative scheme for comparing and
ranking vendor responses such as a weighted
scoring approach. It would include factors each vendor's product are to be evaluated
against and their relative weights. Generally, scoring is completed after all
RFP responses have been received. [8]
3. Project Execution in this stage vendor has been selected and
planning proceeds for swapping software previously used with the new ERP
package. The most
important issue in this phase is to ensure project activities are properly
executed and controlled. During the execution phase, the planned solution is
implemented to solve the problem specified in the project's requirements [18]. The execution
stage includes the actual implementation of the design or plan. In software
systems, this includes conversion (transfer of data from an old system to a new
system), documentation, and training. Training is also important because it
helps users use the software correctly. The bulk of the project's work and largest
capital expenditure is realized in this stage.
4. Project Closure The final stage of the ERP implementation
project-- closeout/operation and maintenance-includes carrying out the usual
bug fixes, responding to enhancements that were not included in the original
implementation, and preparing a final report. The report should include a
critique of what went right and what went wrong over the life of the project so
that lessons learned may be documented and incorporated into future projects.
Guideline
for ERP implementations in Project management
-
Deciding on project scope
The scope of an ERP project has several components. The ERP
project team must decide which business processes will be included in the
implementation and
it should not be changed frequently which will affect other area and project
timeline. The scope should be build to prevent “never ending project”.[13]
- The Right Staff one of the major issues with any IT
project is the staffing issue. Good technology staffs, particularly those with
deep ERP experience are extremely hard to find. Since it's difficult to
transition ERP team members on and off projects thus by lower rate of turnover
is importance.
- Preventing Drain Brain the company has to be
ensuring that knowledge is still be in the company
while consultants have left. By letting the consultants and corporate
staff worked side-by-side throughout the implementation.
- Project scheduling the project manager should to manage
a good time line that can maximize efficiency of resource.
- Monitor Progress The success criteria should be clearly defined in the procedures,
methods, and techniques that are part of a high quality project control system.
Standards and techniques for measuring the quality of performance expected from
the new system should be defined early, and redefined as needed over the life
of the project.
Three most
common mistakes of ERP Implementation
Focusing on
Technology There is no evidence anywhere in the history of IT that software
alone will solve a business problem. [23]
Ignoring
the importance of requirement definition many companies try to adopt ERP system which
doesn’t fit to business requirement which generally lead to project failure.
Jumping
from the Requirement definition to the development phase Most of projects have to
delivery the system in the timeline, thus they may skip some important
implementation steps. For example, Project manager may skip the change manage
process which may create users’ resistance to new system and lead to project
failure.
Conclusion
Enterprise Resource Planning (ERP) can provide a lot of benefits to organization such as lower cost, increase level of data consistency, enable different departments such as Marketing, Distribution, and Manufacturing etc. to share information together, increasing ability to do e-business. Even though, ERP can provide many benefits, it also can lead to tragedy in implementation because of complexity to implement, time consuming, requiring a lot resource such as money, human resource, hardware, and software. Not only resource that is needed, but the commitment from top management and users also. All of these requirements can lead to project failure easily as we can see that 51% of project fail rate.
Consequently, Project Management is very important in ERP implementation. In order to manage project efficiency and reduce the risk for project failure, a company needs to know the high level concept, components of ERP, and the project life cycle. However, by knowing the high level concepts, components of ERP and project life cycle is not enough. As describe earlier, ERP implementation is such a complexity project. Thus, we need to have some guideline and avoid the common mistakes that help project manager to prevent an unexpected outcome and well prepare for the unexpected events.
Appendix 1 [22]
Citations
1. Mei-Yeh
Fang and Dr.Fengyi Lin, “Measuring the Performance of ERP System – from the
Balanced Scorecard Perspectives” The journal of
2. http://www.intuitivemfg.com/Features/top-5-reasons.htm
3. http://scrc.ncsu.edu/public/DEFINITIONS/P%20-%20R.html
4. Frederic Adam, David Sammon, and Fergal Carton, “Project
Management Issues in Implementing ERP – Towards an Approach more Suited to ERP
Projects”
6. http://itmanagement.earthweb.com/entdev/article.php/614681
7. Adel M.adwani, “Change management strategies for successful ERP implementation”, Business Process Management Journal, Vol. 7 No 3, 2001, pp.266-275.
8. http://www.umsl.edu:2099/pqdlink?Ver=1&Exp=11-28-2011&FMT=7&DID=115619827&RQT=309
9. Neville Turbit, “ERP Implementation – The Traps
10. http://www.it-cortex.com/Stat_Failure_Rate.htm
11. http://www.cio.com/archive/051502/nestle.html
13. http://itmanagement.earthweb.com/entdev/article.php/614681#a_characteristics
14. http://www.umsl.edu:2099/pqdlink?Ver=1&Exp=11-28-2011&FMT=7&DID=115619827&RQT=309
15. Rosio Alvarez and Jacqueline Urla, “Tell Me a Good Story: Using Analysis to Examine Information Requirements Interview during an ERP Implementation”, The DATA BASE for advances in Information Systems , Vol.33 No 1, winter 2002, pp.38-52.
16. August Wilhelm Scheer and Frank Habermann, “Making ERP A Success”, Communications of the ACM, Vol.43 No. 4, April 2000, pp.57-61.
17.
Project Management Framework, the
18. http://www.visitask.com/project-life-cycle.asp
19. http://wiki.ittoolbox.com/index.php/Topic:ERP_Project_Cycle
20. Alice Hsu, “Manage Your Way to ERP Implementation Success!”
21. http://itmanagement.earthweb.com/entdev/article.php/614681#a_risks
22. Carl Marnewick and
Lessing Labuschagne, “A Conceptual Model for
23. Berg Tom, Light Matt, “The Project Office, Processes and Tools”, Gartner Group Research, 2000