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Enterprise Resource Planning (ERP) Group 6 Zhenyu Zhu (Adam) Rich Stansfield John Palmer Ryan Kramme
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
Background of ERP • History of ERP • What is ERP? • Major ERP suppliers • Why companies want to implement ERP • ERP implementation procedures
History of ERP • 1960's-focused on Inventory control issues • 1970's focused on MRP (Material Requirement Planning) systems • 1980's focused on the concept of MRP-II (Manufacturing Resources Planning) which was an extension of MRP • Early 1990's MRP-II was further extended to cover areas like Engineering, Finance, Human Resources, Projects Management, etc. • Beginning of ERP as we know it today
History of ERP (Cont.) ERP MRP II MRP Inventory control 1960’s 1970’s 1980’s 1990’s
The Concept of ERP • ERP software ties all departments in a company together into one common system • ERP allows Information Technology to integrate with your company's core business processes to achieve specific business objectives • Information Technology • Core Processes • Specific Business Objectives
Enterprise Integration Purchase Inventory ERP Manufacturing Units Sales HR Treasury
The Relationship Among Three Components of ERP Information Technology integrates with your company's core business processes Business management practice Specific business objectives
ERP Market Space • $16 Billion Total Annual Spending (2002) [The Steady Stream of ERP Investments Fenella Scott, Jim Shepherd AMR research August 24, 2002] • U.S. Federal Government spending on ERP and related systems and services will increase at a compound annual growth rate of 13% • 2002 = $3.5 Billion • 2007 = $6 Billion [http://www.input.com/article_printver.cfm?article_id=606] (Viewed March 18)
Major ERP Suppliers The Top Five ERP Vendors 1. SAP 2. Oracle Corporation 3. Peoplesoft, Inc. 4. JD Edwards & Company 5. Baan International http://erp.ittoolbox.com/pub/erp_overview.htm#r2 (Viewed March 18, 2003) Microsoft purchased two ERP vendors; Great Plains in 2001 and Navision in 2002 http://erp.ittoolbox.com/documents/document.asp?i=1662 (Viewed March 18, 2003)
Different Markets for Different Providers • 11% of the companies surveyed are still using homegrown (legacy) applications • SAP is the market leader in Manufacturing companies • Oracle shows strength in both Manufacturing and Service companies • PeopleSoft is the market leading is Services companies [The Steady Stream of ERP Investments Fenella Scott, Jim Shepherd August 26, 2002 AMR Research]
Benefits of ERP • Improve productivity • Increase customer demand (sales) • Increase competitive advantage • Increase market share • Position company for sale
Business Drivers for ERP www.amrresearch.com/Research/Alerts/Pdf/020826alert14775.pdf (viewed March 16, 2003)
How Does ERP Improve the Business? ERP helps improve information sharing, enhance business performance, and promote service efficiency 1. Allow companies to better understand their business. 2. Helps companies standardize business processes and more easily enact best practices. 3. More efficient processes enable companies to concentrate their efforts on serving their customers, maximizing profit, and building a competitive advantage.
ERP Cost/Benefit Analysis • Average Cost for ERP Among the 63 companies surveyed—including small, medium and large companies in a range of industries—the average cost for an ERP implementation was $15 million. • Average Payback for ERP (Time & Dollars) Among the 63 companies surveyed, it took eight (8) months after the new ERP system was implemented to see any benefits. The median annual savings from a new ERP system was $1.6 million. http://www.cio.com/research/erp/edit/erpbasics.html#erp_abc (viewed March 24, 2003)
ERP Strategies 1. The Big Bang-companies cast off all their legacy systems at once and install a single ERP system across the entire company. 2. Franchising-Independent ERP systems are installed in each unit, while linking common processes, such as financial bookkeeping, across the enterprise. 3. Slam Dunk-ERP dictates the process design in this method; where the focus is on just a few key processes, such as those contained in an ERP system's financial module. The slam dunk is generally for smaller companies expecting to grow into ERP by initially purchasing only a few modules.
ERP Implementation Procedure Steps for ERP implementation • Cost analysis • Blueprinting of Business Processes • Staff Training • Integration • Data Conversion • “Going Live” with ERP
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://188.8.131.52/search?q=cache:ji6Ym4n6lLYC:www.expresscomputeronline.com/20020107/focus6.shtml+ERP+market+statistic&hl=en&ie=UTF-8 [2002.Jan 7]
Case Study #1 Failed ERP Implementation at Raskas Foods, Inc.
Raskas Foods, Inc. • One of the 150 Largest Privately held companies in St. Louis • Purchased by Schreiber Foods in October, 2002 [St. Louis Business Journal, April 2002]
Raskas Foods Background • Founded in 1888 • Nations first private label manufacturer of cream cheese for retail grocery distribution • Sales of over $280 million in 2002 • 3 Manufacturing Plants
Raskas Foods, Inc. • Dr. Heschel Raskas, President and CEO • Ed Thibeault, Sr. Vice President – Marketing and Sales • Rich Coker, Sr. Vice-President – Operations • Rich Scheuerman, Sr. Vice-President – Finance
Raskas Foods, Inc. • Owners • Marketing • Operations • Finance Four Factions to Satisfy:
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
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
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.
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
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
Project Personnel • Mike Doyle (Finance), Project Manager • Cliff Thomason (Finance), Project Facilitator • John Lazare (IT), Project Lead • Wayne Dixon, Director - IT, was left out
Problems • Implementation started in April of 2000 • Employees found that the ERP system didn’t do things the same way they did things • Changes approved to keep Operations involved • Stopped for fall Busy Season September 2000
Startup-January, 2001 • No momentum restarting • Had to upgrade the software to the latest release • Budget increases to $3.3 million
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
More Problems…. • Work on the ERP implementation stopped for fall busy season again • By February, “something was wrong.” • March 2002, lack of Upper Level Management interest in ERP • April 2002, a successful ERP implementation was no longer necessary
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
Case Study #2 Successful ERP Implementation at Cisco Systems, Inc.
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
Company Background Corporate Overview • Worldwide leader in networking for the Internet • Provide Internet Protocol-based (IP) networking suite of solutions • Cisco solutions are in most corporate, education, and government networks worldwide http://newsroom.cisco.com/dlls/company_overview.html (viewed March 14, 2003)
Company Background-Cont. • Founded in 1984 by a group of computer scientists from Stanford University • Publicly traded starting in 1990 (NASDAQ: CSCO) • $13.71 per share (as of April 4, 2003 4:00 PM) • 34,987 employees (as of February 2003) http://newsroom.cisco.com/dlls/corpfact.html (viewed March 14, 2003) Cisco Systems, Inc. Annual Report 2002, page 1
Company Background-Cont. • Global company (HQ in San Jose, CA) • 2002 Net Sales of $18.9 Billion http://newsroom.cisco.com/dlls/corpfact.html (viewed March 14, 2003) Cisco Systems, Inc. Annual Report 2002, page 1
John Chambers-President & CEO of Cisco Systems, Inc. Cisco Systems, Inc. Annual Report 2002, page 3
Core Product Offering • Cisco provides the broadest line of solutions for transporting data, voice, and video within buildings, across campuses, or around the world • Primary products are “routers” and “switches” • Main competitors are 3Com and Dlink • Market share leader with over 75% of the market http://newsroom.cisco.com//dlls/corpfact.html (viewed March 14, 2003) Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online Case Study #9-699-022 (Rev: May 6, 2002)
Company Structure • Centralized functional organization • Manufacturing, customer support, finance, human resources, IT, and sales are centralized • Product Marketing and R&D are decentralized into the following “Lines of Business”: • Enterprise (Large Corporations) • Small / Medium Business • Service Provider Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online Case Study #9-699-022 (Rev: May 6, 2002)
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)
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)
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 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 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 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) Solvik said, “Our orientation in pulling people out of their jobs to work on the project was if it was easy then we were picking the wrong people. We pulled people out that the business absolutely did not want to give up.” Austin, Robert, “Cisco Systems, Inc.: Implementing ERP”, Harvard Business School Online Case Study #9-699-022 (Rev: May 6, 2002)