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

1960s

1970s

1980s

1990s
5

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

Manufacturing
Units

Sales
ERP

HR

Treasury

The Relationship Among Three

Components of ERP

Business
management
practice

Information
Technology integrates
with your company's
core business processes

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.
2.
3.
4.
5.

SAP
Oracle Corporation
Peoplesoft, Inc.
JD Edwards & Company
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)

10

Market Share for ERP Suppliers

11

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]

12

Leading ERP Companies

General Market Shares
40
20
0
50
40
30
20
10
0
Manufacture
ERP

SAP
Oracle
Peoplesoft

25
20
15
10
5
0
Service
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
29%

im proving
productivity
31%

com petitive
custom er
advantage
16% dem and
24%

www.amrresearch.com/Research/Alerts/Pdf/020826alert14775.pdf (viewed March 16, 2003)

15

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.

16

ERP Cost/Benefit Analysis

Average Cost for ERP

Among the 63 companies surveyedincluding small, medium and
large companies in a range of industriesthe 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)

17

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.
18

ERP Implementation
Procedure
Steps for ERP implementation

Cost analysis
Blueprinting of Business Processes
Staff Training
Integration
Data Conversion
Going Live with ERP

19

ERP:
Winners Legend, Losers
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.com/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

[St. Louis Business Journal, April 2002]

22

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
23

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

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 wouldnt do anything for them
Since Finance helped Marketing get their programs,
Marketing was willing to back Finance on the ERP
project provided that Marketing wouldnt 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 packageIts time to get into the
Big Leagues
Just came off successful implementation of Grossto-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
Implementation started in April of 2000
Employees found that the ERP system didnt do
things the same way they did things
Changes approved to keep Operations involved
Stopped for fall Busy Season September 2000

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.
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
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
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)

39

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

40

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

41

John Chambers-President &

CEO of Cisco Systems, Inc.

Cisco Systems, Inc. Annual Report 2002, page 3

42

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)

43

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)

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 were 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
Online Case Study #9-699-022 (Rev: May 6, 2002)

47

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)

48

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)

49

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)
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
Online Case Study #9-699-022 (Rev: May 6, 2002)

51

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
Online Case Study #9-699-022 (Rev: May 6, 2002)

53

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
Austin, Robert, Cisco Systems, Inc.: Implementing ERP, Harvard Business
School Online Case Study #9-699-022 (Rev: May 6, 2002)

54

Cisco ERP Implementation Team Structure

Executive Steering
Committee
Project Management
Office
Order Entry

Manufacturing

Business Lead

Business Lead

IT Lead

Finance

Sales/Reporting

Technology

Business Lead

IT Lead

IT Lead

IT Lead

IT Lead

Business
Consultants

IT Consultants

Business
Consultants

Business
Consultants

Business
Consultants

IT Consultants

IT Consultants

IT Consultants

Users

Users

Users

IT Consultants

Austin, Robert, Cisco Systems, Inc.: Implementing ERP, Harvard Business

School Online Case Study #9-699-022 (Rev: May 6, 2002)

55

ERP Rollout
Broke into phases called CRPs (Conference Room
Pilots)
CRP0 = Training and technical configuration
CRP1 = System works for each specific area
CRP2 = Modifications (red, yellow, or green), continued
training, and initial testing (See slide #57)
CRP3 = Full system testing preparation to go live

Austin, Robert, Cisco Systems, Inc.: Implementing ERP, Harvard Business School
Online Case Study #9-699-022 (Rev: May 6, 2002)

56

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
School Online Case Study #9-699-022 (Rev: May 6, 2002)

57

Initial Challenges
Hardware failures
System instability
Software unable to handle initial volume
Solvik said, I wouldnt say the company hit a wall, but I
would say we had major day to day challenges that
needed to be solved quickly to avoid significant impact
to the company.
Austin, Robert, Cisco Systems, Inc.: Implementing ERP, Harvard
Business School Online Case Study #9-699-022 (Rev: May 6, 2002)

58

Vendor Commitment
Team effort-overcame problems within 3 months
Solvik said, So for about 60 days we were in complete
SWAT-team mode, get this thing turned around. For
example, the president of the hardware vendor was our
executive sponsor. This vendor probably had 30 people on
site at one point. They were all over it. They lost money on
this big time. It was great for them to get such a great
reference, but it was a tough experience for them.
Remember we had bought a capability, so everything they
did to add capacity was out of their own pocket.
Austin, Robert, Cisco Systems, Inc.: Implementing ERP, Harvard Business School
Online Case Study #9-699-022 (Rev: May 6, 2002)

59

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
Online Case Study #9-699-022 (Rev: May 6, 2002)

60

ERP Implementation Dates

Project Kickoff
Prototype Setup Complete
Implementation Team Training
Process, Key Data, Modification
Designs Complete
Functional Process Approval
Hardware Benchmark and Capacity
Plan Validated
Critical Interfaces, Modifications
and Reports Complete
Procedures and End-User
Documentation Complete
CRP Pilot Complete-Go/No Go
End-User Training Begins
Data Conversion Complete
Go Live!

June 2, 1994
July 22, 1994
July 31, 1994
August 31, 1994
September 30, 1994
October 15, 1994

December 1, 1994

December 16, 1994

December 22, 1994
January 3, 1995
January 27, 1995
January 30, 1995

Austin, Robert, Cisco Systems, Inc.: Implementing ERP, Harvard Business

School Online Case Study #9-699-022 (Rev: May 6, 2002)

61

Lessons Learned
Why was Ciscos ERP Implementation a
Success?
Recognized the problem & developed a realistic
plan of attack
Project was a high priority in the company
Upper management supported the project
All areas of the company were involved
Diligent vendor/consultant selection
Limited customization
Meet target implementation dates
Stayed within the initial project budget
62

Projects Do Fail. They

Fail for Many Different
Reasons.

Source: Thompson, Olin, Who to Blame for Project Failure?, www.Technologyevaluation.com,

Sept 20, 2002

63

ERP Best Practices

Lets analyze what can
increase our chances of a
successful ERP
implementation
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,
Harvard Business Review, July-Aug 1998.

66

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
Decide which system will
best fit your companys
needs
Hire a third party consultant
Source: P.J. Jakovljevic, The Joy Of Enterprise Systems Implementations,
www.TechnologyEvaluation.com, July 8, 2002

68

Customization vs.
Standard Application
Decision depends on multiple factors
Company Goals
Happy with Current Productivity?
Desiring Change?
Employee Willingness to Change
Implementing/Upgrading a enterprise system
offers a good opportunity for enterprises to review
their key business processes and resources.
Source: P.J. Jakovljevic, The Joy Of Enterprise Systems Implementations,
www.TechnologyEvaluation.com, July 8, 2002

69

Standard Application
Cheaper
Requires Company Operational Processes
to Change
Constantly requires Employees to Change
Vendors try to structure the systems to
reflect best practices
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
Source: P.J. Jakovljevic, The Joy Of Enterprise Systems Implementations,
www.TechnologyEvaluation.com, July 8, 2002

72

Implementation:
Big Bang vs. Phased
Approach
Big bang has attributed to
a number of failures
Once and its done
theory - False

Phased approach-new
parts are introduced
incrementally.
Start with mature parts
that need the least
customization
Builds momentum,
support and enthusiasm

Source: P.J. Jakovljevic, The Joy Of Enterprise Systems Implementations,

www.TechnologyEvaluation.com, July 8, 2002

73

All the previous factors

discussed can effect the
implementation of an
ERP system, however one
factor has the ability to
outweigh all other
circumstances.
74

Employees
Top Management
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.
Source: Thompson, Olin, Who to Blame for Project Failure?,
www.Technologyevaluation.com, Sept 20, 2002

76

Project Manager
The best person for the job . .
Cannot be spared from their
current role.
Relieved of all previous job
duties.
Understand the whole
business process.

Source: Thompson, Olin, Who to Blame for Project Failure?,

www.Technologyevaluation.com Sept 20, 2002

77

Project Champion
Typically an influential
employee-not a member of the
management team.
Created in the Phased In
approach after seeing positive
results.

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