Enterprise systems

Target class: Information systems 4th year students

By: Fitsum A.

MTU

March 9, 2024
By: Fitsum A. (MTU) Enterprise systems March 9, 2024 1 / 61
Outline
1 Chapter One
Enterprise Systems
Enterprise resource planning(ERP)
Business processes and integration
ERP Modules and their features
ERP System Components
Issues to be consider in planning design and implementation of
ERP systems:
Why do organizations acquiring and implementing enterprise
systems
2 Chapter Two
Business Process Management(BPM)
Selection of enterprise systems software
Challenges associated with the implementation of global ERP
3

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 Chapter One
Introduction to Enterprise Systems

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Enterprise Systems

Earlier,in large organization ,different IS were used to serve

different business functions like sales ,marketing ,production
,manufacturing ,etc. separately.
Business organizations have become very complex.
This is due to an increased layer of management hierarchy and an
increased level of coordination across departments.
Each staff role and management layer has different information
needs and requirements.
Management is generally categorized into three levels:
Strategic, Middle management, and Operational.

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Enterprise Systems...

Today’s enterprise systems are designed to serve these varied

organizational requirements.
Enterprise systems solve the critical problem of integrating
information from various sources inside and outside the
organization’s environment and
make it available, in real time, to all employees and partners of the
organization
Enterprise systems, are a crucial component of any successful
organization today.
provide computer automation support for most business functions
such as accounting, finance, marketing, customer service, HRM, and
more.

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Enterprise systems...

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Enterprise systems...
As organizations become larger and more complex, they tend to
break functions into smaller units by assigning a group of staff to
specialize in these activities
This allows the organization to manage complexity as well as some
of the staff to specialize in those activities to enhance productivity
and efficiency.
The role of IS has been and always will be one of supporting
business activities and enhancing the workers, efficiency.

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Enterprise systems...
As organizations become larger and more complex, they tend to
break functions into smaller units by assigning a group of staff to
specialize in these activities
This allows the organization to manage complexity as well as some
of the staff to specialize in those activities to enhance productivity
and efficiency.
The role of IS has been and always will be one of supporting
business activities and enhancing the workers, efficiency.
Organizations need to be agile and flexible
systems need to have integrated data, applications, and resources
from across the organization
Integrated IS are needed today to
focus on customers,
to process efficiency,
and to help build teams that bring employees together that
cross functional areas.
Today’s competitive business is cross-functional, dynamic
and global.
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Enterprise systems...

Enterprise systems (ES) are industry-specific, customizable

software packages that integrate information and business process
in organizations.
Enterprise-wide Systems
Enterprise Systems, are systems that allow companies to integrate
information across operations on a company-wide basis.
Inter-organizational Systems (IOS)
Systems that communicate across organizational boundaries whose
goal it is to streamline information flow from one company to
another
An enterprise system is central to an organization
Ensure information can be shared across all business functions and
all levels of management to support the running and managing of a
business
An enterprise system is also known as enterprise resource
planning(ERP).

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Enterprise systems...

The ultimate goal is to satisfy customers and provide a

competitive advantage by reducing costs and improving service
Create Value transform inputs into outputs valued by the customer
Organizations create value by performing activities at lower cost or
enhancing differentiation of products or services.

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Enterprise resource planning(ERP)

Enterprise systems are commercial software packages that enable

the integration of transactions oriented data and business
processes throughout an organization.
Enterprise systems include ERP software and related packages as
advanced planning and scheduling, sales force automation,
customer relationship management, product configuration, etc.).

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Enterprise resource planning(ERP)...

Enterprise systems are referred to as ERP systems mainly because

the term ERP is more popular and commonly understood in the
IT industry.
ERPs, are basically integrated information systems.
ERP systems are comprehensive software applications that support
critical organizational functions. Like accounting, financial,
marketing, and production requirements of organizations.
This allows for real-time data flows between the functional
applications.
In addition, an ERP system acts as a central repository
eliminating data redundancy and adding flexibility.

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Business processes and integration
Business process
A crucial role of ERP in business, beside integration of functional
applications and organization information,
is to better position the organization to change its business
processes.
Business process is a series of tasks or activities grouped to
achieve a business function or goal.
For e.g. Order processing may include such tasks as taking an
order, checking inventory, and preparing invoices.
Most organizations have a set of policies and procedures to guide
their business process.
The ERP software has hundreds of business processes built into
the logic of the system.
These processes may or may not agree with the organization’s
current business processes.
An organization has two choices when implementing ERP:
1 business processes to match the software’s functionality or
2 modify the ERP software.
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Business processes and integration

Sample Business process

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Business integration BI

Business integration
Business integration is the alignment of organizational
strategy and goals with information Systems.
The first and the most important advantage lie in the promotion
of ERP packages are integrated,
i.e. Exchange of data among related business components is
possible .
For example, Relevant information from accounting can be shared
with marketing and HR and vice Versa.
ERP designed to combine business technology tools and functions
together, so they can easily be accessed through a single system.
ERP packages the data of related business functions is also
automatically updated at the time a transaction occurs.

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Business integration BI...

For this reason, one is able to grasp business details in real time,
and carry out various types of management decisions in a timely
manner based on that information.
ERP BI eradicates errors and time consuming manual processes.
BI Improve workflow of individual departments in addition to
visibility and accuracy.

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ERP Modules and their features

Finance module:
The financial module is the core of many ERP software systems.
It can gather financial data from various functional departments
and generate valuable financial reports
(e.g., budgets, balance sheet, general ledger, tax management and
quarterly financial statements)
Human Resource module
The HR module streamlines the management of human resources
and human capital.
The HR modules routinely maintain a complete employee
database, including contact information, salary details,
attendance, performance evaluation, and promotion.
An advanced HR module is integrated with knowledge
management systems

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ERP Modules and their features...

Production Planning Module:

This helps in planning and optimizing the manufacturing capacity,
parts , components, and material resources using historical
production data and sales forecasting.
Give overall production lifecycle.
purchase module:
Streamlines the procurement process of required raw materials and
other supplies.
It automates the processes of identifying potential suppliers,
negotiating price, awarding purchase orders to the supplier, and
billing processes.
The purchase module is tightly integrated with the inventory
control and production planning modules.

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ERP Modules and their features...

Inventory management module

Facilitates the processes of maintaining the appropriate level of
stock in a warehouse.
Inventory control identifies inventor requirements, sets targets,
provides replacement techniques and options, Monitors Item usages,
Reconciles the inventory balances and reports inventory status
Integration of the inventory control module with sales, purchase,
and finance modules.
Sales and marketing
The sales module implements functions of order placement, order
scheduling, shipping, and invoicing.
The sales module is closely integrated with an organization’s
e-commerce Web sites.

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ERP System Components

An ERP system, like its IS counterpart, has similar components

such as hardware, software, database, information, process, and
people. ERP system depends on
Hardware (i.e., servers and peripherals)
Software (i.e., operating systems and database)
Information (i.e., organizational data from internal and external
resources),
Process (i.e., business processes, procedures, and policies), and
People (i.e., end users and IT staff)
These components work together to achieve an organizations goal
of enhanced efficiency and effectiveness in their business processes.
Goal of ERP to serve the organization by converting data into
useful information for all the organizational stakeholders.
Note: ERP Failures are often caused by a lack of attention to the
business processes and people components

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Issues to be consider in planning design and
implementation of ERP systems:

The problem with ERP packages is that they are very general and
need to be configured to a specific type of business.
This customization takes a long time, depending on the specific
requirements of the business.

Implementation Costs:
The implementation costs would increase as the degree of
customization increases.
The cost of hiring consultants and all that goes with it can consume
up to 30 per cent of the overall budget for the implementation.
Once the selected employees are trained after investing a huge sum
of money, it is a challenge to retain them

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Issues to be consider in planning design and
implementation of ERP systems:...

ERP Vendors:
As there are about 500 ERP applications available and there is
some company consolidation going on.
Selecting a suitable product is extremely important.
Top management input is very important when selecting a suitable
vendor. Management needs to ask questions about the vendor,
such as its market focus (for example, midsize or large
organization), vision of the future, and with whom the vendor is
strategically aligned.

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Issues to be consider in planning design and
implementation of ERP systems:

Selecting the Right Employees:

companies intending to implement an ERP system must be willing
to dedicate some of their best employees to the project for a
successful implementation.
Employee exhibit the ability to understand the overall needs of the
company and should play an important role in guiding the project
efforts in the right direction.
Training Employees:
Without proper training, about 30 % to 40 % of frontline workers
will not be able to handle the demands of the new system. training
and updating employees on ERP is a major challenge. It is difficult
for trainers or consultants to pass on the knowledge to the
employees in a short period of time. This ”knowledge transfer” gets
hard if the employees lack computer literacy or have computer
phobia

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Issues to be consider in planning design and
implementation of ERP systems:...

Employee Morale:
Employees working on an ERP implementation project put in long
hours (as much as 20 hours per day) including seven-day weeks and
even holidays.
many times employees still spend 25 to 50 percent of their time on
regular job duties) could decrease their morale rapidly.
Leadership from upper management and support and caring acts of
project leaders would certainly boost the morale of the team
members.
Other strategies, such as taking the employees on field trips, could
help reduce the stress and improve the morale.

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why do organizations acquiring and implementing
enterprise systems
Organizations today face twin challenges of globalization and shortened
product life cycle.
Globalization has led to unprecedented levels of competition to
face such competitions, successful corporations should follow the
best business practices in the industry.
Shortened life cycles call for
continuous design improvements, manufacturing ,flexibility,
super-efficient logistics control and better management of the
entire supply chain.
All these need faster access to accurate information, both inside
the organization and the entire supply chain outside.
The organizational units such as finance, marketing production,
human resource development etc. need to operate with a very high
level of integration without losing flexibility
ERP system with an organization-wide view of business processes,
By:business
Fitsum A. need
(MTU) of information andsystems
Enterprise flexibility meet these demands
March 9, 2024 24 / 61
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 Chapter Two
Analyzing business requirements for
selecting and implementing an
enterprise system.

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2.1 Business Process Management(BPM)

The term BPM covers how we study, identify, change, and monitor
business processes to ensure they run smoothly and can be
improved over time.
The literature report three alternatives to business process
manage:
1 Automatize
2 Streamlining
3 Business process Re-engineering

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Automation

While automation can make a business more efficient, it cannot be

used to provide a competitive advantage.
Simply automating a bad process does not make it better.
Organizations that are serious about improving their business
processes will also create structures to manage those processes.
Business process management (BPM) can be thought of as an
intentional effort to plan, document, implement, and distribute an
organization’s business processes with the support of information
technology.

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Streamlining

Streamlining has a better impact on efficiency and productivity,

but it cannot warranty a competitive or sustainable advantage.
It is a good strategy for process that are essential to the company
but they cannot bring competitive advantage.
Business process management will provide several key benefits to
an organization, which can be used to contribute to competitive
advantage.

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Business Process Re-engineering:

Organizations look to manage their processes to gain a

competitive advantage.
Companies should ”blow up” their existing processes and develop
new processes that take advantage of the new technologies and
concepts
Before implementing ERP, the organization needs to:-
Analyse current processes,
Identify non-value adding activities and
Redesign the process to create value for the customer.
BPR is fully understanding the goals of a process and then
dramatically redesigning it from the ground up to achieve
dramatic improvements in productivity and quality.

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Business Process Re-engineering:...

BPM can use various process improvement techniques to optimize

the process.
The impact of an improved business process can be realized in
many ways, including
improved customer satisfaction, reductions in cost, and increased
productivity by allocating resources to more value-added activities.
One way of achieving these improvements is through implementing
ERP system.
Taking a life cycle approach will help organizations achieve their
process improvement goals with ERP.

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Difference between BPR and BPM

BPR and BPM are not the same

BPR suggests that businesses will become competitive by
redesigning core business processes.
It aims at eliminating the human intervention and automating the
process, wherever possible.
BPM is not about radical automation; instead, it follows an
iterative approach of making incremental improvements in the
processes.

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2.2 Selection of enterprise systems software

A successful ERP project requires :-

Selecting an ERP solution
Implement the solution
Manage changes and
Examine the practicality of the system
Most enterprises, the decision to implement ERP functionalities
will require buying a software
package from one of the more popular vendors on ERP market:-
like SAP, INFOR , MICROSOFT , LAWSON , SSA GLOBAL and
Oracle,.
But the selection process is not a straightforward task, hence
thorough understanding of what ERP packages are to offer,
differences in each of them and what might be at stake in selecting
one package over the other should be well examined.

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For effective ERP Solution evaluation and selection
process 5 phases
Stage 1 - Plan Requirement
Business need is defined, along with areas in business that
required technical approach. Develop a specific business case with
business value for a solution.
Ensure that the project sponsor is willing to articulate the
business case for change.
Identify vendors that operate in the line of products you are
looking for.
Get familiar with the software and hardware infrastructure
presence for the solution seeking.
Get general view of investment needed, considering software,
hardware, other related infrastructure and on going support.
Evaluate the organisation readiness for the investment and decide
whether to continue or not.
Now define priorities under ”must-have” and ”nice-to-have”
accordingly.
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For effective ERP Solution evaluation and selection
process 5 phases
Stage 2 - Request for Proposals (RFP)
Shortlist interesting vendor based on the outcome of market
survey for products.
Invite interesting vendors for interaction/demonstration of their
products.
Collects facts/functionalities in line with the business need from
various products demonstrations for the developments of unbiased
RFP for vendors.
Set-up a neutral body to develop RFP using all facts gathered
during products demonstration aligned to the business
requirements.
Distribute out RFP that addresses the vendor as a company and
the products they offer.
Generate basic expectations from an ideal proposal in line with the
business need for onward selection of the ideal software vendor.
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For effective ERP Solution evaluation and selection
process 5 phases

Stage 3 - Solution Evaluation

Identify and prioritise remaining gaps between software
capabilities as demonstrated and business requirements.
Identify how the gaps will be bridge in terms of configuration,
process change or combination of all these.
If the gaps can be bridge consider reengineering of those affected
business processes affected and continue with the evaluation.

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For effective ERP Solution evaluation and selection
process 5 phases

Stage 4 - Contract Negotiation

Negotiate with each vendor.
Establish software, hardware and other infrastructure agreement
requirements, which include version, components, maintenance
and support.
Also negotiate participation in user groups, license costs,
maintenance fees and many others.
Establish service provider agreement which also include
deliverables, timelines, resources, costs and payment schedules.
Establish other legal requirements.

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For effective ERP Solution evaluation and selection
process 5 phases

Stage 5 - Selection and Agreement

Upon successful negotiation with the right vendor;
Review all legal terms on privacy protection, operation guidance
and data manipulation etc.
Approve agreements with the selected vendors.
Agree on implementation plan

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ERP Implementation Life Cycle:
According to the staged system implementation model, the ERP life
cycle consists of four phases:-
1 Adaptation

Adaptation is similar to system investigation.

2 Acceptance
Acceptance is similar to system analysis
where user requirements are analysed and accepted by the team
before proceeding to design and implementation.
3 Routinization
Routinization is where the ERP system is either customized or
business processes are changed to assimilate the system in the
organization.
4 Infusion.
Once operational, the infusion or maintenance and evaluation phase
gets started where recurring problems are fixed and new features
are sought for next implementation life cycle.

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Comparing and contrasting SDLC and ERPLC

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ERP Implementation plan

is used to create a roadmap or blueprint to meet cost, scope, and

time constraints of an implementation.
The appropriateness of the plan depends, in part, on the project,
the company, and the reasons for the implementation.
Following are three major implementation plan choices:
1) Comprehensive
A comprehensive ERP integration plan is the most expensive and
lengthy approach.
It involves implementation of the full functionality of the ERP
soft- ware in addition to industry-specific modules
Implementing the full functionality requires a high level of
business process reengineering (BPR) with major changes in the
business processes and customization of legacy systems.

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ERP Implementation plan

2) Middle of the Road

A middle-of-the-road ERP implementation plan involves some
changes in the core ERP modules and a significant amount of
BPR.
The middle-of-the-road approach is not as expensive as the
comprehensive approach
3) Vanilla.
A vanilla ERP implementation plan utilizes core ERP
functionality and exploits the best practice business processes
built into the software.
A company following a vanilla implementation will have to simply
align their business processes to the ERP system, rather than
modify the software.

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ERP Implementation Methodology

Methodology refers to a systematic approach to solving a business

problem.
Like SDLC, an ERP development life cycle provides a systematic
approach to implementing ERP software in the changing.
There are many different vendor-driven methodologies or
approaches that use:-
Traditional ERP development life cycle
Rapid ERP life cycles (e.g., Total Solution, FastTrack, Rapid-Re,
Accelerated SAP (ASAP), and
Business integration methodology (BIM))

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Phases Of ERP Implementation

1. Pre-evaluation Screening
When the company has decided to implement the ERP:-
search for the convenient and suitable ERP package begins.
Refers to the discussed previous lecture (ERP Selection) to
understand the criteria used in selecting particular ERP package.

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Phases Of ERP Implementation

2. Package Evaluation:-
The objective of this phase is to find the package that is flexible
enough to meet the companys need or Software that could be
customized to obtain a ’good fit’.
Some important points to be kept in mind while evaluating ERP
software include:
1 Functional fit with the company’s business process.
2 Degree of integration between the various components of the ERP
system.
3 Flexibility and scalability
4 Complexity
5 User friendliness
6 Quick implementation
It is better to have a selection committee that will do the
evaluation process.

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Phases Of ERP Implementation
3.Project Planning Phase(pp)
This is the phase that designs the implementation process.
The project plan is developed, roles are identified and
responsibilities are assigned.
Organizational resources that will be used for the implementation
are decided
and the people who are supposed to head the implementation are
identified.
The implementation team members are selected and task
allocation is done.
The phase will decide when to begin the project, how to do it and
when the project is supposed to be completed.
The phase will plan what control measures should be installed and
what corrective actions should be taken when things get out of
control
PP is usually done by a committee constituted by the team leaders
of each implementation group headed by CIO.
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Phases Of ERP Implementation

4.Gap Analysis phase

Simply it is the process through which companies create a
complete model of where they are now, and in which direction
they want to head in the future.
The trick is to design a model which both anticipates and covers
any functional gaps.
Some companies decide to live without a particular function.
Other solutions include:
Upgrade
Identify the third party product that might fill the gap
Design a custom program
Altering the ERP source code, (the most expensive alternative;
usually reserved for mission-critical installation)

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Phases Of ERP Implementation

5. Reengineering
This phase involves human factors In ERP ,Reengineering has two
connotations.
1 The first connotation is the controversial one, involving the use of
ERP to aid in downsizing efforts.
In this case ERP is purchased with aim of reducing the number of
employees.
It is best to regard ERP as investment and cost-cutting measure
rather than a downsizing tool.
2 The second use of the word reengineering in the ERP field focus
on the Business Process Reengineering (BPR)

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Phases Of ERP Implementation

6.Configuration
It is important for the success of ERP implementation.
Configuring the system are able to explain what won’t fit into the
package where the gaps in functionality occur.
ERP vendors are constantly make efforts to lower configuration
costs.
Strategies that are currently being done include automation and
pre configuration.

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Phases Of ERP Implementation

7. Implementation Team Training

Synchronously when the configuration is taking place, the
implementation team is being trained.
This is the phase where the company trains its employees to
implement and later, run the system.
For the company to be self-sufficient in running the ERP system
it should have a good in-house team that can handle the various
solutions.
Thus the company must realise the importance of this phase and
selects right employees with good attitude

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Phases Of ERP Implementation

8.Testing
This is the point where you are testing real case scenarios.
The test cases must be designed to specifically to find the weak
links in the system and these bugs should be fixed before going
live.

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Phases Of ERP Implementation

8.Testing
This is the point where you are testing real case scenarios.
The test cases must be designed to specifically to find the weak
links in the system and these bugs should be fixed before going
live.
9.Going Live
This is the phase where all technicalities are over, and the system
is officially declared operational.
In this phase all data conversion must have been done, and
databases are up and running; and the prototype is fully
configured and tested
Once the system is live the old system is removed and the new
system is used for doing business.

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Phases Of ERP Implementation

10.End-User Training
This is the phase where the actual users of the system will be
trained on how to use the system.
The employees who are going to use the new system are identified
and their skills are noted
Based on their skill levels are divided into groups.
Then each group is given training on the new system.
The end-user training is much more important and much more
difficult than implementation team training since people are
always reluctant to change.

By: Fitsum A. (MTU) Enterprise systems March 9, 2024 52 / 61

Phases Of ERP Implementation

10.End-User Training
This is the phase where the actual users of the system will be
trained on how to use the system.
The employees who are going to use the new system are identified
and their skills are noted
Based on their skill levels are divided into groups.
Then each group is given training on the new system.
The end-user training is much more important and much more
difficult than implementation team training since people are
always reluctant to change.
Post Implementation
There must be enough employees who are trained to handle the
problem that might occurred when the system is running.

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Data Migration:

Data migration is the process of moving required volume of data

from existing systems to new systems.
Data migration encompasses all the necessary steps to cleanse,
correct and move data into a new system.
Technological changes, change in providers, software updates or
data warehousing/data mining projects make such delicate and
critical operations necessary
A good data migration should allow one to:
1 Reduce risk:
2 Lower operational expenses:
3 Improve data quality:

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Vendors and Consultants

Vendors
Vendors are the people who have developed the ERP software’s.
These people have invested huge amount of time and efforts in
research and development to create the software solutions.
The vendor should supply the product and its documentation as
soon as the contract is signed
The another role or responsibility of a vendor is as a trainer

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Vendors and Consultants
consultants
Business consultants are highly skilled professionals
The consultant should be responsible for administrating,
monitoring, and inspecting the activities of implementation.
Consultants are responsible for analyzing and clearly addressing
customization issues,
Consultants develop in-depth understanding of each product’s
strengths and weaknesses, worked by side of the ERP vendors.
It confirms that vendor’s package works and learns the techniques
consultant shares their previous experience about the
implementation of a package
The consultant should guarantee the success of the project and
should be able to show the results to the satisfaction of the
company management.
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2.3 Challenges associated with the implementation of
global ERP
An ERP implementation involves people as well as technology.
Accordingly, it may face people-related challenges, such as
resistance to change, as well as technical obstacles
Common ERP implementation challenges include:-
1. Project management:-
ERP implementations entail multiple phases:
Each phase brings critical tasks, and all elements need to stay on
track, which requires careful project management
2. Project planning:
Organizations often underestimate the time and budget necessary
for a successful implementation.
One of the most common causes of budget overruns is scope creep
Developing a clear and realistic plan from the start can help to
avoid those issue
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2.3 Challenges associated with the implementation of
global ERP

3.Data integration:
A key step in ERP implementation is data migration, But first,
you have to find all of your data;
This may be much more challenging than you expect.
Well-planned data migration can help to keep the entire ERP
implementation project on time and on budget.
4.Data quality:
The information may be stored in different formats; there may be
inconsistencies, and some information may be inaccurate
Ensuring data quality can become a sizable project on its own
involving validating the data, cleaning out duplicates and adding
missing values before migrating data to the ERP system.

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2.3 Challenges associated with the implementation of
global ERP

5.Change management
This requires a shift in mindset and a change in everyday work
processes for many employees Resistance to change can be a
formidable roadblock
6.Cost overruns:
Many organizations underestimate the amount of work required to
move to a new business system, and That results in spending more
money than expected
7.Continuous improvement:
The project team needs to continue to manage the project after
deployment, fixing issues and supporting new requirements as they
come up.

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 Thank you!

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