ENTERPRISE RESOURCE PLANNING AND MAXIM - MAX METHODOLOGY

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1 ENTERPRISE RESOURCE PLANNING AND MAXIM - MAX METHODOLOGY KAZIMIERZ KRUPA University Rzeszow Wdra anie zintegrowanych systemów informatycznych klasy ERP w dalszym ci gu zwi zane jest z du ym ryzykiem pora ki. Do wiadczenie wiele przedsi biorstw pokazuje, ze zazwyczaj popełni si bł dy w czasie implementacji i "profilowania" zakupionego pakietu do konkretnych wymaga i oczekiwa przedsi biorstwa. Opracowane i wielokrotnie sprawdzone w praktyce specjalistyczne metodyki wdra ania pozwalaj ograniczy prawdopodobie stwo złych decyzji w tym zakresie. MAXIM - MAX METHODOLOGY do tej grupy narz dzi nale y. In this article understand how ERP can help companies deal with complex expectations, intricate process, compressed live cycles, deregulation, globalization, the need for predictive anticipation, and product-service convergence. 1. Enterprise Resource Planning and the changes in organizational structures Changing environment, especially the tough competition on the market, requires companies to improve their methods of management. More and more often the improving process is aided by computer systems. As indicated by corporate (Thompson, HBB) practice the software packets of the ERP and MRP II class are the most effective. The ERP (Enterprise Resource Planning) is the system, which features high integration, exceptional efficiency and mufti-accessibility. It is designed for supporting the managing of manufacturing businesses. Its scope of comprehensive managing of a production process, integrality and, most of all, the highly-efficient database are the main reasons for using the system the Machine Building Industry in which usually complex technologies, and a large number of parts and subassemblies co-exist. The scientific base can also be used, though in limited range, as it is characteristic for the expert systems. The ERP systems are used in other industrial branches. For example, there are over 7500 applications of the same class system, called the BPCS, in such corporations and companies as:ciba, Nestle, Sandoz, Yamaha. In Poland: Coca Cola Poland, Bottles Łód, Continental Can Poland, Master Food, and FA Krosno.

2 128 POLSKIE STOWARZYSZENIE ZARZ DZANIA WIEDZ Seria: Studia i Materiały, nr3, 2004 APICS (American Production and Inventory Control Society), the authors of the ERP 43 qualified the system as an important aid for: sales and production planning for various time-periods including the striding planning; developing of production schedules for all components which are necessary to meet the production volume while keeping minimum stocks, or even for production with the J&T 44 management elements. accepting orders and monitoring the order realization and shipments as the aid in logistics and the EDI 45 ; monitoring of purchase of materials including the delivery quality acceptance; managing of inventories and production in process in order to reduce the costs (cost management); managing the finances through the usage of the on-line information on the production unit cost (this obviously relates to the Type-Cost System). In common opinion the major determinates for the successful implementation of these systems are the proper preparing, as well as rapid and comprehensive putting into practice the changes in specialization, formalization, hierarchization, and centralization of organizational structure (in multi-dimensional sense). The specialization is determined as a degree of homogeneity cumulating in variety. After L. Kubicki's and C. Welter's example these measure is usually used for the examination of things, sets, processes, relations, events, and even the public opinion in the area of a given set of problems. The formalization may be regarded as a system of regulations and procedures, and the presence (and possibly intensity) of the formal and impersonal rules of action, as well as the accuracy of the job position specification. For many people the formalization means a degree of standardization of the activities taking place in a company. The scientific management defines hierarchization as a system of job dependencies determined by the range and the span of managing. For example, according to the system approach, it can be stated that the degree of hierarchization depends on the place, and the kind of decisions being taken. The hierarchization is most often describe by means of superiority, power structure, span of managing, configuration and empirical indexes, such as production workers' attitude towards the other (indirect-production) star. 43 American Production and Inventory Control Society (APICS) developed standards for: - the MRP I, in 1957; - the MRP II, in 1989; - the ERP, in Just in Time is the management method based on the philosophy that the raw materials and/or components of suitable quantity and of proper quality are delivered to a buyer right on time. The English name for this system a " pull system" as opposed to "push systems" which stress the quantity in supplies. 45 Logistics is the navigation of deliveries with a target to obtain the full reliability of supplies at continuously decreasing costs. At present, it makes frequents use of the SMS (Satellite Multiservice System), and the IBC (International Business Service), as well as the Bar Code Systems as, for example in PLODETT. To convey information on goods the EDI (Electronic Data Interchange) used on a large scale.

3 Kazimierz Krupa Enterprise resource planning and Maxim - Max methodology 129 The centralization should be understood as a division of decision-making authorizations, a division of power and influences in a company, as well as the decision area. This is, socalled a situational approach. The others are the system approach, praxeological approach, and sociological approach. It seems that the greatest changes take place in the centralization 46. Empirical research shows that during the MRP II implementation, many decision-making authorizations were shifted and considerable authorizations were assigned to three job positions. A new job position was set up which obtained the decision-making authorizations equal to those of board executives. Within its extra authorizations the Chief Process Engineer's position co-ordinated and decided whether all information from technological documentation was being correctly entered the database. However, a double trend appeared noticeable, on one hand an increase in decision-making centralization for several key-positions such as as Chief Design Engineer's post, while on the other hand a certain degree of decentralization of the decision-making, even at the highest level. However, this is not the one-way tendency. A change (increase) in the rank of one position is particularly noteworthy. It finds its reflection in extra decision-making authorizations equal to those of board executives although this particular manager has never been appointed to the executive board. A final conclusion, which the studied companies confirm is that the ERP implementation leads to both the centralization and the decentralization. It depends mainly on the current needs and problems actually to be solved in the company. Also in the first stage of the packet use the decision-making authorizations are again revised in, as it often appears, a reverse direction. There is a trend to cancel a part of the authorizations which were given to Chief Engineer Department units. This concerns not only those authorizations given to the units during the ERP implementation but also those ones (and too much greater extent than could ever be expected) which belonged to them as a result of the original division of competencies, and as statuary tasks. The ERP systems are integrated packets comprising many modules. One of them is the TPP (Technological Production Planning) which, if fully utilized, is able to support the realization of up to percent of the tasks traditionally carried out by numerous teams dealing with production process planning, developing proposals for production program diversification, simulating of co-operation projects and controlling the delivery logistics. According to J.Blewo ski [4, s.3], also in Polish companies the ERP systems bring about positive results, especially in the discrete lot production of complex, or very complex products comprising a large number of typical components, as well as products which features the long production cycles and specific manufacturing processes. However it is 46 This characteristics is based on a case analysis of the ERP applications in several companies. Those mainly referred to the R3 Packet developed by SAP. Empirical studies of changes in organisational structures were analysed separately at system implementation stage, and then in the course of the first period of its operation (however for not longer than two years).

4 130 POLSKIE STOWARZYSZENIE ZARZ DZANIA WIEDZ Seria: Studia i Materiały, nr3, 2004 necessary to make well-thought-out changes in the organizational structure prior to implementing the ERP systems. The changes should primarily concern the information flow (centralization), the scope of duties (specialization), and the circulation of documentation (formalization). As indicated by J. Blewo ski, I. Bartczak, the successful implementation also depends (even up to 70 percent) on positive attitudes of the company management and its employees. 2. MAXIM - MAX implementation methodology 47 WHAT IS MAXIM? MAXIM is MCS structured method for implementing MAX. It brings together the three elements of a successful MAX implementation; people, processes and systems. The purchase of MAX by itself is not enough to ensure the achievement of the available business benefits. MAX must be implemented correctly to deliver the improvement to the company. Changes are likely in procedures, organization and job roles as well as in business processes. Managing the changes is the challenge that MAXIM addresses. Every implementation is different so MAXIM provides guidelines and an approach not a rigid set of activities. Each new MAX customer has a wealth of experience of their own business processes. The MCS team of consultants have a wealth of experience of other manufacturing businesses and of course in the use of MAX. MAXIM is designed to transfer the knowledge of the consultant to the customer and the experience of the end user to the system supplier, all to ensure MAX is implemented quickly for the best business benefit. MAXIM has been developed from the experience of MCS staff, customers and suppliers. It distils the knowledge from over 1000 implementations of business systems into a practical and robust approach. THE CONCEPTS BEHIND MAXIM MAXIM details the activities that are necessary to implement MAX in seven stages (fig. 1). It also proposes a project organization and reporting structure, guidelines for project management, and describes the roles that need to be carried out. MCS are convinced that the customer must lead and own the implementation project. This places control and responsibility in the hands of the customer s Project Manager. At the same time MCS have their part of the project to manage and our Project Manager will provide support at all times. The two key issues behind the design of the MAXIM methodology are fitting MAX to the business processes and ensuring user buy in. FITTING MAX TO THE BUSINESS MAX is a powerful, flexible suite of software. It can be configured in many ways. Tailoring is available from Company level down to individual screens and fields. The best fit of MAX for the new user will occur with improvement to the existing business processes and tailoring of the software to suit. In contrast, there is a risk that MAX s flexibility allows old inefficient processes to be configured embedding bad 47 See papers ICL, UK, London, 1999.

5 Kazimierz Krupa Enterprise resource planning and Maxim - Max methodology 131 practice in the new system. The MAXIM staged structure allows appropriate levels of process change to be implemented and ensures user involvement at all stages. At Project Initiation (Stage 1) the outline business processes, project objectives and time scales are agreed with senior management and published to all as the Enterprise Overview. The MAX Application Prototype (Stage 4) maps the desired business processes to the software functionality. At this stage the detail of tailoring and configuration required is identified. Interfaces with other software are tested and any necessary modifications defined. This phase is dependent on involvement with the end users and is a major step towards their buy-in. Trial Running (Stage 5) confirms the fit of the procedures to the processes and validates the system before cutover. USER BUY-IN User involvement of course has a cost, which will be outweighed by the achieved benefits, the greater the changes needed to the business the greater the cost. The more people involved, also the greater the cost. However the fewer the people involved the greater the resistance and probability of mistakes when going live. MAXIM promotes controlled participation at varied levels of the business, through the structure of Enterprise Overview, MAP and Trial Running and the complementary programmer of education and training. Seven Stages of MAXIM: MAXIM has a staged approach. Each stage has prerequisites for commencement and deliverables before the next stage begins. The interrelationship of the stages is shown following and in greater detail on the MAXIM project template. The stages are shown as sequential, in practice some overlap will occur. Stage 1 Project Initiation Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Stage 7 Startup & Installation Education, Training and Communication MAX Application Prototyping Development Data Transfer & Trial Running System Cutover New System Running Fig. 1. Seven Stages of MAXIM Source: ICL, UK, London, 1999 PROJECT STAGE 1 - PROJECT INITIATION

6 132 POLSKIE STOWARZYSZENIE ZARZ DZANIA WIEDZ Seria: Studia i Materiały, nr3, 2004 The implementation of MAX is a major change in any business. Establishing the framework for the implementation is a critical task on the success route. Everyone involved needs to know what the project is, why the project is being undertaken, when the results are required and their part in the change. Project initiation confirms the scope and objectives of the implementation. It then defines a structure of management and a planned process to achieve the objectives. During this stage a high level description of the business processes to be carried out is defined and the outline application of the software and hardware to be introduced to support them. This Enterprise Overview explains how the business is expected to operate when the implementation is complete. Responsibilities are allocated to the companies, customer and suppliers involved in the change process, and individual roles are defined. It proposes a management structure for the project and procedures for project planning and reporting. Involvement and agreement of the customers senior staff and MCS consultants ensures a co-ordinated approach. By the end of this stage there will be an initial implementation plan describing the scope of the implementation with success milestones and criteria for performance measurement. When combined with the business objectives and Enterprise Overview this plan will guide all of the later stages of the implementation. PROJECT STAGE 2 - EDUCATION, TRAINING AND COMMUNICATION A successful implementation depends as much on the understanding of the users as on the fit and application of the software. This section of MAXIM is concerned with the development and delivery of an integrated education, training and communication plan to support the implementation. The progress of an implementation with educated and aware users will be smoother, quicker and more effective. Investment here will pay back many times over. The No. 1 response of Project Managers when asked What would you do differently next time? is Spend more time on Education and Training. MCS are able to offer an unparalleled selection of courses for manufacturing industry through our own training consultants and associated company Manufacturing Management Ltd. (MML). MML are National Training Award winners and uniquely hold the Institute of Personnel and Development s Award for Excellence in Training Provision. Education concerns the reason why new actions have to be taken. Communication is regular advice on the status of the project to all involved, both internal and external. Training covers specific skills in the use of MAX and other software. All three are closely linked and a necessary part of any MAX implementation. MAXIM covers the spectrum of these activities from pre-implementation education through application training to new system running and preparation for training new users as they join the company. It addresses concept education for the board through to information for the shop floor. The process is continuous and will be carried out in parallel with many other implementation activities. The objective is simple, to provide the customer with the ability to use MAX, to achieve the expected business benefits. That is to equip them with the understanding and skills necessary to define, implement and maintain MAX, in the

7 Kazimierz Krupa Enterprise resource planning and Maxim - Max methodology 133 manner defined in the initial project overview and as subsequently modified through the Application Prototyping and Trial Running stages. MCS consider the people change issues are important enough for the company to appoint an Education and Training Coordinator (ETC) for education/training planning and execution. Often this will be the Human Resources representative on the Project Team. The selected individual(s) will hold responsibility for administration and development of the Education, Training and Communication plan. MAXIM details a structure for education and training, provides guidance for selection of course attendees and the process of monitoring performance. PROJECT STAGE 3 - START-UP AND INSTALLATION This stage of MAXIM addresses detailed project planning and the installation of hardware and software. Project Planning -MAXIM includes a template for the implementation project plan. This generic plan describes the activities necessary to implement MAX and their interrelationships. The template has been produced using MS Project and is easily customised for the individual implementation. Installation-MAXIM details the requirements to ensure effective management of the initial installation of hardware and software. At the end of this stage the site is ready to begin hands on use of MAX PROJECT STAGE 4 - MAX APPLICATION PROTOTYPING (MAP) The MAP activity is probably the most important in defining the eventual way of working and consequently the benefits to be obtained. The MAP operates as a workshop where end users and MCS consultants work together to match MAX to the customer business processes. This stage cements user confidence in the proposed use of the system, starts to show the benefits available and determines any bespoke functional requirements. Experience shows time invested at this stage speeds the final implementation and saves later rectification activity. At the end of the MAP the way MAX is to be used is defined, interfaces with other systems have been tested and outline procedures are produced. PROJECT STAGE 5- DEVELOPMENT, DATA TRANSFER AND TRIAL RUNNING This stage of the project covers the detail activity of converting existing data, finally tailoring MAX to meet the customer needs and to pilot run the new system to ensure compliance before system cutover. This stage contains a number of time and resource consuming activities. Good planning is essential to make best use of resources and time. PROJECT STAGE 6 - SYSTEM CUTOVER System cutover moves the company on to MAX. For the computer systems part of the project, completion of this phase signals success. Business benefit will follow later. MAXIM details how to minimize the risk of cut over and proposes insurance actions to maintain company operation. PROJECT STAGE 7 - NEW SYSTEM RUNNING

8 134 POLSKIE STOWARZYSZENIE ZARZ DZANIA WIEDZ Seria: Studia i Materiały, nr3, 2004 The final stage of MAXIM is to review the implementation and monitor the benefits achieved. Periodic reviews of operation are planned for the bedding in period. MCS propose an audit after the system has been in place for six to nine months. This phase also contains the introduction of ongoing maintenance and improvement activities. 3. Summary The Manufacturing Resource Planning is the system, which features high integration, exceptional efficiency and mufti-accessibility. The MRP II systems are integrated packets comprising many modules. MAXIM is MCS structured method for implementing MAX. It brings together the three elements of a successful MAX implementation; people, processes and systems. Bibliography 1. Ackerman L., Managing Change. Cases and Concepts, (Ed.T.D. Jick), IRWIN, Boston, Adeli J., Balasubramanyam K.V., A Novel Approach to Expert System for Design of Large Structures, AI Magazine, no 9, Agyris Ch., Schon D.A., Organization Learning. A Theory of Action Perspective, Addison-Weseley, Reading Massachusetts, Blewo ski Z. J., Wsparcie dla przemysłu. Strategie i technologie. Warszawa, czerwiec, Burnes B., Managing Change. A Strategic Approach to Organizational Development and Renewal, Pitman Publishing, London, Byrne J. A., Brandt R., The Virtual Corporation. Business Week February, 1993 KAZIMIERZ KRUPA kkrupa@pf.pl