Lending Edge Technology IT, ebusiness, lean The ERP Devils Triangle and the Impact of the Supply Chain Ray Atkinson CEO Atko Global P/L
ERP Devils Triangle Impact on Supply Chain & Corporate Risk An Insight into ERP Failures copyright (c) atko global 2
ERP and the Supply Chain copyright (c) atko global 3
Understand how to use the tool Demand Management Forecasting Distribution RP Customer Orders Contracts Planned WO Trial Kit Order Release Kanban Cards OP Scheduling Kitting Dispatching Order Closeout Production Reporting Picking Despatch Invoicing Business Plan Production Plan Sales & Operations Plan Master Production Schedule Material Requirements Plan (MRP) Planned Purchases Release Orders Vendor Scheduling Kanban Schedules Order Receipt Inventory Control Resource Plan Rough Cut Capacity Plan Capacity Requirements Plan Parts Master Bills of Material Routings On Hand Inventory On Order Inventory ERP Philosophy Manufacturing/Distribution M E A S U R E M E N T copyright (c) atko global 4
History of Disasters: 1970-1990 MRPII 70% underperforming to expectations Some outright failures In-house implementation team with ad-hoc consulting Name change to ERP 1990-Current ERP 70% underperforming to expectations Some outright failures Companies bankrupted Major negative impact on company performance Software House/implementation partners managing project Huge cost for implementation services + 25% overuns on budgeted cost Major Corporate Risk Legal action increasing copyright (c) atko global 5
Success & Failure Companies reporting successful ERP implementations claiming 50-55% of Benefits against expectation Few happy with results Failed ERP is difficult to specifically define. Usually elements of the system working but little benefit Negative impact on company performance Huge internal disruption and internal blame game Executive career risk Money black hole copyright (c) atko global 6
Typical Issues: From a company s perspective Project overrunning budget, costs blow-outs Project late, poor progress Taking shortcuts to bring project back on time Resource issues, lack of expertise Internal confusion and conflicts Management frustration Little benefit Wishful thinking ignoring reality Typical Complaints: From a company s perspective The ERP Software vendor and their partners misrepresented the extent of their expertise and experience. The vendor assigned inexperienced people to the project. The software house concealed or mislead on the limitations of the ERP software functionality. Too many hidden costs copyright (c) atko global 7
Typical Response: From Supplier s & Implementer s Perspective Lack of Top Management Commitment Poor Initial Requirements Definition and ERP knowledge Budgeted cost underestimated for data clean-up, training, education, additional hardware etc., and business disruption Project implementation resources inadequate Scope creep Corporate behavioural and poor change management processes Project implementation schedule unrealistic Software expectation versus reality gap Unrealistic expectation of benefits and ROI Inadequate training and education Unrealistic Go Live date copyright (c) atko global 8
Companies with ERP implementation problems: The Devils Triangle Sold the expectation Try to implement what was sold The Company All share responsibility For success or failure! But! Who was/is being paid for the ERP expertise? copyright (c) atko global The reality: 55-70% disappointed 9
1 2 3 4 1. ERP Acquisition Rationale 2. In House Expertise in ERP 3. Risk Assessment 4. ERP Cost Justification &Budget 5. Request for Proposal (RFP) 6. Software Selection Criteria 7. The ERP Contract 8. Project Plan 9. Go Live Date/s 10. ERP Education 11. ERP Training 12. Implementation Responsibility 13. Project Management 14. Executive Involvement 15. Software House Expertise 16. Software Imp Team Expertise 17. Process Change 18. Data Clean-up 19. Data Conversion 20. Issues Identification 21. Scope Change 22. Software Changes 23. Management Action to Issues 24. Go-Live Readiness Reviews 25. Live Running Cut-over 26. Post ERP Cut-over Results of Project Analysis That represents a common theme Amongst companies implementing ERP systems copyright (c) atko global 10
Effects on Supply Chain copyright (c) atko global 11
In this situation the ERP System will not support The supply chain! copyright (c) atko global 12
The Proven Path is there any such thing? This company was sold on the Basis of a Proven Path implementation Methodology. 70% of ERP systems Do not provide the outcomes cost justified for despite claims of risk free Proven Path Implementation methodology. You decide! copyright (c) atko global 13
Detailed analysis of ERP approaches highlight shortcomings across a large spectrum of activities summarised here: 1. ERP Acquisition Rationale 14. Executive Involvement 2. In House Expertise in ERP 15. Software House Expertise 3. ERP Cost Justification & Budget 16. Software Imp Team Expertise 4. Risk Assessment 17. Process Change 5. Request For Proposal (RFP) 18. Data Clean-up 6. Software Selection Criteria 19. Data Conversion 7. The ERP Contract 20. Issues Identification 8. Project Plan 21. Scope Change 9. Go Live Date/s 22. Software Changes 10. ERP Education 23. Management Action to Issues 11. ERP Training 24. Go-Live Readiness Reviews 12. Implementation Responsibility 25. Live Running Cut-over 13. Project Management 26. Post ERP Cut-over The company Software house/implementers Joint responsibility All of these areas need to be managed but who is given the power and mandate across all of these areas? copyright (c) atko global 14
A practitioners experience with ERP Harry Houston copyright (c) atko global 15