Source : The Manufacturer US
One size does not fit all when it comes to figuring out the costs, timing, and keys to success for an ERP implementation. Jill Rose reports.
There are a lot of nightmare ERP implementation stories out there. You’ve probably heard one or two. But for each of these stories, there is an equal amount of wisdom from people like Dan Bridgeman, director of business applications for ADC Telecommunications in Minneapolis.
Bridgeman, his team, and their colleagues have conducted more than 50 ERP deployments around the world since June 1997, thanks to a worldwide adoption of SAP and a spate of acquisitions by the $2.4 billion manufacturer of telecommunications equipment. Out of ADC’s experience has emerged a project plan that crystallizes the crucial components of successful ERP implementations among all sizes of manufacturing enterprises: a focus on business process; clear communications among project teams, executives, users, vendors, and consultants; and a healthy balance between discipline and flexibility.
Companies seeking to improve their ERP implementation processes tend to focus on money and time: what does it cost and how long will it take? The answer, inevitably, is the same: it depends. ADC will spend about $1 million on its current four-month SAP deployment at a recently acquired company with roughly 2,000 fairly dispersed users. A.W. Chesterton Company, a private manufacturer of industrial fluid sealing, hydraulic/pneumatic, and maintenance products, invested about $2 million during its 20-month, global implementation of an Intentia ERP system. Small companies can conduct a rapid implementation within two months for less than $100,000 through Exact Software North America, or they can opt for a $150,000 investment during a three- to six-month Exact Software implementation with far greater levels of customization and training. Again, it all depends.
“We can take two manufacturers based in Ohio, both making metal fasteners,” says William Wohl, a spokesperson for SAP America in Newtown Square, PA. “Suppose both companies need to create an enterprise system to do what most people think of when they think of ERP. Both companies will approach the project differently; both will wind up spending different amounts of money. Both projects will take different lengths of time to complete. And both could have very different outcomes.” That’s because the success of any ERP installation hinges on the redesign of business processes.
“The most important step you take is not the installation of software on a CD, but the mapping of basic business processes to best practices—or for some companies, the first real identification of what business processes are,” says Wohl.
If one of the world’s leading technology solutions companies emphasizes business process over technology, there must be something to it. And SAP is not alone. Syspro Group, one of the leading ERP providers to the manufacturing sector, first published its implementation methodology, STARS (Structured Technique to Achieve Rapid Solution), in 1998. Earlier this year, Syspro completely rewrote STARS. The new version is business process-based, whereas the first two versions of the methodology were “impact modular based” (i.e., focused on the ERP system’s groupings of financial, distribution, and manufacturing capabilities).
“We found that people weren’t thinking modularly,” says Syspro Vice President of Marketing Joey Benadretti. “They were thinking in terms of process flows. What’s a sales flow? What’s a purchasing flow? What’s the flow on the shop floor? That’s how a manufacturing company addresses it. We believe we have arrived at the point, from an implementation perspective, where we need to look at the business process phases rather than from the impact modular based perspective. Reengineering internal processes is a major step forward for companies that want to gain from the information technology. But there is no reason to implement a new system if you’re not going to take advantage of the technology and the new processes you can perform to save time and money.”
A.W. Chesterton, for example, assigned “process owners” roles as part of its implementation of Intentia’s Movex ERP system. “We had somebody in charge of finance across the company, somebody in charge of customer order maintenance across the company, and so on,” says Anne Wightman, information system operation manager for A.W. Chesterton in Stoneham, Ma. “The tricky part was that we had five different manufacturing divisions at the time. So, even though we had one person in charge of manufacturing as a process owner, they had to make sure that those five different divisions were represented well enough in their own unique areas so they could work with the way the system was being configured. Process owners operated at the highest level. If we had an issue in manufacturing, everybody knew that Paul was the person to go to, and he kept track of where we stood and tracked the issue log.”
Chesterton used Intentia’s Implex implementation methodology. Bridgeman notes that ADC’s methodology closely resembles SAP’s Solution Maps methodology. And Chris Holbert, director of IT for North American Scientific Inc., a manufacturer of radioactive medical devices in Chatsworth, Calif., says Exact Software was “very helpful in providing an overview of its ERP functionality and what is possible through the software.” These and other examples signify the trust that companies bestow on their vendors in successful implementations.
Part and parcel with that trust, however, is the recognition that consulting services, from vendors or their implementation partners, can make up a hefty chunk of the final bill. The successful ERP implementations at A.W. Chesterton and ADC Telecommunications included careful monitoring of consulting hours.
Responsible vendors and consultants respond to this need by transferring their knowledge as efficiently as possible. Early on in ADC’s ERP implementation activity, systems integration and IT consulting firm CSC, along with SAP consultants, were much more involved in the process. “As we gathered that knowledge, we weaned ourselves because that work can get very expensive,” says Bridgeman. “We still gain significant value from calling on them, but now we rely on them for what I would call spot consulting.”
Project teams that listen to the needs of users and relay those issues to the project manager and to external consultants stand a better chance of early weaning. One of the most valuable contributions vendors and systems integrators have to offer is their experience with the project environment. “Ninety-five percent of our consultants’ time is spent working on projects,” says Stephen Thornton, director of services for Intentia Americas. “That’s a totally different environment than our customers are used to operating in. And we ensure that they understand what their commitments are in terms of delivering solutions in the project environment.”
North American Scientific’s Holbert conducted a risk analysis before guiding his company through its ERP implementation. He says two of the greatest risks to the implementation were the workforce’s lack of experience with integrated applications and its lack of familiarity with a project environment. “Other than myself, our CFO was the only other person in the organization who had worked with any type of integrated application, let alone installed one,” Holbert says. To mitigate those risks, he hammered the importance of communications. As project manager, Holbert, who also holds master’s degree in finance, says he sought to “bridge the dialogue between the technical and the functional.”
That type of vision is essential for an ERP project manager. At A.W. Chesterton, Wightman tells of a messy implementation that took place at the company in the mid-1990s. In that case, she says, three people selected the software package and “kind of rammed it down everybody’s throat.” This time, she says, she and the project team established acceptance at the grass roots level by holding project meetings before the selection of Intentia was finalized.
In addition to a 15-member implementation team and five Intentia consultants, A.W. Chesterton established a steering committee made up of the CFO, vice presidents, and division managers. “We made it clear to them that their role was keeping the project on track,” Wightman notes. As project manager (and an IT manager), Wightman emphasizes that her team never had to say no to the rest of the company—that responsibility rested with the steering committee. That decisionmaking structure and executive buy-in prevented the kind of employee vs. implementation team friction that hinders many ERP projects.
Wightman also held regular meetings with the steering committee to maintain open communications. Prior to the meetings, she would meet with each executive member individually to update them. That kept the meetings short. She had project members fill out time sheets, and she presented those numbers at each steering committee gathering. “I would throw up a slide indicating that 90% of the time committed to the project by this division was being done,” she says. “Another division might have only completed 30% of the time it committed to the project. The managers would look at the manager whose division had only contributed 30% of its commitment for that phase and say, ‘Hey, your people need to get with the program.’”
When issues were too small to relay to the steering committee but important enough to address, they were added to a Day Two list. “If we found something we wanted to implement but felt it was going to take too much time or we didn’t have enough experience, we threw it up on the Day Two list,” Wightman says. “Many times, people are afraid something is not going to get implemented. Once they saw it on that list, they knew that after the system went live, we would go back and start implementing all the things on the Day Two list. And we did; we stuck with it.” That way, divisions or smaller functional groups that don’t get all the functionality they want initially remain committed to the project.
That type of flexibility is critical to the success of the implementation. “We came in under budget and right on time,” says Holbert. “One of the phases was a month late, but overall we were on time. Still, our plan changed dramatically from day one, day 60, day 180 and so forth. A lot of companies don’t update plans.”
Thornton agrees, noting that companies tend to focus on cost and time overruns without balancing those changes against benefits. “You can talk about overruns on project budget without really addressing the potential goal you’re aiming for,” he says. “For example, let’s say you have a project that costs you $1 million, and during the project that cost increases to $1.2 million. If your original benefits were $2 million but now they’re $2.8 million, you shouldn’t lose sight of that.”
Wightman says her company increased its ERP budget, but, again, that decision was made at the steering committee level. As with most successful implementations, A.W. Chesterton used a phased approach, which helped keep scope creep in check. “It wasn’t like we had $1 million and then halfway through the project we used half of it,” Wightman adds. “Every phase, depending on the activities within that phase had a certain amount of consultant days and opportunity costs allocated to it. Since everything is tracked within each phase, it feels more like doing five mini-projects than one massive project.”
In addition to scope creep, which affects most large projects, there are several manufacturing specific ERP-implementation challenges. Thornton notes that resistance to change tends to be stronger among manufacturing companies. “Companies sometimes are steeped in customs and practice that don’t necessarily lend themselves to implementations of this nature,” he says. “I think there are cultural issues that need attention. I’m afraid people far too often overlook the change management requirements of an implementation.”
Mohan Thiruvadi, product marketing manager for Exact Software North America, worked for many years on the implementation side before he assumed his current role. He notes that manufacturers often require more training time for their users, particularly those on the shop floor. Manufacturing companies also tend to encounter more issues related to potential gaps in ERP capabilities (i.e., where the software fails to address a need). “There were always discussions on functionality and gaps,” says ADC Telecommunications’ Bridgeman. “Everybody felt they were different. When you looked into it, everybody usually wasn’t as different as they thought. So you really had to focus and understand what they were seeing to determine if they really had a gap. You have to be prepared to determine if there is a fundamental piece of their business that requires some development to support.”
There’s one final manufacturing-specific ERP-implementation challenge companies should address, once they achieve the kind of success evident at ADC. Bridgeman calls it the yawn factor. “When everything goes smoothly, you have to reinforce the fact that these projects are not lay-ups,” he adds. “Despite past successes and an effective implementation plan, you still need executive support, and the team still needs to be rewarded for its work.”
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