ERP IMPLEMENTATION SESSION 1

By Vishnu Tunuguntla B.Tech, MBA, PMP, CSSBB,CQA, (Ph.D)

Major items in the Agenda

Context setting with Strategic Planning Major Elements of Business Strategy Concept of Business Drivers and Pain Points Aligning Business Strategy with IT Concept & Risks of BPR Gap Analysis
Concepts Process Flow Business Process Maturity Model concepts Evaluation of Practices

Case Study of a Business Process before and after Reengineering

Strategic Planning
(C) Strategy (B) Vision

The Change
How do you plan to get to where you want to be?

(C)

Where do you want to be?

(B)

(A) Situation

Where are you today?

(A)

How will you know when you What will help & hinder get to where you want to be? you getting to where you want to be?

(D)

(E)

(D) Drivers & Restraints

(E) Key Goal Indicators

Major Elements of Business Strategy Strategy is an integrated set of choices:

Arenas: Where will we be active
With how much emphasis Which product categories? Which market segments Which geographic areas Which core technologies Which value creating stages

Major Elements of Business Strategy Vehicles: How will we get there

The means for needed presence in the identified areas
Internal development Joint ventures/alliance Licensing/franchaising Acquisitions Which channels

Major Elements of Business Strategy

Differentiators: How will we win
The reasons that customers will choose us
Image? Customization Price Styling Product reliability Anything else .

Major Elements of Business Strategy

Staging : what will be our speed and sequence of moves

Driven by the availability of the resources, urgency, need for credibility and need for early wins Speed of expansion? Sequence of initiatives?

Major Elements of Business Strategy

Economic Logic: How will we obtain our results

What generates cash What decides your margins? What generates market share growth? How fast sales turn in to cash? What numbers/metrics tell us that we are successful What are our underlying core capabilities

Concept of Business Drivers and Pain points

Business Driver
Any internal or external event that has an impact on the business (Bottomline/top line or Image/brand or employees )

Pain Point
a level of difficulty sufficient to motivate someone to seek a solution or an alternative.

Ways to identify Business Drivers and Pain points

Some recommended ways:
Interviews with Key/Critical Customers Interviews with Subject matter experts/Related Management Personnel Study of Customer Complaints Study of Government regulations Study of Technology Trends Study of Political Trends Study of Economic Trends (erosion of dollars/reduction in GDP etc)

Integrating Business & IT Strategy - Where the Business and IT Objectives align
Purpose of an IT Strategy

Integrate IT with the current and future needs of the business. Enable business to meet its objectives in an efficient and effective manner. Provide quality service to customers and employees. Leverage best practices in Information Technology (IT).

Business needs drive technology, and technology enables business capabilities

Vision Shared Corporate Strategy External Drivers (economy, competition, emerging technologies, etc.)
Strategy
Line of Business Line of Business Line of Business Line of Business Line of Business Line of Business

Processes

Customers
Business Needs Drive Technology Technology Enables Business Capability

IT Strategy

Applications
Technology

Infrastructure People and IT Processes

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Concept of Business Process Reengineering

The fundamental rethinking and radical redesign of

business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

BPR means not only change but radical change within a short period. This change is achieved by complete revamp of organizational structure, business process workflow, job description, performance measurement and adoption of information technology.

Concept of Business Process Reengineering

Some of Basic characteristics of BPR are:
View business as a set of customer (both internal and external) oriented processes rather than a set of departmental functions. Processes must have clear cut ownership. Non value adding activities within a process should be eliminated.. Gather information only once at the point of origin

Rationale Behind BPR

The justification for BPR is normally found in two areas: efficiency and competitive repositioning
Efficiency
Cost Reduction through efficient resource consumption

Competitive Repositioning improving Market share

Cycle time reduction --- leading to reduction in time to Market Better customer service leading improved customer satisfaction and better image First entry in to the Market

Risks OF BPR
Unreasonable expectations Lack of sustained executive commitment Resistance to change Technology performance failures

Concept of Gap Analysis

As-Is Analysis (What)
Specifically at identifying disconnects( anything that prevents the process from achieving desired results (e.g., inconsistency between the functions of a process that cause failings of the existing process to achieve its intent.)) within existing business processes and their specified intent.

Output of As-Is Analysis

A functional relationship description of the current situation, including the relationship between functions and activities, showing inputs, outputs, controls, and resources. The time or causal sequence of events within those activities. A measure of the performance and cost. A list of disconnects which are symptoms of root causes and some understanding and definition of the problems associated with the current situation.

Challenges Initial phase of Gap analysis

Where are we starting from? How high is this mountain we are trying to climb? How do we start? What issues do we need to address? When are results and benefits likely to start to materialize? Who do we involve? How do they go about it? etc; etc;

Scoping of Gap Analysis

Identification of the Functions and their boundaries
Geographical locations Stakeholders to be interviewed (Process owners, customers, Management) Projects to be included ensure a representative sample of the overall organization

Critical list of Business Processes to be assessed Method to assess the Business Process and what would be assessed and how it is evaluated (maturity models like BPMM, CMMI)

Key questions to be addressed

Has the firm made the tough strategic choices? Can leaders express strategy in business process terms? Understanding which business processes have to be improved, by how much, to achieve strategic goals? What is your level of aptitude in improving critical business processes? Do your leaders have a concise map of the firms enterprise business processes? Have they appointed process owners/stewards for key processes? Are there clear, usable process measures and metrics? Developed an enterprise view business process relationship map.

Key Questions need to be addressed

Have business process owners/ stewards been appointed for major cross functional business processes? Have key performance metrics been linked from a customers point of view to key financial metrics? Has the organization invested in training key people in a robust framework for change? Have we gone beyond one-time improvements to sustained management of continuous change? Have recognition/ reward systems been aligned with process objectives? Do the leaders see the business from the customers point of view? Do leaders believe customer value is created through a companys enterprise wide business processes? To what extent is there awareness and skill in improving and managing the end-to-end business processes?

Major Challenges to define Current state

Silo behavior - undue preoccupation with organization structure Instinct to reinforce command and control Lack of executive support No strategy for change Difficulty in defining the best process projects Incomplete, inappropriate resources Resistance of turf protection politics Hard to get accurate baseline data from within functions Delays in deploying needed technology

How to Conduct Gap Analysis

Review (& Revise) Schedule of On-site Activities More data needed More data needed Interviews Demos (Optional) Presentations (Optional) Review Collected Data Conduct Interviews

Hold Opening Briefing

*Characterize
Organizational Unit Implementation

Generate Implementation gap statements

*Characterize
Instance Implementation

* Where possible

Flow Charts
Flow Chart: A diagram that uses graphic symbols to depict the nature and flow of the steps in a process Advantages of Flow Charts Promotes a very good understanding of a process Identifies problem areas and opportunities for process improvement Provides a way of training Depicts relationships

Symbols Used in Flow Chart

Start/End

Process Step

Decision

Connector

Drawing Flowchart
Define the process to be flowcharted, and the purpose for flowcharting it. Assemble the right people to develop the who are actually involved in the process. Establish process boundariesthe starting and ending points.
Identify the major activities or sub processes that are included in the process. Determine what is not included in the scope of the process to remove any Doubt or confusion about the boundaries. This may also help establish the scope of related processes.

List the steps, activities, and decisions to be charted. If your team is not sure about a step, mark it to be investigated later. Put the steps in chronological sequence. Assign Flowchart symbols such as boxes, diamonds, and triangles. Review flow

Major Flowcharts
Linear Flow Chart
A Linear Flowchart is a diagram that displays the sequence of work steps that make up a process. This tool can help identify rework and redundant or unnecessary steps within a process.

Deployment Flow Chart

A Deployment Flowchart shows the actual process flow and identifies the people or groups involved at each step. Horizontal lines define customer-supplier relationships. This type of chart shows where the people or groups fit into the process sequence, and how they relate to one another throughout the process.

Opportunity Flow Chart:

a variation of the basic linear typedifferentiates process activities that add value from those that add cost only

Gap Analysis
Assigning Levels of Maturity - based on
Review of artifacts that are produced by performing a process Review of artifacts that support performing a process Interviews with individuals or groups who perform a process Interviews with individuals who manage or oversee the performance of a process Interviews with individuals who support the performance of the process Quantitative data used to characterize the state of the organization and/or the attitudes and behaviors of those in it Quantitative data describing the performance of a process, its outcomes, and business results

Defining the Target Level to be reached (ranging from maturity Level 2 to 5)

Flowchart Example
Start Process Repository PM Check Process Repository for similar projects PM Identify appropriate SDLC Method PM PM Estimation Process

PM

Identify and establish WBS

Identify dependencies

Perform Estimates

PM Identify Stake-holders and involvement

PM Identify Skill Requirement

PM

PM Identify Training and Resource Requirement

PM Identify Data Requirements

PM Identify and analyze Risks

Identify Budget

PM Create Project Org Structure and Develop Roles and Responsibilities BUH PM PM Plan Prepare all plans and consolidate into PM Plan Review Process Project Closure Process

Scrap the Project

Yes PM Communicate the Plan to all stake-holders PM and Stake-holders Any Defects? No PM Send the Plan for Approval Any Strategic issues? No CCB OR CC Defect Handling Process End Baseline the PM Plan

Review PM Plan

Yes

CM Process

Flow chart Cross Functional Flow Example

Please refer to the word document enbedded below

Process Maturity Stages

Process Maturity Stages

Maturity Level 1: Initial
Business processes are performed inconsistently, sometimes adhoc ways with results that are difficult to predict.

Maturity Level 2: Managed

Management stabilizes the work within local work units to ensure that it can be performed in a repeatable way that satisfies the workgroups primary commitments. However, work units performing similar tasks may use different procedures.

Maturity Level 3: Standardized

Common, standard processes are synthesized from best practices identified in the work groups and tailoring guidelines are provided for supporting different business needs. Standard processes provide an economy of scale and a foundation for learning from common measures and experience.

Process Maturity Stages

Maturity Level 4: Predictable
Capabilities enabled by standard processes are exploited and provided back into the work units. Process performance is managed statistically throughout the workflow to understand and control variation so that process outcomes can be predicted from intermediate states.

Maturity Level 5: Innovating

both proactive and opportunistic improvement actions seek innovations that can close gaps between the organizations current capability and the capability required to achieve its business objectives

Process Capability and Maturity

Process Capability
Process capability describes the range of expected results that can be achieved by following a process. The process capability of an organization provides means of predicting the most likely outcomes to be expected from the next effort the organization undertakes.

Process Maturity
Process maturity is the extent to which processes are explicitly defined, managed, measured, controlled, and effective. Maturing processes implies a growth in capability and indicates both the richness of an organizations processes and the consistency with which they are applied throughout the organization. Process maturation implies that process capability is improved over time

The BPMM Process Areas by Maturity Level

Level 5-Innovating Focus Practices Organizations processes are Organizational Improvement Planning Organizational Performance Alignment continually Defect and Problem Prevention improved Continuous Capability Improvement Organizational Innovative Improvement Organizational Improvement Deployment Work processes are managed quantitatively to establish predictable results Organizational Common Asset Management Organizational Capability and Performance Management Product and Service Process Integration Quantitative Product and Service Management Quantitative Process Management

4-Predictable

The BPMM Process Areas by Maturity Level

Level
3standardized

Focus
Organization establishes standard processes and assets for performing the product and service work

Process Areas
Organizational Process Management Organizational Competency Development Organizational Resource Management Organizational Configuration Management Product and Service Business Management Product and Service Work Management Product and Service Preparation Product and Service Deployment Product and Service Operations Product and Service Support Organizational Process Leadership Organizational Business Governance Work Unit Requirements Management Work Unit Planning and Commitment Work Unit Monitoring and Control Work Unit Performance Work Unit Configuration Management Sourcing Management Process and Product Assurance

2- Managed

Managers establish a stable work environment in their work unit

Structure of BPMM Model

Maturity Levels Process Area 1 (PA) Process Area 2 (PA) Process Area n (PA)

Specific Goals (SG)

Generic Goals (GG) Specific Practice (SP) Generic Practice (GP) Sub practices Generic Practice Elaboration

Typical work Product

Legends :
36

Required

Expected

Informative

Concept for evaluation of Processes

Direct Artifacts
Tangible outputs resulting directly from performance of a specific or generic practice, and which are the main intended product(s) of that practice (e.g., typical work products)

Indirect Artifacts
Artifacts that are a secondary consequence of performing a specific or generic practice; something that is not a primary intended product of the practice (e.g., meeting minutes, reviews, logs, and reports)

Affirmations
Oral or written statements confirming or supporting implementation of the practice (e.g., interviews, questionnaires, presentations)

Characterizing Practice Implementation

Fully Implemented (FI) Direct artifacts present and adequate Supported by indirect artifact and/or affirmation No weaknesses noted Direct artifacts present and adequate Supported by indirect artifact and/or affirmation One or more weaknesses noted Direct artifacts absent or judged inadequate Indirect artifacts or affirmations indicate some aspects of the practice are implemented One or more weaknesses noted OR Direct artifacts present and adequate No other evidence supports direct artifacts One or more weaknesses noted Direct artifacts absent or judged inadequate No other evidence supports the practice One or more weaknesses noted Has not yet reached the stage in lifecycle

Largely Implemented (LI)

Partially Implemented (PI)

Not Implemented (NI)

Not Yet (NY)

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Weakness of the Practice

A statement explaining a deficiency in the implementation of a practice
Specific as to the nature of the deficiency Supported by and traceable to objective evidence (or the lack thereof)

Eg: For SP 1: List of objectives are available but they are not very specific

Rule for Rating Goals Satisfied

A goal is rated satisfied (S) if and only if
all associated practices are categorized either
largely implemented (LI) or fully implemented (FI)

AND the aggregation of weaknesses does not have a significant negative impact on goal achievement

For a goal to be rated unsatisfied (U), the team must be able to describe how the weakness(es) led to this rating
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Application of BPMM to Marketing Function

Please see the Excel sheet for evaluating the Organizational Business Governance Process area

Final Findings Presentation: Template

Objectives of Gap Analysis Overview of Gap Analysis Scope of Gap Analysis
organization reference model Geographic locations

Findings
global findings PA findings non-model findings

Ratings (optional)
definitions Process area (PA) profile

Next steps

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Cross functional Flow

Sales dept Collect order and data From customer Ware House dept Receipt of report from production Receipt of sales order from sales Shipping dept Prepare the dispatch, gives to Courier next day Finance dept Perform costing of Products Production dept

Send the Production Details to warehouse

Feed in to sales system

Send Costing to Sales Receipt of acknowledgement Periodically and updates To sales & records From courier next day Provide courier Details to customer Provide list of items Dispatched to customers Next day to sales

Collect Price from Sales Master

Create the Package

Create the Package

item Availble?

Receipt of Receivables data from Sales at the EOD

Inform shipping Inform customer Expected lead time Send sales order to Update the Inventory next day Send the Package to Shipping

Creates receivables Data Periodically and Shares with sales

Ware house for dispatch

Major Disconnects and Recommendations

Disconnects
No Connection between sales and Production with respect to inventory status No explicit connection between ware house and sales with respect to inventory No explicit connection between finance and sales from costing perspective No connection between production and marketing from costing perspective Interface with customer was not shown No explicit interface between Finance and Sales from receivables perspective

Recommendations
Need to understand the kind of interaction needed among departments and establish the connection through information flow. Instead of setting SLAs for each department, SLAs need to be set up for each Business process and the responsibilities and accountabilities need to be articulated Look for the ERP solution which would provide appropriate integration among different functions and online updation resulting in better service to the customer and improvement in bottom line for the organization by removing the redundancy and improving the cycle time

Real Life Illustration of a Business Process

Case study

Case Study Funds Withdrawl in Bank

Business Process before Reengineering

Start

Flow illustration Funds Withdrawl

customer
Requests the bank balance

Bank clerk
Requests the account number

Bank clerk
Identifies and browses The ledger

Bank clerk
Computes the balance

Teller
Counts the currency Denomination and notes

Bank officer
Verify the ledger and approve the cheque

Bank clerk
Enters in register and Passes cheque to the officer along with ledger

Yes

Is balance Available?
no

Teller
Enters the details in to the register

Teller
Pays the money to the customer

Customer
Receipt of Money

Customer
Indicates sufficient/no balance

End

Business Process after Reengineering

Start

customer
Swipes the ATM card

System (ATM)
Validates if the card is valid Is card valid? no no

Yes

System (ATM)
Prompts to provide the PIN number

System (ATM)
Provide Message Invalid vard no

System (ATM)
Are sufficient funds available?

Yes

Customer
Is PIN Valid? Provide the PIN number

Ask the money required

Yes

Teller
System checks the availability of the currency

denomination available?

Yes

Customer
Receipt of Money

System
Updates the account

Teller
System error message

no

End