Enterprise Resource Planning, 1st Edition by Mary Sumner Chapter 8: Managing an ERP Project © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-1 Objectives • Acknowledge the importance of project management and control • Examine the process of organizational change © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-2 Factors Influencing Information Systems Project Success • Number of modifications • Effective communications • Authority for project implementation • Business management • Ability to generate additional funds to cover implementation © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-3 Factors Causing Information Systems Project Failures • Poor technical methods • Communication failures • Poor leadership • Initial evaluation of project © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-4 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-5 Risk Factors • Organizational factors – – – – – • Changes in scope Sufficiency of resources Magnitude of potential loss Departmental conflicts User experience Management support – – • Changing requirements and scope Lack of commitment Software design – – Developing wrong functions, wrong user interface Problems with outsourced components © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-6 Risk Factors, continued • User involvement – – – – • Project management – – • Lack of commitment Ineffective communication Conflicts Inadequate familiarity with technologies Size and structure Control functions Project escalation – – Societal norms Continue pouring resources into sinking ships © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-7 Implementation Risks • Technology – • Organizational – – • Customization increases risks Redesign of business processes to fit package decreases risk Human resource factors – • Consistencies with current infrastructure IT staff skills and expertise Project size © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-8 Managing Large-Scale Projects • MRP or ERP – Package implementation differs from custom implementation • Vendor participation • User skills and capabilities – Management commitment • Project champion • Communication with stakeholders – Training in MRP – Good project management © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-9 Managing ERP Projects • Implementation factors – – – Re-engineering business processes Changing corporate culture Project team • Include business analysts on project team – Management support – Commitment to change • Risk management © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-10 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-11 Factors in Successful ERP Projects • Customization – – • Increases time and cost BPR advantage from “best practices” adoptions lost Use of external consultants – – • Offer expertise in cross-functional business processes Problems arise when internal IT department not involved Supplier relationship management – • Need effective relationships to facilitate and monitor contracts Change management – – • People are resistant to change Organizational culture fostering open communications Business measures – Create specific metrics at start of project © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-12 Project-Related Factors • Project division into subprojects • Project leader with proven track record • Project focus on user needs instead of technology • Project champion • Slack time in project schedule © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-13 Additional Factors in the Success of a Project • User training – – • Management reporting requirements – • Focus on business, not just technical Critical May need to add query and reporting tools Technological challenges – – Data conversion Interface development © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-14 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-15 FoxMeyer versus Dow Chemical • FoxMeyer – – – – – • Project went over budget because of new client Implemented two new systems at same time Technical issues with the ERP software No open communications Unrealistic expectations on ROI Dow – – – – Had project implementation problems Dow had strong leadership and project champion Was able to adjust scope and maintain control Fostered open communications © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-16 Featured Article: FoxMeyer’s Project Was a Disaster Was the Company Too Aggressive or Was It Misled? • Was FoxMeyer misled? • What strategies could have been put into place to avoid the project disaster? • What business misjudgments occurred? • Was FoxMeyer’s failure due to technology failure or business failure? © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-17 Featured Article: FoxMeyer’s Project Was a Disaster Was the Company Too Aggressive or Was It Misled?, continued • Nation’s fourth largest pharmaceutical distributor – 1990s engaged in enterprise-wide software and warehouse automation project – Filed Chapter 11 in 1996 • Claimed to be misled by SAP, Anderson Consulting, Pinnacle Automation – Claimed vendors oversold capabilities – Computer integration problems topped $100 million – Vendors blame management © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-18 Featured Article: FoxMeyer’s Project Was a Disaster Was the Company Too Aggressive or Was It Misled?, continued • Background – FoxMeyer had orders for over 300,000 items per day, anticipated much growth • – – – – Processing hundreds of thousands of transactions each day Old system was Unisys mainframe Wanted scalable client/server system Tested SAP’s software on both DEC and HP against benchmarks Implementations scheduled by Andersen for 18 months • Modules to be implemented in 2-3 months – – Unrealistic – could take up to 12 months All modules fast-tracked © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-19 Featured Article: FoxMeyer’s Project Was a Disaster Was the Company Too Aggressive or Was It Misled?, continued – Two systems for most important business systems • SAP supplied the accounting and manufacturing software – Claims volume was issue • Warehouse system from McHugh Software International – Purchased through Pinnacle » Pinnacle also supplied some hardware • • Added complexities to project Functional holes in systems © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-20 Featured Article: FoxMeyer’s Project Was a Disaster Was the Company Too Aggressive or Was It Misled?, continued • FoxMeyer strategies – – – – – High volume Low price Anticipated savings from new computer system Wanted to win market share by further pricecutting Hoped new system would be more efficient, but did not improve processes © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-21 Featured Article: FoxMeyer’s Project Was a Disaster Was the Company Too Aggressive or Was It Misled?, continued – FoxMeyer got major new client • Out of capacity of mainframe • Issues on balancing system traffic • Unisys-based management system eventually failed • Information wasn’t being received timely • FoxMeyer suffered losses in transferring inventory to new centers • Customers received incorrect shipments • New customer didn’t deliver expected volume • FoxMeyer overspent © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-22 Summary • A number of factors will effect the success or failure of a systems project – – – • Operational methods and techniques Business management and style Leadership and communications Risk factors effecting projects must be considered – – Organizational factors, management support, software design, the levels of user involvement, and the scope and size of the project itself Implementation risks for technologies, the organization, and human resource © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-23 Summary, continued • Success in ERP projects includes factoring in – – – Consideration of customizations, use of external consultants, management of supplier relationships, establishing metrics, and change management Project-related concerns Technological changes, user training, and management requirements © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-24 ... Initial evaluation of project © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-4 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-5 Risk Factors • Organizational... change • Risk management © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-10 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-11 Factors in Successful ERP Projects... Interface development © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-14 © Prentice Hall, 2005: Enterprise Resource Planning, 1st Edition 8-15 FoxMeyer versus Dow Chemical