Best Practices
were also a benefit of implementing an ERP system. When implementing an ERP system, organizations essentially had to choose between customizing the software or modifying their business processes to the "Best Practice" function delivered in the vanilla version of the software. Typically, the delivery of best practice applies more usefully to large organizations and especially where there is a compliance requirement such as IFRS, Sarbanes-Oxley or Basel II, or where the process is a commodity such as electronic funds transfer. This is because the procedure of capturing and reporting legislative or commodity content can be readily codified within the ERP software, and then replicated with confidence across multiple businesses who have the same business requirement.
Where such a compliance or commodity requirement does not underpin the business process, it can be argued that determining and applying a Best Practice actually erodes competitive advantage by homogenizing the business as compared to everyone else in the industry sector.
Implementation
Because of their wide scope of application within a business, ERP software systems are typically complex and usually impose significant changes on staff work practices.[citation needed] Implementing ERP software is typically not an "in-house" skill, so even smaller projects are more cost effective if specialist ERP implementation consultants are employed.[citation needed] The length of time to implement an ERP system depends on the size of the business, the scope of the change and willingness of the customer to take ownership for the project.[citation needed] A small project (e.g., a company of less than 100 staff) may be planned and delivered within 3-9 months; however, a large, multi-site or multi-country implementation may take years.[citation needed]
To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies. These firms typically provide three areas of professional services: consulting, customization and support.
Configuration
Configuring an ERP system is largely a matter of balancing the way you want the system to work with the way the system lets you work. Begin by deciding which modules to install, then adjust the system using configuration tables to achieve the best possible fit in working with your company’s processes.
Modules - Most systems are modular simply for the flexibility of implementing some functions but not others. Some common modules, such as finance and accounting are adopted by nearly all companies implementing enterprise systems; others however such as human resource management are not needed by some companies and therefore not adopted. A service company for example will not likely need a module for manufacturing. Other times companies will not adopt a module because they already have their own proprietary system they believe to be superior. Generally speaking the greater number of modules selected, the greater the integration benefits, but also the increase in costs, risks and changes involved.
Configuration Tables – A configuration table enables a company to tailor a particular aspect of the system to the way it chooses to do business. For example, an organization can select the type of inventory accounting – FIFO or LIFO – it will employ or whether it wants to recognize revenue by geographical unit, product line, or distribution channel.
So what happens when the options the system allows just aren’t good enough? At this point a company has two choices, both of which are not ideal. It can re-write some of the enterprise system’s code, or it can continue to use an existing system and build interfaces between it and the new enterprise system. Both options will add time and cost to the implementation process. Additionally they can dilute the system’s integration benefits. The more customized the system becomes the less possible seamless communication becomes between suppliers and customers.
Consulting Services
Consulting team is typically responsible for your initial ERP implementation and subsequent delivery of work to tailor the system beyond "go live". Typically such tailoring includes additional product training; creation of process triggers and workflow; specialist advice to improve how the ERP is used in the business; system optimization; and assistance writing reports, complex data extracts or implementing Business Intelligence.
The consulting team is also responsible for planning and jointly testing the implementation. This is a critical part of the project, and one that is often overlooked.
Consulting for a large ERP project involves three levels: systems architecture, business process consulting (primarily re-engineering) and technical consulting (primarily programming and tool configuration activity). A systems architect designs the overall dataflow for the enterprise including the future dataflow plan. A business consultant studies an organization's current business processes and matches them to the corresponding processes in the ERP system, thus 'configuring' the ERP system to the organization's needs. Technical consulting often involves programming. Most ERP vendors allow modification of their software to suit the business needs of their customer.
For most mid-sized companies, the cost of the implementation will range from around the list price of the ERP user licenses to up to twice this amount (depending on the level of customization required). Large companies, and especially those with multiple sites or countries, will often spend considerably more on the implementation than the cost of the user licenses -- three to five times more is not uncommon for a multi-site implementation.[citation needed]
Customization Services
The Customization is the process of extending or changing how the system works by writing new user interfaces and underlying application code. Such customisations typically reflect local work practices that are not currently in the core routines of the ERP system software.
Examples of such code include early adopter features (e.g., mobility interfaces were uncommon a few years ago and were typically customised) or interfacing to third party applications (this is 'bread and butter' customization for larger implementations as there are typically dozens of ancillary systems that the core ERP software has to interact with). The Professional Services team is also involved during ERP upgrades to ensure that customizations are compatible with the new release. In some cases the functions delivered via a previous customization may have been subsequently incorporated into the core routines of the ERP software, allowing customers to revert back to standard product and retire the customization completely.
Customizing an ERP package can be very expensive and complicated, because many ERP packages are not designed to support customization, so most businesses implement the best practices embedded in the acquired ERP system. Some ERP packages are very generic in their reports and inquiries, such that customization is expected in every implementation. It is important to recognize that for these packages it often makes sense to buy third party plug-ins that interface well with your ERP software rather than reinventing the wheel.
Customization work is usually undertaken as bespoke software development on a time and materials basis. Because of the specialist nature of the customization and the 'one off' aspect of the work, it is common to pay in the order of $200 per hour for this work. Also, in many cases the work delivered as customization is not covered by the ERP vendors Maintenance Agreement, so while there is typically a 90-day warranty against software faults in the custom code, there is no obligation on the ERP vendor to warrant that the code works with the next upgrade or point release of the core product.
One often neglected aspect of customization is the associated documentation. While it can seem like a considerable -- and expensive -- overhead to the customization project, it is critical that someone is responsible for the creation and user testing of the documentation. Without the description on how to use the customisation, the effort is largely wasted as it becomes difficult to train new staff in the work practice that the customization delivers.
Maintenance and Support Services
Once your system has been implemented, the consulting company will typically enter into a Support Agreement to assist your staff to keep the ERP software running in an optimal way. To minimize additional costs and provide more realism into the needs of the units to be affected by ERP (as an added service to customers), the option of creating a committee headed by the consultant using participative management approach during the design stage with the client's heads of departments (no substitutes allowed) to be affected by the changes in ERPs to provide hands on management control requirements planning. This would allow direct long term projections into the client's needs, thus minimizing future conversion patches (at least for the 1st 5 years operation unless there is a corporate-wide organizational structural change involving operational systems) on a more dedicated approach to initial conversion.
A Maintenance Agreement typically provides you rights to all current version patches, and both minor and major releases, and will most likely allow your staff to raise support calls. While there is no standard cost for this type of agreement, they are typically between 15% and 20% of the list price of the ERP user licenses.
Advantages
In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve:
Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Part of the change can include labeling to identify version numbers.
Some security features are included within an ERP system to protect against both outsider crime, such as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to attempt to take down the company, or other sabotage. ERP systems typically provide functionality for implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better integration with other kinds of information security tools.[4]
http://en.wikipedia.org/wiki/Enterprise_Resource_Planning
