ERP PROJECT

ENTERPRISE RESOURCE PLANNING 2008

CHAPTER 1

INTRODUCTION

Government RC College Commerce & Management Bangalore-01 1


A CONCEPTUAL FRAME WORK ON ERP

1. ENTERPRISE RESOURCE PLANNING:

“ERP is an industry term for the broad set of activities supported by multi-module
application software that help a manufacturer or other business mange the
important parts of its business, including product planning, parts purchasing ,
maintaining inventories, interacting with suppliers, providing customer service,
and tracking orders. ERP cans also include application modules for the human
resources aspects of a business. Typically, an ERP system uses or is integrated
with a relational database system.”

2. ERP – AN INTEGRATED SUITE OF APPLICATIONS:

ERP is a term coined in the early 1990s. It began as a group of applications or
software focused on combining multiple systems in to one integrated system where
data could be shared across the enterprise, presumably reducing redundant data
entry and processes. It was originally proposed for manufacturing and production
planning.
Almost any discussion of enterprise resource planning starts with material
requirement planning (MRP) and MRP II systems of the 1970s and 1980s. In the
manufacturing environment of old, the ability to produce the product was the
focus. As manufacturing evolved over time, the number of difficult questions
increased. Such questions largely focused on the areas of component procurement
for the finished product and on strong the material necessary to make the products.
Organization were trying to understand both the finished manufacturing totals and
how to get to the finished product



MRP II added a focus on the planning aspects of this processes these system
integrated capacity, design engineering and management, cost and long range
planning of the enterprise in to the equation. Many organizations that implemented
this approach instituted mechanisms to correlate the planning and forecasting
process with the actual production numbers this allowed the organization to
achieve higher level of over all efficiency in the manufacturing arena. The real
issue is that while the organization had a better handle on the manufacturing
aspect of the business, it was still missing integration to other components of
finance, sales, marketing, customer satisfaction and distribution to name a few.

ERP is massive software engine that seeks to provide one seem less interface to all
departments, systems and existing data with in organization sp that each
department understands how it fits with in the organizations macro structure and
how it impacts that macro structure. Such understanding in crucial in facilitating
enhanced communication between departments, better knowledge management,
and improved processes. Such enhancement is the foundation for fundamental
business changes.

ERP sits between all of the systems and users regardless of where they are in the
pipeline. It knows all the different data collection points, and it must interface with
all the different formats of the particular data. It also intelligently routes the order
to the appropriate department at the appropriate time; reducing the number of
times a human has to enter data can dramatically reduce errors. ERP also takes all
the data and formats it so that each department can perform its required function.



Today, ERP has gone beyond its original limits to evolve into ‘extended ERP’
Extended ERP includes (Customer Relation management) CRM and Supply chain
management Applications.

Although there is a huge focus on the technological aspects of an ERP deployment,
there must be an equal focus on changing the way an organization functions.
Deploying ERP for the sake of ERP can be dangerous. ERP is not simply
reengineering systems; it is reengineering the way organizations do business.

While the benefits of ERP an impressive, deploying an ERP system is a major
undertaking for any organization. Some of the real issues that occur during an ERP
deployment center on job function. Changing the mentality of the organization’s
employee is critical to changing the business process. The organization will spend
millions of dollars in time, software, and hardware with negligible results.

3. ERP – THE WAY TO RUN YOUR BUSINESS

ERP buying intention remains strong, even in 2002. A William & Blair LLC
survey revealed that 20% of companies were in the process of making a significant
investment in ERP. Another 25% indicated a willingness to buy in the future.
Another 50% had stable ERP systems. Only the rest 5% were unclear. Companies
are rushing to buy ERP systems to address their business needs. Why such a high
demand? The underlying drivers come from both the business and technology side.
The business drivers that compel companies to add brand new ERP systems or
replace homegrown, function specific legacy systems are:· Gaining greater
visibility and control. Too many administration headaches and information
breakdown. Managers want to know instantly and accurately:



⇒ · Can we build it?
⇒ · What will it cost?
⇒ · Do we have the necessary materials?
⇒ · Where is it?
⇒ · When will we ship it?
⇒ · Did we make any money?
⇒ · How much have we sold?
⇒ · What have we shipped?
⇒ · What is the complete inventory status?
As one manger of a large company said, “You can’t manage what you don’t
know before ERP implementation, it was four to six weeks after the close of
the month before we had information reconciled, and we still weren’t sure of
the accuracy. Previously, information was integrated manually and, therefore,
was not reliable or timely”. Improving decision integration across the enterprise.
ERP links information islands. Often, finance doesn’t talk to production, and
production doesn’t talk to purchasing and planning. This detached infrastructure
can create confusion, misunderstanding, and errors and limit company asset
utilization.
The technology forces driving ERP are:
⇒ · The need to integrate a broad range of disparate technologies, along with

processes they support, into a common denominator of overall functionality.
⇒ · The need to create a foundation on which next generation applications can

be developed. ERP acts as the central nervous system. As a fully integrated
system, ERP automates all departmental information into a single relational
database. As the entire quotation through shipping process uses the same
information from a single dataflow, data is entered only once which



improves accuracy and reduces cycle time. Information is retrieved quickly
and easily for real hands-on decision making. ERP breaks the information
bottleneck and provides up to- the minute information to the right person at
the right time.

4. ERP DECISION = ENTERPRISE ARCHITECTURE
PLANNING
Market leaders embraced ERP in order to gain operational efficiencies, but the
process is not pain-free. Remember that ERP provides a business foundation.
Selecting and installing a new ERP solution is one of the most important and most
expensive endeavors an organization will ever undertake. It’s also the single
business initiative most likely to go wrong. Technology itself isn’t the only
challenge in managing transformation. Adopting ERP significantly affects a
company’s architecture, processes, people and procedures. As one manage recently
said: “ERP is not a mere systems change. You are changing the way people have
done their jobs for the past 20 years”.

4.1 Selection Criteria
Not all ERP systems are created equal. Selecting the right technology and solution
provider is the key to success. Anyone can promise, but few can actually deliver.
Deloitte & Touché conducted a study of 1,500 companies, all of which had to
replace systems purchased within the previous 24 months. Here are the top ten
purchasing criteria for selecting software:

1st time 2nd time Criteria


8 1 Level of support provided by the vendor and local partner
10 2 Vendor’s track record of performance
7 3 Software’s ability to fit the business
4 4 Growth potential of the software
1 5 Price of the software
9 6 Quality of documentation
5 7 Functionality of the software
3 8 Ease of use
2 9 Ease of implementation of new system
6 10 Software compatibility with existing hardware

As companies gained more experience and knowledge of ERP systems, they
refocused on vendors who have a proven track record and can make systems work
rather than initially offering low prices. It is clearly an expensive lesson learned in
a hard way.

4.2 Build vs. Buy

Manufactures who are considering building an in-house system must know the
associated costs and risks.
⇒ · High total cost of ownership and complexity associated with developing
and maintaining
⇒ · Custom-designed applications.
⇒ · Software development may not be the core competency. It is estimated that
more than 70 percent of internal software projects fail.
⇒ · Internal development is time consuming. Installed applications are
becoming
⇒ Technically outdated and the ongoing redesign of the business process
makes existing software functionally obsolete.



⇒ · Off-the-shelf solutions integrate the best business practices from a variety
of companies.
⇒ · The ability to import and adopt these best practices from leading PCB
manufacturers translates into bottom-line improvement.
⇒ · With Vendor’ Software Maintenance, companies can stay with the latest
functions and technology at fractions of cost.

4.3 Vendor Selection

Besides product capabilities, the vendor and local support should be carefully
evaluated.
The vendor history:
⇒ · Size of the organization. How many project managers, consultants, systems
and hardware engineers, trainers and support personnel, software developers
are available? How long have these employees been with the firm?
⇒ · Length of time in business. Vendors who have been in business longer than
five Years are generally more stable and more likely to continue in business.
Beware of small firms with less than five employees, or firms that have been
in business less than two years
⇒ Current Software Version. Does the Vendor provide software upgrades
during the course of the products life cycle. Early versions tend to be bug
prone, and require lots of improvement. Avoid those risks, use products that
have proven track record.
⇒ · Size of the vendor’s client base. The size of a vendor’s client base is
directly related to the success of the firm and its level of experience and
expertise. Focus on the client base with a similar profile as your business in



terms of company size, production environment. If you find three or more
profiles similar to yours, the probability of a successful implementation
increases greatly. Hours of operation. Learn about vendor’s business
operations, and support work hours. Employee profile. Company and
employee profiles show the years of experience and depth of knowledge a
firm has acquired. Request these profiles and use them as tools for
comparison. Extent of business services. The vendor should have a broad
range of knowledge and expertise to address a total manufacturing solution
and future growth needs. Measuring customer satisfaction. Vendors focused
on customer satisfaction have programs in place to measure their
effectiveness. Ask the vendor how they measure it. On-site client visit. Once
a vendor has been selected. Arrange an on-site visit to the vendor’s client
who is similar in size and operating environment, transaction volumes.
Make a list of questions and to ask, and spend some time alone with the
client.
⇒ · Documentation. Ask the vendor to provide sample implementation,
training documents, such as help and user manuals. Well-documented
vendors are usually prepared for implementation.
The Vendor Technology:
⇒ · Is the vendor using viable technologies and platforms for the long
term?
⇒ · Does the vendor use objects and components to architecture the
system?
⇒ · Does the vendor have open or proprietary system?
⇒ · Is the system web enabled or web based? What is the vendor’s
Internet vision?



⇒ · Does the system have XML, EDI capabilities for data integration
and transactions with other systems internally or externally?
⇒ · Is the system Web Service ready?
The Total Cost of Ownership:
One time software license fee of core and optional modules
⇒ · Server license fee
⇒ · Client or database license fee
⇒ · Other required software (e.g. reports, SPC)
⇒ · Hardware, LAN costs
⇒ · Software annual maintenance fee
⇒ · Implementation fee (consulting, development, test, configuration,
documentation,
⇒ · installation, training)

4.4 Common Mistakes
Do avoid common mistakes that cause project failures.
⇒ · All software is the same
⇒ · The cheapest solution is the best
⇒ · My friend told me to buy it
⇒ · Beware the “demo trap”

5.0 ERP IMPLEMENTATION – CATCHING THE BULL BY THE
HORNS



1. 49% project over schedule, over budget with less functionality
2. 40% failed to achieve their business case
3. 75% experienced “productivity dip” within first 6 months
4. 20% terminated ERP projects
Picking the right product is just the start of an ERP project. PCB
manufacturers must also consider system configuration, software modification,
user training, and integration with other systems, data conversion, and business
process adjustments. All of these should be well planned in implementation. There
are five important lessons to be learned from other companies who have been
through a less than fully successful ERP implementation:
1. Operating strategy did not drive business process design and deployment
2. The implementation took much longer than expected
3. Pre-implementation preparation activities were poorly done
4. People were not well-prepared to accept and operate the new system
5. The cost of implementation was much more than anticipated
The road map for rapid implementation: Understand business needs, simplify
process, and introduce automation. Here is an example of how leading ERP
vendors implement ERP systems using a Stage and Gate process.

5.1 Stage 1: Analysis
Objectives:
⇒ Gather and document requirements related to functions within project scope
⇒ Minimize or eliminate the amount of development work

Project Milestones:
⇒ Conduct requirements-gathering meetings


⇒ Conduct business analysis review sessions
⇒ Conduct business process improvement sessions
⇒ Document data migration and integration strategy
⇒ Identify and train key users in different business units
Project & Change Management:
⇒ Assess impact on users and manage concerns and expectations
⇒ Create project schedule and training, support plan
Gate 1: Key Deliverables
⇒ Project team formation, senior management sponsor, and project kick off
⇒ Functional requirement document and gap/fit analysis
⇒ Project schedule and plan including the estimation of project resources,
costs, and duration of each activity.

5.2 Stage 2: Design
Objectives:
⇒ Determine how to design and implement the required functionality based on
business process
⇒ Design, data structure
⇒ Create a specification for configuration ad programming (if needed)
Project Milestones:
⇒ Conduct information-gathering regarding customization needs
⇒ Write software requirement specifications for custom-developed functions
(if needed)
⇒ Create a test plan (if programming is required)



⇒ Assess current infrastructure
⇒ Develop data collection, input and test plan
⇒ Finalize project plan and schedule, and present to senior management
⇒ Gate 2: Key Deliverables:
⇒ Present and get approval of updated project plan, schedule

5.3 Stage 3: Development and Testing
Objectives:
⇒ Complete and test software and database required
⇒ Ensure that required infrastructure (hardware, network) is in place
Project Milestones:
⇒ Configure software and database to match the structure of the company with
desired business process
⇒ Develop standard and custom functions and integration
⇒ Manage software incidents and change requests
⇒ Update project plan for next release on an ongoing basis
Gate 5: Key Deliverables:
⇒ Ensure that all business requirements are met
⇒ Measure the new system benefits to determine ROI



5.6 Implementation Leadership Skills
Implementation is where ‘rubber hits the road’. It requires skilled project
leadership p from both vendor and client sides. Qualified vendors usually assign a
seasoned project manager who has “seen” many businesses like yours, and who
thoroughly understands your business issues and knows how to deliver what the
software has to offer.
Of Utmost importance, however, is that top executive sponsorship and a strong
internal project leader is required to make the project implementation successful.
The project leader must possess a broad range of skills including:
⇒ Strategic thinking. What are we trying to accomplish? How well does the
ERP align with your business strategy? Should the priority be costs, speed
of implementation, or functionality?
⇒ Process reengineering. You cannot implement large-scale systems without
first Changing processes. An ERP system is really a collection of business
rules and procedures. Therefore, implementing an ERP system involves
replacing one set of rules and procedures with another.
⇒ Managing implementation complexity. Vendor partnership, shared goal and
Objectives, detailed planning, clear roles and responsibilities are the keys to
Overcoming complexity.
⇒ Transition management. Coordinating a smooth transition and overcoming
employee resistance can be critical factors for the successful completion of a
project.
The internal project leader should have the authority to make changes happen
quickly and who has a sense of urgency and true accountability for completing the
preparation and implementation activities on-time.



6.0 START YOUR ERP JOURNEY NOW
Every long journey starts with the first step. Any ERP selection should include the
following four critical phases of system selection. It is a lengthy process that cans
last three to twelve months. The earlier you start the better. Don’t be left behind.

6.1 Phase I: Identify Business Goals and Objectives
In order to align goals and objectives, and identify issues and priorities,
management needs to ask tough questions and make sure the answers are fact-
based.
⇒ Will ERP help us to improve customer satisfaction? How? How much?
When?
⇒ Will ERP contribute to increasing our market share? How? How much, and
when?
⇒ Will ERP decrease our operating expenses? How? How much, and when?
⇒ Will ERP help reduce inventories? How? How much, and when?
⇒ Will ERP help increase revenues? How? How much, and when?
⇒ Will ERP shorten our order-to-delivery cycle time? How? How much, and
when?
⇒ Will ERP help us keep pace with or surpass our competition? How? How
much?

6.2 Phase 2: Create a Project Team
It is essential that this includes an Executive sponsor, someone high enough in the
Organization (i.e. CEO, CFO, CIO) to cut across departmental lines and deliver the
Executive’s view of the system. Other critical members of the team are users from
various departments, as well as technical representatives. It is important that top


management is committed to the project and is willing to support it from
beginning.
Top management support checklist:
⇒ Are the sponsors and manager totally committed to making it happen?
⇒ Is there an executive ‘sponsor’ representing the project team effectively to
top management?
⇒ Does top management delegate the necessary authority and responsibility to
the project team?
⇒ Is the project getting the resources it needs?
⇒ Is the project endorsed by the sponsor?
⇒ A project team determines the result of the project.
Resource checklist:
⇒ Are there enough resources to achieve the plan?
⇒ Do project team members understand their role and how to measure
performance?
⇒ Is adequate training available for the team?
⇒ Are the team members willing to compromise elsewhere to ensure its
success?
⇒ Do people believe in the project and demonstrate a strong team spirit?

6.3 Phase 3: Requirements Definition and System Evaluation
Through interview and observation techniques, critical system information is
collected with respect to your present data flow and system requirements. The gap
between what you are currently using and what you ultimately require should be
evaluated. It’s easy to get lost in the details. Without clearly defined requirements,



there is little else to base your decision on. You will most likely focus on the cost
of the systems and look for the least expensive offering – as opposed to the system
that will provide the greatest return on your investment.
Project definition checklist:
⇒ Does everyone identify with and understand clearly the nature, purpose and
benefits of the project?
⇒ Is there an effective process for defining and documenting objectives,
assessing risks and producing an outline plan?
⇒ Some ERP Vendors provide a Functionality Checklist for you that can be a
“starting point” for your objectives and vendor comparisons.

7. ERP AND COMPETITIVE ADVANTAGE
In order to gain a sustained competitive advantage, an analysis of markets at the
Micro-level is essential. A detailed analysis of the markets served by an
organization will throw up different qualifiers and order winners and this
necessitate a change in the erroneous belief the manufacturing and support
processes in terms of processing requirements and infrastructure investments
would be the same in all markets. The strategic process hence needs to be based on
a clear understanding of the markets and the differences within a market.
Companies that approach strategy in general terms and undertake strategy using
general courses of action will find themselves at a serious disadvantage. Once an
organization identifies the manufacturing approaches to support its different
markets, it needs to adopt the same approaches in all the other plants also. And the
only way such an approach can be successfully implemented is through ERP.



8. HOW CAN ERP IMPROVE A COMPANY’S BUSINESS
PERFORMANCE?
ERP's best hope for demonstrating value is as a sort of battering ram for improving
the way your company takes a customer order and processes it into an invoice and
revenue—otherwise known as the order fulfillment process. That is why ERP is
often referred to as back-office software. It doesn't handle the up-front selling
process (although most ERP vendors have recently developed CRM software to do
this); rather, ERP takes a customer order and provides a software road map for
automating the different steps along the path to fulfilling it. When a customer
service representative enters a customer order into an ERP system, he has all the
information necessary to complete the order (the customer's credit rating and order
history from the finance module, the company's inventory levels from the
warehouse module and the shipping dock's trucking schedule from the logistics
module, for example) .People in these different departments all see the same
information and can update it. When one department finishes with the order it is
automatically routed via the ERP system to the next department. To find out where
the order is at any point, you need only log in to the ERP system and track it down.
With luck, the order process moves like a bolt of lightning through the
organization, and customers get their orders faster and with fewer errors than
before. ERP can apply that same magic to the other major business processes, such
as employee benefits or financial reporting. That, at least, is the dream of ERP.
The reality is much harsher. People don't like to change, and ERP asks them to
change how they do their jobs. That is why the value of ERP is so hard to pin
down. The software is less important than the changes companies make in the
ways they do business. If you use ERP to improve the ways your people take
orders, manufacture goods, ship them and bill for them, you will see value from



the software. If you simply install the software without changing the ways people
do their jobs, you may not see any value at all—indeed, the new software could
slow you down by simply replacing the old software that everyone knew with new
software that no one does.

9. HOW LONG WILL AN ERP PROJECT TAKE?
Companies that install ERP do not have an easy time of it. The companies
shouldn’t get fooled when ERP vendors tell them about a three or six month
average implementation time. Those short (that's right, six months is short)
implementations all have a catch of one kind or another: The company was small,
or the implementation was limited to a small area of the company, or the company
used only the financial pieces of the ERP system (in which case the ERP system is
nothing more than a very expensive accounting system). To do ERP right, the
ways the company do business will need to change and the ways people do their
jobs will need to change too. And that kind of change doesn't come without pain.
Unless, of course, the company’s ways of doing business are working extremely
well (orders all shipped on time, productivity higher than all your competitors,
customers completely satisfied), in which case there is no reason to even consider
ERP. The important thing is not to focus on how long it will take—real
transformational ERP efforts usually run between one and three years, on average
—but rather to understand why you need it and how you will use it to improve
your business.

10. WHAT WILL ERP FIX IN A BUSINESS?
There are five major reasons why companies undertake ERP.
⇒ · Integrate financial information: As the CEO tries to understand the
company's overall performance, he may find many different versions of the


truth. Finance has its own set of revenue numbers, sales has another version,
and the different business units may each have their own version of how
much they contributed to revenues. ERP creates a single version of the truth
that cannot be questioned because everyone is using the same system.
⇒ · Integrate customer order information: ERP systems can become the
place where the customer order lives from the time a customer service
representative receives it until the loading dock ships the merchandise and
finance sends an invoice. By having this information in one software
system, rather than scattered among many different systems that can't
communicate with one another, companies can keep track of orders more
easily, and coordinate manufacturing, inventory and shipping among many
different locations at the same time.
⇒ · Standardize and speed up manufacturing processes: Manufacturing
companies—especially those with an appetite for mergers and acquisitions
—often find that multiple business units across the company make the same
widget using different methods and computer systems. ERP systems come
with standard methods for automating some of the steps of a manufacturing
process. Standardizing those processes and using a single, integrated
computer system can save time, increase productivity and reduce head
count.
⇒ · Reduce inventory: ERP helps the manufacturing process flow more
smoothly, and it improves visibility of the order fulfillment process inside
the company. That can lead to reduced inventories of the stuff used to make
products (work in- progress inventory), and it can help users better plan
deliveries to customers, reducing the finished good inventory at the



warehouses and shipping docks. To really improve the flow of your supply
chain, you need supply chain software, but ERP helps too.
⇒ ·Standardize HR information: especially in companies with multiple
business units, HR may not have a unified, simple method for tracking
employees' time and communicating with them about benefits and services.
ERP can fix that. In the race to fix these problems, companies often lose
sight of the fact that ERP packages are nothing more than generic
representations of the ways a typical company does business. While most
packages are exhaustively comprehensive, each industry has its quirks that
make it unique. Most ERP systems were designed to be used by discrete
manufacturing companies (that make physical things that can be counted),
which immediately left all the process manufacturers (oil, chemical and
utility companies that measure their products by flow rather than individual
units) out in the cold. Each of these industries has struggled with the
different ERP vendors to modify core ERP programs to their needs.

11. WHAT DOES ERP REALLY COST?
Meta Group recently did a study looking at the total cost of ownership (TCO) of
ERP, including hardware, software, professional services and internal staff costs.
The TCO numbers include getting the software installed and the two years
afterward, which is when the real costs of maintaining, upgrading and optimizing
the system for your business are felt. Among the 63 companies surveyed—
including small, medium and large companies in a range of industries— the
average TCO was $15 million (the highest was$300 million and lowest was
$400,000). While it's hard to draw a solid number from that kind of range of
companies and ERP efforts, Meta came up with one statistic that proves that ERP



is expensive no matter what kind of company is using it. The TCO for a "heads
down" user over that period was a staggering $53,320.

12. WHEN WILL A COMPANY GET PAYBACK FROM ERP
AND HOW MUCH?
The company shouldn’t expect to revolutionize its business with ERP. It is a navel-
gazing exercise that focuses on optimizing the way things are done internally
rather than with customers, suppliers or partners. Yet the navel gazing has a pretty
good payback if the company is willing to wait for it— a Meta Group study of 63
companies found that it took eight months after the new system was in (31 months
total) to see any benefits. But the median annual savings from the new ERP system
were $1.6 million.

13. WHAT ARE THE HIDDEN COSTS OF ERP?
Although different companies will find different land mines in the budgeting
process, those who have implemented ERP packages agree that certain costs are
more commonly overlooked or underestimated than others. Armed with insights
from across the business, ERP pros vote the following areas as most likely to result
in budget overrun.
Training: Training is the near-unanimous choice of experienced ERP
implementers as the most underestimated budget item. Training expenses are high
because workers almost invariably have to learn a new set of processes, not just a
new software interface. Worse, outside training companies may not be able to help
you. They are focused on telling people how to use software, not on educating
people about the particular ways you do business. Prepare to develop a curriculum
yourself that identifies and explains the different business processes that will be



affected by the ERP system. One enterprising CIO hired staff from a local business
school to help him develop and teach the ERP business-training course to
employees. Remember that with ERP, finance people will be using the same
software as warehouse people and they will both be entering information that
affects the other. To do this accurately, they have to have a much broader
understanding of how others in the company do their jobs than they did before
ERP came along. Ultimately, it will be up to your IT and businesspeople to
provide that training. So take whatever you have budgeted for ERP training and
double or triple it up front. It will be the best ERP investment you ever make.
Integration and testing: Testing the links between ERP packages and other
corporate software links that have to be built on a case-by-case basis is another
often-underestimated cost. A typical manufacturing company may have add-on
applications from the major— e-commerce and supply chain— to the minor—
sales tax computation and bar coding. All require integration links to ERP. If you
can buy add-ons from the ERP vendor that is pre-integrated, you're better off. If
you need to build the links yourself, expect things to get ugly. As with training,
testing ERP integration has to be done from a process-oriented perspective.
Veterans recommend that instead of plugging in dummy data and moving it from
one application to the next, run a real purchase order through the system, from
order entry through shipping and receipt of payment— the whole order-to-cash
banana— preferably with the participation of the employees who will eventually
do those jobs.
Customization: Add-ons are only the beginning of the integration costs of ERP.
Much more costly, and something to be avoided if at all possible, is actual
customization of the core ERP software itself. This happens when the ERP
software can't handle one of your business processes and you decide to mess with
the software to make it do what you want. You're playing with fire. The


customizations can affect every module of the ERP system because they are all so
tightly linked together. Upgrading the ERP package— no walk in the park under
the best of circumstances— becomes a nightmare because you'll have to do the
customization all over again in the new version. Maybe it will work, maybe it
won't. No matter what, the vendor will not be there to support you. You will have
to hire extra staffers to do the customization work, and keep them on for good to
maintain it.
Data conversion: It costs money to move corporate information, such as customer
and supplier records, product design data and the like, from old systems to new
ERP homes. Although few CIOs will admit it, most data in most legacy systems is
of little use. Companies often deny their data is dirty until they actually have to
move it to the new client/server setups that popular ERP packages require.
Consequently, those companies are more likely to underestimate the cost of the
move. But even clean data may demand some overhaul to match process
modifications necessitated— or inspired— by the ERP implementation.
Data analysis: Often, the data from the ERP system must be combined with data
from external systems for analysis purposes. Users with heavy analysis needs
should include the cost of a data warehouse in the ERP budget— and they should
expect to do quite a bit of work to make it run smoothly. Users are in a pickle here:
Refreshing all the ERP data every day in a big corporate data warehouse is
difficult, and ERP systems do a poor job of indicating which information has
changed from day to day, making selective warehouse updates tough. One
expensive solution is custom programming. The upshot is that the wise will check
all their data analysis needs before signing off on the budget.
Consultants ad infinitum: When users fail to plan for disengagement, consulting
fees run wild. To avoid this, companies should identify objectives for which its
consulting partners must aim when training internal staff. Include metrics in the


consultants' contract; for example, a specific number of the user company's staff
should be able to pass a project-management leadership test— similar to what Big
Five consultants have to pass to lead an ERP engagement.
Replacing your best and brightest: It is accepted wisdom that ERP success
depends on staffing the project with the best and brightest from the business and IS
divisions. The software is too complex and the business changes too dramatic to
trust the project to just anyone. The bad news is a company must be prepared to
replace many of those people when the project is over. Though the ERP market is
not as hot as it once was consultancies and other companies that have lost their
best people will be hounding yours with higher salaries and bonus offers than you
can afford— or that you’re HR policies permit. Huddle with HR early on to
develop a retention bonus program and create new salary strata for ERP veterans.
If you let them go, you'll wind up hiring them— or someone like them— back as
Consultants for twice what you paid them in salaries.
Implementation teams can never stop: Most companies intend to treat their ERP
Implementation as they would any other software project. Once the software is
installed, they figure the team will be scuttled and everyone will go back to his or
her day job. But after ERP, you can't go home again. The implementers are too
valuable. Because they have worked intimately with ERP, they know more about
the sales process than the salespeople and more about the manufacturing process
than the manufacturing people. Companies can't afford to send their project people
back into the business because there's so much to do after the ERP software is
installed. Just writing reports to pull information out of the new ERP system will
keep the project team busy for a year at least. And it is in analysis— and, one
hope, insight— that companies make their money back on an ERP
implementation. Unfortunately, few IS departments plan for the frenzy of post-
ERP installation activity, and fewer still build it into their budgets when they start


their ERP `projects. Many are forced to beg for more money and staff immediately
after the go-live date, long before the ERP project has demonstrated any benefit.
Waiting for ROI: One of the most misleading legacies of traditional software
project management is that the company expects to gain value from the application
as soon as it is installed, while the project team expects a break and maybe a pat on
the back. Neither expectation applies to ERP. Most of the systems don't reveal
their value until after companies have had them running for some time and can
concentrate on making improvements in the business processes that are affected by
the system. And the project team is not going to be rewarded until their efforts pay
off.
Post-ERP depression: ERP systems often wreak cause havoc in the companies
that install them. In a recent Deloitte Consulting survey of 64 Fortune 500
companies, one in four admitted that they suffered a drop in performance when
their ERP system went live. The true percentage is undoubtedly much higher. The
most common reason for the performance problems is that everything looks and
works differently from the way it did before. When people can't do their jobs in the
familiar way and haven't yet mastered the new way, they panic, and the business
goes into spasms.



CHAPTER 2

REVIEW OF LITERATURE

Article 1: Beyond Plain Vanilla ERP


By: Professor Sowmyanarayanan Sadagopan is the Director of the Indian
Institute of Information Technology, Bangalore (IIIT-B).

A large number of corporations have moved with the ERP wave and
implemented one or other of the leading edge ERP software be it SAP R/3 or
Baan Series or Oracle Applications or Ramco Marshal. Many of them reaped
significant benefits by way of cost reduction, improved customer care, shorter
supply chain, reduced inventories and in turn healthy bottom-line. The ERP
wave also helped major hardware, networking & software vendors; in fact in
the last years ERP was the catalyst behind large corporate IT
investments. Several consulting houses & training establishments also
benefited by the wave. However several companies also burnt their fingers;
they could not either manage the resulting organizational change or manage
the expectations of end users from ERP.

This in turn led to lots of criticism that started questioning the very
utility of ERP. That apart, ERP has come to stay. Significant numbers
of corporations have either implemented ERP or implementing ERP. The
natural question that arises is what next?

Anticipating that ERP growth would taper off and end users would clamor
for things beyond ERP several ERP software vendors & consultants have
been propagating a number of ideas that could be a natural extension to ERP.
This in turn led to three distinct directions of growth

1. Looking beyond the limits of enterprise one would like to extend the notion
of an enterprise to suppliers and the management of their enterprises. Supply
Chain management (SCM) and the resulting optimization of logistics,
production planning and control in the form of Manufacturing Execution
Systems and Advanced Planning Systems. I2 Technologies in particular are
the pioneers in this area.



2. Extending the notion of the enterprise all the way to the end
consumers led to another area generally known as Customer Relationship
Management (CRM). Tools such as data mining find extensive use in
this area and IBM did some pioneering work in this area.

3. From a technological perspective the concept of enterprise component
objects is a major breakthrough that is being mastered currently; the
enabling technology behind this activity is the use of COM & DCOM,
CORBA and Enterprise Java Beans (EJB) technologies. Use of component
technology would lead to "plug & play" of the modules either from the
same ERP software vendor or even across different ERP software
vendors; in addition "extensibility" would also be possible.

Naturally there is a lot of excitement surrounding all these three developments.
But all the three developments leave the very core of ERP untouched. We call
such extensions "horizontal extensions" - in the sense that the processes get
extended beyond the boundaries of the enterprise. Typical ERP currently
implemented address the broad "Common business processes" such as
order processing, purchase, manufacturing planning, logistics, invoicing and
accounting processes. Generally these processes are common to all industries
and are also invariant with the scale of operation, holding pattern or
geographic location. In such a generic environment ERP does a great "clean
up" operation removing the "mess" among disparate functional information
systems, integrates the sub-systems, brings in phenomenal efficiencies and in
turn build up a solid "information infrastructure" for an organization. But what
such "plain vanilla ERP" software's miss out is the leveraging of features unique
to a firm or an industry. It is true that ERP provides initial competitive
advantage; once most of the firms start implementing ERP, many of the
firms loses out on the initial competitive edge gained through the
implementation of ERP. To sustain competitive advantage a firm has to look at
features that are unique to its operation. That is when they start looking for
"beyond plain vanilla ERP", that provides "vertical" extension of the very roots of


ERP.

In the recent years ERP software vendors have partially addressed this
problem by the introduction of "ERP verticals". Typical such solutions are
specific to "vertical market segments - Oil, Automotive manufacturing,
Banking, Telecom, Food & Beverage, Media, Government etc. These are re-
packaged solutions based on extensive experience gained by a specific
software vendor through dozens of implementations in many firms that are key
players in a chosen industry. With some ERP software being more
successful in specific industry segments - for example SAP in Oil
industry, BAAN in discrete manufacturing, Oracle in Telecom and Ramco
Marshal in process industry - this is a natural evolution. Such re-packaged
solution leads to significant gains in implementation time & quality. However,
they continue to maintain the "plain vanilla" nature of the ERP software by way
of addressing mainly the "common business processes".

For sustained competitive advantage firms should start leveraging the "special
processes" that give distinct competitive advantage. Such an activity must be
driven by the "core competence" of the firms and not by ERP software vendors
alone.

For example, for firms where product designs, development, deployment &
maintenance constitute the "core competence"; current generation of ERP
software only addresses the peripheral functions. Industries in this segment
would include Shipbuilding, Machine tools, Capital goods manufacture,
Aircraft manufacturers, and Railway equipment manufacturers, Power plant
manufacturers etc. In these industries product development is the key.
Engineering designs and project management that are generally outside the
ERP software must start driving the enterprise; mere importing of product data
from AutoCAD / UG II or the import of ERP data into project management
software such as Primavera would not be sufficient. Design & development
processes must be integrated into the very core of the organizational



business processes. This would imply design data including 3D, rendering,
and surface & machining characteristics must be integrated into basic
workflow, viewing, searching, version control & access control. Current
generation of ERP software does not implement all these, though they
would support all these functions. Once again design focused companies
would need very sophisticated product data handling for lifetime support,
warranty calculations etc. The emerging area of Product Data Management
(PDM) addresses these issues; but PDM alone would not be sufficient to meet
the enterprise needs. ERP software vendors will not be able to provide full
PDM functionality, though many of them provide very limited PDM
functionality. What is called for is the next generation of ERP software that
truly integrates such "core functionality" specific to engineering industry. Such
PDM enabled ERP would be” engineer's ERP" quite different from the current
plain vanilla ERP that is practically an "accountant's ERP". One could cite
many similar examples. Many airlines have implemented ERP; but their core
functions such as "seat reservation system" continue to be outside the main
ERP. To fully leverage their operations airline industry would need a "seat
reservation enabled ERP". Similarly mining industry would need "mine
planning enabled ERP" and refineries would need "process control enabled
ERP". In all these cases the firms would depend heavily on their "core
competencies" and standard ERP solutions that address only the common
business processes would not give sustained competitive advantage. That is the
place for the next generation of "beyond plain vanilla ERP".



Article 2 ERP as Information Infrastructure
By: Professor Sowmyanarayanan Sadagopan is the Director of the Indian
Institute of Information Technology, Bangalore (IIIT-B).

There are many views to ERP in the organizational context – as a competitive
weapon, a means to improve productivity and reduce costs, a tool to integrate
information systems etc. In this note we will take yet another view,
namely, ERP as the infrastructure for corporate information systems.

An infrastructure has some key features

1. Shared by all
2. Available readily
3. Reliable enough to be depended upon
4. Forms the backbone of all activities
5. Leveraged by many value-added services

1. To be really useful ERP should meet all the key features mentioned
above. First and foremost, it must be shared by all departments across
the organizations and owned by all users. ERP is NOT one more project
initiative from EDP/ MIS/ IT departments. We do not necessarily
mean a “big bang” approach to ERP implementation. Even if Finance
and Logistics modules alone are implemented other related functions like
Production & Quality must be interfaced or externally integrated so that
the base-data of ERP truly reflects the state of affairs across the
organization. There are enough tools available today, both from ERP
vendors or other tools vendors to accomplish this. Even Microsoft Back
office can be used for this external integration. More important the users
in the departments where ERP modules are currently not implemented
should be as much part of ERP as those departments where ERP is being
implemented. The essence of ERP is integration and this must not be lost
sight of under any circumstances.


2. The second feature of ready availability is important, particularly in
Indian scenario. The per user licensing cost of ERP being high, the
tendency in many Indian companies going for ERP is to restrict ERP
access to key managers and senior personnel. While the logic is correct
from cost point of view it beats the very purpose of ERP, which is “data
ownership”. If the order -entry clerk has to own the data that person will
own the data only if he / she were responsible for the data creation /
updating. The access control and infrastructure management tools are
sufficiently evolved today that data sensitivity can be mapped to the user
hierarchy without hardware-based control. As such there is no need even
to have separate ERP access terminals; ERP access can be through
the same PC / Workstation/ Terminal that every user routinely
accesses for e-mail / word- processing / Internet / Intranet. What is
important though is the widespread access to every point of data
generation and modification so that data ownership can be maintained.

3. Infrastructure must offer highest levels of reliability. Naturally the
choice of servers, disk systems, network devices & access devices
must be such that one can take ERP availability as granted. While data
processing or word processing can wait for a few hours or a few days of
downtime, ERP cannot and one should not resort to “offline”
operations with later adjustments except in rare circumstances. Thanks
to distributed processing some of these “buffered” transactions take
place behind the screen but end-users should not be forced to resort
to off-line processing. This calls for better planning part i c ul ar l y
on uninterrupted electric power supply using appropriate UPS devices
both for back- end servers, network equipment & front-end terminals /
workstations.



4. The fourth aspect is the nature of ERP as the information backbone
Of the organization. There is no point in every user department
maintaining individually “private systems” even after ERP has been
implemented.
The organization would be “back to square one” with multiple data
for key elements beating the very purpose for which ERP was put in
place Unless users depend on ERP data for their very job function,
irrespective of their departmental affiliations, the full benefits of ERP
for organizational excellence would remain a distant dream.

5. The most important part of ERP, viewed as infrastructure is the
support it provides for a host of value-added services through
applications. A well- implemented ERP would pave the way for
organizational level data discipline. Users will not have to chase others
for information; no need to set up reminders, follow-up groups and
meetings. “Information would be available on tap”; however it is
important that the users start planning for innovative use of this information
for planning & analysis. Ultimately the real use of information is to
provide insight; information per se will be of little use, except where
required from statutory point of view. It is important to plan
for Supply Chain Management, Customer Relations Management,
Data warehousing & Data mining (OLAP) and other initiatives right
away so that with the high quality information infrastructure provided
by ERP the organization can leverage the high quality information
systematically generated & maintained by ERP towards corporate
excellence. Finally infrastructure should not be viewed from a narrow
“cost benefit” and ROI perspective. The true benefits of ERP are not
necessarily apparent on day 1. Accordingly benefit cost ratio might unduly
overemphasize costs that are apparent and underemphasize benefits that may
not be apparent. Like every other infrastructure- roads, sea-ports, airports,



telecom and railways – information infrastructure in the form of ERP
needs a different mindset too. This is particularly true in India where we
have a distorted view of infrastructure – planning to build it
incrementally through a meter gauge, broad gauge, single track, double
track and finally electrical three track system taking decades to build
the track, putting millions of users to enormous inconvenience,
choking the business growth and running into cost & time over runs and
the attendant CAG Audit queries on the poor engineers! What was
necessary on day 1 was to plan a world-class 3 track electrified rail line or
a four-lane free way that would have changed the very face of Indian
industries. Hopefully we will not repeat the same mistakes in building the
information infrastructure in organizations. It must be noted that
investments in infrastructure pays by the innovative ways in which the
infrastructure is put to use – investments in roads pays off through
returns from trucking industry, business generated through phone calls
pays for investments in telecom network – similarly innovative use of
data generated through ERP would pay for ERP investments. One should
not just stop at ERP implementation alone. The improved organizational
agility provided by ERP must be put to good use.



CHAPTER 3

Design of the study



STATEMENT OF THE PROBLEM

Has ERP implementation brought about strategic changes in your
organization? This research aims at studying the impact of ERP
implementation on the organization functions and performance areas.

OBJECTIVE OF THE RESEARCH

Specifically the following objectives have been set for the research
investigation:
 To identify the strategic advantages that ERP has brought to the

organization.
 To identify the organizational processes that has improved due to

ERP implementation.
 To study the effectiveness of ERP on the organization.

SCOPE OF THE RESEARCH
 This study is restricted to only ERP implemented companies
 Research is conducted at Bangalore Metropolitan Area only.

RESEARCH METHODOLOGY

1. Type of Research

For the present study, the researcher has based his theme on


Exploratory Research. The major emphasis of Exploratory Research is
on the discovery of ideas. Through Exploration, the researcher develops
concepts more clearly, establish priorities, develop operational
definitions, and improve the final research design. This research is both
quantitative and qualitative. This study is based on the data collected through “In
-depth Interview” with key personnel from ERP Implemented Companies.

2. Sources of data
Data has been collected from various sources; there is a
combination of both primary and secondary data that has been used in
this research.

(a) Primary Data
The primary data has been collected by conducting “In -depth Interview”
with key personnel from 17 ERP implemented companies. Primary data has also been
collected through questionnaire from 23 companies. The data collected through
this method was adequate enough to make projections in the study.

(b) Secondary Data
 Articles have been sourced from magazines and journals dealing

with current issues in ERP.
 Internet & Text books related to ERP & Research Methodology

have been a major secondary source for the extraction of the
expert’s opinion.

3. Sampling Technique



Since this project deals with key personnel from ERP Implemented
Companies, Judgment Sampling is considered appropriate for making
projections in the study. Judgment Sampling occurs when a researcher selects
sample members to conform to some criterion. When used in the early stages of
exploratory study, a judgment sample is appropriate. When one wishes to
select a biased group for screening purposes, this sampling method is also a
good choice. We have therefore chosen this sampling method.

4. Sample Size
This research is restricted to a sample size of 30. Since the study deals
with ERP implemented companies in Bangalore city only, the sample size of
this magnitude serves the purpose.

5. Sample Description
The sample under this study consists of key personnel from those
companies that have implemented ERP. In some companies, these key
personnel were the ones who were involved in actual ERP
Implementation. In other companies, the key personnel were from EDP
(Electronic Department), ISY (Information System) Department and
Computer Department. Most of the key personnel whom the researcher
interviewed were “Middle-level Managers” and some of them were
“High- level Managers”.

6. Research Instrument
In-depth Interview:
The primary data has been collected by conducting “In -depth Interview”
with key personnel from 17 ERP implemented companies. The data collected


through this method was adequate enough to make projections in the study.

Questionnaire:
The primary data has also been collected through questionnaires from 23
companies.

7. Tools used for Hypothesis Testing
Two related samples test: these tests concern those situations in which
persons, objects etc are measured twice.

Null hypothesis H0: There is no increase in efficiency after
implementation of ERP.
Alternate hypothesis Ha: There is an increase in efficiency after
implementation of ERP.

8. Plan of Analysis
All data collected was carefully classified, tabulated and interpreted on
the basis of which, tables, charts and graphs were drawn up. Percentages were drawn
from the tabulated frequencies and the data have been analyzed. The analysis
helped in drawing inferences and for better understanding graphs were plotted.

LIMITATIONS OF STUDY
1. Research investigation is restricted to selected key personnel of the
organization.



2. The information given by few personnel deemed to be correct in the

beginning, but later on it was found to be partial incorrect, which
caused in convenience.

3. Many of the respondents gave a negative answer in order to

finish the interview quickly, which may affect in the study.
4. As the perception level of the respondents has not been tested; it is

assumed that all of them have perceived the questions in the correct way.
5. The study is restricted to Bangalore city only.

6. Despite of the limitations, maximum care was exercised to make the

study scientific & meaningful.



CHAPTER 4

Industry & Respondents profile



Industry over view

INDIAN MANUFACTURING SECTOR
Indian manufacturing sector contributes one-fourth of total GDP of India. It employs
30% of non-agricultural workforce. Industrial output valued at US$ 65 billion.
There was a Rise in growth from 2.7% in 1998-99 to 6.1% in 2002-03.
Significant rise in index of growth for the manufacturing sector from 6.5 % in
February 2003 as compared to 2.9% in February 2002

Telecommunication sector
 Over 1.8 billon subscribers depending on mobile as wireless
technology
 Worldwide carrier revenues are predicted to grow from under $1.2 trillion in
2005 to just over $1.5 trillion in 2010.
 Total revenues will grown to 46.3% to 55.6% In the year 2006

Information technology
 The Information Technology Industry is the fastest growing segment of
The Indian economy. The Information Technology Sector has grown in size
From Rest. 5,450 crores in 1994-95 to about Rest. 64,200 crores in 2001-02
Contributing 0.59% and 2.87% to G.D.P.


 The country wise Indian Software Exports in 2000-01 was as follows:
Country Rest. in crores Percentage
USA 17336 61.15, UK 3355 11.84, Japan 1021 3.60, Germany 900 3.20,
Singapore 540 1.90 Canada 425 1.50, Netherlands 360 1.27 & Switzerland
340 1.20.

 The NASSCOM estimates the global market and the opportunity for Indian
Exports to a level of US $700 billion and India's exports form about 5%of
the global market by 2005.

Power sector
India is fifth largest power market in the world with an installed generation
capacity of 126GW, a transmission and distribution network of more than 6.3
million circuit kms generating 600 billion Kwh. However, India still remains
power deficit with peak electricity demand shortfall of about 12% and the average
energy shortfall of about 7%. This demand-supply gap backed by favorable
government policy and initiatives presents considerable opportunity within the
sector.

Real estate Industry

The importance of the Real Estate sector, as an engine of the nation’s
growth, can be gauged from the fact that it is the second largest employer next
only to agriculture and its size is close to US $ 12 billion and grows at about 30%
per annum. Five per cent of the country’s GDP is contributed by the housing
sector. In the next three or four or five years this contribution to the GDP is



expected to rise to 6%. The Indian middle class, which numbered around 57
million in 2001-02 is expected to swell to around 92 million by 2005-06 and cross
the 153 million mark by 2009-10 (Source: NCAER) Thus, the demand for quality
housing is expected to keep rising in the years ahead

Banking Sector

"Indian Banking Sector Analysis”, report provides extensive research and
objective analysis on the growing banking industry, their product quality, and their
services in India. This report helps clients to analyze the leading-edge
opportunities critical to the success of the banking Industry in India. Detailed data
and analysis helps an investor, financial service providers, and global banking
players navigate the evolving market of banks in India.
Key Findings

• The nationalized banks have more branches than any other types of banks in
India. Now there are about 33,627 Branches in India, as on March 2005.
• Investments of scheduled commercial banks (SCBs) also saw an increase
from Rest 8,04,199 crore in March 2005 to Rest 8,43,081 crore in the same
month of 2006.
• India's retail-banking assets are expected to grow at the rate of 18% a year
over the next four years (2006-2010).
• Retail loan to drive the growth of retail banking in future.
• Housing loan account for major chunk of retail loan.

Engineering
 Employs over 5 million skilled and semi-skilled workers, directly or



indirectly estimated size of sector: US$ 32 billion
 Exports in 2004-05: US$ 12.89 billion

 Imports in 2004-05: US$ 10.04 billion

 Strong technological capabilities, particularly in sectors such as
electrical machinery, process plant machinery and general purpose
machinery
 Diversified industrial base with supporting ancillary industries

 Many leading Macs have established base in India- LG, Hyundai,

GM, GE, Ford, Electrolux, Toyota, Sony, Honda, Siemens among others

Chemicals
 Indian Chemical industry ranked 12th in the world production of chemicals

 Rate of Chemical industry growth over last 5 years has been double that of

Asia’s growth & 5 times the world growth rate for the sector
 Indian chemical industry valued at Rest. 1200 billion (US$ 28 billion)

 Accounts for 1.5% of global chemicals market

 Growth rates have been as high as 8.6% over the last five years
 Indian trade is 1.3% of total chemicals trade worldwide

 Net value added of chemicals industry is the highest within manufacturing

sector with a share of over 22% of total value added

Pharmaceuticals
 The output of Indian pharmaceutical industry ranks 4th in terms of volume
and 13th in terms of value and around 8% of the world’s drugs are
manufactured in India.
 Indian pharmaceuticals market valued at US$ 7.3 billion in 2004

 About a third of India’s production – close to US $ 3.5 billion – is exported
and exports are growing at 25% per annum. Half a billion dollars worth of


Exports is to the US alone,

 Production of drugs at 1/20th the cost incurred by developed countries

 India is the largest producer of Sulfamethoxole and Ethambutol (anti TB)

 GlaxoSmithKline India is to become the hub of clinical research in South

Asia
 Discovery research has begun in a major way by Indian companies

with Dr. Reddy’s Laboratories and Ranbaxy pioneering this effort

Steel Industry
 World’s 8th largest producer of steel

 World’s largest producer of sponge iron

 Production of - Finished steel (2004): 24.37 million tones - - Pig iron: 6.7
million tones - Sponge iron: 5.6 million tones
 Export of steel (2004-05): 4.47 million tones, increase of 32.67% over

previous year
 Increasing role of private sector in production – increase in share from

51.4% In 1991-92 to 67% in 1998-99
 Indian steel sector has the capability to produce a variety of grades of steel

conforming to international quality standards
Auto Sector
 Extensive backward and forward linkages – strongly interwoven with

machine tools and metals sectors
 Turnover of auto sector over US$ 10 billion; auto-component segment:

US$ 2.7 billion
 Provides employment to 0.67 million directly and 12 million indirectly High

quality of auto components used as original components for vehicles by



leading international companies
 Distinct cost advantage: labor cost 8-9 per cent of sales as against 30-35

per cent of sales in developed economies

Oil & Natural Gas sector
 Current annual crude oil production: 32 million tones, Current demand: 110

Million tones
 Refining capacity: 119 million metric tones p.a.

 Reliance Petroleum Refinery at Jamnagar is the world’s largest single

stream refinery
 Strong retail infrastructure comprising over 17,000 petrol stations; 6,500

 Kerosene depots and over 5,500 domestic LPG dealers

 World’s largest gas find in 2002 at Krishna -Godavari basin

 Tremendous opportunities for synergies in:

Textiles sector
 Sector accounts for 14 % of India’s industrial production and 27% of

expo rat earnings
 CAGR of 3.66 % over last five years

 India accounts for 15% of world’s total cotton crop production,

largest producer of silk
 Large pool of skilled low-cost technologically experienced workers

 Major segment: Manmade fibers accounting for 40% share in Indian textile industry



FMCG:
 Annual growth of the industry is 6.9% (2004-05)
 Growth in the capital goods sector was healthy & production is
increased in the sector around 12.7%
 The growth in the consumer non-durable is 12% (2004-04)

FUTURE OF INDIAN MANUFACTURING SECTOR
Base for export to third countries - Hyundai Motors using India as export base for
foreign markets, currently exporting to 8 countries and looking at expanding
exports to markets in the European Union and Latin America. The company has
also set up an R & D center at its Chennai plant
 World class R & D facilities

 Emergence as global manufacturing hub with presence of Macs such as

LG, Samsung, Hyundai, Pepsi, GE, General Motors, Ford, Suzuki etc
 Increased implementation of state-of-the-art IT technologies – current IT

usage of15%
 Segments showing high potential: automobiles, steel, aluminium, cement, auto

ancillaries, forging and pharmaceuticals



CHAPTER 5

Data analysis & interpretation



1. How important is replacing aging legacy system?

1. Very 2. 3. Not
important Important important 4. Can't Say TOTAL
Reponses 27 3 0 0 30
% 90 10 0 0 100

Importance of replacing legacy systems

1. Very important
2. Important
3. Not important
4. Can't Say

Graph: 5.1
Interpretation

The figure shows that 90% of the respondents felt that replacing legacy
systems is very important, whereas the rest 10% of the respondents felt that
replacing legacy systems is important.

2. Please indicate which software vendor supplied your ERP software.


SAP AG ORCALE JD EDWARDS OTHERS TOTAL
16.6666666
% 56.66666667 7 6.666666667 20 100

ERP Software vendors
responses and pecentage of

60
50
responses

40
Reponses
30
%
20
10
0
SAP AG ORCALE JD OTHERS
EDWARDS
Software vendors

Graph: 5.2
G Interpretation
The figure shows that 57% of the companies that the researcher visited are
“SAP” implemented companies, 16% companies have implemented
“Oracle”, 7% companies have implemented JD Edwards and the remaining
20% have implemented ERP packages from Local Vendors. Hence we could
infer that most of the manufacturing companies go in for SAP AG ERP
package.

3. Is your company satisfied with purchase of ERP package

No of
Respond responds %
1. Strongly
Disagree 0 0.000
3. Strong Agree 19 63.333
5. Neutral 7 23.333


2. Disagree 0 0.000
4. Agree 4 13.333
6. Not applicable 0 0.000
Total 30 100

Satisfaction Level from Purchase of ERP

70
60
50
% of respond 40
30
20
10
0
1. 5. Neutral 4. Agree
Strongly
Disagree
Satisfaction Level
Graph: 5.3

G Interpretation:

The figure shows that 63% of the companies that the researcher
visited are very much satisfied with their ERP package, 13.33% are
satisfied, 23.33% are Neutral. Hence we could infer that majority of
these companies are satisfied. Other companies are Neutral in their
opinion because they have not reaped the benefits from ERP
implementation as they have recently implemented the ERP package.

4. When you buy ERP Solutions, to what extent does your organization customize the
software?

Do not
A great deal A little customize TOTAL
Reponses 9 18 3 30
% 30 60 10 100



60

50

40

30 Reponses
%
20

10

0
A great deal A little Do not customize

Graph: 5.4

Interpretation

The survey indicates that some organizations may find it
difficult to the goal of successful ERP implementation. Only 10% of the
sample uses the software just as it comes. The majority 60% make some
attempts to customize the ERP solutions; and third 30% say they end up
customizing the software ‘a great deal’ in order to end up with a system
which matches their needs.

5. Do you feel you are using ERP Software to its full extent?

small portion large portion used full used
not used not used extent extensively Total
% 46.66666667 26.66666667 6.666666667 20 100



100
Usage of ERP Full extent

80

60 Reponses

40 used %
extensively
20 20%
used full small portion
0 extent not used
7% 46%
large portion
not used
27%

Graph: 5.5
Interpretation:

Many companies are failing to exploit full potential of their ERP
solutions and admit to leaving many features and facilities untouched. Three
quarters concede that their either some of the software (46%) or a large
element of it (30%) is not used at all. Of the remaining quarter, 20% reckon
the software is used extensively, but only 4% say their solution is used to its
full extent. The possible ramification of this is that many companies are
paying a high price for software which is never put to good use.

6. Overall, the ERP vendor(s) provided your company with strong support after you
purchased the products?

No of
Response responds %
1. Strongly
Disagree 0 0.000
5. Neutral 4 13.333



2. Disagree 0 0.000
4. Agree 4 13.333
Total
100 30 100
80

60 Post pucrhase Assistance
East
West
40
North
20 80
0
70
% of Respons

60
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
50 No of respondts
40
30 %
20
10
0
l
e

e

le
ee
e
tra
re

re

re

ab
r
u
ag

Ag

ag

Ag

ic
Ne
s

pl
s
ng

4.
Di

Di

ap
5.
ro
ly

Interpretation:
2.

t
St
ng

No
ro

3.

6.
St
1.

Assistance Level

Graph: 5.6
Interpretation
visited are very much satisfied with their ERP package, 13.33% are satisfied,
33.33% are Neutral.

Hence we could infer that majority of these companies are satisfied.
Other companies are Neutral in their opinion because they have not reaped the
benefits from ERP implementation as they have recently implemented the
ERP package.



7. If you have decided not to implement ERP Package software for one or
more of your enterprise system, why not? (Select all that apply)

Not Implement ERP Package for 1 or more Enterprise system why not?
No Of
Types Of Responses Responses
1. Our legacy system works 8
2. The ERP solution available in the market
did not seem to be good for our needs 2
3. The experience of others raised red flags 1
4. The company had other priorities 6
5. Unable to secure approval from senior
management 3
6. Wanted to wait for the production to mature 5
7. Waiting for reduction in price 2
8. Other 3

Implemenation of ERP - Departmentalization
1. Our legacy system w orks

2. The ERP solution available in the
market
did not seem to be good for our
needs
3
2 8 3. The experience of others raised
red flags
4. The company had other priorities

5. Unable to secure approval from
5 senior management
2 6. Wanted to w ait for the production
to mature
3
6 7. Waiting for reduction in price

1
8. Other



Interpretation:
Among the 30 respondents, 8 of them feel that their legacy system works, 2 feel
that the ERP solution available in the market did not seem to be good for their
needs, only 1 felt the experience of others raised red flags, 6 had other
priorities, 3 failed to get approval from top level, 5 wanted to wait for the
production to mature, 2 waited for price reduction.

8. Did you use any other outside consultant to assist you in your
implementation?

No of
Response responds %
1. Strongly
Disagree 1 3.333
5. Neutral 4 13.333
2. Disagree 0 0.000
4. Agree 8 26.667
Total 30 100



Outside Consultant - Implementation
No of Responds
60
50
40
No of respondts
30
%
20
10
0 ee

le
ee

e
al

ee

ab
gr

re
gr

tr

gr
ag
a

eu

ic
A
is

pl
A
is
N
ng
D

ap
4.
D
5.
ly

tro

2.

ot
ng

S

N
tro

3.

6.
S

Usage of Consultant
1.

Graph: 5.8
Interpretation

visited are very much satisfied with their ERP implementation by using outside
consultant, 26% are satisfied, 13.33% are Neutral & 1% of the companies they do
not use any consultant to implement the ERP package.

9. Does the ERP system provide the accurate information you need &
providing Exact Reports at the right time?

No of
Response responds %
1. Strongly
Disagree 0 0.000
5. Neutral 4 13.333
2. Disagree 0 0.000
4. Agree 3 10.000
Total 30 100


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