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Erp implementation transition strategies

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Erp implementation transition strategies

  2. 2. INTRODUCTION  The most important factor that decides the success of and ERP implementation is the transition strategy.  Selecting and implementing a new ERP system and parallel changes in process is a complex.  Regardless (without considering) of your size and perceived resources, an ERP implementation is that should be approached with a great careful planning.  Following are the five reasons for poor results : 9/12/20172 Prof.K.D.Zinjurde
  3. 3. Five Reasons For Poor Results  The implementation or transition strategy chosen was not the one suited for the organization  The implementation took much longer than expected.  The implementation preparation activities were done poorly, if at all.  People were not well prepared to accept and operate with the new system.  The cost to implement was much greater than anticipated(expected). 9/12/20173 Prof.K.D.Zinjurde
  4. 4. Transition Strategies  An ERP Implementation Strategy determines how the ERP will be installed.  Different companies may install same ERP software in totally different process.  The same company may implement different ERP software in different ERP software in the same approach.  There are four basic transition strategies as follows: 1. Big bang 2. Phase 3. Parallel 4. Process line 5. Hybrid 9/12/20174 Prof.K.D.Zinjurde
  5. 5. Transition Strategies Conti..  These techniques focus on the strategy of how to make the transition from a legacy system to a new ERP system.  The selection of the transition strategy that is best suited for each organization is difficult as a wrong strategy can result in a failed or flawed implementation.  There are three pillars commonly used for implementing ERP system.  Process  People  Technology  Failure to use any one of these or failure to use them in the best possible manner can result in9/12/20175 Prof.K.D.Zinjurde
  6. 6. BIG BANK STRATEGY  In this strategy organization plan a grand ERP implementation for their companies.  The installation of ERP systems of all modules happens across the entire organization at once.  The big bang approach promised to reduce the integration cost in the condition of thorough(strict) and careful execution.  This method dominated early ERP implementations and it partially contributed to the higher rate of failure in ERP implementation.  But today, not many companies dare to attempt it. 9/12/20176 Prof.K.D.Zinjurde
  7. 7. BIG BANK STRATEGY Conti..  In big bang strategy the company moves from the existing or legacy (traditional) system to the new ERP system on a specific dateLegacy System New ERP System Finance Finance Past Go Live Date Futur e Manufacturing Manufacturing Human Resource Human Resource Materials Management Materials Management Quality Management Quality Management Plant Maintenance Plant Maintenance Marketing Marketing Sales and Distribution Sales and Distribution Fig 1. Big Bang Transition 9/12/20177 Prof.K.D.Zinjurde
  8. 8. BIG BANK STRATEGY Conti..  In big bang strategy the company moves from the existing or legacy (traditional) system to the new ERP system on a specific date shown in above fig.  The big bang strategy is seldom used and often not recommended by ERP vendors, systems integrators and service providers.  Many companies struggle in deciding whether the big bang approach is the right choice for their company.  One of the reasons given for not using the big bang approach is that it consumes too many resources to support the go-live of the ERP system.  The high failure rates have been found using the big bang approach. 9/12/20178 Prof.K.D.Zinjurde
  9. 9. BIG BANK STRATEGY Conti..  Success in using the big bang strategy comes with careful preparation and planning prior to using big bang.  It is not a question of whether the big bang is a good approach for the ERP systems. The success of the big bang strategy depends on how well an organization plans and prepares itself prior to implementation. o Bridges o Skyscrapers o Satellites o Space shuttles o Fighter Planes o Ships etc. all above are more complex project than9/12/20179 Prof.K.D.Zinjurde
  10. 10. BIG BANK STRATEGY Conti..  Advantages of Big Bang Strategy 1. The overall cost of implementation is less because no interface program are required to communicate between the legacy system and the new ERP system. 2. Big bang eliminates all of the sequencing and decision- making of implementing one module at a time. 3. It is well designed for rapid implementations. 4. It creates a strong central focus for all the ERP team members. 5. It can avoid complex integration issues. 9/12/201710 Prof.K.D.Zinjurde
  11. 11. BIG BANK STRATEGY Conti..  Disadvantages of Big Bang Strategy 1. The amount of time and cost of careful planning and preparation for the go live 2. Bottleneck of critical resources, like lack of funds, non availability of professionals, etc. during the implementation can result in failed implementation. 3. The recovery process, if something has gone wrong is more difficult in this approach; it is a do-it-right-the-first-time project. 4. The consequences of a failed implementation can range 9/12/201711 Prof.K.D.Zinjurde
  12. 12. PHASED IMPLEMENTATION  The phased approach implements one functional module at a time, in sequential order.  The phased approach also known as modular, functional and sequential approach.  The method of modular implementation is one ERP module at one time.  This limits the scope of implementation usually to one functional department.  This approach suits companies that do not share many common processes across dept. or business units.9/12/201712 Prof.K.D.Zinjurde
  13. 13. PHASED IMPLEMENTATION Conti.. Legacy System New ERP System Past Futur e Go Live Date Finance Manufacturing Human Resources Materials Management Quality Management Plant Maintenance Marketing Sales and Distribution Finance Manufacturing Human Resources Materials Management Quality Management Plant Maintenance Marketing Sales and Distribution Phased ERP Implementation 9/12/201713 Prof.K.D.Zinjurde
  14. 14. PHASED IMPLEMENTATION Conti..  Independent modules of ERP systems are installed in each unit while integration of ERP modules takes place at a later stage of the project.  This has been the most commonly used methodology of ERP implementation.  Modular implementation reduces the risk of installation, customization and operation of ERP systems by reducing the scope of the implementation  The successful implementation of one module can benefit the overall success of an ERP project. 9/12/201714 Prof.K.D.Zinjurde
  15. 15. PHASED IMPLEMENTATION Conti..  These interface programs are required to bridge the gap between the legacy ERP system and the new ERP system until the new ERP system becomes fully functional.  Example, when the financial modules go live on the new ERP software while the inventory module still remain active on the legacy ERP system.  The use of interface and conversion programs the financial activity that occurs in the inventory modules is exported to the new financial system in a format that can be understood by the new ERP system. 9/12/201715 Prof.K.D.Zinjurde
  16. 16. PHASED IMPLEMENTATION Conti..  Advantages of Phased Approach 1. It allows companies to implement on functional module at a time before another is attempted. 2. Many companies feel more comfortable taking this stepping stone approach 3. The total number of resources needed at any one given point in time may be less 4. Additional flexibility may also be gained in the scheduling of people. 9/12/201716 Prof.K.D.Zinjurde
  17. 17. PHASED IMPLEMENTATION Conti..  Disadvantages of Phased Approach 1. This approach needs a large amount of technical resources. Technical resources are usually needed in this kind of approach because of the conversion and interface programs that are required between the two ERP system 2. The overall cost and time to implement is usually higher using this approach 3. Higher turnover rate can also be expected among key ERP team members because of the lengthy durations that usually accompany this approach9/12/201717 Prof.K.D.Zinjurde
  18. 18. PARALLEL IMPLEMENTATION Legacy System New ERP System Finance Human Resource Manufacturing Marketing Materials Management Sales & Distribution Quality Management Plant Maintenance Finance Manufacturing Human Resource Materials Management Quality Management Plant Maintenance Marketing Sales & Distribution PAST FUTURE GO LIVE DATE LEGACY SHUTDOWN 9/12/201718 Prof.K.D.Zinjurde
  19. 19. PARALLEL IMPLEMENTATION Conti..  The parallel approach keeps both the legacy system and the new ERP System active simultaneously for a length of time.  The amount of time the systems are both in operation ranges from one day to several months.  Portions of the same functional business areas (including software) such as finance, manufacturing, marketing etc. are operating at the same time for the legacy and ERP systems.  An advantage to the parallel approach is that it has good recovery options in case something goes wrong.  Because both the legacy system and the new ERP system are in operation at the same time for a particular module, the company’s business9/12/201719 Prof.K.D.Zinjurde
  20. 20. PARALLEL IMPLEMENTATION Conti..  The parallel approach provides an exact number comparison in real world conditions.  The parallel approach consumes more resources than other techniques during the transition.  All functional interaction with the legacy system must also be duplicated exactly in the new ERP system.  Confusion often erupts when people do not interact with both systems in exactly the same way  This is often detected upon inspection of ending period balances when they are found to be different.  Once the errors are detected, the process of investigation begins to determine whether the 9/12/201720 Prof.K.D.Zinjurde
  21. 21. PARALLEL IMPLEMENTATION Conti..  The parallel approach is ideally suited for mission critical situations that cannot survive a major malfunction of an ERP system. Like banking, insurance, pharmaceutical, or medical companies.  The parallel approach does not work well in situations where the legacy system has an expiration limitation that is within the needed amount of time for the system to operate in parallel mode.  Example of this was the year 2000 situation. They could not continue beyond December 31 1999 their expiration date. It would of course, be impossible to run in parallel mode beyond this date. 9/12/201721 Prof.K.D.Zinjurde
  22. 22. PROCESSED IMPLEMENTATION Manufacturing Manufacturing Quality Management Quality Management Legacy System- Product 1 New ERP System- Product 1 Past Go Live Product 1 Futur e Legacy System- Product 2 New ERP System- Product 1 Go Live Product 2 Finance Finance Finance Finance Manufacturing Manufacturing Human Resource Human Resource Human Resource Human ResourceMaterials Management Materials Management Materials Management Materials Management Quality Management Quality Management Plant Maintenance Plant Maintenance Plant Maintenance Plant Maintenance Marketing Marketing Marketing Marketing Sales & Distribution Sales & Distribution Sales & Distribution Sales & Distribution 9/12/201722 Prof.K.D.Zinjurde
  23. 23. PROCESSED IMPLEMENTATION Cont..  The process line strategy is following the strategy of mini big bang and parallel implementation.  However, it breaks the implementation strategy to manage parallel product lines.  Example, a company making two products where both products are manufactured in the same plant and few resources are shared between them  This approach is utilized by many small to mid-sized companies, which tend to have less complex internal business processes.  In processed strategy firstly all modules small parts (Go Live Product 1) are transformed from old system to new ERP System at once i.e. mini big bang. 9/12/201723 Prof.K.D.Zinjurde
  24. 24. PROCESSED IMPLEMENTATION Cont..  But company will not depends fully on big bang strategy so simultaneously follow the Parallel Transition Strategy till the Go Live Product 2 as shown in above figure.  This initial success victory helps to build organizational trust in the new ERP system, increasing its overall probability of success.  Upon the completion of the first process line, resource is then loaned to the more difficult and challenging process line. 9/12/201724 Prof.K.D.Zinjurde
  25. 25. HYBRID TRANSITION STRATEGY  The Hybrid Strategy is a combination of the Phased, Parallel, and Processed Transition Strategies.  At the beginning of an ERP implementation it is predicted whether to implement Hybrid or not.  The complexity of a hybrid strategy varies tremendously depending upon the situation.  The concept of hybrid strategy is not necessarily fixed over the implementation of an ERP system.  It can changes as people learn more about the software and project scope changes. 9/12/201725 Prof.K.D.Zinjurde
  26. 26. HYBRID TRANSITION STRATEGY Cont..  Many implementations use hybrid strategies because they are flexible in adapting to the specific needs of the situation.  It requires great deal of communication is required, combined with strong leadership, for these to be effective.  Without intensive communication ERP team members can abruptly lost the project. 9/12/201726 Prof.K.D.Zinjurde