Tuesday, August 17, 2010
Sunday, August 15, 2010
We have been hearing about ERPs and integrated applications for some almost two decades now. These concepts were really valued when we were working with different systems/applications for different functions within the same business. How times have changed? These days we take it for granted that any business application is integrated between different systems/functions.
Better organisations are thinking beyond the normal transaction capturing business applications. With the ubiquitous mail clients in all office cubicle people expect the business applications to work in the same way as the mail service is operating - inform selective people as per demand, get confirmation and agreements from required people for each/specific activities/plans. Share/spread information in different formats available in digital media
What it means is that a Sales Order creation in a system may be triggered as given - telephone call for enquiry which was captured in a call centre was forwarded to sales department, approved by credit department and sales control department. On saving of sales order this information is despatched to the customer care centre so that they can update the original prospective that made the sales enquiry. Once the prospect agrees to go ahead with the sale offer, the prospect is converted into a customer record in the company systems, logistics departments are informed about the sales need to be met and required planning/procurement/production activities are triggered. Once the delivery is completed by the outsourced courier/shipper service, company systems are updated with this information and the credit history of customer is updated
The underlying system is not a transaction capturing system like an ERP, but a system which has the capability to communicate, collaborate, and trigger transaction into a transaction capturing system (an ERP). It seems there is no ready made solutions available in the market as of now
Wednesday, April 7, 2010
Wednesday, November 18, 2009
Monday morning in M/s Prism Inc is very busy day for the MIS team, marketing team and sales team. They publish their turnover data for the previous week to their management for performance reporting.
Mr CIO of Prism is very busy trying to push his battery of data entry operators [ other wise designated as MIS managers ] to get the Sales data collated for the week. The team is struggling to put the data into a standard template as preferred by the Mr CEO since the data have to received by them from all corners of the market in a multiple formats with non-standard product description. The non standard data is an accepted reality in the organization. The Sales force have been given complete flexibility in terms of data collection. The Marketing Head and CEO both feel that this a favor that these guys are doing to the organization. Because their prime job is to do selling in the market place and not data collation.
While, Mr CIO is dire hurry to get the weekly sales report for the marketing director and stressfully sitting in his office, gets a service call from a vendor. He promptly shouted back to the vendor in a very dismal mood and said “ Don’t you know that today is Monday. I have no time to take your call early morning and waste my time.” Reply from the vendor “ I know Sir, today is monday …but couldn’t understand what so special about the day?” Mr CIO said “ It is our sales report day. You SME vendors will understand all these. We report sales for the week to the management board on this day every week” Vendor replied with a surprise “ But Sir, we do it every hour, everyday! From our system data flows automatically to us with every invoice that we raise”. Mr CIO with great surprise disconnected the phone but keep wondering “ How is that possible!”
During the sales review meeting with board members, CEO broached the topic of everyday sales report review in view of growing competitiveness in the market place and with increase in number of product ranges and its variants. The immediate reaction of the Marketing director is like “ how that is possible?” He reacted by saying “ Do you expect boys to sit back in office and collate sales numbers instead of pushing sales in the market place?” CEO looked at CIO and asked “ Can IT do something in this area ?” Mr CIO remembered what his vendor told him in morning about tracking of sales data every hour, responded by saying “ I think the same could be done by doing ERP system implementation. Somebody in our vendor organization was mentioning that they track in the system almost on hourly basis”. Mr CEO said “ But we also get our sales data from the system. Then in that case the same should be possible in our organization also”. Mr CIO replied in confused manner “ But we have our systems which are all localized at the sales offices spread across various locations and they are not integrated. Hence, we get the data from each of the sales offices and collate the sales data centrally in the MIS department for weekly review. The entire activity requires atleast one full working day for data to get collated at the Head Office for Sales Reporting. On-line data capture and reporting requires implementation of ERP system for the entire enterprise.” CEO immediately said “Then lets go for it”. Mr CFO replied “ But this is a very expensive proposition. ERP implantation is very resource intensive and returns on that investment may not come that thick and fast”. CEO said “ Lets have a full fledged board meeting on the same immediately to have some detailed level of understanding ”.
On the next day Mr CIO prepared a detailed level presentation covering various aspects of ERP system, its deliverables and benefits to the organization. But the board members seem to be not very convinced with the fact that the unique business practice and processes could be easily put into the system easily which are currently being done by their high skilled and trained resources of the organization. Further, all of them are very concerned as to how suddenly the age old work practices could be changed overnight for which the organization had spend fortune for training and development of their resources. On hearing such apprehensions, CEO requested to each of the board member to put down their expectation from the proposed ERP system in order to engage some implementation consultant who have good experience in such implementation and have better understanding of the industry best practices.
The exact from the minutes of the meeting of the board held are ……………
Marketing Director expects that sales data to be made available in the system with every invoicing done in the sales office across all markets and location. The data must be available on real-time basis.
Finance Directors expects a very ROI from this investment in qualitative terms
Supply Chain Director expects that system will be able to help the business to optimize the inventory holding and do the demand servicing on least cost basis
Technical Director expects system to improve upon the Good Manufacturing Practices and measure production efficiency
CIO expects the system should enable to drive ‘ single version of truth’ in terms of data and reports
CEO expects the system to be a ‘decision support’ and ‘decision enabler‘.
As per instruction of CEO, all these expectations are collated and CIO briefed all potential ERP consultant for proposal.
Almost, all reputed consulting firms are invited for their presentation to the Board on the proposal. Everybody has impressed that all the stated expectations and objective will be delivered but everybody has left the board with some after thoughts by using some terms like Business Process definition, Change management, Change agent, Project Governance and Role definition, Enterprise scope definition, User classifications, training etc. The entire Board suddenly started realizing that onus of such ERP system implementation of more them rather than on the consultants.
Now, the entire board is grappling with these terminologies and trying to decipher more appropriate meaning in context to their own business. Realization has started dawning on them that ERP implementation success lies more on the business rather than on the quality of consulting firm. The debate and deliberation is still on since no consultant can provide input to your business since YOU KNOW THE BEST…………………..
Come, let’s see whether we can provide you with any cues and pointer to sharpen your own thought processes, so that you have a better clarity and understanding about of all these buzz words and terminologies which are frequently used by your consultants. We shall try to walk you through our library of experiences which we have gathered in a very hard way in the past. You share your pain points and we shall try to apply our experiential learning on to it to make your journey more pleasant and smooth. Promise is not the moon or starts it is very hard-core ground level realities which people tend to overlook during such grand phanole.
a/ Refer Appendix A - definition of " most advantageous market" - The fair value measurement is done to benchmark the value of the existing asset / liability of the entity. The intent of the measurement is not to ascertain exit price / realisation price of the asset / liability which are an integral part of going concern and the entity will continue to derive economic benefit from the same. In such context, the consideration of transaction cost and transport cost will destort the true spirit of the value measurement since such cost operate under various market conditions. In the absence of the definition of transaction cost, the value measurement will further get distorted since the element of subjectivity will prevail.
Further, the reason stated for inclusion of the term tranportation cost [ as explianed by Mr K Prabhakar - Board member is ISB on 8/09/09 during deliberation ] is to neutralise the locational disparities between the operating markets and to bring the value more closer to realistic terms. In view of such consideration, then the other costs like storage, handling cost etc. should also be considered. However, there is no mention of such other costs in the exposure draft.
Hence, it is recommended that the operating price in the advantageous market unadjusted for any other cost should be a better reference for fair value measurement. The most relevent reference in this context would be quoted [ unadjusted] price - as mentioned in para 45 of the exposure draft for level 1 input for fair value measurement purpose.
b/ Reference para 53 - 54 of the exposure draft on Level 3 input, read alongwith disclosure requirements as per para 57, the value measurement for assets/liabities will be done basis unobservable input. In absence of any any specific guidline, the entity valuation will get influenced by management assumption and interpretaion. Thus the scope of subjectivity will be very high in the value measurement of assets/ liabilities.
Further, the disclosure requirements as specified in the draft standard will lead to the exposure of entity specific confidential information to competitors.
Thursday, December 4, 2008
most important aspects of any organization, be it in
the services or the manufacturing sector. A services
organization estimates demand for its services and
thereby gears itself up to service demand. A
manufacturing organization estimates demand for its
manufactured goods and works towards activities such as the
supply of raw materials, production capacity, distribution etc.
Demand planning plays a strategic role in any organization as the
planning for a lot of other activities depends on the accuracy and
validity of this exercise. For example, sales and operations
planning is an important function and in some organizations this
planning cycle is triggered once the demand forecasting cycle is
closed. There are many pieces of software available in the market
which help us conduct demand planning in an effective manner.
One of the most widely used of these is Microsoft Excel. Most of
the ERP products like SAP, Oracle Applications and SCM products
like i2 have Demand Planning functionality available in their suite
of product offerings. This article explores some important
functionalities and features that are useful for organizations in
Statistical forecasting: Most demand planning exercises
start with a statistical forecast. There are various models,
each catering to different behavioral patterns shown by
products and markets. These include univariate models,
linear models, the multivariate linear and non linear models,
seasonal models, Croston’s model, mixed model etc. The list
is virtually endless. They may look like small words but
selecting an appropriate model for each of the products in a
portfolio can be a time consuming and intricate task. There
are no shortcuts here. A detailed simulation exercise needs
to be carried out to select the best model for a product and
market. Statistical forecasting models need to be
continuously tested and refined. This means that the
demand planning tool should also support a simulation
environment and also the ability to compare different
forecasting models. Depending on the way that data is
stored in the demand planning tool, statistical forecasting
can be done at various levels. There can be a top down
approach or a bottom up approach. A top down approach
means carrying on statistical forecasting at the highest level
and then breaking it down, while the bottom up approach is
the exact opposite.
Consensus planning: The demand planning tool should
support consensus planning features since demand planning
is rarely the work of a single person or a single department.
Demand planning is often a collaborative exercise between
different departments and people, who bring in their years of
expertise. That is why a tool should be able to capture their
inputs on top of statistically forecasted numbers.
Promotional planning features: The demand planning
tool should also be able to handle promotional planning. An
extensive promotional planning feature is a great asset for
any organization. It helps plan promotions and the effect of
said promotions on other products, like cannibalization.
Cannibalization can be extremely difficult to capture as it not
only affects one’s own product lines in a similar category but
also products in other categories.
Lifecycle management: Planning for the demand of a
product spanning its lifecycle is a complex process. They
may not be a simple introduction of new products or phasing
out of existing products; the situation could also call for
replacing an existing product with a new product or multiple
products. Product substitution functionality should be an
integral part of a demand planning tool. This might seem
extremely simple but technically it requires a lot of features,
like the ability to copy historical sales of one product into
another, the ability to play around with he sales figures of
one geographical area in another area etc.
Seasonal planning: Seasonal planning is an intriguing
process. It can be a difficult thing to simulate in statistics
with a reasonable degree of accuracy if demand patterns are
not regular. The complexity is due to the fact that festival
seasons can fall in different months of the year in different
years. The time span or the duration of a particular season
could be different in different years. For example winter can
be lengthy one year and shorter next year.
User interface: Most organizations start demand planning
with Microsoft Excel. Any organization would vouch for the
fact that Excel is easy to use and over the years they have
become quite comfortable with it. Thus, it makes great sense
if the user interface of the demand planning tool is
comfortable and user friendly. This makes it easy to get
acceptance from the end users.
Data management and archival: Another important
feature of any demand planning tool is the ability to churn a
huge amount of data in a reasonable period of time. It
should also be able to archive old data for reference. This
archival process should be easy and should not affect the
current functionality of the product. If a demand planning
tool is built on the data warehousing backbone it can have
great ability to play around with data in many dimensions.
This also makes it feasible to have statistical data forecasting
at various levels not only at the lowest level at which data is
captured. A data warehousing backbone also makes it easy
to look at the data’s various dimensions and levels increasing
the utility of demand forecasting and planning manifold.
There are various other interesting features which would be
important for an organization. Demand forecasting and planning is
the first step in most planning cycles in any organization. Any
errors that creep into the numbers at this point have a ripple effect
later on which only gets amplified. This phenomenon is popularly
known as the Bullwhip effect in supply chain. With the ever
changing nature of the environment that an organization is
operating in along with shortening product lifecycles and other
competitive pressures it is imperative to have a demand planning
tool which should be able to handle the complexities of the
business not only today but also for the future needs of an
organization as it grows.
Originally published by Express Computers.
Monday, November 24, 2008
It is important to reflect on what is meant by a successful implementation and how an implementation is considered to be a failure.
Despite best efforts and abilities of ERP consultants, ERP implementations don’t take off the grand way it is supposed to do. There are many deterrent parameters that often result in a negative ROI.
The most important of these are the human factors that impact application value. The basic tenet of empowering an organization with new technology: if the end-users won’t use the application, the ROI will likely be negative needs to be realized by ERP consultants worldwide, be it on any platform.
We broadly categorize 4 categories of human barriers faced in ERP implementations:
- Individual – this pertains to the willingness of individuals of the organization in sharing knowledge and information. Individual employees often feel insecure in doing so perceiving that their domain knowledge once incorporated in the ERP would render them dispensable.
- Structural – Groups within the organization may not share information freely and technology alone will not change them. This usually happens more between departments that worked in isolation Pre-ERP.
- Hierarchical – ERP leads to transparency across the organization and this contradicts the usual hierarchical barriers of managers and line staff. ERP changes these ideologies.
- Cultural – This refers to ERP implementations integrating the enterprise with suppliers and customers across the globe. Different countries have different cultures and initially cultural barriers also prevent the ROI from reaching its potential.
Our implementation experience has shown that human factors can influence upto half the potential value to be derived from the ERP.
To maximize this return value, the organization must devote as much energy, to addressing human barriers during deployment and the first operational year, as they did to select the ERP. Issues such as this come under the purview of Change Management. It is extremely important to educate end-users about the concept and the ideology of a ERP.
Most implementations begin with users not aware of what they are going in for. This results in a gap between expectation levels of the client team and implementers. Training sessions on how to adapt to the changing environment and making users aware, help in reducing the shock of the changes that the ERP brings.
Factors which are critical to the success of the project / RoI of the project includes:
Business Process Enhancement (BPE): The biggest advantage of implementing a ERP package is that, it brings with it time-tested streamlined Business processes which are standards across countries and across sectors. Sector specific verticals come as add-on’s to give thrust to that particular industry. The challenge lies in the organizations adaptability to the new post-implementation business scenario
Technology Upgrade (TU): Another important factor is keeping with times and changing the way business is done, by means of advanced technology. Technology has proved to be a boon and benefits derived from this include, better and more efficient manner of execution of tasks, better reliability, better availability, more productivity and less manual intervention. But this is also a volatile component, because only the right kind of technology for the right company will be beneficial.
Spectrum of Application (SoA): · he organization needs to thoroughly analyze the scope of implementation. The spectrum that would be impacted by the implementation is a key factor of ROI. More mature organizations will get higher ROI from wide Application Spectrum whereas less mature organizations with less IT infrastructure and awareness will get higher ROI from a limited Application Spectrum. The best solution for these less mature organizations is to incorporate an iterative model of ERP implementation with “a module – at – a time” approach. The change management becomes easier and less tech-savvy employees can take their time to grasp the new system. With successful implementation of each module, the acceptance factor reaches a high, and in turn gives a high ROI.
Human Resource Maturity and Learnabilility (HRML): · The organization should go in for external consultation for assessing this factor, unbiased. The people of the organization can have a radical impact on the ROI of ERP. With this factor in mind, the implementation process needs to be selected, in order to provide high ROI. The process adjustment would negate low HRML index, and will be matured enough to introduce the ERP in a gradual comprehensive manner.
Payback Period (PP): · The payback period is the period from inception of implementation to the point when the ERP begins to give pertinent answers to business problems. The shorter the payback period, the higher is the ROI, which means these are inversely proportional to each other.
Organizational Factor (OFac): Every organization is unique, and would have organization specific factors, which will impact the ROI of ERP. In our implementation experience, we have witnessed this and found it difficult to classify. This is therefore a generic factor, which will be decided by the organization, if found to have a bearing on the ROI.