ERP at Vandelay Industries

Why ERP at Vandelay?: Top

Mgmt.
 End the existing fragmentation of its system
 Elimination of duplication

 Allow process standardisation

 Widespread business practice changes
 ‘Best way’ (80-20 distribution in the beginning):

‘pouring liquid concrete’

 ‘one best way’

 ‘Gaining visibility’ over data from anywhere

 Facilitate and speedup decision-making at higher
levels
Technology Enabled Change
 SAP determines business processes
 “you must be willing to do things the way the ERP
application requires” (Laughlin, 1999)
 Package of strategic change
 What is the overall objective of ERP
implementation?
 Systemic change
 Structural change
 Cultural change
Context of Change
 High degree of independence
 Profit centre
 Divisional structure
 Stimulating work environment
 Tinkering is encouraged
 Tight market conditions
 downsizing
 Quick response through integration
 Cutting down information processing and
information transfer time
Why ERP at Vandelay?: Middle
Mgmt.
 Getting rid of the old mainframe
 Will help the tinkerers overcome some
of the current roadblocks
 ‘start experimenting with it’
 How do you reconcile the expectations
of top mgmt. and middle mgmt.?
 What about the lower levels?
Cost-Benefit Analysis
 18 months
 50 people
 Part time involvement of many
 $20 million cost: very aggressive budget
 Hardware
 Software
 Consulting fees
 Salaries and expenses of employees
Cost-Benefit Analysis (Contd.)
 Training costs for 2/3rd people
 For R/3 skills
 For adapting to new business practices
 Losing R/3 change agents
 Why do we underestimate costs?
 Can we monetise the benefits? How?
Implementation
 Eight mfg. sites, four order entry locations
 Simultaneously/ serially?
 Extensive training
 Two-thirds of all Vandelay employees
 From one day to two weeks depending upon R/3
usage
 What happens to picking up and adapting to new
business practices?
Implementing ERP
 Can you modify the system?
 How much of Vandelay’s specificities will be
taken care of?
 80-95% through configuring of tables (SAP
estimate)
 Interfacing with legacy systems
 Interfacing with other ‘point solns.’
 Custom software
 Modifying the R/3 source code
 Software will determine business processes or
vice-versa?
Change Agents: Internal
 Steering committee
 Division VPs
 Project team
 Operations level
 Project champion
 What qualities should look for the change
agents?
 Technical skills
 Political skills
Change Agents: External
 Expertise of consultants
 Previous engagements: ‘what had worked,
what hadn’t’
 50% less than two years experience of SAP
 Vandelay as a training ground!
Outcomes
 Who controls what changes would be
made?
 SAP?
 D&T?
 Top mgmt.?
 Middle mgmt.?
 Inevitability of change
 Response?
Approaches to Standardisation
 Processes that create database entries
 Part numbers across plants
 External interface
 Customers, suppliers, etc.
 Consistency of internal interfaces
 Between plants
 Standardise best practices
Centralisation vs. Autonomy
 Involvement of people at the ground
level
 Second guess/ alter?
 Tinkering?
 “Input by many, design by few”
 What happens to the continuous
improvement?
Popularity of ERP
 Packaged as part of a broader business
strategy
 Why is it that audit and tax firms have
moved into ERP implementation?
 If everybody is doing it, to what extent
do you get an advantage?
 Competitive advantage or leveller?
Issues
 What happens when uncertainties
increase?
 What happens to orgn.’s learning
capabilities?
 What happens to ‘tacit knowledge’?
 If ERP is an episode what happens to
continuity?
Business Process
 Technical
 Political
 Cultural
Issues (contd.)
 Credibility of change agents?
 In-group vs. out-group
 Where does larger orgn. come in the
picture?
 Client-consultant alliance
 Information is power
 How people actually use information?
Reengineering of Pacific Bell’s
Centrex Provisioning Process
 Design may be radical but implementation
incremental
 Reengineering assumes clean slate
 “Reengineering ignores what is and concentrates
what should be.” (Hammer & Champy)
 Union (70% employees)
 Time it would take regions to understand and
accept
 Time it would take to select and train for new
roles
 Lead time for IT applications
Reengineering of Pacific Bell
(Contd.)
 Focusses on end-to-end process
 Implementation focusses on the perceived
most broken pieces
 Top-down
 Implemnt. must be owned up & bottom-up
 Time commitment of the senior executives
in implementation
Why ERP Today?
 Institutional theory
 Orgns. as myths and ceremonies
 Mimetic processes
 ‘badge of progressiveness’: a symbolic resource
 Cycles of managerial fads
 BPR: too close to the type of stop-watch
management
 Economic recession
 Commercial pressures on the consultant
Whittington on Strategy
 “Strategy is a way in which managers
try and simplify and order a world
which is too complex and chaotic for
them to comprehend. The regular
procedures and precise quantifications
of strategic planning are comforting
rituals, management security blankets
in a hostile world.”