Squeezing More Out Of ERP

For some businesses, the productivity gains that are drawn from their first enterprise resource planning (ERP) systems often whet their appetites for more functionality. Process improvements, granular information analysis and better positioning for e-commerce with customers and suppliers are just a few of the possible perks of upgrading to a newer release.

Nevertheless, these companies are the exception to the rule, since many battle-scarred ERP veterans wince at the thought of revisiting those painful and lengthy initial installations. "The vast majority tend to avoid major upgrades and stay on an older release, as long as it can meet their business needs," says Bruce Fram, president of Luminate Software Corp., a Redwood City, Calif.-based firm that monitors ERP systems and other applications for Fortune 1,000 companies.

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Ten Critical Success Factors For ERP Upgrades

1. Spell out the strategic, tangible business and operational benefits and find ways to measure success in achieving them. Assign accountability and authority for those goals.

2. Make sure all top management is united behind the business goals driving your upgrade.

3. Because the biggest challenge is change management, retrain staff not only with new technical skills but also with skills that often result from upgrades and new job descriptions.

4. Make good decisions faster that balance schedule and cost vs. benefits and risk. This is especially important because such projects cross functional lines.

5. Implement creative incentives for your project team to reward their hard work and increased value.

6. Be rigorous about project management and the implications of your partnerships with consultants.

7. Look at the big picture, establishing a global architecture before deploying locally. Too many projects begin with a small pilot or in phases and then need to be redone when taken to other business units or countries.

8. Do process re-engineering before and during the project. It's a mistake to think you can do this later or focus on installing the software first, which often includes many decisions on process.

9. Pay attention to demanding training and support needs. Don't try to save money by cutting training costs.

10. Focus and align your organization, team and scope. Your organization needs to understand why the project is worth the pain of change. Your project team needs full-time members, minus the distractions of their real jobs. Your scope needs to be tightly focused to resist the temptation of widening the scope and reworking the project plan.

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Still, there are the hearty few who are willing to upgrade their systems in order to squeeze out even more business process improvements.

For example, streamlining human resources operations was the rationale behind GKN Automotive Inc.'s upgrade to Pleasanton, Calif.-based PeopleSoft Inc.'s PeopleSoft 8.0, which began last month. The Auburn Hills, Mich.-based maker of drive shafts for front-wheel-drive vehicles is upgrading from PeopleSoft 7.5, which it installed last year.

GKN's decision was driven by the company's human resources strategy to move to employee and manager self-service technology, says Ted Bishop, project manager for human resources information systems at GKN. The software will provide employees with the ability to directly change personal information such as marital status, dependents, tax withholding and 401(k) plans "instead of using the HR department," Bishop says.

Meanwhile, managers who are burdened with paperwork, approvals and benefits questions will be able to use the self-service system to initiate pay increases, find out when new salaries will kick in and answer other questions.

"We weren't looking for cost savings but to transform the work HR was doing from reactionary - dealing with paper and manual tasks - to proactive, being on the cutting edge, making people better employees," Bishop says. PeopleSoft 8.0, he adds, turns human resources into a 24-hour service, eliminating data-entry functions. It also has about 10 times the employee self-service functions as PeopleSoft 7.5.

Play It Again, SAP

The Allstate Corp. has a more efficient financials area and is better positioned technologically to provide customer service, thanks to a minor upgrade from SAP 4.3 last year.

Mary Fontaine, director of enterprise reporting and analysis at the Northbrook, Ill.-based insurer, says the upgrade to SAP 4.5 has added functionality in the financials area and for expense processing. "It's now more efficient, and we're able to run functions in parallel," such as allocations, she says.

Prior to the upgrade, says Fontaine, allocations were processed in sequence, which required each job to be completed before the next one could be started. With the SAP upgrade, all those jobs can now be processed at the same time, 40% faster than before. What once took six days can now be finished in three and a half days, says Mike Wahls, an Allstate project director.

Amherst Corporate Computer Sales & Solutions, an online seller of IT products and services to companies such as San Francisco-based Genentech Inc. and Santa Clara, Calif.-based National Semiconductor Corp., found measurable productivity gains, thanks to two successive upgrades of Denver-based J. D. Edwards & Co.'s OneWorld software last year.

"We've seen a 20% productivity increase in terms of sales per employee since we deployed OneWorld, and with every upgrade since," says Paul Ramirez, vice president of marketing at the Merrimack, N.H., firm, whose sales last year topped $300 million.

Sales per employee at Amherst first dipped from $229,000 in the third quarter of last year to $213,000 in the following quarter, due to organizational restructuring and Y2k-related issues.

Sales per employee then rose to $224,000 in the first quarter of this year and $252,000 in the second quarter. "There's no doubt sales increased in early 2000 due partly to pent-up demand from Y2k, but the real issue is how efficiently we are managing those transactions," Ramirez says.

"We're moving transactions better and moving our information with greater precision," says Kevin Hall, Amherst's chief technology officer. "Since we have no inventory, knowing very precisely exactly where your order is is crucial."

Now that 60% of the company's sales are Web-assisted, customer and product information has to be "dead-on," says Hall. "There's no tolerance for error. We've built personalization features into the tools so customers view only products which are relevant, based on their order history."

Testing is crucial when implementing any ERP upgrade, and Amherst uses "a pretty rigorous approach," Hall says. Once its information technology team sees that the system is running properly on the test platform, Amherst extends it to the departments with people from a cross-section of the company.

Sometimes, even a minor "point" upgrade can make a whopping difference. That's what happened when Cybex International Inc., a manufacturer of high-end fitness equipment for gyms and personal use, upgraded from PeopleSoft 7.5 to 7.52 in October last year. "The upgrade was painful, but it was night and day - 7.52 added so much functionality," says Brian Lyman, manager of e-commerce at the Medway, Mass.-based firm.

For example, PeopleSoft 7.52 helps Cybex manage its customer database better. "It allows us to build customer roles and associations - for example, if a health club leases our equipment, we don't have to go back and forth between one and the other," says Lyman.

Since the company's online store was launched last December, Cybex customers have been able to place orders into its backbone system, track orders and see what Cybex sees. "Some of our equipment is made-to-order; the product configuration module lets customers pick colors for the frame and upholstery without the re-entering other modules require," thus shortening the product ordering cycle, says Lyman.

Nevertheless, Cybex had to sweat through some bugs in PeopleSoft 7.52 and needed the vendor's help to get the system running properly, says Lyman.

No Pain, No Gain

For Schurman Fine Papers, a designer and distributor of greeting cards, stationery and gift wrap to retail chains like The May Department Stores Co. and Target Corp., the impetus to upgrade its older J. D. Edwards WorldSoftware legacy system is coming from its electronic data interchange (EDI) provider.

Schurman's upgrade last December didn't generate enough information to its EDI provider, Harbinger Corp. (now Peregrine e-Business Connectivity Group, after being acquired by San Diego-based Peregrine Systems Inc. in June), to map and format the EDI transmissions properly when product shipping for this Christmas season began in July. So the firm was forced to do considerable customization. "The software didn't go down to the right hierarchical level required by our trading partners - they had no idea what was in each box," says Bob Jellison, vice president of IT at Schurman in Fairfield, Calif.

This meant identifying fields in existing table structures, with actual box numbers and universal product codes for each item; scanning each box; and providing additional coding to sort it properly, he says. Schurman will probably upgrade to version A8.1, which Peregrine says is more compatible, sometime next spring, Jellison adds.

"We realize J. D. Edwards is not in the EDI business and [Peregrine] is not in the ERP business, but we need them to work together without getting in each other's backyards," he says.

McDonnell is a freelance writer in New York. Contact her at sharonfmc@compuserve.com.

Copyright © 2000 IDG Communications, Inc.

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