Checklist for a Successful

ERP System

Buker, Inc.
Management Education 800-654-7990
and Consulting email: info@buker inc.. com

WWW.BUKER.COM
 The Checklist for Successful ERP Implementation 2

The roots of Enterprise Resource Planning (ERP) started in the late 1960s and
early 1970s with the use of computers and computer systems in manufacturing
companies. Those early applications of the computer as a tool to manipulate and
store data began in the finance area. Finance used the computer to reduce manual
record keeping and filing systems for payables, receivables, general ledger and
payroll. The logical progression of the computer as a tool to help run the business
was to apply computer capabilities on the operations side of the business, specifi-
cally to help plan, schedule and order material. This technique was called Material
Requirements Planning (MRP). By the end of the 1970s, with computers now
affordable for almost all businesses, thousands of companies began MRP imple-
mentations to better manage their businesses. Companies rushed to implement this
new tool to help them better manage inventories, improve material shortage condi-
tions on the factory floor, reduce purchasing costs and improve on-time customer
delivery.

As more companies began to implement and use MRP to plan, schedule and order
material a select few companies began to realize that to yield the full benefit of
MRP, it must be viewed and managed as a company operating system. This second
generation of MRP, known as Manufacturing Resource Planning (MRPII) provided
an expanded range of functional tools. This improved capability meant that all
functions in the business, including senior management, sales, engineering, finance
and quality, now began to utilize an integrated set of tools to help manage their
operations.

The latest version of busi- ENTERPRISE RESOURCE PLANNING

ness system software is
Enterprise Resource BUSINESS PLANNING Objectives
TOP
Planning. The ERP model MANAGEMENT
PLANNING
DEMAND/PRODUCT PLANNING Demands

(Figure 1) is a method to OPERATIONS PLANNING Resources

effectively manage the total RESOURCES

OK? no
resources in a business BILLS OF yes F
OPERATIONS
MATERIAL
MASTER SCHEDULING
E Products
enterprise. Today, with the MANAGEMENT ROUTINGS E
PLANNING D Material
capability of current ERP INVENTORY MATERIALS PLANNING
B
systems, business system PLANNING A
OK? no
C
integration has been extend- yes
SUPPLY PARTNERS/LOGISTICS
K
Parts
ed to the customer and the OPERATIONS
Hours
MANAGEMENT HIGH VELOCITY MANUFACTURING
supply chain. EXECUTION
Accountability
PERFORMANCE MEASUREMENT

Figure 1
 The Checklist for Successful ERP Implementation 3

Enterprise Resource Planning Checklist

The most challenging component of ERP implementation is getting started.
Knowing the philosophy of ERP and understanding the concepts of predictable per-
formance and accurate planning is quite different from understanding how to put
the pieces into place to introduce the kinds of change that affect not only the
processes and procedures but also the culture. Few operations can truthfully report
a smooth startup with no snags whatsoever, as ERP implementation is a major
change for most organizations. However, in the companies successful in their
implementation there are specific actions that have been documented as fundamen-
tal to their success.

ERP Checklist
1. Company Wide Education
2. Management Leadership
3. Value Proposition
4. Performance Measurement
5. Organizational Accountability
6. Handshake Management
7. Project Organization
8. Project Plan
9. Business Processes
10. Technology Evaluation
Figure 2

1. Education
The education process for ERP is broken into three steps or phases. The first
phase is top management education.

The most successful approach to top management education is for the top
management to attend a course (typically 2 days) on the subject of ERP. This
phase of the education should cover the concepts of ERP, how these concepts
apply to your company, the changes required to make it happen in your com-
pany, senior managements role in the implementation, performance meas-
urements and the steps to success. The most successful approach in the top
management education is to go through the education as a team. By doing
the education as a team a consensus and common vision as to how to move
forward as a company (action plan) can be formulated.
 The Checklist for Successful ERP Implementation 4

Education Pyramid

Top
Management
Education
5-10 People
Operating
Management Education
10-25% of all employees
Critical Mass Education
Detail Video Software
Prof. Societies Meetings Seminars CPIM
90% - 100% of all employees

Figure 3

The second phase of the education is for operating management. The operat-
ing management education typically is for 10-25% of the organization and
should be started no later than 30 days after the top management education.
The education should encompass department managers, first line supervision,
project team members and key staff/support. The operating education is nor-
mally a two-day course taught by outside instructors off-site from the compa-
ny with cross- functional representation from each area of the business.

The third phase in the education process is directed at the critical mass of the
company. In companies successful in their new business system implementa-
tion 100% of the organization receives some form of education and training.
After all, what is ERP about? It is about reinvesting in the people, raising the
technical competence throughout the organization, not just implementing
software.

2. Leadership
Leadership is one of the most critical factors in the successful implementa-
tion of ERP. In our surveys over the last nineteen years of working with and
interviewing high performance companies, each of those companies had a
senior manager champion the new business system implementation.
Preferably the senior management champion should be the president or per-
son in charge of the business. Why? The ERP implementation cuts across the
entire organization and there is only one person with the authority to organ-
ize the resources
 The Checklist for Successful ERP Implementation 5

3. Value Proposition
Part of the effort is to document the reason for the focus or high priority put
on the implementation effort. One of the first tasks or assignments of the
project team must be to cost justify the implementation. By the mere assign-
ment from top management to the project team, top management has
acknowledged that it believes or suspects that there is a justification for the
expenditure of resources and money, but the team and functional managers
must also acknowledge the expenditures and personally sign up for the
resulting benefits. Justifications typically and realistically include:

Benefits:
A. Attained data accuracy
B. Reduced inventory
C. Improved delivery performance
D. Improved flexibility through setup reduction and cycle time reduction
E. Improved product quality
F. Improved morale/quality of life for employees
G. Reduced purchasing and traffic costs
H. Increased sales from increased competitiveness
I. Improved productivity
Costs:
A. Education
B. Outside consulting services
C. Facilitator training and resource
D. Full time project manager
E. Some travel for company visits
F. Time spent on the project by team members
G. Training aids, books, video materials, etc.
H. Software and hardware

The companys justification document should also calculate the Return On

Investment (ROI) for the project and the cost for every month the project is
not completed (cost of a one month delay). Successful implementations are
achieving at least a 250% ROI in the project.
 The Checklist for Successful ERP Implementation 6

4. Performance Measurement
The true measure of success in an ERP implementation is not whether new
systems have been implemented, but what happens to the operating perform-
ance in the business. The focus then is on operating performance, not just
financial performance.

Performance PERFORMANCE REPORT CARD

measurements COMPANY BY DATE
should focus on FUNCTIONAL
RESPONSIBILITY
PERFORMANCE PERFORMANCE
AREA OBJECTIVE MEASUREMENT
rates of improve-
BUSINESS GENERAL RETURN ON
ment to drive the
TOP MANAGEMENT

PLANNING MANAGER INVESTMENT

PLANNING

habit of ongoing DEMAND/PRODUCT

SALES
SALES
PLANNING PERFORMANCE
or continuous
OPERATIONS PRODUCTION
improvement. PLANNING
MANUFACTURING
PERFORMANCE

Management
MANAGEMENT PLANNING

MASTER MPS
MANUFACTURING
should also look SCHEDULE PERFORMANCE
OPERATIONS

at performance MATERIALS SCHEDULE

MATERIALS
measurement as a PLAN RELIABILITY

way to highlight BILLS OF BILL OF MATERIAL

ENGINEERING
MATERIAL ACCURACY
or provide focus
DATA BASE

to the problem INVENTORY

CONTROL
MATERIALS
INVENTORY
ACCURACY

performance ROUTINGS ENGINEERING

ROUTING
ACCURACY
areas. In those
MANAGEMENT EXECUTION

SUPPLY PARTNERS SCHEDULE

areas below 95% LOGISTICS
PURCHASING
PERFORMANCE
OPERATIONS

performance an HIGH VELOCITY

MANUFACTURING
MANUFACTURING
SCHEDULE
PERFORMANCE
action plan to
DELIVERY GENERAL DELIVERY
improve the PERFORMANCE MANAGER PERFORMANCE

performance is CLASS AVERAGE TOTAL

PERFORMANCE
required.
Figure 4

5. Organizational Accountability
The most effective way to create the necessary accountability in the process
of improvement is to have regularly scheduled process review meetings
chaired by the process owner. The process owner is not always the person to
execute the plan, but instead, the person to help, and the one who has the
responsibility to drive the improvement process for that particular area.
 The Checklist for Successful ERP Implementation 7

6. Handshake Management
When an organization decides to make the commitment to implement ERP, it
commits to major changes, new ways of doing things, and new ways of
thinking. There will be excitement generated, and in the best environment
creativity will flourish. If the general population within the organization is
afraid to try new things, positive change will not happen as it should. The
way to ensure the most creativity is to create an environment where people
are coached and expected to take some chances with new ideas that are antic-
ipated to make a positive influence. The resulting enthusiasm can become
dynamic.

Management must display a positive attitude supporting empowerment. This

means giving the authority to initiate change, allowing it, and rewarding it.
This is handshake management, the antonym of fox hole management.
Symptoms of fox hole management include waiting to prey on employees
who make a mistake regardless of the motivation behind it. Blame or finger
pointing is an important goal in fox hole activity.

Figure 5

Keep the focus on opportunity and the future, not on blame and the past.
Handshake management is making the decisions based upon fact rather than
emotion. It is focusing on the process not the person.
 The Checklist for Successful ERP Implementation 8

7. Project Organization
The project leader and the team are integral to the success of the implementa-
tion.The project manager should report very high in the organization. Most
companies have the project manager report directly to the CEO or president.
Do not have the project manager report levels down in the organization. This
again sends the message that the project has a low priority. The ERP project
cuts across all functional areas and there is only one place in the organization
where that happens in a company - at the top!
The project team should have representation from the entire organization.
With an objective to manage all the resources in the business enterprise there
should be representation from all functional areas.

Project Organization
TOP
MANAGEMENT

Steering Project Industry

Committee Manager Consultant

PROJECT TEAM MEMBERS

Marketing Finance Manufacturing

Materials Engineering Purchasing

Education Quality Information

Coordinator Systems

Figure 6

The team members will report to the project manager with a dotted line
reporting structure while still reporting to their existing functional managers
in daily activities.

8. Project Plan
The development of an overall Project Plan is an important undertaking for
the team. Once established, it represents a constitution that can provide need-
ed guidance along the way. This is not to say that there will be no revisions
to it as the team and organization gets farther into the project. Rather, the
 The Checklist for Successful ERP Implementation 9

project plan document continues to be enhanced with additional tasks as they

become known.

The team should be charged with the task of mapping the course of attack. A
recommended way to begin the project planning process is to start with the
ERP checklist in this article. These are main components that must be dealt
with in the implementation of ERP and can well serve as the nucleus of the
plan.

The Project Plan should be broken into the following components:

A. Mission Statement - the mission statement agreed to by the

project team and steering committee should define the scope
and objectives of the project.

B. Operating Plan - the operational component of the project

plan deals with the specific tasks, time frames and responsi-
bilities to improve the operating performance in the business.
This portion of the plan is often an overlooked component of
the project plan. The vast majority of ERP implementations
have a very detailed plan to implement new software. But,
there is little written into the plan about how performance
will be improved, the time frame it will be improved, the
ownership or responsibility and the specific actions required
to improve the performance in a given area or process.

C. System Implementation Plan - this portion of the overall plan

defines how the new business system will be implemented.
Like the operational plan there should be a definition of
tasks, time frames, and responsibilities. The systems imple-
mentation plan is normally developed by information tech-
nology and project operating personnel.

D. Education and Training Plan - as discussed in Step 1 of the

ERP Checklist, the companies that are successful in their
implementation educate and train 100% of the workforce. A
phased education and training plan should be developed so
everyone receives some form of education and training.
 The Checklist for Successful ERP Implementation 10

9. Business Processes
One of the characteristics of high performance companies is their predictable
level of operating performance. These companies have instilled a habit of
ongoing continuous improvement throughout the enterprise. Business
processes have been scrutinized to eliminate non-value added activities
through factory and business simplification.

Companies striving to receive the maximum payback from their implementa-

tion of new business systems review business processes to eliminate varia-
tion from the process and improve operational performance. Typical exam-
ples of business processes that companies must get in control in their imple-
mentation are:

Bills Of Material - 99% Accuracy Inventory - 98% Accuracy

Routings - 99% Accuracy Sales & Operations Planning

The Sales and Operations Planning process is at least a monthly review and
update of forecast demands and establishing rates of output in the form of an
operations/production plan.

10. Technology Evaluation

The activity of technology evaluation is, unfortunately, where most compa-
nies begin the journey to ERP. Experience has shown from surveying, work-
ing in and working with companies that approximately 25% of the benefits
of ERP might be derived from new software tools. Benefits of new software
typically include:

A. System Integration - the new software is an integrated pack-

age whereas the existing company systems might be stand-
alone or not fully integrated. In this situation it is not unusual
for the company operating personnel to be taking data out of
one system only to input it into another system.

B. Increased Functionality - again, the new software may pro-

vide increased functionality that the current system does not
provide. Typical software module areas of improvement
might be forecasting and master scheduling, where as in the
past these functions were probably maintained manually.
 The Checklist for Successful ERP Implementation 11

BENEFITS

Hardware
& Software Management
25% & People
75%

Computer Path Planning & Execution

Path
25%
75%
Figure 7

Choosing Software
There are entire books devoted to the requirements for Enterprise Resource
Planning software and how to choose the software package that best fits the compa-
nys needs. Rather than try to duplicate that effort here, lets concentrate on impor-
tant points in the selection process.

Software Selection Methodology Consists of Six Steps:

1. Definition of Requirements
Developed by extensive interviews of company personnel.

2. Software Selection Team

Company must activate a business system selection team with functional
representation from each area of the business.
3. Compiling Business System Requirements
Developed from user interviews, requirements are determined along with a
request for proposal.
 The Checklist for Successful ERP Implementation 12

4. Identification of System Providers

Identify the 3-4 best system providers based upon software
requirements.

5. Demonstration By System Providers

Each provider will be requested to demonstrate their product. Each firm
should be required to identify the following:
A. Personnel to be involved in the support of the new business system
installation. This would include resumes, list of time with the system
provider, number of times they have been involved in an implementa-
tion of the software and list of reference sites from their implementa-
tions.
B. List of client companies that have fully implemented the business sys-
tem. This list should not include just personnel from information tech-
nology but also operating personnel references.
C. Dunn & Bradstreet financial/credit analysis.
D. Definition of future software direction of the system provider.

6. Analysis and Recommendation

The company software selection team rates the system providers and makes
a specific recommendation to management.

Implementing Software
There are two distinct schools of thought when it comes to software application to a
company business environment. One position is to argue that there is no software
product that truly meets the company needs. Our business is different, or we do
not operate the way the software does or is forcing us to in this area. In this case,
companies purchase a software product and set about altering the product to the
current business environment. Many companies spend as much time and money
altering the product as they paid for it in the first place. Experience has shown that
companies typically end up modifying new software to look like the old product
they operated with. For example, screens and reports are modified at user request to
change the new tool because the user is used to a particular format or screen.

Another major reason for software modification is that the company does not want
to address the issues which implementing the new software surfaces. Rather than
management addressing each surfaced issue on how and why we do business this
 The Checklist for Successful ERP Implementation 13

way, the issue is bypassed in favor of software modification. This is not to adulate
an approach where companies change their business to fit the software. However,
what successful companies are doing is looking at their operational performance
and mapping business processes to identify areas of improvement. From this it can
be determined how software fits and how it should be implemented. The recom-
mendation is to think of software as a 90%+ to 95% solution.

In other words, when modifications are discussed, break them into two simple cate-
gories. First, a need to modification. A need to modification is a show stopper.
This basically says the project can not move forward until this change is made.
These are the modifications to discuss as a team. If the decision by the team is that
the ERP project cannot proceed then the modification probably should be made.
The second category is the nice to modifications. These are modifications to the
software people would like to have. These types of modifications are normally due
to what was discussed before where people are used to the old screens and reports
and want them back.

It is also important to understand that when the new software was purchased part of
the decision set was probably due to the software suppliers company stance to con-
tinue to upgrade and improve their product. Too many company modifications in
this case would make it extremely difficult (time and money) to convert to the
newly released upgrade or version.

Summary
Hopefully it has become apparent that achieving Enterprise Resource Planning is
not about implementing a new computer system. What makes companies truly suc-
cessful is their approach and understanding of training their people, and focusing on
company operating performance and business processes to drive a habit of ongoing
improvement in the business enterprise.