Miikka Kaateri

The Process of Implementing

Microsoft Dynamics 365 Supply
Chain Management in a New
Warehouse

Metropolia University of Applied Sciences / HTW Saar UAS Matrikelnum 385467

Bachelor of Engineering / Bachelor of Science
Industrial Engineering & Management
Bachelor's Thesis
3 September 2022
Abstract

Author: Miikka Kaateri

Title: The Process of Implementing Microsoft Dynamics
365 Supply Chain Management in a New Warehouse
Number of Pages: 67 pages
Date: 3 September 2022

Degree: Bachelor of Engineering

Degree Programme: Industrial Engineering & Management
Professional Major: Double Degree
Supervisors: Antero Putkiranta, Senior Lecturer
Christian Köhler, Professor Dr.

The purpose of the thesis was to provide guidelines for implementing Microsoft
Dynamics 365 Supply Chain Management ERP system in a completely new
warehouse that does not currently have an ERP system in place and has no
daily warehouse operations running.

The essential daily logistics processes of the case company in the thesis are
illustrated using flowcharts. The thesis also provides instructions on
implementing the Dynamics 365 ERP system and the necessary parameters
and configurations for the warehouse to start its daily operations.

This thesis gives a general understanding on what to consider and what needs
to be the focus on during an ERP-implementation process, for a successful
implementation.

The result of the work was a general guide to the implementation of Dynamics
365 Supply Chain Management and the required parameters and configurations
to consider. At the time of writing the thesis, the implementation project is still
ongoing, and the exact time of the finalization is yet to be determined.

Keywords: ERP-System, Microsoft, Dynamics 365, Dynamics

365 Supply Chain Management, implementation,
parameter, configuration, process, flowchart
Tiivistelmä

Tekijä: Miikka Kaateri

Otsikko: The Process of Implementing Microsoft Dynamics
365 Supply Chain Management in a New Warehouse
Sivumäärä: 67 sivua
Aika: 03.09.2022

Tutkinto: Insinööri (AMK)

Tutkinto-ohjelma: Tuotantotalouden tutkinto-ohjelma
Ammatillinen pääaine: Kaksoistutkinto
Ohjaajat: Yliopettaja Antero Putkiranta
Professori Christian Köhler

Insinöörityössä oli tarkoituksena soveltaa ja antaa ohjenuora, Microsoft

Dynamics 365 Supply Chain Management toiminnanohjausjärjestelmä
käyttöönotolle täysin uuteen varastoon, jossa ei ole valmiina
toiminnanohjausjärjestelmää eikä päivittäisiä operaatioita ole valmiina.

Asiakasyrityksen toiveena oli saavuttaa automatisoitu, operatiivisesti läpinäkyvä

sekä mahdollisimman helppokäyttöinen toiminnanohjausjärjestelmäympäristö,
jota on helppo operoida käyttäjärajapinnassa.

Työssä kuvattiin keskeisimmät asiakasyrityksen päivittäisesti käyttöön tulossa

olevat varastoprosessit, sekä pyrittiin antamaan ohjeet, kuinka Dynamics 365
toiminnanohjausjärjestelmän käyttöönotto onnistuisi ja mitä parametrejä sekä
konfiguraatioita se tarvitsee, jotta toiminta saadaan aloitettua.

Työssä myös selitettiin mitä tulee ottaa huomioon sekä mihin tulisi keskittyä,
onnistuneessa toiminnanohjausjärjestelmän käyttöönottoprosessissa.

Työn lopputuloksena syntyi yleinen ohje Dynamics 365 Supply Chain

Management käyttöönotosta ja sen vaatimista parametreista sekä
konfiguraatioista. Insinöörityötä kirjoittaessa projekti on vielä käynnissä, eikä
lopullisen implementaation tarkkaa ajankohtaa tiedetä.

Avainsanat: toiminnanohjausjärjestelmä, Microsoft, Dynamics

365, Dynamics 365 Supply Chain Management,
käyttöönottoprosessi, parametri, konfiguraatio,
prosessikuvaus
Contents

List of Abbreviations

1 Introduction 1

1.1 Case Company 1

1.2 Purpose 1
1.3 Motivation 2
1.4 Objectives and research questions 2
1.5 Scope of the paper 3
1.6 Structure of the thesis 4

2 Methodology 4

2.1 Research approach 4

3 Aligning processes and business strategy 6

3.1 Role of operational management in business strategy 6

3.2 Galbraith Star Model 8
3.2.1 Strategy 8
3.2.2 Structure 9
3.2.3 Processes 10
3.2.4 Rewards 11
3.2.5 People 12
3.2.6 Strategies of logistics 12
3.3 Analysing the effectiveness of alignment 14
3.3.1 McKinsey 7s model 14
3.3.2 Strategy 16
3.3.3 Structure 17
3.3.4 Systems 17
3.3.5 Skills 17
3.3.6 Staff 17
3.3.7 Style 18
3.3.8 Shared values 18
3.3.9 Using the tool 18

4 Material management and logistics 19

 4.1.1 Warehouses 19
4.1.2 Warehousing 20
4.2 Warehouse inventory management methods 21
4.2.1 Fixed timeframe order method 21
4.2.2 Economic Order Quantity (EOQ) 22
4.2.3 Fixed batch order method 23
4.2.4 Min-max method 23
4.3 Introduction to ERP-systems 24
4.4 The most common ERP-systems 26
4.5 Benefits of ERP-systems 27
4.6 Challenges of ERP 28
4.6.1 Personnel risks 29
4.6.2 Event risks 29
4.6.3 Risks of damage 29
4.7 Microsoft Dynamics 365 30
4.7.1 Dynamics 365 ERP solution 32
4.7.2 Dynamics 365 CRM Solution 34

5 Needs assessment 35

5.1 Needs assessment of the target warehouse 37

6 Warehouse process mapping 38

6.1 Inbound operations 40

6.2 Stock operations 40
6.3 Outbound operations 41

7 Model for successful change management 42

7.1 John Kotter 43

7.2 Kotter's Eight Step Change Management Model 43
7.2.1 Step 1: Create a sense of urgency 44
7.2.2 Building a guiding coalition 45
7.2.3 Form a strategic vision and initiatives 45
7.2.4 Communicate the change vision 46
7.2.5 Enable action by removing barriers 46
7.2.6 Generate short-term wins 47
7.2.7 Sustain acceleration 48
7.2.8 Institute change 48
8 System implementation: Dynamics 365 Supply Chain Management 49

8.1 Warehouse parameters 50

8.2 Configuring the core warehouse processes 55
8.2.1 Wave templates 56
8.2.2 Work templates 58
8.2.3 Location directives 59
8.2.4 Concluding thoughts on implementation 60

9 Conclusion 61

9.1 Evaluation of the thesis 62

9.2 Final thoughts of the paper 63

References 64
List of Figures

Pictures

Picture 1. The qualitative research method. ........................................................ 5

Picture 2. McKinsey 7s model ........................................................................... 14
Picture 3. 7s factors .......................................................................................... 15
Picture 4. Distribution warehouse ..................................................................... 19
Picture 5. General modules of the ERP-system ................................................ 24
Picture 6. Microsoft D365 Fundamentals study paths ....................................... 31
Picture 7. Microsoft Dynamics 365 ERP solution descriptions .......................... 33
Picture 8. Microsoft Dynamics 365 CRM solution descriptions ......................... 35
Picture 9. Needs assessment phases and basic steps ..................................... 36
Picture 10. Warehouse process flow................................................................. 39
Picture 11. Inbound operations flowchart .......................................................... 40
Picture 12. Stock operations flowchart .............................................................. 41
Picture 13. Outbound operations flowchart ....................................................... 42
Picture 14. Dynamics 365 warehouse configuration page ................................ 52
Picture 15. Dynamics 365 site creation page .................................................... 52
Picture 16. Dynamics 365 warehouse management parameters ...................... 53
Picture 17. Dynamics 365 location profile license plate tracking setup page .... 54
Picture 18. Dynamics 365 locations configuration page .................................... 54
Picture 19. Dynamics 365 license plate configuration page .............................. 55
Picture 20. Dynamics 365 wave process method creation page ....................... 56
Picture 21. Dynamics 365 wave template creation page .................................. 57
Picture 22. Dynamics 365 work template creation page ................................... 59
Picture 23. Dynamics 365 location directives creation page ............................. 60

Figures

Figure 1-1. The Star Model ................................................................................. 8

Figure 1-2. Vertical processes .......................................................................... 10
Figure 1-3. Horizontal processes ...................................................................... 11
Figure 1-4. Illustration of the EOQ model .......................................................... 16
Figure 1-5. Min-max method illustration ............................................................ 17

List of Abbreviations

ERP: Enterprise Resource Planning. Technology that integrates many

different business functions all in one system.

CRM: Customer Relationship Management. Technology manages

relationships and interactions with customers and potential
customers, all in one system.

B2B: Business to Business. A form of transaction between businesses. Such

as a wholesaler and retailer.

SaaS: Software-as-a-service. A way to deliver applications on the internet.

Manageable through a browser instead of installed software.

WMS: Warehouse Management System. A software solution that provides

visibility into a business's inventory and manages supply chain operations.
 1

1 Introduction

1.1 Case Company

The case company operates in 24 countries in Europe and Asia. The group
consists of the parent company and subsidiaries. In Finland, there are six
operational units, which are located in Helsinki, Hollola, Hämeenlinna, Jyväskylä,
Turku and Oulu. The number of employees globally from the entities adds up to
more than 5000. Total annual revenue for the year 2020 was roughly 388 million
euros. The case company is one of the leading textile service companies in
Europe and offers solutions for work clothing, protection and the cleaning and
décor of workspaces.

The company operates in the B2B sector. The primary services provided are a
continuous agreement with businesses to provide work clothes and matts for use
or purchasing and with the service of washing them.

1.2 Purpose

In Finland, the company is organized into six different business lines. The
different service centres are specialized in providing different services for specific
products. The provided service points include work cloth laundry, carpet cleaning,
toilet cleaning, industrial towel laundry, restaurant textile laundry and cleanroom
laundry.

There is already an Enterprise Resource Planning system in place for the

company at the organizational level. The target business has expanded its
operations over the years, and increased logistics needs come with expansion.
The latest expansion is to build a warehouse in Hungary, which needs a fully
functional warehouse management system that is accurately configured for its
business needs, correctly built with the products in the warehouse in mind and
linked with the financials and the core business operations of the organization.
 2

1.3 Motivation

The motivation for this thesis is to support my work as a System Integration

Consultant, working on an implementation project of the cloud-based ERP
system Microsoft Dynamics 365 Supply Chain Management for a client
organization. Another factor is learning the best practices for implementing such
an ERP system and following through with an implementation project.

1.4 Objectives and research questions

This paper aims to get a general understanding of the configurations and

parameters for a Dynamics 365 Supply Chain Management implementation
project. This paper is strictly limited to the Dynamics 365 Supply Chain
Management module, and the focus is only on the Supply Chain Management
parameter configurations when proposed later in chapter 9.

The thesis's primary objective is to document the critical processes, practices,

and considerations in implementing an ERP system, which in this case is
Microsoft Dynamics 365 Supply Chain Management. The project's objective is to
create a unified ERP system for a new central warehouse from the ground up
and solve the needs and requirements for the system they might have together
with the target company. The main focus is the configuration of the standard daily
processes, such as inbound and outbound goods flow and stock operations.

Currently, there is no ERP system in place for the specific warehouse, but there
is an ERP system implemented globally, which is highly modified and complex.
For the implementation of the new system, there is a need to have the possibility
to import data from the existing system to the new system environment, a feature
which Dynamics 365 supports.
 3

• Research question: What are an ERP system's benefits, challenges, and

risks?
• Research question: What are the vital day-to-day processes of the case
warehouse?
• Research question: What are some of the necessary means and methods
to implement an ERP project?
• Research question: What are the mandatory configurations in the specific
ERP system to get the warehouse up and running?
• Research question: How to successfully implement the Microsoft ERP
system, using examples from the system interface?

1.5 Scope of the paper

The scope of this paper is limited to implementing the warehouse management

solution, leaving out the finance part of the system.
The ERP implementation project is conducted by CGI Suomi Oy, of which I am a
part of. Microsoft is the provider for the system and is responsible for the system's
ongoing development. Currently, there is no system in place for the target
warehouse, and it needs to be built from the ground up. The literature provides
considerations, practices, and the focus points for an ERP system
implementation project. These are the practices that I will follow and go through
in this paper.

Implementing a Dynamics 365 ERP system is quite complex and too wide to go
into too much detail in a bachelor's thesis. With this in mind, the decision was
made to limit the scope of the paper to only cover and highlight the main aspects,
primary configurations, and the main considerations at the general level for this
type of project. The research questions will be answered to get a general
understanding of the implementation process and its considerations.

At the time of writing this paper, the implementation project was not finished. As
a part of guidance and support, I interviewed some of the experts from CGI who
 4

have experience in similar implementation projects, to broaden my view and help

me through the project with the help of other literature. Based on the literature
and my fellow experts' knowledge, I proposed an essential structure for deploying
Microsoft Dynamics 365 Supply Chain Management for a new warehouse. While
writing this thesis, the implementation process for this particular project has
started, and it follows the processes my study suggests.

1.6 Structure of the thesis

This thesis begins with an introduction of the target company, including its
purpose, the motivation for the paper and the scope of the thesis. From there, the
methodology used in the paper will be described, and the theory part follows this.

The theory section will describe a brief history of ERP systems, the benefits and
challenges of an ERP system and an overview of the Dynamics 365 service
provider Microsoft and the Dynamics 365 solution in general. The practical
implementation process will be described from the Microsoft Dynamics 365 point
of view. After presenting the system and the provider, the critical processes for
the case warehouse will be mapped and illustrated as flowcharts. The current
relevant literature provides a good understanding of the necessary components
of a successful ERP-implementation process.
In the paper's final part, a plan is proposed for the necessary configurations and
parameters, backed up with the most relevant literature. The final part of the
paper also includes the conclusions of the project and a final analysis of the
paper.

2 Methodology

2.1 Research approach

This thesis uses a qualitative approach consisting of a theory base and an empiric
part. The theory base consists of the theories of the ERP system in question, the
processes, and the best practices for implementation. The empirical part consists
 5

of interviews with experts, conclusions, and the proposed plans. During the
research, many different sources of information were used to get the broadest
view possible of the subject. The most used sources are scientific articles,
previously conducted research, and the system developers' theory.

The qualitative method was selected for this paper as the approach is better for
answering questions like in what way, how and why? This approach aims to get
answers more practically, such as conducting interviews and gathering
information for them, instead of a more statistical way. This research method is
an interpretative and subjective approach, with the researcher participating in
interviews from the start and accumulating information instantly, compared to a
quantitative method in which data needs to be collected first. (Lasey & Luff 2007)

Picture 1. The qualitative research method (Question Pro, 2021).

Several interview sessions were held for the research question, "What are the
mandatory configurations in the specific ERP system, to get the warehouse up
and running?". The initial interview was with the lead consultant of the
implementation project, which took approximately two hours. The second one
was with some of the target organizations' foremen and the project's lead
consultant and took approximately 2 hours. The interviews were a significant part
 6

of the research as they were an excellent way of collecting information. Several

additional, shorter sessions were held during the process. The interviews sparked
conversations and thoughts, making it easier to get an idea of the processes and
requirements that must be considered, and the interviews brought up different
points of view.

3 Aligning processes and business strategy

In this chapter, I will go through, in general, what needs to be considered on the

organizational level, the driving factors for and organizational decision-making,
and what ties everything together. Understanding and recognizing the
organizational operations and considerations are necessary for any type of
process, especially for an ERP implementation. This chapter will go through the
Galbraith Star Model, which explains why everything must be aligned for an
organization to operate well. For an ERP implementation, the organization must
work as a whole and all the processes need to be aligned with the strategy. The
goal of this chapter is to find a connection between strategy and operational
management systems.

Bringing strategy into operations is one of the big challenges in the business
world. This in generally due to the fact that only a limited part of the organization
is involved in the strategy creation process. For the rest it can be challenging for
the remaining organization to absorb the generated output. To support the
strategy, a functional system needs to be created, which connect the strategy to
the business operations. In the organization, it should be understood that the
body implementing the strategy, is the organization itself and for this reason it is
essential that everyone inside the organization understands their roles and
responsibilities in the implementation of the strategy. (Niemelä, 2008).

3.1 Role of operational management in business strategy

Operational management refers to all the systems with which an organization

ensures the realization of its strategy. Strategy orientation in operational
 7

management has been emphasized from the 1990s, since the ability to monitor
and question the chosen strategy is a prerequisite for an organization’s
competitiveness. (Torra, 2007.) According to Simons (Simons, 2000) states that
from two points of view, the strategy is in the core of operational management
and performance. First the performance evaluation systems and the operational
management systems, serve as the central analysis and communication tools,
when developing strategy. Second the systems are essential in strategy
implementation and monitoring.

In my opinion, an accurate definition of operational management was given by

Merchant & Van der Stede, according to which “operational management is about
the various means and measures that aim to ensure the achievement of the
organization’s strategic goals”. (Merchant et al. 2003.) Therefore, strategic
control and operational control can be distinguished. Strategic control is about
the chosen strategy, and how it operates in relation to the organizations operating
environment. Operational control refers to the procedures, which are directed
organization operations to guide the implementation of the strategy in practice.
(Merchant, 1998.)

Galbraith's Star Model can be considered a framework for organization design,

on which a company bases its design choices. This model helps to describe how
to align strategy in an organization, and how important it is to align strategy
through the whole organization, and what might happen if some aspect is
neglected. Alignment of processes and business strategy is a crucial part in digital
transformation project, such as an ERP-implementation. According to Galbraith
(2002), the framework consists of a series of design policies controllable by
management and can influence employee behaviour. The policies are the tools
with which management must become skilled to effectively shape their
organizations' decisions, behaviour, and the way which the strategy is headed
(Galbraith, 2002).
 8

3.2 Galbraith Star Model

The Star Model framework can be described as it is illustrated in Figure 1-1. The
design policies of the Star Model are divided into five categories. The first
category is strategy, which determines the direction. The second category is
structure, which points to the location of decision-making power. The third is
processes, which are related to the flow of information, so they can be considered
to respond to information technologies. The rewards section, the fourth category,
influences the motivation of people to perform and address organizational goals.
The fifth category is people-related policies (human resource policies), which
influence and frequently define the employees' mindsets and skills.

Strategy

People Structure

Rewards Processes

Figure 1-1. The Star Model (Galbraith, 2002)

3.2.1 Strategy

Everything starts from the top, the strategy. Strategy gives the direction, to which
the other parts are then aimed towards. When strategy changes, for example
when implementing a new ERP-system, the structure of the organization has to
adapt. The strategy of a company is considered the formula for winning. The
company's strategy specifies the goals and objectives to be achieved and the
values and missions to be pursued; it sets out the company's primary direction.
 9

The strategy explicitly delineates the products or services to be provided, the

markets to be served, and the value offered to the customer. It also specifies
sources of competitive advantage (Galbraith, 2002).

The strategy category is traditionally the first component of the Star Model to be
addressed. The organization is important in the design process because it
establishes the criteria for choosing among alternative organizational forms. Each
organizational form enables some activities to be performed well, often at the
expense of other activities. Choosing organizational alternatives inevitably
involves making trade-offs. Strategy dictates which activities are most necessary,
thereby providing the basis for making the best trade-offs in the organization
design. Matrix organizations result when two or more activities must be
accomplished without hindering the other. Rather than choosing the "or" matrix
requires an embracing of the "and." Companies want to be global and local.
(Galbraith, 2002).

3.2.2 Structure

The organization's structure determines the organization's placement of power

and authority. Structure policies fall into four areas (Galbraith, 2002):
• Specialization
• Shape
• Distribution of power
• Departmentalization

Galbraith (2002) stated that specialization refers to the type and number of job
specialties used in performing the work. Shape refers to the number of people
constituting the departments (that is, the span of control) at each level of the
structure. Large numbers of people in each department create flat organizational
structures with few levels. In its vertical dimension, the distribution of power refers
to the classic issues of centralization or decentralization. Its lateral dimension
refers to the movement of power to the department dealing directly with the issues
critical to its mission. Departmentalization is the basis for forming departments at
 10

each level of the structure. The standard dimensions of departments formed are
functions, products, workflow processes, markets, customers, and geography.
Matrix structures are ones where two or more dimensions report to the same
leader at the same level (Galbraith, 2002).

3.2.3 Processes

Information and decision-making processes are known to cut across the

organization's structure. The structure can be thought of as the anatomy of the
organization, and the processes can be thought of as the physiology or the
functioning of the organization (Galbraith, 2002). Management processes can be
both vertical and horizontal.

Figure 1-2. Vertical processes (Galbraith, 2002)

As Figure 1-2 illustrates, vertical processes allocate the scarce resources of funds
and talent. Usually, business planning and budgeting processes are considered
vertical processes. Departments have different needs, which are centrally
collected, and priorities are decided for the budgeting and allocating of the
resource's capital, research and development, training, and so on (Galbraith,
2002). For matrix organizations, these management processes are vital for
effective functioning. These management processes must be supported by
multidimensional information systems, such as integrated ERP systems.
 11

Figure 1-3. Horizontal processes (Galbraith, 2002)

Figure 1-3 shows that the horizontal processes are designed around the
workflow, such as developing a new product or fulfilling a customer order.
These horizontal management processes, also known as lateral processes, are
the primary driver of managing organizations today. There are various ways to
carry out lateral processes, including voluntary contact between members and
the complex and formally supervised teams.

3.2.4 Rewards

A rewarding system aims to align the employee's and the organization's goals.
Rewarding systems provide motivation and incentives for working towards the
organization's strategic direction. The reward system defines salary regulation,
promotions, bonuses, profit sharing, stock options, and such policies. This area
is constantly changing because it supports the lateral processes. Organizations
and companies are implementing pay-for-skill salary practices and team bonuses
or gain-sharing systems. Also, the reward systems use and practise non-
monetary rewards such as recognition or challenging assignments. Pay-for-skill
salary practices come to good use when it comes to ERP systems. ERP-system
providers usually give the possibility to become certified in a specific ERP system
such as Microsoft Dynamics 365. Getting certified is usually encouraged and
funded by the employer, and getting these certifications will, in most cases, be
rewarded with monetary compensation.

Galbraith (2002) suggests that the reward system must be congruent with the
structure and processes to influence the strategic direction. To be effective, the
 12

reward systems need to create a consistent package in combination with the

other design choices.

3.2.5 People

For an organization to operate correctly, people need to be considered. The

people area of the Star Model governs human resource policies of recruiting,
selection of employees, rotation of workers, training procedures, and
development. With appropriate combinations, the human resource policies can
produce the talent required by the organization's strategy and structure. Skill
generating and necessary mindsets for the objectives and the implementation of
the chosen direction can also be governed by the human resource policies. For
the best results of the policy choices, all the other connecting design areas need
to be consistent with each other. Process definition and process optimizations
are a must in an ERP-implementation process.

Galbraith (2002) states that human resource policies also build the organizational
capabilities to execute strategic decisions. For an organization to be flexible,
flexible people are required. For people to be suited for cross-functional teams,
they need to be more generalist and cooperate. People who can manage conflict
and influence others without the need for authority are needed in matrix
organizations. The policies of human resources, help develop people and
organizational capabilities simultaneously.

3.2.6 Strategies of logistics

Manifold is the strategy source (Porter 1980,1998), and it can be based on cost
advantage or differentiation. It can also be built on superior competencies that
are difficult to copy and are built over time or have access to resources
unavailable to other companies.

Galbraith (2002) stated in his literature that there is a relationship between

strategy, structure, processes, reward systems and people. Figure 1-1 illustrates
 13

a model that links different kinds of strategies to organizations. Planning and

designing the organization is not a separate task from other corporate activities.
Quite the opposite, to balance all the different functions and to be able to
cooperate, all these functions should be designed together, and there needs to
be a lot of interaction between the different parts. Figure 1-1 should be interpreted
so that all parts have to be consistent with the strategy and consistent among
themselves (Galbraith, 2002). All the parts draw from the strategy. The structure
has to be consistent with the overall strategy, and it should be able to deliver the
strategy and change it if needed whenever the strategy changes. Solution or
product delivering processes should be designed with the strategy and all the
other parts in mind. The strategy must be fitted, and different strategies need
different kinds of people to deliver what the customer needs. Reward systems
should be based on the strategy of the company and the overall goals (Galbraith,
2002).

If there is a mismatch between any of these parts, one part leading in a different
direction than the other parts, unpleasant or even hazardous situations will occur.
According to Galbraith et al. (2002), the results - depending on the misleading
item – can be:

1. Strategy Confusion
2. Structure Friction
3. Processes Blockage
4. Reward Systems Internal competition
5. Personnel Procedures Bad performances

There has to be a clear understanding, commitment and fit across all these parts.
Otherwise, the organization cannot deliver the results it has been designed for. If
any of the downfalls mentioned above are met, it might tremendously hinder the
results and the implementation process of an ERP system.
 14

3.3 Analysing the effectiveness of alignment

In this chapter I will explain how to analyse the effectiveness of alignment during
the transformation process. In this chapter the McKinsey 7s model is explained
and how to use it.

During an organizational transformation process, it is important to monitor the

effectiveness and alignment of the processes and strategy. To understand and
identify that different key elements of organizational design are effectively aligned
and for allowing the organization to achieve its objectives, we can use the
McKinsey 7s model, which is a tool created specifically for this purpose.

3.3.1 McKinsey 7s model

McKinsey 7s model was created in 1980s by McKinsey experts Tom Peters,

Robert Waterman and Julien Philips with an assistance from Richard Pascale
and Anthony G. Athos. Starting from the presentation, the model has been
generally utilized by academics and specialists and stays one of the most famous
vital arranging instruments. It looked to introduce an emphasis on human
resources (Soft S), as opposed to the traditional large scale manufacturing
tangibles of capital, infrastructure, and equipment, as a key to higher
organizational performance. The objective of the model was to show how 7
components of the organization: Structure, Strategy, Skills, Staff, Style, Systems,
and Shared values, can be adjusted together to accomplish viability in an
organization. The central issue of the model is that every one of the seven regions
are interconnected and an adjustment of one region requires change in the
remainder of a firm for it to really work. (McKinsey, 2022).
 15

Picture 2. McKinsey 7s model (Jurevicius, 2022).

In picture 2, you can find the McKinsey model, which addresses the associations
between seven regions and partitions them into 'Soft Ss' and 'Hard Ss'. The state
of the model underscores interconnectedness of the components (McKinsey,
2022).

The model can be applied to numerous circumstances and is an important

instrument when organizational design is at question. The most well-known
utilizations of the system are (McKinsey, 2022):

• To facilitate organizational change.

• To help implement new strategy.
• To identify how each area may change in future.
• To work with the consolidation of associations.
 16

Picture 3. 7s factors (Jurevicius, 2022).

In McKinsey model, the seven areas of association are partitioned into the 'soft'
and 'hard' regions. Strategy, structure, and systems are hard components that
are a lot simpler to distinguish and oversee when compared with soft
components. Then again, soft regions, albeit harder to make do, are the
underpinning of the association and are more likely to create the sustained
advantage. (McKinsey, 2022).

3.3.2 Strategy

What does a nicely adjusted strategy mean in 7s McKinsey model? As a rule, a

sound strategy is the one that is clearly expressed, is long-term, assists with
accomplishing competitive advantage and is built up by strong vision, mission,
and values. Be that as it may, it's difficult to tell whether such methodology is very
much lined up with different components when investigated alone. So, the key in
7s model isn't to take a look at your organization to track down the extraordinary
strategy, structure, systems and so forth, however to look on the off chance that
its lined up with different components. For instance, short-term strategy is
typically an unfortunate decision for an organization however on the off chance
that its lined up with other 6 components, it might provide strong results.
(McKinsey, 2022).
 17

3.3.3 Structure

Structure addresses how business divisions and units are coordinated and
incorporates the data of who is responsible to whom. As such, structure is the
hierarchical outline of the firm. It is likewise one of the most visible and easy to
change components of the framework. (McKinsey, 2022).

3.3.4 Systems

System are the processes and techniques of the organization, which uncover
business' everyday activities and how decisions are made. Systems are the
region of the firm that decides how business is done and it ought to be the
fundamental concentration for supervisors during organizational change.
(McKinsey, 2022).

3.3.5 Skills

Skills are the abilities that company's workers perform very well. They also
incorporate capacities and competences. During organizational transformation,
the question frequently emerges of what abilities the organization will truly have
to support its new strategy or new structure. (McKinsey, 2022).

3.3.6 Staff

Staff component is worried about what type and the number of workers an
organization will need and how they will be selected, prepared, motivated, and
compensated. (McKinsey, 2022).
 18

3.3.7 Style

Style addresses how the organization is overseen by high level administrators,

how they cooperate, what actions do they initiate and their emblematic worth. As
such, it is the management style of organization's leaders. (McKinsey, 2022).

3.3.8 Shared values

Shared Values are at the centre of McKinsey 7s model. They are the standards
and principles that guide worker behaviour and company actions and
subsequently, are the foundation of each and every organization. (McKinsey,
2022).

3.3.9 Using the tool

To apply the McKinsey 7s model for analysing alignment in a transforming

organization, these are steps to take (McKinsey, 2022):

- Start with shared values, and analyse if they are consistent with structure,
strategy, and the systems. If they are not, identify what needs to change
- After that, observe the hard elements: strategy, structure and systems and
how well do they support each other. Identify any needs for changes.
- Next, analyse if the soft elements (shared values, skills, style, and staff),
support the desired hard elements and if they support each other. If this is
not the case, make necessary changes.
- When adjusting and aligning the elements, an iterative process of making
adjustments need to be used. Re-analyse how these adjustments and
alignments impact other elements and their alignment.

The McKinsey 7s tool is great for analysing and monitoring the current state of
the organization during a transformation process, and a great tool to help identify
the different aspects of alignment that need to be considered in any organization.
 19

4 Material management and logistics

Before going into ERP and warehouse management systems, some basic
procedures, processes, and concepts have to be described. In this chapter, I will
explain what warehouses and warehousing mean and what kinds of different
order types are linked to these entities. ERP systems include types of ordering in
a warehouse for inventory and out from a warehouse. I will start by explaining the
basics of a warehouse and build a base for different ordering methods for
inventory.

4.1.1 Warehouses

A warehouse can mean a space where either products, components or materials

are stored. A warehouse can also refer to an entity that is manageable and
logistical in nature. As a result, transportation vehicles can also be considered to
have stock. Warehouses can be specialized in either products or customers.
They can also be used for various needs of products such as cold or food storage.
Some warehouses can contain, for example, only one type of items, such as
paper or many assorted products, such as thousands of spare parts or medicine.
(Richards, 2014).
 20

Picture 4. Distribution warehouse (Munters, 2021).

Usually, a company has its own warehouse, and in many cases, the warehouse
is located on the company's premises. However, companies can choose to
outsource their storage. This would mean that a company providing logistic
services to other companies would store their customer's products. In this case,
the customer would pay rent for the storage but would eliminate the need for their
own storage facility.

Warehouses offer versatile functions that workers need to manage. For example,
one can work in a phase where goods are received and taken into the warehouse.
These work phases also include put-away, replenishment, picking, packing and
inventory.

4.1.2 Warehousing

Warehousing, or storing, is an integral part of a company's business. The

efficiency of storing is a highly competitive advantage in today's competitive
business environment. A sufficiently broad and large stock selection ensures
good customer service. A lot of capital tends to be tied up in inventories. When
the storage works efficiently, the level of service can be maintained, even with a
smaller amount of on-hand stock. This means flexibility between the supplier and
the company. (Karhunen, Puori & Santala 2004).

Efficient storage involves traversing between a wide range of products and a fast
stock turnover rate. For the storage to be efficient, in almost every case, it
requires integrating information technology and automation. Warehouses should
have an information management system, and an investment should be made for
the development process of the system in order to maintain a competitive
advantage. For a large company, it is vital that an information management
system is adopted to manage the large variety and quantity of products
(Karhunen, Puori & Santala 2004).
 21

4.2 Warehouse inventory management methods

There are several different ways to manage stock in a warehouse. With these
methods, a company can optimize its stock management and gain additional
benefits for the company. Stock management is a crucial part of an ERP system
in a warehouse. It needs to be in place to manage the material flow and the
accuracy of the on-hand stock. This help keep the stock levels optimized for
delivering goods to customers accurately. (Muller, 2011).

The methods to control stock levels are typically based on different mathematical
models, which help find the most cost-effective order methods for the warehouse.
These methods only provide estimates and not perfectly accurate values, which
must be verified before the actual implementation. (Muller, 2011).

During the implementation, it is best to take slow, methodical steps and constantly
monitor the state of the method and if it is working as intended. On top of
monitoring, the methods must be updated because businesses are constantly
changing, affecting inventory management. In the next subchapters, I will go
through the theory of the chosen methods for this system. (Muller, 2011).

4.2.1 Fixed timeframe order method

The pre-determined stock order method is the oldest and the simplest currently
used method for warehouse inventory management. This method is based on
time, and the inventory levels are monitored in a given time period. This makes it
so that the ordering period stays constant, and the ordered quantity changes.
When monitoring the inventory levels and it is noticed that the level is not
sufficient enough to maintain operations until the next check, a replenishment
order is created. Small safety stocks are in place for the operations (Dobler &
Burt 1996).

When the orders are always handled in pre-determined timeframes and periods,
the orders from the same vendor can be collected into one shipment, which can
 22

also help cut shipping fees (Sakki, 2009). The pre-determined stock order
methods help the company reduce the amount of stock held in inventory, since
the orders are being made constantly and flow (Dobler & Burt 1996).

4.2.2 Economic Order Quantity (EOQ)

The Economic Order Quantity refers to the optimal batch size. This means that
the ordering- and warehousing costs emerging from the purchase are as low as
possible (Figure 1-4). EOQ is a fixed quantity order method in which the order
period changes, but the number of items in the order stays constant (Krajewski &
Ritzman 1999).

Figure 1-4. Illustration of the EOQ model (Alamgir, 2018).

When ordering larger batches, the storage costs go up, but the ordering costs
decrease. On the other hand, when the batch size is decreased, the storage costs
decrease, but in this case, the ordering frequency must grow, and the order costs
will grow as a result. The most economical batch size is illustrated in Figure 1-4
at the point where the total cost curve is at its lowest point.
 23

4.2.3 Fixed batch order method

In this method, a pre-determined ordering point triggers the need for an order.
Fixed batch orders differ from the previously mentioned EOQ in that the realistic
delay from the order to delivery is included in the monitoring. The efficiency of
this method comes from the ability to define accurate replenishment times for
different products. A trigger point for this order is the inventory level of a product.
A new order is created immediately when the inventory level goes to or lower
than the trigger point (Karrus, 2003).

The trigger point is defined by the observed or forecasted demand for the product,
the order-delivery delay, and the possible costs. The trigger point is also affected
by the frequency of inventory checking, which can be performed either constantly
or periodically. The trigger point helps to prevent possible out-of-stock scenarios;
the likelihood of one occurring is kept to reasonable levels through service level
and minimum cost targets (Karrus, 2003).

4.2.4 Min-max method

Figure 1-5. Min-max method illustration (Vermorel, 2014)

 24

4.3 Introduction to ERP-systems

The abbreviation ERP comes from the words Enterprise Resource Planning. ERP
systems operate electronically, and they aid in managing business processes. In
ERP systems, the different business sectors, such as sales, marketing, logistics
and finance, have all been integrated inside one system. This makes it easier to
find the business information and data in one place. Utilizing this integration,
companies can coordinate the information in different sectors much more
efficiently and make the daily operations run much more smoothly (Monk 2009).

Picture 5. General modules of the ERP system (Yarab A, 2021)

As picture 5 illustrates, the ERP system is a web of modules integrated with each
other to work as a whole system, enabling a more comprehensive array of
processes to be leveraged within the system (Yarab, A.).

The origin of ERP is said to have roots in 1960 when industrial production wanted
to develop a complete system for controlling inventory. Therefore, Material
Requirement Planning, abbreviation MRP, was created in the 1970s and was in
 25

development until the 1980s. Including the inventory actions, this MRP system
also contained the accounting, marketing, human-resources, and project
management processes. In the 1990s, the concept of ERP started to gain
recognition when the MRP system was utilized using computers in factories.
From then on out, the ERP system has developed to be a broad and versatile
tool, especially in the 21st century as internet usage started to become more
popular. Today's ERP systems are widely popular, operating globally and ranging
from small to large companies, with no preference for a particular line of business
(Sikder 2022).

An enterprise resource planning (ERP) system is an information technology

system that, as its name implies, performs resource management in an enterprise
between departments and different stakeholders. ERP integrable functions can
be divided into different functional areas, in other words, modules. The most
common and critical modules of these can be, for example, from a manufacturing
company's perspective: production, distribution, inventory management and
financial management.

The core principle of ERP systems is that the system can be tailored and adapted
to different sized companies and the varying needs of different industries. When
the ERP system is built to fully serve the needs of a company and unnecessary
features are eliminated, the benefit of the system as a supporting factor for
business and its processes is realized. An ERP system allows a company to
improve the flow of the company's internal and external processes, which as a
result, improves the finance and profitability of the company. The system can also
be used to continuously develop operations to be more profitable and efficient
(Kimberling, 2022).

The continuous data transfer between different departments and stakeholders,

enabled by the ERP system, is an endless process flow that enables the
maximum utilization of the company's resources, including the optimization of
work, machinery and production capacity resources. (Kimberling, 2022).
 26

The ERP system allows the company's operations to be forecasted and

monitored continuously, which helps maintain and improve the profitability of
operations. A logistics company's future material requirements, inventory
replenishment and customer orders can be predicted monthly. Predictability is an
essential tool to provide constant operations flow, especially in the manufacturing
industry. A complete and adaptive inventory management process is a key factor
for a reliable supply chain in the logistics industry. The whole logistics and supply
chain process can be planned and executed using an ERP system. (Kimberling,
2022).

4.4 The most common ERP-systems

ERP systems are complex and broad technical solutions. These systems'
development and maintenance are commonly outsourced to the more significant
software vendors. In small companies, the need for an automated and highly
modified system is often not present, and a more simplified and lighter system
can be used to manage operations. This system might be a product of their
development. In more prominent companies, an extensive ERP system is, in
most cases, necessary to provide a smooth operations flow.

Tailoring and implementing ERP systems are significant investments, whether a

system developed by a company itself or a system from a provider. Usually,
because of the complexity of these systems, companies tend to purchase a
solution or subscribe to a service-as-a-software, a browser-based solution, for a
system to be used in their organization. In this case, the system or service
provider is responsible for the system's creation, development, and maintenance
processes. ERP systems can be delivered as an out-of-the-box solution;
alternatively, the solution can be constructed to serve a company's unique needs
and requirements. (Kimberling, 2022).
 27

The number of ERP systems in 2022 is enormous, and the competition is fierce.
In 2022, the ERP-system providers' competitors can be considered to be
Microsoft, Oracle, and SAP (Kimberling, 2021).

Microsoft is a well-known and prominent provider of services for mid to large-

sized companies, offering solutions for various industries. Microsoft will be the
provider for this ERP system discussed in this thesis. Some providers focus
mainly on specific industries, for example, banking and finance. The ERP system
industry is dominated by these three providers, who compete with each other
every year.

4.5 Benefits of ERP-systems

In today's world, the markets are constantly changing and globalizing. This puts
immense pressure on companies to keep up with the changing and growing
environment and to adapt to new situations. Middle and large-sized companies
have to deal with the increasing burden of resource, process, and information
management. ERP systems facilitate more efficient and more effective means to
manage and monitor complex processes and manage internal and external
resources more methodically. These systems integrate people, information and
data, and business processes in one system, allowing the business to be more
flexible and structured in the way that the business operates.
The functions of ERP systems cover the logistics functions of the business,
inventory management, sales operations, pricing of products, production
processes and quality control. These systems might also include modules for
accounting and human resources. The accounting module enables the managing
of the financials of the company, and the human resources module is used for
managing the information of personnel. (H. Akkermans, P. Bogerd, E. Yücesan,
L. Van Wassenhove)

The most relevant benefits of the ERP systems could be, in addition to the
previously mentioned, enhanced efficiency and control, the rationalization of
inventory processes, the increased leveraging of vendors and suppliers, and also
 28

the enhanced planning of operations and analysis of business data (F. Alizai
2014). Internal integration offers various benefits to the operative side, and
external integration helps to streamline the flow of information with customers
and enhances the management of partnerships and collaboration (F. Alizai
2014). According to Alizai, an additional benefit of an ERP system is the
standardization and unification of business processes; this might take a toll on
the flexibility of the processes, but the unification is the result of choosing the best
practices in relation to their benefits. (F. Alizai 2014).

4.6 Challenges of ERP

There are some possible problems when adopting an ERP system. First is the
costliness of these systems, which can be significant because the costs will have
to cover the system itself, the process mapping and planning, the configuration
of the system and in addition to these, the testing, and the deployment of the
system (Abdul Z Khan, F. Mahmood, Bokhari R.).

The process of implementing a new ERP system is very time-consuming. These

projects might take anywhere from one to five years, and the inclusion of new
users and transferring all the necessary data consume a large number of
resources. The deployment of ERP systems in large and decentralized
organizations is inflexible, and the estimation of the necessity of the system for
the business is challenging (Azevedo P, Romão M, Rebelo E).

The fact that every company is different and unique makes it almost impossible
to match the system perfectly to the requests and demands of the company. For
future updating, overly customized systems tend to be too complex and heavy to
update because of the large number of details (Azevedo P, Romão M, Rebelo E).

Risks are involved in everything; unfortunately, this is also the case in ERP
systems. With an unknown or a new system comes a great deal of new
challenges, and the implementation of a new thing increases and risks that must
 29

be managed. There are several types of risks, and these risks can also be present
in ERP systems.

4.6.1 Personnel risks

The personnel play an essential role in the implementation of new operations.

The attitude of the personnel towards a new system must be accepting and open
before it is taken any further. The resistance to change has to be weeded out
before the implementation or right after it. If the resistance to change is not
eliminated, it can paralyze essential functions. The personnel must be trained
and educated about the system before the implementation so that the system can
be implemented as intended. The possible mistakes and errors made by the
personnel using the system could prove to be very costly and resource-
consuming (Azevedo P, Romão M, Rebelo E).

4.6.2 Event risks

Referred to as event risks are the consequences of, for example, the re-
organization of a company or a purchase. These events can also originate from
an outside action, such as confiscation or a leveraged buyout, which refers to an
acquisition that has been funded with a large amount of debt (Blake, D). The
event can be totally independent of the company's action, like a natural disaster
or a computer virus. These can cause substantial losses for a company if their
ERP system is breached and, for example, shut down. Cyber security risks are
an imminent problem for everyone using any electronic system, especially cloud-
based ones (Blake, D).

4.6.3 Risks of damage

Outside factors can cause damage. Examples of these risks include

transportation risks, sudden loss of life, which can affect the working ability of key
personnel, and information risks.
 30

These risks can arise, for example, from an ERP-system provider which has gone
through a rough year, and is likely to go bankrupt, which affects the deliverables
from the provider to the customer. In some extreme cases, cyber-attacks have
been an issue and are a massive risk to ERP systems. Cyber-attacks can
immobilize the system entirely and make it obsolete, causing massive damages
and losses of revenue to businesses (Blake, D).

4.7 Microsoft Dynamics 365

Microsoft is the largest computer software provider in the world. Microsoft is also
one of the leading providers of cloud computing services, computer, and online
services. Microsoft also provides consulting, product, and solution support
services and trains and certifies computer system integrators and developers.

Microsoft provides cloud-based solutions that provide customers with software,

services and content over the internet through shared computing resources
located in centralized data centres (Microsoft, 2020). One of the cloud-based
solutions of Microsoft is the ERP system Dynamics 365. In the next chapter, I will
introduce the Microsoft Dynamics 365 system.

Microsoft Dynamics 365 is a set of interconnected, modular Software-as-a-

service (SaaS) applications and services designed to transform and enable core
customers, employees, and business activities. SaaS applications refer to
platforms accessed through a web browser rather than an installed application
on a computer. This makes the update and fixes process easy as Microsoft
manages them, which are applied automatically. SaaS makes the application
more accessible since you can access it from a browser, which only requires an
internet connection (Microsoft, 2020).

Dynamics 365 is a cloud-based enterprise software platform that combines

Enterprise Resource Planning (ERP) and Customer Relationship Management
(CRM) capabilities with data integration, business logic and business processes
(Microsoft, 2022).
 31

In Dynamics 365, the ERP and CRM capabilities are broken down into several
apps, and with this design, users can start with what they need and grow at their
own pace. Users are enabled to add new apps and functionalities as and when
they need them.

Picture 6. Microsoft D365 Fundamentals study paths (Microsoft, 2021)

The critical elements of Dynamics 365 are to provide cloud-based, automated,

integrated, and intelligent system capabilities to efficiently connect different
business functions and make them more effective. Dynamics 365 is built on
Microsoft Azure, which is known for offering a trusted platform and a large
ecosystem of services. Microsoft Dynamics 365 also enables data distribution
with multiple platforms, such as Office 365 and Outlook (Microsoft, 2022).
From Picture 6, we can see that there are several different components of
Dynamics 365. This thesis will focus on the Finance and Operations (ERP) side
of things and, more accurately, the Supply Chain Management part (SCM).
 32

4.7.1 Dynamics 365 ERP solution

The focus of Dynamics ERP solutions lies in core accounting, manufacturing, and
the distribution needs of a company, but are not limited to only these. Dynamics
365 brings value through its' solutions by increasing automation, efficiency,
control of variables and the scalability of the system (Santos, 2020).
The Dynamics 365 ERP solutions have two main types: Dynamics 365 Business
Central and Dynamics 365 Finance & Operations.

Microsoft stated that the Dynamics 365 Business Central is a business

management solution for small to mid-sized organizations that automate and
streamlines business processes and helps the organization manage its' business
(Microsoft, 2022). According to Microsoft, highly adaptable and rich with features,
Business Central enables companies to manage their business, including
finance, manufacturing, sales, shipping, project management, services, and more
(Microsoft, 2022). Companies can easily add functionality relevant to the region
of operation, customized to support even highly specialized industries. Business
Central is fast to implement, easy to configure, and simply guides innovations in
product design, development, implementation, and usability (Microsoft, 2022).

The other primary solution type is Dynamics 365 Finance & Operations, an ERP
solution suited for large or diverse companies. Finance & Operations is primarily
used by companies or organizations which operate in multiple lines of business,
in international operations with multi-currency needs, or the organization has
complex discrete and process manufacturing procedures (Santos, 2020).
Dynamics 365 Finance & Operations solution includes Dynamics 365 Supply
Chain Management.

Picture 7 describes the features of the Dynamics 365 ERP solution in greater
detail. The features of the ERP solution include the following modules: Supply
Chain Management, commerce, human resources, project operations and the
shared features between modules.
 33

Picture 7. Microsoft Dynamics 365 ERP solution descriptions (Microsoft, 2021)

 34

Dynamics 365 Finance & Operations consists of Finance, Supply Chain

Management, Commerce, Human Resources and Project Operations modules.
Dynamics 365 Finance and Dynamics 365 Supply Chain Management are the
largest ones of the bunch. With Dynamics 365 Finance comes budgeting, project
management, financials, and accounting. Dynamics 365 Supply Chain
Management consists of stock management, master planning, manufacturing,
warehousing, and distribution (Microsoft, 2022). In this thesis, the focus is on the
Dynamics of Supply Chain Management.

4.7.2 Dynamics 365 CRM Solution

This paper focuses on Dynamics 365 Supply Chain Management, a part of the
ERP solution described in the previous sub-chapter. Still, this sub-chapter will
briefly present the Dynamics 365 CRM solution. Although the CRM applications
are partly integrated into the ERP solution as a whole, in this paper, only a general
description of the CRM applications will be given.
 35

Picture 8. Microsoft Dynamics 365 CRM solution descriptions (Microsoft, 2021)

Picture 8 describes the content of the Dynamics 365 CRM applications, and the
following features included are marking, sales, customer service, and field
service.

5 Needs assessment

When implementing a new system, needs and gaps between the business
processes and the acquired system have to be assessed. The definition of
 36

requirements is one of the most important and laborious steps in acquiring an

information system, as it directly impacts the final system.
The definition clearly states what required features the system should have.
Poorly implemented requirements specifications can lead to reduced system
benefits and additional costs. At the start of the project, participants may have
different and unrealistic expectations of the outcome. Different expectations can
only be overcome by discussion (Bieler, H).

The system requirements for the assessment can be divided into two categories:
operational and non-operational needs. Functional requirements refer to the
functions expected of the system and what kind of needs it has to fulfil. Non-
functional requirements refer to performance, such as response and uptime
(Bieler, H).

The needs assessment process consists of three parts. The first part is in which
the goals are identified. The first part's objective is the justification of the system's
needs and why it should be implemented. The new system should support the
current business needs (Bieler, H).

Picture 9. Needs assessment phases and basic steps

The second part of the assessment is analyzing and recognizing needs. This
phase is usually tricky since the different end-user groups have different needs.
For this reason, it is important to collect the needs and thoughts of all user groups
 37

and then meticulously choose the most important ones for the system as a whole
(Brace, W & Cheutet, V). The requirement assessment describes the current
state as accurately as possible. In this phase, the current system's performance
is evaluated, and the possibilities of developing the system are also considered.
If the system is not up to current standards, the decision might be made to acquire
a whole new system. In addition to the previously mentioned, the current
processes and problems of the system are identified. Also, when conducting the
requirement assessment, the partners and customers have to be considered, and
the new system's impact must be measured (Bieler, H).

The final part of the needs assessment is deciding which objectives and
requirements the demands are derived from. Unclear goals and needs are forged
into clear and precise system demands. The demands must be prioritized so that
the system can be configured to be as functional and smooth as possible for the
situation because all the needs cannot be filled completely. After the approval,
the process moves on to implementation (Brace, W & Cheutet, V).

5.1 Needs assessment of the target warehouse

The needs and requirements for implementing a system for the case company
were mapped and defined through interviews with key stakeholders and the
critical operating user groups. The need for a new system rose as the company
wanted to automate warehouse operations, reduce warehouse costs, keep the
warehouse running continuously, and gain visibility throughout the whole system.

The warehouse management system has to be able to operate in an international

environment and has to take into consideration the geographical location of the
warehouse. The warehouse will operate in Hungary and is connected to different
operational units worldwide. This helped the decision to implement Microsoft
Dynamics 365 since it is cloud-based and can be operated from anywhere.
 38

The need for the system to handle logistics operations was defined as the first
priority, and these operations are the ones this paper will focus on and how to
make Dynamics 365 Supply Chain Management work for them. These operations
include the inbound material operations, stock operations, and outbound
operations. Since the warehouse where the system will be implemented does not
have any system in place, the warehouse processes have to be defined and, from
there, built on the system itself. The system also needs to be able to manage
manual purchase orders, forecasts, planned purchase orders, sales orders,
intercompany orders, and transfer orders. The need for license plate or bar code
tracking is also present, and the system needs to be able to handle that.

6 Warehouse process mapping

A necessary part of an implementation process is the process mapping of the

wanted to-be processes. Without mapping the processes that will be changed
and altered, we cannot know how they will work in the future. Process mapping
helps to match the ERP standard capabilities with the actual processes and helps
find any possible gaps between the system functionality and the process. For
example, this could mean that we cannot just utilize the Dynamics 365 standard
functionalities and need some integrations with another system.

The warehouse to-be processes were mapped and designed to be as accurate

as possible, using flowcharts to illustrate the whole process and possible gaps in
the processes. In this chapter, the warehouse processes for the target warehouse
are mapped and illustrated as a flowchart. The flowcharts were created with
Microsoft Visio.

Picture 10 illustrates the warehouse processes on a general level, which gives a

view of the processes' structural flow and how the items move through the
warehouse. The later proposals are aimed at these three operation zones and
how they are configured to be operational in Dynamics 365 Supply Chain
Management. I will describe the warehouse processes in general and more
 39

straightforwardly to define the configuration needs and attributes required for the
system to match the business and operational needs of the warehouse.

Picture 10. Warehouse process flow

The general warehouse processes are divided into three different sections:
Inbound operations, which include receiving and quality assurance, stock
operations which include and outbound operations which include replenishment
and put-away; and outbound operations which include picking, packing, and
shipping of goods.

Once an order is received at the receiving area, a worker needs to scan the item
into the system so that the system knows that the order has been received. Some
vendors, especially if it is the very first order, the items go through a quality
inspection. Once the items clear the inbound process, they go to the stock
operations, where they are put to their designated places. Once the items are in
stock, they can be picked when a sales order is created. When picked, the items
go through to packing and the shipping area, from where they are shipped to a
customer or a different location in the organization, such as a different
warehouse.
 40

6.1 Inbound operations

The inbound operations for the warehouse are illustrated in Picture 11. The
flowchart shows the different processes of the everyday actions happening in the
warehouse and phases. The inbound processes are the first phase of the general
warehouse process goods flow.

Picture 11. Inbound operations flowchart.

The inbound material flow starts from a made purchase order to a vendor. The
vendor then delivers the goods to the receiving area of the warehouse, and a
worker scans the packages as received, and a license plate for the items will be
generated at this point. A quality control process will begin if the order is a first-
time order from a vendor or if it seems defective. The items in the order will be
investigated, and if the items are defected or damaged, a reclamation to the
supplier will be generated. The damaged goods will be either recycled, scrapped,
or sent back to the supplier, and then credit is requested. If the items are not
defective and in good condition, they will be received typically and put in stock.

6.2 Stock operations

The second part of the warehouse process flow is the stock operations. In Picture
12, the stock operations processes are illustrated as a flowchart. The flowchart
illustrates the stock operations from start to finish.
 41

Picture 12. Stock operations flowchart.

The process flow for stock operations is connected with forecasts and the set
safety stock for items. The flow starts from the query of stock amount, whether it
is replenished or not. If a stock quantity is available in a different warehouse, a
transfer order is created, and the items are ordered from or sent to a different
warehouse. If the transfer order is created, the order will be picked and packed
and then sent to another warehouse, or if the transfer order is an incoming order,
the receiving and put-to-location processes start.
Items to stock can also be produced in a different location inside the organization,
and in this case, a production order is created in the system and proceeds from
there.

If an item is not available to be produced or transferred from another warehouse,

a purchase order process is started, in which a purchase order is created in the
system.

6.3 Outbound operations

The final part of the operations is the outbound operations, and the outbound
operation process flow is illustrated in picture 13.
 42

Picture 13. Outbound operations flowchart.

Outbound operations flow through using the sales order information and its
connections. The orders are released to the warehouse when an order is created
in the system. Releasing orders to the warehouse creates a reservation of the
available item stock. If a stock is not available, the system needs to start the
procurement process of a transfer orders process if there is available stock in
other warehouses. Releasing orders will create work in the warehouse, which are
picking the individual items and packing the entire order. After the work is done
for the order, transportation is arranged for the goods to be shipped, and the
delivery will start to the customer or, if a transfer order, to a different warehouse
inside the organization.

7 Model for successful change management

Before we can start discussing implementing an ERP system or doing anything

that will impact people and current environments, we need to address the need
for a meaningful change management strategy. Successful change management
in an ERP implementation project is crucial. ERP implementations tend to change
the work descriptions and the environment of personnel. It is human nature to
resist change, and it is easy to settle for what has been done in the past or the
current situation. This human feat creates resistance to change, which can
tremendously impact the success of an organizational transformation project.
This is why change management should be carried out through the whole process
of an implementation project.
 43

In the next chapter, I will present Kotter's Model for successful change
management, the Eight Step Change Management Model, which was the chosen
method to follow during this project. The next chapter will explain the method to
understand better how change management should be carried out to enhance
the process and how it can substantially help follow through with an ERP-system
implementation. First, a brief introduction to John Kotter will be given to prove his
credibility as a leading author in the field of change management. Following that,
the Eight Step Change Management Model will be described in more detail.

7.1 John Kotter

An American economist, John Kotter, wrote an article in the Harvard Business

Review called "Leading change: Why Transformation Efforts Fail", which was
published in the spring of 95'. The article gained considerable popularity. This led
to Kotter authoring a book called "Leading Change," based on the article.

In a foreword of the book, Kotter said having discussions with people who read
his book, two reasons stood up as the most significant factors which made his
books so successful: "The list of regular and ordinary mistakes made by
organizations sparked epiphanies, and that the eight-step model was felt to be
very clear and something that organizations can really utilize". (Kotter 1996,
preface).

Kotter also states that he only quoted his own examples and ideas to support his
claims and did not cite anyone in his book (Kotter 1996, preface). This reflects
really well how significant of a person Kotter is in the field of change management.

7.2 Kotter's Eight Step Change Management Model

Kotter's model was born when he first investigated and researched what kind of
mistakes organizations make because of which transformation projects fail. From
 44

these mistakes, Kotter picked eight of the most prominent mistakes or flaws in
transformation projects and stated that these mistakes' impacts could be
mitigated. This requires preparation and will in advance before the mistake has
happened. (Kotter 1996, 14). From these mistakes, Kotter created the Eight Step
Change Management Model, in which he provides means to make permanent
and functional organizational changes. The goal of the model is to aid
organizations embrace and successfully implementing change (Kotter 1996, 18).
The next part explains the Eight Step Model for a deeper understanding of the
method.

The eight steps that will be explained are:

- Create a sense of urgency

- Build a guiding coalition (build a team)
- Form a strategic vision and initiatives
- Communicate the change vision
- Enable action by removing barriers
- Generate short-term wins
- Sustain acceleration
- Institute change (Kotter 2022).

These steps will be presented in this order, starting from the first one: Create a
sense of urgency.

7.2.1 Step 1: Create a sense of urgency

To implement transformation projects in an organization, a significant part of the

personnel has to be made to believe in the importance of the transformation and
to work together towards making the transition. If the importance of the
transformation is not emphasized enough, shortly after starting, the processes
might fade rapidly as there is not enough support from the personnel. (Kotter
1996, 31–32). It is easy for personnel to settle for the current situation, and the
power of settling is never to be underestimated (Kotter 1996, 37).
 45

Emphasizing the necessity of transformation requires upping the work efforts of

several people because the starting push for transformation has to start
somewhere. For this reason, the burden of this usually lands on the management.
If enough people believe in the transformation, the majority's mood for change
cannot decrease significantly. (Kotter, 1996, 32).

7.2.2 Building a guiding coalition

Because of the difficulty of taming the resistance to change of tens or hundreds

of people alone, it makes sense to establish a team responsible for the change,
with all members behind the process one hundred per cent and understanding
the importance. Even though history knows many success stories personified by
a strong personality, such as Steve Jobs and Apple, or Jeff Bezos and Amazon,
such an understanding is however extremely dangerous, according to Kotter
(Kotter 1996,45). One person creates no real success story but a functional team
of trusting people who believe in the cause. Team members must also have a
common goal to strive for and enough credibility among the personnel to lead the
change as efficiently as possible. (Kotter 1996, 46-48.)

7.2.3 Form a strategic vision and initiatives

Especially in sports, it is easy to find examples of a team having high-performing

individuals, but the teamwork is not efficient. A weaker team might win because
of their trust in their tactics. Both teams have winning in mind, but only the other
team realized the importance of teamwork. That is why a successful
transformation project needs more than just a vision. It needs a great strategy
and an action plan. If the focus is too much on what the state of the organization
would be in the future and not enough on how to achieve the state, the progress
of the transformation might be hindered, and it might even be harmful for the
organization. (Kotter 1996, 57-58.)
 46

Kotter states that strategy is not created from nothing, it needs a strong vision.
Just stating that "Our goal is to win gold" is not enough. A great vision is a kind
which will make people take action, even against their own benefit, so that the
organization can achieve the goal of its vision (Kotter 1996, 61).

7.2.4 Communicate the change vision

Organizations should communicate their vision so that all their personnel would
understand and internalize it and would genuinely like to implement it.
Unfortunately, internalizing the vision for staff, the size of hundreds or even
thousands is not an easy task. (Kotter 1996, 74).

There are precisely the same challenges in communicating change, as in any

communication and especially in getting the message across to as many people
as possible, in such a way that it would be digested and understood. In Kotter's
opinion, when communicating the change vision, it is essential that
communication between management and subordinates is mutual. The
personnel need to be offered the opportunity to make a change and to be heard,
but the words and actions of management must also match. Even excellent
change communication might fail if the actions don't match the words. For
example, if middle management tells the staff that if all succeed in making work
more efficient with the help of a new organizational model, the company then has
the opportunity to offer better personnel benefits, but at the same time, the CEO
is renovating his office with tens of thousands of luxuries. (Kotter 1996, 81–85).

7.2.5 Enable action by removing barriers

While studying the change processes of numerous companies, Kotter has

noticed that many companies make the mistake of stopping the change process
when the change vision has been communicated. In reality, the change process
is not yet ready, and the desired results of the vision are not achieved. The reason
for this is that the company's operations still have so much to develop that the
staff does not have the opportunity to realize the new vision. Kotter has listed the
 47

four most important things, the errors or shortcomings, which must be addressed,
or else the companies will not be able to achieve the results according to the
change vision. These are structures, skills, systems and managers. (Kotter 1996,
88–89.)

Structural obstacles are, for example, getting stuck in the wrong organizational
model or the extra rush and stress due to the lack of employees. This significantly
decreases their effectiveness when continued for a long time (Kotter 1996, 89).
Companies where change projects want to be successful should also find out
how much training or coaching the personnel needs, for example, to manage new
work tasks that have changed significantly due to the change project. The training
should also be of the right kind, i.e., efficient and cost-effective, and the kind of
activity that the staff will undoubtedly internalize. (Kotter 1996, 92).

7.2.6 Generate short-term wins

In the sixth point of Kotter's model, it is recommended to ensure that the change
process produces several short-term wins. Although Kotter emphasizes that the
order of progression is essential in his process, in reality, the sixth point
results should already be visible, even if the measures of the first five points are
still in progress. (Kotter 1996, 20, 105.) Short-term successes have several
significant benefits for the change process. Immediate feedback on successes
improves staff motivation and work morale. Successes can quickly turn those who
initially opposed the change to its side when they receive praise for superior
performance. At the same time, it is more difficult for them to justify why the
change does not work if concrete evidence supporting the process can be shown,
such as improved sales numbers. (Kotter 1996, 101–113.)

Encouraging results right at the beginning of the change process provide positive
signs for the personnel and the supervisors, and company management leading
the process. The progress of the change vision is easier to follow if the process
produces data from the decency of the ideas straight from the beginning. Based
on these, it is easier to update the strategy when the organization is still in the
 48

initial stages of the entire process. Change processes are usually costly;
therefore, successes play an essential role in bringing about reforms to be
justified to the company management and are more likely to be carried through.
(Kotter 1996, 101–113.)

7.2.7 Sustain acceleration

Around 400 BC., the famous ancient philosopher Heraclitus stated that
"Everything changes" and "Nothing is permanent except change" (Mark 2010).
This saying is still true today. Since change is continuous, it is also not a clever
idea to celebrate victories too early in change processes. If, for example, one of
the most critical employees who drove the change leaves the company, or if a
company leader "blinded" by short-term profits stops developing processes in the
company, it could have devastating effects. In this case, all the old problems that
caused resistance to change may start again to slow down the company's
success. (Kotter 1996, 116.)

An example of such a situation is when a major organizational change is

implemented in one company. Especially after completing a significant and long-
lasting process, it would be natural to be satisfied with what has been achieved
and to reward the personnel with expensive parties. However, one should
understand that when one process is done, another one is just starting. The
number of changes is increasing rather than decreasing. (Kotter 1996, 117).
When there have been visible successes in the change process, the force of
change should be maintained by implementing more reforms. According to
Kotter, this is achieved by actively developing and training personnel, letting the
lower levels of the hierarchy handle change management independently, and
renewing or eliminating old processes. (Kotter 1996.)

7.2.8 Institute change

In his eight-point model, Kotter does not limit the review period to only change
projects lasting months or a few years. Still, he has to offer tips also for decades
 49

to come, for example, when companies are preparing for the CEO's retirement.
In almost all companies, at some point, it comes up that the operating culture that
has been formed over the years should be renewed, and at the same time, some
of the values that have prevailed in the company even for several years should
be removed. Since such changes do not happen instantly, company culture is
often the last thing to be renewed in the company's change processes. (Kotter
1996, 136.) Kotter states that change processes often start with a change in
operating methods and attitudes so that the company starts producing better
services and products. Still, the changes in the company culture do not take root
until the end of the change processes (Kotter 1996, 137).

Kotter says that new operating methods can only take root in the company culture
when they have been found to be better than the old ones and precise results
have been obtained. It is also good to understand that giving up old attitudes and
norms may be very difficult for some employees. According to Kotter, they need
to have an open discussion with them so they, too, eventually notice the
usefulness of new ways of working. Sometimes even this is not enough, and a
culture change may require the dismissal or retirement of key persons. (Kotter
1996, 137.)

8 System implementation: Dynamics 365 Supply Chain

Management

Implementing Microsoft Dynamics 365 might be a challenging task. With its

robust and broad capability, it has the power to transform a business. On the
other hand, it is easy to be overwhelmed by the flexibility of the software and fail
to translate the technology into a successful transformation (Kimberling, 2019).

According to Kimberling, an unfortunate aspect of Microsoft D365 initiatives is the

failure of many organizations (and their consultants) to reach that ideal state of a
complex digital transformation. These initiatives are peppered with landmines
 50

and risks (Kimberling, 2019). Kimberling also states that there are three stages
of a Dynamics 365 digital transformation:

1. Project inception. In which the software is selected, and the

implementation is ready to begin. The project either never goes live with
the new technology, or it is an unmitigated failure (Kimberling, 2019)

2. The implementation is completed, but it's usually just for a fraction of the
expected technical functionality, scope, and benefits (Kimberling, 2019).

3. A complete digital and business transformation is complete. Full technical

capabilities are realized, business processes are optimized, and the
organization is aligned with the future state. Most importantly, business
benefits and a positive return on investment are realized (Kimberling,
2019).

Implementing Dynamics 365 Supply Chain Management in a new warehouse

requires different parameters and configurations to operate appropriately and
operate within the range of business process needs. Next, I will go through the
necessary parameters and configurations for the warehouse to be operational
and to match the target company's requirements using Dynamics 365 Supply
Chain Management.

8.1 Warehouse parameters

There are many different and flexible ways to define warehouse layouts to meet
ever-changing requirements and needs. In Dynamics 365 Supply Chain
Management, the Warehouse Management System (WMS) provides the tools for
defining the layout.

With WMS, it is possible to establish high-priority and low-priority placement of

products to serve the optimal warehouse layout. The WMS establishes the
division of the warehouse into zones to better serve different storage needs, such
 51

as the need for a low-temperature zone for goods such as frozen berries
(Microsoft, 2021).

First, the general warehouse parameters must be set up before the inbound and
outbound warehouse transactions can be performed. The following parameters
for a warehouse should be set to have an operational supply chain management
system in a warehouse: to create warehouses and sites, products, locations,
license plates, inventory adjustments, work, warehouse mobile devices, inventory
status and warehouse processes (Microsoft, 2021).

When creating a warehouse in Dynamics 365, and since warehouses are the
storage place for goods and materials, high-priority and low-priority areas or
zones can be established for the placement of goods. First, in the system, the
warehouse can be divided into zones to fill the different storage needs, like
different temperature requirements. After the warehouse is divided into different
zones, we now specify the warehouse locations like the site, aisle, rack, shelf,
and bin position. (Microsoft, 2021).

Picture 14. Dynamics 365 warehouse configuration page.

 52

When creating a new warehouse, navigate to Inventory management, Setup,

Inventory breakdown and Warehouses, click new and fill in the information.

The "Site" tab refers to a grouping of business resources, such as warehouses

and production units, which share interrelated transactions, are located in the
exact geographic location, and belong to a single legal entity.

Picture 15. Dynamics 365 site creation page.

Sites can be created by navigating to Inventory management, then Setup,

Inventory breakdown and then sites. Click new and fill in the respective name and
time zone. Addresses for the sites can also be given.
 53

Picture 16. Dynamics 365 warehouse management parameters configuration

page.

The warehouse parameters consist of many types of information to be provided

to the system. The most important ones to provide to get the warehouse up and
running are the Location profiles, Location types, and the Wave processing fields.
Location profiles are mandatory for the setup of warehouse locations.
 54

Picture 17. Dynamics 365 location profile license plate tracking setup page.

Location profiles control the behaviour of locations in a warehouse management-

enabled warehouse. One of the needs for the case company was to enable
license plate tracking for items, and from the Location profile setup, it is possible
and necessary. To set up location profiles with the license plate tracking for these
locations, navigate to the Warehouse management module, then Setup,
Warehouse, then Location profiles, then select "New", then enable the "Use
license plate tracking".

The location parameter refers to where the items are stored and where items can
be picked from in a warehouse. The information for location parameters includes
the size of the location, such as height, width and depth, the aisle, rack and shelf
in the warehouse and the location type, for example, if it is a picking location or
an inbound dock (Microsoft, 2021).

Picture 18. Dynamics 365 locations configuration page.

 55

Locations in the system are created from the Warehouse management module
and go to Setup, Warehouse and then Locations. The format of the locations can
be personalized to preferences, and they can include the aisle, rack, shelf, and
bin numbers.

License plates can be considered as an inventory tracking tool. License plates

can be embedded in barcodes that can be assigned to a specific pallet, location,
work machine, etc. These license plates help track the movement of the items in
the warehouse and make them easier to locate (Microsoft, 2021).
The inventory adjustment is used for adjusting on-hand inventory or inventory
transactions.

Picture 19. Dynamics 365 license plate configuration page.

In Dynamics 365, the license plates are created by going into the Warehouse
management module, and then Setup, Warehouse and then license plates.

8.2 Configuring the core warehouse processes

A big part of a warehouse's operational success is the daily processes that must
be defined. The warehouse processes are linked to the business requirements,
which makes them a significant contributor to the success of a business. In
Dynamics 365 Supply Chain Management, the essential components that must
be configured for warehouse processes are wave templates, work templates, and
location directives (Microsoft, 2021).
 56

Before going into wave templates, I must explain what a wave is. A wave refers
to group orders that are similar in nature, which is grouped together and make
short intervals for picking the items. In other words, a wave contains orders with
some similar property that one wants to release in the warehouse for picking
simultaneously, for example, cluster picking (Microsoft, 2021).

8.2.1 Wave templates

Before wave templates can be defined, wave process methods must be

configured in the system. The function of the wave process method is to break
down an eligible pool of orders into a subset for orders that can be managed
effectively across the picking, packing and shipping activities.

Picture 20. Dynamics 365 wave process method creation page.

The wave process methods can be created by navigating to the Warehouse

management module, from there to Setup, Waves and Wave process methods.
The system provides the wave process methods by clicking the regenerate
methods button, but they can also be edited (Microsoft, 2021).

Wave templates are used to automatically or manually manage the different types
of waves. When a wave is processed, work is created for the operations team to
be performed (Microsoft, 2021).
 57

When setting up wave templates, the following needs to be specified. The site
and warehouse for which the template will create work for. The order in which the
templates will be evaluated. The sequence in which the templates are matched
to released lines on sales orders, production orders, and Kanban's. When a line
is released, the system applies the first wave template that the line meets the
criteria for. The broader the criteria, the more likely it is for a line to meet the
criteria, so you should put the templates with the most specific criteria at the top
of the list. Also, the actions for each of the templates must be specified (Microsoft,
2021)

Picture 21. Dynamics 365 wave template creation page

When creating a wave template, navigate to Warehouse management module,

Setup, Waves and Wave templates. Click new to create a new template. Select
from the Wave template type menu one of the following options: Shipping,
Production orders or Kanban. On the Wave template name and description fields,
select the created site and warehouse for which the template will create waves
and work (Microsoft, 2021).

What happens in a wave is dictated by the Wave Templates, and it might be

required to create many different templates to match all the different situations
that may occur. An example is that a wave template for orders might need to be
 58

created because the orders in a specific wave require special handling or

attention (Microsoft, 2021).

8.2.2 Work templates

Work templates are used for processing and creating warehouse work at various
stages in the warehouse management process. A work template should be
defined as pick and put in the system. For the following warehouse activities, a
working template can be created (Microsoft, 2021):

• Inbound transactions
• Picking
• Production
• Inventory movement and inventory transfers
• Replenishment

To create a work template, navigate to the Warehouse management module,

Setup, Work and Work templates. In the Work order type field, the specific
warehouse transaction has to be selected, which refers to the transaction for
which a work template needs to be created. Click new. In the Work template code
field, a unique ID for the template is provided. If the work creation process has to
be automated when a wave is released, the "Automatically process" check box
must be checked (Microsoft, 2021).
 59

Picture 22. Dynamics 365 work template creation page.

Work templates are essential for defining warehouse management work

processes. They define the work to be performed and how it should be performed.
In the templates, the location directives can be linked as a directive code, which
defines the place where the work is conducted. Work templates include queries
that define the terms for the work. Each template has at least one picking work
phase, and one put work phase to drive the on-hand inventory from one location
to another (Microsoft, 2021).

8.2.3 Location directives

As the name implies, location directives are used to guide work events to their
matching warehouse locations. They define the place for the place of picking and
put. As an example, for a sales order transaction, the location directive will tell
where the items will be picked and where the items will be put. The location
directives can be used to do the following tasks:

• Incoming items put away

• Pick and stage outbound transactions
• Pick and put materials for production
• Location replenishment
 60

Picture 23. Dynamics 365 location directives creation page.

When creating Location directives, navigate to the Warehouse management

module, Setup and Location directives. In the Work order type field, specify the
type of inventory transaction for which the location directive is created. Click new
in the Location directives tab and create a new directive and give the details for
the following fields (Microsoft, 2021):

• Sequence number – Determines the sequence for processing of the

location directive for a given work type.
• Name – Determine a name for the location directive.
• Work type – Determines the type of work to be performed. Available work
types are based on the type of inventory transactions selected.
• Site – Determines the site in which the work should be completed.
• Warehouse – Determines the warehouse location for the work to be
completed in.
• Directive code – Determines the association to a work template.

8.2.4 Concluding thoughts on implementation

These are the mentioned necessary configurations of Dynamics 365 Supply

Chain Management to get a system up and running for inbound, outbound, and
stock operations. With these configurations and settings, a warehouse can run
 61

its daily operations using a Warehouse Management-controlled Dynamics 365

solution (Microsoft, 2021).

9 Conclusion

This thesis aimed to elaborate on the necessary components for configurations

to implement Dynamics 365 Supply Chain Management in a new warehouse:
wave templates, work templates, and location directives. The components are
supported by necessary parameters, which create warehouses and sites,
products, locations, license plates, inventory adjustments, work, warehouse
mobile devices, inventory status and warehouse processes. Also, the importance
of a successful change management method during an ERP implementation was
brought up in this thesis. Change management is one of the most crucial parts of
a digital transformation process.

The research for this paper was done by studying relevant literature, with
interviews and working alongside experts in the field of Dynamics 365. As I have
just started working in this field, all the details of implementation projects and
Dynamics 365 are not perfected.

The research was meant to get a general overview of the subject and to provide
a general guide for Dynamics 365 Supply Chain Management implementation in
a new warehouse.

For myself, to better understand implementation projects and Dynamics 365,

further studies have to be conducted, and further research is needed to get a
deeper understanding of the Dynamics 365 system.

By working on the implementation project team and studying relevant literature, I

have made a generic working guide for implementing Dynamics 365 for a new
warehouse.
 62

Working on the thesis was challenging and exciting. Working with a real project
team was very educational and meaningful. During the project, I encountered
many things that could not be studied in books. During the project, the need to
work together was highlighted in many situations. Working together with a group
of knowledgeable people was a cornerstone for the research and this project. The
project team included expert consultants in the field of Dynamics 365 Supply
Chain Management and project management. During the writing process of this
thesis, I encountered challenges, especially in narrowing down the most
meaningful elements of the implementation of Dynamics 365 Supply Chain
Management and the aspect of implementing successful change management.

The outcome of this thesis is a general guideline for someone who is new to
warehousing, ERP systems and Microsoft Dynamics 365 to have a general idea
of how to implement Dynamics 365 Supply Chain Management and what to
consider when doing so. This thesis leans heavily on relevant literature in the
field, and some of my thoughts and ideas were also brought up since I have some
knowledge in the field of implementation.

The process of the thesis was meant to enhance my professional capabilities

during this kind of project and to support the things I have learned during my
industrial engineering studies. My interest in projects like this has grown during
the writing process of this paper.

9.1 Evaluation of the thesis

The research questions presented in chapter 1.4 were answered according to the
relevant literature and information currently available and to the best of my
abilities. The questions answered were:

• What are the benefits, challenges, and risks of an ERP system?

• What are the critical day-to-day processes of the case warehouse?
• What are some of the necessary means and methods to carry out an ERP
implementation project?
 63

• What are the mandatory configurations in the specific ERP system to get
the warehouse up and running?
• How to successfully implement the Microsoft ERP system, using examples
from the system interface?

I firmly believe if one were to do a thesis on this subject, with the exact instructions
given, they would come to the same conclusion as what has been described in
this paper.

9.2 Final thoughts of the paper

When starting this project, I had set four goals for the paper:

1. The paper should help me advance my knowledge on the topic of

Dynamics 365 Supply Chain Management
2. Use the most relevant information and expertise on hand, such as fellow
consultants and system architects
3. Create a paper that would help anyone to gain knowledge on the subject
4. Manage to finish the paper on time.

With these goals set in the beginning, I felt like I had clear goals of what I wanted
to achieve and did achieve.

In writing this paper, I have gained a tremendous amount of knowledge on

Microsoft Dynamics 365 and more on writing a research paper and how to filter
relevant information for the specific subject. I also managed to finish the paper
on time, as I set strict time restrictions for myself in this project. During the
process, I also learned a lot of professional manners and how to operate with
given information and instructions.
 64

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