ERP vendors are providing built-in configuration tools to enable to customers to change the working of the out-of-the-box core system.  The basic differences between configuration and customization are:

• Configuration like organizational trees, cost/profit center structure setups, purchase approval rules, etc. is required to some extent before making the software work.  But customization always remains an option.
• Configuration is open up to all the customers, whereas customization varies for each individual customer in the level of efforts to capture market.
• The changes to configuration are entered as data in vendor-supplied data tables, whereas changes in customization require some programming and/or table structure changes.
• The effect of configuration changes are predictable, whereas the effect of customization is unpredictable, requiring the implementation team to spend considerable time on stress testing.
• Configuration changes can be easily upgraded to new software versions.  Though some customizations pass through upgrades, they require re-testing.  And if the customizations are more extensive, then the upgrades would overwrite them and they need manual re-implementation.

While customizing ERP packages can be quite cumbersome and expensive, they also provide opportunity for achieving excellence in specific areas of business process.

ERP packages are also suitable for ‘extensions’, i.e., they can be combined with third-party programs which perform reporting, archiving, and republishing, and also for transactional data captures (like tills, scanners, and RFIDs).  But ERP applications have a set of rules to control the creation or changing of data.

ERP system helps in effective interfaces of tasks which include:

• Connection of required software for accurate forecasting
• Integration of functional areas ensuring productivity, efficiency, and effective communication
• Design engineering
• Order tracking, right from acceptance till fulfillment
• Revenue cycle, right from invoice till cash receipt
• Management of inter-dependent complex processes
• Tracking of the triangular process of purchase orders, inventory receipts, and costing
• Tracking accounting tasks at a granular level

continue reading Enterprise Resource Planning (ERP) – part 5

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Hiring professional ERP consultants from outside would be the right choice and the most cost-effective way for implementing ERP systems.  These people are ERP vendors or third-party consulting companies, and their services is of three types – consulting, customization, and support.  Client companies also employ specialists of program management, business analysis, change management, or UAT to prioritize their business requirements during ERP implementation.  The length of ERP implementation depends upon many factors such as size of the business, extent of customization, number of modules, scope of the change, and willingness of customer to take ownership of the project.  The project is split into various phase-ins.  A typical ERP project can take around 14 months, requiring 150 consultants.  It could run to years for a multinational company.

Data migration is strategic to the success of ERP implementation, and requires the following steps:

1.  Identification of data to be migrated

2.  Determination of data migration timing

3.  Generation of data templates

4.  Freezing of tools for data migration

5.  Decision with regard to migration setups

6.  Decision on data archiving

Since ERP vendors have a standard business process package, problem arises when there is a business process mismatch, resulting in failure of ERP projects.  So, it becomes essential that a through analysis of present business process is performed by the organization and select that ERP vendor whose ERP modules represent a close match to that analysis.  Redesign of business process can be made later if necessary.  This redesign has caused some organizations to gain competitive advantage, while some have actually lost it.  Business process mismatch can be reduced by:

• linking of all current organizational processes to the strategy of the organization
• analyzing whether each process is effective in relation to its current related business capability
• understanding the currently implemented automated solutions

continue reading part 3