The business world is used to hearing about the high price tag that often accompanies implementation of enterprise resource planning systems - and about the colossal failures of some of these projects. We hear less about the enormous amount of preparation that should go into these initiatives well before they get under way.
In September, Jonathan Gross, vice president and legal counsel for Pemeco Consulting, sat down with SupplyChainBrain editor in chief Russell Goodman and detailed the necessary steps of a successful preparation. The conversation took place in Montreal, at an ERP vendor / distribution industry conference sponsored by Technology Evaluation Centers.
Q: When should I consider an ERP implementation?
A: Gross: I want to frame my answer by saying implementation projects are huge organizational change endeavors. We're talking about regrading skills and reengineering business processes, and these are projects that often take seven, eight or nine months to complete. So the answer is, as early as possible. Most of our manufacturing and distribution clients bring us on to start planing projects five to eight months before implementation starts, and usually before the [vendor] selection project even begins.
Q: OK, that was the 'when' question, here's the 'what' question. What would you say are the tasks I need to turn my mind to ahead of time?
A: Gross: If I were manufacturer or distributor and I thought I'm going lose my best person in my warehousing department, how long would it take me to replace that person? If I were to lose them next week, what are the costs financially, what is the disruption to my operations, and how long to onboard someone? If we take that answer and say, well, you're going to lose your best person in each and every department for about 75 percent of their working time for the next five to eight months, how long would it take to replace them? The answer to the question is, you need to start planning how to backfill your organization as early as possible.
Q: So, the first step is "¦ ?
A: Gross: So we talk about building out ERP project teams; that's the first thing a company should turn its mind to. Who's going to be on the team, and how much time to commit to the project? So when we look at that, there are three layers. There's the steering committee - that's the executive level, your CEOs, CIOs, your operational directors, your chief operating officers - who are responsible for the strategic direction of the project. They can expect to spend four to six hours a week on the project. Not a big deal.
Then you have project manager, that's the next level. It straddles the executive part and the operating layers, the core team. The internal project manager is responsible for managing risk, making sure people are doing what they're supposed to be doing, on time and to acceptable quality. That's 100 percent of their working time. Who is that person going to be, what are the qualifications? You have to figure out who will backfill them in their day-to-day jobs. Then there's the "meat" - the core team. They will have to consume the most amount of a company's resources during implementation. We're talking about the purchasing manager, your finance and accounting manager, the shop floor manager, planning manager and so forth. They will be committed between 50 percent and 75 percent of the time. We need to first figure out who's going to be on the team and how to continue operating our company while they are committed to the project.
Q: That would be a bit of a shock to anyone who has already leaned out their staff over the last few years looking to reduce costs. How can I manage all of these operations given that so many folks and so much manpower are devoted to implementation?
A: Gross: That's a challenge, and there's no easy answer to this issue. But it's solvable and our clients do it. Let me preface my answer by saying that a lot of clients, manufacturers and distributors, suffered during the downturn. They are now ramping up again, but they still realize the importance of being lean from a human resources perspective and from a process perspective. That's one of the first questions they ask; how can we commit 50 to 75 percent of the time of our best people to these projects?
Q: What do you tell them?
A: Gross: There's only three ways to do it. One, you can ask people to work longer hours, but these projects are very onerous and they tend to burn people out. If we say you work on the project until noon or 1 p.m. and then have to do your day job until one in the morning, that's probably not palatable. Two, you can backfill, but again, backfilling means bringing on new people and having to train them. We were lean and liked being lean and now we have to change that; that's not palatable for many clients. The third alternative is to cross-train. That means taking tasks, the most repetitive tasks, the easiest ones, and downloading them from the core team person onto somebody else in the department.
A lot of people in high levels of the organization, in managerial levels, are doing tasks that would be more befitting someone more junior. So when we're brought on five to eight months early, what we do is chart the daily activities and tasks of core team members and prepare recommendations that say we need to train the subordinate on certain tasks and start downloading them so we're freeing up our core team members to undertake the ERP implementation.
What's important is to know that the implementation will only succeed if you get executive buy-in. The steering committee will say it's OK to take the best people from 50 to 75 percent of the time if they know that operations will continue.
Q: What about the consultants themselves? Could any portion of the work be allocated to them?
A: Gross: The easy answer is the consultants would love it because they get paid by the hour. The right answer for the organization is probably not. We're talking about a significant organizational change project, about restructuring operations and business processes, and the people in the best position to do that are people who have been working in the company day in and day out. They know the processes, work on the teams and know how things should be improved. Consultants may say they know the system, but they're never going to know your organization as well as your people do. So from a business reengineering perspective, the company's people should undertake those responsibilities. Consultants play an important role, but it's a support role. You shouldn't be asking your consultant to reengineer your processes for you. That's a recipe for failure.
With respect to training and institutionalization of knowledge, because your core team members are reengineering your business processes, because they are learning the system inside and out, they will become the go-to resource, the super-user for the organization, for future training and to deploy the system out to the rest of their department. If you let a consultant do that, that knowledge evaporates when their mandate ends. The goal is to institutionalize that knowledge.
Q: Who is ultimately responsible to ensure that the work comes in on time, on schedule, and within scope and budget, the consultant or the company?
A: Gross: That's a tricky one. The ultimate responsibility lies with company because it bears the burden to live with the system and the implementation long after the project ends. When a consulting firm comes in or a vendor comes in and says we're going to supply you with a project manager, well, in many cases, that manager coordinates the consultant's or vendor's people but doesn't perform that internal project management role I spoke about. The internal project manager's role has to coordinate with all the parties, and it's responsible for negotiating upwards with the steering committee.
Ultimately there are four key components of an effective internal project manager. Expertise: Has the manager done a lot of these projects before and know what it takes? Accountability: Is there skin in the game? When a service provider says they will supply project management, look at the contract. It may have language that says the client is responsible for successful delivery of the project. Third: Who is responsible for driving the project to a successful outcome? And fourth is authority, and that can only come from the steering committee. Is the project manager authorized to apply budgets and resources, such as people, to the project?
In summary, the internal project manager needs to be expert, be accountable, needs to be responsible and needs to be authorized.
Q: Will a company necessarily always have someone who can act as the internal project manager?
A: Gross: Most of our clients that are mid-sized manufacturers and distributors don't have an expert ERP implementation manager on staff. Why? They deal with these projects once a decade. So they designate someone to be the internal manager 100 percent of the time and supplement that with an external manager who has proven methodology and knows how to drive these projects to success. That external manager works to support the internal manager and the steering committee.
Keywords: ERP implementation, supply chain IT, supply chain management, supply chain solutions, implementation projects
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