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Please see the attached file and read the pages to answer the 5 questions at the end. The assignment answer should be detailed in paragraph forms. You must write each question then answer it below, then write another question and answer it, in sequence. Grammar and spelling mistakes must be checked. Make sure you answer each question in a paragraph.

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DB DB Bristow & Dunaway - Process for Selecting an ERP System C Pr od or uct de io r n DB The purpose of this chapter is to understand why an enterprise selects an ERP, the ERP selection process, and the steps involved in executing the process. 1 41 CR 5 C pr Con O15 od fi uc r m tio n CR Niche market vendors are independent software vendors who have a unique and specific software application focus. Typically a niche market software vendor provides highly specialized applications for a particular business industry or function to satisfy specific customer needs. Value-Added Reseller (VAR) is a type of vendor that takes an existing product, and adds its own “value”, usually in the form an integrated software application product or complete “turnkey” solution. For example, an ERP vendor may sell the ERP software application and bundle in value-added services, such as additional implementation support, training delivery, or customized programming just to name a few. In re dep qu e ire nd m en en t t 3.2 Basic Concepts and Definitions Po M s IG re t go O ce o ip ds ts t p F-53 ay m en CR B CR Ca s pu t ut n nu es Preliminary Version - send comments to pml@hec.ca h In ve s Readings on Enterprise Resource Planning tm en ts DB GR /IR DB Po s R Ac c. Pa y. C Request for Information (RFI) is a formal request to the ERP vendor to acquire information about the ERP software solution. A typical RFI would request a “fit” response to the company’s requirements, specific criteria questions relating to the company’s business, and the ERP software product information. 40 Po M st IRO in vo ice CR /IR 40 6 Go od sr ec ei p t Request for Proposal, most often referenced as RFP, describes a feature and function list of how the company will operate or function ( Umble, Haft, & Umble, 2003). Additionally, any applicable vendor instructions, terms and conditions, and forms to complete are included in the RFP. The complete RFP is sent to the ERP vendor for a response. GR at CR m Ra w DB In ve so nto ld ry pr ch od an uc ge t R co aw ns m um ate pt ria io l n sa Do le m re es ve tic nu es 40 The software acquisition process has several terms that are standard across industries and are common to any procurement process. Listed below are a few of these terms and how they are defined. Several concepts and definitions are important to facilitate understanding of the process for selecting an ERP system. Many of the terms are typical of any software procurement process that is undertaken, regardless of the type of application software. This by no means is a comprehensive list of terms, but are concepts and definitions most often used in the ERP software acquisition process. The ERP module is a specific application encompassing all the features of a particular business function which may include, but is not limited to, transactions, data exchange, reports, workflow, and processes within the ERP system. For example, the accounts payable module’s purpose is to process the value of goods and services acquired by a company that have not yet been paid for. Functions such as create a vendor invoice, process payments to a vendor, process vendor tax statements, and maintain a list of vendors are all common activities found in this type of module. 5 Pu r or cha de se r M pu Co E5 rc nv 9N ha er se t to or de r Ex M ec D ut 01 e M RP Cr ea VL te 01 de N liv er y In ve st DB m An ERP acquisition is considered a high expenditure activity that consumes a significant portion of a company’s capital budget. Why? If the purchase is made and turns out not to be a good fit, it can adversely affect a company’s business in many different areas and on many different levels (Verville, Bernadas, & Halingten, 2005). More importantly, selecting an inappropriate ERP system is a major reason why most ERP implementations fail (Lall & Teyarachakul, 2006). Hence, the wrong ERP selection can severely jeopardize a company’s operational performance and its very existence (Lindley, Topping, & Lindley, 2008). Therefore, making the right choice during ERP software selection can carry a high level of risk and uncertainty for a company. Whether a company size is small, medium, or large the process for selecting an ERP system can be tailored to a company’s specific business objectives and goals. A wide variety of ERP systems have been developed to enable companies to become more competitive by integrating almost all business functions that use industry best practices onto a common single database. Thus, the process can be tedious, lengthy, and must be conducted with great care. 30 en ts 3.1 Introduction DB 41 3 Ca sh CR There are several types of vendors that provide ERP software applications and are sometimes characterized as best of breed or niche market software application vendors. Best of breed vendors are coined the best software applications of their type. These types of applications are typically isolated to one process or part of a process (Magal & Word, 2009). Often companies and organizations want to purchase software from different vendors to obtain the best solution for each application area; for example, a supply chain package from one vendor and a financial package from another. While ERP vendors provide a wealth of applications for the enterprise and advertise their integrated system as the superior solution, every module may not be bestof-breed. DB In v ch en DB an tor ge y CR Susan E. Bristow, Mary M. Dunaway (University of Arkansas) CR o DB raw ns. DB Fi pr nis od he uc d t Chapter 3 : Process for Selecting an ERP System M pr od Re D0 l uc e a 7 tio se pr Ma CO od ss 4 uc re 1 tio lea n se or de r R m Raw at er ia C l CR Fi pr nis h o DB d ed uc ts CR P ut o ro DB utp d. R 41 0 Ac c. Pa y. C Fa c pr tory od o uc ut tio pu n t CR Re ve nu e DB ec . DB CR Ac c. R CHAPTER 3 33 DB DB M pr od Re D0 l uc e a 7 tio se pr Ma CO od ss 4 uc re 1 tio lea n se or de r Pr od or uct de io r n 1 41 Proof of concept typically happens once the vendor list is narrowed down to two or three choices. It is a process where a script is provided to the vendor for one or more strategic business processes that the vendor must demonstrate. Scalability is an item or concept’s ability to adjust to increased requirements. 30 5 C pr Con O15 od fi uc r m tio n Conference Room Pilot (CRP) or boardroom pilot is often used to demonstrate a company’s business requirements with the potential ERP application. The CRP offers a way for the ERP vendor to demonstrate an understanding of a company’s requirements, and for the company to better understand the ERP system before signing a contract to purchase. Tailoring the ERP selection process allows a company to fit the tasks and activities to their unique business strategy, size, industry, infrastructure, environment, and resources. This flexibility helps ensure that strategic, operational, and tactical goals are met. By planning ERP software selection systematically and thoroughly, companies can substantially increase the likelihood that they will identify ERP software and vendors that genuinely meet their needs (Verville, Palanisamy, Bernas, & Halingten, 2007). In the upcoming sections we will discuss key business drivers to selecting an ERP system, and the selection process steps. M pu Co E5 rc nv 9N ha er se t to or de r Ex M ec D ut 01 e M RP R C CR Ca sh DB CR In ve st DB m en ts 41 3 CR o DB raw ns. CR DB CR Trade-off is the replacement of one item, idea, or concept for another of more or less equal value, particularly to affect a compromise. t 3.3.1 Identifying Key Business Drivers 40 6 Go od sr ec ei p Po s t p F-53 ay m en 40 Po M st IRO in vo ice R Ac c. Pa y. C DB CR CR B CR Ca s pu t ut n nu es Preliminary Version - send comments to pml@hec.ca h In ve s Readings on Enterprise Resource Planning tm en ts DB GR /IR In ve so nto ld ry pr ch od an uc ge t R co aw ns m um ate pt ria io l n CR GR DB Ra w m at Selecting an ERP system for implementation is not like going to a retail store and purchasing a computer application for your home computer, and it is not just another computer project (Kuiper, 1998). Therefore, it is a major business decision that requires much thought and planning. The lack of in-depth assessment, evaluation, and detail can cause major financial damage to a company, and a potentially detrimental shift in business processes. That is why software selection should be influenced by operational experts in the business, and not sa Do le m re es ve tic nu es What are the key business drivers for selecting an ERP system? Organizations have a variety of influences leading to a selection. A good portion of companies should expect to change or significantly upgrade their computer systems at least every five to seven years (Umble, et al., 2003). One key business driver is that an organization’s legacy systems could be out-dated and/or unsupported. The organization must decide to either upgrade the system if possible, or go with a completely new system. Often times the legacy system can no longer be technologically supported because of its age. Additionally, replacing the old system with a new system reduces cost (Kale, Banwail, & Laroiya, 2010). /IR 3.3 Tailoring the ERP Selection Process 40 Po M s IG re t go O ce o ip ds ts In re dep qu e ire nd m en en t t Software Maintenance Agreement (SMA) is a type of agreement between the software vendor provider and a company, whereby the vendor provides maintenance and support services for the specific software application. 5 Pu r or cha de se r Service Level Agreement (SLA) is a type of contract that describes the partner relationship between a software vendor provider and a company, usually defined in measureable terms to create a common understanding of services, priorities, and responsibilities. DB In v ch en DB an tor ge y Total Cost of Ownership (TCO) provides visibility of all costs associated with the acquisition of the ERP software solution. Usually these costs include the direct and indirect, maintenance, hardware, and any future cost related to the acquisition (Burns, 2007). Cr ea VL te 01 de N liv er y necessarily just technical gurus. This will help to ensure the way a company does business is personified in the new system. Outside expertise, which most companies use when selecting ERP software, should be brought in as well, as they can bring knowledge and understanding of current software offerings. Therefore, buying an ERP system means accepting the software vendor’s established interpretation of business process practices for a company’s way of doing business (Umble et al., 2003). A company typically accepts the ERP vendor’s assumptions, providing the opportunity to map or reengineer their business processes to conform to the ERP application. Consequently, a company should try to select and implement an ERP system that models its unique competitive strengths, while helping to overcome competitive weaknesses (Oden, Langenwalter, & Lucier, 1993 ; Hollocks, 2001). While 80-90% of a particular ERP application suite will be the same across different implementations, 10-20% will be different, and tailored to the specific needs of the corporate enterprise (Ptak & Schragenheim, 2004). Therefore, a company should concentrate on identifying its critical business needs, and the desired features and characteristics of the ERP system application suite. The ultimate goal should be to improve the business, not to implement software. DB Fi pr nis od he uc d t Request for Quote (RFQ), sometimes referred to as Invitation For Bid (IFB), is the standard business process for inviting vendors to bid for the application software. The RFQ helps a company leverage the ERP vendor selection process’ competitive nature to negotiate the best possible purchase deal. m Raw at er ia C l CR Fi pr nis h o DB d ed uc ts Bristow & Dunaway - Process for Selecting an ERP System CR P ut o ro DB utp d. R 41 0 Ac c. Pa y. C Fa c pr tory od o uc ut tio pu n t CR Re ve nu e DB ec . DB CR Ac c. R CHAPTER 3 34 DB DB Pr od or uct de io r n 41 1 M pr od Re D0 l uc e a 7 tio se pr Ma CO od ss 4 uc re 1 tio lea n se or de r R C CR 5 C pr Con O15 od fi uc r m tio n • Increase sales capabilities 30 Ca sh DB en ts • Ability to expand product categories across multiple brands CR In ve st DB m • Rewire the organization for growth • Drive down costs without compromising quality • Support existing processes, e.g. manufacturing, purchasing, supply chain planning Competitiveness is an additional key business driver for selection of an ERP system. Businesses are in a fight to maintain competitiveness or, more aspiringly, to beat out competition in their respective industry. With the selection of an ERP system, cost savings can be discovered in the supply chain, efficiencies can be created in regards to customer service, buyer-seller transactions, inventory management, and effective decisions are more likely to be made with real time data delivered from an ERP system (Lollar, Beheshti, & Whitlow, 2010). • Enable the global landscape to quickly and effectively respond to evolving trade and supplier structures • Support future integration of acquisitions and reorganizations • Provide greater consistency of reporting and control • Order management improvements • Standardize and speed up manufacturing processes The decision to purchase commercial-off-the-shelve (COTS) ERP software or customized enterprise resource planning software is a significant key business driver. There is a cost trade-off that must be considered. Does the company want a plain vanilla configuration that cannot be easily tailored to the business, taken out of the box, and adopted? Or, does the company want to make a larger investment in customized ERP software that can be more tailored to the business, its needs, and the processes it performs? The company can save money if it uses COTS ERP software, but sometimes extra investment is needed because of the company’s unique business requirements. When choosing to pursue a customized software option, it is important for the company to understand that the ERP software may need to be repaired or rewritten, as periodic updates occur. The company will incur significant ongoing costs that should be considered before making a customized solution commitment. • Reduce inventory M pu Co E5 rc nv 9N ha er se t to or de r Ex M ec D ut 01 e M RP CR o DB raw ns. CR DB If a business is experiencing one or more of the below business conditions, an ERP system should strongly be considered for implementation. One or more business conditions may be a key business driver for the implementation. CR • Standardize HR Information • Transportation/logistics cost reduction • Standardization across the enterprise In re dep qu e ire nd m en en t t Po M s IG re t go O ce o ip ds ts • Dismantling inefficient legacy systems • Business performance • Customer responsiveness 40 /IR There are many different ways and steps to selecting an ERP system. Software Selection is a somewhat different process than developing an application. Most companies follow a similar process with some minor deviations here and there. However, not all organizations will follow a structured approach. Considerations for the kind of approach the company chooses are size of the company, urgency of time to select and implement, kind of business or industry, scale of the software, and available human and financial resources to name a few. Po s t p F-53 ay m en 40 Po M st IRO in vo ice CR B CR Ca s pu t ut n nu es Preliminary Version - send comments to pml@hec.ca h In ve s Readings on Enterprise Resource Planning tm en ts DB GR /IR DB In ve so nto ld ry pr ch od an uc ge t R Ac c. Pa y. C DB GR CR m Ra w DB R co aw ns m um ate pt ria io l n sa Do le m re es ve tic nu es 6 Go od sr ec ei p t 3.3.2 ERP Selection Process Steps at Since the Sarbanes-Oxley 2002 legislation in the United States, and legislations in other countries such as Canada, Japan, Germany, France, Italy, India, South Africa, Turkey, and the Netherlands have passed, businesses have been relying on ERP systems to help their fiscal compliance. An ERP system’s ability to enable the business to be Sarbanes-Oxley compliant is an important key business driver to consider. 5 • Information visibility 40 Pu r or cha de se r • On-time delivery improvements CR In v ch en DB an tor ge y 41 3 Cr ea VL te 01 de N liv er y An ERP system provides an audit trail of who processed the accounting transaction and when it was done, by attaching a unique document number where applicable. DB Fi pr nis od he uc d t Another key business driver during selection is the need to create efficiencies across functional areas of the business, or the need for silo processes to work together within one system. Verville and Halingten (2002) illustrate the importance of this point with their example of ESC, a utility company, having difficulty compiling the reports for the monthly closing cycle. The process took a great deal of time each month. Four general ledger systems were used, with separate modules for budgeting and accounts payable. To conduct the monthly reports, manual effort was made to collect and interpret the available information. This cumbersome existing process short changed the value-added analysis the finance and accounting departments could have been doing with a more efficient and integrated system. m Raw at er ia C l CR Fi pr nis h o DB d ed uc ts Bristow & Dunaway - Process for Selecting an ERP System CR P ut o ro DB utp d. R 41 0 Ac c. Pa y. C Fa c pr tory od o uc ut tio pu n t CR Re ve nu e DB ec . DB CR Ac c. R CHAPTER 3 35 DB DB 5 30 Selection of the ERP Selection Team 40 5 Pu r or cha de se r Goal requirements identified Po M s IG re t go O ce o ip ds ts Identify system functionality requirements 6 Go od sr ec ei p t Additional ERP selection process items to consider 40 t p F-53 ay m en CR B CR Ca s pu t ut n nu es Preliminary Version - send comments to pml@hec.ca h In ve s Readings on Enterprise Resource Planning tm en ts DB GR /IR DB Po s R Ac c. Pa y. C DB Po M st IRO in vo ice CR /IR 40 The ERP selection team is comprised of individuals from each of the functional areas of the business. The team made up of the best and brightest individuals who know the ins and outs of their departments. The team members will be cheerleaders for the positive change to the new enterprise system, leading the infusion of information sharing and integration. The reason behind the change to a new enterprise system, and the conditions that exist, will be communicated to the implementation team. The team will also need to understand what the end result should look like. GR at CR m Ra w DB In ve so nto ld ry pr ch od an uc ge t R co aw ns m um ate pt ria io l n Typical ERP Selection Process Steps Company’s resources identified and assessed In re dep qu e ire nd m en en t t sa Do le m re es ve tic nu es M pr od Re D0 l uc e a 7 tio se pr Ma CO od ss 4 uc re 1 tio lea n se or de r Pr od or uct de io r n 1 41 C pr Con O15 od fi uc r m tio n Typically, the ERP selection process can include the following steps (Relevant Business Solutions, 2010) : M pu Co E5 rc nv 9N ha er se t to or de r Ex M ec D ut 01 e M RP R C CR Ca sh DB en ts In ve st DB m CR How is Cisco’s selection process different than others? First, the time spent from inception to final selection was aggressive. Costs, time, and risks were not even considered until before meeting with the Board. Contract negotiations had already ...
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