ERP: Making It Happen

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2 ERP: Making It Happen The Implementers Guide to Success with Enterprise Resource Planning Thomas F. Wallace Michael H. Kremzar John Wiley & Sons, Inc. New York Chichester Weinheim Brisbane Singapore Toronto

3 Copyright 2001 by Thomas F. Wallace and Michael H. Kremzar. All rights reserved. Published by John Wiley & Sons, Inc. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) , fax (978) Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 605 Third Avenue, New York, NY , (212) , fax (212) , PERMREQ@WILEY.COM. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought. This title is available in print as ISBN For more information about Wiley products, visit our web site at

4 Contents Acknowledgments How to Use This Book vii xi PART I INTRODUCTION CHAPTER 1 Enterprise Resource Planning 3 CHAPTER 2 The Implementation Challenge 23 PART II COMPANY-WIDE IMPLEMENTATION CHAPTER 3 Company-Wide Implementation Overview 43 CHAPTER 4 Software 57 CHAPTER 5 Getting Ready 79 CHAPTER 6 Project Launch 109 iii

5 iv Contents CHAPTER 7 Initial Education 135 CHAPTER 8 Sales & Operations Planning 165 CHAPTER 9 Process Definition 179 CHAPTER 10 Data Integrity 195 CHAPTER 11 Going on the Air Basic ERP (Phase I) 219 CHAPTER 12 Going on the Air Supply Chain Integration (Phase II) 243 PART III QUICK-SLICE IMPLEMENTATION CHAPTER 13 Quick-Slice ERP Overview 271 CHAPTER 14 Quick-Slice ERP Implementation 281 PART IV BEYOND ERP IMPLEMENTATION CHAPTER 15 Operating ERP 305 CHAPTER 16 The Strategic Future (Phase III) 319 APPENDIX A The Fundamentals of Enterprise Resource Planning 333 APPENDIX B Plant Floor Organization Formats: Job Shop versus Flow Shop 341 APPENDIX C Sample Implementation Plan 347

6 Contents v APPENDIX D ERP Support Resources 349 Glossary 351 Index 365

8 Acknowledgments There are so many people to acknowledge when a book like this is complete. All of those who contributed to the earlier MRPII book certainly played a role, albeit indirect, in this new effort. Many others who are active in the field provided insight through their books, papers, or talks. For sake of brevity, we are going to focus on this book and hope that all of those who built the foundation of the earlier works will still feel ownership for this one. As the final draft developed, we asked a handful of people to help us with input on the quality of our effort. Their insightful feedback has been extremely important. Gary Abyad Chief Operating Officer Clopay Plastic Products Company Mike Friedman Director of Product Supply The Procter & Gamble Company Mike Landrigan Chief Financial Officer Innotek, Inc. Jerry Clement Principal The Oliver Wight Companies Chris Gray Principal Gray Research Jim Rice Leader, MIT Integrated Supply Management Program vii

9 viii Acknowledgments Travis Rushing Director, Commercial Products Product Supply The Procter & Gamble Company Bob Stahl Principal Partners In Excellence Our sincere thanks go to all of you for taking the time to pour over the manuscript and pouring your insights into comments sometimes painful but always helpful. Thanks also to the folks at the APICS Region III Officers Meeting in January, 2001 for their valuable feedback. There are two individuals who need to be highlighted since they did so much to pave the way for what all of us are doing today. The late Oliver Wight must be credited for developing most of the concepts in resource planning still in use today. Ollie certainly was an inspiration for much that has followed. Also, Darryl Landvater developed the Detailed MRPII Implementation Plan that was featured in the earlier works and now continues to be utilized in this book. We owe much to these two as well as many others at the Oliver Wight Companies who have done such good work in developing the widespread understanding of resource planning. In this book, we quote from an excellent work by Thomas H. Davenport, Mission Critical Realizing the Promise of Enterprise Systems. For those digging more deeply into issues related to enterprise-wide software, we highly recommend this book. Also, Professor Jeanne W. Ross, Center for Information Systems Research at MIT, shared her thoughts with us on ERP. Both of these sources were helpful as we wrestled with how best to present the software side of the ERP equation. We need to recognize our families for their support and comfort during this effort. Marilyn Kremzar has been putting up with the frustrations of living with Mike throughout his entire career with P&G and now during this book as well. Yes, Marilyn, Mike will retire one of these days! Tom acknowledges the enormous contributions of his wife of 38 years, Evelyn, in this and so many other projects during that time. She died during the writing of this book. Last, and most assuredly not least, we re deeply indebted to the users, the people in manufacturing companies who ve made resource planning work. The early implementers in particular displayed great

10 Acknowledgments ix vision and courage to persevere, to take two steps forward and then maybe one step back, to keep the faith and to make it happen. Thanks largely to them, a trial-and-error approach to implementing ERP is no longer necessary. Thomas F. Wallace Michael H. Kremzar Cincinnati, Ohio

12 How to Use This Book The intended audience for this book comes primarily from companies in two categories: Companies that recognize the need for better decision-making processes, enhanced coordination, and greater responsiveness both internally and within their extended supply chain Companies that have installed an enterprise-wide software system and now realize that they need to change their businesses processes to gain major benefits from their investment in software. The people who should read all or part of this book include: The executive in charge of the entire business unit (general manager, president, chief executive officer): Read at a minimum Chapters 1, 2, and 3 to understand the basic concepts of ERP and the scope of the project. It should prove helpful to read Chapter 8 on Sales & Operations Planning and Chapter 13 on an implementation approach called Quick Slice. Finish with Chapter 16 for some insight into the full potential of ERP, which is enormous. The chair of the executive steering committee (described in Chapter 6): Read all chapters. Members of the executive steering committee (described in Chapter 6): Read Chapters 1, 2, 5, 6, and 7 and the part of Chapter 11 that xi

13 xii How to Use This Book deals with implementing Sales & Operations Planning. Further, if implementation is being done on a Quick-Slice basis (defined in Chapter 2), they should read Chapters 13 and 14. Here also, Chapter 16 should prove to be of interest. All members of the ERP Project Team: Read all chapters. We prepared this book to be useful either as selective reading for those who need only specific pieces of information, or as a virtual checklist for those who need to know every step. Those of us who have been through ERP implementations with the Second Edition of this book have found that it was the book most often referred to. Even after the project is well underway, we suspect you ll probably find yourself opening this book and referring to specific subjects. Lastly, while this book does cover every aspect of implementing ERP, it does not tell you every step, every report, or every piece of data required. You will need more than this one book to do the entire project. Our job here has been to give you the working knowledge to know what needs to be done. Each company will design the details of the project to reflect its individual business, people, and challenges but the implementation path described here is for every company. Go make it happen!

14 PART I Introduction

ERP: Making It Happen

TEAMFLY ERP: Making It Happen The Implementers Guide to Success with Enterprise Resource Planning Thomas F. Wallace Michael H. Kremzar John Wiley & Sons, Inc. New York Chichester Weinheim Brisbane Singapore