Life-Cycle of ERP

By | May 30, 2018
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In the next chapter, technology and functioning of ERP will be discussed in detail. Before that, a sound knowledge on the lifecycle of ERP is essential so that an end-user, implementer, or a manager who uses ERP will find it easy to study and understand the different functions and capabilities of ERP. The life cycle of any ERP is similar to the normal software development life cycle (SDLC). The stages involved are designing, growth, maturity, and decline. In any company, and especially textile and apparel industries, implementing ERP will go through the following phases: evaluation, selection, implementation, and post-implementation phase.

Below chart shows the life cycle of ERP in different steps. Simple steps are given for better understanding of how ERP is implemented. Let us go through the steps to understand the lifecycle in a better way. The process of evaluating and selecting the right ERP will be discussed in later chapters once a better understanding is achieved on the functionality of ERP and the various modules and reports that can be generated from ERP.

Step 1: Decision to invest in ERP. The company decides to go for an ERP solution to cater to their needs. The needs can vary and could be anything discussed in previous sections. Based on the needs, the budget for implementing

ERP is allocated.

Figure 1.5 Life Cycle of ERP

Step 2: Evaluation of available ERP systems. This process has two key prerequisites: (a) initial planning by the management requiring ERP and (b) formation of a team to take charge of the implementation process and detailed analysis to be carried out by the team. In initial planning, various decisions need to be taken, such as determining whether industry-specific solutions are required and whether ERP has to integrate multiple locations and businesses. A team should be formed to evaluate various ERP systems available in the market. Therefore, the evaluation process involves choosing the right vendor from among the various vendors. Vendors will be called for to demonstrate the capabilities of their ERP system. During demonstration the vendor should be assessed in the context of various factors, including time limit for implementation, cost for basic package, customization possibilities, types of reports that can be generated, and various modules available.

Step 3: Selection of ERP system. In this step, the various ERP solutions should be compared based on the demonstration given and two to three vendors should be shortlisted. After shortlisting, selection and negotiation must be done to match costs vis-à-vis features required from the ERP. Once discussions are concluded, based on the outcome the ERP software of a particular vendor that provides maximum features for the cost paid is selected.

Step 4: Requirement analysis by vendor. The vendor sends his implementation team to perform a requirement study. It is known as business process study and is sometimes called gap study also. In this step, vendor team will study the business processes of the company and prepare a requirement document that is required for ERP. The existing functionalities of the system will be shown to the various department heads and any changes required will be noted down. Based on changes and customization, there will be some changes in the total cost estimated for implementing ERP. This should be kept as the final step for cost finalization, and any changes in pricing should not be entertained after this step. A requirement document will be prepared stating “AS IS” and “TO BE.” AS IS is the existing process and functionality available in ERP, and TO BE refers to changes to be made to the system for successful implementation of ERP. This is a critical step, as the company requirements are finalized and any major changes in the system cannot be accepted by the vendor after this step. It is essential that the in-house team created for overseeing ERP implementation understands the ERP functionality clearly before finalizing the requirement. 

Step 5: Developing and customizing the ERP. In this step, the vendor develops and customizes the ERP software as per the requirement of the company. The vendor develops requirements on the basis of the business process study document prepared as discussed in the previous step. This phase will last anywhere from 15 days to 3 months and simultaneously implementation of ERP can be commenced. In the meantime the company should be ready with the server and database on which the ERP software package will be installed. The requirements of the server and database will be discussed in the next chapter.

Step 6: Implementation. The implementation process involves implementer coming to the company and starting the implementation process by installing the software package and creating the various data required for ERP. Details like materials, machines, company name, and so on will be entered into the system. All the modules of the software will be implemented. This process along with end-user training can last anywhere between 2 and 6 months, depends on the size and processes of the company.

Step 7: Training the end-user. This is a simultaneous step along with the implementation phase. In this phase, all staff and workers of the company who need to use ERP are trained on using ERP for recording various transactions and making appropriate data entries. The training processes involve showing all the available features of the software to the staff and make them enter all transactions to enable them to get familiar with all the functionalities of ERP. All the requirements based on the business process study document are checked in this step. The various reports that can be obtained in the ERP are shown to the users and approval is received.

Step 8: Parallel run of ERP software and existing practices. In this step, along with the existing practices of the company, ERP system will be used in parallel. All the entries made in the existing systems will also be made in the ERP system, and the accuracy of the reports will be checked after the entries are made. Any errors found in the ERP system will be corrected in this parallel run. All the entries will be made by the staff with an implementer supervising their activities. All doubts will be clarified during this period. Any shortcomings in the ERP system will be identified in this phase and corrected quickly before the live run starts. If there are any major requirements arising at this stage, it has to be discussed by the vendor and customer to arrive at an amicable solution. If there is any major change required to be made to ERP, doing so will affect the entire implementation process. 

Step 9: Live run using the ERP system. Once all the requirements are met and all the transactions and reports are verified and confirmed as accurate, the existing systems are withdrawn and ERP comes into full force and becomes the only platform in which data are fed and reports are generated. This is the phase where error or bugs surface in the system mostly on account of incorrect entries. So proper care should be taken in ensuring that live run goes smoothly. This is the final step where implementer will be present in the company and oversee the entries and reports generated from the system. The outcome will be shown to the management and a final sign-off will be obtained from the concerned head and implementer will hand over the ERP system to the client’s team. The company will then start using the ERP system on its own.

Step 10: Periodic updates to the system and fixing errors. Once live run starts, user will encounter errors or bugs in the ERP system. These can be reported to the vendor and the vendor will correct the errors and send appropriate software updates to fix the bugs and errors. Also frequently, vendors send periodic software updates (colloquially called as patch) that are incorporated into the ERP system.

Step 11: Continuous usage. This is the goal behind ERP implementation; the company starts using ERP continuously and reaps benefits in terms of costs, error containment, and enhanced productivity and efficiency. It is where company’s goals for using an ERP system are fulfilled.

Step 12: Replacement of existing ERP system. After using the ERP system for a few years, there will be new advancements in ERP like ERP II, or the company might diversify and would need CRM, BI, or PLM and, hence, may consider replacing the existing ERP system with a new one.

Summary

In this chapter, the evolution of ERP has been explained in detail with timeline. The benefits of using ERP and the needs for ERP have been explained in detail. The various vendors of ERP, classification of vendors based on functionality, industry, and tier have also been explained. The growth potential of ERP with special reference to Indian context has also been highlighted. The chapter speaks of how ERP forms a part of BPR and SCM and also discusses the lifecycle of ERP. The various steps of ERP lifecycle have been explained in detail.

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