Government of Ethiopia(GoE) has initiated a transformation program to enhance operational efficiency & effectiveness of energy sector to attain power sector performance excellence by establishing Ethiopian Electric Utility (EEU) as a “new world class electric power utility company” with an aim to double the customer base (from current 2.455 Million to 6.955 Million by year 2020. The number of full-time staff in this new environment is expected to rise to more than 13,000 in EEU.
To achieve its vision of providing the World Class services, EEU has undertaken an exercise to redefine the way business is done by creating a framework of new organizational structure & business processes. A “To-Be” IT Application Architecture is defined to support the operations and management of the company in order to achieve the Objective of Customer Centricity and Operational Excellence. This prestigious ICT transformation project for new software applications along with deployment of state of the art infrastructure has been initiated with the purpose to establish a platform for EEU’s long term ICT strategy for Capacity Building and sustainable growth.
Under an International Competitive bidding process, EEU has awarded the contract for Implementation of the project “Supply & Installation of Enterprise Resource Planning (ERP), Customer Centric Applications (CCA) and Decision Support System (DSS), including Supply and Installation of IT infrastructure at Ethiopian Electric Utility (EEU)” to Tech Mahindra.
Tech Mahindra (TechM) is India’s 5th Largest Software Services Company (USD 3.8 billion in revenue, employing 103,600+ professionals across 90 countries), with rich and varied experience in ERP and other technologies across various Industry verticals. Tech Mahindra has prominent presence in the continent of Africa and serves around 60 customers in the region and has implemented more than 150+ life cycle projects.
- Historical Background of Enterprise Resource Planning (ERP)
The term ERP was coined in 1990 by Gartner, but its roots date to the 1960s. Back then, the concept applied to inventory management and control in the manufacturing sector. Software engineers created programs to monitor inventory, reconcile balances, and report on status. By the 1970s, this had evolved into Material Requirements Planning (MRP) systems for scheduling production processes.
ERP solutions evolved from applications focused on materials requirements and resource planning to automate all back office functions and computer integrated business. The Enterprise Resource Planning (ERP) term came about when software developers were searching for a name that would more aptly describe these broader systems. These new solutions provided functionality that encompassed other applications in addition to manufacturing.
In the 1980s, Material Requirement Planning (MRP) grew to encompass more manufacturing processes, prompting many to call it MRP-II or Manufacturing Resource Planning. By 1990, these systems had expanded beyond inventory control and other operational processes to other back-office functions like accounting and human resources, setting the stage for ERP as we've come to know it.
Today, ERP has expanded to encompass business intelligence (BI) while also handling "front-office" functions such as sales force automation (SFA), marketing automation and ecommerce. With these product advancements and the success stories coming out of these systems, companies in a broad range of industries—from wholesale distribution to ecommerce—use ERP solutions.
ERP systems has evolved from over the past 47 years to meet the demands of businesses in Manufacturing, inventory management, accounting, planning and other departments of a business. The history of ERP software compels of many parts and has showed us how technology and products evolve to meet the needs and requirements of the business. As discussed that many businesses use applications instead of ERP software, therefore it should be remember that ERP tools are complete software packages to meet almost every need of the organization.
Period of 1960’s when computers were not a part of everyone’s life, as humans are using them today almost every minute. Therefore software was a very new terminology to common layman. Businesses such as Manufacturing were only concentrating on more productivity activities such as inventory control using simple paper copies of spreadsheet everywhere. As the manufacturing industry grown towards the shift was more on the Material requirement planning, which is also known as MRP that allowed to streamline the paperwork end of the business and keeping as much of it as possible in one place.
In the years 1970’s the MRP included of Materials requirement, scheduling of assembly line including the purchasing and procurement, this made the tool used for variety of businesses which it was not covered out in the initial stages. Therefore by creating several applications into a program it was adapted by variety of businesses.
The year 1980 added more functionalities creating MRP II as universal. MRP II handled all variety of business activities from HR, CRM, Planning, Advertising and most importantly engineering. MRP II was crafted with more additional features and quite stable for User friendly experience with as more of one single approach to all the business plans.
Today we all know the incarnation happened from the original IT system called as ERP, Enterprise Resource planning, some even debate that everything is similar and just the term changed, in fact the changes had been vast which is providing today with a complete solution for almost every kind of businesses. Not only small or big organizations are using ERP software but even single owners or individuals are implementing ERP solution to manage their businesses properly. The reason is simple that ERP can cover almost every aspects of business.
- Enterprise Resource Planning (ERP) Definition and Concepts
- What is ERP
ERP stands for Enterprise Resource Planning and it is an enterprise-wide information system that facilitates the flow of information and coordinates all resources and activities within the business organization. Functions typically supported by the system include manufacturing, inventory, shipping, logistics, distribution, invoicing, and accounting. Some solutions now embed customer relationship management functionality. A wide variety of business activities including sales, marketing, billing, production, inventory management, human resource management, and quality control depend on these systems. The ERP system assists in managing the connections to outside stakeholders as well as enhancing performance management. It uses a centralized database and usually relies on a common computing platform. It provides the user a unified, consistent, uniform environment.
- Characteristics of ERP software
ERP software is highly configurable to accommodate the diverse needs of users across most sectors of the economy. Because of this, currently ERP software exists in three different forms: generic, preconfigured, and installed:
- The main features of ERP-software are it provided business solutions, which support the core processes of the business and administrative functionality.
- In its most comprehensive form, the software is generic, targets a range of industries, and must be configured before it can be used.
- Packaged, pre-configured templates have been derived from the comprehensive software. These templates are tailored towards specific industry sectors (e.g., automotive, retail) or companies of a certain size (SME).
- For most users, ERP-software presents itself as the operational installation after the generic or pre-configured package has been individualized according to the particular firm's requirements on site.
- ERP systems use a shared database that supports multiple functions used by different business units. In practice, this means that employees in different divisions—for example, accounting and sales—can rely on the same information for their specific needs.
- ERP software also offers some degree of synchronized reporting and automation. Instead of forcing employees to maintain separate databases and spreadsheets that have to be manually merged to generate reports, ERP solutions allow staff to pull reports from one system. For instance, with sales orders automatically flowing into the financial system without any manual re-keying, the order management department can process orders more quickly and accurately, and the finance department can close the books faster.
- ERP features include a portal or dashboard to enable employees to quickly understand the business' performance on key metrics.
- ERP is commonly implemented by a complete set of applications with the use of single, unified database to store data for various modules.
- Terminate data entry and storage duplicates.
- Benefits of ERP system
This project will Impact every function of EEU and will touch its executives and non-executives employees and partners. In general the project will deliver the following benefits to EEU and its customer:
- Business / Operations Management: Effective platform for consistent asset data management and planning to enable a more efficient energy balancing, workforce scheduling and deployment, logistic operations and failure localization;
- Informed Decision making :Enable EEU to collect, store and manage all corporate data, support to design and share interactive customized reports / dashboards and perform ad-hoc queries and intuitive analysis across varied data;
- Resource and Operational Planning : Improve operational efficiencies throughout the organization by implementing a real-time processing environment and reducing overall operational costs :
- Enable EEU to develop a resource plan, procuring portfolio of resources identified in the plan, and manage the portfolio of resources on an ongoing basis;
- Support Operational Planning and Performance Reporting processes in the establishment of annual financial plans, budgets and performance metrics;
- Support an integrated, full-featured logistics management system;
- Customer Services: Maximize EEU ability to service its customers by leveraging technology to achieve a competitive advantage.
- Accurate meter reading and reading cycle management;
- Improved Billing efficiency and accuracy;
- Enable customers to access their account information and make payments through multiple channels - Improved revenue realization;
- Customer Centric Contact Center- Higher customer satisfaction
Besides the ERP system provides the following benefits to the different level of EEU’s staff.
- Benefits of ERP Software to Employees
While there are many benefits of implementing a new ERP system into an existing business, the benefits to employees are substantial. Employees can benefit from implementing a new ERP system. Here are the ways that employees benefit from a new ERP system.
- i. Increased Transparency
It is easy to overlook how much work other people successfully accomplish during the day. A well-integrated ERP system shows what has been completed by whom. This increased transparency reduces some of the stress of departments feeling that others don't pull their fair share of the work.
- ii. Improved Confidence
Efficient and productive employees are more confident in their ability to complete job-related tasks in a timely and correct manner. When processes are easier to manage, it goes a long way toward improving competency and confidence.
- iii. Additional Training
Transitioning to a new ERP system or internal procedure inherently requires training for the end users expected to utilize the system. For this reason, employees benefit from more training. Employees may learn more about their job duties, or have the opportunity to further clarify aspects of their job that they may have missed.
- iv. Reduced Compliance Risk
One of the major issues that companies face in the 21st century involves ensuring compliance with industry and government regulations. In order to protect customer confidential data and to generate comprehensive financial reports, corporations are required to create, store and protect a wide range of data related to their business operations. A new ERP system is better able to meet compliance standards for tracking and reporting information. If managed by a third-party vendor, the vendor will be able to share some of the responsibility for keeping the ERP system up to date with evolving regulatory compliance standards. Employees can rest assured that they are effortlessly maintaining compliance. ERP software also frees up employees from certain data entry – data collection related works, enabling them further to focus on productive jobs rather than meddling with documentation. ERP lowers the risk and responsibility of the employees, as far as getting or feeding business information is concerned. It set processes with very low tolerance that ensures that human errors are minimized thus lowering accountability of certain tasks on employees.
- Benefits of ERP Software to Managers and supervisors
Although senior and mid-level managers are required to focus on the growth of team and what if analysis; practically they have to spend most of their time gathering data and preparing reports for the management at frequent intervals. If ERP software is in place, managers do not have to burn midnight oil doing routine work of collecting data and preparing reports.
- Benefits of ERP Software to Top Management
ERP software also helps in digging deep into problematic area via its drill down tools in business reports, and then developing a corrective action plan to weed out the problem. With ERP software it is easy to monitor business improvement plans or corrective action plans on a continual basis, by comparing the past records and latest data. ERP systems also help companies to bring transparency in transactions, accounts and finance as the business information is available to top authorities without any barrier.
- Benefits of ERP Software to IT Department
After implementation of ERP, IT Department no longer needs to manage multiple software. All they have to ensure that ERP system – software and hardware is in place. ERP software have lots of security and access control mechanisms, thus IT Managers don’t have to worry about the security issues like unauthorized access, data theft etc. ERP software allows for automated backup processes or at the most one button click to take a backup. These backups are stored in secured storage devices. In case of crashes, virus attacks or any other emergency, ERP software acts as a safeguard against these types of losses. This in turn reduces the IT support cost.
- Why ERP Required to Implement for EEU
The ever increasing of customer demands and the impact of globalization necessitate constant changes in the organization and require effective leaders and employees as well as timely qualitative management decisions. As a result many organizations invest a considerable amount of capital and resources, implementing new techniques to improve their organizational capacity and operating performance. Many approaches and techniques are available. New fashionable methods tend to displace older approaches, which may still have value. These approaches and techniques, if they are implemented as required, enable companies in to achieve a long and gradual process of improving the organizational systems. ERP along with its special characteristics and features is among the organizational reform tools which can add its special values for the effective and efficient management of people, systems and processes.
- Integrate financial information: As the CEO tries to understand the company’s overall performance; he may find many different versions of the truth. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system.
- Integrate customer order information: ERP systems can become the place where the customer order lives from the time a customer service representative receives it until the service delivered and finance sends an invoice. By having this information by integrated software system companies can keep track of orders more easily, and coordinate all activities related with customer service and among many different locations simultaneously.
- Standardize HR information: Especially in companies with multiple business units, HR may not have a unified, simple method for tracking employees’ time and communicating with them about benefits and services. ERP can fix that.
- It creates collaboration and process improvement to maximize operation efficiency and customer's needs satisfaction, which increases the competitiveness of the company and its profitability. ERP helps to achieve competitive advantage by improving its business process.
- ERP eliminates most business problems like material shortages, productivity enhancements, customer service, cash management, inventory problems, quality problems, prompt delivery etc.
- ERP provides intelligent business tools like decision support system, Executive information system, Data mining and easy working systems to enable better decisions.
- ERP enables quick response to change in business operations and market conditions.
- Challenges During ERP Implementation
Risks and issues are part of any and every major IT transformation project. When we put this in perspective of large transformation projects like ERP/SAP these risks and issues can be huge which can collapse the entire project if not managed and mitigated in a timely manner. Business process changes, learning a new system, and understanding new roles and responsibilities are among the dozens of organizational challenges that most ERP implementations face throughout the entire project lifespan and beyond. Unfortunately, even project teams that successfully navigate the technical challenges mentioned above more often fail because of their lack of attention to employee engagement and other organizational change management issues.
ERP PMO tried to identify the possible risks and challenges that might face the project and get ready to tackle them. The top challenges or reasons underscoring ERP failures as well as mechanism to deal with them are stated below.
- Challenges and Risks
- An ERP system may force an adopter to change their business processes to fit the ERP system model. This requires a re-engineering of steps needed to complete business tasks and retraining of employees.
- People inherently do not like change, and this will create resistance and delays for any organization (at least in the short term).
- Problems in Business Process Blueprint (design) stage such as business requirements have not been captured in detail or poor quality system design during realization phase and inadequate testing of your business scenarios and also failure to do enough Data Conversion and Testing leads to the improper installation or customization of ERP modules.
- Insufficient Training in the new work tasks required by the ERP systems is the other probable causes of failure.
- The communication barriers like non availability of web / internet facility at remote rural areas and insufficient Bandwidth are also barriers for ERP implementation. Bandwidth in terms of organizational infrastructure is attributed to the Telecommunication Company’s ability to service the market. Similarly, if the organizational infrastructure in terms of Databases, Communication Networks and Security Standards is not reliable, an ERP project is guaranteed to fail.
- One common risk on ERP implementations is that the Systems Integrator (SI) may take longer than anticipated to complete project activities and deliverables there by missing the project deadlines. If this happens, it can delay the project phase completion and also result in cost overruns.
- Lack of experienced and qualified business subject matter experts, who will represent business processes from client side, may cause project delays and could directly impact quality and progress of requirements gathering, review and approval of to-be business process designs and verification of project deliverables.
- An ERP system implementation involves relatively large expenditures for the acquisition of the hardware, software, implementation costs, consulting fees and training costs, and can last for an extended period of time. Also, an ERP system implementation project has a wider scope compared to most other information system implementations, and may cause a significant number of changes within an organization. The scope and the complexity of the project are a source of significant business risk.
- MITIGATION OF CHALLENGES
Top Management participation is the key for mitigating challenges. The other mitigating tactics are regular interactions with the user employees, educating them and involving them in the implementation phase. Hence below are some of the additional mechanisms to mitigate the challenge of ERP implementation.
- Involvement & Commitment of Top level Executive.
- To ensure that users are aware of the impact the ERP project will have on their responsibilities, a communication plan will be developed and change management interventions will be made.
- If Knowledge Transfer occurs, organizations will become less dependent on consultants for day‐to‐day integration maintenance. Knowledge transfer needs to be actively managed so that the project is not dependent on a few individuals.
- Efforts were made to ensure that business requirements gathered during blueprint phase are at sufficient level of detail that clearly describes the business process. Business requirements and blueprint documents would be reviewed by the subject matter experts (SME) and approved by the business lead and/or business process owner.
- Integration and User Acceptance Testing (UAT) should be very thorough to cover all end-to-end business processes.
- Ensure that your project has well balanced teams of SME (subject matter experts) from your business and SAP solution experts. It is very important to ensure that your business provides required number of SMEs without jeopardizing you current daily production operations.
- From program governance perspective, the risk of delay from the SI side can be accurately monitored by having qualified and effective project team (from the EEU side) and a good project plan with well-defined work breakdown structure that will provide visibility into key activities associated with production of essential project deliverables. The steering committee, PMO director and project managers will make periodic review of progress and identify any work streams that are facing delays and likely to be bottleneck to overall project progress.
- Every week PMO team should work with team leads and update the project plan. Any delays in completion of tasks and deliverables should be reflected in the team leads weekly report and also highlighted in the weekly PMO meeting.
- In order to minimize risks associated with a lack of alignment of the ERP system and business processes, an organization should reengineer business processes, develop a detailed requirements specification, conduct system testing prior to the system implementation and closely monitor the system’s performance.
- Project complexity: The minimization of the risks associated with project complexity largely depends upon the formulation of a steering committee, senior managers’ support, appointment of a project sponsor, the development of a detailed implementation plan, project management, a project team with adequate skills, and involvement by both consultants and internal audit.
- The external consultant’s involvement in the ERP system project, the establishment of a close working relationship between the consultant and project team, and adequate training and knowledge transfer are critical factors in overcoming the business risks associated with the lack of in-house skills.
- Expectation from the EEU’s Employee / Users for the Success of the ERP implementation
Running an ERP implementation can be a tough assignment. The good news is that with a proper set of methodologies, tools and experience, project sponsors and team members can effectively create the ground to implement the ERP system successfully. In general it is expected to assure that the following conditions are fulfilled before the organization is embarked to full scale implementation.
- Implementing ERP means changing the way the business is run. The Critical Success factors in getting the system implemented are mainly the Top management initiative, their will and full involvement along with the regular interaction with the users and the serving departments.
- Leaders, mangers and project team members should help employees understand how their jobs are going to change. In addition to understanding what’s in it for them, employees need to understand why the changes are happening, how the ERP project fits into the organization’s overall strategic direction, and how it will affect their day-to-day jobs.
- Define and implement organizational and job changes.
- ERP implementations entail huge amounts of change, so it behooves organizations to do anything they can to ease the transition for employees. One of the best ways to do this is roll out business process changes before ERP implementation.
- Establish multiple, repetitive and diverse lines of communication.
- Departments should make available the required information for the effective implementation of the system. Resistance in sharing sensitive internal information can reduce the effectiveness of the software. Moreover, in order to avoid failures and ensure success, it is necessary to have among key stakeholders involved in ERP implementation to hold open and honest dialogue at every stage of the project.
- The Capacity Building and Knowledge Transfer should be a regular and continuous activity since conception of project so as to avoid the dependency on consultants and implementation partners after the project is over. Hence, EEU leaders and employees should have the required commitment to achieve this.
- Managers’ soft skills (such as communication and team building skills) are among the most important skills required for a successful ERP implementation.