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Home Implementations Navision Implementation Added Value Model for Agile ERP Implementation Project

Added Value Model for Agile ERP Implementation Project

dreamstime_591151_Value_150Agile ERP Implementation Methodology focuses on providing maximum value to the project at each work iteration. But what exactly does it mean – Provide Value to the Project

First we have to define what an ERP Implementation Project is and define some Value Metrics that will be used to measure task Value.

An ERP Implementation Project is a set of activities required by project team to Develop, Test, Setup, Train Users, Go-Live and Stabilize Operations with a new ERP System.

To define Value Metric let us consider a simple example.

The shipping department of a company has 10 employees with an average salary of $35000/year. Their responsibility is to package goods into boxes, print Fedex labels and load boxes into Fedex tracks. This department used Fedex provided computers that are not connected to the main ERP system. New ERP system can be easily integrated with Fedex by purchasing integration component that will cost $10000 for software and an additional $5000 in training. Implementing this component will add 2 weeks to the project and the company will be able to operate with 7 employees in the shipping department. Therefore the first year salary savings will be $105000.

Implementing this module will clearly result in $90000 savings during the first year of operations. However we will need to look into the value completing this task will provide to the Project. From the Agile ERP Implementation point of view the value provided to the implementation project by completing this task is ZERO.  This task should never be placed into a work iteration and instead just recorded into the “WISH LIST” and we will explain below why.

The Agile Implementation focuses on minimizing the duration of the base system implementation and minimizing negative cash flow from the implementation. If something is not required for Go-Live it will not be implemented as part of the initial project – this task will be implemented after go-live during the continued improvement stage. No task can be considered on an individual basis– the company will start benefiting from the implementation only after Go-Live a longer implementation means a larger negative cash-flow during the implementation. Next diagram shows a comparison of cash flow from the ERP system Implementation. 

cashflow 
Including tasks that are not necessary for the Go-Live can add up over 6 months to the implementation process thereby increasing the cost of the project and the risk associated with project failure. In addition, risks associated with people have to be factored into the decision. In our example the shipping department is critical to company operations – announcing that the system will be replaced at the beginning of the projects can lead to loss of people before the new system will be implemented, overtime work for the rest and can become a distraction to all other operations. During an Agile Implementation the decision to implement shipping functions will be made 2-3 weeks before it will be actually implemented and the risk associated with loss of people will be minimal.

In our model we are dividing all tasks identified during the project into two categories – “Required for Go-Live” and “Wish List”. Any task that is not required for Go-Live has ZERO value for the Base System Implementation. But at the same time we will assign “Company Value” for this task that is equal to company savings during a set period of time (1-3 years). “Company Value” measure will be used during continued improvement stage for prioritizing tasks.

Every task that is “Required  for Go-Live” will have a Value equal to the time (days/weeks) required to Go-Live. For example if some part of the system will require a small modification that has to be followed by a long manual effort to setup and/or train many users – this task will have the highest value to the project and will be assigned to an earlier work iteration. This approach guarantees minimizing “time to Go-Live” with the new ERP System.  

 

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