‘ERP Pyramid Model’ for a Successful Project

It is a great advantage to establish a strong and
well-implemented ERP system. If we can create an ‘ERP Pyramid
Model’ just like Maslow’s ‘Needs Hierarchy’, which
categorizes human needs, we can build successful projects with
stronger foundations.

Maslow’s “Needs Hierarchy” is a theory created by
Psychologist Abraham Maslow to study the needs of people. Maslow
has divided human needs into 5 main categories (physiological,
safety, social, respectability, self-realization) and explained the
relationship between them. According to Maslow, firstly, it meets
the needs at the lower levels and then progresses to the needs at
the upper levels step by step. The Needs Hierarchy is still used as
a theory that explains people’s motivation sources and
behavior.

Inspired by this theory, we can create an “ERP Pyramid
Model” to help businesses approach ERP systems. Applications
hosted by ERP (Enterprise Resource Planning) systems
work-integrated and connected. The majority of these links are in
the horizontal hierarchy, while some require vertical progress.

We can describe this structure as levels rising above each
other, resembling the steps of a pyramid. Typically, it cannot be
moved to the next level without meeting a lower level of
requirements and criteria. A healthy ERP adaptation and project
progress will not occur if it continues to the next level without
meeting the lower-level requirements.

Let’s summarize the 6-level ERP Pyramid in the following
headings.

ERP-Pyramid-ModelLevel 1: Concepts &
Standards

Located at the lowest level of the pyramid, this step also
covers the most space. This level does not include an ERP module or
application, it represents the approach of more businesses to the
ERP philosophy. The components of the first level that shoulders a
full load of other digits rising exponentially are:

  • All departments in the business have ERP awareness and basic
    concepts.
  • Task shares in the organization are specific and defined.
  • Uncovering current functions, process steps, and needs.
  • Having a project team and key users to take part in ERP
    transformation

Of course, all the above components don’t have to be perfect.
Some components will be better understood at progressive levels and
will be further deeper across the business. However, the apparent
weakness or lack of components at the first level will cause
disruptions as they move forward at later levels.

Level 2: Basic Data

Basic data are elements that provide input to all applications
in the ERP system. The basic data needed to create
documents/records in ERP modules are mandatory for the effective
operation of the system. For example; to create a “Purchase
Order” in the system; material basic data, supplier information,
purchase price, etc. are needed.

The main categories of Basic Data in ERP systems are:

Material Basic Data (raw material, semi-product, product,
commercial material, etc.)

  • Customer & Supplier Basic Data
  • Cost (Expense) Centers
  • Production Work Centers
  • Product Trees (BOM)
  • Production Operations and Routes
  • Warehouse & Stock Place (Shelf) Definitions
  • Sales & Purchase Price Lists

The design, editing, and management of basic data are some of
the critical success factors in ERP projects. Basic data designed
incorrectly or incompletely transferred to the system will
adversely affect the operation of all other modules. In order to
proceed firmly towards the next steps of the pyramid, basic data
must be properly designed and managed.

Level 3: Main Processes

At this level, we can now start running modules in the ERP
system. The main processes are mainly modules within the classic
frame of ERP. Identification, adaptation, process design,
commissioning activities are carried out for each module. These
processes are fed by well-designed basic data and the first returns
of ERP are seen by commissioning the main processes. After this
stage, our goal should be to achieve the benefits expected from the
ERP system.

Examples of main processes (modules) for this topic are:

  • Sales Management
  • Purchasing Management
  • Accounting & Finance
  • Production & Planning
  • Quality control
  • Warehouse and Inventory Management

Level 4: Top Processes

The upper processes step includes basic data and advanced
applications that are above the main processes. We can give
examples of the modules commissioned at this level as follows.

MRP – Material Requirement Planning:To
calculate material needs through the system; purchase, sales,
inventory management, production modules must be actively in use
and provide up-to-date information.

Standard Cost: For the standard cost that we
can also qualify as an estimated or projected cost account; product
trees, purchase prices, route operations, standard times, unit
activity cost information is needed.

Supplier Assessment: To give our suppliers
points and evaluate certain criteria; supplier cards, purchase
orders, receipts, input quality control processes will be required.
In addition, the calculation of “Realized (actual) Cost”
requires data from other modules to enable the system to be
traceable from start to finish, capacity planning, and further
scheduling processes. Upper processes are structures that feed on
the data formed in the lower steps of the pyramid and rise above
them.

Level 5: Management Reports

Management reports and business intelligence applications, which
are among the biggest benefits of ERP systems, are at level 5. Data
created by all users is translated into interpretable information,
summary reports, and a meaningful result. The reports required to
realize this transformation are designed and made available to
management teams. Reporting applications can be supported by
“Business Intelligence” tools so that ERP has a “Decision
Support System”. Let’s take a look at the following scenarios
to better understand the relationship between getting management
reports and other steps:

The barrier to reporting material inventory and amounts
up-to-date may be a glitch for underlying data in the second step.
To accurately calculate the costs that have occurred, it may be
necessary to provide more detailed training to key users in the
first step. The solution to getting an administrative report
correctly can be achieved by eliminating inaccuracies in different
steps. Sample output may be reproduced based on the data in the
different components in the ERP system

Level 6: Continuous Improvement

“Maslow’s Hierarchy of Needs” which we mentioned at the
beginning of the article is valid for individuals and the top step
is defined as “Self-Realization”. The institutional structure
of this level can be seen as the top step in which all the benefits
expected from the ERP system are taken. Activities performed at
this level are:

  • Control of the commissioned processes, process improvement
    studies
  • Control of the data generated in the ERP system and increasing
    the data quality
  • Commissioning the new processes and modules
  • Ensuring that the benefits gained from the ERP system are
    permanent
  • Detecting and correcting what kind of defects at which step
    should be seen as part of continuous improvement activities.

Solution:

An enterprise that is prepared for an ERP journey or wants to
benefit from the existing ERP system more effectively can determine
its targets and strategy more clearly by making an evaluation on
the basis of these levels. Correcting the deficiencies in the weak
steps of the pyramid is an imperative need to move up to the upper
levels.

Establishing a strong and permanent ERP system can give the
business a great advantage. Businesses should strive to build
robust and constantly strengthening ERP systems, rather than
building sandcastles that will be destroyed by the first sea
wave.

Written By:

Kaya Metinkaya / IAS
Ä°zmir Consultancy Manager

The post ‘ERP
Pyramid Model’ for a Successful Project
appeared first on
ERP News.