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Implementation of the SAP ERP system for ABC Apparels

Question 1 (150 marks) 

There are many risks in the execution and delivery of engineering projects. Examples include the risks of project cost overruns, poorly designed scope, lack of understanding of risks by senior management, costs not defined well, tight completion time, poor change management practices, communication risks, issues in managing stakeholder, potential environmental damage, and many risks. While most of these risks have the potential to result in negative consequences, there are also opportunities to apply innovative practices to achieve considerable savings and deliver an excellent project. Effectively managing these project management risks is therefore an important task for engineering and built environment professionals. 

Your task

 1. Select an engineering project of your choice. You should justify your selection 

2. Discuss the risk management context with respect to this project. 

3. Using the risk management principles discussed in AS/NZS 31000:2009 Risk management – principles and guidelines, identify, analyse and evaluate at least five (five) risks in managing it. Include at least one (1) opportunity. Justify your selection. For this question, you should identify at least one (1) risk (negative risk or opportunity) in each of the following knowledge areas of project management:  Project time management  Project cost management  Project quality management.

4. Comment on how you would treat the each of the risks that you have identified. 

5. Discuss, in about 500 words:  What other risks you consider important in this project  Your conclusions with respect to your results  The importance of having a sound risk management plan when planning and delivering engineering and built environment projects You will need to use both the course material and references outside the course material, using both on-line and print resources. On-line resources include both the Internet and library on-line material. For example, the University of Southern Queensland subscribes to a number of on-line databases, which contain abstracts (and often full text) of many current journals. Direct quotes from external sources should be limited to no more than 10% of your discussion, be enclosed in inverted commas, and properly referenced. It is more important that you use the input from the various reference sources and put it in your own words (while still acknowledging it) to support your arguments.


Answer


Introduction 

The aim of the report is to present information about the risks and risk management plan related to an information technology project. The project is about the implementation of the SAP ERP system for a medium sized retail business. The report contains information about the business, the project, and risk management process adapted for the business, opportunities and risk treatment. It also covers information about other risks related to the project and the importance of having a sound risk management plan. 

About the Organization 

ABC Apparels is a retail apparel business that supplies woman clothing in the Australia. The business has its HQ in the Queensland. It started as a small business about a decade ago. Then it has flourished steadily. It supplies designer women apparels in many shops and to individual customers who orders their products directly from the website. The website has the features for bulk orders and individual orders. They have around 10 business units scattered in the country. Each business unit run their own business process. They send weekly sales and balance sheet to the HQ by email. The website is managed from the HQ. When an order is placed, it is kept pending until a staff manually checks for the stock of the order in the nearest business unit of the delivery address. If the stock is available, then order is confirmed, if not then the staff first arranges the availability of the product at the required unit and then confirms the order.

With the growing number of orders, it became difficult to manage the process manually. So, the business has planned to implement a SAP based ERP system to automate the sales and inventory management system (Sullivan, 2014). All business units will come under the same umbrella. The centralised ERP system will keep track of the products at different business locations and it will send the orders to the required centres, users can check the availability of the stock of the items from the website in real-time. The process of placing order, managing inventory and making the sales will be more automated and easier for the stakeholders like sales staffs, customers, and management (Sullivan, 2014). 

About the Project 

SAP ERP implementation project is related to the complete process of following a well-defined method to implement the SAP ERP system for an organisation. In this case, the project is focused on the implementation of the ERP system at the ABC Apparels. There are five phases of the project. Those are, 

  • Preparation for the project 

During the phase, the scope and vision of the project are defined. It must meet the financial and business requirements of the organisation. Focusing on the core business processes of the organisation, a TSO or Technical Support Organisation is selected. For the project, the TSO is Global ERP Solutions that works on the deployment of SAP ERP solution for different businesses from different industries (G. Anderson et al., 2012). 

  • Sizing and making the blueprint 

The key operations and activities performed during the phase are, 

  • Performing an analysis for the total cost of ownership. It helps to determine when, how and where the costs will be utilised for the implementation of the SAP solution stack (G. Anderson et al., 2012). 
  • It needs to identify the disaster recovery and high availability of the SAP system so the downtime is low.
  • Getting engaged with the SAP solution stack vendors. In this case, it is the Global ERP Solutions. 
  • Performing the activities related to SAP Data Center so that the short term adjectives of the SAP implementation project. 
  • Providing the training to employees
  • Setting up the SAP data center 
  • Performing the SAP ERP implementation
  • Identifying the staffs for the maintenance to provide round the clock support.  
  • Realisation 
    • Addressing the change management process for the organisation. 
    • Addressing the operations management and SAP systems for the organisation 
    • Performing regression tests, functional, and integration tests to check whether the business process is working properly with SAP or not. 
  • Final Preparation for the Implementation 
    • Performing stress tests and systems testing. It needs to make the plan, testing script, execution of the plan, and monitoring the results from the SAP Stress Tests. It will help to check whether the newly implemented system is capable of meeting the expectations of the stakeholders or not (G. Anderson et al., 2012). 
  • Go Live, Support and Maintenance 
    • Making the newly implemented SAP system available for the targeted end users. 

Risk Management Process 

Risks are uncertain events that may have some positive or negative impact on the scope, time, and cost aspects of a project. Risk management is the process of identifying, assessment, and mitigating or handling the risks using various techniques and using various tools (Schwalbe, 2015). 

Risk management process is a very fundamental process to project management. It starts with the beginning of the project and continues till the end of the project. Risks may come up in a project during any phase. So, the risk register that contains the details of the risks and the risk management plans is a live document. It gets updated during the lifetime of the project (Gillespie & D, 2016).

Identified Risks and Opportunity

Following risks have been identified for the ABC Apparels SAP implementation project. The risks are, 

  1. Failure to re-engineering the business process in alignment of the newly implemented SAP ERP solution 

ERP implementation projects need alignment of the newly implemented ERP solution with the current business processes. It needs customisation of the ERP solution as well as business process re-engineering for the business operations and core processes. This is required to keep the business and the newly implemented ERP solution at sync (Phillips, DeMumbrum, & Ryan, 2013). But there is a risk that either the customisation makes the ERP solution now working properly within the scope of the project. It may fail to meet the initial requirements from the stakeholders. Or there is another risk, that the business process re-engineering fails and there is lack of coherence in the organisation. In that case also, there are risks related to the scope, cost and quality of the project. If the system fails to meet the requirements or the system is kept underutilised then the cost-effectiveness of the solution is no more. It will also degrade the quality of work done by the system. 

  1. Lack of change management process 

As the organisation is following some different organisational process, and culture, so it needs properly planned change management process to deal with the issues like responses and reactions from the employees, customers and management (Gillespie & D, 2016). Lack of communication between the management and the employees will leave the employees in fear that their jobs are at risk, then they won’t welcome the new system and they won’t use it properly. In that case, the scope, cost and quality of work will be affected. 

  1. Lack of support from the senior management level 

The project is completely technical project. ABC Apparels is not a technical company. They are hiring the Global ERP solutions as their IT consultant for the project. So, the project team will be formed by taking persons from both of the participants. If the senior management does not show any interest in the project or do not provide help and support to the IT consultancy then the project will fail to implement the SAP ERP system properly. 

  1. Lack of training provided to the users 

As the end users are not from the technical background, so they need extensive training sessions to get accustomed with the newly implemented system and how it works. Lack of training will put a risk on the situation that the end users may not be able to use the system at all and the system kept underutilised or none use the system at all (Phillips et al., 2013).   

  1. Lack of commitment and support from the employees during the project

Being afraid of the job loss, becoming victim of the lack of change management process etc., the employees may show lack of support, cooperation during the project. However, as the system will be used by them, their help will be necessary. Lack of that support will lead to the risk related to the realisation of the scope of the system, and the cost of the project. 

  1. Poor technical planning 

The implementation of SAP ERP system needs to have a well-defined and proper technical, organisational and managerial planning other than the detailed project plan. The lack of technical planning may lead to failure to realisation of the goals of the system. 

  1. Emergence of some other disruptive technology in the market

Information and communication domains are rapidly changing. It is possible, that during the project or just after completion of the project, some new and disruptive technology related to the ERP domain emerges and that makes the current SAP ERP obsolete or nearly obsolete, then the newly implemented system may fail to realise the benefits but a reactive approach can help to turn the risk into opportunity. They may adapt the new technology in time (Robson, 2013). 

Risk Treatment

The plan for the risk treatment is given below. Most of the risks are dependent on each other. 

Risk ID
Risk
Risk Treatment Approach
Details
1
Failure to re-engineering the business process in alignment of the newly implemented SAP ERP solution
Removal of the source of the risk 
It needs to have a properly planned business process reengineering being followed before, during and after the project. 
2
Lack of change management process
Removal of the source of the risk
Needs the implementation of a suitable change management process for the project. 
3
Lack of support from the senior management level
Changing the likelihood of the risk
It needs to lower down the chances of the risk to happen. 
4
Lack of training provided to the users
Sharing the risk with third party
A third party training solution provider may be appointed. 
5
Lack of commitment and support from the employees during the project
Changing the likelihood of the risk
It needs to have proper change management plan, communication plan etc. to keep the employees informed and allow their participation in the project (Robson, 2013)
6
Poor technical planning
Removal of the source of the risk
The planning must be sound and solid. 
7
Emergence of some other disruptive technology in the market
Pursuing the opportunity 
The organisation can increase the risk and pursue the technology


Other Risks 

Other project management related risks that are applicable to the project are given below.

  • Lack of funding 
  • Lack of resources or poor resource allocation plan 
  • Unrealistic project schedule 
  • Missing the milestones and the deadlines of the critical task 

Importance of Having a Sound Risk Management Plan 

The importance of having a sound risk management plan is given below. 

  • It helps to plan for the success by the establishment of a list of external and internal risks, opportunities etc. The risk management process is focused on the identification, assessment and management of the risks related to a project. Risks may evolve during the project life-cycle. So, a typical risk management plan includes information about the identified risks, the likelihood of occurrence, and other proposed actions to handle the risks. 
  • It gives an organisation the scope to correct some approaches or activities or in taking the right approach to mitigate the risks before those happen. Even, in some cases it gives the corrective approach towards fixing the risks once those are realised (G. W. Anderson, 2013). 
  • Once the risk management plan is defined with all suitable approaches to handle the identified risks, then it helps to maximise the benefits of the project and in this case, it will help to maximise the benefits of the proposed system and will allow the organisation to realise the potential benefits of the ERP system faster (Phillips et al., 2013). 
  • It helps in the evaluation of the success or failure of the ERP implementation project in advance and supported by calculations, methodology etc. For example, if suitable training is given to the employees, then that will help to increase the utilisation factor of the newly implemented information system (Robson, 2013). 

Conclusion 

The report covers different aspects of the project risks analysis and mitigation for the project on the implementation of the SAP ERP solution for the ABC Apparels. The report contains information about risk management in the context of the project, list of the identified risks, a list of risk mitigation approaches, importance of the risk management process for the project and so on. It will help the readers to understand how the risk management process can bring more values to a business. 

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