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Project Risk And Procurement Management For ERP Implementation

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Question:

Discuss about the Project Risk and Procurement Management for ERP Implementation .
 
 

Answer:

Introduction

Risk and procurement management process are two interrelated and connected approaches used within the concept of project management aspects. In addition to these aspects, risk management concept is taken into account in order to manage the effective situation within the project development phases of any considered project (Ji, Huang and Grossmann 2015). On the other hand, the procurement management aspect is important for managing the goods and services that are collected from various vendors in order to manage project development.

In contrast with these facts, this report is considering the importance of risk management and procurement management aspects within the concept of project management perspectives during the project development phases (Kendrick 2015). This report is elaborating about various concerns related to risk management and procurement management process involved within ERP Implementation Process.  

Risk Management and Procurement Management for ERP Implementation

Risk Management is termed as risk analysis process that involves planning stage that identifies origin, probability and magnitude of the problem involved within the project development phase. This aspect helps the project manager in providing risk warrant and proper attention to the exposure of the risk (Mahapatra et al. 2016). In addition to this, procurement process is another aspect that offers effective measurement for identifying the procurement needs for managing the effective system architecture within the project developing life cycle. There are distinguishable risks at different stages of procurement process. In addition to this, these risks are resolved with the help of both risk management and procurement management process involved within the project management. ERP Implementation involves various critical technical risks during the implementation process that harms the project progress. These risks are considered in this report.

Risk Management for ERP Implementation

Definition of Risk Management in ERP Project

Risk Management is the process of identification and assessment of risks that are evolved during the ERP Implementation and are reduced with the help of prioritizing strategies for the risks within the project development life cycle. Timeline and project scheduling is the main risk identified during the ERP Implementation project (Nojavan et al. 2015). In addition to this, realizations of opportunities are the base of risk management strategies that helps the project manager in identifying various significant risks involved within the ERP project. 

 


Persuasion of uncertainties and negative aspects involved within the project causes the involvement of risk management scenario during the ERP Implementation process. Data management risks and technical risks are generally identified as the efficient risks measures involved within the ERP Implementation project (Phillips 2013). All of these aspects are organized in order to manage the effective strategy for minimizing the impact of risks and finds an effective solution for the risk resolution. The project managers easily identify the problems involved within the project development and takes steps for resolving these issues.

Application of risk in ERP Implementation Process

Risk Management is one of the procurement management process that are considered for managing the resources involved within the project. In addition to this, there are various aspects that are influences the internal and external resources for creating conflicts within the project management concept (Sadgrove 2016). There are various risks that are involved during the ERP Implementation process. These risks are elaborated in this part of the report. These are given as follows:

Implementation of Partner track record: ERP project involves various partners into the business process. The track records should have to maintain with the help of proper strategies. This aspect incorporates risks within the ERP Implementation process.

GAP analysis: GAP analysis is one of the most effective risks identified during the implementation of ERP within any organization. In addition to this, less amount of GAP analysis involves various risks within the project implementation.

Total cost ownership: Total cost ownership management is another aspect to be considered as one risk identified during the implementation of ERP solution within any organization.

Implementation wrong road map: This is another risk associated with any ERP implementation process (Segerberg, Simchi-Levi and Rothstein 2014).  In contrast with these facts, the wrong road map involves effective risks within the project of implementing ERP solution within any project.

In addition to this, this domain needs effective solution for managing the risks. Some of these concerned risks are technological risks, organizational and social risk, market risks and financial risks. These risks has o be mitigated by various solutions.

Risk Management Cycle for ERP Implementation Project

Risk management cycle is nothing but the process of managing the risks involved within the ERP Implementation project with respect to the various segments of the project. Risk management cycle involves the following aspects within the project development life cycle. These are elaborated as follows:

Identification of risks: Identification of risks is the first stage of risks management process (Sorunke, Omojola and Adeleke 2016). The project manager identifies the risks associated with the ERP implementation project.

Evaluation of risks: Evaluation of risks is the second stage of risk management process. ERP risks are evaluated with respect to various potential aspects during the project implementation.

Analysis of risks: Analysis of the risks is third stage of the risks management process involved within the project development life cycle. Various critical scheduling issues are identified during the ERP Implementation process.

Resolution of risks: Risk resolution process is also one of the effective solutions to the risk management issues (Ji, Huang and Grossmann 2015). ERP risks are resolved with the help of effective strategies when they are identified.

 

Procurement Management for ERP Implementation

Definition of Procurement Strategy

Procurement strategy is nothing but the strategic planning for managing resources and elements used within the project development for managing the evolved risks during the project development life cycle (Kendrick 2015). In addition to this, there are various procurement management plans and process that are involved for managing risks involvement within the system architecture of the project development plan. This management strategy is incorporated within the project development concept for making the context of risk management concept clear and effective for getting effective results from project management aspect.

Application of Procurement Management within ERP Implementation

The purpose of the procurement strategy is to describe what kind of products and services will be procured under some specific conditions. In contrast with these facts, sometimes the organizations are confused about the products and services that need to be procured with respect to organizational demands as well as with respect to competitive target markets. The implementation or adaptation of procurement strategies and concepts provide guideline to the organization to control their products and services that they are launching within their target market (Mahapatra et al. 2016). In contrast with these facts, in case of the ERP Implementation process, there are various aspect that needs to be identified by the project manager such as functionalities of the business, positive and negative impacts of the system architecture. These aspects involves the ERP procurement strategies that needs to be managed by the strategic planning during the implementation process of ERP within any organization.

Type of contract used in Procurement Management Process in ERP Implementation process

There are various contracts that are used for managing the procurement processes. These are mainly elaborated in this part of the assignment. Among all of these contracts, few are firm fixed price, time and materials and const reimbursable contracts etc. these are some general contracts that are used for managing procurement strategies within the project development life cycle (Nojavan et al. 2015). In addition to this, T&M contracts are mainly used for managing the effectiveness of the project procurement management concepts within the project development life cycle. ERP implementation involves these contracts within the development stages for managing the effective structuring.

 

Theories and practices of risk and procurement management practices for solving ERP Implementation issues

There are various aspects that are considered as project risk and procurement management practices for solving current project management issues during the ERP Implementation life cycle (Phillips 2013). Therefore, there must be some risk and procurement management models that should be used for managing effective project management results. There are various kinds of risks and procurement management models that are used for managing critical situations within the project development stages.

Risks management models

Risk management models are mainly used for managing the critical issues involved within the ERP Implementation stages that helps the project manager in identifying the effective solution for project development related issues (Sadgrove 2016). Among all of these risks management models the Caisse’s Risk Model is considered for managing project risks during the ERP Implementation. This risk model has several stages incorporated within it. These stages are being elaborated in this part of the literature.

The Caisse’s Risk Model

This model divides various risks into three categories. These are business risks, financial risks, and operational risks. In contrast with these facts, there are four general stages of risk management; these are identification of risks, analysis of the identified risks, and impact assessment of the risk and resolution process of the risks (Caisse de dépôt et placement du Québec | CDPQ | Long-term institutional investor | Asset manager 2014). Caisse’s Risk Model incorporates these general stages into his risk management model and it becomes more specific in comparison with various general risks management structure.

Figure 1: Casse’s Risk Model

(Source: Caisse de dépôt et placement du Québec | CDPQ | Long-term institutional investor | Asset manager 2014)

Business risks: Whenever the project risks are asses with the help of Caisse’s Risk Model then the business perspectives are measured with the help of this stage of the concerned model. In addition to this, business perspective is evaluated with the help of this model.

Financial risks: The market, liquidity and other financial aspects are evaluated with the help Caisse’s Risk Model within any concerned ERP Implementation project. This assessment helps the project manager in identifying the total budget for project development.

Operational risks: Every project involves various operational functionalities within its ERP Implementation stages (Caisse de dépôt et placement du Québec | CDPQ | Long-term institutional investor | Asset manager 2014). In addition to this, these risks should be identified by the project manager in order to produce effective project results. Caisse’s Risk Model helps the project manager in identifying the risks.

Robson Risks Management Model

Robson risk management model is another model that provides the insights for identifying the risks involved within the ERP Implementation stages. The stage of this risk management model is given bellow:

Figure 2: Robson Risk Management Model

(Source: Ji, Huang and Grossmann 2015, pp-9201)

Risk identification: This stage of the Robson risk assessment model allows the project manager in identifying the risks during the ERP Implementation.

Risk assessment: Risk assessment stage is capable of effectively evaluating the risks involved within the ERP Implementation.

Strategy selection for risk resolution: This stage of the risks assessment model allows effective strategy selection within the ERP Implementation stages.

Risk evaluation: Risk evaluation stage of the Robson Model allows the project manager for evaluating the risks impacts on ERP Implementation phases (Kendrick 2015).

Procurement management models

Procurement management is another important aspect for any project development concerns. Procurement models are helpful in developing various important and effective solutions for resource management within the ERP Implementation (Mahapatra et al. 2016). In addition to this, there are various situations that can be also managed with the help of procurement models; in short various risks involved within the ERP Implementation can be reduced with the help of project procurement management models. Among various project procurement models few are being elaborated in this part of the assignment.

The Procurement Funnel

This procurement model is known as Procurement Funnel that provides the graphical representation of various factors that are involved within the resource management process involved within a project development stage. In contrast with these facts about the procurement funnel, it is found that cost saving is the main approach behind implementing this model for managing procurement functions during the ERP Implementation (Nojavan et al. 2015). The bottom line for developing the project can be analyzed with the help of this procurement model. In contrast with these facts, the aim behind this model is to provide insights to the project manager that helps them in procurement team involved within ERP Implementation project. There are various critical factors that can be analyzed with the help of amount of money spend on the project development phases. All of these spending are concerned when the development of project procurement funnel is taken into consideration (Phillips 2013). In addition to this, not only the expenditures are taken into consideration in case of procurement model but also the savings are considered in order to maintain the effectiveness of project development phases as well as project results.

Figure 3: Procurement Funnel

(Source: Sorunke et al. 2016, pp-134)

 

The Dominick Matrix

This is another procurement model that can be used within the project development phases for managing the project procurement activities involved within the ERP Implementation phases. In addition to this, there are various factors that have to be considered in case of implementing this model of procurement during the ERP Implementation. These aspects are Supplier management, supplier collaboration, and supplier rationalization and supplier development. Resources are one of the most effective factors involved within any project development phases (Ji, Huang and Grossmann 2015). In contrast with these facts, suppliers play a great role in managing the resources involved within the system architecture of ERP Implementation. There are various important aspects that have to be managed with respect to the influences and demands of the suppliers during the project. Therefore, the demands and importance of the suppliers are analyzed with the help of this procurement model for managing effective resources within the system architecture of the ERP Implementation stages. The supplier plays a great role in solving various important issues introduced by the project management consequences (Kendrick 2015). The strategy chosen for this purpose guides the project manager in solving various aspects that are included within the system architecture of the supplier’s materiality which is important for procurement management aspect during the project management aspect.

Figure 4: The Dominick Matrix

(Source: Mahapatra et al. 2016, pp- 164)

Impact of Procurement and Risk management models in ERP Implementation

Impact of procurement and risk management aspect perspectives must be analyzed in order to maintain effective project results during the ERP Implementation phases. In addition to this, there are various practices and consequences that can be considered as the example of procurement and risk management models within the project development phases. These impacts are being discussed in this section of the assignment (Nojavan et al. 2015). There are various positive and negative impacts of the risks assessment and management within the ERP Implementation. In contrast with these facts, these positive and negative impacts are being elaborated in this part of the assignment.

 

3.1 Positive and Negative Impact Assessment of Risks Management for ERP Implementation

Positive Impacts of Risk Management within ERP Implementation Project

Risk management mainly introduces various positive impacts within the project development. All of these positive impacts are being elaborated in this part of the assignment. These are given as follows:

Reduction of uncertainties: There are various uncertainties that are introduced within the ERP Implementation phases and must have to be reduced with respect to the project objectives and goals (Phillips 2013). These aspects can be incorporated within the project by reducing the uncertain conditions involved within the project development phases.

Reduction in operational errors: There are various operational errors found within the project development phases. These errors should be reduced by assessing the effective errors involved within the ERP Implementation phases. This identification will help the project manager in solving various issues and problematic situations involved in ERP Implementation project.

Reduction of mistakes in project development stages: Risk management models are helpful in solving and providing various solution measures to the project manager that guides them for finding the cause behind the project risk and they can easily solve these issues involved during the ERP Implementation project.

Reduction in evolution of conflicts: Reduction in conflicts is helpful in solving various issues involved within the project during the ERP Implementation (Schwalbe 2015). Project manager takes into consideration the conflict management for reducing the risks involved within the project.

Negative Impacts of Risk Management within Project

The risk management aspect is helpful in solving various issues involved within the ERP Implementation. In contrast with this fact, though there are various positive impacts of the risks management aspects, there are various negative impacts of the risk management aspect on the ERP Implementation stages (Sorunke, Omojola and Adeleke 2016). These negative impacts are being elaborated in this part of the assignment. These are given as follows:

Increased project completion time: Risks assessment and management measures increases the time span for the project development. In addition to this, the increased time taken for assessing the project risks in terms increases the ERP Implementation completion timing. This aspect has negative impact on the project development stages.

Complicated situations involved in project development: Sometimes there are various situations that makes the ERP Implementation very complicated, this increases the project completion timing and affect the project outcomes.

3.2 Positive and Negative Impact Assessment of Procurement Management for ERP Implementation

Positive Impacts of Procurement Management for ERP Implementation

There are various positive impacts or benefits of the procurement strategies in order to control and manage the economic conditions of the project development stages. These are elaborated as follows:

Increment of effectiveness of project: The procurement management increases the efficiency of the ERP Implementation as procurement strategies saves effective amount of money (Ji, Huang and Grossmann 2015). This aspect makes the project economically beneficial and effective.

Increased innovation: The procurement strategies and management process increases the innovation within the ERP Implementation stage. In addition to this, the project result becomes effective and beneficial with respect to project objectives for implementing the procurement strategies.

Negative Impacts of Procurement Management for ERP Implementation

Following are the important negative impacts of the procurement management policies involved within the project development stages:

High expenditure: The expenditure for managing procurement policies affects the budget estimation for ERP Implementation phases (Kendrick 2015). This aspect introduces extra cost within the project development.

Risk of Stock outs: Risk of stocks outs affects the project development and it increases the conflicts within the ERP Implementation stages.

Conclusion

This can be concluded that risk management and procurement management is one important element involved within the system architecture of ERP Implementation life cycle. In addition to this, various important concerns and aspects about risk and procurement management process has been elaborated in this report. Definitions of risk and procurement management processes with respect to ERP Implementation project introduce various important aspects about their importance within the project development life cycle as well as for the implementation stage for the project. The risk management and procurement management strategies are generally introduced by the project manager for solving various issues involved during the project management aspect. Higher degree of uncertainties reduces the chances of successful completion of the project. Therefore, risk and procurement management are two important concepts that can provide the project manager right choice of actions with the help of which they can proceed further for developing the successful project results for ERP Implementation.

 

References

Caisse de dépôt et placement du Québec | CDPQ | Long-term institutional investor | Asset manager. (2014). Risk management. [online] Available at: https://cdpq.com/en/investments/risk-management [Accessed 10 Feb. 2017].

Ji, X., Huang, S. and Grossmann, I.E., 2015. Integrated operational and financial hedging for risk management in crude oil procurement. Industrial & Engineering Chemistry Research, 54(37), pp.9191-9201.

Kendrick, T., 2015. Identifying and managing project risk: essential tools for failure-proofing your project. AMACOM Div American Mgmt Assn.

Mahapatra, S., Bisi, A., Narasimhan, R. and Levental, S., 2016. Integrated Contract and Spot Market Procurement by a Risk-Averse Buying Firm. IEEE Transactions on Engineering Management, 63(2), pp.151-164.

Nojavan, S., Mehdinejad, M., Zare, K. and Mohammadi-Ivatloo, B., 2015. Energy procurement management for electricity retailer using new hybrid approach based on combined BICA–BPSO. International Journal of Electrical Power & Energy Systems, 73, pp.411-419.

Phillips, J., 2013. PMP, Project Management Professional (Certification Study Guides). McGraw-Hill Osborne Media.

Sadgrove, K., 2016. The complete guide to business risk management. Routledge.

Schwalbe, K., 2015. Information technology project management. Cengage Learning.

Segerberg, P., Simchi-Levi, D. and Rothstein, A., 2014. High performance in procurement risk management.

Sorunke, O.A., Omojola, O.S. and Adeleke, E.O., 2016. The Imperative of Risk Management Plan in Curbing Corruption in Public Procurement System in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 6(2), pp.134-139.

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