Implementation of Enterprise-Resource Planning Systems - Research Paper Example

? Implementation of ERP Systems Implementation of ERP Systems Obstacles experienced during implementation ERP systems areconsidered essential information systems for survival of many companies. An ERP system is a package of business software designed to automate business processes, ensure availability of data and provide real time access to information. ERP implementation has occurred across many business sectors such as banking, insurance, manufacturing, telecommunication and many more. Universities and colleges have also incorporated ERP systems within the education sector. Implementing these systems introduces flexibility within an organization and eases expansion process. Information is essential for business transactions and ERP systems introduce a centralized source of information. An improved information and communication technology system has led to convergence of global business activities. Many global organizations have incorporated ERP systems to improve their global business operations. Globalization, acquisition, mergers, and aging legacy systems have increased ERP popularity (Harwood, 2003). Companies face several complexities in the process of implementing ERP systems. These complexities affect both global and domestic organizations. These complexities are technological or cultural including organizational culture. The reason for ERP implementation in most companies is to provide a solution to Y2K issue (Deloitte, 1999). Companies conduct a gap analysis to determine necessary changes for the company or the ERP system. Some of the impacts of the system in the organization are often underestimated, which makes the company to struggle with implementation due to lack of enough resources and inexperience with such projects. These barriers become insurmountable for most companies (Calegero, 2000). Companies set deadlines by which the legacy systems have to be replaced. Some of them fail to understand the complexity of these systems, which leads to under optimization of business processes during implementation (Davenport, Harris and Cantrell, 2002). They solve the problems associated with legacy systems but fail to achieve maximum benefits expected from ERP implementation. This causes a need to revisit the implementation process in order to leverage investment and experience the full range of benefits. Revisiting the implementation process requires more investments and more time is required for reimplementation. Underestimating changes leads to poor strategies for accommodate new business processes. This makes an organization fail to achieve full potential. Global companies implement ERP systems to provide a centralized source of information in order to streamline business activities. These systems have standardized global templates that lack flexibility and fail to account for cultural differences. Global companies prefer this standardization and adopt these global templates to improve their information flow (Liang et al, 2004). Implementing these systems in some countries has a negative impact due to cultural differences. Most ERP systems are made in Europe and are based on the rules of mature economics. Implementation of these systems in China conflicts with their relation based governance system. As noted by Sheu et al. (2003), ERP systems have a western name format that differs with the format found in eastern countries. The use of standardized templates lacks flexibility for eastern formats. Majority of reports and transactions through ERP systems are performed online. Asian workers prefer paper-based reports as per their cultural believes. Alteration of cultures causes dissatisfaction to employees and takes several years to become effective. Global companies face language issues when implementing ERP systems. Early ERP systems did not support a Unicode character format. This is a standard where each character from a particular language is represented using a standard format. This allows an ERP system to accommodate different languages. Some of the companies try translations, but this introduces another complexity due to cultural issues that have to be reflected in the system. For example, naming conventions vary depending on the country of application (Paluszek, 2006). Asians have a different name formats from Americans and Europeans. Systems designed in western countries may fail to accommodate naming conventions present in Asian counties. Several Indonesians have only one name while Koreans prefer name titles. Employees might use western language without understanding its’ full meaning. They lack the willingness to seek clarification and come into an agreement without understanding the full context. Managers have to reaffirm messages derived from information databases and new data introduced into the system. ERP implementation is cost intensive. The information platform requires millions of dollars to implement depending on the size of the organization. This can reduce the short term profit margin of the business organization. Implementation processes occur in various stages and may take several years before completion. The management requires budgetary allocations for the whole project. A new system requires an evaluation of existing infrastructure and implementing possible upgrades. ERP systems require servers, workstations, and internal networks. Companies have to upgrade old hardware systems to current systems that can handle complexities brought about by ERP implementation. A centralized data management and retrieval requires server hardware with high processing speeds and can store large amounts of data. The internal network has to handle large amounts of data and high bandwidth and data rates are required. These system upgrades can be costly especially for large domestic and global organizations. The implementation process introduces new changes to the conventional business processes. An organization requires an IT department if none existed before or expanding the current department to incorporate the changes. These changes increase implementation expenses in the organization. Every organization has a culture that has to change to accommodate new systems. Process and organizational change are perceived to be the most challenging issues in ERP implementation. Many employees lack an understanding of the new capabilities brought by the software packages. This calls for intense employee training. Human beings resists change naturally and have to be convinced about the advantages brought about by ERP systems. Organizational culture refers to employee habits and tradition of performing business activities. Automation of business processes and information management changes the working tradition in an organization. Most employees take time to adopt these changes and understand the advantages of automation. Organizational leaders require strategic plans to manage changes introduced by the system. Employee training and familiarization with the new system is necessary during early implementation stages. Change management in several organizations is a crucial issue that limits benefits realized from ERP implementation. ERP systems undergo software upgrades, which creates a necessity for constant familiarization with the applications and constant upgrades to cope up with the changing business environment. ERP software vendors have a wide range of software packages that provide different services. These packages have different levels of customization, which may not satisfy business requirements for some organizations. Product evaluation is necessary before commencing on the implementation process. The implementation team has to carry out an assessment of business processes and choose a scope, size, and type of system to implement. Intense consultation is conducted within the organization and across the industry. The selected software has to match organizational goals such as expansion with minimum changes. A scalable and flexible system is necessary to allow for future expansion including globalization. Requirement identification process may take too long due to the wide range of elements to be considered. The implementation process therefore takes several years before completion. In some cases, the implemented requirements may not be the correct and necessary requirements. The organization is forced to reverse the implementation and start a new process. For example, Allied Waste industries rolled back the implementation process after spending $45 million in a $250 million project. This is as a result of poor identification of requirements and results to large losses for the organization. An organization can also implement a system that does not support long term organizational goals. Typical problems Faced by Companies Internal distribution of ERP is a problem faced by many companies. Recipient units exhibit low motivation and weak absorptive capacity. Integrating ERP may require adjustments in the organization structure, which is not received well by many employees. Initial launch of the system faces resistance (Xu, Tjoa and Chaudhry, 2008). This is brought about by lack of employee willingness to accept the changes, and lack of enough knowledge about the system. Managers and workers develop tight relationships with the old technology and may fail to recognize the need of the new features. New systems differ considerably from old ones and employee knowledge about the old systems may become obsolete (Wallace and Kremzar, 2001). This is solved by involving employees in the design process. The management collects ideas from the employees regarding the new system, including additional recommendations. Gradual implementation of the system helps employees change to the new system. ERP systems are rolled out in phases, which give employees a chance to accept the change. Gradual conversion from the old systems to the new ones overcomes the cognitive and cultural sediments from employees. The learning process takes time as stated by Sheldon (2005). ERP systems contain additional technologies and employees require training for competence. Learning becomes difficult due to familiarity with the old system and reluctance to accept changes. Employees take a long period before they can use the new system comfortably. The installations are documented, and these manuals given to managers. They can then organize for training sessions for their department employees. The installation process is gradual, and employees are given a hands-on experience on the system. This improves their learning process. The organization can also utilize the experience of implementers for customized learning experiences. Learning processes are stimulated by knowledge sharing and communications by the users and managers. The company structure also affects the implementation process. Some organizations have decentralized structures and plants act as profit centers. Local plant managers have autonomy over the business activities of their plants. Installing the system requires centralized management of all business units. Plant managers are therefore required to show compliance to instructions and commands from the top management. Some of the local managers may lack commitment to the system. They find it hard to attach meaning to the system. They also get the feeling of loss of management control over the local branches. This requires more effort from the central office to help the implementation phase. The top management neglect this help by assuming local managers can optimize the use of the system. The branches may develop conflict of interest with the corporation. The system should be driven locally. Branch managers should be given the responsibility of designing the effects of the processes in the local plants. ERP systems are irreversible and they require enormous financial commitments both for external systems and solutions created in the organization. These costs are committed early in the process, without prior testing of the actual business settings. These commitments involve contract signing, planning switching processes, and other alternative methods. These commitments create s costly path that is hard to exit. Employees require training on the new system which cannot be undone. Every improvement made to the system requires learning and unlearning by employees. Organizations may be unwilling to invest in new systems frequently due to the costs incurred. Due to learning involved with these systems, infusing new competitive knowledge is difficult. Implementing the process requires a lot of consultation between the management and shareholders. Once the implementation process has begun, halting it or changing to another system requires more consultation. Data management is also an issue. Company data is stored in a central database server that connects to all departments and is accessible to all employees. The company requires to transfer data from the old systems such as excel spreadsheets to the new system. This process is time consuming and some data may be misrepresented. Any misrepresentation of old new affects the process and consumes a lot of time for analysis and correction. The organization faces the hardship of managing data integrity. Employees can access the system and tamper with stored data. Many organizations support telecommuting. This offers remote access to the company database by mobile workers. Information flows through the internet and middle men can access and filter confidential corporate information. Employees can also access the database beyond working hours and tamper with stored information. Administrators are required to set up security measures such as VPN technology to protect information flowing through the internet. Passwords and usernames need to be changed regularly especially for employees who cease to work for the organization. Several companies are faced with selection problems. Different organizations require different systems depending on their size, production rate, financial ability, and technical knowhow. Managers must choose a system that will match the organizational goals and visions. The size and type of the system is determined by the infrastructure present in the company. An organization must choose a scalable system. It should accommodate future expansion and growth of the organization. The internal network must be analyzed to determine the type of system it can accommodate. The network includes servers, workstations, and the speed and bandwidth of internet. This is essential for remote access by mobile employees. These conditions affect the profitability of the system. The organization can improve the performance of their internal network by upgrading servers, workstations, and internet connections. This upgrade allows adoption of more complex and diversified systems (Leon, 2008). New Technologies Enterprise application integration (EAI) is emerging software generation that enables integration of intra and inter-organizational systems. It combines traditional technologies such as database oriented middleware and new EAI technologies such as adapters and message brokers. This combination supports efficient incorporation of information systems. More data, objects, and processes can be accommodated in this integration. E-business solutions are also incorporated in this software generation. This integration involves transportation and transformation of information between different applications. The rules governing this exchange can be timed, and integrity constraints that determine the success or failure of integration are defined. These constraints and timing provide information security during the exchange process. This integration helps data flow between companies with different and incompatible IT infrastructure. A company can have different ERP systems from different vendors. In some cases, these systems are incompatible, and information exchange between the applications is impossible. EAI process offers a platform for integrating these systems to facilitate information flow instead of changing the ERP systems. Data extracted from one ERP system is transformed to XML codes and transmitted to the target application (Boreham and Parker, 2008). Electronic business encompasses e-commerce, e-business, and e-partnering. This process is aimed at reaching the customer. It leverages an internet based channel for sales and marketing and making purchases more efficient. With the development of XML, web-based technologies can exchange information effectively. It utilizes open standards to connect suppliers and customers along the value chain. E-partnering creates a relationship between business vendors to share business improvements. ERP systems focus on information flow within the enterprise. Web based technology facilitates the flow of information between businesses, consumers, and business to shareholders. However, this process requires a well-structured internal ERP system that can interface external business partners, customers, and suppliers (Unhelkar, 2009). Web based technology enables constant interaction with value chain partners. The company derives competitive advantage from the ability to relay information quickly from an integrated value chain. Organizations buy and sell products over the internet. ERP functions as the internal information hub and the internet extends the internal information infrastructure to the external business world. This opens the organization to new strategic opportunities. ERP systems will help the company manage internal information while internet connections provide access to external hosts. This integration is essential for smooth flow of information between customers, suppliers, and customers. Modern ERP systems are integrated with a web browser that enables users to access the system remotely. They are quick and simple to reconfigure, and have interfaces that require no training. This integration provides real-time data access and offers interactive features such as real time chat (Reynolds, 2009). Advanced planning and scheduling (APS) systems are designed to develop optimized plans of production lines, plant, or supply chain. They receive data from databases and ERP systems. Their functionality ranges from strategic, tactical, to operational. These systems use mathematical algorithms to identify solutions to complex planning problems. These problems involve materials, labor, and capacity resources. They are also suited to solving problems associated with supply chain management. They focus on critical constraints such as machine capacity, analyze different models, and highlight exceptions and recommended courses of action. Companies require these systems for globalization, shorten the product life cycles, and maximize the effectiveness of supply chains. ERP systems have information flows, but the planning logic is based on manufacturing resource planning (MRP 2). APS software provides a better supply chain management package. Electronic supply chain management (e-SCM) is the use of technology to enhance business to business processes. It improves speed, agility, customer satisfaction, and real time control. It also deals with cultural change and changes in business management policies. Information visibility across the supply chain is a form of inventory management. This requires strict policies, discipline, and continuous monitoring. The supply chain is integrated within the company and across trade partners, logistics providers, and distributors. The business organization acts as the hub. Visibility, access, and timeliness form the core of the value chain integration. Companies develop collaborative business systems and processes that can spread beyond the company boundaries. Integrated production and distribution utilizes real time demand and strategic partner alignment. Collaborative planning requires buyers and sellers to have a single demand forecast and supply plan to support this demand. These projections require regular updates. Collaborative development of products involves product design and development techniques across multiple enterprises. When customer purchases occur at one company, that information is uploaded to the ERP system. The system makes necessary adjustments and the data uploaded to the company extranet. The data is then updated in the ERP systems of collaborative companies. The end result is real time update of customer demands to the raw material supplier. The E supply chain provides a continuous link from the customer to the manufacturer. Organizations achieve a balance of customer responsiveness and low levels of inventory (D’atri, 2009). Journal Review The journal seeks to explain the integration of ERP and Supply chain information. Research conducted by Abbas and Amin (2011) shows that with the increase in business information levels, the business environment has become more dynamic. Organizations need to adapt to these dynamics for survival and development. They require innovative systems that will enable them increase their profits and promote their response to customer needs. ERP systems have been adapted to create efficient information systems. They are aimed at integrating information and knowledge in an organization. Many organizations in various industries have adapted ERP and supply chain management (SCM). ERP systems enable organizations integrate and computerize financial matters, project management, and inventory management. SCM helps establish a chain of suppliers, and customers. The management of an organization can facilitate the relations between customers and suppliers through information sharing. Strategic decisions in an organization are based on the stored information in the organization. Due to the complexity of the business environment, customers and suppliers are considered as part of the company structure. Therefore, it is vital to establish and integrate information between them and the various departments. Date sharing improves placement of orders to suppliers and speeds up the delivery process. ERP is one of the most significant tools to promote quality of service and gain market success. Poor implementation of information systems can fail to integrate the business processes. Information may become incompatible, which reduces the growth capability of the company. ERP is a software package structured to integrate information processes and operational fields. Knowledge and information have become the most important issues in the competition sphere. Therefore, companies require information systems that cooperate and coordinate relations with each other and foreign suppliers. Such systems facilitate information flow, integration, and sharing. The main advantages of ERP systems are: I. The system provides a sharper view of MSC. This results in adaptation of decisions that increase profits from management supply chain. II. ERP systems have real time information updates. Changes in information are propagated immediately to all relevant departments. These changes can also be propagated to business partners and suppliers. III. ERP systems have more supporting technologies. Internet technologies enable information sharing between different ERP systems. This gives an advantage over the old information systems. These systems have disadvantages such as: I. They suffer from low analysis capability. The software is designed in a specific way regarding the skills of the coder. This makes the system focused to specific operations. II. The systems are expensive and difficult to implement. The whole system requires millions of dollars to design. Implementation process occurs in phases and may take several months or years. Different vendors have different modules, which might be incompatible. Company employees especially the senior management may be reluctant to adapt to the new system. Changes occur in the organizations due to the new system, which may cause employee dissatisfaction. Implementation requires learning and abandonment of the legacy systems. Employees may be reluctant to embrace the new changes. The implementation also requires restructuring the business processes. Information regarding business operations has to be fed to the new system the organization structure may be reorganized to accommodate the department in charge of implementing and maintaining the system. With the invention of internet technologies, the supply chain was reviewed and restructured. The flow information was networked. This helps producers, suppliers, and customers to contact each other. Modern supply chain system reduces costs by sharing information. Emergence of E-commerce has added foreign suppliers to the supply chain. The supply chain makes a cycle that starts from customers and ends at them. The supply chain contains two currents; physical and intangible. The physical current includes raw materials, distribution, and transportation. The intangible currents include information sharing and financial processes. These currents unify and analyze the interaction between the entire elements of the supply chain. Coordination between the supply chain members is the most important element of SCM. This information helps the management implement intelligent strategies. The chain shares information about the products to be purchased, the price, and the delivery process. Demand information contains the quantity, price, and location of customers. This information must be precise, correct, and accessible. Managers access the information and can align their visions and goals according to changes in demand and supply. This information can be propagated to all departments. This work is faced with several limitations. Companies are not willing to share their information with other organizations or business partners. ERP systems offer the platform to share information but some managers may withhold some information to maintain their competitive edge. They are also faced with the difficulty of choosing data to share with partners. The company cannot share some crucial information with partners. Some decisions regarding operations of partners may lack support from some organizations. This requires cooperation models between suppliers and purchasers. Different institutions have different policies. These policies govern the operations of the institutions. In some cases, there is a lack of support for integration of operation policies between partners. There is a significant role of information in the supply chain. As shown in the previous discussion, ERP and web based technologies provide a platform for information exchange. The supply chain can be managed through the internet by utilizing e-SCM system. ERP systems integrate the information and make the business more conscious of their operations. The shift to e-commerce and business to business relations force ERP providers to re-assess their models. Real time updates of customer demands and integrated demand projections improve the competitiveness of a business. ERP systems providers require a more flexible system to accommodate changes in the business environment which create different business needs. Re-engineering of business processes improves the mechanisms and procedures to conduct the business. Different organizations have different vendors of the ERP systems. This requires integration of different applications to ensure a constant flow of information. References Abbas, T. and Amin, A. 2011. The Role of Enterprise Resources Planning (ERP) in the Contribution and Integration of the Information in the Supply Chain. European Journal of Social Sciences, 20 (1),pp 16-25. Available at http://www.sites.google.com/site/uabc442sia/assignments/ensayotheroleoferp25feb2012/The%20Role%20of%20Enterprise%20Resources%20Planning.pdf [Accessed 25 May 2012]  Boreham, P., Parker, R. 2008. New Technology @ Work.Routledge, London. Calegero, B. 2000. Who is to blame for ERP failure?" Sunsaver. D'atri, A. 2010.Information systems: people, organizations, institutions, and technologies. Berlin, Physica-Verl. Davenport, T., Harris, J. and Cantrell, S. 2002. The Return of Enterprise Solutions, Accenture. Deloitte. 1999 “ERPs second wave,” Deloitte Consulting. Harwood, S. 2003. ERP: the implementation cycle. Oxford (UK), Butterworth-Heinemann. Leon, A. 2008.ERP Demystified. New Delhi, Tata McGraw-Hill. Liang, H., Xue, Y., Boulton, W., Byrd, T. 2004. Why western vendors don’t dominate china’s ERP market. Communications of the ACM, 47(7). Reynolds, G. 2009. Information technology for managers. Boston, Mass, Cengage Course Technology. Sheldon, D. H., 2005. Class A ERP implementation integrating Lean and six sigma. Boca Raton, Fla, J. Ross Pub. Sheu, C., Chae, B., Yang, C. L. 2004. National difference and ERP implementation: issues and challenges. The international journal of management science, 32. Srinivasan, M. n.d. E-Business and ERP: An Evolving Relationship Available at http://www.personal.psu.edu/users/m/u/mus10/ERP%20and%20E-Business%20Working%20Paper.pdf [Accessed 25 May 2012]. Unhelkar, B. 2009.Handbook of research in mobile business: technical, methodological, and social perspectives. Hershey, PA, Information Science Reference. Wallace, T. F. and Kremzar, M. H., 2001.ERP: making it happen : the implementers' guide to success with enterprise resource planning. New York, Wiley. XU, L. D., Tjoa, A. M. and Chaudhry, S. S. 2008. Research and practical issues of enterprise information systems II. New York, Springer. Read More