Difficulties in Enterprise System Implementation - Case Study Example

Difficulties in Enterprise System Implementation: The Case of Millicent Homes By (Student’s Name) Foundation Course- Tutor: (Instructor’s Name) Institution’s Name Department Date Difficulties in Enterprise System Implementation: The Case of Millicent Homes Executive Summary Enterprise Resource Planning (ERP) has become reputable software in the business industry. Given the prevalent upsurge in market share, majority of the firms in the United States have implemented the system. The intent is to attain competitive advantage and sustainable growth. Despite the innumerable years of practical experience and academic research, difficulties in the implementation of the ERP continue to persist. These problems are evidenced by many project failures around the globe. This case delineates issues encountered during and after the implementation of Systems Applications and Products (SAP) at Millicent Homes. Millicent Home’s is a residential construction company in the United States. The company sought to change its operating system by adapting to the modernized, complex, and reliable ERP. Along the way, a number of inalienable challenges that expose the company to significant losses were highlighted. The cause of the problem revolves around inadequate research seeking to unearth Millicent Home’s requirements. It is prudent for Millicent Homes to undertake conclusive research to avert the salient challenges. Since SAP is a reliable, timely, accurate, and efficient ERP working for other multinational corporations, Millicent Homes should not despair amid the prevalent challenges. This paper highlights the individual problems and avails amicable recommendations that would mitigate further loss and provide practical solutions. Introduction The ERP market is predicted to double in the next five years. The estimated long–term growth rates in the ERP solutions are a stratospheric 36 percent to 40 percent. Companies could spend hundreds of millions of dollars in the implementation of the ERP solutions. Intriguingly once an ERP system is implemented chances of going back are very limited as to undo the changes is too expensive. An ERP implementation is among the riskiest projects that an organization may undertake. The empirical research shows that about 65% of the ERP in both Europe and the United States take more than a year to complete and this goes for a cost of roughly $5 million (Robertjacobs & Tedwestonjr, 2007). Due to the nature of ERP projects, a direct effect on the organizations structure is inevitable. Estimates of the ERP implementation failure are staggering with the range of over 60 percent and the losses ranging in millions (Umble, 2003). Additionally, the risk factors in ERP implementation are not functional or technical rather the so-called soft factors. This includes the organizational factors such as management support and effective communication. There are risk factors that arise from the relationship between the organization and its implementation partners. They include overpromising on the ERP vender and lack of detailed specifications for the configuration of custom development. Functional or technical issues that may be encountered during the implementation may lead to changes in organizational roles and increase in the employee resistance to change. This might augur well with the organization as individual abilities of the members in any organization play a critical role in the implementation success (Park, 2005). Gaps may arise in the implementation procedure for a number of reasons including differences in the business process. This is gap will be realized between the organization and the ERP system. In this case, the organization may is obliged to adapt its processes to conform to those in the ERP system or in customize the system. This is because most ERP packages are general since they are meant for different industries. Implementation of the ERP requires careful exercise in strategic thinking, planning, and negotiations among stakeholders. It is essential for firms to be on the lookout for certain critical issues before implementation (Ching-Chin, et.al, 2010). When right considerations are in place smooth rollout and realization of full benefits emanating from ERP solutions are inevitable. Case Background Millicent Homes is a builder of single-family homes, operational in the America. In 2000-2005 Millicent Homes was in operation producing an average of 4,000 homes a year. This generated annual revenue of $1 billion. The company attributed two main characteristics to its competitive edge. First, the company purchased land within the city but not in the city, the company then divided the land into lots, which were marketed as upcoming cities. Second, Millicent Homes had an endearing brand name in the construction industry. Millicent Homes won Americas Best Builder attributed to quality homes and sustained growth rate. While the business was thriving, operations were crumbling. The accounts office and the purchasing department were overwhelmed by the growth. Sales people and builders behaved in unethical manner. Additionally, dissatisfaction with the information systems was prudent which supported the entire business operations. Millicent Homes had two primary systems that were in operational. The first system was the desktop-based software package Computers For Tracts (CFT). The CFT was used to generate paper work for customers when they purchased houses and all regal documents. The second system was an in-house development, referred as AS/400-based system. It supported the entire corporation with the exemption of sales. The industry used AS/400 where each company had its own library for data storage negating sharing. The employees did not AS/400 because it was difficult to use. Additionally, AS/400 was unreliable and outrages were common. To counter these inconsistencies in the current system, Millicent Homes decided to undergo a significant reengineering and systems implementation project (Geisler & Rubenstein, 2008). The project steering committee noted that, to attain sustainable development change an overhaul was inevitable. Enterprise Resource Planning system would replace the existing system in consolidating data across the organization. This was to standardize the business process across the markets. After evaluating the available options and consulting with the stakeholders, Millicent Homes decided to implement SAP, the market leader in ERP software. Project Scope and Structure Millicent Homes decided to implement the system in phases. The pilot project was set up at the Atlanta division. This was because the company headquarters are in Atlanta. This would support the senior leadership and the information systems (I/S) department. The second reason was pegged on the fact that, Atlanta needed the overhaul as profit margins were lower compared to other divisions. The senior management in the company felt that if SAP would fix Atlanta it could work for other division. Jim Slager was the project manager because of his experience and knowledge. SAP was chosen primarily because of its breadth of functionality. The initial scope of the project for the Atlanta division was a wide suite of SAP modules including sales and distribution and materials management (FI) and service management. Additionally, SAP had begun developing an engineering and construction (EC) module. The intent of this module was to provide functionality in the construction industry such as management in land and neighborhoods. Millicent Homes decided to adopt SAPs business warehouse (BW) to handle reporting needs. This data warehouse system extracts data from the SAP system database. The data extracts are then used to generate static or dynamic interactive reports for users. After purchasing the software, Millicent Homes contracted SAP as the primary implementation partner. SAP offered to complete the Atlanta implementation for a fixed $8 million covering hardware, software, and consultation (Unknown Author, 2004). Issues Encountered In the Implementation Phase While implementing SAP in the Millicent Homes business, there were salient challenges encountered by the responsible team. It is worth indicating that the challenges were both technical and operational (Momoh, Roy & Shehab, 2010). Additionally, the ERP implementation was not only cumbered by operational problems but also attrition issues emanating from the workforce were prevalent. Functionality of SAP During the implementation of SAP or any ERP system in any organization, it is vital to map out the entire process. The essence of this undertaking is to ensure that no process or activity however insignificant is omitted (Al-Mashari, 2003). Similarly, the implementation team had to compile all activities under Millicent Homes operations. It was during this time that some gaps illumined but since none was viewed as consequential, they were ignored. As expected, the configuration phase was complicated because of the gaps. For instance, printing of forms is among the vital processes in Millicent Homes. This is because of the fact that, house sales amount to legal contracts hence the ability to print and reprint paper work is consequential. This function in itself forms a cornerstone to the organization as a copy is printed for every new client. SAP does not offer this momentous function as it was omitted and instead it generates a new copy each time printing or reprinting is done (Robertjacobs & Tedwestonjr, 2007). The problem emanates from the fact that, there is no standard method to indicate changes to an order, as history is non-existent. Additionally, configuration cannot be traced to a house relying on the date indicated, as it is misleading. Additionally, the sales agent’s software was not operating accordingly. This is because, each time a change was made in the CFT, sales agents would print the changes in isolation. With Sap, the system could not inculcate this endeavor as a standard procedure hence problematic. SAP is a complex system that handles multiple functions at a go. It is hence questionable as to why simple systems execute functions better that SAP. Loading Data Another functionality problem emanated from the fact that, data was periodically loaded into the business warehouse. The BW team sought to load the data on a timely basis during the implementation stage (Momoh, Roy & Shehab, 2010). With the new development, many employees elicited discomfort indicating that the new method was inconsistent hence inconveniencing procedures. For instance, changes made during the day were only visible in the system the following day after they were loaded the previous night. Testing of reports was also cumbersome, as the any change made on the data would have to go through the entire cycle. Data loading time took more than hour for a single report and this was an issue of imperative concern. SAP was expected to work efficiently producing customized reports expeditiously (Park, 2005). During the implementation phase, the BW team indicated that their system could not provide timely, accurate, and reporting. This implied that SAP was vital, as it would harness these inconsistencies. Conversely, the implementation team failed to recognize these inconsistencies hence they were not indoctrinated. The BW team members thought that the issue was clear or common knowledge thus they did not highlight the same to the implementation team members. Purchase The purchasing function was also problematic during the implementation phase (Chou & Chang, 2008). It is worth noting that, the purchasing process was more robust and formalized by using SAP. Compared to the current AS/400 purchasing system, SAP is far way more complicated necessitating a new purchasing department. For instance, creating a new order with regard to Millicent Home’s operations requires a minimum of five screens. Similarly, when creating the same order ASS/400 requires one or two screens (Momoh, Roy & Shehab, 2010). The installation of SAP will duplicate the purchasing job roles by threefold. This implies that the employees will bear cumbersome tasks than before in the event that SAP is inculcated into the purchasing department. Sales The sales function in Millicent Homes would be significantly affected by the implementation of the SAP system. This is because, in each neighborhood where Millicent Homes constructed houses, there was a model house that doubled up as the organizations office. First, the office had no internet connection hence the sales agents only used computers for printing documents and feeding data into the CFT (Kumar, Pollanen, & Maheshwari, 2008). With SAP, a network interconnection is a prerequisite. The first phase evidenced slow internet connections, which derailed the sales agents significantly. Additionally, the CFT was usable for two main functions. The first function was to generate sales contracts meant for houses. The sales agent had the mandate to display available options that consumers wanted. After a few selections, the consumers would proceed to the design center where all options are availed before making a conclusive decision (Mehrjerdi, 2010). SAP uses a Variant Configurator, which requires more options to be selected before creating a sales order. This makes the system much more complicated for both the sales agents and the clients. Unlike Sap, CFT used print marketing and follow up letters for the prospective clients. Similar to other inalienable challenges emanating from SAP, the system hindered other clients with job performance. Attrition Attrition was another immutable challenge sprouting from the SAP implementation. Employee turnover was not as high during the first phases. The project lost the consultant who was replaced by a lousy accountant resonating to a worse scenario. In June 2002, a huge blow faced Millicent Homes during the SAP implementation procedure. This is because, during this time the Unit Report that indicates the number of homes built, sold, started and those in process was due (She & Thuraisingham, 2007). The Unit Report was an initial mandate of the BW team who under conclusive analysis had affirmed incapacity to produce the same. According to the SAP custom development manager, this was not achievable and the pressure emanating from the company seniors was reprehensive. Stress Testing The implementation team to affirm workload capacity under that SAP system conducted stress testing. This necessitated high volume transactions and generating standard SAP reports then comparing them to the BW reports. Secondly, the implementation team obtained twenty devices configured with the builder’s confirmation process (Unknown Author, 2005). Two vital issues resonated from the stress test. First, an erroneous load program led to failure in the report issuance after five minutes. Secondly, once the devices were configured, the SAP system stopped. The stress test depicted that, the SAP system would not handle a handful of synchronized hand held devices. Issues Encountered In the Cutover and Go-Live Phases As is the case with any other ERP installation, the preceding the cutover primarily entails end user training, customizations and data conversions. After working on extensive time schedules, the implementation team completed the task on time. It is worth indicating that some reports previously assigned to the earlier systems were lagging behind schedule. Most of these reports were insignificant and could not hinder business operation. The only blow to the cutover was that master data conversion was erroneous (Jack, & Kholeif, 2008). This implies that the data had imperative inconsistencies between the SAP system and the AS/400. With the help of volunteers, temporary contractors and other employees, the implementation team managed to convert the date manually after few weeks. The scheduled cut over date was on 1st September 2002. The noble idea was for the implementation team members to position themselves strategically to negate any surfacing problem. To their detriment, extensive issues emerged surpassing their expectations. The builders were the first lot to undergo the problem. The handheld devices programmed to use SAP were recorded as extremely slow taking a minute or more to load from one screen to the next. A single house had 140 tasks and the device could only display 10 at a time. During the testing period, data was significantly less hence the devices executed the duties faster. As data increased, speeds decreased and for any new development, the builder had to travel to the SAP offices for synchronization (Momoh, Roy & Shehab, 2010). It was apparent that builders are spending too much time on computer screens as opposed to building houses. After deliberations, the issue was fixed partly indicating that were was a chance it would revert casing a snarl-up in the entire system. Sales agents availed a complaint indicating that SAP system extensively delayed the time required to input a sale. A process that took five minutes using CFT took more than an hour while using SAP. The design center used an hour on normal occasions but using the SAP system, four or five hours were inadequate (Robertjacobs & Tedwestonjr, 2007). Apart from the delay, connectivity was a prerequisite when using Sap. This implied that any network fluctuation rendered the entire process worthless. The connectivity issue emanated from the fact that, SAP handled significant data loads that at times severed connections. It would take months before fully resolving the connectivity issue (Ebook Library, 2013). Millicent Homes faced a severe detriment from the SAP system with the vendors. It is worth noting that the builders rarely did activity confirmations in a timely or accurate manner. This implies that payments to the vendors were not triggered. Majority of the vendors were operating small business that depended on every paycheck for business operations to continue. This led to confrontational scenarios as the vendors demanded paychecks (O'Leary, 2004). With the new system, accountants were unaware of how to make emergency payments hence necessitating help from the Millicent Home’s bank. Some of the vendors vowed never to work with Millicent Homes anytime in the near future. Recommendations With the passage of time, change is inevitable. This implies that regardless of the procedure, it has to changed for the better once in a while. Scholarly articles affirm that changes are at times cumbered by severe challenges. Millicent Homes is an organization seeking to indulge an overhaul change in the operating system (Collins, 2009). This is by dumping the old systems for a new modernized system, which accord remarkable glory from the global market. It is prudent to indicate that there are inalienable problems facing Millicent Homes. These challenges as indicated above emanate from the indoctrination of the new system. The principal cause of the problem revolves around the fact that, Millicent Homes management as well as the implementation team carried out insignificant research. Any change process requires conclusive research to identify critical areas that will amount to failure. The first recommendation is that Millicent Homes requires undertaking a holistic research on the corporation’s activities. This will alleviate many of the difficulties combating the ERP. For instance, majority of the implementation problems emanate from the fact that the first step was inadequate hence resulting to failure. It is notable that Millicent Homes is a growing corporation that has numerous activities. SAP is an ERP garnering remarkable reputation from the world round. This implies that the ERP works for other corporations some being expansive than Millicent Homes. It is apparent that as it is, the implemented SAP inadequately meets the company requirements. This is because of the fact that, the research stage was inefficiently executed. In the event that this changes, SAP will be implemented corrected ensuring that speed, accuracy, reliability, and effectiveness will be restored. Employees are a significant element in any organization. Millicent Homes requires a proficient workforce that has the zeal and capability required to execute job roles. This implies that it is vital for the organization to engage a reliable workforce that has the responsibility to undertake duties assigned accordingly. Scholars have it that employees resist change due to an array of reasons. It is imperative for the management to ensure that the change is comprehensive seeking to minimize resistance. This includes engaging the workforce in training to ensure that they are well vast with the new software. This will negate challenges revolving around speed, accuracy, and reliability. In the event that the employees accept the change, the ERP will be acceptable, as it will be indoctrinated in Millicent Home’s culture. Given the inalienable challenges that have been facing Millicent Homes, losses are inevitable. For instance, the company has lost a fair share of vendors given the unreliable payment system. This would be negated by affirming the remaining suppliers the incidence will not reoccur in the foreseeable future. Additionally, the company should engage in comprehensive marketing to regain client’s confidence. Given the improper services offered by employees, it is vital to undertake aggressive marketing antics seeking to retain and expound on the market share. From the recommendations above, it is prudent to indicate that, Millicent Homes should adopt the SAP operating system. Given the exorbitant financial outlay already relayed, time, expertise, and other resources, it would be illogical to give-up on the project. This is because of the fact that, the remaining part is achievable in the event the recommendations are inculcated accordingly (Jones, 2007). Millicent Homes is a corporation in the verge of expansion and a well implemented ERP will only boost the success stream a notch higher. As indicated, the benefits indicated in the review literature from scholarly articles outweigh the risks entangled in implementing an ERP system. The management should have its reservations but forge ahead towards achieving excellent implementation and operation of SAP in its operations. Conclusion It is apparent that Millicent Homes is facing a momentous challenge that affects the entire organization. After weighing the risks and benefits, it is prudent that amending the challenges is a wise decision. This is because it will amount to significant benefits in the foreseeable future. Review literature affirms that changes are inevitable and hence Millicent Homes should rectify the implementation and cutover challenges affecting the SAP system. In the event that this is well harnesses, the organization will perform excellently in the industry-surpassing rivals. Bibliography Al-Mashari, M. (2003). Enterprise Resource Planning: A Taxonomy Of Critical Factors. European Journal of Operational Research, 146(2), 352-364. Ching-Chin, C., Ka Ieng, A. I., Ling-Ling, W., & Ling-Chieh, K. (2010). Designing A Decision-support System For New Product Sales Forecasting. Expert Systems with Applications, 37(2), 1654-1665. Chou, S., & Chang, Y. (2008). The Implementation Factors That Influence The ERP (enterprise Resource Planning) Benefits. Decision Support Systems, 46(1), 149-157. Collins, R. H. (2009). Salesforce Support Systems: Potential Applications To Increase Productivity. 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