ERP in Digital Transformation - Coursework Example

Case Studies in Digital Transformation Table of Contents Table of Contents 2 Introduction 3 Reason Centrifugal Forces are Stronger than Centripetal Forces 3 Reason 2: Environmental Issues Raising Problems of Staff Retention after Training 5 Reason 3: Problem of Sustainability 7 Conclusion 9 References 10 Bibliography 13 Introduction Theoretically explaining, the ERP system assists organisations to assimilate and build coordination within a range of organisational operations, with an expectation to facilitate a smooth strategic implementation process (Newman & Zhao, 2008). With a similar intention, Gearbox had implemented the ERP system for strengthening its business position to overcome the challenges raised due to its ever-increasing market demand in Asia. Irrespective of a transparent vision and the expected pros of applying the mechanism, in the later phase of its application in Gearbox, various challenges and shortcomings were found associated with the program, causing misalignments in the diverse range of functions conducted by its management team (Reimers, 2004). As noted in Xue & et. al. (2005), managerial failures linked with the implementation challenges of ERP software are mostly related with cultural divergences, technological issues, and environmental effects. Correspondingly, 3 major reasons, liable for the failure of the ERP implementation in Gearbox, have been described in below. Reason 1: Centrifugal Forces are Stronger than Centripetal Forces The basic problem witnessed in Gearbox’s implementation of the ERP system linked to its cultural principles that believed the mechanism to be a mere software package to obtain business benefits by controlling the diverse range of operations (Reimers, 2004). This in turn limited the management team’s efficiency to align its operations in China with its overall goals in implementing the software program (Huang & et. al., 2001). Findings obtained in Zaglago & et. al. (2013) and Sheu & et. al. (2004) also revealed that most organisations fail to gain success through the implementation of the ERP program, especially when performing on an international basis, owing to the gap persisting in the languages, cultures and political structures of the two nations. For instance, Information Technology (IT) officials from the German based parent company of Gearbox were bestowed with the task of training the Chinese IT employees and make them capable enough to proficiently use the R/3 ERP system. However, as the language used in German financial recordings through ERP was quite different from the language used in China, the Chinese users in Gearbox’s IT department were facing massive difficulties in adapting to the training provided, as they had to transform all the data according to the Chinese financial regulation (Reimers, 2004). The training was done to make the employees acquainted with the R/3 version of the ERP software but the training in German financial regulations created complexities in their operations, making the process limited on the efficiency scale. In this circumstance, the centrifugal forces can be observed as stronger than the centripetal forces, determining the chances of success/failure of the organisation when concerning the implementation of ERP. Chien & et. al. (2007) defines centrifugal forces as those drivers, which creates problems in the ERP implementation process and causes inhibitions in team’s overall performance by polarising the members. In the case of Gearbox, the centrifugal forces can be identified in terms of its language and cultural differences from its parent company, resulting in the deficiency of the training process (by its German based parent company officials to its China based IT department). This can be better identified with the application of the DeLone and McLean’s IS success model, which explains six categories under which the success / failure of the software could be assessed, viz. information quality, system quality, use, user satisfaction, individual impact and organizational impact. This model states that the success of any software is dependent on the satisfaction of the users and the company manufacturing it. However, in case of Gearbox, it could be observed that the managers of Gearbox were facing problems in decoding the trainings given by German company officials as per the applicable Chinese regulations when using the ERP system. The company was also facing problems in losing its trained employees, which turned up into a major threat for the company. Subsequently, it was observed that a lack of user satisfaction prevailed in the company, as the employees at the initial stage could not become acquainted with the R/3 version of ERP (Zhang & et. al., 2005). Hence, with the application of DeLone and McLean’s IS success model, it can be assessed that Gearbox had failed in the course of ERP implementation. Reason 2: Environmental Issues Raising Problems of Staff Retention after Training As mentioned above, at the onset, being dependent on the skills and proficiencies of its parent company, Gearbox had to face issues related to the cultural differences underlying the Chinese and the German manufacturing plants, raising the problems caused by centrifugal forces associated with the ERP system implementation. This undoubtedly made the training process of the company slower to prove its effectiveness. However, in the latter phase, even though the training proved effective in giving the Chinese personnel an understanding of the system, retaining the trained members became a challenge for the company, indicating its lacuna in Human Resource Management (HRM). This is another major cause of ERP implementation failure faced by Chinese companies as per Avison & Malaurent (2007), Xue & et. al. (2005) and Zhang & et. al. (2005). The company was making continuous arrangements of training the staff members regarding the use of the advanced ERP software programme in its daily business activities. However, during this course, one of the major problems observed was that the retention rate of the trained staff members increased, as they could bargain on persuasive job offers in the external market in China, unastonishingly owing to their unique set of skills in using R/3 ERP program. According to Leavitt’s model of organizational change, an organization can be treated as a classification of people (the staff members), task, structure and technology (Orlikowski, 1996). In accordance to this model, Gearbox can be observed to have failed in planning its performance structure as the training of R/3 version was allotted to the technology department. There also exists lack of involvement of the people in the entire task of technological integration concerning the R/3 version of the ERP system. For instance, the managers of Gearbox could not make the proper selection of the software at the initial stage where they took a leap over the efficiency of its existing manpower, resulting into failure of its task execution process as well as in the technology phase. Moreover, because the technical department was only provided with training facilities, the people of the other departments are quite likely to face perplexities in understanding their roles and responsibilities towards the entire structure of the ERP task, disrupting the change implementation process at the structural phase as well. It was particularly because of the rising demand for skilled labour force in the IT department in the Chinese labour market, which created a negative impact on the retention of trained employees in Gearbox. Additionally, as a relatively young company in China, Gearbox also had to suffer weak employee loyalty, which added to its challenges in retaining trained employees (Reimers, 2004). To be noted in this regard, as the company was new in China, it lacked employee confidence, which can be noted as a fundamental issue observable in the Chinese culture (Iles & et. al., 2009). Reason 3: Problem of Sustainability Apart from the aforementioned issues witnessed by Gearbox during the implementation of the ERP system, the company officials also had to face certain other problems, which indicate a higher chance of its failure in the future. As mentioned in Aptean (2014), ERP can reward massive growth to a company, aiding it in coordinating the various dimensions of manufacturing and distributing the products throughout its supply chain. Chung & et. al., (2008) also presented the view that structured implementation of the ERP system can facilitate growth of the company by a large extent. In the case of Gearbox, a similar result is observable where the company has been recording massive hikes in its output rate, even surmounting to 100% and imposing massive challenge for the company officials to manage the inventories. Maintaining such growth in the production on a continuous basis undoubtedly requires high level of effectiveness to be possessed by the management team of the company and technical understanding of the ERP system to maintain the inventories at a controllable limit. However, considering the limitation of the company to apply changes efficiently and accordingly, have a well-structured mechanism to the management of company operations as demanded by its output growth rate, the technical deficiency of the management team can also be determined as another major factor contributing to the failure potentials of the project. As mentioned in Xue & et. al. (2005), technical know-how and understanding of the team is much required to ensure the overall success of the company when implementing an ERP process. As per the three factors of Lewin/Schein change theory, i.e. unfreezing, moved and refreezing, it can be apparently observed that Gearbox had unfrozen the level of production in its company through the implementation of ERP. Due to the unfreezing of the production level, the company had a huge hike in its output rate. However, the second level of the production process (i.e. inventory processes) was neither moved nor refrozen. As the company did not make any move towards the refreezing of the process, it could not sustain its inventory effectively. As observed, training was mainly provided to the people of technical department due to which the major focus went on to the production level. Subsequently, the management failed identifying the area of change in the inventory system and take necessary steps for the improvement (Wirth, 2004; Reimers, 2004). However, future sustainability of the program becomes dubious because the company is observably under pressure to manage its inventory levels along with its growth rate. This might result in increasing the gaps between the company’s operational efficiency levels, implying its failure to build coordination between its manufacturing and distribution operations, further increasing the risks of market failure for the company and demanding essential managerial focus. Conclusion Based on the above analysis and discussion, it can be affirmed that potentials of failure are high in case of Gearbox when concerning its approach towards ERP implementation in China. To overcome the issue, it is suggestible that the company focuses on taking assistance of local trainers to eradicate the gaps in the Chinese and the German cultures during the implementation of the ERP system. Conclusively, it is recommendable that the company emphasises the implementation of the aforementioned models for the successful application of ERP to ensure its success, focusing adequately on the various factors influencing its competent performances in China. References Aptean, 2014. Benefits of an ERP System. The Real Advantages of ERP Systems. [Online] Available at: http://www.aptean.com/en/Solutions/By-Application-Area/Enterprise-Resource-Planning-ERP/Resources-Folder/ERP-System-Benefits [Accessed February 17, 2014]. Avison, D. & Malaurent, J., 2007. Impact of Cultural Differences: A Case Study of ERP Introduction in China. International Journal of Information Management, Vol. 27, pp. 368-374. Chien, S. W. & et. al., 2007. The Influence of Centrifugal and Centripetal Forces on ERP Project Success in Small and Medium-Sized Enterprises in China and Taiwan. International Journal of Production Economics, Vol. 107, pp. 380-396. Chung, B. Y. & et. al., 2008. Analyzing Enterprise Resource Planning System Implementation Success Factors in the Engineering–Construction Industry. Journal of Computing In Civil Engineering, Vol. 22, No. 6, pp. 373-382. Huang, J. C. & et. al., 2001. Knowledge Integration Processes Within The Context Of Enterprise Resources Planning (ERP) Systems Implementation [Case Study]. Global Co-Operation in the New Millennium, pp. 1214-1226. Iles, P. & et. al., 2009. Talent Management and HRM In Multinational Companies In Beijing: Definitions, Differences And Drivers. Journal of World Business, pp. 1-11. Newman, M. & Zhao, Y., 2008. The Process of Enterprise Resource Planning Implementation and Business Process Re-Engineering: Tales from Two Chinese Small and Medium-Sized Enterprises. Information Systems Journal, pp. 1-22. Orlikowski, W. J., 1996. Information Technology and Changes in Organizational Work. Springer. Reimers, K., 2004. GEARBOX (China) Ltd.: Will the Company’s ERP System Support Its Ambitious Growth Strategy? Journal of Information Technology, Vol. 19, pp. 140-148. Sheu, C. & et. al., 2004. National Differences and ERP Implementation: Issues and Challenges. The International Journal of Management Science, Vol. 32, pp. 361-371. Wirth, R. A., 2004. Lewin/Schein’s Change Theory. Stage 1 – becoming motivated to change (unfreezing), pp. 1-2. Xue, Y. & et. al., 2005. ERP Implementation Failures in China: Case Studies With Implications for ERP Vendors. Int. J. Production Economics, Vol. 97, pp. 279-295. Zaglago, L. & et. al., 2013. The Impact of Culture in Enterprise Resource Planning System Implementation. World Congress on Engineering, Vol. I, pp. 1-6. Zhang, Z. & et. al., 2005. A Framework of ERP Systems Implementation Success in China: An Empirical Study. Int. J. Production Economics, Vol. 98, pp. 56-80. Bibliography Muscatello, J. R. & et. al., 2003. Implementing Enterprise Resource Planning (ERP) Systems in Small and Midsize Manufacturing firms. International Journal of Operations & Production Management, Vol. 23, No. 8, pp. 850-871. Read More