Implementation of an Enterprise Resource Planning System - Literature review Example

? Information Systems Introduction The International Accounting Standards have made it possible for applications such as SAP (Systems, Applications and Products in Data Processing) to gain popularity. This is because not only does SAP faithfully comply with the provisions of the International Financial Reporting Standards they also provide the best practices and best methodologies for companies in the same industry (Mirza, Holt, & Knorr, 2011). The question that begs to be asked is: Why are there still material and distinct differences in the way these software impact the operation of these companies even if they are within the same industries? In order to answer this question we need to detail in the next couple of pages the standards being provided by Enterprise Resource Planning applications such as SAP to companies or to its users. The next to be exhaustively discussed are the differences that make a company unique. A detailed examination of these unique qualities will be essential in determining how ERP or any software implementation no matter how the company complies with the standard as mandated by the software still manages to operate differently. Using SAP as an example of how applications affect or impact companies within the same industry this paper shall detail the way SAP is implemented. The details of how SAP is implemented hopefully would provide a logical explanation on how the company’s collective consciousness and culture influences the decision of every individual in the company. This paper shall similarly examine how the collective consciousness and culture is displayed if not manifested. ASAP or accelerated SAP is the process in which SAP is implemented or rolled-out in every company. The utility of the ASAP itself indicate the commonality of how SAP is implemented indicating that each company has the same processes that could be automated by SAP (Khan, 2002). However, even if SAP’s implementation is managed uniformly, there exist variances in the way companies operate even if they are using the same application or were implemented in the same way. According to ASAP, the business processes of each company intending to implement SAP could be documented uniformly using the same discovery techniques. However, ASAP equally mandate that in the documentation of the business processes it is imperative that the business process owners (BPO) and the subject matter experts (SMEs) assist if not be the one to define the “as is” processes. In the development of the “to be” process, the SMEs and the BPOs are not only needed but is also essential (Keller & Krugger, 2002). The standards The IFRS (International Financial Reporting Standards) are not only accepted by companies all over the world but governments likewise use the standards imposed by IFRS in conducting audits to companies. The provisions and interpretations of each terminology are therefore the uniform and constant all over the world. The format in which reports are printed or displayed on screen is equally identical (Mackenzie, Coetsee, Njikizana, & Chamboko, 2011). To illustrate: The way “revenue” is defined in one country or specifically in a company is the same all over the world. This is similarly true for the word “expense” and “taxable income” and a few more. The way debit and credit is qualified is also the same including how it is presented in the books or ledgers of the company (Bragg, 2010). Regulatory Reports are the reports mandated by the government. A close examination of the reports of each country would reveal that even though the format maybe different but the contents are generally the same. The way Financial Statements are presented all over the world is also the same. This would include the way books are maintained and logged (Morley, 2009). Standard Management Reports for each industry is also the same. The contents are the same even the presentation is the same. However, even SAP acknowledges that there are some management reports containing specific information that are needed by a certain company but not required in others. This is also the reason why the development tool ABAP is included in the package to ensure that unique management reports can be created using ABAP (Keller & Krugger, 2002). A company engaged in the service utility industry particularly electricity have the same distinct processes all over the world. These processes include power generation, transmission, distribution and collection. The way power is computed is also the same, base power (minimum power in which they provide a fix charge. Excess of the minimum power consumed wherein they charge on a per kilowatt basis is then added to the bill. The computation of the distribution charge and the generation charge is also the same (Jones & Burger, 2009). However, not all companies charge transmission loss and system loss. Unique charging are most of the time dependent on how the power industry in each country is set-up. There are also instances wherein different taxes or tariffs are imposed and is segregated and presented from the actual bill. This practice normally occurs when there is a demand from the consumers to itemize the charges utility companies include in their billing (Hurst & Nowak, 2000). The Differences As initiated above, even though there are companies within the same industry who has the same processes there are different people who use these applications. That by themselves can define the differences in the operation of the company. Although guided by the same basic principle or the same best practices. The appreciation of an individual on how to interpret or translate the best practices into a dynamic working operation may be varied. Different margin or revenue requirements most often are defined by the market situation and the prevailing price of the products of companies that implemented standard applications. The pressure most often than not comes from the shareholders or investors that demands for a shorter return on investment cycle. These kinds of direction coming from the stakeholders or owners results in either shortcuts or a wider but allied sources of revenues. Not all companies are created equal some are created with excess capital spent on advertising while some are created with little to no advertising budget and relies solely on word of mouth or their market presence to advertise their products. The size and geographical reach of the company also defines the marketing strategy of the company since to effectively maximize their strength their market position and market presence have to be assessed and included in the strategy. These differences define the operating strategy including the operating priorities of the organization. Thus even if they are using the same application the way they make use of these tools are different. Applications are nothing more than tools that help the organization achieve its goal. Since the application does not perform the operation or conduct the business by itself the way applications are used in a company’s operation may be different. In retrospect, this is also true for tools or equipments. Each company may start off with the same or standard chart of accounts. However, as the company matures and its revenue and operation progresses the evolving chart of accounts could be very different from where it originated. The chart of account reflects the business strategy of the company. It also defines the items where the company gets its revenue from. And it also defines where the company spend its money on. Implementation methodology of SAP In implementing SAP the normal way is to do it the ASAP or Accelerated SAP. The latest ASAP methodology has six gates. Each phase or gates of the implementation methodology is segregated in such a way that each phase cannot start without the preceding phases’ completion. SAP is an ERP application that practically defines the business process and automates the process flow of the company that uses it (Anderson, Nilson, Rhodes, & Kakade, 2009). Companies that have implemented SAP can be considered as doing what the best practices are in the industry. SAP also makes use of the standard templates required by the governments as mentioned above. Therefore, for all intents and purposes companies that use SAP should have the same operation. Project Preparation is the first phase of SAP this is the phase where the ownership structure of the organization is defined. The interdependencies or relationship of each allied divisions are likewise defined. Project Preparation concerns itself with knowing what the company is all about that would include its products, revenue streams and its high level processes (Jarocki, 2011). Blueprinting will define the business blueprint of the organization. A more detailed examination of its processes will be scrutinized. The examinations will not be confined on the forms the company uses but focus shall be made on the various data in the forms and how they are used as well. This phase of the implementation will also define the reports and also the interfaces that link one department with another. In this phase an authorization matrix is normally defined (Fajardo & Dustin, 2007). Authorization matrix are the normally the persons or departments where business forms that defines the operation of the organization have to go through in order for the intent of the forms to be realized. To illustrate: In the inventory system, before an item to be requisitioned is purchased by the company the process should start with a request or order form. The order form shall contain among others the requesters name and department, the purpose of the purchase and the projected amount of the purchase. This form will then go to the head of the department for authorization of the purchase. The authorization given by the department head signifies that the purchase is a valid company related purchase (Shields, 2001). The realization phase is where most of the customization of the application is done. This will include reprogramming of the screens that will be the front end of the applications where most of the data entry will be done. This phase will also link the various forms and interfaces of the application. In this phase user acceptance testing is also conducted to ensure that all the programs meet the requirement of the company (Simon, 1999). The final preparation includes the data conversion part. This converts the data generated by any legacy system into the SAP format. The next phases are the Go-Live and Support phase where the cut-over of the company into the SAP application will be done. This phase will also mark the end of the use of the legacy system (Verhage, 2009). Conclusion Enterprise Resource Planning as an example of applications that are based on standards and is actually developed as a solution for specific industry could be implemented differently even within the same industry. The primary reason for this is the different operating environment and different market forces are always at play within a company. These forces influence the direction and decision making processes of the company in order to turn a profit. The different corporate culture that defines the collective consciousness of companies also pervades within each organization. Most of the time, these actually defines how business imperatives or decisions are implemented in each company. In SAP the authorization matrix are normally defined to determine the approval process of a single document. The level of authority is normally defined by the authorization matrix that show the level of trust the organization gives to each employee within the organization. These by themselves define the operation of each company. And, the level of trust given to employees is as unique as the owners of each company are. The operation of a company starts and survives on how forms pass from one department to another. The operation of the organization can be considered proprietary since it is unique and defines how the company turn over revenues. Various companies belonging to the same industry operate differently from one another even if they comply with the standards and government mandated reports. As indicated above the difference in the chart of account alone can be considered a mark difference in the way accounting processes are practiced. The difference in the authorization matrix defines and reflects the culture of the company provides that unique character in any implementation. The other differences that would include the differences in the people, operating environment and market environment provides the significant differences in the way processes are implemented. These differences are the reason why companies still operate differently even if they are using the same platform and the same applications. References Anderson, G. W., Nilson, C. D., Rhodes, T., & Kakade, S. (2009). SAP Implementation Unleashed:A Business and Technical Roadmap to Deploying SAP. Chicago: Sams Publishing. Bragg, S. (2010). The Vest Pocket Guide to IFRS. New York: Wiley. Fajardo, J., & Dustin, E. (2007). Testing SAP R/3: A Manager's Step by Step Guide. New Jersey: Wiley. Hurst, Q., & Nowak, D. (2000). Configuring SAP R/3 FI/CO: The essential Resource for Conifiguring the Financial and Controlling Modules. California: Sybex Publishing. Jarocki, T. L. (2011). The Next Evolution - Enhandcing and Unifying Project and Change Management: The Emergence One Method For Total Project Success. Washington: Brown and Williams Publishing. Jones, P., & Burger, J. (2009). Configuring SAP ERP Financials and Controlling. California: Sybex Publishing. Keller, H., & Krugger, S. (2002). ABAP Objects: Introduction to Programming SAP applications. Virginia: Addison-Wesley Professional. Khan, A. (2002). Implementing SAP with an ASAP Methodology focus. New Jersey: iUniverse. Mackenzie, B., Coetsee, D., Njikizana, T., & Chamboko, R. (2011). Wiley Interpretation and Application of International Financial Reporting Standards. New York: Wiley. Mirza, A. A., Holt, G., & Knorr, L. (2011). Wiley IFRS: Practical Implementation Guide and Workbook. New York: Wiley. Morley, M. (2009). IFRS Simplified. California: Nixon Carre Ltd. Shields, M. (2001). E-Business and ERP: Rapid Implementation and Project Planning. New Jersey: Wiley. Simon, E. (1999). Implementation of an Enterprise Resource Planning System with Focus on End-User-Training. Germany: Dilpomarbieten Agentur. Verhage, L. (2009). Management Methodology for Enterprise System Implementation. New Jersey : Wiley. Read More