Power IT Resource Planning Strategy - Case Study Example

Case Study POWER IT Introduction Power IT Ltd. is an England based company that has an annual turn over of ₤ 40 millions. The company comprises of two units: Power IT Production which designs and manufactures the power supplies and the other one, Power IT Services which provides full customer support related to the product repair and fault diagnosis. During the year 1999, it was decided that the company should replace the existing MRPII (Material Resource Planning) system which was being used to support the company’s production processes with the latest ERP (Enterprise Resource Planning System. As a result, a 3rd party off-the-shelf enterprise system was acquired and implemented in the year 2000. This paper will explore the impact of this implementation process of the project. The problems encountered during the various phases of implementation of the system are addressed. The efficiency with which the company handled the implementation of the ERP system in the existing environment is closely scrutinized. Finally, after a close analysis of various facts an adequate approach is formulated which the company must adopt in order to encounter the problems in the best possible manner. Power IT’s ERP acquisition strategy The decision of the kind of ERP system to purchase was made by the chief executive officer and the financial director. Considering the limited capabilities of the internal IT department, a tender invitation was drafted for purchasing the ERP system from a third party vendor. It was consented that the system would be modified by the vendor to suit the company’s needs. The relative areas of strength of this acquisition strategy which is called ‘third party modified off-the-shelf’ are defined as; a high in area of software development expertise; a high in area of application domain expertise and; a low in local company knowledge. This rating of the acquisition process can be justified as: since the software is developed by the software production company who has the requisite expertise and experience to carry out the development process, hence the process is rated a high in area of software development expertise. Similarly, since the ERP system is suitably modified by carefully examining the requirements provided by the buyer, the process rates a high in area of application domain expertise as well. But the process rates a low, in the area of local company knowledge since the developers did not interact with the end users while developing the software. Each company has a unique of operating the different processes involved in production; marketing; ordering etc. and the software developers do not consider studying the company’s way of performing each and every operation. Instead, the developers expect that the user to get adapted to the ways of the software. Also, some assumptions (made by the developers) about the end users general knowledge and common understanding may not prove very accurate, leading to a need of making more changes in the software. The ERP system selection and implementation process The chief executive officer and the financial director hired a business development manager to overlook the process of procurement and implementation of the ERP system. The manager executed the tendering process which was undertaken for selection of the third party. This process constituted of five steps: Identify need for the system; Develop Invitation to tender; Shortlist potential vendors; Choose Vendor’s systems; Produce detailed specification; Roll out system. The business manager was given the responsibility to carry out all the steps, and he was faced with problems from the initial step. The manager was not able to well coordinate with the other managers and staff members as he was not perceived as a part of the organization. Another reason the business manager was not taken seriously was the attitude of the other managers toward the new system “there was little active involvement in, or acknowledgement of, the project by chief executive officer and other managers” (Edwards & Humphries, 8). As a consequence of business manager’s poor social skills he was not able to comprehend the reason for this lack of cooperation and support. He carried out his tasks using mandatory actions, and failed to collect the requisite information to the extent desirable. There was a lack of enthusiasm and sincerity among the staff members about their involvement in the information providing process which hindered the first two stages of the tendering process. The business manager’s inadequacy in using the “brown paper maps” provided by the managers of different departments for assessing the business processes which were likely to be affected by the new system prevented the third step from getting successfully completed. Possible reason for this was differences between the business development manager and other managers, “there were obvious personality clashes and conflicts between the business development manager and the managers” (Edwards & Humphries, 8). The fourth step i.e. choose vendor’s system was executed based on the presentations given by the short listed vendors. The project was awarded to the vendor who according to the business manager gave the best presentation. The lack of cooperation and the staff’s resistance in providing the information to the business manager led to inadequacies and errors being introduced in the modification process of the system, too. During the implementation phase, the shortcomings of the previous steps were evident that lead to a system lacking some major functionalities being rolled out. Problems encountered after implementation For the successful implementation of any software application it is necessary that the concepts of human computer interaction be kept in mind while designing the system. Although, the business manager did organize group meetings of the user groups who would be directly using the software, due to lack of cooperation he was not able to extract full and relevant information crucial in the designing of the user interface. Furthermore, a task analysis which could have proved to be very crucial in identifying system functions that were performed, input and out put formats that are required and information flow of the task was not performed by the business manager. Hence, the information about the additional tasks which the system must support, need of inclusion of other applications was not provided to the vendor at the time of modification. There were a number of integration issues faced by the users because of the aforementioned reasons. Use of supplementary packages were not known to the managers are hence were not to support by the ERP system. The functions and operations of the MRPII system were not analyzed and studied properly that resulted in ‘instances of inaccurate data’; much of which was a result of poor data importing (from MRPII) procedures (Edwards & Humphries, 10). The result of modifications as demanded by the end users was not taken into account, which led to the instance: the “back flushing” function becoming inaccessible because of a minor modification in the system. Identifying the class of the project according to Figure 1 After a close inspection of the facts and figures it can be stated that the project belongs to the class ‘c’. The system is used partially by some of the departments of Power IT, as can be detected by figure 4: “Expected” verses “Actual” usage for ERP system (Edwards & Humphries, 11). As can be seen in the figure in case of the Manufacturing, materials & account department, the expectations are fulfilled 100% by the ERP system. In case of quality, services and design manufacturing departments the expectations are not fully reached, but partially achieved. Custom order, sales and traded departments are the ones which are unable to use the system even partially to their benefit. But there is also, one department where the actual usage exceeds the expectations i.e. Planning & Production. Need for technical and organizational changes The technical changes identified are easier to achieve as compared to the organizational changes. The technical changes identified were 29 in number, out of which 10 fit the Power IT’s cutoff set for investing in the modification processes. Five of the additional features required were already present in the ERP system, all that was needed that they may be enabled for usage. Three of the items needed technical assistance and the vendor agreed that these came within the terms of maintenance contract and could be corrected at no cost to the company (Edwards & Humphries, 12). Some other of the modifications identified were well in the internal IT departments’ reach, and could be carried out by it. The remaining of these could be included to the future enhancement plans of the system. The changes required by the organization in order to successfully implement the system were proper training facilities being provided, and the employees being provided with detailed information about the processes they were involved in. The employees were used to carry out their tasks in a certain way, and at some levels for example, at operation levels the project was not seen as a ‘high priority’ activity (Edwards & Humphries, 8). As a result, these employees were reluctant to adapt the changes in their working practices and were inclined to mentally reject the system. The employees also were more inclined to stick to their previous practices which being associated with supporting software packages was not apparent to the managers. The idea that the successful implementation of an ERP system requires a significant change in organization behavior and changes was not communicated to the workforce. Apart from inter organizational problems, the vendor who provided ERP system services to the company were taken over by a larger software house (Edwards & Humphries, 13). The new organization had their own policies and methods of dealing with problems as compared to the previous consultant group. So, another challenge which Power IT faced now was no re-establish relations with a new group of consultants and negotiate with them their terms and needs. Furthermore, this new group did not show much interest in dealing with the modification and repairing requests made by the company. Hence, in both cases, changes were encountered and due to a general human tendency to resist change, technical changes would be much easier to implement rather than the organizational changes. Performance of Power IT against five criteria for the ERP success Recommendation # 1 Secure executive sponsorship Power IT did well in this regard as the decision to acquire an ERP system was well thought of by the chief executive officer and the financial manager who arranged the resources for the project too. The overall cost of the project was estimated after a careful review of the available options to about ₤ 360,000 including the cost of training, maintenance, enhancement as so forth (Edwards & Humphries, 3). Top-management support was well provided as the company even considered and provided the modification requirements as requested upon detection by the end users. The company has set a cutoff limit for these modifications too, to ₤ 1500. Recommendation #2 Get help from outside expert The need for requisite expertise in the procurement and implementation of the system was recognized early by the company’s mangers and a business development manger was hired for the fulfillment of the same. Recommendation #3 Thoroughly train users The conflicts between the business development manager and the other staff members, as discussed earlier, led to an adequate estimate of the training requirements of the users. Hence, the organization nearly failed to implement this recommendation successfully. Recommendation #4 Take a multidisciplinary approach to implementations Again, in this respect although the business development officer did try to engage users and managers at all levels in the process of providing him with the information in order to understand the business practices well, the disinterest shown by the participants made his tasks difficult. He had to make do with assumptions and guesses about their practices. However, after the implementation when the users started encountering difficulties, the suggestions offered by them were considered and modifications introduced. So, the organization did quite average on this recommendation. Recommendation #5 Look beyond ERP In this respect Power IT would score a null point. Since, the organization managers based their decision of acquiring of the ERP system on the basis that their competitors had implemented it. They pre-estimated a rise in gain figure that could be achieved after the implementation of the system. Conclusion & Suggestions In my opinion, the Power IT must choose the option of re implementing the current ERP system and modify the business processes to better match the system. Since, four of the departments of the organization: Manufacturing, Materials, Accounts, and Planning & Production successfully implemented the system as was expected. The Quality department nearly implemented the system to the expected level; the small gap can be filled by providing better training to the staff. As far as the Services and design for manufactures departments are concerned, the problems can be rectified internally by dealing with some interface problems by the internal IT department. The correction of “back flushing” feature can further improve the performance of the system in the design for manufactures and production departments (Edwards & Humphries, 11). In the case of Customers orders, sales and traded departments, a re implementation can be well thought of. If the organizational processes are modified in accordance to the system then the benefits of the system can be best availed. WORKS CITED Helen M Edwards & Lynne P. Humphries, Change Management of people & technology in an ERP implementation, Journal of cases on Information Technology, Vol . 7, No 4, Idea Group Publishing, chocolate avenue, USA 2005 . Read More