Benefits and Problems of Economic Resource Planning Implementation - Case Study Example

Name Tutor Title: ERP Implementation Institution Date Introduction Economic Resource Planning (ERP) is one of the modern technologies that many companies are embarking on. Research studies shows that around 90% of large and small companies have implemented an Economic Resource Planning (ERP) system (Manufacturing Business Technology, 2008). ERP systems are software packages comprising of numerous modules, for example human resources, sales, finance and production, ensuring cross-organizational combination of transaction-based data management during imbedded business process support. These software packages can be modified up to a certain limit to the specific needs of each organization. Though ERP have been described as the most essential development in the business use of technology, it has not been effective enough and therefore have been failed to attain all the results predicted (Ragowsky et al., 2005). Benefits for implementing an ERP system For companies, the basic desired effect of implementing ERP is to get benefits when compared to present manner of doing things. There are three major benefits that accrue to organizations that have successfully implemented ERP systems: business process computerization, appropriate access to organization information and improvement in the supply chain through the use of e-commerce and e-communication (Yusuf et al. 2004). Other benefits consist of information visibility, reduced costs, quicker period-end closes, better market receptiveness, greater control over reverse logistics and others (Cullen et al., 2007). The business world commonly agrees that information technology should be envisioned as more than just an automation of business process. The way business is conducted can be tremendously changed by technology information. ERP provide cross-functional, project broad incorporated system with profound functionality for core commerce procedures and data is stored in a centralized way, which make it easily accessible by all the section for retrieval and storage. Analysis tools are offered to change the information into more significant and useful data to assist the executive in formulating timely decisions. It helps reduce the expenditure by saving precious man time because it can mechanize a variety of procedures extend across the entire association, which are recurring and cooperative. It also decreases the probability of incorrect entries. ERP systems that are properly implemented lead to improvement of competence and success of organizations through added value, computerization, incorporation of business procedures, sharing of information and practices and immediate information. ERP system implementation is significant step for the incorporation of inter organizational delivery chains for the companies (Markus and Tanis, 2000) Other benefits include reducing operation time, better flow of information, reduction of redundant data by different departments, improved coordination of business process thus helping the organizations to attain their business objective (Ramirez and Ancha, 2005). ERP provides a tested system security basis which guarantee to keep the organizations up to security standards and for providing data security (Yusuf et al. 2004). ERP offer improved management operations, improved information accessibility and reengineering processes. Others benefits include enhancing collaboration and enabling teamwork between workers in the business. ERP help in making production inside manufacturing companies further efficient by incorporating information from other departments like sales and procurement into the production system, which as a result assist in eliminating cost and advance production schedules (Cullen et al., 2007). ERP systems help in facilitating daily management. Disadvantages of implementing ERP The project of implementing an ERP system is expensive and risky and their implementation environment tends to be very complicated. They generally require large-scale business procedure reengineering (BPR) undertakings, complex technical arrangement to integrate the core ERP knowledge with an already existing or future software, and cautious management of the contributions of several projects participants such as functional departments, consultant’s business partners and vendors. All these requirements enlarge project supervision challenges making them prone to implementation failure (Gupta et al., 2004). ERP customization, configurations and consultation services needs a big portion of time, human resources and capital (Sarker and Sarker 2000). The time required for setting up an ERP system is at an average of 21 months and 11 months to fully implement it (Markus and Tanis, 2000). Re-engineering of organization procedures to fit the production standard set down by the ERP system may create some problems to the user to understand and hence mistakes can be made. New system can be too difficult for the users to understand. There is a possibility of data loss in the event of security breach since the databases are centralized in the system. Information redundancy or distortion, failing of server or interruption by third party, which take place due to lack of appropriate technology or technology breakdown. These can cause huge loses to the organization within a short period. The development of the organization is slowed down during ERP execution since the employees are redirected from their definite responsibilities (Hallikainen, et al., 2004). Business can lose their competitive verge following the execution of ERP as it moves forward the process in order to go with industry standards and in this endeavor wipe off the flexibility that can cause the value of the ultimate manufactured goods and services of the organization to go down. Employees comfort intensity can also be brought down by that inflexibility and create dissatisfaction among the workers. Dealing with employees is a sensitive issue that needs lot of endurance and valuable change management. This can lead to lot of time wastage (Ramirez and Ancha, 2005). Problems of implementing ERP Most of the implementations problems for ERP are early ERP adoptions that do not have powerful business rationalization (Gupta et al., 2004). This is credited to the misalignment between the goals from ERP implementation and the considered organizational and information technology goals. This misalignment can lead to lose of the benefits associated with implementation of ERP systems. ERP failure can be associated to internal or external feature to the business. Insufficient business knowledge is associated to internally failure while weak technical skills of the specialist assisting in the ERP implementation are associated with externally failure. Lack of communication between the teams concerned can as well lead into failure (Hallikainen, et al., 2004). Opposing EPR activities associated with ERP can result to ERP project failure. Inadequate teaching of end-users is as well a cause credited to ERP failures (Gupta et al, 2004). Enough training should first be provided to the end –users to make the outcome extra accurate. There are a lot people associated problems that comprise of employees not understanding the newly installed system, which consequently led to little performance; end users can resist and tend to fight the modification in the organization procedures; end users can receive inadequate guidance. Mangers, end users, customers and vendors are supposed to be offered different kinds and different height of training before the process of implementing the system is started. The training is customized and can be offered by either inside or external trainers (Aladwani 2001). Change management Change management is an arranged move toward change within a business. It’s a main concern in ERP project implementation within many businesses. In reference to adopting an ERP system, change management can be defined as activities, procedures and methods that enhance workers understanding and organization modifications throughout an ERP systems implementation and reengineering programs. In addition, change management is a process that assists the management to implement appropriate planned change for the progress of the company. When an ERP system is implemented there can be two elementary cause of resistance, which is apparently risk and habit. Risk refers to ones awareness of the threat related with the choice to acceptant ERP system. The contemporary practices that one is routinely doing are referred to as habit. Maximizing the benefits for the business and lowering the possible risk associated with any ERP solution changes is the objective. The changes can either be immediate or proactive. Immediate change is caused by external sources while proactive change is target oriented (Hallikainen 2004). Many people go through resistance, which is a psychological facet of any change. Any Change management that is valuable touches on these entire features within the business. The crucial procedure of change management commences by determining attitudinal modification as the procedure of ERP execution commences. This needs a communication and guidance procedures. Applying an ERP system in a business will result in changes to the manner in which persons work within the establishment. Procedures will adjust and there may be job discontinuation and responsibility rationalization within sections. Employees can be evoked to resist due to all these changes and these has to be controlled effectively ahead of, throughout and after the implementation of the ERP package. In order to successfully implement and adjust to the change in the organization a strong change management team is required (Al-Mashari, and Zairi, 2003). Why is it crucial to ERP implementation? It’s always hard to put up with any change. Time and help is needed to get accustomed to any new system regardless of its importance to you or others. Change management makes employees and managerial staff ready for the changes that will take place with ERP. Change management is aimed to help employees adjust to the new system in a way that won’t put pressure on them by use of guidance and management panel to initiate fresh procedures in small quantity instead of one massive progress. When organization is prepared for change implementation of the ERP will be smooth and effective. This ensures a reduction in resistance to the latest technology and the changed business performance. The end users will also have a positive attitude towards the implementation process. There will be fewer complaints and leads to a reduction in cost of implementation of the project. Training is another very significant component of change management. Guiding employees to utilize of ERP and recognize their new duties in an organization that has ERP clarification in place is an outstanding way to avoid refusal to go along with (Al-Mashari and Zairi, 2000). Change management strategies. There are different approaches for implementing ERP successfully. They are categorized into organizational, technical and people strategies. Strategies included in Organizational policy are change strategy advancement and deployment, change supervision techniques, assignment supervision, organizational composition and resources, managerial style and ideology, communication and management and IS function characteristic (Gable and Stewart, 1999; Sarker and Sarker, 2000). Technical approaches that have been recommended to determine ERP accomplishment consist of technical aspect of ERP installation. Staff and management attitudes involvement and training are the best examples of people’s approaches (e.g.Amoako-Gyampah, 1999). Aladwani suggested for the incorporation of marketing strategies for effective implementation of an EPR implementation system. This incorporated, process-centered strategy comprises of three stages: knowledge formulation, plan implementation and status assessment (Aladwani 2001). The main two marketing strategies are strategic marketing and consumer behavior. The strategic view is concerned with offering common measures to be pursued by a business to protect its long-term survival. These stages can be abbreviated as shown: A business recognizes objectives and expands strategies to attain them, a business executes the recognized strategies; and, a business assesses if it has attained what it wanted to attain. After recognizing its objective the first step is for the organization to examine its possible markets through users’ study in order to expand the appropriate change management approaches. Users’ analysis entails studying users requirement, motives, opinions, etc (Guiltinan and Paul, 1988). Porter proposed three standard change management approaches to attain potential users: differentiation, cost leadership and focus. Focus strategy has two alternatives, differentiation focus and cost focus. There are many strategies for differentiation, which includes eminence and practical superiority, product awareness, among others. Low cost strategies include features management, labor decrease, government subsidies etc. In the second stage, approaches that fit well with users are implemented. This stage is known as the action phase. It necessitates cautious crafted strategies and assessments from top management. Estimating the success of the implemented strategies is the last step. Adequate feedback is needed so that the crisis can be recognized, analyzed and dealt with. It is also very important to take into account consumers behavior when implementation an ERP system. Issues that have an effect on consumer’s buying decision, such as opinions, manner, culture, reference groups are internal and external factors analyzed in consumer behavior view of marketing. A three-stage model can be used in order to understand purchaser’s attitudes. The model include cognitive, affective and conative constituent (Guitinan and Paul, 1988). The ideas a person has concerning an object is dealt with in cognitive component. A person’s reactions towards an object are dealt with in affective component while the conative component deals a person’s behavioral objectives with respect to an object. Top management should employ approaches that have an effect on each of the three stages in order to convince users to adopt a new product, such as an ERP system (Wilkie, 1990). CASE STUDIES MADAR Madar works in King Saud University as an enterprise system producing all organizational software of the university and doing other outer projects. It’s one of the most thriving enterprise systems. An interview was carried out to collect some practical data about the feedback and recognition of change management for Madar system to determine the achievement range of Madar change management approaches and procedures. The implementation of Madar enterprise system has been widespread by most of the business and it put in better-managed structure in the relevance of developmental approaches of the business. The information gathered from our interview is presented below (Guiltinan and Paul, 1988). Prior to execution, Madar officers make pre executions stride and create orientation session to examine and establish the workers computer knowledge and familiarity particularly in web applications. The duration of the pre execution step is eight months to examine and establish the employees who are acknowledge the new system and the ones opposing and how much they demonstrate their opposition. Remarkable awareness about the advantages of Madar among all university sections using university website, magazine and by sending email to all university workers is made prior to execution. The system was named Madar after the users voted for that name. According to pre-execution step there are many resistance people and it’s observed that female employees are less resistant than male employees. Political issues may be the cause for opposition (Wilkie, 1990). Prior to execution, Madar administrator formulates gap investigation then make acceptance test for preferred key user in order to approve Madar as project system. In each section the more passionate employee is chosen by the Madar administrators to become delegate and given more guidance throughout execution. More than 300 guidance sessions are made and a laptop is given for distinct trainee. A certificate is given after training. Employees who resist are engaged in decision making and giving a chance to go to the meeting to unravel the opposition employee’s difficulty. Communication involving end user and Madar technical support by phone, email, web site and forum is very impressive (Gable and Stewart 1999) The Madar administrator evaluates the development of Madar job presentation following execution. Three phases are used when executing Madar enterprise system that is pre-execution phase, execution phase, and assessment used in executing Madar enterprise system. In pre-execution Madar specialist make learning and assess the staff, understanding and staff preparation. In execution phase, they make guidance session for workers and hence good contact is maintained with workers. Employees using Madar system did not express any complications and the work presentation for the workers are visibly advanced from commencement of Madar execution until now. 100% of workers believe that Madar system assist them to do their work in simple and valuable way. The main difficulties that inhibit workers to make use of Madar project system are unfamiliarity in computer and web appliance (Al-Mashari and Zairi 2003). Spanish Higher Education Institute case study The number of predictable end –users was around 220. The execution was followed by usual execution phase: planning, design realization, go-alive and support. In planning a system formation was defined, the description of all procedures that attempted to be executed in the fresh system, communication with all stakeholders and the problem of getting information. In design, the goal was to create the technical requirement of how to execute the preferred solution. The ERP project manager and vice president of the ERP execution were primarily contacted in order to agree to conduct the research. The reasons for adopting the ERP system were because the existing legacy system was technologically out of date. The preceding system could only act in response to new lawful and functional conditions by means of in-house perceptive (Computerworld 1998). Three working teams were created: a team for investigation of functional knowledge and capability, for preparing guidance, and last one for definition of procedures. Top management chooses not to create an internal group of specialists. The height of implication and contribution of users of the unit along the development was low this is because the project group and steering working group did not engage them adequately. Formal communication plan was not there. Communications doings such as: The explanations of publications, information on the project position was not carried out throughout the execution. There were two training phases: the project group training and the end –users training. End users were guided on the ERP units that they would utilize in future. During the guidance some problems in expressions of economic administration ideas were noticed in many end-users. Several end users mentioned the feeling of being given too much data in very little time (Amoako-Gyampah, 1999). Several difficulties came up during the project execution. Information relocation was troublesome and it resulted in several holdups. There was no correct prediction of time and effort needed for the information relocation procedure. Complication in the formation of interface with other system was another unexpected crisis. Slow decision making procedures led to complications in a number of occasions. The ERP execution has helped improve procedures at the university. It has also increased dependency on the consulting organization (Gable and Stewart 1999) REFERENCE Aladwani. A. (2001),”Change management strategies for successful ERP Implementation”, Business Process Management, Journal, Vol. 7 (3), pp. 266-275 Al-Mashari, M. and Zairi, M. (2003), Information and business process equality: the case of SAPR/3 implementation’’, Electronic Journal on Information Systems in Developing Countries, Amoako-Gyampah, K. (1999), ``User involvement, ease of use, perceived usefulness, and Behavioral intention: a test of the enhanced TAM in ERP implementation environment’’, 30th DSI Proceedings, 20-23 November, pp. 805-7. Computerworld (1998), ``ERP user interfaces drive workers nuts’’, (http://www.computerworld.com/home/print.nsf/CWFlash/981102erp). Cullen, J., Bernon, M., Tsamenyi, M. and Gorst, J. (2007), Reverse logistics in the UK retail sector: A case study of the role of ERP systems and management accounting in driving organizational change. Working paper: University of Warwick, 28 November. Gable, G. and Stewart, G. (1999), ``SAP R/3 implementation issues for small to medium enterprises’’, 30th DSI Proceedings, 20-23 November, pp. 779-81. Guiltinan, J. and Paul, G. (1988), Marketing Management: Strategies and Programs, McGraw-Hill, New York, NY. Gupta, A. (2000), “Enterprise resources planning: the emerging organizational value systems”, Industrial Management & System, Vol. 100 No. 3, pp. 114-18. Hallikainen, P., Laukkanen, S. and Sarpola, S., 2004. “Reasons for ERP Acquisition,” Proceedings of the 6th. International Conference on Enterprise Information Systems (ICEIS), Porto, Portugal, pp.1-4. Hultman, K. (1979), the Path of Least Resistance: Preparing Employees for Change, Learning Concepts, Austin, TX. Manufacturing Business Technology (2008), IDC: Mid-market ERP penetration in Latin America to grow 27%. Business News Americas – English, April 8. Tuesday 4:09 PM GMThttp://www.mbtmag. com/articleXml/LN772386882.html Markus, L. and Tanis, C. (2000), The enterprise systems experience – from adoption to success, in Zmud, R.W. (Ed.), Framing the Domains of IT Research: Glimpsing the Future Through the Past, Pinnaflex Educational Resources, Inc.,Cincinnati, OH, pp. 173-207. Ragowsky, A., Somers, T., and Adams, D. (2005). Assessing the Value Provided by ERP Applications Through Organizational Activities," Communications of the Association for Information Systems, Vol. 16, No. 18, pp.381-406. Ramirez, P. and Garcia, R. (2005), “Success of ERP in Chile: An Empirical Study”, Proceedings of European, Mediterranean & Middle Eastern Conference on Information Systems 2005. Russo, K., Kremer, A. and Brandt, I. (1999), ``Enterprise-wide software: factors effecting implementation and impacts on the IS function’’, 30th DSI Proceedings, 20-23 November, pp. 808 Sarker, S. and Sarker, S. 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