Implementation of Enterprise Resource Planning Systems - Case Study Example

Implementation of ERP systems Name Course Institution Date Introduction In order to maintain a competitive advantage, many companies have been changing their strategies in information technology in order to maintain a competitive level of efficiency being able to be more responsive to the needs of the market. The main focus on ERP is on its successful implementation. During its development, an ERP requires a reconfiguration of the business processes ERP implementation while a technical exercise is mainly an overhaul of the organization. ERP allows for a provision of cross – functional view of the organisation, the applications referred to as ERP have in them inbuilt processes for all activities in an organization. The nature and the structure of ERP is documented in the form of a process blueprint. It is this blueprint that guides the organisational reconstitution in order to comply with the ERP system. There however is the possibility of the software being made specifically for the organizational processes. Since the system is integrated and all processes have a centralise process, database from which all organisational information can be accessed. ERP has also been defined as an adaptable and a changeable commercial system that supports in real time in a way in a manner that manages all the firm’s affairs in an integrated manner There have been ongoing studies on how ERP can be made effective in implementation and execution. According to Davenport, Harris and Cantrell (2004), organizations seeking to benefit from the original process of ERP must ‘integrate, optimise and informate’ this paper is a discussion of these three processes. The paper discusses the three attributes of ERP mentioned above i.e. integrate, optimise and informate on the basis of different perspectives raised by different scholars and industry players. It also outlines the potential benefits to be got from the attributes of ERP that are the subject of discussion. Integration Where Enterprise Resource Planning systems are concerned, integration is the interconnection between different functions and levels of hierarchy and interactions between different processes in an organization. These processes include the general running of the organization including HRM, finance, production etc. This may be considered one of the more universal characteristics of ERP systems. Integration is also a very essential characteristic being an indispensable minimum characteristic required in order for a system to be referred to as an ERP system. Flexibility of the system is complementary characteristic to integration and therefore may be considered an extension of integration. Organizational Integration both internal and external is different from system integration which is the integration that is a characteristic of ERP. Due to the nature of business and the interlinked nature of doing business in the contemporary world, integration is also important between different organizations in the same industry (Davenport 2000). Internal integration is a close linkage of different activities by different individuals taskforces and companies which leads to the formation of a harmonized business process. Systems integration creates links between varied information systems and databases. Hence, organisational integration as described by Markus (2000) is a cultural revolution in the said organization where a culture of centrality is developed. Systems integration on the other hand is often imperative in the achievement of organisational integration it however is not always sufficient. When one speaks of an ERP system, the main type of integration is basically systems integration, but its assessment cannot ignore the organisational integration that it starts, and that it appears to support (Sor 1999). The integration of an ERP system can be seen from two perspectives, the first is considering the integration perimeter which is the organisational coverage the other perspective is how deep the integration goes. Regarding organizational coverage, it can be top down, or across the organization or even across different organizations. Vertical integration concerns the level of connectivity between different levels of organizational hierarchy (Pawlowsiki & Boudreau 1999). Horizontal integration, on the other hand is shown as interconnections between the various functions in an organization or departmental functions. It also refers to the inter-organisational connections between the organization and its business partners. From the perspective of depth or integration of integration the point is to establish the extent to which the In the second view, one distinguishes the level to which integration has been achieved Concerning the depth, Toussaint et al. (2001) describe the depth of integration as being the quality of integration, this co-ordination is seen through behaviours of staff and also the type and methods of communication (Turban et al. 1999). Another school of thought argues that the process of ERP implementation is impossible to view from a purely instrumental point of view. It also involves the process of changing the organizational values. This process has been described as a myth – making strategy which plays an important role in the construction of an ERP system as integrated and in the elaboration of organizational values already in existence (Alvarez 2002). Potential benefits Integration is advantageous in that it provides a central position from which the company management can monitor all the activities in the organisation through integration. It is imperative in the current competitive environment for an organization to avoid the challenge ‘island’ processing environments. This is because there are some problems that cannot be solved by any organisation individually. The inability to solve problems individually is as a result of the current globalization of business leading to the necessity for a transparent and distributed computational ability this calls for a large scale and complex system. Modern requirements in the market call for complex systems that are increasingly compound with varied and unstable requirements. These requirements call for different systems to be developed separately which calls for additional efforts to be made at integrating the systems. The modern system also brings in the possibility of coordination problems due to the large scale of the systems required in running a business. From the management’s point of view, there sometimes is no clear distinction between the general objectives of the business and the long term objectives of the company. The lack of clarity usually calls for the engagement of different developers which leads to a technological gap and a lack of standardization of tools. The factors mentioned above, if left unchecked would lead to discarding of the organization’s long – term objectives; this problem would be solved by integration of the system. ERP systems also require the various technologies involved to be bridged and have the new emerging technologies incorporated into the entire system to come up with solutions for the problems at hand. Systems usually are made for multiple users and therefore require customization to the environment of the different individuals that use them. This calls for a long system life that necessitates integration of new technologies. Barriers to integrate One of the main barriers to integration is the continued use of paper processes. Elimination of this barrier calls for the automation. Traditions are also a barrier to integration as members of different departments that would require being integrated hold on to certain ways of doing things which is not in line with the integrated system. Lack of clarity in communication of goals from the management to the system developers is also a problem as it leads to them failing to understand exactly what is in line with the organization’s strategic objectives and thus ought to be included in the system. Should the system fail to meet the objectives set for it by the company management, it becomes redundant in part and the redundant parts would have to be retired leading to a system that that is less than integrated. There is also the barrier of a big implementation team which is difficult to control which makes room for errors to be made in the course of implementation. A weak organizational change management that does not offer clear leadership and guidelines on implementation creates unnecessary bottlenecks in the integration process. There is also the possibility of the process being hampered by weak project management. Case study The case study on integration concerns a public research university in Northeastern USA with a total enrolment of 24,000 and a budget USD 5 billion. The university in question is a part of a system of five campuses each of which has a vice chancellor and a chief administrative officer. All campuses, however, report to one president for the whole system. The implementation of ERP in this very diverse system relied heavily on integration this is because integration was one of the main organisational values for the university. The activities geared towards integration, therefore showed an agreement between the new ERP system and its environment. Integration is of particular importance in a research environment particularly regarding data received in interviews. Early in the life cycle of the project the university leadership described the objectives of the project as coming up with a integration and implementation of a flexible, easy to tune system that would allow for departmental control. Integration was seen as a way of enabling each department to undertake their own computing services instead of sending them to a particular department that was dedicated to computing that did not have knowledge on the specific requirements of computing associated with the department in question. This information would also be available from a central database according to the needs of different departments. A system for authorisation with regard to access to the information in the database had to be put in place to control access at different levels of sensitivity. Optimization Optimization is the process through which an ERP system is used to the fullest extent possible. ERP optimization enables an organisation to operate at its maximum productivity using the fewest possible resources. In this context, ERP becomes a tool for reduction of costs and improvement of efficiencies. Optimization also allows employees to support the improvements to ensure there are some sort of continuity and a reduction of resistance to implementation of the ERP system. Optimization also allows for fewer standalone or manual activities which require the input of only an individual this reduction of manual and stand alone activity reduces the amount of disruptions to organisational activity since activities are centralised. This is optimization. Optimization is an important and an underutilized tool since most organizations use 30% or less of their ERP capabilities. Most companies utilize 30% or less of the functionality of their ERP. It is important for deliberate steps to be taken to ensure optimization of the ERP. This is because new ERP systems are made with an objective to ensure they operate like the old system. Once the system works at the level the old system, many of the people who had experience in the old system feel that it has reached an acceptable level of productivity thus failing to push it to achieve its full potential. Many times the system is not even fully implemented. Optimization becomes necessary where no performance indicators have been established or benchmarks established to gauge indicators. Lack of proper training and the complex nature of ERP systems causes dissatisfaction among users. Benefits of optimization Optimization has the advantage of enhancing technology in the organization in question. This is because while ERP systems are implemented when the other systems fail to meet the test of being current. An ERP system whose potential is not being implemented to its optimum potential does not do much in a manner of providing the necessary change. Optimization provides the maximum benefits in speed after introduction of the ERP system. An optimized ERP system also ensures that the labour-intensive manual processes are eliminated from the process for which ERP has been established, there is a tendency of people reverting to old practices instead of working with new processes due to the comfort that comes with familiarity with the old system. These relapses lead to the necessity resources being deployed in places where adoption of ERP has made unnecessary. An optimized system also leads to properly integrated and consistent information through replacement of multiple databases that are not connected through an optimally integrated one. It also leads to better employment of talent from staffers in the organization. Information in an optimized ERP does not have to be used in more than one system. At the same time internal and external entities are well interfaced. Optimization also allows for easier and more customizable reporting which makes it easier for parties involved to report easily to compound requirements for data. In an optimally tuned system, workers are also able to manipulate data and information in the system which makes their work much easier. Optimization also makes the system more user friendly since it allows information to be accessed more easily by all especially by functional staff. This is particularly the case among members of staff who are involved in offering services directly to customers because they are able to be efficient and even enjoy their work. A system is also able to function at top functionality as it requires few workarounds. The other advantage is an improved level of communication between different parts of the organization. Barriers to optimization Barriers to optimization of the benefits that should be realized from introduction of an ERP system goal for which there mainly the barriers that lead to total failure in implementation of ERP but experienced to a lesser extent than they appear in instances when implementation fails completely. These barriers include a lack of clear definition of the strategic goals in the enterprise in order to conform goals whose achievement is the reason why the ERP system has been introduced. When these goals are not clear, it is not possible to tailor the system for the express purpose of meeting them, this leads to the system having to be supplemented with other processes that are not part of it in order to conform to the strategic goals. There have also been instances when an organization’s top management is not committed to the system, its implementation, therefore lacks leadership at the top leading to interested departments and individuals using it while the ones more comfortable with the old system having the leeway to go back to it. Failure to adopt performance measures as a way of ensuring organizational change leads the adopted ERP system being used less than optimally due to the fact that there are no benchmarks upon which its effectiveness may be checked. This leads to uneven implementation and adoption of ERP system across the enterprise hence the lack of optimization. A system may also be sub-optimized due to changed business requirements. These requirements may be as a result of organic growth, new demands from customers or other factors. This means that a system that was performing optimally can become sub-optimized midway (Holland & Light 1999). Case study The enterprise that is the case study on optimization is Dow Corning, a chemical company in Michigan USA. Which sought to optimize its existing ERP, the system was being adopted to new realities in the company. The optimization was meant to ensure enterprise wide access to operational information. This was because before optimization there was often the necessity to generate paper reports and experts had to travel long distances which was an expensive process. Optimization of ERP allows integration and hence efficient use of the available technical resources. It also involved identification and correcting of process bottlenecks which was made an ongoing process where these bottle necks are identified continuously to ensure the system does not become sub-optimized. Optimization also called for investigative process monitoring and predictive maintenance due the lack of real-time monitoring tools at the time of optimization. The systems that had been in place to control process led to generation of large amounts of date but there were only limited facilities to enable storage of the data generated for long periods. The company also sought to develop more e-business activities as a way of adapting the business to new approaches (Jarrar et al. 2000). Information This refers to communication across the enterprise concerning the new system. This communication includes having all players on board regarding what the ERP system is meant to achieve and what role the individual players are expected to play in order to ensure that the process is smooth. Information also refers to the training necessary, which is given to staff and other stake holders in order for them to effectively play their role to ensure the system is works as it is intended to work. Simply put informate is the communication part of change management. According to Cooke and Peterson (1998), change management where adoption of ERP is concerned is the undertakings, methodologies and processes which help employees to understand the changes in the organization during implementation of the ERP system Al-Mashari (2000) and Summer (1999) argue that one of the main causes of failure in ERP implementations is failure to focus on soft issues including business process and change management. Parr et al, (1999) noted that nearly half of all ERP projects fail to bring the benefits anticipated due to underestimation of the necessity of change management in the process of implementation. Change management is has become continuously urgent in organizations that seek to introduce new technology Guptara (2000). Opposition to change is one of the obstacles in the way of implementation of ERP. In order to reduce the said obstacles, Martin and Ching (1999) suggest that all stakeholders ought to be engaged in the process and be informed on how the change is of benefit to them. Introduction of an ERP system has very considerable impact on an enterprise, their staff is particularly adversely affected (Welti, 1999). For this reason, adequate and constant information to staff is essential for preparation of the enterprise to introduction of the system and its eventual successful implementation. ERP systems are very complex and they call for intensive training. Installation of the software without proper end user training can lead the activities in the enterprise in question grinding to a halt. Ineffective or no training is a major contributor to a large number of ERP systems failures (Kelley et al. 1999; Gupta 2000). Barriers to information Information on implementation of ERP system may be hindered by lack of a dedicated team to take up the role of communicating to members of staff concerning the new system. Clarity of purpose concerning what each member of staff will be expected to do in the new system is also important in ensuring that their training is tailor made to help them achieve their role under the new system. Lack of such clarity can be a major impediment to proper information. There is also is also the barrier of resistance by stakeholders to change. This resistance could be as a result of some of them feeling that their positions are threatened by introduction of the new system. This attitude leads to the intended recipients of the information being less than receptive of it thus leading to the process being ineffective (Smethurst & Kawalek 1999). Case study A case that presents a good example of how information is important in implementation of an ERP system is the implementation of ERP at King Saud University. The system was to cater for financial, human resource, administrative communications, inventory control, warehouse, and employee welfare. To ensure the implementation was smooth, a change management team drawn from all departments was formed. The team was formed to investigate reasons why employees were resistant to implementation of the ERP. Some old employees in the finance, HR and payroll departments who have built considerable experience in learning and using the old system feel threatened by the new system. It was reported that they perceive the ERP as a new system threatening to terminate their job. This perception has lead to resistance behavior exhibited by this demographic of employees. To solve this problem, the staff in question was offered extensive training in a personalized way which enabled them to understand the system and how it would make them more efficient. This understanding also reduces the level of uncertainty and the extent to which they perceive innovation as risky to them individually (Rogers 2003). Conclusion The process of implementing ERP is fraught with difficulties owing to its complex nature. The three areas of integration optimization and information important to ensure that the system is able to is well installed and is used to fulfill the purpose for which it is intended. The paper looks at definitions of the three words that are its subject and what the benefits of implementing the concepts associated with it are. There are also difficulties in coming up with an integrated system, that is set to perform optimally and also that is accepted by all stakeholders due to how well information has been given to stakeholders. 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