How Enterprise Resource Planning Effects Companys Management - Essay Example

Name: Course: College: Tutor: Date: MANAGEMENT REPORT Abstract This review discusses Enterprise Resource planning ERP and its impact in Management of companies in the world today. It also discusses Change Management and how it’s relevant to ERP. Consequently this review suggests strategies that should be adopted by companies in order to implement successful change. Introduction Enterprise Resource Planning (ERP) is a company management system that is made up of incorporated sets of wide-ranging software which can be used if implemented without hiccups to manage and execute all integral functions of a company. These functions include major business applications, advertising, and purchases, Supply and sales (Boykin, 2001). This study wishes to find an overview of benefits of an ERP system to companies and the negative impacts perceived by them. An Overview of the Benefits (Case Study-Multinationals) Enterprise resource Planning ERP can be a blessing or a curse many companies rush into it with good faith of profiteering others realize when its too late that they incurred millions of losses as a result of this system.(Wagle,1998).It all depends with the timing of the integration of changes and how first and fast they were implemented. The major advantage of this system is that it enhances the integration of a global business environment particularly to multinationals All companies in the early 90s including those that reigned in hefty profits and were thus stable thought of reducing production costs by thinking of centralizing logistics and other primary functions that had been reduplicated in the company structures thus eating into their revenues. Since the globe had suddenly turned techno savvy ERP was the way to go for they realized they could cut on costs and increase on salaries and welfare benefits with this strategy. Since this system resulted in companies working smart and not hard application of ERPs have resulted to uniform application of management procedures irrespective of where a multinational is located at the click of a button one is able to see the growth of stock, profits and salary scales meaning that its only the local legal and taxing mechanisms that change but the rest are uniform. ERP has enabled companies to get rid of redundant technologies that don’t incorporate the current ways of doing business and do create a gap between a company and its competitors who are techno savvy. Implementations of the ERP is an opportune time for the company to delve into data history and have food for thought on how they have been doing things and the best way to do it as they go through their performance indexes in the past. As the IT department works with staff from their respective ERP agents in their process of bringing them to speed with the nitty and gritty of the company’s operations they are in a position to realize where they went wrong in a given financial year and find possible solutions to the problems. By ERP Centralizing roles it leads to the breaking down of boundaries between key departments that deal with finance, logistics, production and marketing. This is because for the first time they discovered they had to use the same data base to inform their decisions and as a result this working under one roof precipitated that there were more concentrated efforts geared toward consultations and this improved performance. ERP has made communication easier and faster. This is because any financial records and reports are available on company websites and communication from and to the company can be done at the click of a button. Even employees at the lower cadre can answer immediate questions on phone from clients for at the click of a button they can access the company data bank and retrieve all relevant information asked by customers or suppliers unlike in the olden days where they had to make calls to the main Manager’s or Director’s office who had in turn to go through a number of files to retrieve necessary information. Possible Disadvantages That May Occur while implementing an ERP System In the early days of the incept of the ERP System various major financial adverts talked of an IT Solution that is a one stop shop for all Management Problems that deal with cost saving. It was foreseen that at the click of a button all relevant technical issues that are done by a number of staff would be handled by one person and eventually result in reduction of costs meaning some staff would be presumed redundant and therefore dismissed, deployed or retired early. Nevertheless history has it that the costs soared much to the detriment of the management at that point in time. This is because success means different things depending on who is defining it and the context in which the definition is done. (Markus, 2000) The major aftermath of this project is dismissal of staff rendering them jobless without any explanation. This could result into rebellion and emotions in the remaining staff that won’t put their best in production as a result of being demoralized with the fact that they could be the next target with the infusion of technology. In one case study multinational companies decided to move the centralization way that has swept across companies in the 90s by centralizing production in European countries and letting other countries bring in the raw materials later due to globalization they later decide to have their companies in third world countries so as to benefit from the low costs of wages and salaries while maintaining the same or more production. This leads to partial job cuts in Europe. Due to the fact that implementing an ERP System to be user friendly to the requirements of a company is a costly venture the editors of these systems read Microsoft and other IT moguls had to partner with sales agents to do the dirty work for them. Wit time many companies realized that their marriage to the ERP providers read editors was a life time venture with no loophole for a divorce. This is because the editors capitalized on this by constantly bringing new updated versions of their ERP software in within twelve to eighteen months. They also organized conferences and workshops to teach their clients how to integrate the new innovations into their system. ERP agents don’t give out all their information or else they wont secure contracts with the said companies as a result they are increasingly being seen in companies for they have source codes to the main system which they use to repair any malfunctioning. Due to this you can’t tell who is an employee of the company and who is not. With time all companies realized that they were making losses if they didn’t update their system to align itself with the new updates and those that had shunned these new innovations by not implementing any ERP system were forced by circumstances to follow suit or face redundancy in the market. A case study is about companies trading in Europe in the year 1999 for their financial systems to customize the euro in the year 200 they had to install the latest version of the ERP module into their systems. Its at this point in time that several companies made huge losses this is because they had to go back to the drawing board to integrate these new innovations. (Ross, 2000). ERP came with challenges of training staff in the IT/Computer Engineering department to be at par with the latest innovations so as to implement them in the company’s structure. This came at a cost. For they had to leave their respective departments and be confined in a class for a long period of time until the implementation started to bear fruits. Within this time the company had to recruit other staff on a temporary basis. During this interphace of change from the old system to the latest update it was deemed necessary to upgrade the central computer system and this was a risky venture so that companies had to work on two parallel systems at the same time which was very costly until the new update fitted into the system. ERP implementation leads to destabilization of the working procedure in a company’s structure. This is because it comes up wit new ways of interpreting data and thus also provides new ways of implementing it. As a result everyone from the receptionist, to the IT technician and even the director himself find themselves groping with a completely new way of finding and implementing solutions. This is costly to the company for the transition period takes time before it stabilizes. Strategies that Companies/Multinationals have adopted in order to implement successful change To ensure there are no gaps left during the transition to ERP companies have restructured their IT Portfolio to incorporate new departments so as to be able to mitigate the fallout that has characterized the implementation of ERP.The database Manager is an office which has been created for the person who is tasked with the duty of verifying the integrity of data received before its send to the rest of the company system. The software Manager which was once a temporary position has been made permanent to ensure that this office plays an integral role in ensuring a smooth transition from the old system to ERP without any hiccups. Most short term contractual assignments that were made to ensure the new system was set in place have now been made permanent since ERP changes have now become common and no one knows when the next innovation will come knocking for they don’t alert you. There has been a high demand of people competent in IT to steer companies to the next level this is because technology changes every other minute and new software are entering the IT market at a rate that has never been seen before. The position of I internal software developer and other clerical duties have been scrapped from many companies to ensure that these persons are trained to be at par with the challenges that come with ERP development. This is because inception of ERP into the company structure results into simplification of work and thus certain positions become redundant. Employees and other staff are increasingly being empowered and delegated major duties under supervision or the close eye of Managers to ensure that the next time the company has to go to an ERP crisis the will have able persons to take up roles of specialists in the IT department who mostly at this time have the ardent task of monitoring and implementing the change from the old system to the new one. There is need for companies to ensure that there ERP systems are in tandem with what is currently being used by their suppliers and competitors to ensure that once a transaction takes place online the physical authentification of the said transaction is verified and no issues are raised to infringe on the efficient dissemination of messages. This should also factor in the customers in the supply chain. In order to see tangible profits of ERP it should no longer be a project of the IT department rather a person in the whole organization who has shares in the company and has a go get it attitude and has steered the company to success before should be appointed and given this responsibility. He should be supported by a committed management team that will ensure its success. A good ERP system should be one that will integrate strong business values and steer the company to success but if one of its main objectives is to result to redundant staff then it will meet opposition from the working force meaning its implementation will delay resulting to huge losses. To avoid such delays let the objective be partial job cuts and not active ones i.e. by creating senior positions and training internal staff to fill up empty seats. It’s also important that a company finds out its major requirements for the ERP before choosing one because they might end up choosing an expensive venture instead of an efficient one. This main ground the company to a halt if its needs don’t fit in the BRP system. In cases where the ERP is found to be extraneous it should be customized to meet the needs of the company. This is because if you change the business to fit into the system it could take longer than precipitated leading to losses since some people may have to undergo months of training to get to know exactly what they are supposed to do. During the lifecycle of the ERP a company should reevaluate its needs and assess if they are being catered well by the system or something needs to be done to ensure they are reading in the same script worth the ERP system. This means the system should be in a position to incorporate any delays on part of the company and ensure the situation is changed to factor in profits. Change Management Change Management is an organized manner of dealing with change both from the company’s point of view as well as the employees. Why Change Management is crucial to an ERP Implementation; Whenever there is ERP implementation in an organization there are series of murmurings amongst its personnel who feel it would lead to them being declared redundant and thus oppose its implementation to the core. Change Management comes in timely to prepare the employees of a company to accept an ERP Implementation strategy. Many companies go through a harrowing experience during implementation process of an ERP program because they underrate the challenges that come with this noble task. (Hawking, 2004) Because companies have tended to underrate the quality and quantity of Management that is supposed to be factored in to oversee the transition ERP integration processes have had to eat much into the budget of the company and this is mainly because the company management don’t prepare themselves in advance for this daunting task as a result they end up being white elephant projects for they don’t finally succeed in accomplishing what they were set to do. (Schneider 1999) Most companies are in slumber land for they think that EPR is just like any other change in an organization. It’s prudent for them to note that it entails change in skills of the employees, structural and infrastructural changes of the company, Change in management techniques and even roles. These are not changes that are to be taken lightly for they are all crucial for the eventual success of the ERP integration process. (Martin, 1998). Resistance to change is manly experienced because employees don’t have the skills that come with a new ERP system and therefore its prudent that a company that is serious on stabilizing and improving its production goes the extra mile and trains its employees in this period of transition. It is always good to make hay while the sun shines before a company introduces any ERP system in its structure it should conduct an internal survey to find out what could be the main cause of resistance to change and deal with it before they effectively introduce the ERP using the right mode. The right strategic intervention by the company should be effected at the right stage to fight all causes of resistance before they erupt (Aladwani, 2001). It’s prudent that in order to effectively deal with resistance amongst its staff a Change Management team that encompasses membership from the entire structure of the company should be created to oversea the implementation of the radical changes that come with implementation of the ERP System. This team should be headed by a Project Manager who should be a person with impeccable authority and must hold a big position in the company (Scherer, 2001) Second Case Study- Diffuser Mumias Sugar Company The diffuser is an equipment that is used to crush sugar cane in the sugar industry and initially used to be operated by several employees but in the mid 90s as technological innovations started to infiltrate various companies Mumias sugar company was not left behind and started to inculcate changes in its personnel and employees that would see some being retrenched after being declared redundant but with a golden handshake to boot which came in form of enumeration depending with the age and number of years left to retire. As a result of this the diffuser was eventually being operated by one person at a time via a computer machine. The ERP system at Mumias Sugar Company involved changes in its financial and administrative departments as well as its external programs. The objective of this ERP was to ensure relevant information for operations of the company were available to all departments via a networking program that stored shared files so that any employee could get relevant information at the click of a button. By doing so the company wanted to provide an effective decision support system where everyone including employees in the lower cadre would participate in giving informed decisions on how the company should face the growing challenges of the sugar industry in order to maximize its profits. The company realized that changing the IT department wasn’t enough and therefore embarked on a series of refresher courses to let its employees be computer literate and be relevant with the changes that were sweeping across all companies in the world. Those whop passed the exams were promoted but those who didn’t were given golden hand shakes in order to mitigate on any fallout in its implementation stages. Departments were restructured and new ones were formed to align themselves with the ERP changes. Since the costs of implementing this system were high given they had to recruit lecturers from Moi University to ensure their employees were up to speed with the relevant ERP changes the implementation process took a slow but sure mode. Within a span of five years the results of these innovations started to bear fruits. In order to overcome any resistance golden handshakes were incepted to give redundant employees enough income and tools of trade like tractors that would see them start up businesses and build more gainful employment. This was after a change Management team which was headed by the Human resources Manager and comprising of staff from all departments of the company in addition to external consultants sat down and came up with the best strategy of dealing with emotional attitudes that would want to resist the changes. Conclusion Successful ERP implementation takes place where the employees are taken more into consideration than the process itself. In cases of resistance the Companies should first sit down with the employees and talk instead of opposing their resistance vehemently. In any case for future anticipation of ERP in a company the management should take tentative measures to introduce it bit by bit even before the implementation stage itself by making its employees be techno savvy through various training schedules. This overview concedes that many companies initially had a problem to content with the reality of ERP but since it has now taken root and its part of the system proper preparations should be taken by the company Management to ensure that they are not caught unawares with changes that could see them stagnate in their production. This can only be done if they have IT specialists to monitor these changes as well as developing proper strategies to absorb workers that would be declared redundant by the system rather than dismiss them. This ensures that no one is sacrificed by the new system. To avert sacrificial lambs they should result to deployment and training staff to take up new management roles left by those who have been deployed to the new departments. This in itself averts a case of uncertainty and ensures morale boost to the employees. REFERNCES: Aladwani, A. M. (2001). “Change management strategies for successful ERP implementation”. Business Process Management Journal, Vol. 7 No. 3, pp.266-275 As found at: citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.87.5630&rep... on 20th May 2011 Boykin, R.F. (2001), “Enterprise resourceplanningsoftware: a solution to the return material authorization problem”, Computers in Industry, Vol. 45, pp. 99-109.As found at: etds.ntut.edu.tw/etdservice/view_metadata?etdun on 20th May 2011 Hawking, P., Stein, A., and Foster, S.(2004). Revisiting ERP Systems: Benefit Realization, In proceedings of the 37th Hawaii International Conference on System Sciences, pp. 227 234 As found at: www.jatit.org/volumes/research-papers/Vol23No2/5Vol23No2.pdf on 20th May 2011 Markus, M.L. & Tanis, C. (2000). The enterprise systems experience – From adoption to success. In R. W.Zmud (Ed.), Framing the domains of IT research: Glimpsing the future through the past (pp. 173-220).Cincinnati, OH: Pinnaflex Educational Resources. As found at: www.iseing.org/emcis/EMCIS2008/...Un.../EMCIS2008_TBERP.pdf on 20th May 2011 Martin, M. H. (1998). 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