ERP Implementation- An Effective Management Tool

Transcription

1 ERP Implementation- An Effective Management Tool 1 Kamal Khanna, 2 Gurjeevan Singh, 3 Dr. Rakesh Kumar, 4 Gazal Preet Arneja 1,2,3,4 Shaheed Bhagat Singh State Technical Campus, Ferozepur ( 1 kksbs1@gmail.com, 2 gurjeevansandhu@gmail.com) Abstract ERP is the technique and concept for integrated management of businesses as a whole for the effective utilization of resources to improve the efficiency of enterprise management. Industries are investing large amounts in the implementation of enterprise resource planning (ERP) systems. The optimization (or effective use) of such an information system now a day s is becoming a major factor for industries striving to reach their performance objectives. The purpose of the study is to give an insight to those who want to implement ERP about its implementation plan. Implementation of ERP systems in the industries does not remain always successful as sometimes this brings partial success or failure. This study explains the whole design, development and implementation process of ERP systems. This study will help managers/ practitioners /consultants to develop batter strategies for supervising and controlling ERP implementation systems. ERP is watchword in the manufacturing industries & more & more industries are turning to ERP solutions. 1. Introduction & History of ERP ERP was first conceived in India in 1995 & some of the industries implemented it in The Literature insists that ERP systems allow seamless integration of information flow & business processes across functional areas within a company. The critical success factors for the implementation & use of ERP systems & their effects on organizational performance have been reviewed from the research papers & there are many inconsistent & inconclusive findings. Chuck C.H. Law et. al. (2007) examined the relationship between the success of ERP system adoption, extent of business process improvement (BPI) and organizational performance and investigated the associations between the outcomes of these initiatives. It also demonstrated that system-level and organizational outcomes are subject to the influence of the firm s strategic intent and objectives when adopting ERP systems. V. Botta- Genoulaz et. al in 2005 noticed that in industries the stakes n control of integrated systems cannot be limited to the phases of implementation or deployment. Better use of these information systems drives industries to new organizations and to continuous adaption of industry s strategy. It should help in the re-evaluation of the positioning of the ERP in the information system to identify relevant improvement in a given situation. Weiling Ke et. al. (2007) suggested that how the top management should perform to foster the desired organizational culture and thereby enhance the chance of ERP implementation success. Their study also focuses on the influence of top management team and ignores peer s influence and also do not consider national culture and identifies the conductive actions for ERP implementation. For successful ERP implementation, organization must have the capability of effective knowledge sharing to start with. The competitive advantage arises from the industry s capability in integrating the adopted processes. Capabilities should be in the form of reconstructing the organizational roles in order to increase knowledge transfer and fill the gap between the knowledge requirements of the ERP system (Ramin Vandaie, 2008). The literature review and historical background of ERP systems suggests that the applications of ERP systems in the areas other than the large manufacturing industries have been rare and inconsistent. Little evidence exists on ERP implementation in service sector which has a significant potential in India. An attempt can be made to explore the implementation of ERP system and analyze the impact in service organizations. Little evidence also exists in literature on ERP implementation in small scale industries. Literature has reported tremendous financial gains through ERP projects in large manufacturing sector, so an attempt can be made to replicate it in SME sector too. 2. Changes in Manufacturing Environment Inculcating ERP 2.1 Before ERP Systems Before ERP systems the various departments function in isolation and have their own system of data collection and analysis. So the information that is created or generated by the various departments. The result is that instead of taking the organization towards the common goal, the various departments tends to pull it in different directions seems the department does not know what the other does. Order Shipment Sales Production Logistics Billing 370

2 Figure 1- Legacy Systems. Departmental objective sometimes be conflicting e.g. the sales and marketing people may want more product variety to satisfy the varying needs of the customers while the production department will want to limit the product variety in order to cut down production cost. So unless all the departments know what the others are doing and for what purpose, such conflicts will arise and disrupt the normal functioning of the organization (Alexis Leon, 2009) After ERP Systems An enterprise system streamlines a company's data flows and provides management with direct access to a wealth of real-time operating information. For many companies, these benefits have translated into dramatic gains in productivity and speed. ERP predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning, and scheduling tools, which: Links customers and suppliers into a complete supply chain Employs proven processes for decision-making Coordinates sales, marketing, operations, logistics, purchasing, finance, product development, and human resources Managers & Stakeholders Sales & Delivery Reporting Financial Customer Services Centralized Database Manufacturing Suppliers Service Human Resource Inventory & Supply Employees Figure 2 - Anatomy of an Enterprise System Companies have invested considerable resources in the implementation of enterprise resource planning (ERP) systems. The results initially expected have rarely been reached. The optimization (or efficient use) of such information systems is now a day s becoming a major factor for firms striving to reach their performance objectives (Vale rie Botta-Genoulaz, Pierre-Alain Millet, 2005). ERP users reaction may be different from that of other types of IT users due to complexity of ERP. Using ERP systems entails familiarity with both ERP functions and application problem domain as ERP refers to commercial software systems that aim for providing best practices that can be integrated into the business processes (Liang et al., 2007). Successful ERP implementation (initial stage of ERP) does not necessarily lead to the success of ERP post-implementation.this is so because ERP users lack complete will to determine whether they use ERP systems in the initial stage, while the decision on whether they continue using ERP and how they adapt to the distinctive features of ERP are not always mandatory (Shih-Wei Chou, Pi-Yu Chen, 2009). Industries that fail to utilize systems such as ERP may find themselves using various software packages that may not function well with each other (Michael Krigsman, 2010). 3. Need for Present Study The purpose of this study is to describe and analyze the factors that contribute to the successful ERP system implementation, the stakeholders of ERP system and how these stakeholders are related to CSFs (critical 371

3 success factors) of ERP system implementation. Some of the researchers working on the success of ERP systems have addressed the critical issues including Project justification, rests & ERP process fits, for the industries who have adopted the ERP systems. Limited study has been conducted in the ERP implementation risks area, with most research consisting of implementation of case studies in individual organization. The current study have focused on the success of ERP adoption, extent of Business Process improvement (BPI) & organizational performance, but still the study of influence of organizational variables on BPI, organizational performance etc. is needed. To sustain in the present competitive age, operational excellence is the basic success factor for manufacturing organizations. To implement ERP judiciously & used efficiently to have the ability to raise the productivity & profits of industries dramatically. 4. How ERP Should Be Implemented? ERP implementation is so knowledge-intensive that the fate of the whole project is in hands of a group of knowledgeable employee from across the organization and success of the project relies heavily upon effective management of knowledge into, within, and out of this team during enterprise system life cycle. Employees need to know how their task fits into the overall process and how that process contributes to the achievement of organizational objectives. ERP experts need to know more about the business processes and business process experts need to leverage their knowledge about the IT systems in place in their organization. Eventually, the overlap between the knowledge of different divisions increases and the knowledge on the organizational scale follows a converging pattern. 4.1 ERP: A Tool of Information Management Planning Design Transition Testing Post Implementation Analysis Figure 3- Flowchart for ERP Implementation 372

4 Table 1 ERP Implementation Methodology S.No. 1. Planning 2. Design 3. Transition 4. Testing 5. Post Implementation Analysis Phases of ERP Implementation 5. ERP Implementation: Critical Success & Failure Factors a) Hold discussion with various personnel to establish the actual number of system operating at client s site. This stage will be useful in eliminating those packages that are not suitable for the business process. b) The plan is developed, roles are identified and responsibilities are assigned. It will also decide when to begin the project, how to do it and its completion. c) Project scoping document for proposed solution & budgeted time has been prepared in this phase. a) In this phase the companies create a complete model of where they are now, and in which direction will they proceed in the future. b) Test scripts are made in this phase which is to be followed during testing of the system and interface paths of various modules are being prepared. c) Best people are chosen from the industry having good functional knowledge & the system is tested to verify the accuracy. a) In this phase a significant change in number of employees and their job responsibilities are assigned according to specific areas as the process becomes more automated and efficient. b) In this phase the employees are given training according to their specific areas. a) In this phase the company tests the real case scenarios. b) The system is configured and now everybody must come up with extreme cases like system overloads, multiple users logging on at the same time. c) This phase is performed to find out the weak link so that it can be rectified before its implementation. a) Once the implementation is over, the hired consultants will go. It is the time to reap the fruit of the implementation it is very important that the system has wide acceptance. b) The system must be updated with the change in technology. The post implementation will need a different set of roles and skills than those with less integrated kind of systems. From the literature it is found that the success or failure of ERP implementation mainly depends upon a good number of organizational and technological factors. In order to reduce the failure rate of ERP implementation, a number of studies have attempted to identify the critical success factors (CSFs) in the implementation of ERP (E.W.T. Ngai et.al. 2008). The firms engaged in ERP implementation in different countries differed significantly in performance concerning some CSFs. There have been a few papers recently published on the factors contributing to ERP implementation. José Estevez and Joan Pastor, (2001) consider strategic and tactical factors for implementing ERP and propose a critical success factor model. CSFs are the limited number of areas in which results if satisfactory will ensure successful competitive performance for the organization. The CSFs Unified Model represents all the critical success factors pertaining to organizational perspectives and technological perspectives as shown below: - 373

5 Table 3: Unified Model of Critical Success Factors Organizational Perspectives Technological Perspectives Strategic Sustained management support Effective organizational change management Adequate project team composition Good project scope management Comprehensive business re-engineering Adequate project champion role Trust between partners User involvement and participation Avoid customization Adequate ERP implementation strategy Adequate software configuration Adequate ERP version Tactical Dedicated staff and consultants Appropriate usage of consultants Empowered decision makers Adequate training program Strong communication inwards and outwards Formalized project plan/schedule Reduce trouble shooting Adequate software configuration Adequate legacy systems knowledge Similarly the critical factors responsible for causing failure after ERP implementation are identified and are listed in the given table: - Organizational 6. Conclusion and Technological Perspectives Table 4: Unified Model of Critical Failure Factors Strategic Tactical Critical Failure Factors ERP system misfit High Turnover rate of Project Team Members Poor Consultant Effectiveness Poor IT Infrastructure Poor Knowledge Transfer Over- Reliance on heavy Customization Poor Project Management Effectiveness Poor Quality of Business Process Reengineering Poor Top Management Support Too tight Project Plan/ Schedule User s Resistance to change Unrealistic Expectations from Top management Inadequate Resources The study shows that ERP implementation is a versatile information tool to achieve competitive advantage in the market and has a lot of potential for all types industries which are being continuously threatened by modern economic turbulence. The concluding recommendations are given as: Top management support, primary users support, consultant s in-depth knowledge of software and industry, proper training for project team members & end users and good communication between top management and ERP project team are the most pertinent considerations for the successful ERP implementation in any industry. Sustained management support, strong communication, adequate training program and adequate ERP implementation strategy are the most contributing factors for a good success and are to be attended without 374

6 compromise. Poor Consultant Effectiveness, Poor IT Infrastructure, Poor Knowledge Transfer and User s Resistance to Change are the critical factors responsible for failure in ERP systems. The special guidelines of ERP practitioners emphasized that the selection of right consultant, support from top management at all levels and all times, dedicated and experienced project team, proper utilization of all resources, pre-screening of the ERP software and proper design of ERP methodology are the key elements for a successful ERP system. References 1. Thomas H. Davenport, Putting the Enterprise into the Enterprise system Harvard Business Review, (1998). 2. Holland, P., Light, B. and Gibson, N. A critical success factors model for enterprise resource planning implementation, Proceedings of the 7th European Conference on Information Systems (1), , (1999). 3. Thomas H. 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