Environment Is Continuously Changing

Published Date: 02 Nov 2017

On

A Study of Critical Success Factors for

ERP Implementation in

FMCG Sector

Submitted in partial fulfillment of the requirement of

Global Masters in Business Administration (GMBA)

Information Technology Management Specialization

Submitted By:

Hardik Sanghavi

Johnson Chacko

GAPR10IT160

GAPR10IT163

April 2010 Batch

April 2010 Batch

Under Guidance of: Dr. Dhrupad Mathur

SP Jain Centre of Management

Academic City

Dubai UAE

Acknowledgement

Nothing is more important than acknowledging the help and guidance of those who have helped us in making this project the success that it is. With this in mind, we take this opportunity to thank all those who were a guiding force in helping us towards the completion of this project successfully. With great respect we extend our sincere gratitude towards Dr. Dhrupad Mathur, a fountain of knowledge and experience, who provided us meaningful insights and guided us throughout the duration of the project. Our discussions with him always helped us to gain a different and new perspective in the development of our project.

We would like to thank S P Jain Center of Management for providing us this wonderful platform to work on applying the knowledge which we have gained during the tenure of this course. It was a great learning experience to put the theoretical knowledge which we have gained during the course to practical use. The exposure to a particular industry and developing contacts and interacting with these contacts during the in-depth interviews conducted was truly a rewarding experience.

We take this opportunity to thank our professors Dr. Balakrishna Grandhi and Mr. Umesh Kothari for giving us the knowledge and the insights which enabled us to complete the various stages of the research successfully. We would also like to thank Ms. Mini Menon and Mr. Prashant Pawar who were helpful in providing us with industry contacts using the S P Jain Alumni Network.

Our sincere gratitude also goes out to all the interviewees who were a part of the qualitative research for giving us their valuable insights and sharing their knowledge of the industry.

Declaration

We hereby declare that the matter included in this ARPs report entitled "A Study of the Critical Success Factors for ERP Implementation in the FMCG Sector in the UAE", is the result of study and interviews carried out by us. We further declare that this is our original work and has not been published anywhere before.

This Project Work has been carried out for the sole purpose of submission in partial fulfillment of Global Masters in Business Administration (GMBA) in Information Technology Management at S P Jain Center of Management, Dubai.

The above is true to the best of our knowledge and understanding.

We have read, understood and signed the SPJCM Code of Ethics.

Hardik Sanghavi

Roll No : GAPR10IT160

GMBA Batch

SP Jain Center of Management

Block 5

Academic City

Dubai, UAE

Johnson Chacko

Roll No : GAPR10IT163

GMBA Batch

SP Jain Center of Management

Block 5

Academic City

Dubai, UAE

Project Mentor: Dr. Dhrupad Mathur

Table of Contents

Executive Summary

In the current world scenario, the business environment is continuously changing and competition is at its peak. In order to survive and flourish in this highly dynamic environment it has become mandatory for companies to continuously revitalize, reinvent and resize themselves to gain a competitive edge and position themselves for success. Companies are continuously striving to improve themselves in areas like quality, time to market, process streamlining, time to market, customer satisfaction, performance and profitability. Business that have the infrastructure in place to quickly respond to critical information, make informed business decisions based on this information and implement these business decisions across all functions and locations are the ones that are going to be the winners.

Enterprise Resource Planning (ERP) Software is the tool that fulfills this need of business and provides a lot more functionalities. ERP’s are proving to be quite successful in bridging the gaps of information asymmetry, process standardization, integration, communication, collaboration, coordination, and providing efficiency to the Business Processes of a Company. Major corporations all over the world are now turning to ERP’s to give them a competitive edge in the increasing competitive markets. ERP’s have changed the rules of the game and the game itself. The level of integration an ERP is capable of providing knows no bounds.

The FMCG sector is one of the most dynamic industry sectors with quick turnover of goods at relatively low cost. Most FMCG goods have a short shelf life because of high consumer demand or short shelf life. Almost all FMCG companies in the UAE are mainly focused on distribution as a result of which managing the supply chain is a vital task. It is one of the most competitive industries because of low operational cost, a solid distribution network and emergence of new FMCG companies. In order to gain a competitive edge almost all FMCG companies are adopting ERP systems to streamline their supply chain management and incorporate manufacturers and retailers into their network to enable maximum efficiency leading to maximum profitability.

The FMCG companies that have been successful in implementing ERP Systems are reaping the benefits of having information symmetry across the Company, standardized procedures, integrated work environments, better communication, collaboration and collaboration across different departments and finally improving efficiency and profitability of the company. But not all ERP Implementations have been successful and in several cases have lead abandonment of the implementation and heavy losses to the companies. Despite the advantages of ERP in FMCG sector over 70% of the ERP Implementation Project have either resulted in failure, go over budget, exceed implementation timeline or do not meet the needs of the Organization. More than 95% of these failures are a result of the companies implementing the ERP rather than the ERP Vendor. In order for there to be a successful ERP Implementation it is vital to identify the causes of these failures and plan the implementation accordingly.

The objective of this research is to carry out a study to identify the Critical Success Factors for ERP Implementation in the FMCG sector. This study will help in identifying these pitfalls and enable companies that are going to adopt ERP’s plan their implementation keeping these CSF’s in mind so that they will be successful in maximizing the Return on Investment in the ERP.

The research has been carried out in 2 phases. The first phase of the research includes a detailed Secondary Research which has been carried out by looking into past researches carried out in similar fields and developing an understanding of the problems which have been occurring previously and integrating them in our primary research so as to cover all the areas. The second phase of the research includes a Qualitative Research which is being carried out through in-depth interviews with industry professionals who have undergone the process of ERP Implementation in their respective companies. The data which was obtained during the secondary research provided the basis for the in-depth interviews which were carried out.

The findings of the Primary Research have been analyzed and the results obtained from the analysis has been interpreted to provide recommendations which help future ERP Implementations to keep in mind the check points and balances which are necessary for a successful implementation. The major Critical Success Factors obtained during the research phase were Upper level management Support, Effective communication, Clear and focused goals and objectives, Effective project Management, Suitability of Hardware and software, Business process Reengineering, Data Accuracy and integrity, Vendor support, User involvement and Training and development of the User. The top 3 factors were identified as Upper Level Management Support, Clear and focused goals and objectives and Training and Development of End Users.

Introduction

Fast Moving Consumer Goods (FMCG) Industry

FMCG industry primarily deals with the production, distribution and marketing of consumer packaged goods. Fast-moving consumer goods (FMCGs) are those retail goods with a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Some FMCGs – such as meats, fruit and vegetables, dairy products and baked goods – are highly peris93hable. Other goods such as alcohol, toiletries, pre-packaged foods, tobacco, soft drinks and cleaning products have high turnover rates.

The goods in the FMCG sector have extremely quick turn over at relatively low cost. The absolute profit on a unit sold will be relatively small but these are products that are sold in large quantities and hence the cumulative profit on FMCG products will be large. A subset of FMCGs is Fast Moving Consumer Electronics which include innovative Electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products. White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, and Music items.

Fast Moving Consumer Goods (FMCG) can be categorized into three groups based on the purchasing pattern of these products:

Staples

These are goods that are consumers buy on regular basis. These are essential commodities such as meats, fruit and vegetables, dairy products and baked goods – are highly perishable. Also, toiletries, soft drinks, cosmetics, cleaning products, shaving products come under this category.

Impulse goods

These are goods that are purchased by consumer out of sheer impulse. There is no plan going into purchase of these types of goods. Chocolates, certain food and drink commodities come under this category.

Emergency goods

These are goods the consumer purchases as and when the need arises. These can even be seasonal products.

Some of the prime activities of FMCG industry are selling, marketing, financing, purchasing, etc. The industry is also engaged in operations, supply chain, production and general management.

FMCG can also be categorized into three groups based on the Consumer perspectives.

Frequent Purchase

These are products that are most frequently purchased by the consumers. These goods are rarely stocked up by consumers as they can be bought at any time

Low Involvement

FMCG are considered to be low involvement products. These are products for which the consumer has vast variety of options. The consumer has a lot of options in case the brand the consumer is not available at the store.

Low Price

FMCG are generally low priced. The companies rely on the quantity of products sold. The feature of low price of the products makes it in the low involvement category.

The factors that made the FMCG industry a highly competitive one are low operational cost, solid distribution networks, and emergence of new FMCG companies. The exponential growth of world’s population has also attributed for the huge success of the FMCG industry. Some of the leading FMCG companies all over the world are Sara Lee, Nestlé, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, PepsiCo, Johnson and Johnson etc.

FMCG Industry in U.A.E. is distribution based with major emphasis on the supply chain management of products and commodities. With the growing population in the UAE the FMCG industry is becoming a highly competitive industry with companies coming into this sector and industries trying to gain a competitive edge by developing a successful SCM distribution network. Major FMCG companies in UAE are already using ERP’s or in the process of implementing ERP Systems. The functionalities of ERP’s used by FMCG companies in UAE has been severely restricted because of the fact that they are distribution driven rather than manufacturing, distribution and sales driven.

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Figure - FMCG Companies

Enterprise Resource Planning

Introduction

Enterprise resource planning (ERP) is the term used to describe a broad set of activities supported by multi-module application software that helps a manufacturer or other business manage the important parts of its business. These parts can include product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business.

Goal of an ERP: To provide a platform for integrating dissimilar enterprise applications, such as business-critical inventory, manufacturing, sales, marketing, and finance applications. The idea is to improve and streamline the internal business processes which require a re-engineering of current business processes.

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Figure - Essential Features of Comprehensive ERP

Components of an ERP:

ERP Software - Module based ERP software is the core of an ERP system. Each software module automates business activities of a functional area within an organization.

Business Processes - Business processes within an organization falls into three levels - strategic planning, management control and operational control. The success of an ERP is dependent on the integration and implementation of the Functional Modules.

ERP Users - The users of ERP systems are employees of the organization at all levels, from workers, supervisors, and mid-level managers to executives.

Hardware and Operating Systems - Many large ERP systems are UNIX based. Windows NT and Linux are other popular operating systems to run ERP software. Legacy ERP systems may use other operating systems.

Advantages of an ERP:

Integration among different functional areas to ensure proper communication, productivity and efficiency

Order tracking, from acceptance through fulfillment

The revenue cycle, from invoice through cash receipt

Managing inter-dependencies of complex processes bill of materials

Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)

The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level

Eliminates the problem of synchronizing changes between multiple systems - consolidation of finance, marketing and sales, human resource, and manufacturing applications

Permits control of business processes that cross functional boundaries

Provides top-down view of the enterprise (no "islands of information"), real time information is available to management anywhere, anytime to make proper decisions

Reduces the risk of loss of sensitive data by consolidating multiple permissions and security models into a single structure

Shorten production lead time and delivery time

Facilitating business learning, empowering, and building common visions

ERP Implementation

Implementation of an ERP is the time at which companies can be made or broken. It requires a substantial dedication of a company’s time, money, resources and involves significant technical and business risks.

Firms that are able to successfully implement an ERP gain a significant competitive edge over the competitors that do no implement an ERP or are unsuccessful in implementing an ERP. ERP Implementation is fairly difficult and usually results in failure due to a lack of clarity and proper implementation planning. A failure of an ERP implementation constitutes of the following factors:

Exceeding Implementation Timelines significantly

Overextending the Budget

No Return on Investment visible

Inability to meet the customer requirements

Supply Chain Management failure

Figure - ERP Implementation Phases

Research Methodology

Statement of Problem

FMCG Industry primarily deals with the production, distribution and marketing of consumer packaged goods. The key to the success and profitability of the organization depends on the how effectively the organization manages the production, distribution and marketing of their goods. Information technology has transformed how the FMCG industry can effectively utilize and manage their resources. In particular ERP (Enterprise Resource Planning) has transformed business in the FMCG industry.

ERP systems are software applications that link the transaction oriented data and the business process of the organization. ERP systems touch the financial systems, manufacturing systems, supply chain and sales systems of the organization. As the ERP system touches all the key external and internal aspects of the organization, the proper implementation of ERP system is a key to the overall success of the organization. Organizations face various problems during the implementation of an ERP system. These problems can range from lack of support from Upper level management to User involvement to Vendor support. Overcoming the above mentioned problems is essential to the successful implementation of an ERP system in an organization.

Objective

The objective of this applied research project is to identify and study the Critical Success Factors (CSF) for a successful implementation of Enterprise Resource Planning (ERP) system in the Fast Moving Consumer Goods (FMCG) industry in UAE.

Methodology

Information technology in the FMCG sector has a very large scope but we have narrowed down our objective to the Critical Success factors of ERP Implementation in the FMCG Sector in the UAE.

On determining the scope of our research we have carried out the research in 2 phases. The first phase of the research involves a detailed Secondary Research on the critical success factors of ERP implementation in FMCG industry worldwide. Using the resources available online and the library we were able to obtain a thorough understanding of the various aspects of the FMCG sector on the whole and some information about the FMCG sector in UAE as well. The pitfalls involved in ERP Implementation were also obtained through secondary research. The secondary research was quite successful in giving us information about the factors responsible for a successful ERP Implementation which helped us in the second stage of our research.

Figure - Research Methodology

The second phase of the research involved Primary Research which was carried out using a Qualitative Research Methodology through the use of in-depth interviews. The data obtained from the secondary research was used as a guideline to carry out the in-depth interviews and gain a better insight into the problem at hand. The in-depth interviews were carried out with industry experts who had undergone the process of ERP Implementation in their respective companies or were in the process of implementing the ERP. The industry experts were instrumental in giving us useful insights about the market scenario in FMCG sector in UAE and the various complications involved in an ERP Implementation in this part of the world.

Secondary Research

The secondary research was carried out through past researches, research journal, books and internet. In addition to this, we also made use of a number of online resources for performing secondary research such as

Google books

Zawya

Secondary research helped us understand:

The basic business process of FMCG industry

The role of IT ( Information Technology ) in FMCG industry

The role of ERP systems in FMCG industry

The extend of usage of ERP systems in FMCG industry

The critical success factors of ERP implementation in organizations worldwide

The secondary research gave us a direction for proceeding as far as our primary research is concerned. We designed our qualitative questionnaires based on our secondary research findings.

Primary Research

To understand the Critical Success factors of ERP (Enterprise Resource Planning) system in the FMCG (Fast Moving Consumer Goods) industry in UAE we conducted in-depth interviews with industry experts who have implemented ERP (Enterprise Resource Planning)

Qualitative Research

We conducted qualitative research through in-depth interviews with industry professionals who have been involved with the implementation of ERP in their respective organizations. We conducted one to one interviews with the following professionals:

Mr. Anil Jain, Head Finance & HR, Baqer Mohebi

Mr. Sinoy Muttichur – IT Analyst, National Trading

Mr. Nailesh Mascrehnas – IS manager, Estee launder

Mr. Sameer Agarwal– IT Analyst, IIFCO

Mr. Ashok Sanghavi – Project Manager, Al Baker Group

The questionnaires used for conducting the interviews are attached in Appendix of this report.

Literature Review

ERP

Enterprise Resource Planning Systems have become an integral part of any Industry. We first studied the 2010 ERP Report by the Panaroma Consulting Group in order to get an idea of the status of the ERP industry in the current world scenario. This report identified the benefits, drawbacks, risks and results experienced by organizations implementing ERP software across the globe. This study surveyed nearly 1600 organizations that were involved in implementing ERP’s within the last four years. The ERP Software was classified into Tier I, Tier II and Tier III. The report was able to give us an idea of the status of the ERP Implementations going on globally and giving us a basis to develop our analysis. Tier I Vendors includes SAP, Oracle, Oracle eBusiness Suite, Oracle JD Edwards, Oracle Peoplesoft, Microsoft Dynamics, Tier II includes Epicor, Sage, Infor, IFS, QAD, Lawson, CDC Software and Tier III includes ABAS, Compiere, Exact, NetSuite, CGS, Syspro etc.

Figure - Market Share of Major ERP Vendors

From Figure 5 it can be seen that the share of Tier II ERP Vendors has been 30% of the total Market Share. This share has increased from 23% in 2008 to 30% in 2010. This is an important factor which was confirmed by our research which showed that companies are thinking of shifting from major ERP Vendors to vendors which provide customized solutions or developing in-house ERP’s so as to meet the functionality needs of the company.

Figure - Overall Duration of ERP Implementation

Figure 6 gives an idea about the duration of ERP Implementations. The most prominent information from the above figure would be the fact that less than half the ERP implementations (43%) are completed in the expected duration period. Overall, only 21.5% of the organizations have had their implementations completed within a time frame shorter than expected and most importantly 35.5% of the organizations took longer than the stipulated time frame to implement their ERP solutions. This figure gives us an idea of the inconsistency in the implementation time frames of various companies.

Figure - Duration of ERP Implementation by Tier Classification

The above given Figure 7 gives us a better understanding of the duration of implementation across the various classifications of ERP Systems namely Tier I, Tier II and Tier III. The most notable features of this figure would be the trend of increasing number of companies completing their implementation as per the expectation and decreasing number of companies taking longer than the expected timeframe to implement the ERP across the various tiers. Tier I relatively has the minimum number of companies completing the Implementation within the stipulated timeframe and maximum number of companies which take longer than expected to implement the ERP whereas Tier III has exactly the opposite. The longer an implementation exceeds its expected timeframe the greater the chances of its failure in one of the phases of the implementation. It implies that either the estimated timeframe was not realistic enough or there is a problem in one or more if the phases of implementation process like process design, requirement gathering, configuration, business and technical testing, and end-user training.

Figure - Implementation Budget and Cost for 2010 vs. 2008

Figure 8 signifies that in addition to exceeding the expected timeframe over 50% of the ERP Implementation exceed the implementation budgets as well. There is a marginal decrease in 2010 as compared to 2008 in both the budgetary overshoot and total cost as a percentage of revenue. This can mainly be attributed to the restrictions imposed on the IT Budgets in the wake of the economic crisis. The main problem of overshooting the budget can be attributed mostly to the failure of companies to identify costs not attributed to software vendors, such as project management, change management, hardware upgrades etc.

Figure - Results of ERP Implementation

The result of an ERP Implementation can be observed in the Figure 9. The level of Employee satisfaction with the ERP Solutions is only 61% with the remaining 39% expressing dissatisfaction with the ERP. Similarly, 32% of the executives express dissatisfaction with the ERP Solution. Also more than one in three companies (40%) has realized operational disruptions during the go-live stage of the implementation. There have been an overwhelming 41% of the companies which have failed to realize more than 50% of the benefits of the ERP and 22% which have failed to realize some benefits. These figures are quite astonishing and paint a bleak picture of the kind of implementations which are taking place.

Figure 10 shows the level of customization required by different companies. 47.8% of the companies chose to have at least minimal customizations done to the software to meet the needs of the organization. Only 28.3% of the companies did not involve in any customization whatsoever. 23.8 % of the companies opted for heavy customizations or complete customization. Customizing an ERP Package involves a lot of risks because they are expensive, complicated and lead to a delay in the delivery of the ERP and the benefits of having an integrated system.

Figure - Customization Level of Companies

Despite all the problems which are involved in the ERP Implementation, the companies which have been surveyed expect that the jobs of the Employees will be easier by 39%, the Business Operations will be standardized by 39% and 69% of the Business Processes will be improved by the implementation of the ERP (as seen in Figure 11). This clearly signifies the importance of an ERP despite all the problems associated with its implementation implying that ERP’s are a double edged sword which can transform an organization but at the same time has the potential to destroy companies if the implementation is not carried out correctly.

Figure – ERP Expectations of Companies

Critical Success Factors of ERP Implementation

A good amount of research has already gone into the identification of the Critical Success factors for ERP (Enterprise Resource Planning) in different countries. In this Literature review we will focus on the on the various Critical success factors that has been identified across the globe through various researches and also on the process of the ERP implementation in an industry. Most of the available literature combines the Critical Success factors (CSF) with various characteristics of the organizations ERP (Enterprise Resource Planning)

Feeny and Willcocks (1998) identified nine core IT capabilities required for successful ERP implementation. Table 1 lists these capabilities as shown below.

Table - Core IT Capabilities require for ERP Implementation Success

IT CAPABILTY

IMPACT

IT leadership

Develop strategy, structures, processes, and staff

Business systems thinking

Adopt systems view

Relationship building

Cooperate with business user

Architecture planning

Create needed technical platform

Technology fixing

Troubleshoot

Informed buying

Compare vendor sources

Contract facilitation

Coordinate efforts

Contract monitoring

Hold suppliers accountable

Supplier development

Explore long-term mutual benefits

This also shows us the requirement of a highly capable internal IT group for the successful implementation of the ERP. Jiang Yingjie (2005) in his research on Critical Success Factors in ERP Implementation in Finland identified ten critical success factors of ERP implementation.

Figure - Conceptual Research Model of ERP Implementation in China

The above framework clearly explains the key factors that have been identified from the study done on the Critical Success Factors in ERP Implementation in China. The organisational factors found out during study include top management support, Business process reengineering and effective project management. The people characteristics like user involvement of the users in the implementation of the ERP and the training of the users has been identified as a key success factor in the implementation of ERP. The support of the vendor also has been found to be a critical success factor. One of the major outcomes from the study was the cultural factors involved in the success of ERP implementation. The study stressed on the importance of the culture of the people of the region at which the ERP is implemented. 

Majed Al-Mashari, et al (2003) in his paper discusses the taxonomy of the key success factors in an ERP Implementation. The below given Figure 13 diagram shows the taxonomy of the key success factors in an ERP Implementation The paper discusses about the three stages of ERP implementation such as setting up, implementation and Evaluation. The evaluation of the performance is a key factor in measuring the success of the implementation process.

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Figure – Taxonomy of ERP Critical Factors

Limitations

The limitations of our research are as follows:

• The primary source of data for us has been the in-depth interviews we had with the IT managers involved with the ERP implementation in FMCG firms in Dubai. But we were unable to get a substantial number of responses from IT managers especially in International FMCG firms having their subsidiaries in the UAE

• The research would have an element of interviewer bias as the IT Managers from these firms would not give us a complete true picture of the status of their firm

• The FMCG sector is one of the biggest industries and one of the fastest growing industries in UAE. We could not interview a large part of the industry’s IT managers due to time constraints and lack of industry contacts

Data Analysis

Findings

Every project that organizations undertake has got its critical success factors. These are the factors that the organization will have to perform well for the success of the project. In case of Information Systems these factors are a key for the proper functioning of the system.

From our study we found that the Critical success factors for a successful implementation of ERP (Enterprise Resource Planning) system in the FMCG (Fast Moving Consumer Goods) industry in UAE are

Upper Level Management Support

The support of the top Management is a key factor for any information system implementation and ERP in particular. The top management has to take the initiative to see that the ERP implementation is in line with the overall business strategy and goal of the organization. They will have to provide the Financial as well as other resources that are required for a successful implementation of the ERP. Without the support of the Upper level management the ERP implementation will not be a success.

Effective Communication

Effective communication is one of the most important factors for the successful implementation of the ERP. The communication between the top level management and the implementation team and also between the ERP vendor and the implementation team is a key to the success of the implementation. The top management should be able to convey the message and the strategic business goal of the organization to the implementation team so that there lays no ambiguity during the implementation of the ERP. The in house Implementation should be able to communicate to vendor the actual requirements of the organization as well as the business process of the organization so that ERP implementation is in tune with the business processes and goals.

Clear and focused goals and objectives

Any implementation before it begins needs to have identified the goals and the objectives of the implementation so that there is clarity of thought and a focused approach towards the same. It provides metrics and indicators which can be referenced from time to time to ensure that the implementation is on the correct path and will result in a successful implementation. Nearly 60% of the ERP implementations are because of lack of clear goals and inadequate functional requirements (objectives). In order to succeed it is thus necessary to have a comprehensive and systematic set of goals and objectives in mind before the implementation even starts.

Effective Project Management

Project management is the art of planning, executing, controlling, and organizing the resources to attain specific goals and objectives. Project management goes beyond one single factor because management is a key throughout the implementation. If we look at the ERP as a large project, we have some areas that we should consider, such as integration/plan, scope, time, cost, quality, human resource, communication, risk, and procurement. If all these areas are taken into account, it will result in the successful implementation of the ERP system.

Figure – Areas of Project Management

Project management activities last the lifetime of the project, right from the inception till closing of the project. Experts shall be assigned to manage the project in order to have a successful implementation. It is the project manager who will have to manage time as well as other resources for the successful implementation. At the initial planning phase the management will have decided on the budget and the duration of the implementation. It is the project manager who effectively utilizes the resources in hand to see that the implementation takes place in time and also within the allocated budget.

Suitability of hardware and software

Different ERP vendors use different hardware platforms, databases, and operating systems, and certain ERP packages are compatible only with some company’s databases and operating systems. Although most vendors do not like to offer connections with other vendors, sharing is becoming a new trend.

Business Process Reengineering

A business process can be defined as a sequence of activities or tasks that produce a specific service or product for a particular customer or customers.

There are two types of business process:

1. Operational

2. Infrastructure.

Operational processes deals with those business functions including product

Development, order management, inventory management and customer support.

Infrastructure processes are more administrative such as establishing and implementing strategy and aspects of the organization including human resources, physical assets, and information systems (Olson, 2004).

Business Process Reengineering optimizes the organizations business and creates the best way to do things. Reengineering has helped in cost reduction and increased the overall efficiency of the organization. ERP has been instrumental in Business process reengineering. ERP systems have helped organizations design workflows that will cater to the business needs and hence helped in business process reengineering.

Data Integrity & Accuracy

Data is an integral part of any ERP system. The accuracy of the data and its availability is a necessity for an ERP to provide proper functionalities to the system. It is also necessary to maintain the integrity of the data and prevent the data to be accessible for changing or manipulating by sources other than the authorized users.

Vendor Support

Vendor Support is one of the most critical factors at the time of implementation. The issues that arise during the implementation might not be resolved by the in house team. If the support and service of the vendor are not present during the time of the implementation, the project can also go beyond the timeline set for completion of the project.

Education and Training

The ERP implementation process can be completed within budget and within the desired period of time. But the implementation can fail miserably due to lack of proper training for the users using the system. The time taken by the end user to get accustomed to the ERP system is very essential as this affects the productivity of the organization.

A comprehensive training program is essential to make the user comfortable with the system. This factor is too often ignored. It is a major hurdle for a company implementing such a system to find an appropriate plan for the training and education of the end-user. In most cases, consultants are included during implementation process, and while all the aspects of the system should be explained and transferred the end-users, the main goal of ERP training is that the users understand the various business processes behind the ERP application Employees with many years of experience will be resisting the change. But it is essential that all the users are brought on board and all the users are able to use the ERP system effectively.

User Involvement

User involvement refers to the participation of the user in the process of ERP implementation. The functions of the ERP system rely on the user to use the system after going live, but the user is also a significant factor in the implementation. There are two areas for user involvement

1. User involvement in defining the company’s ERP system needs and

2. User participation the implementation of ERP systems.

As users are the best judge of what the company needs from its ERP system, they can suggest the various requirements at the time of implementation and can thus get involved with the implementation process. This participation will also help the user in getting accustomed to the new system. If all the users are not involved with the ERP implementation, the organization will not be able to utilize the ERP system effectively.

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Figure - Classification of CSF into ERP Lifecycle Model

Analysis

The analysis of the findings gives us 2 distinct kinds of responses of Companies based on their Business Structures. The companies which have been interviewed can primarily be divided into 2 types of companies:

Limited Liability Companies with Local Ownership

These companies are part of a group of companies which are family owned companies which have a part of the company dedicated to the task of marketing and distribution of FMCG products. They are mainly involved in the distribution of FMCG products and the sales and marketing initiatives. They do not have any manufacturing capabilities and are linked with FMCG manufacturing companies from around the world and provide them with local distribution channels using their familiarity with the locally existing markets.

Subsidiaries of International Companies

These companies are merely subsidiaries of International FMCG companies which give the brand a local presence and help them establish inroads into the local UAE markets. They also usually do not have manufacturing capabilities and are merely distribution driven. Dubai being a central logistics hub in the world provides opportunities for growth and as distribution channel for these companies and they have moved here to take advantage of this fact.

The processes of ERP implementation in these companies are quite different from each other. LLC companies with local ownership rely on local or international vendors for the ERP Implementation and the decision of the ERP Implementation lies solely in the hands of the local owners. The subsidiaries of international companies though are completely dependent on their parent companies about the decision of implementing ERP’s. They have to rely on the parent companies for the implementation so that the systems and processes are uniform throughout the world. Majority of the ERP maintenance is provided usually from remote sites with a minimal IT staff present in the UAE to support the ERP end users.

Figure - ERP Implementation Completed Within Estimated Budget

The above given Figure 16 shows the extent to which the ERP implementations completed along the lines of the stipulated budget at the five companies where we have done our research. A low rating of 1-4 suggests that the implementation was covered within the stipulated budget while a rating of 6-10 indicates that additional financial resources were required for the completion of the project. We can see that majority of the companies in this case are almost close to the stipulated budget with only 2 companies exceeding the stipulated budget by a small factor.

Figure - Penetration and Usage of ERP

Figure 17 shows us the penetration and extent of usage of the ERP system in the companies that we have done an in-depth analysis of. We see that almost all the companies are able to make full use of the ERP. Only Baqer Mohebi Est has not been able to maximize the utilization of their ERP in .all their business functionalities. This is mainly due to the inconsistency of the usage of ERP across their various companies. They have only been able to implement the ERP’s in some of their companies and hence are not able to completely utilize the benefits of the ERP completely.

Figure - Functionality Requirements Met By ERP System

The above plot (Figure 18) shows the extent to which the ERP system was successful in meeting the Business Functionalities of the company. Both at National Trading & Developing EST and Baqer Mohebi we see that in the departments in which ERP is implemented it is meeting all the business processes. The ERP system at Al Baker Group has not been able to meet all the business requirements. There were several customizations which were required to make the ERP fit the needs of the business like the addition of about 80% of the reports and several other customizations.

Based on the secondary research which was carried out and the response obtained from the Interviewees with various companies we have identified the Critical Success Factors which are responsible for a successful ERP Implementation. Analyzing the results of the data collected from the research we have calculated the average ranking of the factors individually and derived an idea of the importance of the factors accordingly.

The top Critical Success Factors as seen in Figure 19 below are

Top Management Support with an average ranking of 9.6

Clear Goals and Objectives with an average ranking of 8.4

Effective Project Management with an average ranking of 6.6

Education and Training of End Users with an average ranking of 6.4

Figure - Importance of the Critical Success Factors

We have analyzed the CSF wise support that was provided in the companies where the ERP Implementation has been done. Based on this analysis the following observations have been made.

From the Figure 20, the Critical Success Factors which have the least support in the ERP Implementation stage in the FMCG companies in UAE are

Vendor Support – 5

User Involvement – 5.4

Education and Training of End Users – 6

Communication between various Stakeholders – 6

Figure - Support provided for the CSF’s in the companies during ERP Implementation

The most noticeable fact is that the kind of support the ERP Implementation team gets in almost all companies is relatively low in this part of the world. In order for there to be a successful ERP Implementation it is necessary that there be a synergy in the companies to provide maximum support to the ERP Implementation team in order to gain the maximum output from the ERP. Therefore it is mandatory that there is a better support for all the above given CSFs within the companies to provide the best results required for a successful ERP Implementation.

Conclusions & Recommendations

This research study aimed to identify the Critical Success Factors (CSF) of ERP Implementation in the FMCG Sector in UAE and provide an understanding of the methods which can be employed to ensure effective ERP Implementation and realize its benefits. An on-time and within a stipulated budget ERP Implementation can be carried out provided the Companies realize the importance of these CSF and work together in implementing the ERP System.

Organizational Perspective

The following frameworks have been recommended for a successful ERP Implementation within an organization to keep track of the various phases of ERP Implementation.

Integrated Framework for Successful ERP Implementation

This research paper has proposed an integrative framework for successful ERP implementation in the FMCG industry in UAE.

 

Figure - Integrated Framework for Successful ERP Implementation

The success of an ERP implementation depends on the successful implementation of three below mentioned key factors

1.    Strategic factors

1.    Upper level management Support

2.    Effective communication

3.    Clear and focussed goals and objectives

 

2.    Tactical factors

1.    Effective project Management

2.    Suitability of Hardware and software

3.    Business process Reengineering

4.    Data Accuracy and integrity

3.    Operational factors

1.    Vendor support

2.    User involvement

3.    Training and development of the User 

Framework for Monitoring User Involvement and Participation for a Successful ERP Implementation

The below given framework can be used to monitor the user involvement and participation during the various phases of ERP Implementation. This framework can be utilized to provide indicators which will be monitored closely by the implementation team during all the stages of the implementation. This framework takes into account the various ERP Implementation Phases, Stakeholders involvement and Critical Success Factors Participation Dimensions.

Figure - Framework for Monitoring User Involvement and Participation

Key Performance Indicators for ERP Implementation

Key Performance Indicators are a measure of the effectiveness of any ERP Implementation. Figure 20 describes the KPIs of business processes which can be used to gauge the effectiveness. This framework of measurement was proposed by Price Waterhouse Coopers in their Report on ERP Implementation in the Mid Market Segment.

Figure - KPIs of ERP Implementation

The above described KPIs are based on the business processes and are qualitative and quantitative values that serve as a benchmark to assess the effectiveness and success of ERP Implementation. Companies should take give itself sufficient timeframe after an implementation to start gauging these indicators so that it reflects the changes brought about by the introduction of an ERP.

Vendor Perspective

From our interaction with industry experts we have found out that especially in Limited Liability Companies with Local Ownership that is the companies are part of a group of companies which are family owned companies have a different set of requirements as far as their ERP systems are concerned. They require a huge amount of customization to cater to their specific business needs. The major ERP vendors in the world have a great opportunity to provide customized vertical ERP solutions to these companies. These companies hesitate to build a relationship with the major ERP vendors due to factors such as cost , support provided by the vendor and lack of adherence to the business needs of these companies.