Implementation Organization Impact And Limitation

Published Date: 02 Nov 2017

This report focuses on the use of enterprise resource planning systems within organizations, it comprises of the description analysis of EPR systems, it will further discuss the implementation of EPR systems and it concludes with the organizational impact, benefits and limitation to businesses and organizations.

Contents

Introduction……………………………………………………………………….. 4

Defining ERP……………………………………………………………………… 4

Theoretical background…………………………………………………………… 5

ERP components………………………………………………………………….. 6

ERP integration……………………………………………………………………. 7

ERP Implementation………………………………………………………………. 8

Successful ERP implementation: Pacific Dunlop Garments ……………………..10

Failure ERP implementation: Hershey’s manufacturing…………………………..10

Impacts of ERP for businesses and organizations…………………………………. 11

Limitations of ERP solutions……………………………………………………… 12

Conclusion………………………………………………………………………… 13

References…………………………………………………………………………. 15

Diagrams……………………………………………………………………………18

Introduction

The growth of information technology continues to provide new competitive opportunities. Businesses are continually adopting the use of new IT applications as an approach to reduce production cost, to provide a differentiation strategy and improving the overall efficiency in production (Fryling, 2010). ERP continues to influence the method businesses conduct their transactions, by shaping the modern business environment effectively. The backbone of most of ERP systems is integrated in business processes (Fryling, 2010). However, when not carefully implemented, ERP systems can be of little use for the business or cause a potential risk to critical business operations. Therefore, this report examines on the critical concepts of ERP, assessing the potential benefits accrued from its adoption and critical success factors that govern its implementation to facilitate automation and synchronized reporting (Botta-Genoulaz and Millet, 2005).

Defining ERP

ERP systems, integrates both external and internal management of information within and across a given business enterprise. It makes use of an integrated software application to integrate all the functional units of a business organization together (Yakovlev, 2002). Such functional units include sales, manufacturing, customer service, accounting and finance. The concept of the ERP system can be illustrated in appendix (1). Its main objective in an organization is the facilitation of information flow across and within all business units, both internally and externally an organization (Sheilds, 2001).

Theoretical background

Several academic sources on ERP have been linked to provide different approaches, For instance, Botta Genoulaz & Millet (2005) classified the EPR concept into three main sectors which are; operational stage, the analytic stage and the tactical stage.

Operational stage- ERP systems offer an opportunity to optimize and integrate information flow for organizations; they work under the principle of providing real time information as opposed to reliance on automatic updates (Brown &Vessey, 2003). Once implemented, continuous improvements and customization is required to keep up with the changing business needs, Effective assimilation is also essential to realize the intended organizational benefits (Gill, 2011). Effective assimilation is a success factor in ERP implementation. It involves increasing the interactivity of ERP components, effective deployment to support the different managerial levels, increased sense of ownership from the employee’s perspective and effective institutionalization to support information flow for the organization’s work processes (Kumar & Hillegersberg, 2000).

Tactical stage-In adopting an ERP system for any organization, issues such as effective selection and evaluation of vendor consultants, possible gains expected from the adoption of the system, risks and costs and post implementation strategies such as continued employee training and maintenance are examined(Vilpola, 2008).According to Gill 2011, the Critical success factors behind the successive implementation of EPR includes increased user participation, effective vendor partnership, and adequate support from the top management, selection of the right team in terms of competence, frequent monitoring and evaluation to identify possible bottlenecks .

Strategic stage-Another factor to consider in implementing these systems involves the change management program. ERP systems require a substantial organization change. Changing from the legacy based systems to ERP systems require both the management and technical support. Effective change management should be based on redesigning the organizational goals with clear business plan and vision (Gill, 2011). The decision to implement a given ERP solution requires active and complete participation with a shared business vision among all the involved stakeholders (Kumar & Hillegersberg, 2000).

ERP components

According to Brown and Vessey (2003), ERP makes use of computer hardware, networks and software; both application and system software with a database component act as the information repository. Among the key components of any ERP system, there exist the following elements:

i There is a management portal that provides summary of key transactions and reporting system, which is usually customized according to specific business need (Vilpola, 2008).

ii Then there is a transactional database. The database provides a store for storing transactional information. ERP makes use of a database management system (Brown & Vessey, 2003). This is a software application that allows users to retrieve, update, modify, add or remove data from and to the database. (Dehning &Stratopoulos, 2003).

iii then there is document management function. This function allows easy manipulation, access and retrieval of related documents. The function also provides a tracking option, where certain documents can be tracked easily (Fryling, 2010).

iv There is also a function to enable external communications. Such functions are enabled through technologies like web services. A workflow management system is also crucial in an ERP system. This is to manage the workflow processes between employees with set deliverables, budget and time constraints (Dehning & Stratopoulos, 2003).

ERP integration

ERP integration refers to the techniques and processes involved in connecting the ERP system to the backbone information system. It makes use of system integrators that allows the system to provide transaction and real time data and information (Gill, 2011). This relies of a broad base of knowledge involving the business processes, various vendor solutions and equipment knowledge. There are three major types of integration; namely: direct integration, enterprise appliance transaction module (EATM) integration, database integration and custom-integration solutions (Fryling, 2010).

i Direct integration- solutions provide a connectivity which is the communication system to the plant floor processes and equipment as a function of their product offering (Ovacs & Paganelli, 2003).

ii Database integration- involves connecting the ERP system to the data sources. This is made possible through the use of staging tables provided in the database. Plant floor processes, systems and equipment’s deposits or repository information into these databases (Botta-Genoulaz & Millet, 2005).

iii EATM integration- allows direct communication between devices and the plant floor processes/systems or equipment’s through mechanisms supported by the ERP system. They employ the use of web services, staging tables and system-specific application programming interfaces (APIs) (Ovacs &Paganelli, 2003).

Iv Custom-integration -involves specific connections for particular business applications (ovacs and Paganelli, 2003).

ERP Implementation

Implementing an ERP system in an organization demands an organization change within the current business processes. It requires a deep understanding of the business processes. Among the key factors that affects the implementation is effort and time, the business or organizational size, the extent of customization, number of the modules needed in the ERP system and the readiness of the organization to take up the changes. (Ovacs and Paganelli, 2003).

Implementing an ERP system usually requires the following steps or processes.

i Process preparation involves understanding what needs to be automated plays a crucial role. In this process, assessments of business processes are essential. Process preparation allows the organization stakeholders to analyze the effectiveness of automating the current process, it allows understanding of the linkages of the existing processes to the business strategy and understanding current or previously automated processes that require to be integrated with the ERP system (Gill, 2011).

ii Configuration involves linking or connecting the ERP system to meet the intended needs. It involves balancing and adjusting the system until the desired outputs are realized. Customization is a critical implementation process of any ERP. It involves specific configurations that allow enterprises to incorporate their own rules and practices (Sheilds, 2005).

iii other implementation steps involve extensions, such as incorporating features like RFID technology to capture transaction data and data migration. Data migration refers to the procedures of migrating data restructuring from the current system to the ERP system. (Ovacs & Paganelli, 2003).

To elaborate on the success factors behind ERP implementation, it is important to consider two companies, one that has successfully adopted ERP system and a failure company in adopting the ERP system.

Successful ERP implementation: Pacific Dunlop Garments

Pacific Dunlop Garments is a cloth retailing company. It is one of Australia’s largest garment retailers, with worldwide known international brands. The company was faced with problems of information management, and as a result, experienced major losses. To solve the operational problems, the organization realized that managing effectively its information technology unit by adopting an EPR system would benefit the organization. After the adoption of the ERP systems, Pacific Dunlop Garments was able to strengthen its production management, reduce costs of inventory, control its operational costs and, shorten its production cycles (Parellax, 2012). Resulting from these benefits, the organization has been able to provide its products at very competitive rates through costs leadership.

Failure ERP implementation: Hershey’s manufacturing

Hershey’s manufacturing was able to experience an ERP implementation failure as a result of overlooking testing and scheduling phases (Gross, 2011).Hershey’s manufacturing, manufactures and distributes confectionary products. After spending amounts worth $112 million on ERP and information technology systems, the company underwent a major loss resulting to a disrupted supply chain (Gross, 2011). The company abruptly implemented an ERP systems integrated with a CRM system to improve production. A process that was supposed to take 48 months was rushed to 30 months. As a result, elements such as efficient requirements elicitation and system requirements were inadequate. After 2 years of implementation. Unforeseen issues interrupted the supply chain, preventing order flow through the systems. (Gross, 2011). There is the need for efficient ERP system testing after integration. Testing an ERP system helps in establishing the possible causes that can lead to an ERP failure (O'Brien, 2011).

Unlike pacific Dunlop garments Hersey’s manufacturing did not implement efficient ERP scheduling. The timing resource at this stage is crucial, and ERP systems are usually very complex in nature it required efficient understanding of heresy’s manufacturing requirements which didn’t occur. Pacific Dunlop was able to efficiently carry out scheduling and this established proper understanding on how the proposed ERP system will fetch data; process information and transmit and report data appropriately for the organization (Ovacs and Paganelli, 2003).

Impacts of ERP for businesses and organizations

ERP systems have various impacts on businesses. Most of the impacts are as a result of the availability of information in real time.

i Internal communication and generation of management reports ERP fosters effective internal and external communication within an organization. This Effective communication is integrated both internally and externally through the help of synchronized and improved information flow in the organization. This is mostly essential in organizations where interdepartmental communication is important because it allows collaboration among all departments (Kallunki, Laitinen & Silvola, 2011).

ii The quality of internal reports is also improved. ERP systems allow generation of critical summaries that are of great importance in assisting key decision makers in the decision making processes (ovacs & Paganelli, 2003) Generation of strategic reports is a competitive strategy for most businesses and ERP helps in standardizing the work processes within an organization. This assist in harmonizing the interdepartmental processes and improves the overall work flow (Sheilds, 2005).

iii Quality and efficiency Implementation of ERP systems have been linked with efficiency and quality improvement within an organization, both to the production processes and customer service. With smooth running of the business’s internal processes, efficiency and quality aspects of business operations and processes are enhanced. These results to better outputs, improved manufacturing/production processes and customer service (O'Brien, 2011).

iv An ERP system also increases the flexibility of business enterprises. This is through enhanced agility that allows businesses to adapt to the prevailing changes and situations. Increased cohesion within and across organization increases the efficiency, both internally and externally (Shang & Seddon, 2002)

Limitations of ERP solutions

i Replacement of human effort/reduction of employment

Like many automation systems, when not implemented properly, ERP system can be a source of organizational risks. The key risk involves the mentality that automated systems reduces the use of human resource and hence employment. In such cases, organizational change resistance is common and might impede the overall implementation of the ERP system (Soja & Paliwoda-Pẹkosz, 2009). However, when managed properly, it can act as a method of increasing the employee motivation, satisfaction and morale.

ii Cost and technology

Another aspect involves the initial costs involved and technology investments costs for maintenance and operational. When not planned properly, implementing an ERP system can lead to budget strains and eventually beat the logic of implanting such system. It also requires a substantial investment in human/technology capital. However, the popularity of outsourcing practices is providing a cost effective mechanism for organizations to successfully implement ERP systems (Head, 2005).

Conclusion

In conclusion, this report briefly defines an enterprise planning resource systems as the systems that provides an automation function, by integrating both external and internal management of information within and across a given business enterprise. EPR systems consist of computer hardware, networks and software and other key elements which were briefly described. The integration of an EPR system has three major types which are direct integration of enterprise appliance transaction module (EATM) integration, database integration and custom-integration solutions which enables the connection of the back bone of information within the organization (Fryling, 2010). Additionally, the report further analyzed the theoretical stages of ERP into three aspects, operational, tactical and strategically stage. Taking into consideration the analysis and theories analyzed by this report it is concluded that when implemented effectively within an organization, ERP systems can provide a competitive strategy for most organizations. It requires careful planning, training of employees, effective change management and implementation to reap the benefits of ERP systems (O'Brien, 2011). The provision of real time reports, centrally managed information repositories and communication in real time increases the overall efficiency of business processes.