Implementation of ERP system

ERP modules are usually sold with mechanisms and tools to support some amount of modification of the standard "out of the box" solution at relatively low cost by simply setting software switches or modifying tables that determine workflows. Vendors typically call this type of customization configuration. Configuration only allows changes within certain boundaries limited by what the vendor has decided to include in the software. Some configuration is always required (Brehm et al., 2001), but it can vary substantially from one organization to the next.

  • Brehm, l., Heinzl, A., and Markus, M.L. (2001), Tailoring ERP systems: A spectrum of choices and their implications. Paper presented at the 34th Hawaii International Conference on Systems Science, Maui,HI.

For firms that wish to run business processes reengineering and ERP implementation, the best solution to the dilemma is to perform ERP implementation after completing a business processes reengineering.

The implementation of an ERP system is the key to improving the efficiency of all business processes. Reengineering is the main means of smoothing the existing processes.

  1. Create the vision. Define the corporate mission, objectives, and strategy. Use cross-functional teams and executive-level input to identify, examine, and rethink existing business processes. This helps to ensure the necessary buy-in of both executive management and the process owners. Clearly define why the ERP system is to be implemented. If multiple plants are involved, the process must include participants from all plants. Once the vision is approved by top management, broadcast the vision to the entire company.
  2. Create a feature/function list. A team composed of respected individuals who are familiar with the various software packages, company processes, and the industry should be responsible for identifying the features and functions required for the software to effectively support each functional area as well as the overall company vision. Business unit managers must be able to document their current business processes to the project team and to map those processes to the new best practices model from the ERP application.
  3. Create a software candidate list. The field may be narrowed based on criteria such as the size of the enterprise or industry type. Select only ERP providers that are right for your business. Business processes cannot be separated from an enterprise system. The very nature of an enterprise system is an integration of business processes, data bases, business units, etc. The fit between the business process and the system has been studied (Gattiker and Goodhue, 2002) and determined to be important to positive business outcomes. Gattiker and Goodhue (2002) take the need for IS to be strategically aligned and study the application of this alignment at the subunit (department) level. Building on the view of that paper, one way to determine if the implemented system supports the strategy of the company is to look at if the implemented system contains customizations that are strategic, or merely consistent with the current operations of the company.

Methods

A survey instrument to measure the nature of customization, strategic alignment, and systems agility will be created. A new measure will be created for customization, while strategic alignment and systems agility will be measured with modification to existing measures. After these measures have been developed and validated, a pilot survey will be performed. This survey will involve managers from organizations that currently use ERP systems. Since different business units will contribute to and have different impacts on strategic alignment and systems agility, it is possible to use several participants from each organization representing different business units. In the pilot, perhaps only an equal number of IS and business managers is needed. After a successful pilot, and any needed re-tuning of the instrument, the final survey would be completed. For the final survey, one IS manager and one business manager from each business unit participating in the organization would complete the survey. This would ensure that the perspectives of IS people and business people were included in the study as the contribution of both parties is relevant to strategic alignment and systems agility measurement. The author has access to senior executives who will be respondents on this questionnaire.

  • Haines and Goodhue. (2004). Managing Enterprise System Implementations: Key Influences on Enterprise System Module Specialization. Working paper.
  • Gattiker and Goodhue. (2002). Software-driven changes to business processes: an empirical study of impacts of Enterprise Resource Planning (ERP) systems at the local level. International Journal of Production Research, 40(18), 4799, 4716p.

Successful implementation of ERP systems in small businesses: a case study in Korea

In developing the objectives for IT projects, most business organizations prefer to have elegant goals such as competitive advantage, speedy operation, and user satisfaction that are often too ambiguous to most low-level employees. However, Jinyang chose one single objective, the reduction of material loss that had been a critical problem for all levels of the organization. Sharing the clear, concrete single objective has made it easy to explain why the proposed ERP system is important to the organization and to involve all the workers in the project.

Davenport (1998) maintained that successful ERP users had carefully prepared for ERP adoption. He recommended that companies should consider the following ERP implementation objectives: competitive advantage, organizational environment, and the degree to which business functions are reformed by ERP systems. Thus, ERP system implementation would be easier if a firm intends to conform its business processes to the ERP system (Ferratt et al. 2006). Before making the system development plan, ComputerMate also spent a significant amount of time analyzing Jinyang's current processes and recommended new processes.

According to Law and Ngai (2007), a company could make its ERP implementation successful and thus lead to improved organizational performance when it has a strong intention of building a system that supports its business strategies. Thus, top management should urge departments to act in harmony with each other when business processes of each department are required to be changed by ERP implementation (Plant 2007) because ERP adoption is necessary to not only introduce a new technology but also a new business strategy (Davenport 1998). As many other cases reported, Jinyang also had trouble adopting and diffusing the new processes due to the resistance from field workers and managers who were accustomed to the old, existing processes. However, the project team did not initiate developing new systems until new business processes were fully developed. Both Jinyang and ComputerMate agreed that changing business processes should be completed prior to developing new systems.

Not merely computerization, but rather process innovation 1 Many failures in adopting ERP systems were primarily due to the fact that organizations did not consider ERP systems to drastically change their existing business processes. All the employees, ranging from operational workers to computing department managers and top managers, must understand that the adoption of ERP systems is not merely computerizing the existing processes without changing much of them. Jinyang's top managers understood that it was necessary to change their old processes in order to realize the true benefits of an ERP system. Jinyang explained to their employees that the processes would be redesigned almost from scratch. Jinyang did not think of the ERP adoption as computerization, but rather as process innovation. The ERP system was thought of as a high performance vehicle that could take the organization to the next level. The ERP system at Jinyang, however, has never been thought of as a change agent in itself, but rather the workers were the true factor that brought the success. The CEO of Jinyang expressed his approach as follows: ''Mindset is the first, software the second, and hardware the third.''

  • Davenport TH (1998) Putting the enterprise into the enterprise system. Harv Bus Rev 76(4):121-131
  • Ferratt TW, Ahire S, De P (2006) Achieving success in large projects: implications from a study of ERP implementations. Interfaces 36(5):458-469
  • Ferratt TW, Ahire S, De P (2006) Achieving success in large projects: implications from a study of ERP implementations. Interfaces 36(5):458-469
  • Law CCH, Ngai EWT (2007) ERP systems adoption: an exploratory study of the organizational factors and impacts of ERP success. Inf Manag 44(4):418-432
  • Plant R (2007) Critical success factors in international ERP implementations: a case research approach. J Comput Inf Syst 47(3):60-70

Management based critical success factors in the implementation of Enterprise Resource Planning systems

  • Joseph Bradley International Journal of Accounting Information Systems 9 (2008) 175-200

The existence of a champion is positively related to implementation project success. 2 ERP implementations involve change in almost every area of business processes. Software vendors include several options for configuring ERP systems based on best practices, but it is unlikely that these options will fit existing practices of all users. Implementation projects inevitably cause major changes in the adopting organization resulting in "resistance, confusion, redundancies and errors" (Somers et al., 2001). Half of the ERP implementation failures occur because companies "significantly underestimate the efforts involved in change management" (Appleton, 1997, p. 52). Change management planning must be an integral part of project planning. It must be "rigorously planned and generously resourced" (Brown and Vessey, 2003, p. 67). Lapoint and Rivard (2005) reveal that 43 articles published in the last 25 years in 20 IT and IT-related journals treated user resistance as a key implementation issue. Furumo and Melcher (2006) found management's failure to address problems with resistant team members contributed to the failed ERP project of a mid-sized university. For this study, the following is proposed:0

  • Somers TM, Nelson K. The impact of critical success factors across the stages of enterprise resource planning implementations. The proceedings of the 34th Hawaii International Conference on Systems Science; 2001.
  • Somers, T.M. Ragowsky, A.A., Nelson, K.G., Stern, M. exploring critical success factors across the enterprise systems experience cycle: an empirical study (Working Paper 2001). Detroit, Michigan: Wayne State University.
  • Lapoint L, Rivard S. A multilevel model of resistance to information technology implementation. MIS Quart 2005;29(3):461-91.
  • Lassila KS, Brancheau JC. Adoption and utilization of commercial software packages: exploring utilization equilibria, transitions, triggers, and tracks. J Manage Inf Syst 1999;12(2):63-90.
  • Furumo K, Melcher A. The importance of social structure in implementing ERP systems: a case study using adaptive structuration theory. J Inf Technol Case Appl Res 2006;8(2):39-58.

Poor quality of BPR

For Alpha and Beta, the project team members disclosed that they had an unclear vision of why or how to conduct BPR, and their consultants provided unprofessional advice for conducting BPR. They commented that the consultants provided lots of workarounds to resolve problems associated with business process mismatch. Project team members found it difficult to collaborate and contribute to BPR, and the poor quality of BPR led to incorrect system configuration problems. Business processes were not successfully reengineered to fit with the ERP systems, and the project teams were unready for the adaptation of new business processes and they did not have the mind-set for implementing or using the ERP system. Moreover, during the BPR process, consultants did not conduct mapping analysis to map the software functionalities with business requirements, and this led to a mismatch between ERP and business processes.

ERP Software misfit

Due to poor ERP selection and evaluation process, ERP software was found to be ill-fitting with the business requirements. For example, the ERP was inefficiently managing a high volume of product master files, and unable to design complicated bills of materials and production planning formulation). Our research results indicate the ERP system was utilized in a very limited way due to the problem of misfit. Project teams relied on heavy customization (for example, changing the system program, or writing many management reports, or conducting data transfer as workarounds) to solve problems.

Impediments to successful ERP implementation process

ERP software configuration and features

ERP packages may be configured to more closely fit an enterprise's structure, business practices and workflow (Chalmers, 1999). Configuring the system involves making compromises and has limitations, given the adaptability of the software and the effort involved (Davenport, 1998). This fine-tuning of the standard system is a key process in the implementation and requires translating business needs into appropriate parameter settings.

Configuration Management

Configuration Management is defined as a process for establishing and maintaining consistency of a product's performance, functional and physical attributes with its requirements, design and operational information throughout its life (US Department of Defence 1997). In addition DoD Regulation 5000.2-R defines Configuration Management as:

"The configuration management effort includes identifying, documenting, and verifying the functional and physical characteristics of an item; recording the configuration of an item; and controlling changes to an item and its documentation. It shall produce a complete audit trail of decisions and design modifications."

Basically configuration management is a good accounting procedure that registers all steps of the engineering process in which the product is defined, how all parts of the product relate to each other during the product lifecycle including all changes, and which document versions define these parts. Proper accounting of the actual product configuration prevents engineers from working with outdated information. Moreover, it supports in estimating the impact of a change because the configuration shows which parts are affected and which documents needs to be altered as a consequence.

It can also proof to be very useful in case of claims or liability issues. For exa mple, in case a bridge collapses the engineering contractor should proof that their calculations and drawings are right. They should be able to find the original documents that define the bridge including the appropriate signatures showing that they followed the right procedures. If they cannot submit the evidence they risk to be held responsible for the disaster, which can have severe financial consequences.

Summarising the main functions of Configuration Management are as follows: configuration identification, configuration control, configuration status accounting, and configuration verification & audit (ISO 2003, US Department of Defence 1997).

Analysing the factors responsible for effectiveness of implementation and integration of enterprise resource planning systems in the printing industry

Configuration management <-> Project management

This relation is centring on change control in projects. The focus is on changes that affect the product configuration including the documents that define the product. To manage changes engineering contractors use change control procedures that basically consist of three steps: change request, change order and change notification. In the first step, change request, a change is proposed and assessed by several people on its budgetary, schedule, and technical consequences. The second step, change order, starts after approval of the change request. It involves the actual processing of the change. Hours that are spent on processing the change are reported to a (new) activity that is created to monitor the change activities. After processing the change the change control process reaches it final step, change notification. People on the project are updated. i.e. notified, about the details of the change and when it becomes effective.

From a project management perspective, it is important to manage the budgetary and schedule consequences of the change. In order to be able to monitor the consequences of each individual the Work Breakdown Structure is extended with additional activities. Each additional activity receives a unique identification number and its own budget in order to be able to monitor the financial cons equences of a change. Progress of each additional activity is monitored to monitor the schedule consequences. Moreover, it is important to monitor the status of the complete change control process. There are several systems, product data management systems for example, which support change control processes with workflow functionality (Cimdata 1995). The status of such a workflow can be used to monitor progress of the change control process. From a configuration management perspective it is important to ma intain all changes to the product configuration, i.e. using version control and base lining. Moreover, the complete change control process should be traceable. Hence important decisions during the change control process have to be recorded, i.e. who approved the change and what is the consequence/outcome. Traceability can also be established using workflow functionality. An integral support of the change control process, using workflow functionality for example, therefore integrates the project management and configuration management aspects of a change.

The material requirements planning module is like a computerised inventory control and production planning system. It will use the bill of material (BOM) as its basis. A BOM describes different components that together create a product. It includes all sub-assemblies, components, raw materials that go into a parent assembly, showing the quantity of each constituent required to make that assembly. In the printing industry, this may be paper, binding cloth, binding glue, ink, etc. Hence if a new paper is needed for a book, BOM would assist in raising an automated purchase order and a Effectiveness of production order for that paper. BOM is directly linked to the inventory management system. The materials management module in the printing industry will probably be the most effective module for this industry, since paper means the world to a printer, and a printer wastes most of it. The module will ensure that they have the right paper, in the right place, at the optimum quantity and price.

The hidden financial costs of ERP software

Inventory problems. For many companies, inventory levels are kept to a minimum by forecasting anticipated inventory needs and maintaining only a small level of backup inventory, thereby, reducing the firm's capital investment in inventory. Imperative in keeping a low level of inventory are accurate records plus quick and accurate communication within the company and with suppliers. The problems encountered with rigid ERP software can make it more difficult to maintain low levels of inventory, particularly if it depends on communication among many departments and many outside suppliers.

Evaluating business process-integrated information technology investment

A business process-integrated IT evaluation methodology While a large body of researchers have focused on the theoretical contributions of IT evaluation, little attention has been paid to the evaluation methodology that integrates business process and IT. Since IT may fundamentally change the ways in which business organizations interact with internal and external constituents, business strategy and business processes should be considered in the evaluation process. The proposed evaluation methodology consists of four step-by-step phases:

  1. Strategic analysis.
  2. Business process redesign.
  3. IT configuration.
  4. Performance evaluation.

This methodology helps managers estimate the impact of business process design and IT on organizational performance, and helps determine the most appropriate business processes and IT to achieve business strategies. The evaluation process may iterate until the best IT and business process combination is developed. The evaluation procedures are shown in Figure 1. We next describe each phase in detail.

Strategic analysis

The strategic analysis is concerned with understanding a firm's business environment and internal organization, and developing business strategies to counter competition The starting point of the strategic analysis is identifying major internal/external opportunities and threats from employees, customers, suppliers, competitors, regulatory agencies, and other stakeholders involved. Porter's (1980, 1985) competitive forces and value chain models are helpful in conceptualizing these forces. Current and potential business problems and opportunities are identified from the analysis of competitive forces. Once business opportunities and threats are identified and analyzed, managers should develop business strategies to capitalize on Business process redesign

In many firms, redesigning key business processes has been a major motivation for new IT investment. Business processes should be designed to achieve specified strategic goals. Business processes convert various organizational inputs into value-added outputs through a set of interrelated activities. Different types of values are generated by different business processes. Since some values are nonfinancial, managers need to investigate how these nonfinancial values contribute to the financial benefits and may derive equivalent financial values. Business process-integrated IT evaluation helps managers make a sound IT investment decision by comparing IT-enabled new business processes with existing business processes.

Business process redesign can be classified into two categories: BPR in physical flow and information flow. BPR in physical flow involves redesign in the transfer of products or services in a physical space. Redesigns of distribution centers and transportation networks are typical examples of BPR in physical flow. On the other hand, BPR in information flow changes the ways in which we create, transform, disseminate, and store information. IT plays a crucial role in achieving BPR in information flow by removing space and time barriers and lowering information processing cost. IT also plays an indirect, yet critical role in achieving BPR in physical flow. For example, electronic data interchange (EDI) is a critical IT application in re-engineering inter-organizational information exchange for electronic orders and invoices. EDI also helps manage the just-in-time materials flow between vendors and manufacturers. Most BPR projects usually address both physical and information flows at the same time.

Three major stages of redesign include the analysis of existing processes, establishment of redesign objectives, and design of new and improved processes. The analysis of existing business processes lead to the establishment of process design objectives (Davenport, 1993). Process design objectives such as cycle time reduction or improved information quality serve as the guidelines for all the IT development activities that follow. Order fulfillment processes are analyzed in terms of the frequency of transaction events, types of processes, speed of processes, and information flow between processes. Product development processes are analyzed in Evaluating IT terms of information flow within processes, types of processes, speed of processes, and frequency of information exchange between processes.

In the analysis of BPR, external/internal entities, business events, required processes, and information flows between processes are analyzed. Business processes are classified as either technology-dependent or technology-independent. The processing time and information quality of technology-independent process activities are estimated first. Technology-dependent process activities are identified here, but the processing speed and information quality are estimated in the IT configuration phase since these parameters usually depend on the types of IT chosen. Information flow time between entities and processes are also estimated. The primary tool for the business process design is the business process diagram (BPD). BPD shows the external entities, information flows within and between the systems, and the processes that create, distribute, transform, and store the information. BPD also captures five dimensions of business processes: probability of internal processing events, processing time, frequency of events, information quality, and information flow time.

The following illustrates the use of BPD for the business process redesign. Suppose that an order process redesign is recommended (the BPD for the typical order process is shown in Figure 2). The frequency of periodic internal processing events at each process is derived from the external events triggered by customers. For example, suppose customer orders arrived in an exponential probability distribution of m 6 time units. Accordingly, the frequency and processing time of a periodic internal processing event, "review sales order", is estimated.

The proportion of information flow is specified as 1.0 if one and only one process exists next in the information flow route. Otherwise, the proportion of information flow p between processes is 0 , p # 1: There are two possibilities in the subsequent information flows: disjoint and overlapping. If the subsequent information flows are disjoint, the sum of subsequent information flow proportions is always 1.0. For example, if the subsequent events are disjoint, the proportion of information flow between "review sales order" process and "create new customer" process is 0.1, and that of information flow between "process sales order" process and "check customer credit" process is 0.9. If the subsequent information flows are overlapping, the sum of subsequent information flow proportions is more than 1.0. BPD serves as an input into the configuration of IT and the performance evaluation phases.

IT configuration

IT configuration involves establishing IT requirements, analyzing existing technology, identifying new IT, and measuring its capabilities. In establishing IT requirements, minimum requirements of CPU, software, storage, and telecommunications capacities are estimated based on the business processes' needs. After analyzing the existing IT to see whether it meets the IT requirements for achieving business strategies, new IT options may be considered. Costs of new IT options are broadly classified as hardware, software, telecommunications, maintenance and upgrade, and personnel expenses incurred over the duration of an application life cycle. It is worth noting that a majority of companies which invested in e-commerce applications have reported that upgrade and maintenance costs are much higher than the initial installation costs. Processing time and information quality of technology-dependent processes are also estimated in this phase.

Today software-based technologies as, for example, Enterprise Resource Planning Systems - ERP are able to guarantee to each firms tools to check, plan and manage, in an integrated way, all the activities, from production to distribution, from planning to logistics, from sales to financial planning, overcoming the traditional confinements of the functional system, and can be tailored in order to fit firms specific requirements.

starting a reparation cycle as soon as the maintenance activity stops because we are able to identify univocally the disassembled parts;

  • activating the accounting procedures for that components that need to be repaired;
  • eliminating the data redundancy because each department uses the same information
  • traceability of each part along the whole logistic chain using the univocal serial number instead of the material code

Furthermore, during a reparation cycle of each component with part traceability, we can compare the release of the parts sent to the repairer with that of the parts redelivered by him. In this way the information system give us the possibility to check the qualitative level reached by the repairers. Fig. 3 shows the operative configuration of the two-level system developed, where we can see the information flows between the above mentioned integration PM-MM/PUR-IM and the connection flows related to the financial modules.

System implementation

The proposed model has been implemented to the ERP system of the biggest italian mobile phone company. In such case the proposed model has been applied with a bottom-up approach, starting by the second level with the implementation on the database of the Bill of Material (BoM) of each plant to be maintained. Fig. 4 shows the form related to the creation of a new plant to be maintained with the related BoM.

The main advantages obtained at this level are

  • easier location of the plant warehouse out of stock;
  • fast identification of all the parts that have to be replaced
  • allocation of all the available spare parts on the stations that need them.

ERP systems are software packages, generically designed, keeping the industry-wide needs and best practices in mind. One of the major challenge an adopting organization faces while configuring an ERP system is that software does not fit all their requirements (Davenport, 1998). Even with today's state of the art technology, organizations find that not all their requirements are provided by the ERP systems they adopt Tough control of information and financial flows: according to the information traceability, each operation is stored with the operator's name, the date and sometimes the hour of the transaction. For example, this traceability is widely used in stock management, in purchasing demands (dates of: creation, modifications, computing, invoicing. . .), and for the update of component information data (dates of component modifications since the use of the ERP system).

Better security of IS: according to themanagement of ''profiles and authorisations'' which are independently user adapted from the ERP modules by transaction, the IS security is better. Another advantage is the ease and speed of accessing information. The ERP system unified data and applications with a central, secure, and role-based access to all information system modules. Users have personalised access and single sign-on has resulted in significant time savings and productivity gains because users only have to log on once.

A process approach is used: consequently, most of the functions of different services in the firm are interconnected. For example, when a new flow is implemented as a supplier consignation, an integration test is made between the key users of the different modules of the ERP system: financial, purchasing, stocks management, distribution, manufacturing, planning. . .

Reliable information and data coherence: using a better following of the supplier demands and information traceability, the information is reliable and data is coherent.

Unique and identical information in real time for all users: the unified data and applications and the uniqueness of the database, whatever the module or the function of the system, allow the same information to be given to all users at the same time thus allowing processing redundancies to be avoided. For example, the state of stocks of a common component to several production shops, the state of a purchasing demand, and the supply date of a customer's demand. . .

More rigour in data management: for example, the firm can give more precise data and information concerning the customer's demands. . .

The deployment of the planning process The production planning process plays an important and crucial role in the optimisation of the ERP system. It is one of the most important processes in the IS and strongly affects the other processes of the ERP system as well as the reactivity of the supply chain. The firm does not undergo the fierce variation of customer demand. It must be able to anticipate it and then avoid stock-outs when demand accelerates, and overstocks when demand decelerates. The firm must identify how to react on time to the demand change. An ERP system provides new perspectives of progress and evolution for such problems.

The production planning process we present concerns the ''pumping and detection'' activities at Alcatel and its subsidiaries. The ERP applications mainly concerned by the production process are: Materials Management (MM), Production Planning and Control (PP), Financials (FI), Controlling (CO), Sales and Distribution (SD), and Project System (PS).

Use the power of modern Information Technology to radically redesign business processes in order to achieve dramatic improvements in performance (Hammer, 1990).

Total transformation of a business; an unconstrained reshaping of all business processes, technologies, and management systems, as well as organizational structure and values, to achieve quantum leaps in performance throughout the business (Goll, 1992).

The process of fundamentally changing the way work is performed in order to achieve radical performance improvements in speed, cost, and quality (CSC Index 1994).

Davenport and Short (1990) identify four objectives of BPR. Their set of objective include cost reduction, time reduction, output quality, and quality of work life (QWL)/learning/empowerment.

Morris and Brandon (1993) suggest six basic goals of BPR: (1) streamline the operation; (2) reduce costs; (3) improve quality; (4) increase revenue; (5) improve customer orientation; (6) merge acquired operations.

Stow (1993) reports that the objectives of BPR can be identified as improving an organization's effectiveness, efficiency, competitiveness, and profitability. He especially argues that a reengineering project should be conducted by its objectives and the key to a successful BPR project is defining objectives first.

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