Successful implementation of ERP Systems: issues and obstacles
Introduction
Enterprise Resource Planning (ERP) systems are packaged (but customizable) software applications, which manage data from various organizational activities and provide a fully integrated solution to major organizational data management problems. It integrates all data and processes of an organization into one single and centralized system. These systems comprise many components of hardware and software, in order to achieve integration from various departments in the organization. The development of new technologies it’s an essential part of their long-term competitive strategy. ERP software applications can be used to manage product planning, purchase, inventory, interacting with suppliers, customer relationship management service, and order tracking.
Discussion
Enterprise resource planning (ERP) packages touch many aspects of a company’s internal and external operations. Consequently, successful deployment and use of ERP systems are critical to organizational performance and survival. This paper presents the results of a study of the problems and outcomes in ERP, a project which was conducted under the sponsorship of an ERP systems vendor. Enterprise systems (or enterprise resource planning systems – ERP) have been instrumental in advancing efficiency in organizations throughout the world.
However, David Hebert of the Hackett Group stated, “Only a select few companies have gotten value out of their ERP implementations, and those are world-class companies”. Many companies are radically changing their information technology strategies to maintain a competitive advantage, become more responsive to change markets, and deliver better service at lower cost by purchasing off-the-shelf integrated ERP software instead of developing IT systems in-house. [1][2][3]
ERP System
Enterprise Resource Planning (ERP) systems are software packages that use relational database technology to integrate various units of an organization’s information system. ERP systems provide several separate, but integrated modules, which can be installed as a package for any organization [4]. Many large corporations use several different and separate information systems, often because they have merged with and/or acquired other companies with varied systems. An ERP system integrates these separate information systems and results in improved data reliability and processing efficiency.
ERP systems quickly became popular with large corporations that needed a seamless integration of their business but are now frequently used by small to mid-sized companies. The excellent ability of ERP systems to simplify business transaction processing, eliminate work that adds little or no value, and simultaneously improve customer service are the main reasons for the outstanding success and popularity of these systems [5] ERP Model:
Enterprise Resource Planning (ERP) systems are off-the-shelf software packages that support most of the key functions of an enterprise, such as logistics, sales, and financial management. These systems are generic, and the functionality they provide can serve a large variety of enterprises. ERP is a critical strategic tool to achieve business goals. However, ERP adoption is not always successful despite using substantial amount of time and human and material resources. To prevent ERP failures, proper adoption processes and selection criteria should be considered to minimize possible losses. To explain the ERP Fig: Model
in an easily understandable format you have to know about the 4ps marketing model. Usually, the 4Ps marketing model was a general marketing model where the 4Ps originally stood for people, product, promotion, and price [6]. Over the years, this model has been changed to become a business model and was modified by replacing promotion and price with process and performance [7]. The modified 4P business model was created to architect the ERP Conceptual model because several people working in management are familiar with the concept of the 4Ps.
The ERP model is made of 4 components that are implemented through a methodology. This figure demonstrates the integration between the components. Methodology encircles all four of the components to illustrate that each component is addressed and implemented in an integrated manner. [7] [8]
ERP System Implementation
With the development of new technologies many companies now consider technological improvements an essential part of their long-term competitive strategy, and consequently try to apply these technologies. Computer technology has brought about many benefits in helping the construction industry meet increasingly complex challenges. It has achieved a wide range of successful applications at the project level such as engineering design, project estimating, scheduling, planning and control, and integrated project management.
H. Klaus and G. Gable analyzed the concept of ERP, in order to explain its origin. They consider that the designation is not related to the role and characteristics of this system. The integrated system of type ERP is not focused on the resource management and it is not very developed within planning area, as its name may suggest it. It is rather focused on the integration of all organization departments, functions and processes within a single computer informational system, capable of supporting all these areas, with their individual and specific requirements. [8]
Design of Evaluation Model for ERP System
ERP allows employees to share information, query data, and run reports. This eliminates the need to store duplicate information in more than one place and reduces the amount of work necessary to gather and analyze information [9]. ERP systems increase efficiency by freeing employees from performing time consuming, manual work. For example, legacy systems often require hours or days to run reports. With ERP, reports can be produced in seconds. These efficiencies allow employees to spend time on other tasks; reducing operating expenses. Here’s a proposed evaluation design model for ERP system-
The proposed ERP evaluation model
Issues in Implementing ERP: A Case Study
Information technology/systems play a major role in improving the competitiveness of organizations. There are numerous enterprise information software packages available in the market. One of them is enterprise resource planning (ERP). ERP can provide significant improvements in efficiency across a company, but only when implemented correctly. Otherwise, an ERP system could be a curse and drag the whole enterprise into spiraling inefficiency.
Planning for ERP systems and their implementations requires an integrated approach to meet the requirements of various functional areas. With a brief overview of ERP implementations, this paper describes some experiences of an ERP implementation in a water corporation. The case study reveals some of the intricacies during the planning and implementation stages that may occur in any company in any part of the world. Suggestions are offered in resolving the issues of implementing ERP.
The Criteria for Success (and Failure)
Whether a system is branded as a success or a failure is a judgment, usually made at some point in time by one or more people with the benefit of hindsight. Most people, for example, consider that the new system at Heathrow airport’s Terminal 5 was a failure when it opened in 2008. Now, however, that same system (more accurately, system of systems) is operating successfully with few reported problems on a day-to-day basis.[10] The judgment of whether a project has ‘failed’ is not a simple yes/no decision. It is common for systems that initially did not live up to expectations to evolve over time to deliver useful services. However, management usually regard a project tends as a success if it meets three high-level criteria:
- It should be delivered on time
- It should be delivered within budget
- It should deliver the expected functionality
In addition to these should be added the considerations of the users, to make sure that the system fits in with their everyday working: It should be acceptable to the users (and hence used).
If a project fails to satisfy one or more of these criteria when it is deployed, it is likely to be labeled a failure. If we closely examine the causes of system failures, we see that most of them are not attributable to failures of the technology. Instead, they are failures of the socio-technical system, often arising because the social and organizational aspects either have not been appropriately considered, or have been separated from the technological aspects.
It is important that the social and technical aspects of the overall system are developed in parallel, because they are often interdependent. If they are developed separately, any mismatches may not be detected until late in the project when they are invariably expensive and time-consuming to correct, and can even lead to the project being abandoned.
The Most Important Problems of Erp System Implementation
There are several studies dealing with difficulties in enterprise system implementation. The researchers use different concepts, which have various scopes and meanings. As a result, comparing and integrating their findings is difficult. The number of recognized categories of problems and issues experienced by companies adopting ERP system varies from two through three to five. The identified groups cover issues of various nature and scope, e.g., technical, operational, legal, business/economic, organizational, managerial etc. The respondents opinions regarding the problems observed in ERP system, divided into the described categories, are presented in Table 1. Within each category, various difficulties are listed together with a short description. [11]
Problems occurring during ERP system implementation
Organizational problems
- Project goals
- Lack of clearly defined goals of the implementation project; incorrectly defined goals; lack of priorities
Company’s condition
- Poor company organization; unclear organizational procedures; unclear strategy
Communication
- Problems with communication and information flow; different understanding of the same ideas by different departments
Decision making
- Problems with decision making (e.g., regarding personnel); indecisiveness of company representatives
Personnel availability
- Key employees unavailable; workers’ lack of time
Conflicts
- Conflicts between a company’s departments; conflicts during organizational change
Implementation
- Mistakes in project management; lack of risk management; lack of implementation tasks’ coordination management
- Organizational and ownership changes during the project; changes in requirements;
Changes in a company
- Changes in company organizational structure imposed by the introduced system
Training
- The inadequate training phase of a project; cutting training
Social problems:
- Employees’ knowledge and education
- Lack of management competence; lack of personnel computer literacy; lack of knowledge about company operations, enterprise systems and their implementation
Top management
- Lack of top management support and involvement; lack of project understanding by top management
Implementation team
- Lack of implementation team members’ commitment; inadequate composition of implementation team (e.g., too few people, people not empowered to make decisions)
Motivation
- Lack of employees’ motivation to perform implementation tasks and learn new skills
Resistance to new system
- Resistance of middle management, IT staff, and system users; people avoiding implementation duties
Resistance to change
- People highly accustomed to existing solutions and unwilling to change
Project manager
- Lack of a project manager; inadequate person appointed as a project manager; necessity of sharing time between implementation tasks and organizational duties
System
- Provider’s competence
- Consultants lacking competence, knowledge, and experience; problems with the availability of system provider’s services
Project acceptance
- People not convinced about the project; lack of general acceptance for the project; problem with project acceptance by people not involved in implementation duties
Personnel’s fear
- Fear about possible consequences of implementation project: loss of job, position, and status
Users’responsibility
- Lack of responsibility and care among people entering data into the system
Technical problems
- Data
- Problems with completing and organizing system data; problems with transferring data from legacy systems to ERP system
System efficiency
- Users unable to enter data on-line; problems with customer and provider order handling
System drawbacks
- Implementers unaware of program’s errors and shortcomings; lack of efficient application testing;
Economic problems:
- High costs
- Inadequate financial budget for the project; loss of financial resources; lack of financial flexibility and resource allocation
The problems discovered in Table 1 refer to practically all stakeholders involved in the project: employees, implementation team members (who are functional departments’ managers in enterprise X), and top management representatives. Next, the organizations suffered from the high costs involved and problems connected with goals definition.
Conclusion
There is no silver bullet that can be used to kill off the potential for failure of ERP system development projects. The proportion of failures remains stubbornly high, even though several of the factors that are associated with failures appear to be known. A quick look at several of the “Top 10” style lists of factors associated with failures (and successes) reveals that no two lists are identical, although there are several factors that recur on many lists.
The lack of agreement suggests that the analyses of the reasons for failure may be overgeneralizing, by treating all failures as being more or less the same, whereas there are really different types of failure that arise through different combinations of factors.
Reference
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