All entries for Friday 09 July 2010

July 09, 2010

Stages in the implementation of an ERP System

Today, ERP systems play a major role in many global organisations, multinational to SMEs. These were implemented in order to save operating costs, integrate multiple incompatible systems, improve performance of business functions, access real-time information and at the turn of the century, in order to achieve Y2K compliance. Advocates of these systems are quick to highlight these benefits. Yet, apart from the hefty price tag, there are many not so obvious hurdles to the successful execution of ERP systems.

During her research in conjunction with Benchmarking Partners, Jeanne Ross from the Sloan School of Management at the Massachusetts Institute of Technology surveyed executives from a number of manufacturing organisations. Of importance was the varied perspective gained by interviewing executives at three levels of each organisation: senior managers who sponsored the implementation, project managers responsible for the implementation and managers of business units affected by the system.

The first stage in the implementation of an ERP system is the Design stage. Of importance during this period is understanding the general assumptions made by system developers, which is unlike traditional systems development where systems are built in support of processes, and not matching processes to systems. Management decisions on the level of standardisation also plays a key role in this stage.

The Implementation stage which typically lasts upto a year, sees performance drop drastically across the organisation. The integration with or replacement of legacy systems requires training of staff and sees the disruption of normal operations. Methods to continuously monitor the impact of the ERP system need to be put in place.

The Stabilization stage which follows is an opportunity to get familiarized with the new system, verify and if required modify business processes and iron out irregularities. Like in all the stages, resistance to the system is common to be encountered. Apart from training, incentives to successful implementation can be offered.

The next Continuous Improvement stage is one of consolidation. Being expensive and disruptive to implement, many organisations do so in modules. By first trialling the system in across a business unit or geographical region, difficulties are identified and addressed before the system is expanded further.

The Transformation stage of an ERP system implementation is when organisations see a marked improvement in key performance indicators. These vary between organisations but can often be quantified in monetary terms.

ERP Implementation Stages

Ross, J. W. (1999). Surprising Facts About Implementing ERP. IT Professional , 1 (4), 65-68.

Why Enterprise Resource Planning Projects Fail?

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Enterprise Systems For Management
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Why Enterprise Resource Planning (ERP) Projects Fail?

Adopting an ERP system has become a norm in most multinational industries in today’s competitive market. Organisations have recognized the potential benefits of implementing an ERP system so as to gain competitive advantage and improve their business strategy. Nevertheless ERP project has an infamous reputation of failure as most projects become over budget and delayed.

Umble et al (2003) based on their research identified various reasons why ERP implementation project fail. They argued that the main reasons for failure can be grouped into ten categories as listed below:

1.     Obscure Strategic goals

2.     Top management is not committed to the system

3.     Implementation project management is poor

4.     Lack of organisations commitment to change

5.     Incompetent implementation team not selected

6.     Inadequate education and training

7.     Data validation is inaccurate

8.     No performance measures

9.     Improper resolution of Multi-site issues

10.  Technical difficulties

Umble et al (2003) further reviewed the case of an ERP implementation at Huck International Inc, a design and manufacturing company. They identified that though the company successfully implementation an ERP system and achieved some of their benefits, they underwent various challenges such as; lack of complete top management and implementation team involvement during the implementation phase of the project. This resulted in the company going over budget during the course of the project and exceeding their initial time plan.

An organisation that plans to implement an ERP system needs to understand its complexity and consider all possible factors that determines its successful implementation. Careful analysis and planning must be carried out at all the different implementation phases (before, during and after implementation) so as to avoid a project failure.

Various other real life case studies of ERP implementation  that shows that factors above influence the success and failure of ERP projecthas been reviewed in Motiwalla & Thompson's book referenced below.

Book: Motiwalla, L. and Thompson J. (2009). Enterprise Systems For Management. New Jersey: Pearson Prentice Hall.

Article: Umble, E., Haft, R., and Umble, M. (2003). Enterprise resource Planning: Implementation procedure and critical succes factors. European Journal of Operation Research, 241-257.

Further Comments are welcomed!

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