June 22, 2011

Why companies should integrate their ERP and what they should be aware of

I have been pondering on how best to go about answering this question for a couple of weeks now. I think I might have figured out the best way to do this (at least by 70%). I first started developing the question by building a mind map for it (IF YOU ARE NOT MIND MAPPING YET, YOU ARE MISSING OUT). As I said before, I feel my work is at least 70% done (very subjective) so it's no surprise that the mind map reflects this. Then I developed a thesis for the question which is (Currently) "The adoption and integration of ERP systems should follow a company's strategy to realize the desired benefits". To answer the question completely I feel that the following list of objectives should be considered:

1. the Importance of Integrating Business functions and the potential of Enterprise systems (ERP)

2. the Importance of Strategy in driving the choice of an ERP system

3. Identify the benefits obtained from an ERP system as per strategy adopted (e.g. Cost differentiation)

4. Identify the potential problems that might be faced when integrating business functions through an ERP system implementation (What to watch out for)

For a complete picture on how I intend to answer this question, see the mind map. Cheers.

ERPI PMA Mind map

- 10 comments by 1 or more people Not publicly viewable

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  1. Hi, David
    Thanks for posting your ideas towards the first PMA question. I do think you will write a well-structured essay.
    However, I do have a slightly different understanding about this question. Maybe let us discuss through this blog.
    In my view, this question asked not only the integration within different functions of a particular company itself, but also the inter-organisational integration. Since different companies may develop their own ERP system based on their own business models or source from different ERP system providers, information exchange may become potential difficult among companies.

    23 Jun 2011, 09:15

  2. Nice idea to commence with drawing a mind map. Unfortunately i can’t read it due to the low digits of the attached picture.
    One hint for the start point with this PMA is we may need to look back how ERP system concept has been generated. It should explain what’s the issue the companies faced before ERP system has been created, how the ERP system may address those issues. Because we definitly can write a book to introduce different companies why they introduced the ERP. However, there should be a ‘core’ reason there.
    Hope it helps.

    24 Jun 2011, 11:47

  3. David, is it possible for you to post your mind map with an enlarged font

    27 Jun 2011, 09:55

  4. Hi Guys, sorry for the small picture but unfortunately the blog does only allow pictures of that size. The good news is I still have the picture and can drop you an email if interested.


    28 Jun 2011, 15:31

  5. I think a clear distinction should be made between adoption and integration. I believe it is not the same thing. By adoption i guess you are referring to implementation. The benefits of why companies should implement ERP system is very well discussed in literature. However, the question is asking about the benefits of integration and not implementation. The oxford dictionary defines the word ” to integrate” as ” to combine”.

    Therefore we can ask ourselves, integration of ERP with what?

    According to me, the benefits and drawback of the following can be discussed:

    1. why companies have integrated their information systems at first.
    2. integration of several modules within the ERP itself and the benefit & disadvantage for that.
    3. how integration affects the business process of the company and silo thinking.
    4. integration of ERP with CRM and SCM.
    5. integration of ERP with legacy systems or 3rd party specialised system.

    These are some of the ideas that i thought of. It might be useful for you.

    30 Jun 2011, 15:58

  6. i am confused about the potential problems. I think there are two types of potential problems. One ktype are the problems in ERP implementation, such as inadquate investment and change management and a lack of training. The other type are the potential problems brought by ERP systems, for instance companies’ business process may be the same and loss their competitive advantages if they implement the same ERP system, because they change their business process to fit the software. Another problem is the risk of losing important data since many people can access to ERP systems. So I feel confused about what kind of potential problems we need to discuss

    30 Jun 2011, 16:28

  7. Hi Geerish,
    I do agree with your definition of the word integration from Oxford. But I feel in the case of ERP systems the distiction between adoption and integration is ambiguous. I suspect this is because of the inherent nature of the characteristics of ERP systems which by definition contain different modules. So whether you are implementing a new ERP system or adding some more functionality to an already existing system, you are still integrating because you are bringing different business functions of a company together under a single entity or acrhitecture using the different modules.

    As for the discussion points I can’t agree with you more, but rather than limiting your context to the technology I would suggest that your discussion of the benefits be on the context of the whole company. I strongly believe that the remaining challenges in ERP implementation are more to do with the business side of things (including project and change management) than the technological side of things.

    Feel free to enlighten me if and when I am wrong.


    02 Jul 2011, 12:55

  8. My friend david, i agree that integrating erp will provide business related benefits to the company… I think ultimately, it is the technological benefits that translate into the business benefit. Lets say that “sharing of information” is a technological benefit. It does translate into business benefits because it improves productivity: workers can also do more in less time which can generate more revenue.

    I also agree that the question is indeed ambiguous and i guess each of our classmates has his/her own interpretation of the question.

    02 Jul 2011, 19:55

  9. I agree with David in terms of ambiguity of ERP systems adoption and integration. I think that ERP system implementation already covers all the aspects of ERP integration, however it is essential that management smartly and gradually executes management of change and tries to avoid the situation when its ERP integration is limited to the internal processes, not covering external environment, i.e. customer and supplier management. I think that the main concern here is how company divides its goals in ERP integration into separate time scales, so that every benefit of ERP integration i.e. ERP system implementation is achieved one after another step by step. This is related to a proper project management.

    04 Jul 2011, 07:29

  10. I believe there is no right or wrong answer to this question. It simply lies onto your own interpretation. From the discussion here, we’ve seen that each one of us have had different interpretations and hence different views about it.

    It would have been nice to have Neil’s input on this… How he would have approached this question..

    04 Jul 2011, 16:58

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