All entries for May 2013

May 05, 2013

The Multinational Dimension of ERP….Reality or Illusion?


Organizations thought the world are sacrificing big capital investments for the implementation of ERP systems. Implementation has been proved to have a level of difficulty and this is mainly because of business problems and not technical obstacles. The technical part which is mainly related with the installation and the existing systems integration is considered to be a critical phase, but the management aspect of ERP system could have an even greater impact on the success of the system or use.


C. Sheu et al. (2004) attempted to investigate the dimensions of natural differences. Some of those which play a vital role in the ERP Implementation are language, culture, politics, government regulations, management style, and labor skills


Based on what was mentioned above, it can be supported the view that no universal ERP system can be implemented in different counties successfully without resolving obstacles that are driven from national differences. The business models, including operating processes underlying most ERP software packages, reflect European and US industry practices. Such operating processes are likely to be different in Asian countries, having evolved in a different cultural, economic, and regulatory environment.


Both European cases suggest that ERP implementation in Europe is a very challenging task due to national differences between countries in Europe. Specifically, ERP implementation in Europe is more complex because companies have diverse national cultures that influence corporate culture, thereby making the implementation of multinational ERP solutions difficult. This study supports previous evidence that ERP implementation in the US has been more effective that in Europe because of the more complex European corporate and national cultures (Krumbholz & Maiden 2000), (Vernon M., 1999).

The analysis is focusing on the cultural diversity which is considered to be a factor which may affect the implementation of ERP. However, this fact standing itself does not help very much on resolving the problem. It needs to be addressed which are the impacts on the implementation strategy per national difference.

Initially, it can be considered the factor which is related with the culture of language which might cause problems like; technical problems in entering data, cultural resistance, communication barriers between facilities due to different languages, localized implementations and alteration of training programs in different site. We can also consider the Management Style factor which is more related with problems like; differences in priority settings, implementation style: either “big bang” or “piecemeal” approach to the implementation and project duration.

There are many more national differences which might be analyzed and a lot of research has been done for that topic as it considers being one of the most critical issues which need to be resolved for the successful implementation of ERP.

References

Chwen Sheu, Bongsug Chae, Chen-Lung Yang, (2004), National differences and ERP implementation: issues and Challenges, The International Journal of Management Science Omega 32, pp 361 – 371

Krumbholz M, Maiden NA. (2000,) How culture might impact on the implementation of enterprise resource planning packages. CAiSE pp 279–93.

Vernon M. (1999), ERP endangered species? Computer Weekly, pp 32–35.


Managing Risk using ERP

Can implementation of enterprise resource planning (ERP) ever be acknowledged as the ultimate risk managing strategy with in a business? There are numerous literatures surrounding the challenges of ERP implementation. However it must be recognised by CEO’s or senior management that ERP has the potential of performing beyond their expectation levels. ERP can enable business to manage risk in a collective perspective. There is interconnectedness amongst risks and the joined-up risks requires to be mitigated or managed considering the consequence on others. ERP can support businesses to managed risk in holistic manners, where the most crucial information of the business processes is held.

Lack of control due to consistent outsourcing is seen as a major risk to supply chains, ERP can help companies integrated in a modern manner. Where information can flow through numerous different levels between the customer and the outsourced party. ‘Information is power’ which means more information makes one competitive. However the increase in information sharing across supply chain make the supply chains even stronger (Christopher & Lee 2004).

ERP will further help reduce risk such as information distortion, which is caused because of exaggerated figures due to numerous reasons such as, promotional schemes causing forward buying from customers (Sunil & Sodhi 2004).

Supply risk and demand risks are managed using strategies such as, increase integration, building relationships amongst supplier and customers. Customer relationship management (CRM) has been included in the workings of ERP; it would be beneficial to investigate what results are achieved in terms of handling risk by managing the customer.

ERP systems are situated centrally with the elements of functional integration to improve business performance. One can argue that the challenges of implementing and operating ERP, undermines the benefits one can achieve from the system.

ERP has the potential of being used as an initial, essential tool for supporting the adopted risk managing strategies. If looked closely ERP is constantly managing risk for the business, by streamlining and automating the processes to make it less vulnerable to uncertainties, ERP constantly reduces mistakes and fraudulent activities, however one must understand the complete use of such systems in terms of handling risk.

Sources

Chopra, S. & Sodhi, M.S., 2004. Managing Risk To Avoid Supply-Chain Breakdown. MIT Sloan Management Review, 46(1), pp.53-62.

Christopher, M. & Lee, H., 2004. Mitigating Supply Chain Risk Through Improved Confidence. International Journal of Physical Distribution & Logistics Management, 34(5), pp.388-96.


The Role Of Enterprise Resource Planning

Enterprise Resource Planning is the process of implementing an Enterprise Resource Planning system and ensuring that it synthesises effectively with existing systems and software architecture within the business. Since the original development of ERP's in the early 1990s the sophistication of these systems has increased exponentially and with the complexity of organisational software and Management Information Systems (MIS's). Organisations have come to rely on ERP's to help them achieve their strategic goals and objectives which has increased reliance on management data and effective interface between various different management systems within the business. The role of an ERP is to bring together all of this information in a central repository so that managers within the business can be confident that they have the most accurate and timely information on which to base their decisions.

However it is unrealistic to think that a full organisational-wide ERP can be implemented in one attempt. Normally, it is necessary to adopt a modular approach to ERP implementation at various stages in the process. It is necessary to integrate the ERP with existing systems such as accounts packages and Materials Resource Planning (MRP) packages. One very popular ERP has been developed by the company known as SAP. This is a modular ERP which helps to improve and ensures that organisations gain return on their investment and information flows within the business remain accurate and timely. The reason for this is SAP has worked with many organisations to create a software solution which can be adapted to suit the needs of the business.


Sources:

- Kallunki, J. P., Laitinen, E. K., and Silvola, H. (2011) Impact of enterprise resource planning systems on management control systems and firm performance. International Journal of Accounting Information Systems, 12(1), 20-39.

- Su, Y. F., and Yang, C. (2010) Why are enterprise resource planning systems indispensable to supply chain management. European Journal of Operational Research, 203(1), 81-94.


- Momoh, A., Roy, R., and Shehab, E. (2010) Challenges in enterprise resource planning implementation: state-of-the-art. Business Process Management Journal, 16(4), 537-565.


May 04, 2013

Should SMEs use ERP systems?

In the knowledge era of today, organisational performance relies deeply on the level of knowledge that can be obtained, used and retained within an array of organisations. Increasingly, firms are realising the importance of integrated information systems and enterprise resources planning systems as a tool to achieving higher performance and gain greater competitiveness within the business environment. Nevertheless, the implementation of these highly integrated systems have proven to come with a hefty price tag. Owing to its extreme price, it can be argued that traditionally, only large organisations are willing to pay and bare the risks these systems entails. The question is then, would it be worthwhile for small and medium sized enterprise to adopt an ERP system?

As the business world gets ever more competitive by the day, there are many advantages that can be brought to small and medium enterprises (SME) by implementing ERP systems. On top of the well-established advantages such as the shortening of lead time, integration of databases, refinement of business process etc... from different academic literatures. One significant unique benefit to SMEs is that ERP can bring SMEs closer to large enterprises. Traditionally, large enterprises relies heavily on the its established business processes and information systems. As a basic requirement, external organisations who aspire to partner with these large enterprises will incur huge costs in the adoption of electronic data interchange systems to support data transfers from these large enterprises to their partners. The benefits of ERP can open up huge market potential and act as a competitive advantage against similar sized enterprises. (Malhotra & Temponi, 2010)

However, considering the amount of resources an average SME can afford to invest into a complex ERP system together with the risks that may incur, it may not be realistic to propose such a drastic change. Many organisations tend to fall into the trap of romanticising and underestimating the resources needed for the adoption of an ERP system. First of all, the software system accounts only for approximately one-third of the total costs incurred. Secondly, human resources through direct intervention and indirectly through training and education can also consume a substantial cost. Finally, the prolonged time frame of the implantation is also often underestimated. These are only some of the resources needed for the implantation of an ERP system as a highlight.

(Malhotra & Temponi, 2010) identifies 6 critical decisions which SMEs are advised to consider throughout before selecting and implementing ERP systems to enhance implementation and organisational success.

In conclusion, with the globalisation effect, the world is becoming a smaller place. In order for SMEs to survive, they must enhance their competitiveness against organisations across the globe. I feel that is it necessary for SMEs to evolve by unifying business processes through the use of best practices as a foundation, and therefore can then develop competitive advantages through flexibility and adaptability to compete with their large scale competitors. If resources permits, SMEs should implement ERP systems which they can cope with within their capabilities.

References

Malhotra, R. & Temponi, C., 2010. Critical decisions for ERP integration: Small business issues. International Journal of Information Management, 30(1), pp. 28-37.


May 03, 2013

Organizational Support on ERP

ERP systems are information systems which provide integrated processes for an organization to share information by using a common database. The organization may receive many advantages like reduce cost on operations, reduce the time to complete business processes, as well as enhance organizational performance. The adoption of ERP systems has been considered to be a key to accomplish a competitive advantage in the fast changing business environment. Brazel and Dang (2008) reported that ERP adoption creates positive market responses and ERP implementations may improve operational performance in organizations (Hunton et al., 2003).

However, not all organizations using ERP system improved their organizational performance significantly (Olson, 2004). Thence, it is important to know the success factors of ERP implementation, but also the causes of ERP implementation failure.

 From the previous studies, we can find out that numerous of theoretical models which are successful in ERP implementation. Since the ERP system is complex, employees who are involved in ERP implementation in the workplace may gain good skills and information. However, employees who lack information and/or training may feel anxiety (Olson, 2004).

Actually, those organizations that implement ERP systems successfully usually provide a better work environment for their employees which they can work efficiently with different level of supports.

Organizational support has been argued to be a critical success factor for enhance the performance of any organization (Chung and Lee, 2005) as well as for the successful adoption of a new system (Lee et al., 2006). Organizational support theory considers factors that heighten employee satisfaction and then evaluate performance of the increased work effort through their contribution.

Organizational support has been identified as a crucial value for improving employees??business performance and job satisfaction as well as emotional power (Chung and Lee,2005). Thus, organizational support has been viewed as employees resource in a workplace of any organization (Leung et al., 2008), which can help employees to determine the fraud of stressful situations, in order to cope with stress by improving their jobs in their ability.Moreover,Organizational support can sustain employees' belief and improve the task performance.

Organizational support affects BI to use the system, especially in organizations with using a technical system.Organizational support can be divided into two categories: formal support systems and informal support systems(House, 1981).

Informational and instrumental support are included in the formal systems,and instrumental support assists the individual work directly. Informational support is complementary and supplemental to formal support systems of an organization, which includes support from peers and supervisors in the workplace.

Formal support systems can include education and training of employees for new systems, such as new technologies, improved business process, ERP systems. Informal support systems can involve methods to provide a better communication with co-workers or a better work environment where learning from peers can take place.

If the organization offers sufficient support to employees for their tasks, employees are more likely to improve their performance through usage of the new system in an ERP system environment.

Also, stress of using the system would be reduced when employees who used the ERP system felt that sufficient support and information were received from the organization.

Organizational support leads to the emotional reaction of employees, and consequently reduces stress about using the system. Therefore,organizational support refers to the support-providedfor employees work in an ERP system environment.


May 01, 2013

ERP: The necessary evil

When reading relevant literature on ERP implementation and its Critical Success Factors, one gets the impression that ERP is very rigid, complex and risky. In fact, reading case studies of ERP implementation projects that have failed and forced large organisations to file for bankruptcy is like being told stories of people who have died as a result of ignoring their doctors’ instructions when taking medications. Just like one is required to follow the doctor’s prescriptions fully in order to get rid of a life-threatening disease, the ERP implementing company is required to pay attention to key Critical Success Factors for the project to be successful and lead to process performance improvement. These Critical Success Factors include senior management involvement, Business Process Re-engineering, Training and Education, IT infrastructure, proper package selection, Project Management and Management of Change.

Due to the severity of the consequences of poor ERP project implementation organisations must always avoid the temptation to succumb to peer-pressure and hasty decisions. Kick-starting the ERP implementation process should only take place when the most important Critical Success Factors are readily available and the environment made conducive enough to handle the complexities and massive changes that are associated with ERP introduction and operation. Failure to pay attention to these rules serves to invite the Evil side of ERP which often represents disaster!

Source: Basu, R., Upadhyay, P., Das, M. & Dan, P. (2012), “An approach to identify issues affecting ERP implementation in Indian SMEs”, Journal of Industrial Engineering and Management, 5(1):133-154.


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