All 6 entries tagged Implementation
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March 18, 2015
Benefits and challenges of ERP in management control
- ERP in actionóChallenges and benefits for management control in SME context.
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This article is about benefits and challenges for management control when implementing an ERP system.
1. Top management:
(1) Enabling the vision: ERP makes it possible to implement new strategy. Growing and globalizing business needs new kind of control systems.
(2) Transparency: ERP system is a good control tool. In particular it makes business transactions transparent.
(3) Routine tasks: Top management perceives that ERP system works well in routine tasks, but only negative things will be discussed openly.
(1) Transparency/bookkeeping: Accounting and book keeping work well. Monthly profit and loss statements will be gathered very quickly.
(2) Possibilities: In ERP systems are numerous functions (some not utilized).
(3) One system: Only one system. Knowledge and support will be focused on the ERP system. There is no need to support other systems.
(1) Transparency/bookkeeping: Accounting and book keeping work well. Monthly profit and loss statements will be gathered very quickly.
(2)Routine tasks: Basic and simple things can be done by ERP. ERP works if things happen as predefined in the system.
Making entries: ERP is based on processes, but employees do not know what the processes are. Employees do not understand why it is required to make entries in processes. Too many steps included in the entry process. It takes time and generates incorrect entries. Employees perceive that making entries is not part of their job. If supervisors use the ERP reluctantly, shop floor workers follow their lead.
(1) Making entries: It is not possible to make correct entries. Such problems occur when there are different kinds of
machines or production lines than predefined in ERP system. Employees will take a short cut and in this way speed up their tasks.
(2) Personnel resources: Key person leaves the company. In that situation knowledge is lost away from the company. There is time to utilize only the basic functions of the ERP, even if people perceive that there are a lot of other utilizing possibilities. There are no experienced people to use ERP. There is a lot of data for different kind of management control purposes, but there are no people to do that.
(3) Technical problems: ERP system breaks down or it is very slow.
(1) Making entries: Employees do not know what processes are and how they relate to the whole. Employees do not understand why it is required to make entries. Rapid changes in production. Production lines are required to changes (by the customers), but there is no time and no personnel resources to make these changes into ERP system. Too many phases included in the entry process. It takes time and generates incorrect entries. The ERP system is very complex. Making entries is required to be done in many different screens. Complex system takes time away from physical production, which cause that people do not want to use the system. Mistakes occur (incorrect entries) and it takes lot of time to find and correct these incorrect entries. People who have only basic skills to use ERP, cannot solve this kind of problems.
(2) Technical problems: ERP system breaks down. Data which is required in production cannot be obtained from the ERP system.
(3) Standard nature of ERP: There are predefined processes in ERP system, but production is many times unpredictable: machines will break down, production lines will be changed, and the output of the machines is many times not known.
(4) Lost focus: ERP will attract all the focus away from development of production. Resources will be used to develop the ERP system and ERP processes, which is time away from the development of production.
Reference: Teittinen, H., Pellinen, J., & Järvenpää, M. (2013). ERP in action—Challenges and benefits for management control in SME context.International Journal of Accounting Information Systems, 14(4), 278-296.
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.
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.
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.
June 03, 2011
An ERP Success Story – Discovery Toys
Discovery Toys is a medium-size company that has recorded positive total cost of ownership savings from implementing an ERP system. Discovery Toys designs, distributes, and sells toys with educational value. The company outsources all manufacturing activities. Richard Newton, vice president of Operations, estimated that in the first year of operation of their ERP system, Discovery Toys saved approximately 10 million dollars.
The reasons for Discovery Toys’ successes appear to be in the selection and implementation process. Richard Newton used six criteria for ERP supplier selection: risk, implementation, functionality, partnership, cost, and technology. Risk was assessed by how much the selected ERP system would interrupt business during implementation. (Many companies have had major problems with implementing ERP systems and he wanted Discovery Toys to avoid the problems). Implementation referred to the speed and ease with which the software could be integrated into the company’s working information technology. Functionality covered the issue of how closely the software actually met Discovery Toy’s business needs. (Mr Newton had noticed that many vendors provided ‘bell and whistles’ that were unnecessary, but did add cost and complexity.) The forth criteria, partnership, addressed the relationship the supplier provides, primarily in terms of support during and after the implementation. Cost addressed the total cost of ownership, which included estimating the hidden costs such as training, upgrades, and maintenance. The last criteria, technology, referred to an investigation into the software’s compatibility with existing legacy hardware and software systems.
Discovery Toys implemented a J. D. Edwards ERP system. J. D. Edwards designed its software for small to medium-size companies like Discovery Toys, so the cost was low compared to that of other suppliers. The software did not have as many ‘bells and whistles’, but it did meet the functionality requirements of Discovery Toys. In addition, Richard evaluated the system as quick to implement. In fact, implementation took Discovery Toys only about six months. One of the most important criteria to Richard was partnering. J. D. Edwards demonstrated to Richard through its actions during the proposal phase that it would provide Discovery Toys with strong support after the sale.
The results? After stabilisation of the ERP system, the purchasing staff at Discovery Toys was reduced from nine to two full-time employees. The seven employees released or cross-trained into other areas had been performing clerical work prior to implementation of the ERP system. Similarly, the accounting staff was reduced even more dramatically from 21 to five full-time employees. The ERP system automated most transactions, thereby eliminating almost all of the paperwork and enabling instantaneous tracing of orders and transactions. The two retained purchasing professionals essentially became supply managers and are now able to focus on strategic decision-making. As a result, Richard pointed out that the qualifications for future employment of supply professionals at Discovery Toys had increased significantly, to the point where a college degree in supply management is now essential. Additional improvements were: customer service staff reduced, overall inventories reduced, and average lead time for processing orders dropped from five days to one day (Richard Newton, personal interview, November 1999).
Reference: Burt, D. N., Dobler, D. W., & Starling, S. L. (2003). World class supply management: The key to supply chain management. Boston: McGraw-Hill/Irwin.
May 23, 2011
An ERP Implementation Case – Ekin Project
This entry is related with an ERP implementation project within an International construction sub-contractor company. In the study Ekin Project`s ERP experience will be shared and analysed. Firstly brief summary of the project decision stage will be held and afterwards implementation process will be analysed in detail.
Ekin Project is a company which usually does mechanic sub-contracting jobs in large scare construction project such as airports, commercial centres and skyscrapers. They work internationally and employ staff different nations. They use project based organisation structure and they suffers from not being able to keep the intellectual property within the company. There was not an integrated IS tool they use. Data capturing and stored was done by spreadsheets stored in company`s databases. This disintegrated structure causes some problems in information sharing and results in duplications in data. Every staff use their own way of keeping and tracing the information and when they leave, their system cannot be continued by the new comer.
The owner of the company foresees the need of and integrated IT program and forces the management board to have an ERP program. The owner has a name in his mind, MS Dynamics Axapta. The program decision was not given rationally. The owner of the company gathered some information from his friends and contacts who he has in construction company. In the decision process the needs of the company and best candidates were not selected by going through a logical process. Even IT department`s manager`s decisions were not taken into consideration. The patron took a pushy role and forced the company implement the change as soon as possible. However middle level and lower level managers were not happy to have such a large scale change in the current process. Ekin is an old company and employs old fashion people as well. Excitement of the boss did not shared by his employers, however nobody sounded any disagreement in the board meeting or any an official meetings organised by the boss. They did not resist and comment on the issue until they realised they have to change.
In the company a new organisational unit was formed. ERP implementation and integration team was formed with 2 personnel and one manager. These two personnel are experienced in their subjects and had work for the company at least 7 years. Even though the manager is new in the company, he is loved and respected by the other personnel. Although they work willingly in the project, they were not happy not to be asked their opinion in the program`s selection process. The duty of this team is acting like a bridge between the program developer consultant company and the site staff.
Probably, MS Dynamics was not the most ideal alternative. Microsoft is well known and has god reputation in the global market as a software supplier but developing and selling an ERP program was totally new to them. They got in ERP sector by requiring acquiring an European software company and their ERP product. Especially first few versions create lots of problems and did not do well in the market. However version 4 and especially 5 do a good job with a reasonable price. They aim at SMEs by implementing a cheap price.
Obviously Axapta was not ready to be used within construction sector. While the biggest player in the market SAP providing the sector with different editions of the ERP program, Microsoft uses developers and solution partners to tailor the general version of the program to a specific company. In general, there are a handful of construction companies which utilise an ERP module with all modules. Construction sector requires a totally different product because their processes are different from a production company. Therefore alternating the current modules and making them suitable for a construction job made the project last longer than it was planned initially.
The process of the implementation process was like; the consultation company gives training for an ERP module and describes the capability of the module. Ekin ERP team analyses the current system and process and comes up with a requirements list. By using these two, ERP team decides on amendments which are necessary for the implementation. This process generally involves floor personnel who actually use the system. They are consulted while analysing the system and creating a process flow with satisfies the company`s needs and adapts ERP program`s capabilities. Change demands are shared with developers after they are agreed by the ERP team. Developers estimates a duration for the change asked for and at the end of this period new part of the program is tested by ERP team. Tested and approved modules are explained and trials are done with the floor personnel. A user manual for the each module and sometime for the small add-on are prepared in two languages and disseminated to the concerned personal.
Floor staff and even middle level are not usually willing to change. They persist to keep the status quo. During the training phase, their awareness of the benefits of the new program is tried to be increased. When this does not work, the boss publishes an ordinance to force the change to personnel. The huge support from the boss accelerates the implementation process. However the need to keeping the new and old processes until the ERP module becomes fully functional. As an experience, staff should be allowed to work in the two systems simultaneously during a specific period of time. After it is understood that the ERP module is fully functional the old way of doing the job is abandoned. In this way any unexpected problem can be dealt with.
Accounting module is the most crucial one in an ERP program. Nearly every sub-module has a relation with this module. Purchase module transfers the details of purchase bills, project module transfers the direct and indirect costs of the progress done in that period. Therefore the manager of the ERP team decided on implementing the accounting modules last after all others are done.
As a conclusion, like every change project, an ERP implementation process confronts challenges and resistance from staff. Resistance can be overcome by educating the personal and showing them the benefits of the new system from their point of view. High level managements support and encourage are crucial in the success of such projects. Such a large scale project requires commitment from everyone within the business.
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.
Ross, J. W. (1999). Surprising Facts About Implementing ERP. IT Professional , 1 (4), 65-68.