Organization structure impact on ERP implementation success

ERP systems have long been in the limelight due to the indisputable potential and benefits organizations realize when implementing them successfully. However, numerous ERP implementation initiatives have suffered disastrous failures. The misfit between the characteristics of the adopting organization and the imposed standardized business process designs embedded in ERP systems constitutes a critical factor which negatively affects an ERP implementation success.

It is acknowledged that the organization structure is intimately related to the ERP implementation success. If the ERP system matches the organization, then the power structures, job profiles and responsibilities will not incur significant modifications. Generally, it is reported that the more intense the changes ERP systems impose the more fierce the organization resistance gets; the more fierce the organization resistance, the higher likelihood for the ERP implementation initiative to fail. The figure below depicts how the interrelation of organization structure and the ERP system affects ERP implementation.

Business processes standardization and business function integration are the two main characteristics of ERP systems. In essence, the standardized processes necessitate formalization of organizational rules, policies and procedures. Furthermore, theory suggests that ERP is intimately related to low levels of decentralization and structural differentiation. The aforementioned structural dimensions are expected to massively determine the success or failure of an ERP implementation project.

It is really important to examine how the different organizational structures respond to the dimensions outlined above. There are various different organization types. It is reckoned that the machine bureaucracy, professional bureaucracy, adhocracy and divisional structure form the mainstream of organization types.

Machine bureaucracy is adopted mainly from mature and large organizations operating in a relatively stable environment. This particular organization structure demonstrates limited horizontal decentralization and differentiation as there is the tendency to follow formal programs and plans. It is expected therefore that organizations adopting the machine bureaucracy are likely to positively affect the ERP implementation initiative.

Professional bureaucracy is principally embraced from law firms, universities and accounting firms. Individual professional within these organizations prefer to work independently on tasks defined by them. Professionals require work autonomy and any attempt for centralization would induce severe dissatisfaction, conflicts and resistance. Hence it is evident that this organization type is negatively predisposed to fitting the dimensions set in the beginning, thus making an ERP implementation project slightly difficult.

What is more, adhocracy is characterized by informality and high levels of decentralization. Within such organization structure individuals with disparate goals from different departments cooperate quite closely contributing to high levels of differentiation. It would seem logical to expect a lower level of match among adhocracy structures and the ERP characteristics.

Finally, organizations structured in a departmental way usually are composed of divisions with very different capabilities and requirements. Divisions operate in an autonomous manner with little if any communication among them. Nevertheless, the director of each division aims at formalizing the behavior of divisions via relatively standardized procedures which facilitate monitoring and control of their respective progress. Similar to professional bureaucracy, any attempt for centralization from the headquarters would provoke severe dissatisfaction, discomfort and resistance by the divisional managers.

Overall, the table below summarizes the aforementioned characteristics of each organization structure in relation to the structural dimensions of formalization, decentralization and differentiation.

It is evident that the theory suggests that machine bureaucracy is the most suitable organization structure among the four described as it demonstrates a high degree of fit with the ERP features, thus it is likely to facilitate a potential ERP implementation initiative. However, these results are the outcome of pure academic theory. In order to better understand whether the assertions are reliable or not, it is essential to have them empirically tested. Only after these relationships are complemented by anecdotal case evidence will it be possible to claim for their validity.

Morton, N & Hu, Q (2008), Implications of the fit between organizational structure and ERP: A structural contingency theory perspective, International Journal of Information Management, Vol.28, Issue 5, pp.391-402, (online ScienceDirect).

Pan, Y & Tang, Y (2010), Review of Misfit Issues between ERP Principles and Organizations, paper presented at the 2010 International Conference on Education and Management Technology, 2-4 November 2010, (online) URL: http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&a rnumber=5657545, (Viewed 10 May 2012).

Dimosthenis Mavrogiannakis : 10 May 2012 21:58 |  Comments (0) |  Close comments |  Report a problem

efficient management in ERP

Every change exist motivation in the process. The majority of companies is eager for more resource for providing better quality to the customers. However, it is irony that the managers acquire great amount of asset without managing efficiently. Thus, ERP provides a solution for resolving them.

Integration is always a complex task for the stakeholders and directors. Inevitably, there are already some asset or data in presence in business running. An efficient system should consider about the compatibility as well. It is not only compatible with existing information but also harmonious with other partnership. In other words, the business owners should not consider an exact solution which just meet their own target. Through coordination, the business should fully utilize the relative resource in order to compete with challengers. In modern business model, supply chain integration is the most difficult task among the targets. The managers should consider about this before manufacturing their own products. ERP will help to collect and to control these important data. The information will be updated in no time. Through real-time system, the resource must be using more efficiently in real world. The raw material will also be stocked in order. Thus, much more resource will be enhanced the competiveness of the business.

Considering human resource, the employees will also reduce the burden on routine work. Basically, inventory management affects the efficiency of overall operation. However, it is inevitably error in such a complex process. Through automatic system, the error rate could be minimized in all circumstances. It is largely reduce the exhausting work on every employee. The employees will no longer consuming time on this sort of work and utilize their time smartly. Furthermore, some new business might be expected in the future, since the employees have change to develop new skill in other fields. The manager is always interested in all kinds of skills which might bring stable income in the business running. There will be more available time for brainstorming new ideas. Similarly, the training course also need time to develop new knowledge. In brief, the employees will be easier in work than previous time. Certainly, the error rate would also be reduced due to this efficient system. Through communicating, the managers will have chance to realize the thought of employees and to carry out any profitable idea.

Modern business emphasized the competition but also stressed the collaboration. Though ERP, the business will have great opportunities to defeat their competitors. It is no reason to survive without the solid partnership in modern business operating. The essential data will be transmitted immediately. The linkage among the suppliers will also be connected closely. Certainly, it is also getting great chance to achieve win-win situation for strategic partners.

Shih-chieh Kuo : 29 Apr 2012 21:00 |  Comments (1) |  Close comments |  Report a problem

Impacts of ERP on Supply Chain Integration

ERP, which originated from MRP in manufacturing industry, has enjoyed a great popularity in recent decades. Meanwhile, the scope of ERP has been expanding in different sectors and there are increasingly more ERP vendors start concentrate on the ERP solution for supply chain integration.

Supply chain integration, which reduces the overall costs, improves efficiency and effectiveness, shortens lead time, develops customer satisfaction, plays a vital role in most industries nowadays.

With regard to the way how ERP helps the entire supply chain to gain competences, I think the most important function is the real-time information exchange. It refers several aspects.

First is inventory management. Based on the real-time sales transactions and the production and schedule plan of suppliers in ERP, inventory level can be appropriately controlled. The real-time sales data also helps develop forecasting plan so as to enable companies be prepared. Furthermore, the relationship with suppliers is developed as well. There is a trend that it is better for buyers to cooperate with fewer but more reliable suppliers. The information sharing with suppliers?? delivery and production plan makes buyer company works closer with its suppliers.

Secondly, customer service satisfaction is improved. Since companies are able to access real-time data of customer requirements and all the resources of operational process through ERP system, the reaction time is shortened. Also, with the control of operational activities, better quality of products can be achieved. Furthermore, ERP system is able to support mass customization by translating a specific order from a customer into production so as to achieve assemble-to-order or make-to-order.

Thirdly, ERP system contributes to more smooth and streamlined operational process. With all the integrated data available, it is much easier to fulfill and replenish orders, organize production plan and purchase raw materials. Accordingly, the overall costs are reduced.

Even there are many benefits that ERP contributes to supply chain integration. Some obstacles still exist. For instance, the standardization of data among partners throughout the supply chain, the resistance of information sharing in order to keep confidential and overwhelming available data for decision-making.

To conclude, ERP does bring loads of benefits to supply chain integration. The obstacles need to be further tackled and supply chain members should also pay attention to these obstacles when integrating.

References

Kelle, P and Akbulut, A. (2004). The role of ERP tools in supply chain information sharing, cooperation, and cost optimization. International Journal of Production Economics. 93 (8). pp. 41¡§C52.

Akkermans, H, A., Bogerd, P., Y¡§?cesan, E and Wassenhove, L, N, V. (2002). The impact of ERP on supply chain management: Exploratory findings from a European Delphi study. European Journal of Operational Research. 146(2). pp. 284¡§C301.

Sua, Y. and Yanga, C. (2010). A structural equation model for analyzing the impact of ERP on SCM. Expert Systems with Applications. 37 (1). pp. 456¡§C469.

Songqin Wei : 27 Apr 2012 14:03 |  Tags: Chain Erp Integration Supply |  Comments (2) |  Close comments |  Report a problem

ERP vs. BPM

Today, there are many discussions on the internet about relationship between ERP and BPM which show that many people are confused and don’t understand the differences between these two solution. The question in this area included;

- Does BPM is going to replace ERP?

- What is the business value of BPM comparing with ERP?

- Which solution should be implemented first?

ERP: the concept of ERP is focusing on integrate information flow within a company using the concept of decentralize database which will be updated on demand and give a single view on customer data. In order to work with ERP in multi user environment, it requires the effective process management to make sure that all users realize the important of process and discipline to business procedure. Some customers didn’t realize an important of business process in implementing ERP and expect that the system will support their processes. However in most cases, company need to reengineering their business process to match ERP best practice and this is why the cost of ERP solution is very expensive.

BPM: in the other hand, BPM is focusing on workflows of task which essential to deliver business objective. BPM aim to make business processes more efficient, more effective and flexibility enough to support any change that happen within the company.BPM tools provide the platform that allows users to create business applications bringing all different data, document, operation and people together. Moreover, it will help improve business agility and productivity while business components can be reusable and changeable.

The difference characteristics of these two systems give the answer that BPM cannot replace ERP system as they focus on different purpose. In spite of those facts, I'm not surprise to see both of BPM software vendors and ERP software vendors offer the solution of complementing these two systems together.

In SAP website, the given information shows that the company adjusts BPM concept solution to help integrate business process throughout application and organizations, know as SAP BPM solutions. SAP BPM claim to have ability to exchange data across applications or module both from SAP and non-SAP. The latest improvement of using SAP BPM is the ability to allow mobile users to interact with SAP and non-SAP application via mobile application. This is just only one example of benefit from combining ERP and BPM together.

As ERP can handle all the data and information while BPM will create business process base on those data to make sure that the data was used through entire business process even the process has been changed, I think ERP BPM solution will easily attract new ERP customer to go for this solution.

References

1. http://processgeniearchitect.wordpress.com/2009/08/10/bpm-or-erp-or-both/

2. http://www.ebizq.net/topics/bpm/features/11594.html

3. http://www.architectsap.com/sap-netweaver/sap-bpm/

4. Enterprise Resource Planning: Implementation and Management Accounting Change in a Transitional Country. Ahmed O. Kholeif, Magdy G. Abdel -Kader and Michael J. Sherer. Palgrave Macmillan, 2008. Palgrave Connect. Palgrave Macmillan. 24 Apr 2012 http://0-www.palgraveconnect.com.pugwash.lib.warwick.ac.uk/pc/doifinder/10.1057/9780230584051

5. DAVIS, R. & BRABÄNDER, E. 2007. An Introduction to BPM ARIS Design Platform. Springer London.

Kanita Tippayajan : 25 Apr 2012 08:00 |  Tags: Bpm Erp |  Comments (2) |  Close comments |  Report a problem

Benefits of using ERP solutions as cloud–based services

An ERP cloud is also known as enterprise resource planning using cloud computing which is one of the major ways a new business that provides an approach as Software as a Service, which can ensure continued growth and increasing profits as time goes on. This unique way of organising a business focuses on a modular, consistent management of information across an entire organisation or business.

Many new entrepreneurs form their first business around their area of expertise, and may in fact be highly skilled within that area, but may also be unprepared for day to day management of growing business. Such an entrepreneur may find that as their business increases in size, inconsistencies can pile up as well.

The number one reason why such inconsistencies may happen is that as a business grows, a number of different software may be used in order to manage various areas on information within a business, for example, such as finance, human resources, various supply chain management tasks, as well as payroll and fixed asset and cash management.

Such multiple kinds of software can make it very challenging for a growing business to manage some very technical administrative reasons. In fact, many newer owners make the mistake of continually patching up issues as they crop up, hiring various experts and buying newer and newer types of software.

It is precisely for this kind of a situation that enterprise resource planning was designed to handle. Originally a software process developed for the biggest of international conglomerates, this type of software has been in recent years geared and rebuilt with smaller and growing businesses in mind, in order to be available and useful to many new clients.

In fact, as such businesses may not have the space or large sums of money to pay upfront for an entire retooling of their existing information management systems. For that reason, this type of enterprise resource planning software is also designed to work in a special and growing way of storing management via an ERP cloud.

The advantage of this particular type of computing is that it does not require retooling of the client’s physical systems at all because the data required is stored centrally at a dedicated server that does not need to be hosted in the building where the target business is located at all. In fact, with this type of computing, the client business may only need to have a dedicated internet line.

Since this type of computing means that data is stored in one location and not in the business of the client at all, convenience is at a premium as this type of computing is particularly well suited for the business owner who may not have much technological expertise, as well as not much of a budget to hire such experts or to retool the way the business’s own hardware. Furtermore, in this approach all software might be availale as on-demand concept and there is a flexible schemes of payments for this model.

Example of on-demand service architecture

When it comes to running a growing business, ERP cloud may be more of a necessity than a luxury. A growing business has specific needs if it is to remain profitable and remain successful.

Nikita Korchin : 21 Mar 2012 14:52 |  Tags: Cloud Computing Erp |  Comments (2) |  Close comments |  Report a problem

Understand the objective of ERP application

For a large percentage of ERP customers, an ERP implementation has been the most complicated andcostly software project they have undertaken. Companies have made big investments in ERP software, and leading CEO¡¯s now want to see IT contributing more to the bottom line ¨C producing higher value at lower cost. Notwithstanding, patches and new releases create ongoing support and business adaptation challenges that can chip away from the returns on ERP investments. Unmanaged changes to ERP applications have generated some of the most recounted project horror stories. Consequently, ERP Change Management is becoming the focus of attention in many IT organizations. Changes are inevitable. Most companies adapt their business processes for their ERP, but initially find it easier to reduce the impact of the organizational change by customizing and extending the ERP functionality to provide legacy system capabilities that are considered to be business critical. The magnitude of these collective changes is more than most companies can effectively manage. Staffing levels required for steady-state support operations quickly become overwhelmed because the roles they have traditionally played must take on significantly more responsibilities, and the roles in the ERP environment are very different from legacy system administration functions.

: 07 Jul 2011 06:54 |  Tags: Erp Integration |  Comments (0) |  Close comments |  Report a problem

Rethinking ERP Implementations

Many organisations have hoped to improve their competitiveness by investing in ERP systems. However, the implementation and associated changes in business processes is a complex and highly cost intensive project. There are several stories about failure during the implementation and divers authors call attention to the implementation process. Hence, it can be agreed that, next to a high leadership commitment, a strong control mechanism is needed during the implementation in combination with a step by step approach.

So far, consultancies mostly undertake the implementation process, which, as it is said, costs three times more as the system itself. However, if the success rate is so low that only few are able to benefit from the plenty of advertised benefits of an ERP system, why is there such a lack of innovations regarding the ERP implementation?

Considering the implementation of Six Sigma via a belt system, I wonder if this would be suitable for ERP implementations in a similar way. The belt system is a hierarchy based on 5 specified roles, each of them indicating a certain degree of expertise with the aim to convert the culture and the processes. Transferring this to the ERP implementation would mean that there are trained leadership roles, responsible for promoting and direction the chosen ERP implementation area (e.g. HR, Production or Finance) and trained managers and employees at various levels, responsible for conducting and control the implementation, conducting process redesigns under consideration of the old legacy system and feedbacks of future process user and for conducting coaching and teaching session on the operational level.

I see advantages in, firstly, that various roles and responsibilities required for the implementation process are clearly defined and separated compared to having a small number of external consultancies, which are responsible for a whole set of implementation activities. Secondly, organisations invest into their own employees and create valuable knowledge, as they understand the business process from the past. Thirdly, since any change requires a cultural change, which happens internal in the mind of the workforce by fully agree and adapt to the change, the “belts” can make a significant contribution to enable a true change by decreasing the resistance of employees to use the ERP system.

One disadvantage represents the costs, which are still very high. Moreover, it is important that the chosen employees for the belt system are only concentrate on the implementation over a longer period. Hence, their current role may be replaced by other required employees, which increases labour costs. Nevertheless, on a long term perspective this is likely to pay off compared to the non-success stories of past and properly future ERP implementations.

I only can see this from my point of view. If anybody has a better background of both Six Sigma and ERP implementation I would be pleased to obtain some critic in form of limitations or disadvantages of integrating a belt like system for ERP implementations.

: 30 Jun 2011 18:00 |  Comments (2) |  Close comments |  Report a problem

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.

: 22 Jun 2011 13:17 |  Tags: Erp Integration |  Comments (10) |  Close comments |  Report a problem

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.

: 03 Jun 2011 10:36 |  Tags: Criteria Erp Implementation |  Comments (0) |  Close comments |  Report a problem

Extract datas from ERP system to BI system

BI (Business Intelligence) system is a data analysis tool and ERP system is an online translation processing system. Are there any relationships between these two systems? The answer is certainly yes. Moreover, let us take oil industry as an example, the ERP system is just like an oil field, and BI is an oil refining tool. During the oil refining period, we need the basic raw materials????oil. The oil is the data which is stored in the ERP system.

The users always worry about three problems when they extract data from ERP system to Business Intelligence system. First of all, the company should ensure the integrity of the data. If the data is incomplete, it may cause a great deal of problems. What is more, the data should be accurate. This is due to the fact that the accuracy of data is playing a vital role in the whole information system. Last but not least, the data must be extracted in time. If the data can not reach to the BI system timely, it is useless at all. The data extracting solution will be successful when these three problems are solved.

In realistic working process, data selection can be divided into two parts. The first part is initialized extracting, normally people will use totally extracting pattern during this process. That is to say, people will copy the entire data from ERP system to BI system without any modifications. It will last for a long time if the database of the enterprise is big. Furthermore, the second part is the follow-up extracting. After the first data selection finished, the data may be changed as the global market is changing all the time. In this case, people will not apply total replacement method into data selection. Instead, they will just update the new information into the database. It is efficient, convenient and money-saving to use this method.

: 23 May 2011 04:55 |  Tags: Bi Data Erp Systems |  Comments (0) |  Close comments |  Report a problem