Going Live Is Not the End of the Erp Journey – ERP System

ERP an acronym for Enterprise Resource Planning, which is now a day’s widely used in the industry be it financial or manufacturer. The term itself is really complicated and to simplify, it is an information system that supervise information about a company. More precisely it is a system which maintains information of company’s customers, buyers and suppliers, finances, production facilities and employees etc while used by each and every department and employee of that respective company.

A system where the sales department can perform their own activities for example checking the inventory levels, issuing invoices and receiving payments, entering the sales order by the customers and checking prices and cost of each product. Financial group of the company can perform their own tasks for example to make the balances sheets and income statement, staff can manage account payables and receivables, can enter payments required and received by customers, buyers and suppliers. Marketing can forecast sales and plan demand accordingly while production department can check balances of products, create and manage the schedule of production, create order of productions and maintain the record for finished goods and work in progress. Human resource on the other end can evaluate the record of all the employees including salaries, date of joining and resigning and their designation and titles. Hence an ERP system manages all the resources of an enterprise and hence known as Enterprise Resource Planning.

Although Enterprise Resource Planning (“ERP”) is a system which helps a company or an organization to maintain a streamed way of working at all times but it all depends on the development of the system, the way of usage of the system by the employees and the staff and most importantly on the stage at which the system has reached. In this report, while taking examples from the industry, system development will be evaluated and the benefit of each stage will be discussed. There are always barriers and hurdles in any system development and in case of ERP, the potential hurdles which may hinder the system performance will be discussed.

(Zimmerman and Smedley, n.d., pp. 1-5) discusses that an ERP system once implemented in a company, an organization or in any business, it is a milestone achieved and hence the company can celebrate the achievement but it is the first step and a first milestone of a never ending process. This process includes proper maintenance of final project documentations so that if the company wants to redo the system, they shouldn’t go through repetition of the same task and it is the most neglected step. Help desk or on site help is another most important centre. Every time with a new development in the system, the users have new queries hence an on-site help desk is always useful and an important factor. In any organization, people come and go hence an unavoidable situation and therefore additional training session for the new recruits is always very important and a continuous system should be in place to avoid any unforeseen.

(Zimmerman and Smedley, n.d., pp. 4-7) narrates that ERP system implementation, which includes planning, configuration, customization and testing is a costly process therefore before the approval for such system is taken, project feasibility is created to check if the system is feasible. At every stage of the ERP system, or on a periodical basis, the current performance level should be checked with the initial feasibility to access the ROI. The upgrading system is another task which is continuous in nature and hence needs time and effort and definitely has impact on ROI.

(Zimmerman and Smedley, n.d., pp. 7-8) describes that there is always a scope of improvement in the system besides the up-gradation. As and when the requirement arises in the business model, additional systems are augmented for example to better perform on the supply side, a module of Supply Chain Management to be connected with the ERP or to enhance the customer care unit, a Customer Relationship Management system is embedded in the ERP system.

(Zimmerman and Smedley, n.d., pp. 9-10) discusses that system cannot run without people and maintaining the key project staff and taking care that these people stay at their respective places is very important. Continual improvement of any new ERP system, its solutions and additional is very difficult and hence staff retention is very important.

Other factors such quality data input in the system and it audit is very important which is again a factor of continuous improvement program because a simple rule of rubbish in is equal to rubbish out will become a big hurdle in the system performance.

(Zimmerman and Smedley, n.d., pp. 11-12) concludes that the Enterprise Resource planning is not one single step taken which will ultimately make the business a mechanical work but it is a continuous process which will keep on working well only when it is well planned but surprises are not unavoidable. Careful planning before and after the implementation of ERP system and following steps which are outlined in the implementation plan will ensure the success of the system.

ERP system development is not a one day task and the creation of the ideally goes through a seven (“7”) step process flow. Every step in its self is a mile stone to be achieved and comes with many benefits and many hurdles to cross hence each and every step  is taken seriously as success of one is dependent on the successful implementation of the prior. As discussed by (T. Cornelius III, n.d., pp. 1-6) there are seven steps:

1. Strategic Plan
2. Assessment of readiness
3. Prepare for Vendor Selection
4. Vendor Selection
5. Planning the Implementation
6. Implementation stage
7. Post Implementation

(W. Ross, 1999, pp. 2-3) explains that in the planning stage, every organization which wants serious implementation of ERP system has to take two important decisions related to the design. Firstly, for every system there are certain assumptions embedded in the software that how the data would flow in the system. Once the data enters the ERP system, there is no control over it of the staff or employees and the results cannot be controlled by anyone but the system. In-case the organisation wants any change has to go for customization which is exceptional expensive and hence a barrier. Therefore the company which required customization would be able to engineer its process but at the same time the system improvement or up-gradation will become hurdle. Secondly, the process is standardization was another feature to be taken care off while implementation because one the system is in place, the change in it will be an additional cost. Therefore the staff has to be engaged in order to understand the needs and requirement of each department and hence designing the system accordingly.

(Gross, 2006, pp. 1-3) discusses Hershey’s project strategic design failure case where the system was unable to process the orders and resulted in delayed orders. Each department had their specific requirement from the system but the managers were not willing to give time and support to come up with the system which will result in enhancement in the company’s overall income. Moreover, the company was in a hurry to go live and hence not all the critical evaluation was done at step one and hence the system failure. Therefore it is always very important to encourage all the key management to get engaged in the process planning and give it its due time.

(W. Ross, 1999, pp. 3-5) discusses that in 2^nd stage where the company’s readiness toward system implementation is evaluated; staff awareness is a key aspect to be taken care off. The organization on the whole should be prepared to accept the upcoming changes in the organizations system and process flow. System readiness and staff preparedness are the key factors.

(Schneider, 2000) discusses a forestry product manufacturer in Atlanta where while the company was checking the preparedness level didn’t consider the Vice Presidents of all the 12 division of the company. In order to centralize operations and integrate back office systems, the company decided to apply one system to all the division and the VP’s were unaware of the management decision which caused them to lose on to their autonomy. Once realized after 11 months of implementation, the system came to a halt and scrapped.

(W. Ross, 1999, pp. 7-10) discusses the third stage of preparation for the vendor selection. This is again a very important step and includes two things which the management has to do; firstly, the management has to prepare a list of specific needs and requirements which it wants in its ERP system. Secondly, the management has to completely understand that how the business is conducted currently and how will it affected by the ERP system or software.

(Gross, 2006, pp. 4-6) discusses the ineffectiveness of Hershey’s where the basic requirement of the system was not clear specially the Customer Relationship Management system and logistic packages system requirement of the company. The company included both in the first stage of system implementation, which increased the complexity element and hence the staff was unable to make sense out of it and resulting in downward learning curve for employees. Therefore if the requirements are not accessed properly, the system will result in becoming a cost instead of improving the ROI of the company.

(W. Ross, 1999, pp. 11-12) discusses the vendor selection and declare it to be the most important part of any ERP implementation plan as the vendors are the key stakeholders hence selection should be the one which best suits the overall strategic goal of the company. Two companies are involved here one is ERP providers are software companies which sell license of their software along with the technical and functional, training and consulting services if necessary, while the other is ERP implementer, which provides only consulting and training for the software provided by ERP providers.

(Schaefer, 2004) discusses the case of W.L. Gore’s lawsuit which was against People Soft and Delioitte & Touche, where the company claims that unqualified consultants were sent to perform the consulting and training job, and forced the staff to rely on customer service hotline when the system faced problems after going live. Gore then hired another group to fix the issues which resulted in waste of thousand of dollar. Third party issues are always there but selection should be intelligently done so that the company doesn’t have to face issues after the system goes live.

(T. Cornelius III, n.d., pp. 4) elaborates planning the Implementation phase, and narrates that planning is one phase which consumes the most time. It includes many documents preparation for example, project scope document which was elaborate goals, budgets, limitations, timeline and reasons of implementations. Further in the same document, project timeline and schedule for all the tasks and name of the staff carrying out each staff is included. Project organization explains the teams which will be associated to each task and the supervisor of the team while project budget states budget allocated for each process and each task.  Risk Analysis views the issues critical in nature that should be addressed while the communication plan elaborates the communication system and content of the same.

Project planning or preparation for implementation is a crucial stage of ERP and it should be carried out thoroughly as this provide a road map for all the stages in the future and also an important risk assessment and mitigation tool.

(T. Cornelius III, n.d., pp. 5-7) explains the implementation stage for an ERP system which is a final stage but requires high level of attention and consumes almost 18 to 24 months. Successful implementation of any ERP system or software is primarily dependent on excellent communication between the employees and the management to decide on the requirement of the said system, a good budget, confidence in staff, management of the project on professional level, professional ownership of the project and excellent and cordial relationship with the technology providers and partners.

Implementation phase is dependent on the project manager and his/her initiatives. This is job which comes with lots of promises and needs immense efforts. The job of the Project manager is to execute communication plan, a risk analysis program, problem facing and log maintenance of the same.

(Hilson, 2001, pp. 7-15) explains Sobesys, a leading grocery chain in Canada, which experienced different problem with their new ERP system.  Dave Boulanger, The Project Manager and a senior director said that there were no single Project managers for the system and hence an executive from the different organization came and installed a different system where the other Project Manager has different expectation from the system performance level.

Therefore a project which is handled by one of the best project managers will guarantee better performance levels and better results which if the project is handled by different people at different level will result in performance conflict and hence more time and funds wastage.

(W. Ross, 1999, pp. 13-16) explains that many organizations failed with their ERP system implementation and maintenance because they all stopped at stage 6 and never learnt any important lesson to make improvement in the future. While the Project Manager goes through implementation phase, there are few types of post implementation data collection activities which need to be carried down. First, problems faced and lesson learned should be discussed with the stakeholders of the project which will help in improving. These lessons will also help in the upcoming news projects so that the same mistake is not repeated again. Secondly, feasibility plan which work as a foundation and periodically an assessment to be done to evaluate the system performance and objective achievement. Third activity should to evaluate if the people working with and on the system ate still comfortable with the system or are aware of all the functionalities of the system which are available to them. In-case the staff is uncomfortable with the functionalities, the same problem should be jotted down and an improvement exercise should be done.

(M. Khaparde, 2012, pp. 12-30) explains that nothing comes with hurdles in place and there are always reasons to take a step forward in ERP system generation. Firstly, the author discussed that most of the firms are hardly prepared for ERP implementation and few barriers which keep the management away from successful implementation of ERP are as follows:

1. Under-estimation: At-times, the company although prepares itself for ERP implementation with different strategic plan in hand but unable to anticipate the scope of outcomes and hence a faces problems. Moreover, the companies which are unable to identify their expectation level from ERP system will not be able to take proper benefit from system implementation. ERP implementation is a lengthy process hence people get discouraged and this attitude leads to bad performance which is again a problem or hurdle. In few cases the actual results are different then the anticipated one which declares that the metrics were not intelligently created hence a problem.
2. Inadequate Resources: Implementation of ERP is a very costly matter and after crossing stage 6 of Implementation, the management withdraws from investing into Post Implementation phase which is again the most important phase. While the system is going through post implementation examination, there are stances where there is a need of redesigning but because of lack of resources and funds, the redesigning which can be in form of functionality improvement or system reengineering is ignored.
3. Lack of Management Reporting: (Tambovcevs, 2010, pp. 1092–1098) elaborates that the system which performs many tasks mostly doesn’t perform the management support system task and hence the data which is in-put in the system doesn’t show results for management information concluding that management was unable to access how the business is performing after implementation phase.
4. Addressing Resistance: Not everyone in the organization will accept the ERP system and hence there will be resistance at all times. There is always tradition resistance to any changes and the staff most reacts negatively to any improvement to maintain their autonomy hence a problem or hurdle in ERP system implementation.

CONCLUSION

ERP software has been predicated to grow even at a faster pace in the coming future while it has been developing and improving in the last one decade. In the above research, the objective was to analyse and investigate different stages of ERP system evolution and post implementation stage while giving examples from industry as how they faced problems at different stages and how they managed to get out of the problems. The study also elaborate that how an organization can resist to any change which comes it way and what are the hurdles it faces for successful implementation of ERP system and if the organization is unable to pass those hurdles can lead to failure of the same. There are many benefits of the ERP system as discussed and all the department from marketing to purchase department, Human resource, production unit or the management can take benefit but on the same time, the system has certain limitations which are unavoidable and only intelligent customization can help to improve.

References

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Schneider, P. 2000. Another Trip to Hell. [online] Available at: http://www.cio.com.au/article/24057/another_trip_hell/ [Accessed: 16 Oct 2013].

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Tambovcevs, A. 2010. ERP system implementation: a case study of the construction enterprise. Economics & Management, pp. 1092–1098.

1999. Ross, J. 1999. The ERP Revolution: Surviving Versus Thriving. Center for Information Systems Research, pp. 1-16.

Zimmerman, E. and Smedley, J. n.d. ERP Implementations – a never ending  story?. [e-book] pp. 1-12. Available through: Diva Portal http://www.diva-portal.org/smash/get/diva2:239523/FULLTEXT01.pdf [Accessed: 16 Oct 2013].