Enterprise resource planning: comparison implemantation procedures of two companies
| Author | Mehmet Sahin/Didem Pasaoglu Hamsioglu |
| Position | Anadolu University, Faculty of Economics and Business Administration, Turkey/Anadolu University, Faculty of Economics and Business Administration, Turkey |
| Pages | 215-224 |
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The environment of business changes so rapidly. Companies face of increasing competition, expanding markets, and rising customer expectations. This puts pressure on companies to lower costs, expand product choice, provide better customer service, improve quality, and coordinate demand, supply, and production (Shankarnarayanan, 2000).
In competition environment businesses upgrade their capabilities, to stand competitive; must improve their own business practices and procedures. Therefore, businesses begin to implemententerprise resource planning (ERP) systems (Ptak, Schragenheim, 2000).
ERP contains businesses all functions and departments; and all business transactions are entered, recorded, processed, monitored, and reported. This provides departmental cooperation and coordination. But it enables companies to achieve their objectives of increased communication and responsiveness to all stakeholders (Dillon, 1999).
1960's inventory control was important part of businesses. Businesses tried to keep inventory, to satisfy customer demand and stay in competitive. Most software packages were designed to handle inventory based on traditional inventory concepts (Ptak, Schragenheim,2000).
In the 1970's, it businesses could not consign of inventories. This led businesses to use material requirements planning (MRP) systems. MRP represented materials planning process
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which is bill of material files that identified the specific materials needed to produce each finished item, a computer could be used to calculate gross material requirements (Ptak, Schragenheim,2000)..
In the 1980's, companies began to take advantage of the increased power and affordability of available technology. Manufacturing resources planning (MRP II) systems evolved to the financial accounting system and the financial management system along with the manufacturing and materials management systems. This system makes businesses to have a more integrated business system that derived the material and capacity requirements associated with a desired operations plan, allowed input of detailed activities, translated all this to a financial statement, and suggested a course of action to address those items that were not in balance with the desired plan (Ptak, Schragenheim,2000).
By the early 1990's, MRP II began to be expanded to incorporate all resource planning for the entire businesses. ERP can be used not only in manufacturing companies, but in any company that wants to enhance competitiveness by most effectively using all its assets, including information (Shankarnarayanan, 2000).
Enterprise systems software packages undertake integration of all information about financial and accounting information, human resource information, supply chain information, and customer information.
Implementation of ERP systems needs investment and time. Not only do ERP systems take a lot of time and money to implement, they can disrupt a company's culture, create extensive training requirements, and even lead to productivity and mistreat customer orders, at least in the short term, can damage the bottom line (Stein, 1999).
Implementing an ERP system is an expensive and risky. In fact, 65% of executives believe that ERP systems have at least a moderate chance of hurting their businesses because of the potential for implementation problems (Cliffe, 1999). Numerous authors have identified a variety of factors that can be considered to be procedures of an ERP implementation. These are described below (Sousa and Collado, 2000).
4.1. Strategic Aims
ERP implementations require that key people throughout the organization create a clear, compelling vision of how the company should operate in order to satisfy customers, empower employees, and facilitate suppliers for the next years (Latamore,1999). There must also be clear definitions of goals, expectations, and deliverables. Finally, the organization must carefully define why the ERP system is being implemented and what critical business needs the system will address (Travis,1999).
4.2. Top management Support
Successful implementations require strong leadership, commitment, and participation by top management (Holland et all, 1999). Since executive level input is critical when analyzing and rethinking existing business processes, the implementation project should have an executive management planning committee that is committed to enterprise integration, understands ERP, fully supports the costs, demands payback, and champions the project. (Akkermans and Helden, 2002).
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4.3. Project management
Successful ERP implementation requires that the organization engage in excellent project management. This includes a clear definition of objectives, development of both a work plan and a resource plan, and careful tracking of project progress (Akkermans and Helden, 2002).And the project plan should establish aggressive, but achievable, schedules that instill and maintain a sense of urgency (Laughlin, 1999). The project and should identify the modules selected for implementation as well as the affected business processes. If management decides to implement a standardized ERP package without major modifications, this will minimize the need to customize the basic ERP code. This, in turn, will reduce project complexity and help keep the implementation on schedule (Axam and Jerome, 2003).
4.4. Change management
The existing organizational structure in most companies is not compatible with the structure, tools, and types of information provided by ERP systems. ERP system imposes its own logic on a company's strategy, organization, and culture. Thus, implementing an ERP system may force the reengineering of key business processes and/or developing new business processes to support the organization's goals (Bernroider and Koch, 2000)The changes may significantly affect organizational structures, policies, processes, and employees.
If people are not properly prepared for the imminent changes, then denial, resistance, and chaos will be predictable consequences of the changes created by the implementation. However, if proper change management techniques are utilized, the company should be prepared to embrace the opportunities provided by the new ERP system-and ERP will make available more information and make attainable more improvements than at first seemed possible. The organization must be flexible enough to take full advantage of these opportunities (Chang, 2004).
4.5. Implementation team
ERP implementation teams should be composed of people who are chosen for their skills, past accomplishments, reputation, and flexibility. These people should be entrusted with critical decision making responsibility (Daneva, 2003). Management should constantly communicate with the team, but should also enable empowered, rapid decision making (Chang, 2004).
The implementation team is important because it is responsible for creating the initial, detailed project plan or overall schedule for the entire project.
4.7. Education and training
Education/training is probably the most important critical success factor, because user understanding and buy the system. ERP implementation requires of knowledge to enable people to solve problems the system. If the employees do not understand how a system works, they will invent their own processes using those parts of the system they are able to manipulate (Laughlin, 1999).
A Business that implements ERP has to accept the vendor's basic necessities about the business and change existing processes and procedures. Therefore, each business should try to select and implement a system that underscores its unique competitive strengths, while helping to overcome competitive weaknesses (Laughlin, 1999).
The company must identify its critical business needs and the desired features and characteristics of the selected system. Literature includes some recommended steps and suggestions for the selection process (Hong and Kim, 2001).
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Vision: Define the corporate mission, objectives, and strategy. Use cross-functional teams and executive-level input to identify, examine, and rethink existing business processes. Once the vision is approved by top...
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