The Emergence Of Enterprise Resource Planning Systems Information Technology Essay

The Emergence Of go-ahead Resource Planning Systems development Technology EssayMany g all overnments have initiated Enterprise Resource Planning schemas, using such(prenominal) packages as SAP, Peoplesoft and Oracle. The ERP market is one of the fastest growing in the softw are industry. In a research conducted by APICS, 34.5% of the companies with revenues eitherwhere $1 billion think to purchase or upgrade in ERP system. This research is relevant to maneuver that the ERP market may reach $ 1 trillion by the year 2010 (Umble et al., 2005).Enterprise resource planning systems are a major investment. Companies have invested hundreds of millions of dollars in ERP software. Its writ of execution promotes a variety of worry justifications which include replacement of numerous legacy systems, reduction in cycle beat from devote to delivery, and reduction in operating costs. Also, the on-line, real-time operative data that ERP systems enable managers to make founder decisi ons and improve responsiveness to customer needs (Gyampah, 2004).There is evidence that organizations are satisfied with ERP. Based upon a sample of 117 firms in 17 countries, the Conference Board reports that 34% of the organizations were satisfied with ERP, 58% were somewhat satisfied, 7% were somewhat unsatisfied, and only 1% were unsatisfied (Al-Mashari, M., Zairi, M., 2009).Organizations have a barter justification for implementing ERP systems. The business benefits of ERP include alter accessibility of information, real time access to data across the organization, improved cycle time for companys, decreased financial closing time, reduced operating costs, and get down history levels. In addition ERP systems provide an opportunity to re-align business subroutinees with best practices and to integrate enterprise-wide information supporting financial, human resources, manufacturing, sales and merchandising functions.Evolution of ERPIt was in the Sixties that the concept of resource planning was first introduced by software packages that dealt with inventory control capability. Material Requirements Planning (MRP) systems were later introduced in 1970s and these contained a master production schedule and a bill of materials file with list of materials needed to produce each item. MRP systems were enhanced by adding tools for sales planning, customer order touching and capacity planning that provided input production scheduling, k flatn as closed loop MRP. In the 1980s, MRPII systems incorporated financial accounting system on with manufacturing and materials management systems.MRPII led to an integrated business system that was used to create a database of material and capacity requirements for production and this system then translated these requirements into financial information. By 1990s ERP systems provided seamless integration of all information flows in the social club- Financial Accounting, Human Resources, Supply Chain Management and Custo mer Information (Rondeau Litteral, 2001).Challenges of ERP SystemERP system projects involve considerable time and cost non only in terms of investment but also for realization of benefits from their instruction execution. Research by Standish meeting illustrates that 90% of ERP projects are late over budget. Meta Group survey data, based on 63 companies, showed that average execution cost of ERP was $ 10.6 million and took 23 months to arrest (K. Siau, 2004).A triumphful implementation of ERP requires a multi-stage approach (Jones M. and Price L., 2004), and the benefits of ERP may not occur until later stages. Jones et al., propose three stages the project phase, the shakedown phase, and frontward and upward phase. ERP software is introduced during project phase and is implemented into firms operations during shakedown phase. It is not until onward and upward phase, during which ERP modules are successfully integrated with operations, that the organization dismiss achieve actual business results, such as inventory reduction (Motwani et al., 2002).However, Spathis et al. identify iv phases for implementation of the same. The phases are a planning phase, a re-engineering phase, a anatomy phase, and a configuration and testing phase (Spathis et al., 2003). They indicate that re-engineering business practices around the ERP software is critical to successful implementation. In their stage analysis, Rondeau et al. (2001) conjure up benefits of ERP occur when ERP modules are implemented successfully and when organizations can use the ERP foundation to add advance modules such as customer relationship management.A company has to make sure that its ERP investment fetches increased profitability. The key challenge is not in managing technology, but in managing people. An ERP system counter adjustments the way people work, and for the system to be effective, the change must be dramatic. It promotes efficient business processes with the requirement of fewe r people than before ERP implementation or up-gradation. This implies that some employees will be asked each to change their day-to-day activities or their services would no longer be needed.Managing human behavior aspects of organizational change also known as organizational change management (OCM) cannot be underestimated in importance of this part of the implementation process. One of the keys to managing OCM is to realize that people tend to defy changes associated with their work related activities. If the ERP implementation is a project that is being forced on the employees, then they will instinctively resist it. However, if it is viewed as a chance to make the company much efficient and effective by upward(a) business process, and consequently these process improvements will make the company more profitable and ensure job earnest to employees, then in that respect is a greater likelihood that the employees will wholeheartedly support the implementation efforts. The b est way to improve a business process is to delegate the task to develop process improvement ideas to people who are around familiar with the process using their experience and creativity.Sometimes, a company is not ready for ERP. In many references, ERP implementation difficulties result when management does not fully understand its current business processes and cannot make implementation decisions in time . In order to obtain benefits from an ERP system resulting in reduction of costs needs an organization to streamline its business processes. However, if a company is not fain to change its business process es, it will find a large bill for software and consulting fees with no improvement in organizational performance.ERP packages imply, by their design, a way of doing business, and they require users to follow that way of doing business. Some of business operations, and some segments of its operations, may not match the constraints inherent in ERP. Therefore, it is imperative for a business to analyze its business strategy, organization, culture and operations before choosing an ERP approach.Review of LiteratureCompanies implement Enterprise Resource Planning (ERP) systems in order to achieve better responsiveness to the needs of customers through real-time information provided by the system, to link customers and suppliers into a complete supply chain, to provide high spot of cross working(a) integration, to reduce the costs and to provide the foundation for effective e-commerce (Vollmann et al., 2005). The pressure to survive in the new world order and align with the new paradigm for organizational success, namely, speed, flexibility, integration and innovation, further drives organizations towards adopting integrative software approaches like ERP. It is also a well known fact that information technology affects the organization structure (Bhattacherjee, 2000). Hence, ERP implementation would impact the structure, but this impact has not been elabo rately investigated. It is often supposed that IT creates a flatter structure (Stevens, 1998). The flat structure speeds up decision-making process, shortens lines of communication and support in savings (Klein, 2001). ERP implementation benefits are not realized quickly as expected and the process is lengthy and expensive (Siau, 2004). Many organizations world over and particularly in the fast developing countries are traditional hierarchies and managing changes in structure get throughering challenges.As ERP implementation is an enterprise wide venture of change.It is pregnant to understand how to manage impact on the organization structure. Two research objectives were central to this research project.ERP implementation influences the structure of the organization.Management of the change to the new structure.This reputation is an attempt to examine the ERP implementation experience in a company. It drew on Organization Theory and transplant Management theory to understand t he inflection between structures and to provide the explanations (Amoako-Gyampah, 2004).ERP represents a comprehensive software approach and information technology effects on the organization structure (Kurup, 2004) and ERP implementation success involves change management of techniques, the change management theory (Paton and McCalman, 2004) prove useful in explaining the outcomes of the case study .IT and Organization mental synthesisThe organization structure defines how the tasks are to be allocated, who reports to whom and the formal coordinating mechanisms and interaction patters that will be followed (Robbin, 1990). Organization structure has three components Complexity, Formalization and Centralization.These components are described below and impact of IT on these components is express and applied to case analysis to aid in investigation of the influence of ERP on organization structure.ComplexityComplexity refers to the degree of differentiation that exists within an org anization. This includes the degree of specialization or division of labour, the number of levels in the organizations hierarchy, and the extent to which the organizations units are dispersed geographically (Klein, 2001). With introduction of this component of organization structure, it is possible to have wider orthodontic braces of control with more knowledgeable and em origined employees. Companies with IT can reduce the middle management layers and widen span of control and thereby flatten the organization structure. However, removing layers dexterity create new challenges. New mechanisms for coordination might be needed or new process of governance might be necessary. According to the nonplus proposed by Klein (2001), IT results in wider spans of control, fewer levels, fewer people, easier collaboration and communication. In other words, IT lowers the complexity.FormalizationFormalization refers to the degree to which an organization relies on rules and procedures to direct behavior of employees. Evidence exists to indicate that developing detailed guidelines of appropriate operating procedures enhances coordination and is suitable in a stable environment (Martin, 2009). Formalization, however, is negatively associated with adoption and implementation of innovation in organizations (Ahadi, 2004) and accordingly it is negatively related to the ERP implementation because it tends to boast deleterious effects on the work attitudes.CentralizationThe decisional control in organization could be centralized or decentralized. In traditional hierarchies the decisional control is usually centralized. Research indicates that IT tends to make the decisional control more decentralized with no commensurate loss of control by the go management (Robbin, 1990). It is possible that the centralization component is related to the size of middle management although there are conflicting findings. IT results in a decrease in the size of the middle management workforce in organizations with centralized decision authority and with an increase in the number of middle managers in organizations where the authority is decentralized.Change ManagementThe change management when linked to ERP implementation has been more focused on process change (Davison, 2002). The other type of change namely organizational restructuring provides specifics related to moving from one structure to another. The objective of restructuring is based on the companys long-range plan and the intention is to set up a structure that enables a company to be ready for new activities. However, changing an organizations structure can be difficult and successful restructuring depends on three conditions sound planning, effective leaders and organizational commitment (Witzel, 2002).To examine organizational change in a traditional hierarchical organization, consideration is given toHuman element and informal organization. unavoidableness of strong management actions and inspirational vision .Sustainability of an initiative.None of available models considers all the three aspects.InformalOrganizationINPUTStrategy Formal OUTPUTResources, Organization case-by-caseEnvironment team,PerformanceManaging Change Transformation ProcessFigure -1In traditional organizations, manager had to solve problems by directly communicating with the employees and was related to power and values. However, in ERP implementation much of the learning process comes from hands on use under normal operating conditions after the implementation period is over. and so power is then transfered to individuals who are able to operate the ERP system better and utilizeWorkPeoplethe system resources efficiently (Aladwani, 2009).ERP affect on record of work and training is an important part of change management practices. ERP requires users to understand that they are no longer working in isolation, and whatever they do now impacts someone else. This can create resistance that comes from a fear of the un known and from the need of stability. There are two fundamental sources of resistance to innovations like ERP perceive Risk and Habit. The habit of keeping the routine practices prevalent in hierarchies has to be tackled using appropriate strategies.Spathis and Constantinides (2003) have proposed a planned change model and this model assumes that change can be defined and moved in a planned way. Unlike other planning models, the four phases suggested in this model are linear and irreversible. This model satisfies the requirement of well-controlled change and strong management actions. Four phases that have been suggested areExploration,Planning,Action andIntegration.Implementation of ERPInformation technology leads to a frightful impact on productivity of both manufacturing and service organizations. Companies have implemented systems such as enterprise resource planning (ERP), MRP, EDI, over time for improving their productivity. ERP systems have received attention lately due to more effective decision-making capability. Many companies are implementing ERP as a means to reducing operating costs, change magnitude productivity and improving customer services (Martin, 2009 Pliskin and Zarotski, 2000). ERP system can cripple a company, if not implemented properly. There are horror stories concerning implementations gone astray (Laughlin, 1999 Bancroft et al., 1998).Implementing ERP system successfully calls for strong leadership, a clear implementation plan, and a constant watch on the budget (Wagle, 2008). From a project managers point of view, most important consideration is a clear implementation plan and a strategy, that should evolve through systematic consideration of companys requirements and its ability to manage changes called for under new circumstances. Some of the factors to be considered seriously at planning stage areInformation needs at the operational and managerial level for various(a) available areas.Feasibility of ERP system integration w ith the existing information systemsSchedule for adaptation of the new system.An organization requires development of an implementation strategy. Such a strategy, will make up how the related changes can be successfully absorbed at various parts of the organization. It has been found that the organizations that had no SAP implementation strategic plan performed severely compared to those who had a plan. ERP implementation from countries around the world demonstrates that success is essentially conditional on adequately managing complex context of the implementation, which necessitates change management across various key areas related to business processes, IT structure, and management systems (Al-Mashari and Zairi, 2009). This highlights practical issues associated with the implementation of ERP systems.For successful implementation three basic requirements are to be meta clear business objective,comprehension of the nature of changes andunderstanding of the project risk.Strong l eadership and constant watch on budget are the two other, yet equally evidentiary requirements, as stressed by Wagle (2008).For an effective implementation of ERP system, particularly SAP R/3, an organization must take a holistic view of the process (Al-Mashari and Zairi, 2009). Various issues at strategic, managerial, and operational levels should be addressed in order to achieve optimum outcomes from an ERP system. For a successful outcome an organization must name competencies in four core areasChange Strategy development and deployment,Enterprise-wide Project Management,BPR integration with IT, andtechnical aspects of ERP installation.These competencies will enable managers to effectively manage changes and direct the organization to in demand(p) goals (see Fig.2).Fig. 2. Core competencies in effective implementation of ERP (adopted from Al-Mashari and Zairi 2009).Change management StrategyChanges in an organization are brought about through implementation of strategies. Kuru ppuarachchi et al. (2002) examined the success (and failure) factors and implementation methodologies that contribute to change management strategy formulation in organizations. Fig. 3 presents a framework of the change management process, incorporating change agents and strategic considerations at various stages of ERP implementation, when viewed from an IT project implementation point of view.Meyers et al. (2009) analyzed about 130 research papers to find out factors influencing the implementation of new technologies for improved operational efficiencies. They classified implementation success factors as buyers characteristics, seller characteristics, buyer-seller port, and environment. These factors are listed belowHuman resources greater education and training among personnelpositive motivation, attitudes, and commitment toward the innovation.Structure an adaptive and flexible structure strong communication theory mechanism and net work across structural boundaries.Decision pro cesses broad strategic, as opposed to narrowly and earlier involvement of technical goals greater and earlier involvement of the operational workforce top management support and commitment and the presence of a recall dose cooperation among units slow, gradual radical incorporation of the innovation.Technology fit familiarity with the new technology and availability of relevant skills within the organization.Higher level of technical capabilities of the seller.Strong communications skills of the seller.Expertise in project management of the seller.Constructive cooperation between buyer and seller in implementation.Knowledge transfer the buyer is involved in leaning, diagnosing, and cause usage patterns of the buyer.Intensive networking within and across industries leading to greater exposure to innovations.Fig.3. Change management considerations (Source Kuruppuarachchi et al., 2002).Case Study -IPantaloon ERP in RetailMore than eight-spot years after it forayed into the retail bu siness, Pantaloon Retail decided to implement SAP to keep itself competitive in the rapidly growing Indian retail market. terminal operations have never been as important to retailers as they were then. Successful retailers are those who know that the battle for customers is only won at the frontline, which in the case of a retail chain is at its stores. Pantaloon was regularly opening stores in metros and there was an urgent need for a reliable enterprise wide practical application to attend impart its business effectively. The basic need was to have a robust deed management system and an enterprise wide platform to run the operations, says Rakesh Biyani, Director, Pantaloon.The SolutionThe company was looking for a solution that would bring all its businesses and processes together. After a comprehensive evaluation of different options and software companies, the management at Pantaloon decided to go in for SAP. Some of the qualities of SAP retail solutions are that it support s product development, which includes ideation, trend analysis, and collaboration with partners in the supply chain sourcing and procurement, which involves working with manufacturers to sate order according to strategic merchandising plans and optimize cost, quality, and speed-variables that must be weighted differently as business needs, buying plans, and market demand patterns change managing the supply chain, which involves handling the logistics of moving finished good from the source into stores and overseeing global trade and procurement requirements selling goods across a variety of channels to customers, which requires marketing and brand management managing mark-downs and capturing customer reactions, analyzing data, and using it to optimize the next phase of the design process.In a NutshellAimTo deploy a robust transaction management system and an enterprise wide platform to run its operations.SolutionSAP retail solutionImplemented bySAP team with the abet of Novasoft, SingaporeNumber of usersAround 1,200Time takenAbout six monthsCost of implementationA $ 10 millionImplementationThe implementation was outsourced to a third party. The implementation was done by the SAP team with stand by of Novasoft which is based at Singapore, says Core Team Member. This project was headed by Pantaloons Chief Information Technology Officer, Chinar Deshpande. Some people from Pantaloon assisted in the project and twenty four qualified people worked on the SAP implementation.Three PhasesSAP implementation in Pantaloon was not a single phase process. The project was divided into three phases.The first phase of implementation involved blueprinting of existing processes and mapping them to the desired state. In this phase, the entire project team worked on current processes within Pantaloon Retail. The various existing processes were thoroughly analyzed and drafted. This blueprint was later used in the formation of new states of the solution. Since the SAP would combi ne all the processes, each and every one of these had to be evaluated.In the second phase, the SAP platform was developed with the help of Novasofts template which was predefined by SAP after evaluation of Pantaloons needs and expertise in retail solutions.The last phase in this project was for stores to switch over to the new system and for current data to be ported. Before the SAP implementation, all the data was nonunionised. This data had to be migrated to the new SAP application.The project was flagged off on 15th June 2005 and took about six months to finish. It went live at the head office on 1st January 2006. The Pantaloon Retail stores used SAP from 1st January 2006 to thirtieth June 2006.Benefits and ChallengesThe key challenges in this project were not in the implementation. Rather, the difficulties were faced during the data migration and in managing the interim period when the project was underway for about six months. Migrating unorganized data to an organized format was a challenging task.SAP General Ledger gives Pantaloon a higher level of transparency into individual operations and helps it continually drive productivity improvements across the enterprise. For example, Pantaloon can now automatically split accounting line items per document for each company profit center. These transactions are handled by the software,and the company no longer needs to make period adjustments to balance sheet and profit and loss statements. With the document splitting tool, Pantaloon now has a real-time, complete picture of its accounts receivables and payables across all operational levels, which has enabled it to reduce receivables by up to 10%. In addition, it is now able to close the monthly books 20% faster, due to tight integration between financials and controlling components and real-time reconciliation capabilities.The application is currently being used by around 1,200 employees across the organization. For maintaining this implementation and its re lated applications, Pantaloon has an in-house team and it has outsourced ABAP resources. ERP system relied greatly on this in-house team for training its employees (at every level) and extracting benefits from ERP. The system runs on a HP Superdome server on HP UNIX 11 and the database is from Oracle. The cost of this project was about $ 10 million.Future projectsAfter the successful implementation of SAP for its retail chain, Pantaloon plans to go ahead with IT projects such as implementation of WMS with RFID, Customer Intelligence and CRM. Inventory and Promotions Optimization are being pursued.Case Study IIAce Designers Ltd.ERP reduces manufacturing costs by 20% for industrialEquipment manufacturerOverviewSince 1987, Ace Designers Limited, Indias manufacturer of CNC lathes and auto lathes, has been exporting machines around the world, including Brazil, Germany, United Kingdom and the United States. With growth, their largely manual systems started breaking down. They had no cent ralized get department and means of sharing information, so company groups were paying different amounts for the same parts from the same vendor. Delivery dates were missed because of a lack of inventory control, and top management had little visibility to manufacturing process.The ChallengeAce needed a complete information system built around an ERP solution that would help manage every aspect of their manufacturing process-from purchasing and inventory to manufacturing, planning and preparing for ISO certification.The SolutionAce commissioned a comprehensive survey of the ERP market and spontaneous was selected for four major reasonsA 100 percent Microsoft platform,an easy-to-use graphical interface,excellent support, andscalable open architecture features that permitted the addition of users at any time.The consultants who evaluated Intuitive ERP and its competitors for ACE Designers reasonIntuitive ERP is easy to install, interface, customize and maintain. It can be integrated seamlessly into any manufacturing environment and has a good scheduling flexibility and versatile options. It also has a definite ISO 9000 facilitation orientation.Ace Designers ResultsAce started module wise implementation of Intuitive ERP in four phases, which were completed in four months.Intuitive ERPs graphical interface and integration with Microsoft Office and Access made it easy for Aces staff, which prior to this had virtually no computer experience, to learn and use the new system. And using Microsoft SQL Server as the database engine delivered speed and robustness necessary for their mission critical applications. Hence, employees support was a crucial factor that added to achievement of success in ERP implementation in the organization.We transformed the company from a practically nil computer culture to a total computerized system, said V. Chandra, General Manager of Ace. The learning curve for Intuitive ERP is reduced to well below that of other manufacturing systems because of graphical and interactive flow charts and complete context sensitive online help.Implementing Intuitive ERP led to dramatic improvements in every operational areaManagers now have the most current inventory and costing models available to them at all times, and they can set competitive determine that ensures profitability. They are able to monitor online status of work orders for components, sub-assemblies and final assemblies.Improved Planning With the previous manual planning system, it was difficult to coordinate customer requirements and design changes with production and assembly functions to meet the manufacturing schedule. Now there is seamless coordination between all departments while significantly reducing planning headcount.Prior to Intuitive ERP, there had been virtually no inventory management at Ace information on non-moving or slow-moving items and stock values was not available. With new tools in place, manufacturing inventory has been reduced by 20 perce nt.With reports such as Purchase Price Variance, there is visibility of the cost of every purchased item. This has resulted in better wrong negotiation with suppliers resulting in a 20 percent price reduction.Intuitive ERP provides accurate data for making manufacturing decisions through reports that include online machine utilization, online work order status monitoring, online WIP components costing, online WIP sub-assembly costing and online labor utilization.Case Study IIIERP Implementation Failure at HPStanford engineers Bill Hewlett and David Packard started HP in California in 1938 as an electronic instruments company. Its first product was a resistance-capacity audio oscillator, an electronic instrument used to test sound equipment. During the 1940s, HPs products rapidly gained acceptance among engineers and scientists. HPs growth was assist by heavy purchases made by US government during the Second World War.In the 1980s, HP emerged as a major player in the computer indu stry, offering a full range of computers from desktop machines to powerful minicomputers. This decade saw the development of successful products like the Inkjet and LaserJet printers. HP introduced its first ain computer (PC) in 1981, followed by an electronic mail system in1982. This was first major wide-area commercial network that was based on a minicomputer. HP introduced its HP 9000 computer with 32-bit super chip. HP became leader in workstations with the purchase of market leader, Apollo Computers, in 1989.In August 2004, HP announced that its revenues for the third quarter and it was place that its Enterprise Servers and Storage (ESS) segment had gone down by 5% (amounting $ 3.4 billion) as compared to the same quarter the previous year. The company attributed this revenue shortfall chiefly to the problems faced because of migration to a centralized ERP system at one of its North American divisions. The total financial impact of the failure including backlogs and lost rev enue was pegged at $ 16