Enterprise Resource Planning

Discuss about the Enterprise Resource Planning.

The ERP system or the “Enterprise Resource Planning” system can be identified as an effective tool to improve the efficiency of the operation of a company only when implemented correctly. As mentioned by Sánchez-Rodríguez and Spraakman (2012) “it is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources.”

Now implementing an ERP system is one of the most expensive, time consuming and intricate tasks for the management of a company. A number of issues are associated to the successful implementation of this project. It is important for the companies to identify the implications of these issues and manage them properly to obtain the best result by successfully implementing the Enterprise Resource Planning system.

In a number of empirical cases, it has been noted that failure in managing the potential and related issues of ERP implementation have made the companies lost their chance of reaping the advantage of this system. Hence, the purpose of this report is to review such cases to understand the importance of them; and how the future companies can manage these issues, for successful implementation of the ERP system.

Here, in this report the author has provided a brief introduction about the topic and mentioned the purpose of the report. Then he/she has made a discussion on the ERP implementation issues or the “people issues” those are to be taken care of, for obtaining the positive effects of this system. In doing this, the author has made a critical review on some empirical cases and tried to understand the causes of success and failures of the companies in implementing this system. Finally, the author has concluded the report by discussing the implication of the previously discussed issues and their important in the companies’ concern in implementing the ERP system.

Discussion:

Implementation of this particular system involves a number of “people issues.” These issues may involve the internal resistance, lack of commitment or patronization of the management and top level executives, hasty implementation, unrealistic expectation, lack of managerial and pragmatic strategy for the implementation, availability of skilled resources, employee training and many more.

As discussed by Ram et al. (2013) “implementing an ERP causes massive change that needs to be carefully managed to reap the benefits of an ERP solution.” The companies need to understand the implication of these issues in the successful implementation of the ERP within their operations.

The implication of these issues can be discussed as following:

Poor Planning of the ERP Implementation:

For implementing any new operational technique or replacing the old one with a new, a careful and strategic planning needed. As mentioned by Parr et al. (2013) implementation of the ERP, without any upfront planning has made a number of companies experience huge financial stake, massive confusion among the employees, huge employee turnover and loss of credibility of the companies in the market.

As discussed by Melander (2016) to address this issue, the companies need to make an internal audit of all the processes and requirements of the departments. By doing this, they management will be able to incorporate the solutions within the system and it will be helpful for the users to use accordingly. Moreover, as opined by Schniederjans and Yadav (2013) prior to the implementation, the companies need to make an evaluation tam or planning team “composed of stakeholders from across the business,” or hiring a third party consultant for identifying the requirements and successfully implement the ERP system within the company. The largest personal care product provider company of India, Dabur has implemented this strategy. They have maintained a team from each of their departments and considered the unique requirements of all their diverse divisions.

On the other hand, the companies need to arrange contingency planning for the success of the ERP system. As mentioned by Amini and Sadat Safavi (2013) implementing a new system may create various types of risks. Hence, it is needed for the companies to opt for a risk identification and management team to save the project from being a disaster. The Waste Management Inc. faced this issue. As mentioned by Ghosh (2012) their lack of rick management planning was largely responsible for the failure of the ERP implementation project.

Careful Management of the Project:

As opined by AlSudairi (2013) upholding a pragmatic management is crucial for the success for any operational decision. In this context, as mentioned by Ijaz et al. (2014) the management needs to implement the project with strategic phase division. Moreover, it is also needed that the companies must not install it with a big bang approach. It made Hershey lose its credibility. On the other hand, strategic management helps Cadbury in obtaining the positive implications. Moreover, evaluating the process before final installation can also be identified as a part of its strategic management.

Ensuring the Upper Management’s Support:

Ensuring the management’s support can be identified as one of the major issues those are related to the company’s success in implementation of the ERP system. As mentioned by Hailu and Rahman (2012) the upper management’s support helps the company in financing, data transfer and management of the whole process. Moreover, with the management’s support, the employee faith can also be obtained. The Waste Management Inc. of North America has faced issue in ensuring support from the top management. It made the project failed and the company filed a legal case against SAP.

Ensuring the Employee Support:

Here, the case of Nestle US can be cited as an example. The company failed to collect the employee support because of their lack of pragmatic planning and ineffective management of the system. It has caused them a huge level of employee turnover and loss in the profit count.

For ensuring employee support, the companies need to impart prior information to the employees about the change management. As mentioned by Ram and Corkindale (2014) a sudden change without any prior intimation creates a sense of dissatisfaction, confusion and lace of value within the employees. Hence, it is important for the companies to make a prior intimation to the employees and make them enable to welcome the project.

Cadbury has used this strategy by previously notifying the stakeholders and got a huge support for that very end. It helped the company in creating a positive approach for the new process and accelerating the implementation of the project. By involving the employees Dabur has also got the support of the stakeholders and experience a notable success.

Understanding the Time Requirements:

A new project implementation needs enough time to be successful. Moreover, installation of a new process involves a number of interrelated and intricate sub-processes. Hence, it can easily be understood that time makes a huge difference in the implementation of the ERP system. As mentioned by Stanciu and Tinca (2013) “ERP systems come in modular fashion and do not have to be implemented entirely at once. Several companies follow a phase-in approach in which one module is implemented at a time.” it is the most suitable process for implementing the ERP system.

If a review to the technical issues of the ERP system it can be noted that, the typical ERP packages are very general. Hence, they need to be customized for the specific business requirements. Therefore, it is needed for the companies to provide the time for this customization and obtain the maximum utilization of the project.

Here, the case of the massive ERP failure of Hershey can be discussed. The company made an impossible time-frame for the implementation of the project. The team designed for the implementation recommended a pragmatic timeline, but the management demanded for a shot time limit and the project failed. Moreover, it is also need for the companies to identify the right time to implement the new project. As opined by Capaldo and Rippa (2015) for introducing any operational change within the company the lean season can best be identified. However, Hershey selected its peak season for the process implementation. It made the company experience a huge loss in the stock market.

Lack of Training within the Users:

Skilled resources are important for the success of any operational plan. Hence, it can be easily speculated that obtaining the trained human resource for usage and implementation of the ERP project. As opined by Ward (2016) “without proper training, about 30 percent to 40 percent of front-line workers will not be able to handle the demands of the new system. ERP systems are extremely complex and demand rigorous training. It is difficult for trainers or consultants to pass on the knowledge to the employees in a short period of time”. Moreover, it is foolish to forcibly direct the employees to use the new system. It creates confusion, decreased level of expertise and employee turnover.

The Nestle USA faced this issue while implementing the ERP system within the company. The management set a timeline, and made it mandatory to use it within that period. It created confusion among the employees and the productivity dropped.

Feedback System:

Implementation of the ERP system is a time taking project. As mentioned by Chakravorty et al. (2016) collecting feedback helps the management to keep an eye on the track of the progress of the system implemented. It can be identified as a strategy that needs to be implemented after the installation of the process. Cadbury has utilized this process and reaped the profit of it.

However, in the cases of failures, the above discussed cause or causes had played crucial roles. Not any of the companies mentioned above failed in implementing or got a success for a single reason. There were a number of reasons, which led them to experience such results. Hence, the companies need to keep eye on them all together.

The Case Studies:

For supporting this above discussed argument, the examples or the case studies of a few previously mentioned companies can be reviewed.

The Sweet Success of Cadbury:

The implementation of this particular system was a sheer success in the case of Cadbury. The company implemented the system with a great managerial strategy. As mentioned by Ijaz et al. (2014) the company followed a fragmented policy while implementing the ERP system. It gave them the convenience of a pilot study and a reducing the level of threat of complete failure. The company made no rush in implementation the new operation and data management system. As mentioned by Sánchez-Rodríguez and Spraakman (2012) the realistic timeframes and implementation stages has helped the company to collect the data from the previous stage and incorporate necessary changes in the next phase.

On the other hand, as mentioned by Melander (2016) the company concentrated on the issue of employee acceptance and the employee capability of using the ERP system with highest priority. It provided them a huge level of success in implementing the ERP system and obtaining the positive implications of the system. The organization developed a feedback system with the aim of keeping a track and “ensure it was meeting critical aims” (Cadbury.com 2016). It also provided the company the faith of the employees and the top-level management on the new system implementation. In addition, the company chose the right vendor for the implementation of their ERP system. As mentioned by Ijaz et al. (2014) choosing the rights vendor is one of the major pre requisites for the success of the ERP implementation. Hence, the case of Cadbury can be identified as a success of project management and adherence to the new system in experiencing the success story of ERP implementation.

The Failure of Nestle USA:

On the other hand, in the case of Nestle USA, the company faced the issue of non-acceptance and unavailability of the skilled resources (like employees) for the appropriate implementation of the project. As mentioned by Kapp et al. (2016) in 1999, when the concerned team stared to implement this particular system to the company they realised that the employees have issues with accepting it. They discovered that “none of the groups that were going to be directly affected by the new processes and systems were represented on the key stakeholders team” (Kapp et al. 2016) Hence, the failure can also be detected in the field of the project management. As mentioned by Sussy et al. (2016) at the beginning of 2000, the implementation program took the form of a complete disaster.  Employees had no idea about mechanism of the new system. Moreover, “they were being forced to adopt this new operational management procedure,” about which they did know nothing. 

Bernroider (2013) has discussed that the company has created a complete new team for the implementation of this project and the divisional executives Divisional executives were “left out of the planning and development of the new system.” Hence, they also had no idea about the project and they “were less than willing to assist in straightening out the mess that had developed.” It led the company to face a massive decline in the team morale and lately the company faced huge employee turnover and consecutive reduction in the demand of the Nestle products (nestleusa.com 2016). Hence, from this above case the importance of employee acceptance, appropriate project management can be speculated for the successful implementation of an ERP system within a company.

The Massive Failure of Hershey:

A review on the failure of Hershey can also be discussed in this regard.

As mentioned by Ghosh (2012) the implementation team recommended 4 years for the successful implementation of the ERP system. However, the management demanded it to be made within 2.5 years and the project met its obvious fate of disaster (Hersheys.com 2016). As opined by Chakravorty et al. (2016) for every change management the companies need to provide pragmatic time limit. However, the company denied to give it to the implementation team.

On the other hand, the company opted for a big bang approach for implementing the system and discarded the phased approach, which was marked as the key to Cadbury’s success in ERP implementation. As discussed by Melander (2016) the over-squeezing implementation schedule directed the company to failure in successful implementation of the plan.

On addition to this, as mentioned by Chung et al. (2015) the company made a big mistake of denying the system testing before big bang implementation approach. The concern of expediency led the company to take such a juvenile decision. It made the company experience, low production, disrupted supply chain and reduced market share.

As mentioned by Stanciu and Tinca (2013) while opting for change management the organizations need to take a fragmented approach. As the strategy is completely new, it is foolish to implement it at once for the whole of the company. Moreover, as mentioned by Melander (2016) a fragmented approach provides the management an insight into the frailties in the project or the probable threats. The big bang approach left Hershey with no time for incorporating the required changes within the project plan.

Last but not the least, as discussed by Ghosh (2012) the management took a very improper decision by introducing the ERP system implementation program in the busiest period of the company. As mentioned by Chakravorty et al. (2016) introducing any operational change within the organizations need to be done in the lean seasons. In the peak seasons the companies need to serve the market and a changed model of management slows down the production. It creates confusing and significantly low level of market performance.

With the failure of the ERP project, the company faced issues with the order fulfillment and retailers’ delivery. Thus, the company lost its credibility to the market. Moreover, as mentioned by Chung et al. (2015) with the management’s declaration of the ERP failure, the company lost almost 8% shares in the stock market in one single day. The company lost almost US $150 million in sales (Hersheys.com 2016).

How Dabur made it Happen:

On the other hand, the largest personal care products company of India Dabur implemented the ERP system with immense success. However, while implementing this, the company followed a great management strategy.

As discussed by Shaul and Tauber (2013) the company made a team comprising of the members from each departments like distribution, planning, finance, sales and IT. Thus, the company ensured the involvement of the executives and gained employees’ trust.

The company also followed the multi-phased strategy (four stages) like Cadbury. As mentioned by Ram et al. (2013) it provided the stakeholders the time to get acclimatize to the changing pattern of the operational management. Moreover, the company tried to collect information regarding the requirements of each of the departments and tried to incorporate solutions within the system (Dabur.com 2016).

The Case of Waste Management Inc.:

It is another case of ERP implementation failure. The company took almost 2 years to implement the project, unlike Hershey, this huge time line made the project failed for the company. However, there are so many other reasons too. As discussed by Chung et al. (2015) the top line managers failed to commit to the new operational process. This failure led the company to lodge a legal battle against SAP (Wm.com 2016). As mentioned by Chakravorty et al. (2016) SAP claimed that the company “failed to timely and accurately define its business requirements, and providing sufficient, knowledgeable, decision-empowered users and managers to work on the project.”

Hence, it can be noted that the company needed to make an audit prior to the implementation project. As mentioned by Chakravorty et al. (2016) it is important for gathering business requirements and provides the information to the implementing agency.

Conclusion:                                                                                          

Thus, in conclusion it can be said that the people issues like management’s commitment, employee’s support, collection of required data, competent employees, time management and many more play a crucial role in the successful implementation of the ERP system within an organization.

Without the management and the employee support, it becomes impossible to reap the profit of any system within the companies. Careful planning and management means colleting the data regarding the business’s requirements, phased implementation, feedback and many more. As told by Ram et al. (2013) ERP is not about the destination but the journey. It is an intricate and time-consuming process. Hence, it is important for the companies to address these issues and take necessary steps to make the ERP implementation process successful.

From the above discussion, it can be noted that the success stories are fewer that the cases of failures. Hence, the companies need to take a lesson from the failed cases and try to follow the pathways of the success stories. 

References:

AlSudairi, M.A., 2013. Analysis and exploration of critical success factors of ERP implementation: a brief review. International Journal of Computer Applications, 69(8).

Amini, M. and Sadat Safavi, N., 2013. Review paper: critical success factors for ERP implementation. International Journal of Information Technology & Information Systems, 5(15), pp.1-23.

Bernroider, E.W., 2013. Effective ERP adoption processes: the role of project activators and resource investments. European Journal of Information Systems, 22(2), pp.235-250.

Bhave, P., 2012. ERP Systems—Overview of their Emergence, Implementation and the Way Forward. Ethical Governance, p.1234.

Cadbury.com 2016. Mondelēz International, Inc. – Home. [online] Available at: http://www.cadbury.com [Accessed 8 Sep. 2016].

Capaldo, G. and Rippa, P., 2015. Awareness of organisational readiness in ERP implementation process. International Journal of Information Systems and Change Management, 7(3), pp.224-241.

Chakravorty, S.S., Dulaney, R.E. and Franza, R.M., 2016. ERP implementation failures: a case study and analysis. International Journal of Business Information Systems, 21(4), pp.462-476.

Chung, S.H., Ahmad, S.I. and Tang, H.L., 2015. Symptoms, causes and remedies for failures in enterprise systems implementation. International Journal of Business Information Systems, 19(1), pp.103-118.

Dabur.com. 2016. Dabur Ayurvedic Natural Health Care Products India. [online] Available at: http://www.dabur.com/ [Accessed 8 Sep. 2016].

Ghosh, R., 2012. A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of Failure. Journal of Marketing and Management, 3(1), p.123.

Hailu, A. and Rahman, S., 2012, June. Evaluation of key success factors influencing ERP implementation success. In 2012 IEEE Eighth World Congress on Services (pp. 88-91). IEEE.

Hersheys.com 2016. Home. [online] Available at: http://www.hersheys.com [Accessed 8 Sep. 2016].

http://www.nestleusa.com. 2016. Homepage | NESTLÉ® USA. [online] Available at: http://www.nestleusa.com/ [Accessed 8 Sep. 2016].

Ijaz, A., Malik, R.K., Nawaz Lodhi, R., Habiba, U. and Irfan, S.M., 2014. A Qualitative Study of the Critical Success Factors of ERP System-A Case Study Approach. In International Conference on Industrial Engineering and Operations Management, Indonesia (p. 25562566).

Kapp, K.M., Latham, W.F. and Ford-Latham, H., 2016. Integrated learning for ERP success: A learning requirements planning approach. CRC press.

Melander, A., 2016. On previous failure’s effects and critical success factors in ERP implementation-A case study.

Melander, A., 2016. On previous failure’s effects and critical success factors in ERP implementation-A case study.

Parr, A.N., Shanks, G. and Darke, P., 2013. 8 IDENTIFICATION OF NECESSARY FACTORS FOR SUCCESSFUL IMPLEMENTATION OF ERP SYSTEMS. New Information Technologies in Organizational Processes: Field Studies and Theoretical Reflections on the Future of Work, 20, p.99.

Ram, J. and Corkindale, D., 2014. How “critical” are the critical success factors (CSFs)? Examining the role of CSFs for ERP. Business Process Management Journal, 20(1), pp.151-174.

Ram, J., Corkindale, D. and Wu, M.L., 2013. Implementation critical success factors (CSFs) for ERP: Do they contribute to implementation success and post-implementation performance?. International Journal of Production Economics, 144(1), pp.157-174.

Ram, J., Corkindale, D. and Wu, M.L., 2013. Implementation critical success factors (CSFs) for ERP: Do they contribute to implementation success and post-implementation performance?. International Journal of Production Economics, 144(1), pp.157-174.

Sánchez-Rodríguez, C. and Spraakman, G., 2012. ERP systems and management accounting: A multiple case study. Qualitative Research in Accounting & Management, 9(4), pp.398-414.

Schniederjans, D. and Yadav, S., 2013. Successful ERP implementation: an integrative model. Business Process Management Journal, 19(2), pp.364-398.

Shaul, L. and Tauber, D., 2013. Critical success factors in enterprise resource planning systems: Review of the last decade. ACM Computing Surveys (CSUR), 45(4), p.55.

Stanciu, V. and Tinca, A., 2013. ERP solutions between success and failure.Accounting and Management Information Systems, 12(4), p.626.

Sussy, B., Saul, V. and Vicente, M., 2016. Acceptance Factors of ERP Systems. In New Advances in Information Systems and Technologies (pp. 523-533). Springer International Publishing.

Ward, S., 2016. Simple Steps for Measuring and Ensuring ERP Success.Quality, 55(7), p.33.

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