Enterprise Resource Planning

1.0 Introduction

As technology advances at bullet speed and software capabilities constantly grow, it has become more difficult and complicated to manage a company under intense pressures of competitive market pricing. Hence to compete efficiently, organizations today must rely on real-time information in order to make vital decisions correctly and promptly. This will in turn reap long-term competitive advantage, real-time and precise operation flows that are integrated within the organization. In this light, many enterprises have devoted themselves to implementing enterprise resource planning (ERP) systems.

1.1 Overview of ERP

Enterprise resource planning (ERP) is the industry term used to describe a broad set of activities supported by multi-module application software that helps a manufacturer or other business manage the important parts of its business. The immediate benefit of its implementation include reduced operating costs, such as lower inventory control cost, lower production costs, lower marketing costs and lower help desk support costs. Over time, it improves the efficiency of management decisions and plans and increases the flexibility with adjustments of functionality to react to changes in business needs. Despite these benefits, the cost of implementing an ERP system is high and it takes as long as 4 years to bring out its maximum benefits.

The success rate of the implementation of an ERP programme is highly dependent on several factors such as the accuracy of needs analysis of the company, perception of managers and styles of implementing the ERP system. Hence it is essential for vendors in todayÐ'ÐŽÐ'¦s society to understand the constraints and benefits of the ERP system to a firm prior to marketing them to ensure greater degree of acceptance by the organization and ensure fit with its practices.

1.2 Real-World Example: ABN AMRO Bank

An example of a company that has reaped the benefits of a successful ERP implementation is ABN AMRO bank. The bank collaborates with the PeopleSoft Enterprise in incorporating the idea of ERP systems into its Multi Channel Program (MCP). MCP program is one that enables its client to choose how and when they wish to communicate with ABN AMRO by integrating the communication channels (call centre or Internet) such that clients who enquire information through the internet would not have to repeat their story when they call the call centre. Hence, it improves efficiency. In addition, it helps ABN AMRO sales and marketing department to make the right offer to the clients.

1.3 Overview of the Report

This report aims to analyze and critic three articles - ERP Implementation Efforts at 3 Firms, ERP in the Minds of Supervisors and Value-Added Processing Calls for New-Model ERP (Please refer to Appendix for the 3 articles). Through them, we aim to identify the profile of companies that implement ERP system, the reasons for implementing it, the important factors that affect the success of ERP implementation and the key challenges vendors need to address in marketing ERP systems to organizations today and what can organizations do to further enhance the integration of ERP systems.

2.0 Summary of the Three Articles

2.1 Article 1: ERP Implementation Efforts at Three Firms

Article one analyses how the implementation efforts of ERP system at three firms go in line with the prescriptive steps of ERP implementation based on strategic information systems planning (SISP) and IT-enabled literature. Thus, through the article, the effectiveness of the prescriptive steps suggested by the SISP and IT-enabled were being evaluated.

The SISP processes have 6 dimensions: comprehensiveness; formalization; focus (balance between innovative and integrative orientation); top-down flow (initiated by top managers); broad participation; high consistency.

IT-enabled literature is based on 8 principles:

a. Systematic process for change (develop vision on final outcome and allocate resources towards the vision);

b. Manage equilibrium and mutual adaptation of organization, technology, and business processes;

c. Energy for change (focus on how to restore energy when personnel who are incongruent with the change exist);

d. Analyze the size of change effort;

e. Analyze and manage stakeholder commitment (focus on how to manage the different level of receptiveness caused by different level of commitment);

f. Major change require a champion;

g. Prototype organizational response (involves modeling and mapping to understand on how organizational roles will change as a result of the new system); and

h. Build change reviews into management process.

The study is investigated on 4 main areas: ERP motivation and justification; ERP project organization; ERP specification and selection; and Managing customization.

2.1.1 ERP Motivation and Justification

In spite of the huge costs involved in implementing ERP in which many expect significant financial analysis, the 3 companies (A, B and C) had little or no evaluation of the financial impact of the ERP implementation decision. Company A treated the ERP system as a maintenance project; company B implemented ERP system based on the decision made by the key decision maker to standardize the practices across sites and although company C had financial benefits from ERP, there was no significant effort to estimate the saving prior to ERP implementation. Hence from the scenario, it can be realized that the SISPÐ'ÐŽÐ'¦s dimension of comprehensiveness is not followed.

All the 3 companies were biased towards a controlled orientation as the three firms claimed that the lack of standardized information systems made it difficult to evaluate business performance across the various sites or to move personnel between the sites as needed. However, SISP dimension of focus is about getting a balance between control and innovation.

2.1.2 ERP Project Organization

In respect of the suggestions made based on IT-enabled literature,

a. All the three companies developed detailed implementation project plans and established the required organizational entities. Systematic approach for the ERP implementation suggested