Enterprise Resource Planning

ERP SYSTEM

Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data and processes of an organization into a unified system

Definitions

Rosemann (1999)

described the ERP system as packaged (but customisable) software applications, which manage data from various organizational activities and provide a fully integrated solution to major organizational data management problems. They provide for both the core administrative functions, such as human resource management and accounting, as well as integrated modules which can be selected to support key business processes, such as warehousing, production and client management.

O’Leary

defined ERP system as “computer-based systems designed to process anorganization’s transactions and facilitate integrated and real-time planning, production,and customer response.”

He concluded the following characteristics of ERP system:

пÑ"? ERP systems are packaged software designed for a client server environment, whether traditional or web-based.

пÑ"? ERP systems integrate the majority of a business’s processes.

пÑ"? ERP systems process a large majority of an organization’s transactions.

пÑ"? ERP systems use an enterprise-wide database that typically stores each piece of data once.

пÑ"? ERP systems allow access to the data in real time.

пÑ"? In some cases, ERP allows an integration of transaction processing and planning activities (e.g., production planning).

пÑ"? support for multiple currencies and languages (critical for multinational

companies);

пÑ"? support for specific industries (e.g., SAP supports a wide range of industries,including oil and gas, health care, chemicals, and banking);

пÑ"? ability to customize without programming (e.g., switch setting).

Why Need ERP System?

The company relied on various computer systems for different functions and due to this there was a lack of integration. This resulted in data having to be entered manually more than once and often led to the risk of dirty data. As a result the company decided to invest in a new system that would be better integrated, more efficient, reduce error rates, reduce maintenance costs and generally be flexible enough to meet any future requirements.

For Example, Management at Geneva realised that such problems existed in their company which led to their belief that they needed a "common, integrated company-wide solution to improve data and reduce costs". Their solution? Deploy SAP's R/3 system.

ERP Implementation Problems

ERP implementation is much more than technology change, it also incorporates substantive process and people changes; and without appropriate change management strategies and experienced leadership, ERP projects are likely to fail. But the success of the implementation often depends on the customer organization and the project management ability of its implementation team.

пÑ"? Problems in not Having the correct Implementation team & not having proper communication among them

• Underestimate the strategic importance of the implementation process.

Assign more junior people to the team. This tends to create problems of vision, as younger, less experienced employees of a company, or those in staff-level positions, tend to have an excellent grasp of their own jobs, but a lack of understanding when it comes to the company's strategic goals or company operations as a whole

• heavily load the team with senior-level executives

These senior players have an excellent grasp of where the company is today and where it needs to go tomorrow, so their buy-in is vital to the project. However, senior executives often lack an understanding of the specific processes and activities

• Who belongs on the implementation team?

Choose middle managers who are key users of the software and who have extensive knowledge of both company strategy and detailed processes. They must be empowered to make decisions regarding the implementation, require senior-level buy-in and support.

• Not give them time to work on the implementation.

Once the members of the team are chosen, it is vital to make sure their regular jobs are backfilled so they have time to concentrate on the implementation.

For Example in Geneva Case Study stated

“To implement R/3 Geneva set up a team of 20 full and part time employees from within Sandoz (all of whom had no R/3 experience) and a team of 5 consultants from Whitman-Hart who had previous R/3 experience. Verne Evans, Director of Supply Chain Management, was assigned project leader. There was a lack of communication between the different groups that lead to problems defining the system as the requirements were not clear or shared between parties. “

For Example in Nestle USA Case Study stated

When the project began a team of 50 top executives and 10 senior IT professionals was assembled to develop a set of best practices for all Nestle USA divisions. “none of the groups that were going to be directly affected by the new processes and systems were represented on the key stakeholders team” . So by the time the implementation began in 1999 Nestle already had problems with its employees’ acceptance of the system

пÑ"? Problems in Corporate Culture

What most managers who have been through an ERP implementation, will tell you, is the biggest impact is on "Corporate Culture". It is always underestimated and never overestimated.

Corporate Culture is a combination of two things.

A) The type of people who are employed by a company. Their