ERP – Issues &
Challenges in Successful Implementation
The
emergence of the Internet, evolving customer demands, pressure to accelerate
business process, and the need to establish more collaborative relationships
with key suppliers and business partners are all pushing organizations towards
ERP solution. So, what is ERP? Enterprise Resource Planning (ERP) is described
as an information system package that integrates information and information
based processes within and across functional areas in an organization.
Traditional stand-alone applications were designed for specific customers, with
limited functionality, and isolated from other applications. ERP is a business
tool that integrates all the applications required by an organization as a whole,
and connects the organization to other enterprises in a network form. It is
usually compromised of several modules such as: a financial module, a
distribution module, or a production module. Today, ERP have added new
functions such as supply chain management, product data management, electronic
commerce and warehouse management. Thus, ERP opens a window of opportunity for
businesses to compete globally, respond to competitive pressures, and increase
revenue.
Defining
ERP
ERP is the acronym of Enterprise Resource
Planning. ERP utilizes ERP software applications to improve the performance of
organizations' resource planning, management control and operational control.
ERP software is multi-module application software that integrates activities
across functional departments, from product planning, parts purchasing,
inventory control, and product distribution, to order tracking. ERP software
may include application modules for the finance, accounting and human resources
aspects of a business.
Components
of a ERP System
- ERP Software -
Module based ERP software is the core of an ERP system. Each software
module automates business activities of a functional area within an
organization. Common ERP software modules include product planning, parts
purchasing, inventory control, product distribution, order tracking,
finance, and accounting and human resources aspects of an organization.
- Business Processes -
Business processes within an organization falls into three levels -
strategic planning, management control and operational control. ERP has
been promoted as solutions for supporting or streamlining business
processes at all levels. Much of ERP success, however, has been limited to
the integration of various functional departments.
- ERP Users - The
users of ERP systems are employees of the organization at all levels, from
workers, supervisors, and mid-level managers to executives.
Hardware and Operating Systems - Many
large ERP systems are UNIX based. Windows NT and Linux are other popular
operating systems to run ERP software. Legacy ERP systems may use other
operating systems.
ERP
Characteristics & Basic Operations:
ERP
facilitates company-wide Integrated Information System covering all functional
areas like Manufacturing, Selling and distribution, Payables, Receivables,
Inventory, Accounts, Human resources, Purchases etc. - ERP performs core
business activities and increases customer service satisfaction. - ERP
facilitates information flow across different sections or departments of the organization.
- ERP bridges the gap between business partners allowing ongoing collaboration.
- ERP is a good solution for better project management. - ERP is built as open
system architecture, meaning it allows automatic introduction of the latest
technologies such as: Electronic Fund Transfer (EFT), Electronic Data
Interchange (EDI), Internet, Intranet, Video conferencing, E-Commerce etc. -
ERP not only addresses the current requirements of the company but also
provides the opportunity of continually improving and refining business
processes. - ERP provides business intelligence tools like Decision Support
Systems (DSS), Executive Information System (EIS), Reporting, Data Mining and
Early Warning Systems (Robots) for enabling people to make better decisions and
thus improve their business processes. - ERP tracks a wide range of events in
an organization, and plans for future activities based on these events.
ERP
driving forces:
1. The
need to increase supply chain efficiency.
2. The
need to increase customer access to products or services.
3. The
need to reduce operating costs.
4. The
need to respond more rapidly and flexibly to a changing market place.
Critical
Issues in ERP Implementation successfully
The
successful implementation of an ERP project requires management to plan carefully,
and have all needed human and financial resources in place. Below is a list of
the main critical factors for the success of ERP:
1- Top Management Support:
Among the most important factors for the success of ERP project is the top
management commitment and support. The role of top management includes,
developing an understanding of the capabilities and limitation of the proposed
system, setting goals, and communicating the corporate IT Strategy to all employees.
2- Project Management: Another
important factor for the success of ERP is managing the project life cycle from
initiating to closing phase. The Project Manager (PM) has sole responsibility
and authority for planning and controlling the project scope to meet the
deliverables in the given time frame and budget.
3- Selection of the appropriate package: Selecting the appropriate package is an
important managerial decision. Analyzing and evaluating the organization needs
and processes help in taking the right choice that best suits the business
environment. A careful selection of the right package results in minimum
modification and successful implementation and use. On the hand, selecting the
wrong software may mean a commitment to architecture and application that do
not fit the organizational strategic goal or business process.
4- User training and education: A quality implementation can de derailed by
poorly trained employees who do not know how to properly operate the ERP
system. The knowledge transfer to employees is arguably more important than the
quality of the system. For that reason, companies should use consultants to
run
training sessions on how the system works, and how they relate to the business
process.
5- Business Process Re-engineering: Business Process Reengineering is a pre-requisite
for going ahead with implementing ERP system. An in depth BPR study has to be
done before taking up ERP. Business Process Reengineering brings out
deficiencies of the existing system and attempts to maximize productivity
through restructuring and re-organizing the human resources as well as
divisions and departments in the organization
6- Dedicated Resources: One of the main critical factors for ERP
success is determining the human and financial resources needed to implement
the system. This should be done at an early stage of the project. Failing to
commit the required resources often result in schedule and cost overdue.
7- Project Team Competence: Another key element of ERP success or
failure is related to the knowledge, skills, abilities, and experience of the
project manager and team members. The project team should work in a coordinated
way to achieve one goal. Hence, it is vital for team members to have technical
and business skills to complement their work.
8- Clear goals and objectives: Setting clear goals and Identifying the
Objectives of the ERP Project is the third most critical success factor. The
initial phase of any project should begin with a conceptualization of the goals
and possible ways to accomplish these goals. It is important to set the goals
of the project before even seeking top management support.
9- Ongoing Vendor Support: Ongoing vendor support represents an
important factor with any software package. ERP systems require ongoing vendor
support to keep them up to date with the latest modules and version. In
addition to this, vendor support provides technical assistance, and
maintenance.
10- Interdepartmental communication: Good communication is a key component for
the success of ERP. Hence, it is essential to communicate effectively between
team members and the rest of the organization, in order to keep everything
working properly.
To
conclude, ERP implementation could become a complex and risky process, if not
managed properly. Organizations need to identify the critical issues that
affect the implementation process. Such as: selecting the appropriate software
package, securing commitment and support from top management, cooperation from
business partners, having adequate knowledge among team members, training employees
and keeping them informed. All those issues and other more can minimize the
failure of ERP project and maximizes the success of ERP implementation.
By Manjeet Kumar
Dated: 30th April, 2013
