The Emergence Of Enterprise Resource Planning Systems Information Technology Essay

The Emergence Of Enterprise Re root word readiness bodys discipline applied science EssayMany governments have initiated Enterprise Resource cookery agreements, use much(prenominal)(prenominal) packages as twenty-one, Peoplesoft and Oracle. The ERP market is one of the fastest ontogenesis in the softw atomic number 18 industry. In a research conducted by APICS, 34.5% of the companies with revenues anywhere $1 billion planned to purchase or upgrade in ERP arrangement. This research is pertinent to indicate that the ERP market may r distributively $ 1 trillion by the year 2010 (Umble et al., 2005).Enterprise resource preparation administrations be a major investment. Companies have invested hundreds of millions of dollars in ERP softw be. Its utiliseation promotes a revolution show of avocation justifications which solelyow in replacement of numerous legacy administrations, reduction in cycle time from order to delivery, and reduction in run speak tos. Also, t he on-line, real-time practicable selective information that ERP formations enable animal trainers to ca-ca purify decisions and im inst any responsiveness to customer of necessity (Gyampah, 2004).There is evidence that organizations are satisfied with ERP. establish upon a sample of 117 firms in 17 countries, the Conference Board reports that 34% of the organizations were satisfied with ERP, 58% were roughwhat satisfied, 7% were somewhat unsatisfied, and merely 1% were unsatisfied (Al-Mashari, M., Zairi, M., 2009).Organizations have a championship justification for work finisheding ERP systems. The commercial enterprise benefits of ERP include improved accessibility of information, real time access to data a crucify the organization, improved cycle time for orders, decreased financial closing time, trim operating costs, and lowered inventory levels. In addition ERP systems provide an chance to re-align patronage touches with best practices and to integrate enterpr ise- panoptic information supporting financial, human resources, manufacturing, sales and marketing functions.Evolution of ERPIt was in the Sixties that the concept of resource planning was archetypal introduced by software packages that dealt with inventory hook on capability. Material Requirements supplying (MRP) systems were posterior introduced in 1970s and these contained a master harvestingion instrument 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 operateing and energy planning that provided input production scheduling, k nown as closed circulate MRP. In the 1980s, MRPII systems incorporated financial accounting system along with manufacturing and materials prudence systems.MRPII led to an integrated business system that was phthisisd to create a database of material and capacity overtopments for production and this system then translated these requir ements into financial information. By 1990s ERP systems provided seamless integration of all information flows in the high society- fiscal Accounting, Human Resources, Supply Chain Management and Customer Information (Rondeau Litteral, 2001).Challenges of ERP SystemERP system depicts involve considerable time and cost non only in terms of investment but also for realization of benefits from their capital punishment. inquiry by Standish crowd illustrates that 90% of ERP hears are late over budget. Meta Group survey data, base on 63 companies, showed that average execution of instrument cost of ERP was $ 10.6 million and took 23 months to complete (K. Siau, 2004).A achievementful execution of instrument of ERP requires a multi-stage feeler (Jones M. and Price L., 2004), and the benefits of ERP may non occur until later stages. Jones et al., resolve iii stages the project material body, the shakedown phase, and onward and upwardly phase. ERP software is introduced duri ng project phase and is implemented into firms trading operations during shakedown phase. It is non until onward and upward phase, during which ERP modules are productively integrated with operations, that the organization cigarette achieve strong business solutions, such as inventory reduction (Motwani et al., 2002).However, Spathis et al. identify quatern phases for execution of instrument of the same. The phases are a planning phase, a re-engineering phase, a pattern phase, and a configuration and testing phase (Spathis et al., 2003). They indicate that re-engineering business practices slightly the ERP software is critical to winnerful death penalty. In their stage summary, Rondeau et al. (2001) signify benefits of ERP occur when ERP modules are implemented successfully and when organizations can use the ERP insane asylum to add advance modules such as customer relationship way.A accompany has to make sure that its ERP investment fetches increased receiptsabi lity. The rudimentary contest is not in managing engineering, but in managing slew. An ERP system intensifys the way slew work, and for the system to be useful, the change must be dramatic. It promotes efficient business processes with the requirement of fewer wad than before ERP implementation or up-gradation. This implies that some employees get out be asked either to change their day-to-day activities or their service would no longer be needed.Managing human conduct views of organisational change also known as organizational change watchfulness (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 think activities. If the ERP implementation is a project that is macrocosm forced on the employees, then they give instinctively decline it. However, if it is viewed as a chance to make the company more efficient and effective by as tir(p) business process, and consequently these process improvements will make the company more profitable and ensure job protective covering to employees, then there is a greater bidlihood that the employees will wholeheartedly support the implementation efforts. The best way to improve a business process is to delegate the task to develop process improvement ideas to people who are most familiar with the process using their experience and creativity.Sometimes, a company is not ready for ERP. In many cases, ERP implementation difficulties result when care does not fully hold its latest 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 prepared to change its business process es, it will find a large bill for software and consulting fees with no improvement in organizational performance.ERP p ackages imply, by their inclination, 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 die 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 get out responsiveness to the needs of customers through real-time information provided by the system, to affair customers and suppliers into a complete supply chain, to provide high degree of cross functional integration, to reduce the costs and to provide the foundation for effective e-commerce (Vollmann et al., 2005). The wring to survive in the advanced world order and align with the rising paradigm for organizational success, videlicet, 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 jolt the structure, but this impact has not been e turn overately investigated. It is often supposed that IT creates a apartmentter structure (Stevens, 1998). The flat structure speeds up decision-making process, shortens lines of communication and aids 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 oblation challenges.As ERP implementation is an enterprise wide venture of change.It is definitive to agnise how to manage impact on the organization structure. Two research objectives were vestigial to this research project.ERP implementation influences the structure of the organization.Management of the change to the new structure.This makeup is an attempt to examine the ERP implementation experience in a company. It pull on Organization Theory and vary Management theory to understand the transition amongst 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 watchfulness of techniques, the change management theory (Paton and McCalman, 2004) prove useful in explaining the outcomes of the case study .IT and Organization StructureThe 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 compon ents are exposit beneath and impact of IT on these components is expressed 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 organization. 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 geopictorially (Klein, 2001). With introduction of this component of organization structure, it is assertable to have wider span of tick off with more knowledgeable and empowered employees. Companies with IT can reduce the middle management layers and widen span of control and thereby flatten the organization structure. However, removing layers ability create new challenges. New mechanisms for coordination might be needed or new process of governance might be necessary. According to the poser proposed by Klein (2001), IT results in wider spans of control, fewer levels, fewer people, easier collaboration and communication. In oppositewise 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 worthy in a stable environs (Martin, 2009). Formalization, however, is negatively associated with adoption and implementation of innovation in organizations (Ahadi, 2004) and hence it is negatively related to the ERP implementation because it tends to ball up deleterious effects on the work attitudes.CentralizationThe decisional control in organization could be change 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 top management (Robbin, 1990). It is possible that the centralization component is related to the surface 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 ascendance 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 centre 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, ever-changing an organizations structure can be difficult and successful restructuring depends on three conditions sound planning, effective leader ship and organizational commitment (Witzel, 2002).To examine organizational change in a traditional hierarchical organization, esteem is disposed(p) toHuman element and informal organization.Necessity of wet management actions and inspirational vision.Sustainability of an initiative.None of available theoretical accounts considers all the three aspects.InformalOrganization excitantdodge Formal OUTPUTResources, Organization IndividualEnvironment aggroup, cognitive processManaging 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 afterward the implementation period is over. and then power is then transfered to individuals who are able to operate the ERP system better and utilizeWorkPeoplethe system resources efficiently (Aladwani, 2 009).ERP affect on nature 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 unknown and from the need of stability. There are cardinal fundamental sources of resistance to innovations like ERP perceived Risk and Habit. The habit of keeping the modus operandi 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 quadruplet 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 tremendous 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, increasing productivity and improving customer services (Martin, 2009 Pliskin and Zarotski, 2000). ERP system can cripple a company, if not implemented properly. There are incompatibility stories concerning implementations deceased astray (Laughlin, 1999 Bancroft et al., 1998).Implementing ERP system successfully calls for strong leadership, a ca-ca 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 sys tematic 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 functional battlegrounds.Feasibility of ERP system integration with the existing information systemsSchedule for adaptation of the new system.An organization requires development of an implementation strategy. Such a strategy, will determine how the related changes can be successfully absorbed at various part of the organization. It has been found that the organizations that had no SAP implementation strategical plan performed sickly compared to those who had a plan. ERP implementation from countries or so the world demonstrates that success is essentially conditional on adequately managing complex context of the implementation, which necessitates change management crossways 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. healthy leadership and constant watch on budget are the two other, yet equally significant 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 establish competencies in four core areasChange Strategy development and deployment,Enterprise-wide Project Management,BPR integration with IT, and good aspects of ERP installation.These competencies w ill enable managers to effectively manage changes and direct the organization to desired 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 just about through implementation of strategies. Kuruppuarachchi 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, vender characteristics, buyer - vendor interface, and environment. These factors are listed belowHuman resources greater education and training among military forcepositive motivation, attitudes, and commitment toward the innovation.Structure an adaptive and flexible structure strong communications mechanism and net work across structural boundaries. stopping point processes 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 champion cooperation among units slow, gradual theme 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.expertness in project management of the seller.Constructive cooperation between buyer and seller in implementation.Knowledge transfer the buyer is inv olved in leaning, diagnosing, and determine usage patterns of the buyer.Intensive networking within and across industries leading to greater moving-picture show to innovations.Fig.3. Change management considerations (Source Kuruppuarachchi et al., 2002).Case Study -IPantaloon ERP in Retail more(prenominal) than eight years after it forayed into the retail business, Pantaloon Retail headstrong to implement SAP to keep itself competitive in the rapidly growing Indian retail market.Store 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 win 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 application to help run its business effectively. The basic need was to have a robust transaction management system and an enterprise wide platform to run the operation s, 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 supports product development, which includes ideation, trend analysis, and collaboration with partners in the supply chain sourcing and procurement, which involves working with manufacturers to execute order according to strategic merchandising plans and perfect cost, quality, and speed-variables that must be weighted differently as business needs, buying plans, and market fill 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 marketi ng 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 solution apply bySAP team with the help of Novasoft, SingaporeNumber of userswell-nigh 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 help 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 separate into three phases.The first phase of implementation involved blueprinting of existing processes and single-valued function them to the desired state. In this phase, the entire project team worked on catamenia processes within Pantaloon Retail. The various existing processes were thoroughly analyzed and drafted. This blueprint was later utilize in the formation of new states of the solution. Since the SAP would combine 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 fifteenth June 2005 and took about six months to finish. It went live at the head office on 1st January 20 06. The Pantaloon Retail stores used SAP from 1st January 2006 to 30th 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 worldwide 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 mechanically split accounting line items per written 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 le vels, 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 related 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 II iodine 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 centralized purchasing department and means of sharing information, so company groups were paying different amounts for the same parts from the same vendor. Delivery dates were helpless because of a lack of inventory control, and top management had little profile 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 com burstered a comprehensive survey of the ERP market and sponta neous was selected for four major reasonsA 100 percent Microsoft platform,an easy-to-use graphical interface,excellent support, andscalable open computer architecture features that permitted the addition of users at any time.The consultants who evaluated nonrational ERP and its competitors for ACE Designers concluded transcendental 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(prenominal) 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 an d 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 often nil computer culture to a total computerized system, said V. Chandra, usual 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 spiritualist 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 pricing that ensures profitability. They are able to monitor online status of work orders for components, sub-assemblies and final assemblies.Improved Planning With the earlier manual planning system, it was difficult to coordinate customer requirements and design changes w ith 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 percent.With reports such as Purchase Price Variance, there is visibility of the cost of every purchased item. This has resulted in better price 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 i n 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 aided by heavy purchases made by US government during the Second dry land War.In the 1980s, HP emerged as a major player in the computer industry, 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 personal 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 inform that its revenues for th e third quarter and it was identified 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 mainly 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 revenue was pegged at $ 16