CRITICAL APPRAISAL FOR IMPLEMENTATION OF ERP IN MANUFACTURING INDUSTRY

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2 Int. J. Mgmt Res. & Bus. Strat Manpreet Singh et al., 2013 ISSN X Vol. 2, No. 1, January IJMRBS. All Rights Reserved CRITICAL APPRAISAL FOR IMPLEMENTATION OF ERP IN MANUFACTURING INDUSTRY Chandan Deep Singh 1, Rajdeep Singh 1 and Manpreet Singh 1* *Corresponding Author: Manpreet Singh, manpreetd87@yahoo.com An Enterprise Resource Planning (ERP) system is a packaged business software system that enables a company to manage the efficient and effective use of resources (materials, human resources, finance, etc.) by providing a total, integrated solution for the organization s informationprocessing needs. It supports a process-oriented view of the business as well as business processes standardized across the enterprise. Among the most important attributes of ERP are its abilities to: automate and integrate an organization s business processes; share common data and practices across the entire enterprise; and produce and access information in a realtime environment. ERP is an enterprise-wide resources, information, and activities needed to complete business processes such as order fulfillment or billing. ERP systems can cover a wide range of functions and integrate them into one unified database. ERP predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning, and scheduling tools. Successful ERP implementation (initial stage of ERP) does not necessarily lead to the success of ERP post-implementation. Following the general quality literature, DQ is defined as data that is fit for use by data consumers. Many DQ dimensions have been identified. Commonly identified DQ dimensions are: accuracy, timeliness, completeness, and consistency. Critical factors for successful ERP implementation are clear understanding of strategic goals, commitment by top management, organizational change management, excellent project management, a great implementation team, data accuracy, extensive education and training, focused performance measures, multi-site issues. Keywords: ERP, Critical success Factors, Quality issues INTRODUCTION Enterprise Resource Planning (ERP) is an enterprise-wide resources, information, and activities needed to complete business processes such as order fulfillment or billing. ERP systems can cover a wide range of functions and integrate them into one unified database. For instance, functions such as sales and distribution, financial counting and costing, material management, human resources, production planning, basis were all once stand alone software applications, almost all organization are 1 Department of Mechanical Engineering, University College of Engineering, Punjabi University, Patiala. 39

3 turning to some sort of enterprise to some of enterprise resource planning package as a solution to their information management problems.erp package if chosen correctly, implemented judiciously and used efficiently, will raise the productivity and profits of companies dramatically. But many a companies fail in this because of wrong product, incompetent and haphazard implementation and inefficient or inefficient usage. This study is carried out in a company which is into agricultural and biotech research and product manufacturing to help and contribute largely to the farmer community in increasing their productivity year after year keeping the fertility of the soil Kumar et al. (2009). ERP is a tool that helps companies cut costs and improve efficiency by integrating business processes and sharing common resources across an organization. ERP systems institutionalize the sharing of resources by requiring the consolidation of diverse and decentralized computing platforms, data models, and functional processes in order to improve operational efficiency. ERP systems are large, complex and often require fundamental changes to the way organizations perform processes. They may also impact the organizational decision making that underlies the processes. There is evidence that ERP enables organizations to achieve decision support benefits such as improved knowledge processing, enhanced decision making reliability, and better ability to gather corporate evidence to support the decisions made. Furthermore, managers believe it is important for ERP systems to provide decision support for quicker decisions, lower costs of decision making, and improved ability to manage large quantities of knowledge. In order for this to occur, however, appropriate organiza-tional knowledge must be incorporated into an ERP system so that the system has a sufficient underlying knowledge structure to achieve this support. Knowledge from a diversity of perspectives and experiences must be shared and incorporated during ERP implementation. ERP systems or enterprise systems are software systems for business management, encompassing modules supporting functional areas such as planning, manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project manage-ment, inventory management, service and maintenance, transportation and e-business. ERP systems can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information. CHARACTERISTICS ERP systems typically include the following characteristics: An integrated system that operates in real time (or next to real time), without relying on periodic updates. A common database, which supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the Information Technology (IT) department. Finance/Accounting General ledger, payables, cash management, fixed assets, receivables, budgeting, consolidation. Human Resources Payroll, training, benefits, 401 K, recruiting, diversity management. Manufacturing Engineering, bill of materials, work orders, 40

4 scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow, activity based costing, product lifecycle management. Supply Chain Management Order to cash, inventory, order entry, purchasing, product configuration, supply chain planning, supplier scheduling, inspection of goods, claim processing, commissions. Project Management Costing, billing, time and expense, performance units, activity management. Customer Relationship Management Sales and marketing, commissions, service, customer contact, call center support. Data Services Various self-service interfaces for customers, suppliers and/or employees. Access Control Management of user privileges for various processes. BACKGROUND OF ERP Enterprise Systems (ES), also called ERP systems, are among the most important business information technologies to emerge in the last decade. While no two industries Enterprise Systems are the same, the basic concept of Enterprise Systems is focused mainly on standardization, synchronization and improved efficiency. ERP is basically the successor to Material Resource Planning (MRP) and integrated accounting systems such as payroll, general ledger, and billing. The benefits of ES are very significant: coordinating processes and information, reducing carrying costs, decreasing cycle time and improving responsiveness to customer needs (Davenport 2000; and Elarbi 2001). Traditionally, the construction industry has been faced with the problem of getting and keeping projects on schedule, under budget, and safe with the quality specified by the owner and/ or Architect/Engineer (A/E). Although the construction industry is one of the largest contributors to the economy, it is considered to be one of the most highly fragmented, inefficient, and geographically dispersed industries in the world. To overcome this inefficiency, a number of solutions have long been offered. Recently, a significant number of major construction companies embarked on the implementation of integrated IT solutions such as ES to better integrate to their various business functions, particularly those related to accounting procedures and practices. However, these integrated systems in construction present a set of unique challenges, different from those in the manufacturing or other service sector industries. Each construction project is characterized by a unique set of site conditions, a unique performance team, and the temporary nature of the relationships between project participants. This means a construction business organization needs extensive customization of pre-integrated business applications from ERP vendors. Unfortunately, such an extensive customization can lead a construction firm to ERP implementation failure. Based on a number of consultants comments, the best way to achieve the full benefits from ERP systems is to make minimal changes to the software. For these reasons, finding the best implementation strategy of 41

5 integrated ES is mandatory to maximize the benefits from such integrated IT solutions in construction companies. Modern ERP systems have their roots in Materials Requirement Planning (MRP I) systems, which were introduced in the 1960s. MRP I systems are computer based systems for inventory control and managing production schedules. As data from the factory floor, warehouse, or distribution center began to affect more areas of the company, the need to distribute these data across the entire enterprise demanded that other business area databases interrelate with the MRP I system. However, MRP I systems had limitations on this functionality leading to the development of Manufacturing Resource Planning (MRP II) systems, which have now given way to ERP. MRP II systems can evaluate the entire production environment and create or adjust master schedules based on feedback from current production and purchase conditions. The Evolution Tow ards ERP: Materials Requirements Planning (MRP, or MRP-I) system was launched in the mid-1960s and quickly became popular for providing a logical, easily understood method for determining the number of parts, components, and materials needed for the assembly of each end item in production. As computer power grew and demands for software applications increased, MRP systems evolved to consider other resources besides materials. Software modules were added to include functions such as scheduling, inventory control, finance, accounting, and accounts payable. MRP- I system, is a computer-based system for managing inventory and production schedules. This approach to materials management applies to large job-shop situations in which many products are manufactured in periodic lots in several processing steps (Bed worth and Bailey, 1987). MRP and Push systems are often used interchangeably. Conceptually, MRP can be viewed as a method for the effective planning of all resources of a manufacturing organization (Russell and Taylor, 1998). According to Daft (1991) MRP can be defined as a dependent demand inventory planning and control system that schedules the exact schedule to calculate requirements for material and determine when to release the material replenishment order (Torkzadeh and Sharma, 1991). Thus, for the purpose of this paper MRP can be defined as a computer based planning, scheduling, and control system that gives management a tool to plan and control its manufacturing activities and supporting operations obtaining a higher level of customer service while reducing costs amount of all materials required to support the desired end product. It is an inventory ordering and timephased scheduling technique, which uses bill of material, inventory data, and the master production. The focus of manufacturing systems in the 1960 s was on inventory control. Companies could afford to keep lots of just-in-case inventory on hand to satisfy customer to handle inventory based on traditional inventory concepts demand and still stay competitive. Consequently, techniques of the day focused on the most efficient way to manage large volumes of inventory. Most software packages (usually customized) were designed. In the 1970 s, it became increasingly clear that companies could no longer afford the luxury of maintaining large quantities of inventory. This led to the introduction of material requirements planning systems. MRP represented a huge step 42

6 forward in the materials planning process. For the first time, using a master production schedule, supported by bill of material files that identified the specific materials needed to produce each finished item, a computer could be used to calculate gross material requirements. Using accurate inventory record files, the available quantity of on-hand or scheduled-to-arrive materials could then be used to determine net material requirements. This then prompted an activity such as placing an order, canceling an existing order, or modifying the timing of existing orders. For the first time in manufacturing, there was a formal mechanism for keeping priorities valid in a changing manufacturing environment. The ability of the planning system to systematically and efficiently schedule all parts was a tremendous step forward for productivity and quality. Yet, in manufacturing, production priorities and materials planning are only part of the problem. Capacity planning represents an equal challenge. In response, techniques for capacity planning were added to the basic MRP system capabilities. Tools were developed to support the planning of aggregate sales and production levels (sales and operations planning), the development of the specific build schedule (master production scheduling), forecasting, sales planning and customer order promising (demand management), and high-level resource analysis (roughcut capacity planning). Scheduling techniques for the factory floor and supplier scheduling were incorporated into the MRP systems. When this occurred, users began to consider their systems as company-wide systems. These developments resulted in the next evolutionary stage that became known as closed loop. 1960s most organizations designed, developed and implemented centralized computing systems, mostly automating their inventory control systems using inventory control packages (IC). These were legacy systems based on programming languages such as COBOL, ALGOL and FORT- RAN. Material Requirements Planning (MRP) systems were developed in the 1970s which involved mainly planning the product or parts requirements according to the master production schedule. Following this route new software systems called Manufacturing Resources Planning (MRP II) were introduced in the 1980s with an emphasis on optimizing manufacturing processes by synchronizing the materials with production requirements. MRP II included areas such as shop floor and distribution management, project management, finance, human resource and engineering. ERP systems first appeared in the late 1980s and the beginning of the 1990s with the power of enterprise-wide inter-functional coordination and integration. Based on the technological foundations of MRP and MRP II, ERP systems integrate business processes including manufacturing, distribution, accounting, financial, human resource management, project management, inventory management, service and maintenance, and transportation, providing accessibility, visibility and consistency across the enterprise. During the 1990s ERP vendors added more modules and functions as add-ons to the core modules giving birth to the extended ERPs. These ERP extensions include Advanced Planning and Scheduling (APS), e-business solutions such as Customer Relationship Management (CRM) and Supply Chain Management (SCM). In 1990 Gartner Group first employed the acronym ERP as an extension of Material Requirements Planning (MRP), later manufacturing resource planning and computerintegrated manufacturing. Without supplanting 43

7 these terms, ERP came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing. Not all ERP packages were developed from a manufacturing core. Vendors variously began with accounting, maintenance and human resources. By the mid 1990s ERP systems addressed all core functions of an enterprise. Beyond corporations, governments and non-profit organizations also began to employ ERP systems. The many features of ERP systems have greatly increased the quantity and quality of information provided to enterprises, helping them to achieve efficiency in their management processes. Over the years, much has been learned about the success of ERP systems. Several researchers show that ERP provided tremendous support for business planning and organizational objectives. ERP applies a single set of resource planning tools across the entire enterprise, provides real-time integration of sales, operating, and financial data, and ERP connects resource planning approaches to the extended supply chain of customers and suppliers. ERP is an extension of MRP II with additional capabilities, such as better graphical user interface, the use of relational database, fourth language generation, open system portability, and is much more integrated than MRPII (Boyle, 2000). In addition, Kapp et al. (2001), state that the differences between ERP and MRP II is the inclusion of a variety of manufacturing processes within ERP, in which modern ERP software is able to handle both discrete work orders and flow orders, Just-In-Time (JIT) and MRP, Electronic Data Interchange (EDI), and hand-entered orders. Wainewright (2002) also stated that MRP was used for tracking suppliers, work-in progress and the output of finished goods, while ERP was used for all type of business with additional functions including financials, payroll and human resources management. According to Wallace and Kremzar (2001) ERP is far better than MRP II for three reasons: 1. ERP applies a single set of resource planning tools across the entire enterprise; 2. Provides real-time integration of sales, operating, and financial data; and 3. ERP connects resource planning approaches to the extended supply chain of customers and suppliers. Issues on ERP Implementation: Implementing an ERP causes massive change that needs to be carefully managed to reap the benefits of an ERP solution. Critical issues that must be carefully considered to ensure successful implementation include fundamental issues, organizational change process, people, and implementation cost and time and employee morale. The pertinent issues are: 1. Fundamental Issues are (a) Role of Manager (b) Role of an Auditor (c) Top Management Commitment 2. Organizational Change Process (a) Reengineering of the existing process (b) Integration of ERP with other BIS (c) Selection of Right Employees (d) Training Employees 3. Implementation cost and Time 4. Employee Morale Phases of ERP Implementation Planning: The plan is developed, roles are identified and responsibilities are assigned. It will 44

8 also decide when to begin the project, how to do it and its completion. Design: In this phase the companies create a complete model of where they are now, and in which direction will they proceed in the future. Transition: In this phase a significant change in number of employees and their job responsibilities are assigned according to specific areas as the process becomes more automated and efficient. Testing: In this phase the company tests the real case scenarios. The system is confi-gured and now everybody must come up with extreme cases like system overloads, multiple users logging on at the same time. Post Implementation Analysis: Once the implementation is over, the hired consultants will go. It is the time to reap the fruit of the implementation it is very important that the system has wide acceptance. REVIEW OF LITERATURE Hongjiang Xu et al. addressed data quality issues. Data quality is a critical issue during the implementation of an ERP system. Data quality problems can have a significant impact on an organization s information system. Therefore, it is essential to understand data quality issues to ensure success in implementing ERP systems. Al-Mashari et al. discussed the critical success factors in enterprise resource planning implementation process. ERP benefits cannot be fully realized unless a strong alignment and reconciliation mechanism is established between technical and organizational imperatives based on the principles of process orientation. Botta- Genoulaz et al. addressed noticed that in industries the stakes in control of integrated systems cannot be limited to the phases of implementation or deployment. Better use of these information systems drives industries to new organizations and to continuous adaption of industry s strategy. It should help in the reevaluation of the positioning of the ERP in the information system to identify relevant improvement in a given situation. Bhatti discussed Implementing an ERP system project is a difficult and high cost proposition as it places tremendous demands on organization s time and resources. Many organizations do not achieve success in their ERP implementation projects. Much has been written about implementation and the critical success factors for ERP implementation projects. But there very few studies have scientifically developed and tested constructs that represent critical success factors of ERP implementation projects. Ngai et al. addressed The Critical Success Factors (CSFs) in the implementation of ERP across 10 different countries/regions. The findings of study reveal that appropriate business and IT legacy systems, business plan/vision/ goals/justification, business process reengineering, change management culture and program, communication, ERP teamwork and composition, monitoring and evaluation of performance, project champion, project management, software/system development, testing and troubleshooting, top management support, data management. In these 18 CSFs, top management support and training and education were the most frequently cited as the critical factors to the successful implementation of ERP systems. Robert Plant et al. addressed the paper first examines the perceptions of the critical success factors at differing stages of project development 45

9 at each company. Findings include the shift in emphasis during the implementation from top management support, clear goals and objectives together with strong inter-departmental communication, viewed as being critical early in the project lifecycle, to a convergence upon: top management support, project team competence and interdepartmental co-operation in the final stages of the implementation. Sherry Finney et al. addressed To explore the current literature base of CSFs of ERP implementations, prepare a compilation, and identify any gaps that might exist. There is a need to focus future research efforts on the study of CSFs as they apply to the perspectives of key stakeholders and to ensure that this stakeholder approach is also comprehensive in its coverage of CSFs. As well, there is need to conduct more in-depth research into the concept of change management. Peter Aiken et al. discussed A data quality challenge associated with DOD/DLA s migration from SAMMS to SAP, has now evolved through six distinct phases. Tangible savings and results have been documented. Perhaps more useful are the lessons learned over the multiple project years as we collectively reached improved understandings of the problem nature and its importance. Alwabel et al. Every technical invention is initially designed and eventually applied to solve a real-world problem. The evolution of ERP is no exception. Owing to its well-organized success to effectively integrate isolated multiple information systems and its ability to significantly improve businesses efficiencies, ERP systems have emerged as the core of successful information management and the enterprise backbone of organizations and e-business. Amin Hakim et al. addressed Although ERP systems were already introduced many years back and were implemented in different organizations, there are still companies who hesitate to decide about establishing ERP systems in their structure. This hesitation will itself result in the projects to go in vain. On the other hand, taking into account the Iranian organizations, the unfamiliarity with these systems is obviously comprehended, something that stems from the lack of information in decision-makers and managers concerning the above-mentioned issue, together with the feeling of fear and inconvenience with this novel technology. Kees Boersma et al. discussed In this paper, we present a case study of the restructuring of an ERP system within a manufacturing company, in particular the combination of Material Requirement Planning (MRP) with a Just In Time (JIT) material management procedure at the assembly lines. Shih-Wei Chou et al. addressed Improving the performance of ERP systems remains an important issue. This study examines ERP performance at the post-implementation stage, particularly from the perspective of managerial intervention. Ed O Donnell et al. discussed This paper proposes a research framework for examining how features of an information system affect the decision-making process. The framework is synthesized by merging frameworks from the Accounting Information Systems (AIS) literature and the Human Information Processing (HIP) literature. CRITICAL SUCCESS FACTORS IN ERP The ERP system is a generic term for a broad set of activities supported by multi-module 46

10 application software that helps organizations to manage their resources. The ERP system has been shown to be able to provide significant improvements in efficiency, produc-tivity and service quality, and to lead to a reduction in service costs as well as to more effective decisionmaking. Critical factors for successful ERP implementation. Critical Factors for Successful ERP Implementation 1. Clear understanding of strategic goals: ERP implementations require that key people throughout the organization create a clear, compelling vision of how the company should operate in order to satisfy customers, empower employees, and facilitate suppliers for the next three to five years. There must also be clear definitions of goals, expectations, and deliverables. Finally, the organization must carefully define why the ERP system is being implemented and what critical business needs the system will address. Commitment by top management: Successful implementations require strong leadership, commitment, and participation by top management. Since executive level input is critical when analyzing and rethinking existing business processes, the implementation project should have an executive management planning committee that is committed to enterprise integration, understands ERP, fully supports the costs, demands payback, and champions the project. Moreover, the project should be spearheaded by a highly-respected, executivelevel project champion. 2. Excellent project management: Successful ERP implementation requires that the organization engage in excellent project management. This includes a clear definition of objectives, development of both a work plan and a resource plan, and careful tracking of project progress. And the project plan should establish aggressive, but achievable, schedules that instill and maintain a sense of urgency. A clear definition of project objectives and a clear plan will help the organization avoid the all-too-common scope creep which can strain the ERP budget, jeopardize project progress, and complicate the implementation. The project scope must be clearly defined at the outset of the project and should identify the modules selected for implementation as well as the affected business processes. If management decides to implement a standardized ERP package without major modifications, this will minimize the need to customize the basic ERP code. This, in turn, will reduce project complexity and help keep the implementation on schedule. 3. Organizational change management: The existing organizational structure and processes found in most companies are not compatible with the structure, tools, and types of information provided by ERP systems. Even the most flexible ERP system imposes its own logic on a company s strategy, organization, and culture. Thus, implementing an ERP system may force the reengineering of key business processes and/or developing new business processes to support the organization s goals. And redesigned processes require corresponding realignment in organizational control to sustain the effectiveness of the reengineering efforts. This realignment typically impacts most functional areas and many social systems within the organization. The resulting changes may 47

11 significantly affect organizational structures, policies, processes, and employees. Unfortunately, many chief executives view ERP as simply a software system and the implementation of ERP as primarily a technological challenge. They do not understand that ERP may fundamentally change the way in which the organization operates. This is one of the problematic issues facing current ERP systems. The ultimate goal should be to improve the business not to implement software. The implementation should be business driven and directed by business requirements and not the IT department. Clearly, ERP implementations may trigger profound changes in corporate culture. If people are not properly prepared for the imminent changes, then denial, resistance, and chaos will be predictable consequences of the changes created by the implementation. However, if proper change management techniques are utilized, the company should be prepared to embrace the opportunities provided by the new ERP system and ERP will make available more information and make attainable more improvements than at first seemed possible. The organization must be flexible enough to take full advantage of these opportunities. 4. A great implementation team: ERP implementation teams should be composed of top-notch people who are chosen for their skills, past accomplishments, reputation, and flexibility. These people should be entrusted with critical decision making responsibility. Management should constantly communicate with the team, but should also enable empowered, rapid decision making. 5. Data accuracy: Data accuracy is absolutely required for an ERP system to function properly. Because of the integrated nature of ERP, if someone enters the wrong data, the mistake can have a negative domino effect throughout the entire enterprise. Therefore, educating users on the importance of data accuracy and correct data entry procedures should be a top priority in an ERP implementation. ERP systems also require that everyone in the organization must work within the system, not around it. Employees must be convinced that the company is committed to using the new system, will totally changeover to the new system, and will not allow continued use of the old system. To reinforce this commitment, all old and informal systems must be eliminated. If the organization continues to run parallel systems, some employees will continue using the old systems. 6. Extensive education and training: Education/ training is probably the most widely recognized critical success factor, because user understanding and buy-in is essential. ERP implementation requires a critical mass of knowledge to enable people to solve problems within the framework of the system. If the employees do not understand how a system works, they will invent their own processes using those parts of the system they are able to manipulate. The full benefits of ERP cannot be realized end users are using the new system properly. To make end user training successful, the training should start early, preferably well before the implementation begins. Executives often dramatically underestimate the level of education and training necessary to implement an ERP system as well as the associated costs. Top 48

12 management must be fully committed to spend adequate money on education and end user training and incorporate it as part of the ERP budget. It has been suggested that reserving 10-15% of the total ERP implementation budget for training will give an organization an 80% chance of implementation success. 7. Focused performance measures: Performance measures that assess the impact of the new system must be carefully constructed. Of course, the measures should indicate how the system is performing. But the measures must also be designed so as to encourage the desired behaviors by all functions and individuals. Such measures might include on-time deliveries, gross profit margin, customer order-to-ship time, inventory turns, vendor performance, etc. Project evaluation measures must be included from the beginning. If system implementation is not tied to compensation, it will not be successful. For example, if all managers will get their raises and bonuses next year even if the system is not implemented, successful implementation is less likely. Management, vendors, the implementation team, and the users must share a clear understanding of the goal. If someone is unable to achieve agreed-upon objectives, they should either receive the needed assistance or be replaced. When teams reach their assigned goals, rewards should be presented in a very visible way. The project must be closely monitored until the implementation is completed. The system must be forever monitored and measured. Management and other employees often assume that performance will begin to improve as soon as the ERP system becomes operational. Instead, because the new system is complex and difficult to master, organizations must be prepared for the possibility of an initial decline in productivity. As familiarity with the new system increases, improvements will occur. Thus, realistic expectations about performance and time frames must be clearly communicated. 8. Multi-site issues: Multi-site implementations present special concerns. The manner in which these concerns are addressed may play a large role in the ultimate success of the ERP implementation. The desired degree of individual site autonomy may be a critical issue which depends on two factors: (1) the degree of process and product consistency across the remote sites; and (2) the need or desire for centralized control over information, system setup, and usage. One of the objectives of an ERP implementation may be to increase the degree of central control through the implementation of standardized processes. Alternatively, the implementation may be undertaken in order to provide the remote sites with capabilities that allow them to fine tune their processes to their unique situations. In a multi-site implementation, a phased approach is generally considered to be preferable. This is partly because the success or failure experienced in the first attempt at implementation often decides the fate of the entire project. Thus, the management team can gain momentum by selecting a pilot site that has a high likelihood of success. And if ERP is installed in a phased approach module by module, department by department, or plant by plant the lessons learned at early sites can make the implementations at later sites go smoother. 49

13 QUALITY IN ERP A comprehensive approach to quality management one that integrates information and processes across departments and corporate boundaries empowers your employees and supply chain partners to maintain and improve quality levels. The ERP application provides a single, powerful solution that lets you take a comprehensive, broad based approach to total quality management. It delivers a wide range of integrated quality management functionality and supports collaborative business processes for cost-effectively ensuring the quality of your products and processes and transforming quality management into a competitive advantage. In today s economy, you must invest in business software in order to invest in your company s future. It is important to lay a trusted foundation for business excellence and innovation and to provide your organization with the ERP functionality that is needed to gain strategic insight, competitive differentiation, increased productivity, and business agility. With the SAP ERP application, SAP has transferred its vision of increasing efficiency within an organization to software for ERP that helps automate end-to-end business processes and extends those processes to the entire business ecosystem, including customers, partners, and suppliers. With SAP ERP, you can increase your employees productivity and provide them with the insight needed to make decisions that set you apart from the competition. Quality is a vital core competency for manufacturers industry-wide and given today s complex and often global production cycles, it cannot be treated as simply an afterthought. You have to engineer quality into the design of products and processes; you have to track quality through procurement, production, and delivery; and you have to constantly improve quality to keep pace with evergrowing customer expectations and competitive pressures. In short, you need to take a comprehensive approach to quality management one that integrates information and processes across departments and corporate boundaries and empowers both your employees and supply chain partners to maintain and improve quality levels. SAP ERP enables the comprehensive and efficient approach you need to transform quality management into a competitive advantage. SAP ERP delivers a wide range of integrated quality management functionality and supports collaborative business scenarios for costeffectively ensuring the quality of your products and processes. As your employees work throughout the entire product life cycle along the supply chain, SAP ERP ensures that quality is efficiently built into your processes, systems, and products, from the shop floor to the top floor. If you are considering implementing or have already implemented Quality Management (QM) with SAP ERP in your company, and you want information on current functions and new developments, then this document contains all the information you need. This document targets project planners, decision makers, and people interested in implementing QM with SAP ERP. It explains how QM with SAP ERP is integrated in the SAP Business Suite family of business applications and enterprise Service-Oriented Architecture (enterprise SOA), powered by the SAP Net Weaver technology platform. It provides you with insight into the current functional scope of QM with SAP ERP. It also shows how QM functions are integrated in SAP ERP and support the business processes of the supply chain. Quality Management An Integrated Management Approach 50

14 1. Offering a Total Quality Management Solution: The SAP ERP application provides a single, powerful solution that lets you take a comprehensive, broad-based approach to total QM. Far more than a traditional isolated computer-aided quality system or a laboratory information manage-ment system, SAP ERP supports quality processes in any industry. 2. Practice Continuous Improvement: Practice Continuous Improvement You can quickly identify and analyze problems, then rapidly eliminate their root causes. With the quality notifications functionality, for example, you can ensure that all problems and unplanned events are captured directly when they occur, that they are correctly assigned and resolved, and that all actions are monitored for maximum effectiveness. An enterprise service-oriented approach allows employees as well as business partners to create requests or notifications, work together online to record information, dispatch information, and track the processing status of requests providing the full functionality needed to ensure corrective and preventive actions. In addition, the analytic functionality of SAP ERP and the SAP Net Weaver Business Intelligence (SAP Net Weaver BI) component enables you to monitor quality performance and adjust quality strategies to eliminate problems. Using the flexible QM cockpit for evaluations in SAP ERP, for example, you can analyze both online and archived quality management data to support your company s Six Sigma projects. 3. Manage Audit Processes: The audit management functions of SAP ERP let you plan, conduct, and evaluate audits throughout the enterprise. You can perform internal or external audits of systems, processes, products, and environmental conditions; conduct a range of assessments and reviews; and monitor the effectiveness of all corrective and preventive actions linked to quality notifications. All this helps you comply with legal requirements, support benchmarking efforts, and uncover opportunities for improvement. Audit management functions support a wide range of industry standards, such as ISO 9000:2000, QS-9000, Good Manufacturing Practice (GMP), ISO 14011, and ISO Deliver Quality-Related Information Where It s Needed: Where It s Needed Web-based enterprise portal technology and ready-made SAP content give your employees and your partners a single point of access to all the information, applications, tools, and services they need to collaborate on quality initiatives. The easy-to-use, context driven portal increases the reach of your quality management efforts to include both everyday and occasional users in quality processes. For example, quality inspectors can work more efficiently by using the portal to access the specific work list they need to complete each inspection lot. 5. Stand Out at Quality Control: SAP ERP gives you quality control functionality that supports strategic planning, continuous monitoring, and quick problem resolution. The application lets you share quality information and control quality processes across the supply chain. You can plan, conduct, and manage quality inspections and integrate them into processes throughout the product life cycle. You can accurately track results and defect data; record and charge inspection costs; manage and maintain laboratory data related 51

15 to samples, tests, and stability studies; automatically create quality certificates for customers and exchange that information with business partners; and connect, monitor, and maintain test equipment to ensure data accuracy. 6. Internal and External Integration: The openness of the SAP Net Weaver technology platform and the seamless integration of QM with SAP ERP into a complete business solution support you in total quality management and satisfy the criteria for ISO 9000 or GMP. In the integrated SAP Business Suite family of business applications, SAP ERP functions are incorporated into other applications, such as the SAP SCM or SAP Customer Relationship Management (SAP CRM) applications. Project success is generally evaluated in terms of time, cost, quality and scope. The ERP implementation project does not have an impact on ERP benefits while the quality and scope of the ERP system has a significant impact. It does not mean that the progress of the project is not important to the company. It really means that the progress should not hurt the quality of the project because Quality is one of the main predictors of ERP benefits. The question is What should we do to ensure successful ERP implementation? To achieve the ERP project success as described below: To maximize ERP benefits, the company should focus more on the quality and scope of the ERP system matching with the company s needs. For this purpose, well defined functions and the right software are mandatory, similar to increasing usefulness of the system. A more realistic schedule and budget should be planned to minimize the negative effects on the quality of the system. This method can satisfy the company in both progress and quality of the ERP project. Choosing strong consulting partners is required for ERP project success. They can lead the company in the right direction to have a successful ERP implementation in both progress and quality. Internal support is the main determinant of the progress of the ERP project. To complete the project on time and within the budget as initially planned, top management support, training and good project planning are required during ERP implementation. RESEARCH METHODOLOGY Research Plan Research plan represents the systematic flow of all the steps or activities taken to achieve the objectives of the present research. Figure 1 represents a process flow chart to depict the sequence of activities under the methodology adopted in completing the research work. Literature survey is the first step to know the present status of the research and applications of ERP across various manufacturing industries. The literature review has indicated that there are poor evidences on ERP implementation in small scale manufacturing organizations. It was also observed that ERP systems has emerged as one of the most effective business improvement strategies among large industries all over the world. So, in this study, an initiative has been taken to justify the highly useful role of ERP systems for manufacturing industries and effect of various critical success and failure factors. After identification of the research gaps, the objectives 52

16 of the study are formulated. This analysis yielded some useful results which are implemented to improve the existing processes. Finally the conclusions are drawn and scope for future is identified to continue the research in this field. Research Purpose Industries have invested considerable resources in the implementation of ERP systems. The results initially expected have rarely been reached. It becomes apparent that nowadays, results do not live up to the managers expectations. The main purpose of this study is to bring out some relevant elements for the problem of optimization of ERP use. The purpose is also to describe and analyze the factors that Figure 1: Flowchart for Methodology Adopted in Research Work contribute to the successful/unsuccessful ERP system implementations, the stakeholders of ERP system and how these stakeholders are related to CSFs/CFFs of ERP system implementation. This Research also tells how Quality and at what level Quality is improved after ERP implementation. Research Approach The approach of this study provides the understanding of problem through research instruments/tools that are oriented towards determining/ finding/analyzing the fact and giving significance to the context and usage. The manner of the research approach chosen for this study is of a qualitative nature, where data collection consists of thorough literature review, secondary data review of documentation regarding the CSF s and Data Quality Issues in ERP implementation, observations and interviews. In order to carry out the above mentioned tasks a multi-channel survey consists of various factors and the questionnaire is adapted from prior literature. Research Strategy In the survey questionnaire information was asked on ERP implementation and current use in the industry: the respondents and the industry characteristics, the ERP project characteristics and initial contributors (budgets, timelines, user satisfaction, performance measures, benefits, operational disruptions etc.), CSF s, quality issues, organizational characteristics (during and after deployment), needs of improvement/ evolution and Post-go-live diagnostic. The responses were encoded using a mix of check boxes, open ended answers and a binary scale with yes or no responses. The amount of openended questions allowed appreciates numerous details. Given the length and comprehensive 53

17 nature of the survey, this response rate was concluded to be reasonable. The Actual Survey After designing the questionnaire with the help of industry people, the seventy questionnaires were sent to different industries, out of which twenty responded and finally sixteen responses were taken for the analysis purpose as the response received from four industries was incomplete. The questionnaire used is attached as an Annexure-B. SURVEY QUESTIONNAIRE AND RESPONSES FROM EACH COMPANY Survey Questionnaire Section A: Organization Structure Q: 1 Please state your principal area/region of business? Hong Kong Mainland China India Other Countries, please specify. Q: 2 In which Sector your organization Proprietary? Private Ltd. Publicly Listed Q: 3 Which Industrial sector your organization belong to? Automobile Manufacturing Pharmaceutical Infrastructure Food and beverages Other, please specify. Q: 4 Please Describe the Size of your Organization? Small Medium Large Q: 5 Do you want to implement a ERP system across the organization? Yes No Section B: ERP Implementation Q: 6 What are the Key Business drivers behind the ERP implementation? Fear of failure Directors about missed deadlines Budget over-runs Others Q: 7 What were the major goals of implementing ERP in your industry?( You may tick more than one, if applicable). To Achieve goals Be an ERP implemented company Customer s Satisfaction To Proceed Other(s) if any please specify... Q: 8 Were the outcomes after implementation of ERP in your industry effective or noneffective? Yes No Q: 9 Name ERP software used by your industry SAP 54

18 ORACLE BAAN Other Q: 10 What Percentage of results were observed after implementation of ERP in your industry? Up to 25% 26% to 50% 51% to 75% 76% to 100% Q: 11 Which was the most complex stage of ERP implementation? Scheduling Design Modify Execution Q: 12 What Time was spent on implementation of different ERP phases? Scheduling Design Modify Execution Q: 13 Did your trade improve with ERP implementation? Yes No Q: 14 To what extent Production processes improved after ERP implementation? Up to 25% 26% to 50% 51% to 75% 76% to 100% Q: 15 What was end users respond after ERP implementation? Cooperative Uncooperative Q: 16 Was there any interruption in ERP implementation? Yes No Q: 17 What are the reasons behind delaying ERP implementation in your company? Useless funds Workers conflicts Other(s).. Q: 18 Did you hire any expert for ERP implementation in your industry? Yes No If yes, give Name of expert. Q: 19 What was the nature of funds for ERP implementation? Fixed Unlimited Q: 20 Estimated Cost spent on ERP implementation... Q: 21 Does Management remain helpful during ERP implementation? Yes No Section C: Critical Success Factor Q: 22 From your experience, what do you consider to be the organizational critical 55

19 success factors of an ERP implementation? Redesigning business processes to fit software Organizational commitment to change Integration with software Adequate internal expertise Adequate mix of internal and external human resources Sufficient standardization and discipline Avoiding technical bottlenecks Avoiding conflict with business strategy Clearly stating scope of project Clearly stating project timeline Assigning role/responsibilities for functional areas Others - please specify: Q: 23 From your experience, what do you consider to be the functional critical success factors of an ERP implementation? Preliminary business analysis Fit between software and business processes Aligning project objectives and strategic business goal Training and re skilling Acknowledging change management Obtaining full time commitment of users Dealing with organizational resistance Effective communications Justifying project expectation and objectives Others, - please specify: Q: 24 What percentage of implementation objectives were achieved? (Objectives such as Integrating/streamlining business processes, information sharing, improving productivity etc.) 0-20% 20-80% 40-60% 60-80% % Q: 25 On the basis of your response to the above question, please state how much each Critical Success Factor (CSF) below contributed to your answer above (example: if you stated 80% Objectives achieved, your answ er maybe CSF1 contributed 10%, CSF2=35% and so on adding up to 80%) CSF1 - Management Support CSF2 - Project Management CSF3 - Data/Infrastructure CSF4 - Users Response Table (Table 1) CONCLUSION This Research identifies that ERP is not only a showoff but also it is a Easiest way to increase the productivity and to improves the quality. CSF s and Quality Issues are the most important factors for successful implementation of ERP. The CSF s for successful implementation of ERP are Clear understanding of strategic goals, Commitment by top management, Organizational change management, Excellent project management, A great implementation team, Data accuracy, Extensive education and training, Focused performance measures, Multi-site issues. The implementation of ERP improves the firm s 56

20 Table 1: Response of Each Question by Different Industries S. No. C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C