The ERP Systems in Czech Republic A strategical innovation

Transcription

1 The ERP Systems in Czech Republic A strategical innovation José Arnaldo Cardoso Monteiro de Melo I. Introduction Nowadays it is possible to verify that the global tendencies of the market pointed out to an emergency of digital economy in which the cadence of the appearance of new challenges and opportunities are incoming more and more. We are in a world that each enterprise can compete in a global market, it doesn t matter its dimension. It makes that each organization faces today new markets, new competitors, and consumers well informed and very strict. So the enterprises are forced to search new models of business and strategies to assure its survival and to obtain better profits. In front of scenery characterized by the development of competitiveness in the markets and by the constant search of information fast and precise to its management necessities, the enterprises have appealed to a fundamental element: the effort of information integration among their different activities. Growth now depends on the ability of businesses to innovate. Innovation is no longer regarded as the exclusive preserve of the research and development department. Instead, many businesses see that innovation must become part of the core competency of every part of the organization and its network of business partners. Business leaders today put a value on activities that encourage innovation. A new generation of innovation management software is emerging to support these leaders, cultures, and processes as like as the application of the ERP - Enterprise Resource Planning. ERP presents itself as being one of the most important tools in the management, based by a complex system of computers gives information and the necessary knowledge to the organized management allowing it different stages of competition. An ERP system is a packaged business software system that allows a company to automate and integrate the majority of its business processes, to share common data and practices across the entire enterprise, and to produce and access information in a real-time environment. We can see this kind of solutions essentially in determinate industry s sectors and have more implementation in large and medium-size companies. Adoption of ERP/no ERP VS Company's Dimension Anual Turnover (Millions EURO) 50,0% 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% < >750 Without ERP 13,6% 0,0% 18,2% 0,0% 2,3% 0,0% With ERP 4,5% 2,3% 31,8% 11,4% 13,6% 2,3% Without ERP With ERP

2 II. Methodology The purpose of this study is to analyse the consequences of the ERP implementation system of integrated management in the enterprises organisation in Czech Republic. To know these consequences an survey was sent it enquired a representative sample of the Czech enterprises that might be interested in the use of the ERP system of integrated management. To collect information about the changes in the enterprises organization I enquired people who are responsible for each enterprise linked to the ERP implementation. The survey is divided into two parts, the first is linked to the enterprise identification and the second is linked to the management project. The main purposes of this work are: Find out the special characteristics of the enterprises that adopt ERP systems. Find out the reasons why enterprises adopt these systems. Find out the critical factors of success associated to these implantation and the main difficulties. Find out the effects and the development felt by its implementation. Analyse the great differences between the data of the two countries and finally find out the possible causes of some factors linked to the information in the inquiry. In the study the quantitative investigation was used, it is the most used technique to analyse the market; its purpose is to obtain quantitative estimates being based on statistics for study how, who, where and when. The phases used by this type of investigation are: the creation of the sample and survey and the data processing. The population used as base of this survey come from the biggest enterprises in the Czech Republic mainly based in two criterions: turnover and number of employees. To create the sample it was used the software Kompass and with these criterions it was possible to obtain a list of 1814 enterprises located in Czech Republic in a world of enterprises divulgated in the software. With the dispatch way chosen, the electronic mail, the inquiries sent with success, we have a rate of answers in the order of 4%. The expected to a study sent by usual port (mail by letter) is about 10%. III. Analysis of the Results As the selected enterprises in the study are between the biggest ones, in Czech Republic, it was expected that they had already adopted an ERP system, which has been proved. So, 66% of these ones had already got it or they were in the phase of implementation, or project of an ERP system. In a first analysis between the relation of the enterprises dimension and the adoption of an ERP system, it demonstrated that the turnover has the greatest factor of correlation, 65.1%, with the adoption of an ERP, than the number of employees, 57.8%.

3 Adoption of ERP/no ERP VS Company's Dimension Anual Turnover (Millions EURO) 50,0% 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% < >750 Without ERP 13,6% 0,0% 18,2% 0,0% 2,3% 0,0% With ERP 4,5% 2,3% 31,8% 11,4% 13,6% 2,3% Without ERP With ERP In the sample was evident that there is in the sector of Manufacturing Industries and Automotive Industries as like as Chemical Industries, that the implementation of these solutions has more acceptances. I already expected it as the ERP implementation systems is more associated to the Industrial Sector. The main motives that lead the enterprises to adopt ERP system have varied throughout the time. From motivations of technical characters like the problem of the Year 2000 to business motivations like the reengineering of business process are some of the reasons that have contributed to the selection of this type of solutions. In the sample, the main reasons of change are the standardisation of the system and a great desire to Obtain and/or keep a competitive position in the market. It s important to say that the Transition to the year 2000, and the Reorganization of the enterprise were not motives to implement ERP system to the most part of the enterprises. Among those that answered Others and specified which was the motive, the only answer obtained was the Reduction and/or control of costs, an answer however with only 18%. So, we can say that are technical reasons, operational and strategic reasons that lead these enterprises to adopt an ERP system. The duration of the installation is a fundamental point but it is very common that the date is often calculated wrongly. The installation of the system is a great adventure as we can see by the answers in 64% of the cases the installation lasts less than 18 months. This is always a difficult question because to define the beginning and the end of a project it is a hard task. Implementation of an ERP is a major investment and commitment for any organization. The size and complexity of the ERP projects are the major factors that impact the cost of ERP implementations. The costs of many ERP projects budget run over 12 million Euros for example. The costs of installation, integration, customization, data migration, user craning generally run about two to three times the original cost of the packaged ERP software.

4 From the results obtained 82% of the enterprises told that they spent less than 8 millions of Euros with the ERP implementation. About 40% of these spent between 1.6 and 7 millions Euros. Companies costs with ERP system (millions of EURO) 40% 14% 5% 5% 14% 22% Less than 0.3 From 0.3 to 0.7 From 0.75 to 1.5 From 1.6 to 7 From 8 to 15 Not estimated ERP is supported by multi-module application software that integrates activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, to order tracking. ERP can also include application modules for the finance and human resources aspects of a business. We can see in the table below the results obtained. Speaking about the installed modules, the ones of Financial area and accountancy, such as the Production planning, followed by the Material management modules were the most important. These conclusions were not unexpected because the financial area is the one who has the most normalized process throughout the world, so it is easier to implement these modules. About the strong implementation of the Production planning module, it is because the fact that the majority of the companies belong to sectors where this module is extremely useful, as like as, Manufacturing Industry, Chemical Industry and Automobile Industry modules. The management of the project in most of the enterprises in the sample, 50%, passed by a join approach, it means, the management of the project between the enterprise and one of consultation. About 32% decided to do it in an independent way. About the way of ERP implementation, 46% of the enterprises told that adopt the implementation together with a consultant; 36% told that they did it together with the supplier. But 9% of the enterprises told that the consultant supervised the ERP implementation system. Other interesting answer is that no enterprise decided to give all work to a consultant, which demonstrated the importance of ERP implementation to an enterprise. After deciding about ERP implementation system, the enterprises face a new problem, which ERP acquirer. In this question I tried to find out the main motives to choose ERP. Among the different criterions, those who are more important are the Functional criterions with 68 % of the answers. The other one are the Cost criterions, one answer expected. In a way, we can relate this answer with that given before in the strategy of the ERP system acquisition, when the majority of the

5 enterprises answered that they would integrate different modules of different systems. So the functional criterions are the most important to the enterprise choice. Most of enterprises, 59 %, have opted for a composed configuration, only by software, and among them, the chosen was SAP R/3. Second appears the Oracle system. This data of the sample follows that I have mentioned back, when I spoke about the distribution of ERP system in the world, where SAP has the biggest quote in the market with 32 %, followed by Oracle system with 10%. The often enterprises, 41 %, have chosen the installation and use of multiple software together, such as, Cim +, SFC (Shop Floor Control System), Skylass, ORSOFT, i2fp, SAP, or even ERP systems created only for the enterprise. The top manager s and the future users of the system engagement it is a very important factor to the success of the ERP implementation. According to the answers of the enterprises, 55 % told that the project was presented totally to the workers; the others 46% have chosen the present it partially. It is important to say that the enterprise in a way or in the other, have presented the project to their workers. The results show that the difficulties in the ERP implementation, because there is always resistance to the change, so it is essential to motivate those who participate, not only in the implementation, but also in the future use of the system. And a way to motivate those who will use the ERP system is to participate actively in the implementation of the system. In the next table we can see all the data about the participation of the workers and consulting enterprises in an ERP implementation. Internal External with External without External C onsulting C onsulting Total with W orkers's involvement 32% 36% 68% without W orker's involvement 32% % TO TAL 64% 36% 100% An ERP is nowadays a tool of great importance for companies. Among others objectives, it is responsible for processes integration. The ERP implementation is a long project, which can present several kinds of problems. The previous knowledge of the possible problems can be of fundamental importance to take preventive actions or even to adopt more adequate procedures. Problems Found Percentage Conflicts, social problems 18,2% Useless functions and tasks 54,5% Fear of using the software 45,5% Exchanging data between the new software and the old information system 63,6% Decisions on files and data to be converted between the software and the old system 54,5% Decision of physical and conceptual data divided between the software and the old system 18,2% Redundancies of information 27,3% None 0,0% Others 18,2%

6 There are many ways that an ERP system can help an organization. First, an organization s operating costs can be reduced. An ERP system integrates all parts of an organization so that it has more control of its operation. Also, an ERP system increases the organization s time efficiency. Since all the parts are now connected and integrated with each other within an ERP system, people use less time to perform tasks. Additionally, people now have more and faster access to their information, which improves the time and resources for decision making. The most important changes felt by the enterprise were Company s restructuring, and Changes of task. Redistribution of the staff it was also a change felt, but with less importance. As we spoke about the improvements felt after the implementation and that can be many, that who was seen as being the best, it was the Availability of information with 68%. Other improvements felt in bigger number were: Integration of industrial and management processes, Improvement of the quality of the information and Improvement in finance management, all with 55%. IV. Conclusions After having done this study about the use of ERP systems in Czech Republic I can see that the ways that lead enterprises to decide and implement ERP system are hard and it supports huge varieties, often difficult to deal. As the enterprises selected in the study are among the biggest in the Czech Republic, it was not a surprise that 66% of them had already had contact with the reality of the ERP systems. These enterprises adopted these solutions because of the normalization of the system and a desire to obtain or to keep a competitive position in the market. The enterprises search the simplification and standardization of the business process as the normalization and integration of information, important condition to reach a competitive position in the market. There are several changes felt by the enterprises after being implemented an ERP system. Between the most important are Company s restructuring, and Changes of tasks, which confirm the organizational change that an ERP system imposes to any organization. The major improvements felt by the enterprise are Availability of information as like as Integration of industrial and management process, Improvement of the quality of the information and Improvement in finance management. After being implemented the system we can trust on data, which are checked in real time without redundancy of information. So the enterprises can produce in a more efficient and quick way. There are so many advantages of an ERP system, beyond the productivity improvement, there will be given more attention to the clients with less time of answers are better assistance; improvement in the communication; clear information; a better management of the products; improvement of operational planning; reduction and more control in the different costs in the enterprise among others advantages.

7 But, as everything in life, an ERP system is not perfect. We also found some disadvantages such as: the changes resistance by the users, all costs linked to the system implementation or the dependency to the supplier if a module is not available by any motive and it compromises the others and the enterprise stop its activities. Based on ERP sales, the width of its implementation in various industries over the past few years, and estimated business trends, ERP systems will continue to play a critical role in a company s infrastructure. ERP systems, after all, provide the foundation by which business intelligence, customer relationship management, and other strategic initiatives are realized. System implementations and upgrades do involve many risks. If ERP systems are not properly implemented with the right scope, approach and staffing, they may very well mean disaster for a company. However, if ERP systems are planned and implemented correctly, the benefits may certainly exceed all expectations and provide a company with an excellent platform for future growth and expansion. Despite the low number of answers I can say that ERP, in the Czech Republic market, seems to be indispensable to the enterprise in order to follow the market and to reach a competitive position. The purpose of the enterprise it is not to put the software in production but improve the business using technology of information. More than a change of technology, the adoption of ERP systems implies a process organizational change. V. REFERENCES ARAMBULO, J.L., Improving Productivity with ERP Systems. Article published by Ernst & Young, 2003, available in: ERP_systems. DAVENPORT, T.H., Putting the enterprise into the enterprise system, Harvard Business Review, p , July-August FERREIRA, A.C. ; SILVA, G.G., Um sistema de Gestão Empresarial baseado no conceito de ERP, Universidade Católica de Pelotas, Brasil, 2004, available in: - AUGUSTO C FERREIRA & GUILHERME G DA SILVA.doc GIBSON, N. ; HOLLAND, C.P. ; LIGHT, B., Enterprise Resource Planning: A Business Approach to Systems Development. Article published by IEEE Computer Society, 1999, available in: INMON, W.H., Sap and Data Warehousing. Article published by Kiva Productions, 1999, available in: KAVAN, M., Management Study Guide, textbook CTU, Prague, KLEIM, R.L. ; LUDIN, I.S., Project Management Practitioner s Handbook, U.S.A., Amacon Books, KOCH, C., The ABCs of ERP, Article published by CIO.com, 2002, available in: - erp_abc.

8 NAH, F.F.; LAU, J.L.; KUANG, J., Critical factors for successful implementation of enterprise systems, Business Process Management Journal, Vol.7 No.3, 2001, pp José Arnaldo Cardoso Monteiro de Melo Department of Management Porto Engineering University Portugalsko