ERP Implementation. Different phases and related issues

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1 Volume 1, No. 11, January 2013 ISSN The International Journal of Computer Science & Applications (TIJCSA) RESEARCH PAPER Available Online at ERP Implementation Different phases and related issues Praseeda Manoj Dept. of Computer Science Muscat College Sultanate of Oman Abstract An Enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve that goal. Planning is required to manage all these resources. Therefore Enterprise Resource Planning (ERP) is a method of effective planning of all the resources in an organization. In IT industry, ERP Software has been designed to model and automate many of the basic process of a company, from finance to the shop floor with the goal of integrating information across the company and eliminating complex, expensive links between computer systems that were never meant to talk to each other. Installing an ERP system helps to eliminate the limitation in legacy systems and provides a flexible, integrated and real time decision support to improve the business performance. This paper attempts to analyse the different phases and methodologies of the ERP implementation along with various issues. Keywords- ERP, Implementation, Small and Medium Enterprises, BPR. 1. Introduction Enterprise Resource Planning (ERP) packages are initially targeted at the manufacturing industry and consisted mainly function for planning and managing core business activities. Now a days adaptation not only to the manufacturing industry, but also to diverse types of industry has become possible and the expansion of implementation and use has been progressing in a global level. A circumscribed ERP system isn t much better than the legacy system it replaces. In many cases it is worse because the old code at least was written specifically for the company and the task. ERP system s generic processes produce the dramatic improvements that they are capable of only when use to connect parts of an organization and integrate its various process seamlessly. There is no doubt that the market for ERP systems is in great demand. Industry analyses are forecasting growth rate of more than 30% for at least next 5 years. The answer for many companies replacing their key business system is: To enable improved business performance To support business growth requirements. 2012, - TIJCSA All Rights Reserved 59

2 To provide flexible, integrated, real-time decision support. To eliminate limitation in legacy systems. To take advantage of the untapped mid-market. 2. The Advantages of ERP Installing ERP system has many advantages both direct and indirect. The direct advantage includes improved efficiency, information integration for better decision making, faster response time to customer queries etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction and so on. Some of the direct benefits of an ERP system are: Business integration Flexibility Better analysis and planning capabilities Use of latest technology The most important advantage lies in the promotion of integration. The reason why ERP packages are considered to be integrated is the automatic data updation (automatic data exchange among applications) that is possible among the related business components. ERP package provide the flexibility to cover different languages, currencies, accounting standards and so on in one system, and functions that are comprehensively manage multiple location of a company globalization and system unification. Another advantage is the boost of the planning functions. By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilize many types of decision support systems and simulation functions. Next advantage is the utilization of the latest developments in information technology (IT). The ERP vendors very quick to realize that in order to grow and sustain the growth, they had to embrace the latest developments in the field of IT. 3. Why ERP packages being used In regard to the application packages, many products have been developed thus far and are selling well. So, how do conventional application packages and ERP package differ? The first answer to this question is that ERP packages can not only handle individual business functions such as accounts and inventory, but also the entire range of business functions necessary for the company s operations. The second difference is that ERP package are targeted at everything from small businesses to the largest organizations and that they can be composed of a highly flexible decentralized database and an information system cluster linked by a network. The third difference is the global adaptation, represented by ERP package s multilingual and multi-currency capacity. 4. Obstacles in the implementation In the isolated information system each department decided what system they needed to buy and went ahead accordingly. But the ERP system is for the entire organization. The 2012, - TIJCSA All Rights Reserved 60

3 system needs the support of all departments and users, in addition to a strong commitment and support from the top management. Getting all the various departments to agree on a system is one of the most difficult tasks that the ERP coordinator is going to face. When the new system will be introduced, there will be a fear that the system will replace existing jobs, as many functions will be automated. Hence job profiles will change, job responsibilities will undergo drastic alterations, and people will be forced to develop new skill sets. If these fears are not addressed and elevated well in advance, then it will be asking for trouble. It should be worth noting that while the ERP systems eliminate many existing jobs, they create many new ones. It is easy to see that the automation of the business processes through technology can eliminate the jobs of many employees whose function is to record, control, calculate, analyse, file or prepare reports. But it must be pointed out to the employees that the same automation creates many more opportunities for them because they can get away from the monotonous clerical work and transform themselves into highly valued individuals in a new and challenging work environment, using the most modern technology. If the company can succeed in making its employees accept this fact and assist them in making the transformation, then the major obstacle in the path of an ERP implementation is solved. 5. ERP Implementation Life Cycle Figure -1 ERP Implementation life cycle different phases The different phases of ERP implementation are given below. i. Pre-evaluation Screening Once the company has decided to go in for the ERP systems, the search for the perfect package starts. Analysing all the available packages before reaching decision is not a viable solution. It is also very time consuming process. Hence company should do a preevaluation screening to limit the number of packages that are to be evaluated by the 2012, - TIJCSA All Rights Reserved 61

4 committee. It is always better to find out how the different packages are performing in different environments. It is generally accepted that most ERP packages are stronger in certain areas than in others, and each one is trying to add functionality in areas where they have been lacking. For example, PeopleSoft is strong in HR and less in manufacturing; Baan, on the other hand, is stronger in manufacturing than in finance and so on. While making the analysis it would be a good idea to investigate the origins of the different packages. ii. Package Evaluation The evaluation process is one of the most important phases of the ERP implementation, because the package will decide the success or failure of the project. Since ERP system involves huge investments, it is not an easy task to switch to another one. Once the packages to be evaluated are identified, the company needs to develop selection criteria that will permit the evaluation of all the available packages on the same scale. To choose the best system, the company should identify the system that meets the business needs such as functional fit with the company s business process, integration between the various components, flexibility and Complexity, quick implementation, ability to support multi-site planning and control, client-server technology and security, regular upgrades, customization and total costs. iii. Project Planning Phase In this phase, the details of how to go about the implementation are decided. This phase will decide when to begin the project, how to do it and when the project is supposed to be completed. The project planning is usually done by a committee which will review the progress and chart the future course of actions. iv. Gap Analysis Gap Analysis is the most crucial phase for the success of the ERP implementation. This is the process through which companies create a complete model of where they are now, and in which direction they want to head in the future. That is to design a model, which both anticipates and covers any functional gaps. It has been estimated that even the best ERP package could not meet the company s full functional requirements. The uncovered requirements present a problematic issue for the company s business process reengineering. v. Reengineering This is the phase that the human factors are taken into account. In ERP implementation settings, reengineering has two different connotations. The first connotation is involving the use of ERP to aid in downsizing efforts. Some of the occasions ERP packages will be purchased with the aim of reducing the number of employees. It is best to treat ERP as an investment as well as cost cutting measure, rather than as a downsizing tool. The second use of business process reengineering (BPR), refers to an ERP implementation model initially designed and used with big consulting firms. The BPR approach to an ERP implementation implies that there are two separate, but closed linked implementations involved on an ERP site: a technical and a business process implementation. The BPR approach emphasizes the human element of necessary change within organizations. This approach is more time consuming. But adherents of the BPR approach to ERP would 2012, - TIJCSA All Rights Reserved 62

5 argue that there is no way that you can ignore the human element in an implementation that involves significant changes in responsibilities. vi. Configuration This is the main functional area of the ERP implementation. ERP consultants configure and test the prototype, they attempt to solve any logistical problems inherent in the business process engineering before the actual live implementation.. Configuring a company s system reveals not only the strengths of a company s business process but also shows its weakness. Configuring the system is able to explain what won t fit into the package and where the gaps in functionality occur. So people with such skills should be assigned to these tasks. In large implementations, the functional configurations are split between the different areas within the company, so some will attend to HR, some will be involved in financials and so forth. vii. Implementation Team Training and Testing This is the phase where the company trains its employees to implement and later run the system. After the successful implementation, company should have good in house team that can handle various issues in the ERP running system. Thus it is very vital that the company recognizes the importance of this phase and select those employees who have the right attitude and good functional knowledge. In testing phase, different modules have to be tested. The test cases must be designed specifically to find the weak links in the system and these bugs should be fixed before going live. Once the technical and functional prototypes are fully configured and tested, the system is ready to go for live. By the time, End user training has to be given for the employees who are going to use the new system viii. Post-implementation To reap the full benefits of the ERP system, it is very important that the system should get enterprise wide acceptance. There should be enough employees who are trained to handle the technical problems as and when required. The system must be upgraded when new versions or new technologies are introduced. The post-erp organization will need a different set of roles and skills than those with less integrated kinds of systems. 6. Problem areas in ERP implementation When installing an ERP system, the most important thing is the attitude reform of the employees at all levels of that company. How managers use information systems and information technology as strategic management methods is likely to become the turning point of the change. The most important point for the purpose of ERP s success is for company executives to have definite timetable. IF time schedules and deadlines are not set and adhered to, then it must be borne in mind that not only the ERP implementation, but anything that the company attempts to do will be in vain. Al so there are many misunderstandings caused by wrong estimates if the implementation costs are estimated based on the figures from in-house development and implementation, the chances are that they would be wrong because developing and implementing a solution within one s own company is normally less expensive. In the case of ERP implementation, there are 2012, - TIJCSA All Rights Reserved 63

6 substantial additional costs that are necessary, such as consultation, customization, training and education. 7. Success full ERP implementation The most important step of ERP implementation is the phase called Gap analysis, which is the step of negotiation between the company requirements and the functions, a package possesses. In order for persons with differing viewpoints involved in a project to function as a team, and to push ahead smoothly, it is effective to invite outside consultant with wide experience in package implementation to the user side, such persons can be assigned the role of co-ordinator between the package vendors and the system integrators. This consultant can act as a neutral person to resolve conflicts and can push the project ahead, while giving direction on the whole. The First important point is clearly defining the company objectives and targets and making these known and recognized throughout the entire company. Next the manner in which the company management is involved in the project and speed of decision making is important. Last is selection of experienced consultants and integrators. Unfortunately, in the present state of affairs, getting experienced experts could be difficult. This is because there are few experienced persons and too many projects. The best way to solve this problem is to select employees with the right aptitude, commitment and functional knowledge to get them trained and make them work along with the external consultants. This will leave the company with enough in house consultants and integrators when the vendor s staff and external consultants leave the scene. 8. Future of ERP packages In order to enable faultless package selection and implementation, one has to collect and grasp a broad range of accurate information, organizing necessary common functions and putting them into modules will minimize customization during the implementation, and eliminate work and cost. Also, establish and master the implementation methodology necessary to enable promotion of an efficient implementation project. One company alone cannot possibly realize these in a short time frame. It is difficult to conceive the core business reconstruction by just one company without the support of an integrator. Who will coordinate the activities of the various parties involved like organization, consultant, vendors etc. and in terms of improved package functions and implementation project promotion, efforts on the part of vendors have a major influence. The most important point in favour of using these packages is their ability to adapt to version upgrades of the packages themselves. In core business systems especially, adaptation to the latest version cannot be ignored. Otherwise, it will mean that with new systems, much money has been spent in constructing legacy systems with no flexibility and short life times. The selection of packages that are constructed so as to require minimum customization and whose customized portions are guaranteed also for new versions is important in this respect. 9. Conclusion 2012, - TIJCSA All Rights Reserved 64

7 It is recognized that commitment of top management is one of the most important elements in the successful implementation of ERP system. Top management provide sufficient financial support and adequate resources for building a successful system. Though Implementing ERP package is a complex and costly under taking, the cloud era provide companies to save on IT infrastructure such as hardware, middleware, network, database, operating system etc. 1. References [1] A Frederic Adam, David Sammon, and Fergal Carton, Project Management Issues in Implementing ERP Towards an Approach more Suited to ERP Projects University College Cork. [2] Neville Turbit, ERP Implementation The Traps [3] Carl Marnewick and Lessing Labuschagne, A Conceptual Model for Enterprise Resource Planning (ERP), Information Management and Computer Security, Vol.13, 2005, pp [4] Project Management Framework, the Ohio State University [5] [6] Alice Hsu, Manage Your Way to ERP Implementation Success! [7] Al-Mashari,M., Al-Mudimigh, A and Zairi, M.(2003), Enterprise Resource planning: a taxonomy of critical factors, European journal of perational research, Vol 146. [8] Falkowski, G., Pedigo, P., Smith, B. and Swanson, D. (1998), ``A recipe for ERP success,beyond Computing, pp [9] Vilpola, Inka Heidi (2008). "A method for improving ERP implementation success by the principles and process of user-centred design". Enterprise Information Systems 2 (1): [10] Alexis Leon ERP Demystified Tata McGraw-Hill Publishing compamy Limited, New Delhi, [11] Chen, R., Sun, C., Helms, M.M.and Jih, W. (2008), "Role negotiation and interaction: an exploratory case study of the impact of management consultants on ERP system implementation in SMEs in Taiwan", Information Systems Management, Vol. 25 No.2, pp [12] Vijaya Kumar et al. (2010), Application of Analytical Hierarchy Process to Prioritize the Factors Affecting ERP Implementation, International Journal of Computer Applications ( ) Volume 2 No.2. [13] S. Sadgopan, ERP A Managerial Prospective Tata McGraw-Hill Publishing compamy Limited, New Delhi, [14] Stein T. (1998) Extending - companies that don't use enterprise resource planning software to share information may regret it. Issue 686. InformationWeek. (June). [15] [16] Brown, C., and I. Vessey, "Managing the Next Wave of Enterprise Systems: Leveraging Lessons from ERP," MIS Quarterly Executive, 2(1), 2003 [17] [18] Thomas H. Davenport, "Putting the Enterprise into the Enterprise System", 'Harvard Business Review', July August 1998 [19] [20] [21] , - TIJCSA All Rights Reserved 65

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