ERP: Implementation Procedures and Critical Barriers

ERP: Implementation Procedures and Critical Barriers

Vijay M Khaparde1 (Research Scholar-SPCE, Mumbai Univ., Mumbai) Faculty in K J Somaiya COE,

Mechanical Engineering Department.

Dr. S M Khot2

(BOS Chairman, Mumbai Univ., Mumbai & Principal (Fr. Agnel COE,Vashi).

Abstract – ERP is nothing but Enterprise Resource Planning. It is a MIS (Management Information System) and is the backbone of IT (Information Technology). The purpose of the research paper is to implement the procedures and to find out the critical barriers of implementation of ERP system. The result of the paper lies in the effective implementation of ERP system with the identification of barriers and methods to be deployed to minimize those barriers.

Some of the critical barriers include Technology barriers, Change Management, Geographical Barriers, and Lack of Top Management Support etc. The conclusions of this paper states that ERP is an integrated system which combines all the departments of an organization and is used to reduce the cycle time operation and to increase the effectiveness of an organization.

Keywords: ERP (Enterprise Resource Planning), MIS (Management Information System), Backbone, IT (Information Technology), Barriers.

INTRODUCTION

1. WHY ERP?

   As everybody knows ERP (Enterprise Resource Planning) is integrated software which is used for business management system. Among the most important attributes of ERP are its abilities to automate and integrate business processes, enable the implementation of best business practices, share common data and

   practices across the entire industry and produce and access information in real time (Soh et al., 2000; Nah and Lau, 2001), and often the implementation of ERP has been linked to business process re-engineering (BPR) (Koch, 2001a; Subramaniam et al., 2009). During the 1990s ERP systems became the de-facto standard for the replacement of legacy systems in large industries, particularly multinationals (Shanks, 2000).

   ERP is necessary because it is an integrated system used in industries all over the world to reduce the cycle time of operation and increase the efficiency of an organization. It also improves the communication and information required.

2. THE EVOLUTION TOWARDS ERP

   During the past decade, ERP has attracted attention from both academic and industrial communities (Shehab et al., 2004) and one feels that now is an opportune time to ask how the ERP has evolved and what its present state is (Chen and Hirschheim, 2004). However, several scholars have already argued that research on ERP has reached some maturity (Botta-Genoulaz et al., 2005; Moller, 2005) and others have argued that the studies in ERP systems constitute a separate research domain (Moller, 2005). None of these researchers seem to have statistical documentation for their statements, and one would like to investigate whether they are right. This will be accomplished through a exhaustive literature study of more than 100 peer-reviewed journal publications published from 2000 to 2015. We have chosen to analyze the papers published in various disciplines and journals, and have not limited ourselves to papers published only on, e.g. information systems, accounting and operation management.

   An extensive number of papers have included literature studies focusing on specific aspects of ERP, e.g. business process re-engineering (BPR) (Subramaniam et al., 2009), critical success factors for the implementation of ERP (Al Mashari, 2001; Nah and Lau, 2001, Al-Mashari et al. 2003), where papers are analyzed according to established frameworks. However, only a limited number of literature reviews have been carried out on the ERP research field (Esteves and Pastor, 2001; Cumbie et al.,2005; Esteves and Bohorquez, 2007), only included papers within limited and/or out-dated time frames (Botta-Genoulaz et al.,2005) or not made their method for collecting papers to be included in the review explicit to the reader (Shehab et al.,2004). Even though these reviews bring about some insight into the ERP field, none of the reviews focused on the entire ERP field until 2009.

   The purpose of this paper is twofold. The first objective is to write about implementation procedures of the ERP system and second objective is to identify the critical barriers while implementing this ERP system in Indian Industries.

3. THE PROMISE AND PITFALLS OF ERP WHY THE IMPLEMENTATION PROCEDURE

   (PROCESS) MATTERS:

   Enterprise systems (ERP) appear to be a dream come true. The commercially available software packages promise seamless integration of all information flows in the company financial and accounting information, human resource information, supply chain information and customer information.

   A successful ERP project can cut the fat out of operating costs, generate more accurate demand forecasts, speed production cycles, and greatly enhance customer service all of which can save a company millions of rupees over the long run. ERP systems reportedly also lead to improved cash management, reduction in personnel requirements, and a reduction in overall information technology costs by eliminating redundant information and computer systems. Therefore, the implementation process matters.

   The pitfalls of the ERP are its high cost package or package cost which is sometimes not affordable to all the organizations particularly small industries. Another pitfall of the ERP system is lack of training to the users. The hands on training to the users are essential in effectively implementing this ERP system in Indian Industries. Poor integration planning and testing are the biggest pitfall in ERP system.

4. IDENTIFIED BARRIERS DURING THE ERP

   IMPLEMENTATION:

   In doing so, following barriers have been identified during the ERP system implementation. They are listed as below.

   1. Lack of Clear Understanding of strategic goals.

   2. Lack of commitment by top management.

   3. Lack of excellent project management.

   4. Lack of organizational change management.

   5. Lack of great implementation team.

   6. Lack of data accuracy.

   7. Lack of extensive education and training.

   8. Lack of focused performance measures.

   9. Lack of multi-site issues, and

   10. Lack of technological resources.

   Apart from the above barriers, some more barriers have been identified during the ERP system implementation which is as under.

   1. Technological Barriers includes technology,

   2. Geographical Barriers includes geography, location etc.

   3. Knowledge Gap includes gap between present and future generation, and

   4. General Barriers includes lack of training to the end users, lack of top management support, lack of appreciation / motivation / morale, lack of incentives, lack of belongingness, lack of preparedness, lack of financial resources, lack of MIS, lack of IT resources, lack of networking etc.

5. ERP SYSTEM SELECTION

   ERP (Enterprise Resource Planning) system selection depends on the various factors or parameters of an organization.

   1. Scope of work / Nature of work

   2. Financial resources availability

   3. Viability of the project / Feasibility of the project

   4. Management policy / guidelines

   5. Technology

   6. Geographical factors and environmental conditions

   7. Change management

   8. Knowledge management

   9. General factors

   Cost of the ERP software package

   10. User friendliness of the module / package

   11. Requirements of the module (in particular organization)

   12. Flexibility

   13. Govt. policy, regulation and control

   14. Usage and time required to run the system

   15. Integrated software

   16. Nature of demand

   17. Local and Global competition in the market

   18. Market survey research about the system & its report

   19. Authenticity of the software package, etc.

   Thus, ERP system selection depends on the above mentioned factors. For healthy and effective implementation of ERP system in an industry, most of the above factors should be fulfilled and should be taken into account. Therefore, ERP system selection is very important in effective implementation of the system in Indian Industries.

6. IMPLEMENTATION STEPS

   Overall, there are five stages or steps of ERP implementation.

   1. Project Preparation Phase

   2. Requirement Gathering

   3. Business Blue Printing (Print)

   4. Realization Phase

   5. Go-Live Preparation or Data Migration

   Description of ERP Project Implementation:

   1. Project Preparation Phase

      This is initial phase of project where most of the planning work is happening from both side, e.g. from Business Company and from Implementation Company. E.g. Technical Scope, Geographical Scope, Detail of Functionality Implementation, Infrastructure Scope.

   2. Requirement Gathering

      During this phase, various requirements are collected from Business Stakeholder by Business Analyst and categorized as per domain.

   3. Business Blue Printing (Print)

      Here, requirements are mapped to ERP solution. Various solution options are discussed for their pros and cons.

   4. Realization Phase

      During this phase of ERP implementation, system built is being done, and actual solution is being implemented. Various Testing units like, Integration Testing and UAT done with reference to this business blue print.

   5. Go-Live Preparation or Data Migration

      During this phase, data migration is done from legacy system to ERP system.

      The main tasks that should be performed during implementation process / steps are as under-

      • Assembling the participants stakeholders

      • Need analysis review

      • Project mission and vision statements creation

      • Determination of organizational structure

      • Determination of the modules to be implemented

      • Creating the core team

      • Establishing the training needs

      • Establishing the data conversion strategy

      • Establishing the interfaces

      • Determining the work estimates

      • Cost of consultants

      • Calculation of implementation time

      • Identifying constraints, and

      • Establishing the policies and guidelines.

   Although training is present in all the phases (steps), the largest training investment is made during the implementation phase.

7. MANAGING THE IMPLEMENTATION

   The nature of ERP implementation is such that it is best handled within a project management context. The implementation involves a series of activities that do not fit naturally into the normal business cycle of events. It also requires allocated resource and the development of specific skills. It is multidisciplinary and team oriented.

   The implementation plan should identify the implementation strategy, that is, whether the incremental approach or the big bang approach will be used and whether ERP will be implemented in all the projects simultaneously or introduced in a pilot project.

   When the incremental approach is used, all ERP modules are not implemented in one-step. The different modules are introduced one by one. The advantage of the incremental approach is that the company can get feedback on the

   implementation, it can spread the investment over a period of time.

   The advantage of big bang approach is that the company can start reaping the full benefits of ERP immediately after implementation. This big bang approach is effective if the organization is mature and conducive to ERP and the people are ready for it. Here, there is no room for error; it is a do-it-right-the-first time proposition.

8. ERP IMPLEMENTATION PLAN

   Before implementing an ERP system in an organization or project, it is very crucial that the implementation process be planned. Implementation planning includes developing the implementation strategy, schedule and organizing the implementation team.

   The implementation plan documents the why, what, when, where, who and how of the project. The plan provides a guide to the project and is used to monitor the progress. It enables people to carry out a set of interconnected tasks in a coordinated manner.The implementation planshould address all concerns such as the existing procedures, the effect of the ERP The implementation plan on the procedures, how it will affect the employees, the work environment of the organization, the ERP awareness of the employees, creation of the ERP user manuals, and so on.

   Following precautions to be taken in devising theimplementation plan for effective implementation of ERP system.

   1. Timescales should be realistic. If they are overly optimistic then the project will soon fall behind and is unlikely to catch up. This will have the effect of demoralizing the team. Likewise, if the timescales are too long, the momentum may never build-up and delays may result from inertia.

   2. Having produced a plan, it is important to maintain that plan against progress, revising it as necessary. When problems arise, so do the potential for delays. It can be argued that it is better to push out dates rather than not get it right, since a sloppy solution may re-emerge at a later date with a magnified impact.

9. WHY IMPLEMENTATION FAIL

   Following are critical failure factors because of which generally implementation (of ERP system) fails:

   • Poor planning / poor project planning

   • Lack of strategic decision

   • Lack of user training

   • Lack of top management commitment

   • Lack of top management support

   • Lack of technology resources / infrastructure

   • Lack of finance / financial resources

   • Lack of preparedness

   • Lack of judgments

   • Lack of ERP awareness (of ERP system)

   • Lack of data migration

   • Lack of system integration (test)

   • Lack of conviction and perseverance

   • Lack of skill / Lack of knowledge

   • Lack of ERP package selection

   • Lack of material master (data) and maintenance

   • Lack of UOM (Unit of Measurement)

   • Project overrun and project delay

   • Lack of estimation of resources

   • Lack of feasibility study (of the project)

   • Lack of HR people(s)

   • Lack of team work

   • Lack of ERP solutions and understanding

   • Lack of customization or lack of mapping of legacy system with ERP system

   • Lack of business blue printing (print)

   • Lack of go-live preparation

   • Lack of consultants / consultancy work

   • Lack of vendor relationship

   • Lack of implementation steps / stages

   • Lack of organizational factors such as behavior etc.

   Because of the above factors, implementation of the ERP system is doomed to be failed.

10. CASESTUDY: ERP IMPLEMENTATION AT J. K. FILE (J K INDUSTRIES), THANE

11. Brief history