Is ERP an Evil Business? paper by Jayabalaji Sathiyamoorthi
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Transcript of Is ERP an Evil Business? paper by Jayabalaji Sathiyamoorthi
Is ERP an Evil Business? What causes ERP, a business promoter to an administrative evil
Production Management Systems – Term Paper Summer 2008
Submitted by
Turdpoom Pookusmas 5019656 Jayabalaji Sathiyamoorthi 5019665
SS 2008, Masters in Technical Management
Submitted to
Prof. Dr. Agnes Pechmann
04 May 2008
Production Management Systems
Is ERP an evil business..? | 2
Acknowledgement
We are indebted to our professor Dr. Agnes Pechmann for providing such a topic on
ERP. It is certainly an opportunity to study and understand the underlying concepts of
ERP over PPS. It was such a wonderful learning experience for each one of us, in the
course of writing this paper. Besides that it was a good opportunity to both of us to
improve inter-cultural skills.
We thank our beloved parents who have motivated in terms of money and support that
they have rendered in sending us to Germany for our higher education. A special
thanks to the FH Emden library staffs for fetching the necessary journals on time. And
we also we thank our friends who assisted in reviewing and brainstorming our concepts
and ideas.
Jayabalaji and Turdpoom
Production Management Systems
Is ERP an evil business..? | Acknowledgement 3
Table of Contents Acknowledgement ........................................................................................................................................ 2
Abstract ........................................................................................................................................................ 6
1. Introduction .......................................................................................................................................... 7
1.1. Definition of ERP ........................................................................................................................... 7
1.2. History of ERP ................................................................................................................................ 7
2. ERP Systems .......................................................................................................................................... 8
2.1. ERP implementation - Incremental Approach .............................................................................. 9
2.2. The Components of an ERP System ............................................................................................ 10
3. Critical Success factors of ERP in organizations .................................................................................. 10
3.1. Significant success factors of ERP ............................................................................................... 11
3.2. Reduced operating costs ............................................................................................................. 12
3.3. Easy Day-to-Day Management ................................................................................................... 12
3.4. Strategic Planning Support.......................................................................................................... 12
3.5. ERP implementation strategy ..................................................................................................... 12
3.6. Common ERP Challenges: Why Projects Fail .............................................................................. 12
4. ERP Life Cycle Implementation Process .............................................................................................. 13
4.1. Pre evaluation Screening ............................................................................................................ 13
4.2. Evaluation Package ..................................................................................................................... 13
4.3. Project Planning .......................................................................................................................... 13
4.4. GAP analysis ................................................................................................................................ 13
4.5. Reengineering ............................................................................................................................. 14
4.6. Team training .............................................................................................................................. 14
4.7. Testing ......................................................................................................................................... 14
4.8. Post implementation .................................................................................................................. 14
5. Impact from ERP implementation ...................................................................................................... 16
5.1. ERP’S impact on stakeholders ..................................................................................................... 16
5.2. Impact on Implementation Process ............................................................................................ 16
5.3. Impact on Departments .............................................................................................................. 17
5.4. Impact on the organization as a whole ....................................................................................... 17
5.5. Impact on Employment ............................................................................................................... 17
5.6. Impact on the nature of Job and information access ................................................................. 17
Production Management Systems
Is ERP an evil business..? | Acknowledgement 4
5.7. Impact on the individual employees ........................................................................................... 17
6. ERP issues over PPS ............................................................................................................................. 18
6.1. Project team formation............................................................................................................... 18
6.2. Ease of change ............................................................................................................................ 18
6.3. Measurement of success ............................................................................................................ 18
6.4. Project phase problems .............................................................................................................. 18
6.5. Software modifications ............................................................................................................... 19
6.6. Changes in Employees Attitude .................................................................................................. 19
6.7. System Integration issues ........................................................................................................... 19
6.8. Expensive – Implementation and Support .................................................................................. 19
6.9. Problems with product and implementation consultants .......................................................... 20
6.10. Cutting end-user training ........................................................................................................ 20
7. Measures to avoid administrative Issues ............................................................................................ 20
7.1. Improved Training – Hierarchical Method .................................................................................. 20
7.2. Building maintenance & support team ....................................................................................... 21
7.3. Use of single vendor package ..................................................................................................... 21
7.4. Access to accurate information .................................................................................................. 21
7.5. Simplification and standardization ............................................................................................. 21
7.6. Knowledge transfer from Consultants ........................................................................................ 21
7.7. Top management involvement. .................................................................................................. 22
7.8. Defined metrics ........................................................................................................................... 22
8. Change Management and ERP Implementation ................................................................................. 22
8.1. What is Change management? ................................................................................................... 22
8.2. Change Management Aspects .................................................................................................... 23
8.3. Component of Change Management ......................................................................................... 23
9. Case Study ........................................................................................................................................... 25
10. Discussion ........................................................................................................................................ 26
11. Summary and conclusion ................................................................................................................ 27
References .................................................................................................................................................. 28
Appendix ..................................................................................................................................................... 29
Production Management Systems
Is ERP an evil business..? | Acknowledgement 5
Table of Figures
Figure 1: ERP Vendors (Source: AMR Research, 2005) ..................................................................... 8
Figure 2: ASAP Methodology (Copyright, SAP AG.) .......................................................................... 15
Figure 3: Key ASAP Deliverables (Copyright, SAP AG.) ................................................................... 16
Segregation of Work
SNO NAME SECTIONS HANDLED
1 Turdpoom 1, 2,3,4,5,8,10,11
2 Jayabalaji 5, 6, 7, 9, 10, 11
Production Management Systems
Is ERP an evil business..? | Abstract 6
Abstract
Enterprise Resource Planning systems (ERPs) integrate (or attempt to integrate) all
data and processes of an organization into a unified system. A typical ERP system will
use multiple components of computer software and hardware to achieve the integration.
A key ingredient of most ERP systems is the use of a unified database to store data for
the various system modules
In this paper we try to analyze whether ERP systems leads to administrative evil1 or
acts as a promoter for the business operation.
In the first phase, we study the implementation concepts of the ERP and the importance
of having an ERP system in the production planning. Then we discuss about the
success factors of the ERP system in PPC.
Later we discuss the various scenarios of ERP implementation, which causes problems
for individual and organization called as “Administrative Evil”. In which it is considered
that individual and moral responsibility gets turmoil by technical responsibility.
We propose ideas on how to avoid so called evils and also provide more information on
change management and effective ERP implementation. Most of the companies
adapted similar strategies and were very successful in terms of the return on investment
and streamlining production planning. We support this with the help of a case study.
Ultimately, the influence of the people and practices makes the success of the ERP
tools, unplanned activities causes the evil which make employees illiterate of their work
using ERP tools. So with the proper training, simplifying and standardizing the ERP tool
will have a long term beneficial influence on any organization.
Keywords: ERP, Administrative evil, Change management, success factors, ERP
lifecycles
1 Enterprise resource planning systems: A physical manifestation of administrative evil, Jesse F.Dillard, Linda
Ruchala, Kristi Yuthas, International journal of accounting information systems, Volume 6 issue 2, 2005
Production Management Systems
Is ERP an evil business..? | Introduction 7
1. Introduction
“More than 85 percent of respondents agreed or strongly agreed that their ERP systems
were essential to the core of their businesses and that they could not live without
them2.”
After reviewing the paper3, we would like to discuss on whether ERP is an
administrative evil or a business facilitator. We provide the reasons for what makes ERP
a business promoter to an administrative evil. As a frontage we present the history,
theory and knowledge of ERP implementation.
1.1. Definition of ERP
ERP systems are commercial software packages that enable the integration of
transactions oriented data and business processes throughout an organization.
The Enterprise Resource Planning system is an enterprise information system designed
to integrate and optimize the business processes and transactions in a corporation. The
ERP is an industry-driven concepts and systems, and is universally accepted by the
industry as a practical solution to achieve integrated enterprise information systems4.
An ERP system can include software for manufacturing, capturing orders, accounts
receivable and payable, general ledger, purchasing, warehousing, transportation and
human resources.
The major ERP vendors are SAP, PeopleSoft, Oracle, Baan and J.D. Edwards. Lawson
Software specializes in back-end processing that integrates with another vendor's
manufacturing system. (See Figure 1)
1.2. History of ERP
The history of ERP dates back to the 1960's, the main focus in those days was towards
inventory control. A major part of the software's developed were based on traditional
2 Thomas W, Why ERP Systems Are More Important Than Ever, 2008
3 ERP: A physical manifestation of administrative evil, Volume 6 issue 2, 2005
4 Young B. Moon , Management and Enterprise Development, Vol. 4, No. 3, 2007
Production Management Systems
Is ERP an evil business..? | ERP Systems 8
inventory concepts. The next decade witnessed a shift of focus towards Material
Requirement Planning (MRP). The purpose of MRP's was to translate the schedule for
individual units. The 1980's brought the concept of MRP-II (Manufacturing Resource
Planning). This system helped in optimizing the entire production process. MRP-II was
later extended to include areas such as Finance, HR, Engineering, Project Management
etc. This gave birth to ERP (Enterprise Resource Planning). Its job was to integrate core
business areas.
In the past, ERP software was not used to its full potential. Today, the business model
of an organization (domestic or global) is based on ERP. It is used as a management
tool and gives organizations a great competitive advantage.
Figure 1: ERP Vendors (Source: AMR Research, 2005)
2. ERP Systems
Production Management Systems
Is ERP an evil business..? | ERP Systems 9
ERP is an acronym meaning Enterprise Resource Planning. It is a software
package/solution most often used within the manufacturing environment. ERP is a
business tool that management uses to operate the business day-in and day-out. It is
comprised of several modules such as financial module, distribution module, HR
module or a production module. Each of these modules share information that is stored
within the database structures on which the ERP system was programmed.
ERP helps to break down barriers between departments within a company. For
example, many times the sales department may be selling 25% more product than the
production department can produce. By utilizing an ERP system, the sales department,
production department, operations management, shipping, financial department,
purchasing department all have access to the up-to-date information that is needed to
operate smoothly within any manufacturing environment. Additionally this facilitates
supply chain management.
ERP is more of a business methodology than a piece of application software, although it
does incorporate several software applications, brought together under a single,
integrated framework.
2.1. ERP implementation - Incremental Approach
An ERP implementation can cost a huge sum of money to create, and may take several
years to complete. An ERP system likely represents a company's largest IT investment,
so some companies prefer to implement ERP in a more incremental fashion rather than
all at once. Some ERP vendors provide modular software units together with a unified
interface to allow for this gradual approach.
Once implemented properly, the ERP system brings tremendous advantages. Because
all systems are joined together, all departments can, more easily share information. The
workflow that takes place between departments can become much more automated,
and ultimately, customers are better served because the individual using the customer-
facing applications will have access to every bit of information regarding each relevant
process.
Production Management Systems
Is ERP an evil business..? | Critical Success factors of ERP in organizations 10
2.2. The Components of an ERP System
The components of an ERP system are the common components of a Management
Information System (MIS)5.
2.2.1. ERP Software
Module based ERP software is the core of an ERP system. Each software
module automates business activities of a functional area within an organization.
Common ERP software modules include product planning, parts purchasing,
inventory control, product distribution, order tracking, finance, and accounting
and human resources aspects of an organization.
2.2.2. Business Processes
Business processes within an organization falls into three levels - strategic
planning, management control and operational control. ERP has been promoted
as solutions for supporting or streamlining business processes at all levels.
2.2.3. ERP Users
The users of ERP systems are employees of the organization at all levels,
from workers, supervisors, and middle level managers to executives.
2.2.4. Hardware and Operating Systems
Many large ERP systems are UNIX based. Windows NT and Linux are other
popular operating systems to run ERP software. Legacy ERP systems may
use other operating systems as well.
3. Critical Success factors of ERP in organizations
“Even though much of ERP success has been in facilitating operational coordination
across functional departments, successful implementation of ERP systems benefit
strategic planning and management control one way or other6 .“
5 Dr. Bruce Z, ABCs of ERP,2005
6 Anthony R A, 2005
Production Management Systems
Is ERP an evil business..? | Critical Success factors of ERP in organizations 11
3.1. Significant success factors of ERP
There is a numerous business benefits of implementing a new age ERP application in
the right environment and the most prominent of these are listed below
1. Improved Organizational efficiency due to Process integration and standardizing
across various departments and division of an Organization
2. Capability for external process Integration through ERP integration framework,
with the key business entities like customers, suppliers, Partners, Banks etc. to
manage the business operation in a controlled, automated, online and real time
mode
3. Leverage the latest technology to carry on organizational operations in more
efficient way.
4. Minimizing redundant data – by providing universal and single version of truth
around all masters and transactional data.
5. Visibility of real time information across the entire breadth of processes.
Information accessibility for right decision offered by an ERP solution is
perceived as big advantage by the management of any organization.
6. Increase in Employee productivity (Over a period of time higher employee
satisfactions have been achieved with ERP solution)and reduction in head count/
possibility of redeployment of people
7. Well traceable and faster processes like Order to Cash, Procure to Pay,
Shipping, Receiving, use of statistics tool for reliable forecasting, Improved and
informed Scheduling, improved inventory turnaround time, reduced process cycle
times etc. all leads to improved organizational efficiency.
8. Reduction in operation costs such as Inventory carrying cost, Analysis cost,
Management Reporting cost, lost opportunity, cost of customer dissatisfaction,
etc.
9. Adaptability to latest manufacturing model and ever driven market needs.
10. Highly Improved Control and Audit capabilities for compliance with governance
rules
Production Management Systems
Is ERP an evil business..? | Critical Success factors of ERP in organizations 12
3.2. Reduced operating costs
ERP software attempts to integrate business processes across departments onto a
single enterprise-wide information system. The immediate benefit from implementing
ERP systems we can expect is reduced operating costs, such as lower inventory control
cost, lower production costs, lower marketing costs and lower help desk support costs.
3.3. Easy Day-to-Day Management
The implementations of ERP systems nurture the establishment of backbone data
warehouses. ERP systems offer better accessibility to data so that management can
have up-to-the-minute access to information for decision making and managerial
control. ERP software helps track actual costs of activities and perform activity based
costing.
3.4. Strategic Planning Support
Strategic Planning is a deliberate set of steps that assess needs and resources; define
a target audience and a set of goals and objectives; plan and design coordinated
strategies with evidence of success; logically connect these strategies to needs, assets,
and desired outcomes; and measure and evaluate the process and outcomes.
3.5. ERP implementation strategy
An ERP implementation strategy is necessary using which millions of companies
around the world used the process to much success. This strategy is a way for the
company to clearly identify the areas where they need help, and find solutions to meet
those needs. Creating an ERP implementation strategy should be one of the first steps.
Identifying problem areas is always not an easy job. Consider a company with over
10,000 employees, who work in accounting, marketing, manufacturing, and a number of
other departments. In such a case it is important that the company poll their employees,
or find some other way to make sure that all the problem areas are identified.
3.6. Common ERP Challenges: Why Projects Fail
The following are few of the common ERP challenges involved in any project. Failing to
handle any one of the below factors might lead the project to fail.
Unclear business rationale for implementing ERP
Production Management Systems
Is ERP an evil business..? | ERP Life Cycle Implementation Process 13
Failure to consider key business requirements during vendor selection process
Too little focus on optimizing business processes
Poor project management and project cost controls
Lack of focus on organizational change management, communications, and
training
Failure to measure performance / ROI and to conduct post-implementation audit
4. ERP Life Cycle Implementation Process
ERP lifecycle highlights the different stages involved in the implementation of ERP.
They are as follows.
4.1. Pre evaluation Screening
Once the company has decided to go for the ERP system, the search for the package
must start as there are hundreds of packages. This stage will be useful in eliminating
those packages that are not suitable for the business process.
4.2. Evaluation Package
This stage is one among the important phases of the ERP implementation, as the
package that one selects will decide the success or failure of the project. As
implementation of an ERP involves huge investments and it is not easy to switch
between different packages.
4.3. Project Planning
This phase deals with the implementation process. It is in this phase that the details on
how to go about the implementation are decided. The plan is developed, roles are
identified and responsibilities are assigned. It will also decide on the project milestones.
4.4. GAP analysis
This is considered the most crucial phase for the success of ERP implementation. This
is the process through which the companies create a complete model of where they are
now, and in which direction will they opt in the future. It has been estimated that even
the best packages will only meet 80% of the company‟s requirements. The remaining
20% presents problematic issues for the company‟s reengineering.
Production Management Systems
Is ERP an evil business..? | ERP Life Cycle Implementation Process 14
4.5. Reengineering
It is in this phase that human factors are taken into consideration. While every
implementation is going to involve a significant change in number of employees and
their job responsibilities, as the process becomes more automated and efficient, it is
best to treat ERP as an investment as well as cost cutting measure.
4.6. Team training
Training is also an important phase in the implementation, which takes place along with
the process of implementation. This is the phase where the company trains its
employees to implement and run the system. Thus, it is vital for the company to choose
the right employee who has the right attitude- people who are willing to change, learn
new things and are not afraid of technology and a good functional knowledge.
4.7. Testing
This is the phase where one tries to break the system. One has reached a point where
the company is testing the real case scenarios. The system is configured and now you
must come up with extreme test cases like system overloads, multiple users logging on
at the same time, users entering invalid data, hackers trying to access restricted areas
and so on. This phase is performed to find the weak link so that it can be rectified before
its implementation.
4.8. Post implementation
Once the implementation is over, the vendor and the hired consultants will go. To reap
the fruit of the implementation it is very important that the system has wide acceptance.
There should be enough employees who are trained to handle problems those crops up
time to time. The system must be updated with the change in technology. The post
implementation will need a different set of roles and skills than those with less
integrated kind of systems.
We would like to present one methodology which is very well-known that is ASAP
methodology
Production Management Systems
Is ERP an evil business..? | ERP Life Cycle Implementation Process 15
Figure 2: ASAP Methodology (Copyright, SAP AG.)
ASAP is a simply a tool designed to speed up the implementation process. However,
there are always other factors which could affect the speed of an implementation
Phase 1- Project preparation: Initial planning and preparation.
Phase 2 - Business Blueprint: documentation of the business process requirements of
the company.
Phase 3 - Realization: implement all business and process requirements based upon
the business blueprint.
Phase 4 - Final Preparation: complete testing, user training, system management and
cut-over activities.
Phase 5 - Go-Live & Support: transition from implementation production.
Production Management Systems
Is ERP an evil business..? | Impact from ERP implementation 16
Figure 3: Key ASAP Deliverables (Copyright, SAP AG.)
5. Impact from ERP implementation The positive and negative impacts on the ERP implementations are discussed as
follows.
5.1. ERP’S impact on stakeholders
Impact of ERP on the role of managers or organization or stakeholders can be best
studied and understood if the subject is analyzed right from the implementation stage.
Nevertheless it has a strong influence on the business process itself as soon as it is
gripped and decides major issues for employees, customers and other stake holders.
5.2. Impact on Implementation Process
ERP has a significant impact right from the time it is conceived in the organization.
Firstly it facilitates the members in the organization to arrive at a consensus. It paves
way for restructuring in organizations sticking to traditional and conventional values.
ERP is an eye-opener for such organizations because they get to realize the tinge and
factors involved in modifying the business process.
Production Management Systems
Is ERP an evil business..? | Impact from ERP implementation 17
5.3. Impact on Departments
This helps to bring about interactions and tends to nurture healthy relationships among
departments in organizations which would have otherwise remained isolated. The
problems of co-ordinations faced by each department are made known to the company.
They can arrive at a better means of doing things on such group discussions.
5.4. Impact on the organization as a whole
The ERP consultant will able to identify the flaws and guide the organization in devising
better procedures. It helps organizations to adapt and adjust to change right from the
implementation process.
5.5. Impact on Employment
ERP creates job opportunities for many individuals, whom the organizations hire at the
implementation process. They even realize the need to retain them on permanent rolls
once ERP goes full-fledged in the organization. The good news is that it gives another
room of employment for the existing IT professionals in the country. They were able to
update themselves on ERP modules and continue serving the organization in terms of
enhancing user interface with ERP applications.
5.6. Impact on the nature of Job and information access
ERP has directly and indirectly helped to redefine functions in the organization.
Anything that people wanted to know about the company was available by a click of the
mouse. There was no more relying on the department of internal communications even
for single information. Outsiders don't have the hassle of obtaining permission and
following stringent procedures to access information.
5.7. Impact on the individual employees
ERP provided more freedom, authority and responsibility to the individual employees
which were mutually beneficial to the management. Each employee became more
aware of his/her function while ERP has given the confidence to execute it individually
and successfully Above all it resulted in transparency and accountability. This has
resulted in easing the process of handling and answering customer queries and
undertaking clientele orders.
Production Management Systems
Is ERP an evil business..? | ERP issues over PPS 18
6. ERP issues over PPS
In the production planning systems, we have certain demerits which were complimented
by ERP systems. The physical manifestation of the technology is termed to as
“Administrative Evil7 “. They are as follows,
6.1. Project team formation
In ability to acquire/retain employees and external advisers with requisite expertise in
ERP, project management and supporting technologies. Because IT products and
services Žfirms are growing rapidly, they find it difficult to provide continuity in personnel
assigned to adopter projects and adopters strongly value continuity in personnel.
6.2. Ease of change
If the project encounters major changes immediately after the start of the project, then
decision makers might terminate it. So such major changes in project scope are not
feasible to embed. A modification that doesn‟t work is not easy to change.
6.3. Measurement of success
There is no specific entity to measure success. More often objectives, expectations and
perceptions are set as the standard for defining and measuring success. In the first
place, it is hard to normalize them across individuals and organizations, thus making
comparisons difficult.
The success of the ERP system is defined only when,
(1) Users have learned how to use the system well,
(2) Managers have used the data collected by the system in order to make business
decisions and plan improvements in business processes, and
(3) Ease of incorporating additional changes in business processes, practices, software
configuration, etc.
6.4. Project phase problems
The most challenging project phase problems reported so far involved software
modifications, system integration, product and implementation consultants and turnover
7 Administrative behavior depriving innocent people of their humanity like dignity, justice, rights, safety, health
etc.,
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Is ERP an evil business..? | ERP issues over PPS 19
of project personnel. There is no ready to use ERP tool to cater a business. It has to be
customized to serve the business objectives and needs.
6.5. Software modifications
Almost every analyst of the ERP strongly advises companies to avoid modifying the
software. Companies are advised to live with existing ERP functionality and to change
their procedures to adapt to it. ERP packages are selected on a centralized basis in
order to fit the majority of corporate needs
6.6. Changes in Employees Attitude
Many IT specialists thrive on project work and view assignment to a „competence
centre‟ (support unit) as unpleasant maintenance work. Though IT products and
services companies are growing rapidly, they find it difficult to provide continuity in
personnel assigned to support and maintenance activities.
6.7. System Integration issues
ERP systems are sold as „integrated packages‟, implying that they contain everything
one needs and that ERP software configuration (plus tailoring) is the major activity of
the project phase. ERP system needs to be integrated with the computing platform on
which it will run.
But companies have great difficulty integrating their enterprise software with a package
of hardware, operating systems, database management systems software and
telecommunications systems suited to their particular organization size, structure and
geographic dispersion. They reported having difficulty finding experts who could advise
them on the precise operating requirements of their ERP configuration.
Most of the companies are forced to retain some legacy systems that performed
specialized functions which are not available in ERP packages.
6.8. Expensive – Implementation and Support
Incorporating specialized functions to the ERP packages is possible. However in that
case the companies have to bear a very high cost. Further the maintenance and
support of such software are too expensive. Alternatively, they can acquire specialized
Production Management Systems
Is ERP an evil business..? | Measures to avoid administrative Issues 20
software from third parties. These systems needed to be interfaced with ERP systems,
again this process that is both challenging and expensive.
6.9. Problems with product and implementation consultants
ERP implementations are socially complex activities. As many as a dozen or more
external companies – including the ERP vendor, vendors of ERP product extensions,
vendors of supporting hardware, software and telecommunications capabilities,
implementation consultants and so forth – may be involved in different aspects of an
organization‟s ERP experience. Coordinating the efforts of all these firms is, to put it
mildly, a challenge.
Companies were often rightly reluctant to cede authority for project management to an
outside party, even when they were willing to pay the steep fees for outside assistance.
6.10. Cutting end-user training
In some companies, training was not budgeted as part of the ERP project itself, but was
left to the budgets and discretion of operating managers. This management policy
increased the likelihood of inadequate end-user training.
Schedule pressures affect training as well as scope because end-user training is
typically one of the last activities to occur in the project.
7. Measures to avoid administrative Issues
7.1. Improved Training – Hierarchical Method
Imparting complete formal training on the ERP system is very important. All the
companies need to develop a detailed plan for training users.
ERP systems are very complex and hierarchical; this means training also needs to be
hierarchical, with heavy users receiving more intense training early in the process. In
fact, the more successful firms involved their heavy end users throughout the
implementation process instead of providing training at the very end. Another feature of
successful training programs was that the lead users were trained first, in turn becoming
trainers for those further down in the hierarchy. Hence the training programs shouldn‟t
be taken for granted due to time constraints. The training can be formal class room
trainings and on-job trainings.
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Is ERP an evil business..? | Measures to avoid administrative Issues 21
7.2. Building maintenance & support team
ERP consulting companies can have a separated team for support and maintenance
activities. This might help the employees to seek help instantly. The employees‟ attitude
issue also gets resolved. In this method developers or consultants are not forced to do
the support and maintenance job.
7.3. Use of single vendor package
A single-vendor solution is a possible way to reduce complexity and cost. Certainly, it
may not have all the functionality required, but it will be easier to implement. The trade-
offs between the single and multiple vendor solutions are fairly simple. A multivendor
solution can provide the best functionality for each module, but implementing it
becomes more complex because of the interfaces that need to be established. So
using a single vendor solution reduces the complexity and helps in simplifying and
standardizing them. Furthermore these also ease the expected future upgrades to
be a much easier.
7.4. Access to accurate information Right information has to be accessed by right person in right time. This is one
among the key tasks, so that interactions and communications with customers and
suppliers could be improved. Most of the companies need to have this as a strategic
priority.
7.5. Simplification and standardization Working smarter is always the better way than laboring with an activity. The
underlying motivation for ERP is to improve business processes. That is, an ERP
system is generally adopted to improve the firm's overall productivity; it is viewed
as a business solution rather than an IT solution. Hence simplification and
standardization is also a key factor.
7.6. Knowledge transfer from Consultants
The companies need to establish clear guidelines on how to use outside consultants.
Additionally, providing a knowledge transfer sessions from consultants to in-house
experts for both system configuration information and long-run maintenance, will be of
added advantage. The consultants had to work with and depend on the company's staff
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Is ERP an evil business..? | Change Management and ERP Implementation 22
to complete the project, which in turn forced the internal staff to learn more about the
implementation, thereby retaining the knowledge in the company.
7.7. Top management involvement.
Senior management has to thoroughly involve in the project activities from the onset
and establishing clear priorities. Several of the companies viewed their ERP project as a
major investment as that of a new plant or an acquisition. Thus, it was given the same
level of commitment. Additionally a cross-functional implementation team with a more
senior management leader helped to take care of the assignments and took on extra
responsibilities for the ERP implementation.
7.8. Defined metrics
Clear guidelines have to be laid out on measuring performance. These metrics were not
just technical ones but also included business operations. Organizations have to set the
standards for defining and measuring success. In the first place, it is hard to normalize
them across individuals and organizations, thus making comparisons difficult.
8. Change Management and ERP Implementation
Change management is one of the biggest tasks involved in the business. This doesn‟t
only require a significant amount of funding but also require unappealing commitment
throughout the whole business component.
8.1. What is Change management?
Change management is a deliberate approach to bring major changes towards people‟s
expectations to move the business forward smoothly. The main concept of change
management in ERP implementation is bringing an understanding that in post-industrial
phase business should be customer oriented rather than production oriented.
Business should prioritize the point on “what final product is preferred by customers and
how to deliver the product in the right time” above “how to produce cheap, high volume
sellable products8 “.
8 Lukman Susanto, Change Management and ERP Implementation: Side-by-side , 2003
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Is ERP an evil business..? | Change Management and ERP Implementation 23
8.2. Change Management Aspects
As many other types of system implementation, change management in ERP
implementation are established to build an understanding throughout business
components so that they are well prepared to accept the change and clearly
understanding how the changes may affect them9.
There are various aspects that may involve in change management and they vary for
different systems. Specifically with ERP implementation, change management will be
required in separately functional areas where the system will be applied such as
financial department, human resources or manufacturing.
Change management will be more than likely happen locally within those departments.
However, if the implementation involving a more complex area such as applying ERP
system in all major departments in company or many company within enterprise this
certainly require collaborated participation and support throughout business
components including higher management areas and executives.
8.3. Component of Change Management
There are various tasks available as part of the change management strategy. They are
defined as follows:
8.3.1 Communications Strategy
The strategies are preparing project plan, project costs analysis, progress report
and some other important issues such as preparing trainings for employees. The
important point in delivering information is timing. As each component of the business
may have different priorities, working in collaboration will result a better outcome.
Managerial levels as the decision makers are often enforced to make such decisions
which may not make everyone happy. That is why it would be wise if they keep their
hands open for possible cooperation. Another important part in communication strategy
is allotting the correct messenger to the audience in order to the get the message
through. Different personnel will have different approach which will be suitable for
different audiences.
9 Island Consulting, Change Management, July 2007
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Is ERP an evil business..? | Change Management and ERP Implementation 24
8.3.2 Impact Analysis
This is a method to thoroughly determine the current business system and analysis on
how ERP system will affect the business environment. Current business processes
needs to be systematically documented especially for the area which may be affected
by the new system.
As a standard method of documentation, many experts are using data flow / work flow
diagram. From all above information, business can start to analyze how significant the
ERP implementation may affect the system, which will be the most affected by the
implementation and what training may be required to ensure the smoothness of this
new system implementation.
8.3.3 Skills Analysis
One of the main issues during ERP implementation is training. As this is a new system,
most of the operator / user will require a certain specific training for their job purposes.
To find out who needs to be trained and what kind of training required, the companies
need to perform skills analysis.
Every individual employee who may work in ERP system will be audited their
qualification, skills, internal and external experiences to find the best position for each of
them and to find out whether the company will need to hire new staff or external
consultants to ensure the business operates adequately.
Many people are assuming that change management is part of ERP implementation. In
fact, because of the level of complexity of the system, change management has always
been a continuing process required throughout ERP implementation.
Some experts are agree that ERP will not be successfully implemented without “a
massive dose of change management otherwise the organization will likely not be
positioned to best use the new system10 “.
ERP is an integrated complex cross-departments application. That is why its
implementation is a very costly process and yet most of the companies implemented.
10
Gerald T & Winford H, Change Management critical to making ERP work, May 2001
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Is ERP an evil business..? | Case Study 25
The main issue in any new system implementation especially ERP is changing the
existing system with a new one.
9. Case Study
To illustrate how ERP helped in optimizing the production process, we study the case of
Ms BAYER MATERIALSCIENCE11, which is one among the leading international
manufacturer of polymers. They used the SAP® Advanced Planning & Optimization
Component to Streamline Production planning, scheduling and Optimize Stock Levels
Key Challenges
To achieve such a streamline production planning, they have to face a number of
challenges. Among which the key challenges involved are,
• To improve ability to manage complex 24-hour production processes involving more
than 40,000 tons of Product formulations and 100 product variants on different
production lines
• To provide more transparent production information to enable more effective planning
and scheduling
• To improve communications with external service providers Project Objectives
• To extend use of SAP Advanced Planning & Optimization to enable transparent and
detailed scheduling
• To eliminate manual tasks so employees can focus more on production processes and
less on coordinating the supply chain
• To extend the planning horizon Solution and Services SAP Advanced Planning &
Optimization
They have chose SAP solution to achieve the above tasks. For the fact that using SAP
they can easily integrate into existing SAP software environment and also best practices
model established for other implementation projects
Key Benefits achieved
The outcome of the project is they got a single platform for all planning data. Also they
have achieved significant benefits, they are listed
11
Bayer Material Science is a leading international manufacturer of Polymers, Head quarters at Leverkusen, Germany.
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Is ERP an evil business..? | Discussion 26
• 33% reduction in planning time and effort
• Improvements in delivery reliability
• Extension of planning horizon from 4 to 7 weeks
• Less coordination time
• No integration gaps
• Automatic creation of filling orders
“The employees are relieved of routine activities and always have an integrated view of
what is going on in production and planning.12”
This illustrates the success of ERP system in production planning and control.
10. Discussion
After reviewing the article, we have to analyze on “why ERP is said to be a physical
manifestation of administrative evil” and also to know the solution for the question “Is
ERP an evil business?”
Certainly, ERP is not to turmoil the business activities. How organization and individual
employees are getting affected by ERP? To answers these question we need to
understand that ERP is just software/package tool for using or helping you in business
operations. Reality is ERP isn‟t a completely software where you install and use it. It has
to be customized to fit the requirements of the organization. The new system may not
be easy to work with, but the employees need to be more open minded to accept and
adapt to the new change.
Before developing an ERP system, every individual need to put their inputs for the
implementation. To do so, the involving team members, have to discuss and provide
relevant information to the consultant. An employee team has to work closely with the
ERP consultant group, so that the requirement are shared and there is no gap in
communication
12
Dr. Eric Bischof, Global Product Manager for Coatings, Adhesives and Sealants, Bayer Material Science AG
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Is ERP an evil business..? | Summary and conclusion 27
Normally companies have people, from different cultural backgrounds. These people
have their own idea and opinion, which can be for or against the ERP implementation.
In such a scenario, if an organization implements ERP to streamline its production
process. Then employees shouldn‟t get abased by it. Instead they should make up their
mind and embrace change and posses the quest for learning the new tools.
In the current technological world, change is inevitable. So organizations have to be
strong enough in Change Management.
So it is very important to communicate with every employee, in a project, that company
will undergo change and new systems will be in place in the future. Also organizations
have to schedule training programs to train the new system & process and try to migrate
to the new system in an increasing fashion. Make your employee to be friendly with the
system. If they know the benefits of ERP and know how ERP helps them to do the job
easily, they will accept ERP. If the employees are reluctant to adapt the changes, in the
organization, then we can claim it to be more than EVIL.
11. Summary and conclusion
Consolidating our learning in this paper, we justify that ERP is not an administrative evil.
Regardless of how a company approaches it, ERP is sure to bring significant changes
to how a company does business. It helps to modify the workflows, and alters long-
standing processes.
Companies often meet with resistance on the part of employees who are reluctant to let
go of their proven methods. Employees may also fear for their jobs; since ERP makes
such radical changes to business processes, it's not unusual for job descriptions to
change or be eliminated altogether.
But the underlying truth is that if right people with positive attitude are involved in the
ERP implementation, then there is NO EVIL BUSINESS. The new system is meant to
ease the tiresome process and streamline the production planning systems.
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Is ERP an evil business..? | References 28
Hopefully change management will play a major role to soothe employees to embrace
change and they can travel together with company without any evil. We believe that the
ideas presented in this paper might give more knowledge about ERP implementation
and represent the solution how to bring company and employee success together, with
their strategies will certainly demonstrate that “ERP is NO Evil business”
References
1. F. Robert Jacobs and F.C. „Ted‟ Weston, Jr., Enterprise resource planning (ERP)
A brief history Journal of Operations Management, Volume 25, Issue 2, March
2007, Pages 357-363
2. Thomas Wailgum , Why ERP Systems Are More Important than Ever, January
29, 2008, http://www.cio.com/article/177300 accessed on 20th April 2008.
3. Jesse F.Dillard, Linda Ruchala, Kristi Yuthas, Enterprise resource planning
systems: A physical manifestation of administrative evil, International journal of
accounting information systems, Volume 6 issue 2, 2005
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http://www.amrresearch.com/Content/View.asp?pmillid=18358&docid=12642
accessed on 24th April.
5. Dr. Bruce Zhang, ABCs of ERP, 2005,
http://www.sysoptima.com/erp/erp_definition.php accessed on 25th April.
6. Lukman Susanto, Change Management and ERP Implementation: Side-by-side,
2003, http://www.susanto.id.au/papers/ChangeMngt.asp accessed on 26th April
7. Island Consulting, Change Management, July 2007,
http://www.islandconsulting.com.au/IChange.htm accessed on 28th April
8. John P. Kotter, Leading Change, Harvard School Press 1996
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Holland & Davis., Change Management critical to making ERP work, May 2001.
10. Neville Turbit , ERP Implementation :The Traps , 1995
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Is ERP an evil business..? | Appendix 29
11. Mabert, Vincent A. Soni, Ashok Venkataramanan , Enterprise Resource
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Practices, Addison-Wesley, 1998
Appendix
ERP – Enterprise Resource Planning
MIS – Management Information Systems
PPS – Production Planning Systems