PAPER REVIEW: ENRERPRISE RESOURCE PLANNING (ERP) IMPLEMENTATION PROCEDURES AND CRITICAL SUCCESS FACTORS | E-COMMERCE

INTRODUCTION AND EVOLUTION

The ERP systems cater to the ever increasing information processing, timely and effective communication and coordination across functional units, Strategic Business Units (SBUs), and with the key stakeholders in the entire supply chain of an organization. Moreover, ERP systems improve operational efficiency, help reduce costs and hence add value to the entire business operations for achieving competitive advantage. Two major benefits of ERP systems are; a unified and integrated view of all organizational departments; and an enterprise-wide database which can be accessed by any functional units as per its pertinent needs and thus adds to improved communication and cooperation. The ERP systems evolved out of the Inventory control systems of 1960s aiming at conveniently satisfying customer demands. In 1970s, Materials Resource Planning (MRP) systems were introduced to assess material requirements and requisition time with the help of computer-aided automation. MRP coupled with enhanced technology transformed into Manufacturing Resource Planning (MRP II) in the 1980s. The expansion of MRP II to the entire enterprise led to the development of ERP in the early 1990s.
1960s Inventory Control 1970s Materials Resource Planning 1980s Manufacturing Resource Planning 1990s Enterprise Resource Planning

SCOPE OF ERP AND ITS PROS AND CONS

ERP systems represent a One-for-all solution to several different information processing needs of different functional units such as Financial, HRM, Supply Chain and Operations, and Marketing and Sales. However, ERP has both its pros and cons: They integrate the flow of information across subunits of an enterprise and hence result in greater coordination and operational efficiency. This, in turn, saves millions for organization. On the other hand, there are additional training, maintenance and upgradation costs associated with ERP. Moreover, they can disrupt the organizational culture and return on investment (ROI) may not be realized for extended periods of time. CRITICAL FACTORS FOR ERP IMPLEMENTATION ORGANIZATION must define the objectives of ERP implementation and the key expectations and deliverables from the system. Moreover, ERP should be implemented with the input of suppliers and with consideration of customers. The implementation also requires commitment and dedication on the part of top management and development of proper work plan and resource plan. Most importantly, the organization must be flexible enough to redesign its processes as per the ERP infrastructure. The implementation team should comprise of skilled and experiences employees and the resources necessary should be readily available to them. Correct data entry is the key to overall performance of an ERP system. Moreover, the old system must be creatively destructed gradually and everyone should be using the ERP. For achieving this purpose and for benefiting fully from the ERP, proper training programs need to take place. Certain objective performance measures should be used to evaluate the effectiveness and overall impact of an ERP system. Pertinent performance measures may include inventory turnover, vendor performance, on-time delivery to customers etc. Despite all the critical factors, ERP may initially turn the productivity down as due to the complexity of the system. However, management needs to be consistent and patient to reap the benefits of ERP system. ERP SELECTION AND IMPLEMENTATION For an ERP system to be successful, it must be aligned with the organizations existing business processes and procedures. More than half of ERP systems fail due to lack of such alignment of organizations infrastructure with the ERP technology architecture. ERP systems are not typical softwares and need to upgraded. Moreover, the hardware components also need to be upgraded for smooth running of ERP. Umble et al (2003) suggest 12 step procedure for ERP selection which starts with creating vision, feature / function list, and software candidate list, the list is then narrowed down to four to six candidates and a RFP is made for the potential suppliers; the proposal are reviewed and two or three finalists are shortlisted; the finalists demonstrate their packages and winner is decided; investment is justified as per the cost benefit analysis and the contract is negotiated; finally a pre-implementation pilot is being run and the investment justification is validated. Finally, there are certain implementation steps comprising of: reviewing the overall pre-implementation process; installing and testing new hardware; installing the software and performing the room-pilot; attending system training; training the conference room pilot; establishing security and necessary permissions; ensure that data bridges and rubost and data are accurate; documenting policies and procedures; making the entire organization on-line; celebrate and strive for continuous improvement.
Umble, E. J., Haft, R. R. and Umble, M. M. (2003). ERP Implementation Procedures And Critical Success Factors. European Journal of Operational Research,
Vol. 146, Issue: 2006, pp. 241-157

YASIR MUHIB | MBA 2K11 | SECTION A | NUST BUSINESS SCHOOL