ERP IMPLEMENTATION

TISCO deserves lot of credit for implementing ERP because of the fact that many organizations in the global level have given up the very idea of ERP due to the fact that there are lots of failures associated with it even in the implementation stage. ERP implementation did in wrong manner have caused havoc to organizations more than bringing profits. This being the case it is natural to expect a large company (in terms of Size and volume of operations) like TISCO to discourage the idea of Enterprise resource planning. However TISCO proved to be different from the others by choosing ERP in the right time and implementing it in a proper manner. They have also reported a whooping profit and reduction of costs in the whole process. Another amazing fact is that they implemented it into the whole systems in one single spree. The method of implementing it in one spree carries a lot of risks especially for a bigger company. Infact the success rate of this method itself is low in general and very low as far as bigger companies are concerned. Incase of the rare success organizations will experience effective results in their enterprise operations. TISCO has achieved that by way of meticulous handling and professionalism. The net results of their ERP software have been described to be pathbreaking and a trendsetting one.

WHY ERP IN TISCO

TISCO faced two major problems from the systems that existed for a long time. Firstly they were not customer friendly. The whole system was tuned to the process and very little attention was paid to the customer demands. Secondly the systems were outdates and the modalities of operation were too complex and not error free. In order to rectify these issues which would otherwise prove to be major setbacks to the company the organization resolved to take up ERP. This was instigated by the concerned departments. Leading consultants were hired and the business structure was studied and suitable plans were drafted accordingly.

What Should They Do?

Let’s say you’re the CEO of a large multi-national steel company, and you’re running a global operation with plants on four continents. You need to make good business decisions, and you rely on your IT systems to provide the data to make those good decisions.

But your IT systems are not well integrated. There are too many different systems, and too many gaps between them, a legacy of the company’s history of mergers, acquisitions, and improvement initiatives. You need a common information backbone. You’ve heard that ERP systems can do that, but you’ve also heard about ERP project failures from years ago.

Can ERP handle the challenges of a steel company today? And will that lead to business benefits for the company? answer are yes, and yes.

Information Systems For A Quickly Changing Steel Industry

In a quickly changing industry like steel, one need information systems which quickly provide them the data they need. We believe that ERP, especially in its mature implementations today, is the crucial component for a company’s IT data backbone. ERP can play an essential role in:

Driving accurate and fast decisions (product profitability, procurement spend) with consistently defined data

Running broadly known and supported applications

Harmonizing and optimizing back-office processes across the enterprise that comply with finance requirements such as SOX and IFRS

Enabling best-practice demand planning for supply-chain processes Future-proofing global applications that support global enterprises

What is ERP?

ERP or Enterprise Resource Planning is IT software that integrates business activities across an enterprise—from product planning, parts purchasing, inventory control, and product distribution, to order tracking. ERP may also include application modules for the finance, accounting and human resources aspects of a business. SAP and Oracle are the two ERP leading vendors.

From a business perspective, ERP today has expanded from simply coordinating manufacturing processes to being the integrator of enterprise-wide backend processes. ERP has also evolved technologically from a monolithic legacy implementation into flexible, tiered, client-server architecture.

ERP Project Risks

In the late 1990s many ERP projects started, but more than a few failed. While ERP projects remain challenging even today, most can now be successful because the best practices have been identified and ERP professionals are more knowledgeable and more experienced with making the projects successful.

ERP Business Benefits

ERP is an enabler of business benefits, and should not be viewed as a standalone initiative with the requirement to pay back its implementation cost. The most immediate ERP benefits include

(1) Improved visibility of procurement spend and savings from improved sourcing policies, (2) Decrease of work-in progress and days-of-sale-outstanding, (3) Improved productivity through better sales order handling, better procurement operations and more efficient planning.

However, the most important business benefits will often be delivered after the ERP backbone is established, by other initiatives that use the ERP backbone:

Integrated supply chain: from network planning through scheduling and Manufacturing Execution Systems (MES)

Easier integration of business processes with business partners Shared services and outsourcing of support functions Increased information transparency to enable better decisions Agility in acquisitions and “carve-outs” or divestments Increased regulatory compliance Robust and future-proofed backbone systems

There are cost savings on the IT side, often around 10-15%, especially when different ERP implementations are being harmonized. These IT savings include: Reduced ERP implementation costs due to a common template Reduced application maintenance costs Lower integration cost due to standard interfaces

Lower infrastructure costs

With an awareness of the best practices and a good understanding of ERP project complexities, the risks in an ERP implementation are usually outweighed by the benefits. The ERP discussion on investment return is one of mindset more than one of standalone business cases.

Six ERP Design Challenges for Steel Companies

A steel company presents six industry-specific design challenges for implementing ERP, as described below. A successful ERP project will start by analyzing these challenges in detail across all of the company’s integrated processes. This analysis will result in the basic decisions that will be the foundation of the ERP project.

Challenge 1: More than one planning strategy

Steelmakers often use a combination of production planning strategies. Typically the flat or strip products are make-to-order, whereas the long products are make to- stock. Depending on the existence of a “de-couple point”, finish-to-order could be a relevant planning strategy as well. Such a combination of planning strategies affects the design of most ERP processes, including supply chain processes as well as the financial/cost control processes. Cost control in make-to-stock tends to go for standard price approaches, but in a make-to-order environment costing happens on an individual order cost collection and forecast basis. ERP systems today can handle this kind of complexity.

Challenge 2: Complex product variations

A steel product is made up of a large number of characteristics, making the product difficult to configure when entering it in the ERP system. Configuration in the make-to-order entries is typically done while entering the order, whereas for the make-to-stock entries, configuration is done in the product definition, that is, on the “material master”.

This burdens the early discussions during the design phase of an ERP implementation. Fundamental decisions need to be made very early in the project about how many (finished product) materials should be defined: one extreme is to define by material group which needs to be configured completely in the order, or the other end of the spectrum is to define all possible/feasible characteristic combinations which can possibly explode into an extremely large number of finished product definitions.

A steel product tend to explode towards the end of production processing; in other words, the bill of material “stands on its head” or is “v-shaped,” as shown in Figure 1. This means that the later in the process you define a product, the higher the number of products to be defined becomes. ERP solutions today can readily handle the complexities this of the V-shaped bill of material. They allow “characteristics based product configuration” with automatic deduction of characteristics, characteristic value inheritance from sales order header to item level, entry of multiple order units such as pieces, tons, dimensions, and so on. Characteristics then drive production, shipping and purchasing processes across the supply chain

Challenge 3: Flexible planning

Planning for steelmaking often needs to happen on short notice, with unstable production processes and unplanned outputs. This requires continuous re-assignment of products to processes and orders dependent on the Characteristics described above. ERP systems today allow re-assigning flexibly to handle these situations.

Challenge 4: Specific Customer Service Requirements

To cope with high-demanding customer segments such as automotive and construction, tight integration with business partners on forecasts, electronic customer orders (EDI, internet etc.) are typically needed. ERP systems today support electronic integration with partners.

Challenge 5: Complex production scheduling combining both continuous and batch production

Figure 2 below illustrates the flow in a typical steel mill. While the blast furnace and converter work in batches, the caster works continuously and the finishing lines work in batches again.

The batches need to be selected based on characteristics during production, preparation and shipment planning. This means that the planning process needs to be able to derive batches with characteristics inheritance and history tracing. Finally, the scheduling part of the planning system needs to be able to work with multiple and dynamic bottlenecks – that is, bottlenecks which can change based on incidents such as production problems in certain process steps. ERP systems today can handle all of these situations.

Challenge 6: Detailed margin analysis

In today’s steel industry when prices are high and capacity short, margin analysis becomes the essential method to tell what money is being made on which customer/product segments. On top of segment analysis, it is also essential to differentiate between “strategic materials” (cokes and ore, Ni and Cr for stainless) and the other cost elements that may be easier to control. ERP systems provide the tools to support these decisions.

The ERP system will also need to work closely with the company’s Business Information Systems (BIS) to optimize the business benefits. Working together, the ERP and BIS systems can, for example, improve inventory allocation to late orders.

Integrated IT Model for Steel

An integrated IT model as in Figure 3 is important because it lets you see the systems involved in planning and production. A typical flow would be:

The Supply Chain Management (SCM) application provides the rough-cut planning in “Demand Planning.” The result is planning blocks of similar products which are then handed over to production planning.

When orders are being entered, availability checks assign the order to a block (unless inventory already exists that meets the order) and feeds back a promise date (at the end of the block to allow for the flexibility of possibly moving to an earlier date).

The mill optimizer then typically would re-shuffle orders in between the blocks, and feed results back into the SCM application in order to optimize the load balancing.

Right before production starts, planned orders from the SCM application are converted into production orders and, via the ERP system, are transferred into the MES layer. It is at that time when quantities are being translated into pieces (slabs, coils etc.).

Detailed scheduling then takes place, sequencing and combining pieces from various orders throughout the mill into lots for optimization.

Production completion then posts an updated status of the orders into the ERP system, including stock receipts of finished products, and so forth.

Figure 3 is also important because it lets you identify gaps among a company’s different IT systems. A typical gap occurs between the ERP and MES (process control and machine control) systems, where the “system” is actually combination of custom-built applications and manual spreadsheets. “Bridging this gap” properly is essential forrealizing the business benefits of the IT investments.

If the applications in Figure 3 are to provide true value, they need to be robust, integrated and cost efficient. A recent IBM survey indicates that steel clients process control and MES systems are custom-built applications 66% of the time, and that these custom-built applications usually differ from mill to mill. Clearly, this risks creating sub-optimal processes and leaves the company open to all the problems of maintaining custom-built, legacy applications.

Implementation Approaches for ERP

The key element for ERP success is to know how to implement an ERP project. Past experiences recommends best practices such as:

Rapid/realistic project timelines due to external pressures (acquisition synergies, legal reorganization)

Command-and-control approaches from a central project management office A global business process owner who has the authority and credibility to approve process

designs and business model/ organization changes

However, there’s much more to it than these few general principles. Implementing ERP is complex and takes a team of knowledgeable and experienced ERP professionals to successfully implement an ERP project.

Implementation Process At Tata Steel The company knew well that they had a tough time especially to implement the software in one stroke. They had to choose top ERP software in order to ensure that it meets the demands of a big firm like

TISCO. They went ahead with associating and implanting TISCO to all the stakeholders so that they become compatible. These ideas also contributed to the success. They were also shrewd enough in adopting the modern and most recent technology available in the market. The period set for implementation seemed to be another major challenge. The time granted for the process was 8 months.

The business process was divided into two main segments. The core functions were denoted to be major ones. Similarly the supporting functions were named minor ones. A plan of action on the proposed ERP's impact was drafted depicting their relation to one another and to the business process. All of them were made to bear in mind the fact that ERP's implementation was imperative and that the deadlines were not very comfortable. The company took all efforts to ensure that the change did not produce any sort of resentment in the organization. This was done by educating everyone on the need and desirability of change. In addition all apprehensions relating to change were discussed and clarifications made to the fullest satisfaction.

It sounds almost Utopian doesn't it? But that's exactly the result of TISCO's ERP implementation completed within eight months. TISCO is Asia's first and India's largest integrated private sector steel company. It has a state-of-the-art 3.5 million tonne steel plant and is capable of meeting the most rigorous demands of its customers worldwide.

The company adopted ERP technology to take a lead in the competitive steel industry and through constant learning, innovation and refinement of its business operations, has transited seamlessly from a production-driven company to a customer-driven one. The existing technology was a simple replication of the manual system. Not only did it operate as individual islands of information but the technology had outlived its lifetime and was completely obsolete. The employees and management at TISCO faced a cumbersome task exchanging and retrieving information from the system.

Further, the reliability of information obtained was questionable because of inconsistency and duplication of data from different departments. Also there was no built-in integrity check for various data sources. Besides, several times the information against certain items was found missing.

An Early Response

Responding to changing customer needs started as early as 1991, with a study on cost competitiveness and a formal business plan, followed by ISO 9002 certification and benchmarking initiatives. Realizing the need to further support the re-engineered core processes and quickly align the business processes to radical changes in the market place, Tata steel decided to go for a new robust solution.

Design

In 1998-99 a small cross-functional in-house team along with consultants from Arthur D. Little (Strategy Consultants) and IBM Global Services (BPR Consultants) redesigned the two core business processes: Order Generation & Fulfillment and the Marketing Development processes. This was done to improve customer focus, facilitating better credit control, and reduction of stocks. In keeping with this commitment it adopted the latest production and business practices to offer innovative processes that meet the changing demands of its global and local customers.

Choosing The Platform And Technology

The management at Tata Steel wanted the software to seamlessly integrate with its existing information system and further provide compatibility with its future implementations. After an in-depth study of functionality, cost, time, compatibility, esteem, operability, support and future organizational requirements was done, SAP topped the list of contenders.

The implementation of SAP software was associated with certain strategic goals in mind. With this implementation, TISCO wanted to bring forth a culture of continuous learning and change. This would enable TISCO to achieve a world-class status for its products and services and strengthen its leadership position in the industry. Besides this, TISCO also wanted the software to result in quick decision-making, transparency and credibility of data and improve responsiveness to customers across all areas.

The Real Challenge

B Muthuraman, MD (Designate), said, "Implementing any ERP system is a challenge for an organization because of the declining success rate of ERP implementations world-wide.” The challenge is compounded if the ERP provider is a world leader - SAP. At Tata Steel however the real challenge for us did not lie in successfully implementing SAP or in rolling it out to our 46-odd geographic locations across the country under a big bang approach in just eight months. The real challenge lay ahead in building a conducive environment where SAP will be embedded in the hearts and minds of the people and the customers of Tata steel. They all looked forward to knowledge-based, successful organization. It is inspiring to know that our TEAM ASSET with support from Pricewaterhouse Coopers and SAP successfully lived up to our axiom and truly demonstrated leadership skills by going live across 46 locations within a record time frame of eight months.

Mapping Technology To Business Processes

The path was set to achieve success through SAP. All the branches, which had huge numbers of transactions and complexity, were identified as a HUB while the smaller branches along with the consignment agents were defined as SPOKES which were attached to these branches. In January 99 the team from TISCO was decided and christened 'TEAM ASSET' an acronym for Achieve Success through SAP Enabled Transformation. The TEAM ASSET had two simple axioms:

Go-Live date - 1st November 1999 There are only 24 hours a day

Preparatory task forces activities were conducted and core business processes were mapped to SAP modules. Also another parallel activity called 'Change Management' was initiated within the company. The prime objective of 'Change Management' was to reach out to people involved non-directly in the project to apprise them of the developments taking place. "We wanted that Tata Steel be the number one in the steel industry…we wanted to be the first to have the latest systems…" said Mr. Sandipan Chakravortty, GM (Sales), TISCO.

Tata Steel planned a big-bang approach of going live with all the modules at the same time, in just a span of eight months. Driven against the speed of time, the pace of implementation was fast with all activities backed by a lot of thought process and meticulous planning. On 1st November 1999 Tata Steel pulled off a big bang implementation of all SAP modules at one go across 46 countrywide locations, as per the set deadline.

Achieving Business Agility Through SAP

Marching ahead, Web enabling of SAP R/3 is on the cards. On the surface, it means it would allow anyone to access our SAP R/3 over the Internet. But beneath it, the implications are tremendous, as it would result in sharing of information with enterprise accounts and key customers. The success in Marketing and Sales has prompted a re-visit of the existing system in the works and a detailed rollout is expected as below.

Phase I - To Extend SAP in Works with FI, CO, MM, PP & QM Phase II - To implement SAP modules such as Asset Management & Budget management

sub-modules of FICO, Plant maintenance, Human Resources, Production Optimizer (such as SAP APO)

Phase III - SEM (Strategic Enterprise Management)

The company also plans to adopt the my SAP Customer Relationship Management solution to enhance its customer relationships in the near term and eventually realize its dream of a becoming the most efficient and competitive company in the world in its vertical.

ARCHITECTURE AT TATA STEEL

Major IT initiatives and implementations at Tata SteelSAP R/3 in Sales, Procurement, Finance and Accounting, Production Planning Systems for Steel plants using the APO module of SAP

Baan at Tisco growth shop and in spares manufacturing unitWorkflow, Document Management, Collaboration using Lotus NotesData Warehousing and Data Mining for manufacturing processesE-procurement, e-auction, and other e-enablement initiativesKnowledge Management and IntranetVideoconferencing, live video streaming for improved communication across geographiesVoIP, Wi-Fi, integration with cell phones and PDAs to support mobile computing

THE OUTCOMESAP ERP solutions produced a remarkable result to the company in terms of financial technical and managerial parameters. The effective handling and speed delivery resulted in greater sales .Similarly there was a drastic fall in the amount owned to creditors. The systems were made more user friendly without any

In a Nutshell The Company

TISCO is Asia's first and India's largest integrated private sector steel company. It is present in 46 nationwide locations.

The NeedThe company wanted to keep its lead in the competitive steel industry through constant learning, innovation, and refinement of its business operations. It had to transit from a production-driven company to a customer-driven one. The legacy systems had outlived its life and was quite obsolete.

The SolutionAn ERP SAP R/3 was deployed in a 'big bang' approach across all its locations nationwide.

The BenefitsThe company now has efficient business processes, enhanced customer service, reduced costs, improved productivity, accelerated transaction time, workflow management and reduction in the number of credit management errors. There have also been significant savings in manpower, inventory levels, and resources

complexities and procedural lacunas. This improved the quality of work and lessened the time taken for work and thereby increased the productivity. This was followed by a massive change in terms of accountability administration and control.

"Post the introduction of the ERP solution, the results have been terrific. Tisco has spent close to Rs 40 crore on its implementation and has saved Rs 33 crore within a few months," said Ramesh C. Nadrajog, Vice President, Finance. "The manpower cost has reduced from over $200 per ton two years ago, to about $140 per ton in 2000. The overdue outstanding has been brought down from Rs 5,170 million in 1999 to Rs 4,033 million by June 2000. The inventory carrying cost has drastically deflated from Rs 190 per ton to Rs 155 per ton. To add to this, there have been significant costs savings through management of resources with the implementation of SAP. With SAP's solution Tata Steel can now update their customers on a daily basis and provide seamless services across the country improving customer management. The availability of online information has facilitated quicker and reliable trend analysis for efficient decision-making. Besides the streamlined business process reduces the levels of legacy system and also provides consistent business practices across locations and excellent audit trail of all transactions.

Future Moves

This exercise undertaken by TISCO has been a motivating factor for both companies and ERP vendors. TISCO is not determined to stop ERP or attain a saturation point now. They are working on to improve and increase the scopes of enterprise resource planning software in the organization so that it benefits the stakeholders in all possible manners. Organizations can take this as a model guide and combine it with the critical success factors for ERP systems and critical success factors for ERP implementation in order to enjoy ERP success.

Conclusion

ERP is a key backbone application for companies in a fast changing industry like steel. Given an awareness of the best practices and a good understanding of the project complexities, the risks in an ERP implementation are usually outweighed by the benefits. The ERP discussion is often one of mindset more than one of standalone business cases. While implementing ERP can be challenging and demands sustained commitment from top executive levels, it is fundamental to enhancing the competitive position of a company in the dynamic environment of the steel industry today.

ERP in India

SOME of the first Indian companies to have adopted ERP practices are HLL, ONGC, ESSAR, Godrej Soaps, Cadburys, BASF, Telco, Maruti Udyog Ltd., Century Rayon, Citibank, ACC, ANZ Grindlays, German Remedies, Blue Star, Mahindra & Mahindra, Rallis India, Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford Motors, Kirloskar, Knoll Pharmaceuticals, and Glaxo.

First tier companies (those with a turnover greater than Rs.10 billion) implement ERP to increase internal efficiency and external competitiveness. Once ERP is established at this level, these large companies begin to desire similarly increased efficiency from their suppliers. Hence, second tier companies are pressured to implement ERP, and a trickle-down effect ensues. Powered by the axiom that a chain is only as strong as its weakest link, Indian industry quickly has recognized that in order to work at maximum efficiency, ERP must be implemented at all levels.

Initially, the majority of ERP solutions have been marketed to companies with greater than Rs. 2 billion, and generally, according to industry reports, the total cost of deploying ERP has ranged between 1 and 2 percent of companies' gross sales. Lower cost solutions are available for comparatively smaller sized companies.

Though the market seems to be very encouraging for ERP implementation, the time-frame for deployment may be an issue. However, since many companies that have not yet implemented ERP are leaders in their markets, it reasonably can be assumed that they will go for it within next five years. In fact, the ERP market should grow at a rate somewhere near the industrial growth rate.

Some industry categories, such as Automotive, Steel, Consumer Durables, Engineering, and Textiles have shown a very high ERP penetration. This means that these categories represent the greatest potential markets in next two years - other industries will follow. Figure 1 illustrates the market across various industries.

Survey of Industry ERP Implementations ERP implementations completed between 1995 and 1998 in India can give a sense of specific hurdles that companies may encounter in ERP deployment. Several companies were surveyed, and numerous ERP professionals were interviewed in order to assess the state of ERP in India.

The results indicate that Indian companies are moving forward with ERP implementation primarily in response to thrusts from parent collaborators, to revamp in order to meet increased load, or to reduce lead times and inventory levels, and improve customer satisfaction.

Resistance to change - in the form of fear of the unknown, reluctance to learn new techniques, or IT department reluctance to change due to attachment to its product - was a major hurdle faced during many ERP implementations. Additionally, the duplication required in the initial stage, and the intense pressure exerted on manpower proved to be problematic, as did the level of customization necessitated by disparities between company requirements and solutions offered by ERP software. This problem is diminishing due to advances in the software facility models.

Cost overruns also proved to be a pervasive problem with ERP implementations. Since most consultants charge on a man-hour basis, project time overruns substantially inflate incurred costs. To avoid this problem, top management must develop the necessary commitment to ERP, and all employees should be prepared for the change before the ERP implementation process is started. This model should help to eliminate needless project time and cost ballooning.

ERP in the Service SectorTransportation, medical care, hospitality, courier service, telecommunication, banking and financial services, and entertainment represent the major components of India's service sector, and on probing into the various needs of these groups, it becomes apparent that the courier, transportation, and entertainment industries do not have specific current needs for ERP. Banking and telecommunication each have very specialized requirements that the manufacturing-inclined software solutions on the market would not effectively address. The same holds true for the medical care and hospitality industries. The service sector has the potential to become an important ERP market within a few years. At this time ERP implementation in the services sector is very limited - only a few hospitals and banks have done small-scale experiments. New software and processes will need to be developed to meet the specific demands of the service industries, so ERP players should begin now to prepare themselves for the tremendous potential of this future market.

Assessment The Indian economy has reached a level of maturity that demands advanced technology. Although the Indian agricultural sector has not yet mechanized and there is little potential need for agriculture-based ERP in the foreseeable future, the services sector offers a largely untapped potential. With the pace of developments in the services sector continuing at 7 percent, there is a large scope for ERP in these markets.

Many Indian industries already have realized the need for ERP solutions, and the industry-related market growth should match the expansion of the sector as a whole. The maximum potential growth of the ERP market rests with companies that have a greater than Rs. 2 billion turnover, with smaller companies positioned to follow directly.

India is developing its infrastructure, ERP manpower requirements can be met, and the Indian mindset is changing with the times. Certainly, if the national railways could computerize operations, ERP does not seem an insurmountable challenge. In fact, the Indian ERP market looks very much like a $7.5 billion opportunity that has decided to take the plunge.

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TCS completes ERP implementation at ABB groupBS Reporter / Mumbai May 19, 2009, 14:42 IST

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Top Indian information technology firm Tata Consultancy Services ( TCS) Ltd. said it had successfully completed ERP (enterprise resource planing ) consolidation for ABB UK, in order to reduce complexity, standardize business processes and systems and make better use of data.

ABB UK is the subsidiary of global power and automation technology giant ABB Group. ABB had selected TCS as part of global simplification and business transformation programme 'One Simple ABB’.

 

TCS has migrated the company’s finance, human resources and operations functions onto a single SAP ERP system. TCS is of the view that bringing these operations onto a common platform will streamline these business processes, provide a single view of the business, aid compliance to regulations such as Sarbanes-Oxley, and allow for central data management and information sharing across the business.

"Greater transparency will enable a granular view of consolidated information and create, for example, quick access to accurate data about all stock, or all business with one customer or supplier," said TCS in a release

Factors influencing ERP implementation in Indian manufacturing organisations: A study of micro, small and medium-scale enterprises

Document Information:

Title: Factors influencing ERP implementation in Indian manufacturing organisations: A study of micro, small and medium-scale enterprises

Author(s): Parijat Upadhyay, (International School of Business and Media, Salt Lake City, India), Saeed Jahanyan, (Faculty of Management and Economics, TMU, Tehran, Iran), Pranab K. Dan, (West Bengal University of Technology, Salt Lake City, India)

Citation: Parijat Upadhyay, Saeed Jahanyan, Pranab K. Dan, (2011) "Factors influencing ERP implementation in Indian manufacturing organisations: A study of micro, small and medium-scale enterprises", Journal of Enterprise Information Management, Vol. 24 Iss: 2, pp.130 - 145

Keywords: Critical success factors, Factor analysis, Manufacturing resource planning, Small to medium-sized enterprises

Article type:

Research paper

DOI: 10.1108/17410391111106275 (Permanent URL)

Publisher: Emerald Group Publishing Limited

Abstract: Purpose – The purpose of this paper is to present the findings of a study which is based on the results of a comprehensive compilation of literature and subsequent analysis of ERP implementation success factors in the context of Indian micro, small and medium-scale enterprises (MSMEs). The paper attempts to assess empirically which factors are most critical in the ERP implementation process from the perspective of the Indian MSMEs. This research is potentially aimed at being useful to MSMEs as a guideline, so as to ensure a positive outcome of the implementation process.

Design/methodology/approach – The paper tries to explore the factors affecting implementation across the stages of ERP implementations using the responses

from 98 MSMEs engaged in manufacturing activities. The minimum number of factors explaining the maximum variance in data is determined using confirmatory factor analysis (CFA). The factor analysis is performed on SPSS with the principal component method using the Varimax rotation technique.

Findings – The results of this study highlights four crucial factors that influence the ERP implementation process in the Indian MSME segment. Broadly, they may be summed up under the following heads: project execution competency; product and vendor perspective; organizational climate; and technical perspective.

Originality/value – The findings will be beneficial for MSMEs for proper utilization of their limited resources and to pay adequate attention to those factors that are most likely to have an impact on the implementation of the ERP s

Why ERP Implementations fail in India?08 23 10'

Written by Team iPOTT

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Since early 1990s, many firms around the world have shifted their information technology (IT) strategy from developing information systems in-house to purchasing application software such as enterprise resource planning (ERP) systems.

As more and more enterprises move from functional to process-based IT infrastructure, ERP system becomes one of today’s most widely used IT solutions in many large enterprises. IT managers responsible for managing their organization’s ERP implementation view their ERP systems as their organizations’ most strategic computing platform. In spite of the widely used IT solutions, many ERP implementations are not successful. It takes longer time and costs more money than expected. Given the large investment that an ERP project requires and the potential benefits it can offer if successfully implemented, it is important to understand what is needed to ensure a successful ERP Implementation , during a whole process of ERP implementation, i.e.: pre implementation phase, implementation phase and post-implementation phase.

Serving as a company’s central nervous system, ERP systems orchestrate many functions, including order management, materials planning, warehouse management, payables, receivables, and general ledger. Because these systems touch so many aspects of a company’s internal and external operations their successful deployment and use are critical to organizational performance and survival. In reality, ERP implementation is costly and complex. In many cases, ERP is the largest single investment in any corporate-wide project. The software is expensive, and the consulting costs even more

Here is what works and what you need to do to reap the benefits of a fully integrated business.

A critical success factor is something that the organization must do well to succeed. In

terms of information system projects, a critical success factor is what a system must do

to accomplish what it was designed to do. Three factors consistently appear as critical success factors for information systems projects: top management support, client consultation (user involvement), and clear project objectives

The critical success factors can be categorized as strategic factors, tactical factors, and operational factors.

Strategic factors:

Top management support – In any ERP implementation a top-down decision, approach needs to be taken for ERP adoption .The commitment of top management should be emphasized throughout an organization. In particular, no more important factor than the support of the management is critical in the project’s life. The roles of top management in IT implementation include developing an understanding of the capabilities and limitations of IT, establishing reasonable goals for IT systems, exhibiting strong commitment to the successful introduction of IT, and communicating the corporate IT strategy to all employees Senior management must be involved, including the required people and appropriate time to finish and allocate valuable resources to the implementation effort.

Tactical factors:

Effective project management – in order to successfully accomplish the decision

to implement an ERP system, the effective project management comes into play

to plan, coordinate and control such an intricate project. In order for the ERP system to progress it is critical to clarify the ERP project’s and every participators’ scope and ensure

consideration of all the required work

Re-engineering business processes –To gain full benefit of ERP systems, it is imperative that business processes are aligned with the ERP systems, It is a proven fact that the ERP itself can not improve the firm’s performance unless the firm reengineers the business process per ERP systems. Modification of the software causes problems, such as code errors and difficulty upgrading to new versions. Each company needs customized software, but the organization must keep customization to a minimum, since any modification will lead to higher related cost . It is very important to consider the extent to which the company needs to re-engineer its current business processes in order to be compatible with the ERP software

Suitability of software and hardware – management must make a careful choice of an ERP package that best matches the legacy systems, e.g. the hardware platform, databases and operating systems.

Operational factors:

Education and training – when the ERP system is up and running it is very important that the users be capable to use it, hence they should be aware of the ERP logic and concepts and should be familiar with the system’s features. ERP systems involve big change for people, and the system will not do you any good if people do not understand how to use it effectively. Therefore, spending time on money on training, change management, job design, etc. is crucial to any ERP project.

User involvement – participating in the system development and implementation, the users go through a transition period that gives them time to better understand the project’s consequences.

By ensuring these critical success factors in place, your organization will be much more likely to maximize the business benefits of ERP.

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ERP Implementation at BPCLIn November 2001, Bharat Petroleum Corporation Limited (BPCL), a leading player in theIndian petroleum industry, successfully implemented an Enterprise Resource Planning (ERP).Implementation began in April 2000 after the company decided to integrate all its activities

through the ERP package SAP R/31.The company hoped to speed up its decision-making and respond faster to customer needsthrough ERP. The intention was to show the differentiation in service, retain customers and helpincrease the business of its Industrial & Commercial (I&C) customers2. BPCL also wanted toincrease its retail thrust by exploiting IT initiatives to the maximum. The noteworthy aspect wasthat the company was one of the very few Indian companies to have successfully implementedERP. With the successful implementation, BPCL customers could access information and dobusiness online, which enabled BPCL to increase its share of I&C customers from 14.9% in2000 to 15.8% in 2001. After the ERP implementation, BPCL's revenues grew by 2.28% in2000-01, even as the revenues of the petroleum industry declined by 3.4%

  ERP IMPLEMENTATION

   

We provide consultancy of ERP implementation to YOUR business. ERP implementation is to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.  ERP implementation brings together fragmented operations, often replacing multiplicity of legacy systems.  By sharing common information across an integrated set of application modules, ERP implementation can speed up transactions that cross your business.  ERP implementation solutions are effective at streamlining business processes that cut across the functional areas of your business. 

We expertise in implementation of various ERP softwares like Microsoft AXAPTA, RAMCO, Microsoft Dynamics and EMS(a highly customizable and cost effective product for all business sizes).

If you are interested in knowing more about how can ERP be beneficial to your organization, please contact us and we will get back to you within 24 hours.

Adapts the solution to your processes and your business needs and not the other way around Ensures that end users are involved in firming up the business processes along with

the user interfaces Enables to see visually what is going to be final solution even at the early stage of

development minimizing the gap between expectations and the final output

Provides a process based approach to implementation allowing prioritization of areas with the highest return

Has a web based integrated delivery environment, allowing collaboration over multiple locations thereby optimizing knowledge, skills and costs wherever they may be around the world

Leverages the highly automated and declarative nature of the development environment enabling rapid delivery of complex and personalized solutions

Has structured, and automated methodologies for Blueprinting, Requirements specifications, Design, Construction, Testing, Deployment and Change management maximizing your time and effort and ensuring rapid delivery

Enables continuous improvement of the solution during and beyond the go live stage, over the life cycle of usage of the applications

Realize your business vision faster, with better operational control and at lower risk of execution.

Faster time to benefit

For large and complex projects, our solutions are delivered in about half the time it normally takes through conventional approaches. You enjoy the benefits of your IT investments early, leading to a higher ROI. You can prioritize `High Return implementation initiatives' to be delivered earlier.

From a business perspective, you can start with your current needs and progressively grow with the required functionality without being burdened with any unnecessary baggage of software. This approach will realize quicker returns and avoid sensational and inefficient big bang implementations.

Operational independence

You are no longer constrained by periodical vendor product release plans leading to disruptive quality issues and unnecessary functionality. You can have your own solution and technology road map with pre-built or new components. In short, you are free to chart your own course.

This improves your ability to shift your IT assets from potentially obsolete technologies. You can now implement your business imperatives without the constraints of complex inter-related technologies and codes that are difficult to maintain, let alone change.

Lower risk

History has shown that most problems in enterprise applications occur during the specification of business requirements. You, as a part of the business entity always tend to be in a divergent path from the application vendor. Following the traditional path of enterprise applications results in higher risk. This is due to the implementation methodologies and delivery approaches not adapting to business, user and ongoing change needs.

Our solutions are intrinsically designed to address the business requirements and support ongoing adaptations in a superior manner compared to products and customs solutions.

Our solutions are evergreen and are there for you today and into the future.

Advantages of ERP :-

Ease of use – The system of ERP is very user friendly. With the correct amount of training, it becomes easy for the employees to use the system.

Best business practices – The ERP system helps companies to do away with the erroneous ways of carrying out the different business functions and introduces business best practices. This further helps to provide better control and introduces standardized ways to execute business processes.

Ready-made elucidation for most of the problems – Most of the problems get resolved as the vendors who develop ERP software packages, take the best ideas from all their customers and incorporate them into their products.

Only customization required – ERP Systems are already developed to suit the general businesses. But as every company has a slightly different way of operating, only minor changes may be needed to customize the system to suit the company’s particular business requirements.

Information entered only once into the system – As all the departments and the functions in the organization are integrated and linked to one single database, data needs to be entered only once into the system. It can then, be accessed by different departments according to their needs. For example, before taking an order from a customer, the sales representative can have access to information regarding availability of inventory, credit rating of the customer, etc.

Easy enterprise wide information sharing – Once the information is entered into the single database, everyone in the organization has access to the information and sees the same computer screen.

Reduction in time required to complete tasks – As the different parts of the organization are connected with each other, people have faster access to information and require less time to do their tasks. This helps to improve the time and resources for decision-making.

Customer satisfaction – In the paper-based system, the order moved from basket to basket around the organization, and often caused delays, errors in processing due to repeated entries by the different department or got lost. With the ERP system, the order process moves quickly through the organization. This helps to get the orders to the customers faster and there is no in-basket time waiting time involved.

ROI earlier than the software developed in-house – Developing software in-house requires a great amount of investment, experienced professionals and tremendous amount of time. The payback from the in-house system takes an equally longer time. As ERP software packages are developed by vendors who have the required expertise, they are basically off the shelf packages that companies pick up that require minor customizations as per company requirements, and so they don’t involve an in-depth development like the in-house software. Hence the ROI is received faster from the ERP system

ERP implementation issues and challenges: AFISHBONE analysis in context to Indian industriesAbstract: Enterprise Resource Planning (ERP) systems are the wellaccepted solutions among Indian industries for improving theirsupply chains and overall business performance to face the strongglobal challenges. ERP provides competitive advantages in businessoperations and strengthens cohesiveness among the different wingsof an organization with quick response and low transaction cost.But the implementations of ERP involve added complexity andsometime it ends with total failure and loss of huge investment. Thispaper is aimed to explore and identify critical issues in ERPimplementation in context to Indian industries. Fishbone (Ishikawa)analysis has been applied to identify the critical issues for Indianindustries as they experienced during implementation of ERP intheir organizations. A stratified sampling method has been adoptedfor capturing primary data from Indian industries. Our findingsshow that certain factors, like improper system implementationstrategies, lack of well-defined scope of implementation procedures,improper project planning and huge customization of the systemselected for implementation etc, have significant influences on thesuccessful ERP implementations.Key Words: Enterprise Resource Planning (ERP), Small andMedium Scale Industries (SMIs), Fishbone Analysis, Informationsystems (IS).1. INTRODUCTION:With the globalizations and development of technologies, theIndian firms are facing a multitude of forces pertaining to thegrowth of fierce competition, market expansion, and risingcustomer expectations in the dynamic business environment.The global and domestic competitors in any business domainare continuously upgrading their internal infrastructure andcapabilities to stay competitive in the current dynamic businessenvironment. To keep up the pace with this dynamicenvironment, Indian enterprises are developing strategies onInformation Systems (IS) which root out the difficulties anddisruptions in the supply chain, hence to grasp the competitiveadvantage over the other industry players and to strive for itsbetter performance. ERP systems offer tremendousopportunities to more consistently provide IS to theorganizations in a standardized, centralized and cost-efficient

manner and highlights the wide scope of applications ondifferent functional areas and multiple business units compriseaccounting and financials, human resources, supply chain,operations and logistics, sales and marketing [5]. Fig. 1 showsthe typical ERP system is fully integrated solution to handle allthe different wings of an enterprise like production,procurement, manufacturing, accounting, sales, marketing,distribution, customer service, etc.Fig. 1 ERP SystemBack in the 1960’s, Information Systems come into picturewhen the focus of the systems was mainly towards inventorycontrol to handle inventory of an enterprise [11]. In 1970’s thefocus was on MRP (Material Requirement Planning) which wasdesigned for raw material planning and procurement. Then, thenew concept came in 1980’s, which is MRP-II, involvedprimarily in optimizing the entire plant production process [11].IRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

221Though MRP-II, in the beginning was an extension of MRP toinclude shop floor and distribution management activities,during later years, MRP-II was further extended to includeareas like Finance, Human Resource, Marketing, Planning,Engineering, Project Management etc. [3]. With furtherrefinement of MRP-II, ERP came into market, which coveredthe cross-functional coordination and integration in support ofthe production process. The ERP as compared to its ancestorsincluded the entire range of a company’s activities [10]. Fig. 2shows the ERP systems evolution history over the years.Period ERP Evolution2000 - Extended ERP System (ERP II)1990sEnterprise Resource Planning(ERP)1980sManufacturing ResourcesPlanning (MRP II)1970sManufacturing ResourcesPlanning (MRP)1960s Inventory Control PackagesSource: Adapted from Huang et al. (2003)Fig. 2 ERP System EvolutionBroadly speaking, ERP is one of key IS applications that areused to capture, store, and transmit information so as to enhanceefficiency and visibility in handling physical goods movingwithin the firm [12]. ERP brings the two significant advantagesthat do not occur in non-integrated departmental systems: (1)encompasses all functions and departments within the firm; (2)enhance the interdepartmental cooperation and coordinationbecause of the firm database in which all business transactionsare entered, recorded, processed, monitored, and reported.Overall, it can facilitate the firms to accomplish their objectivesof enhanced communication and responsiveness to allstakeholders [1]. Unfortunately, ERP systems have a reputationfor costing a lot of money and providing meager results,because the people who are expected to use the application donot know what it is or how it works [17]. According toPanorama’s study, 35.5% of ERP implementations take longerthan expected, ERP implementation cost is 6.9% of the

enterprise’s revenue and 51.4% ERP systems implementationscosts exceeds it initial budget [24]. Also they mentioned in2010 ERP report, 67.5% of companies surveyed fail to realizeat least half of the business benefits they expected from theirERP systems. In addition, over one in three companiessurveyed (40%) realized major operational disruptions afterimplementation go-live, such as the inability to ship products orto close the books [24]. According to Research firm StandishGroup, 31.1% of ERP projects being canceled beforecompletion. The results also illustrate 52.7% of ERP projectscost 189% of their original estimates [8]. However, recognizingthe repeated causes of failure permits understanding,preventative occurrence and proactive risk mitigation strategies.In this paper, we are aiming in identifying critical issues for thefailure of ERP Implementation and then developing causalanalysis using fishbone analysis which in turn, will highlightmajor action plans for Indian SMIs and large Organization toimplement EPR systems successfully to avail competitiveadvantages among its competitors.2. LITERATURE REVIEW:There has been lot of work done over the world to identify thecritical success factors for ERP implementations. We havementioned some of them in this section.ERP systems have been widely used in developed countries allover the world. With the opening up of Indian market to theglobal market, there is a significant expansion in the Indianmarket segments both in large enterprises and small andmedium enterprise (SMIs) segments. Indian enterprises haveimplemented ERP systems or they are in the process ofimplementing ERP systems. It has been found that factors likelimited capital, lack of proper infrastructure, lack of skilledresources, absence of ERP awareness and poor implementationplanning are seriously affecting the implementation of ERPsystems in India and other developing countries as compared tothe developed countries. There are similar needs that areresponsible for implementing ERP systems in SMIs ascompared to large enterprises [19]. There are more or lesssimilar factors that are affecting ERP implementations both inSMIs and large enterprises. Parijat Upadhyay et al (2008)mentioned in his research work that some critical issues, likeselection of big ERP vendors and implementers, availability ofproper infrastructures and availability of skilled ERP resources,affecting the implementations and impact of such enterprisesystems are different depending on the volume of organizationas the business strategy and policy taken by Small and Mediumscale enterprises (SMIs) are not the same as large organizations.Sometimes SMIs in India are limited by low IT budgets,insufficient infrastructure, unclear line of control and improperwork culture as compared to large enterprises [15].M.N. Vijaya kumar and team (2010), in their research work,prioritized the critical factors affecting ERP systemimplementation in fertilizer industry in and the factors wereidentified: inadequate and in-consistent data, improper useracceptance testing and training, never run parallel system,conference room pilot, employee retention, customization, andclarity in management objective and external consultantdependency [21]. N. Venkateswaran and Dr. V. Mahalakshmi(2010) outlined the six major challenges faced by Indianenterprises which are data maintenance and integration

problems, involvement of consultants in respective projects,vendor selection, little implementation experience, weak ITinfrastructure and access knowledge and human resource etc[14].ERP implementations face lots of resistances in Indianorganizations, mainly from SMIs, due to huge investments andmore failures associated with it. The study of ERPimplementation issues is necessary to encourage IndianIRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

222enterprises to go for ERP implementation as ERP is vital intheir future growth.The study conducted by Parijat Upadhyay and team (2008), intheir research work, on Indian SMIs, revealed that for ensuringsuccessful ERP implementation, the six major factors like onclarity in goals and objectives behind the implementation,adequacy of user training, competency of the projectimplementation team, acceptance of changes brought about bythe implementation and adequate vendor support and externalconsultant participation had a key role to play [15]. Accordingto Ravi Seethamraju, and Seethamraju, J.(2008) another barrierfor ERP implementation is related to the IT maturity in bothnational and organizational levels. In developing countries likeIndia, IT infrastructure has many weak issues related to the ITpenetration such as internet and computer penetration inorganizations and social levels. This is in addition to the lack ofnumber of computer and internet users on both national andorganizational levels. Other factors which lead to lack ofadoption are related to cultural factors and lack of knowledge ofERP systems [18].Hany Abdelghaffar and Reem Hamdy Abdel Azim (2010), intheir study conducted among Egyptian enterprises, showed that90% of international organizations obtained their competitiveedge over their competitors in their respective fields of businessstems from 'National factors', namely; 1) ICT infrastructure, 2)Government regulatory, 3) Economic growth, and 4) Regionallocation of Egypt. Whereas the 'Manufacturing' factor is acommon factor for all companies working in Egypt and has nosignificant role in the success of ERP implementation in thiscontext. Additionally, we examined the 'Organizational factors',to find some of them are of significance, namely; 1) Businesssize, 2) IT maturity, and 3) Computer culture. Whereas theManagement commitment and Business Process Reengineeringare common in all organizations and do not play a differentialrole in the ERP success implementation in Egypt [7]. In anotherstudy by Ali Noudoostbeni (2009), it has been found thatcompanies spent large money in developing ERP systems thatare not utilized. In a study conducted in Malaysia by studyingERP Implementations have identified 10 success factors likeimplementing team’s teamwork and composition, effectivetraining of users, clear and direct communication, groupstructure, other department’s participation, reasonableexpectation with definite targets, top management involvement,cooperation between enterprise & ERP implementers, projectmanagement, effective decision - making [2].Yuanqiang Xia et al (2009), based on the analysis of conditionsof SMEs of China, suggested the 6 critical factors for ERPimplementation: top management support, great competence

project team, right implementation scope, management programchange, data accuracy, education and training in another study[23]. Doom and Milis (2008) grouped the critical successfactors in five categories in order to test their importance forERP implementation and included: (1) vision, scope and goals(2) culture, communication and support (3) infrastructure (4)approach and (5) project management. These group factors andtheir sub-factors were considered as a core part of anysuccessful ERP implementation in organizations (Raymond etal., 2005) [4].Another study discussing the case of three companies isprovided by Poon P.-L., Yu, Y.T.(2006). Their study suggeststhat, at least in the considered companies, the ERP procurementprocess had been less systematic and comprehensive than inWestern companies with probably less organized projectplanning, reluctance to hire external consultants and lesscomprehensive selection criteria [16]. Wenhong Luo and DianeM. Strong (2004) identified the major hurdle in ERPimplementation is to find out the exact match and gap betweenthe ERP system and an organization’s existing businessprocesses by appropriately customizing the ERP system andchanging the organization process to fill up the gaps.Framework for supporting management decision-making aboutCustomization choices and the capabilities required toaccomplish the match has been provided by variouscustomization possibilities for ERP systems in a study [22].According to Markus et al. (2000), three main factors that canbe held responsible for failure of ERP system are: poorplanning or poor management; change in business goals duringproject; and lack of business management support [13].3. ERP BENEFITS:The benefits of ERP in any organization are beyond doubt.Some of the key benefits are listed below [6]:• Reduced manufacturing cycle time• Reduced Production Cost• Reduced inventory overheads• Reduced requirement of manpower• Increased transparency in procurements• Reduced delay in supply chain• Enables faster response to changing market situations• Better utilization of resources• Increased customer satisfaction• Enables global outreachIndian enterprises have adapted ERP systems or in the processof adapting ERP systems to avail the multi-dimensional benefitsof ERP systems, though ERP systems in India are in earlystages as compared to developed countries like USA, Europe. Itstarted from the late 1990s when MRP II, ERP and SCMbecame more and more popular in Indian market and manyindustrial enterprises have commissioned new ERP systems,such as SAP/R3, Oracle, and BAAN IV/V. Government ofIndia also continues to support the ERP system’s adaptations inGovernment owned enterprises.Above mentioned benefits can be availed from ERP system,once the ERP systems implemented successfully. One of thefactors for successful ERP Implementation is the ERP vendorselections. There are a number of ERP vendors like SAP,Oracle, Tally, Microsoft, Ramco etc. There are the two largestIRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

223ERP players, SAP and Oracle, and their combined marketshares in India reached close to 60% of the overall market; nowindfall, however, awaited other vendors who struggled toenhance their market shares. Indian ERP vendors like Tally, 3iInfoTech, and Ramco have their niches, but were squeezed hardby the biggies. Fig. 3 shows the ERP players market shares inIndia.Oracle18%SAP39%QAD2%SSA Global3%3i InfoTech3%Others13%Cognos1%Intentia1%Tally9%Ramco5%Microsoft6%

Fig. 3 ERP Market shares in India****Source: DQ estimates Cyber Media Research3.1 ERP & Indian SMIs and Large EnterprisesWe can divide Indian organizations into three major categoriesdepending on their volume in terms of annual revenue, manpower: i) Small and Medium scale Industries & ii) Large Scaleor Multinational Enterprises.ERP systems adaptation for Indian SMIs can be done either forall the departments or for specific departments depending onmainly three factors i) Cost effectiveness of the implementationii) Absolute necessity for implementation and iii) whether theinvestment would yield a profitable return. So all the factorsare related with cost where as Indian large organization canafford to adopt an ERP in its entirety only because it wouldhave the money power to do so. Thus we can say that ERPimplementation in SMIs is done in stages.The initial hurdle in ERP implementations faced by IndianSMIs and large enterprises is the awareness of the ERPconcepts. A survey conducted by IDC stated that the awarenessof the ERP concept among SMI is less than 35%, compared toover 80% in large [20].The next hurdle is the selection of ERP vendors and ERPimplementers. Huge investments in associated with big ERPplayers like SAP, Oracle and big ERP implementer like TCS,Wipro, Infosys etc.Another critical hurdle is the implementation strategy, involvesstrong and quick decisions, required for implementation ERPsystem. There are two strategic approaches to ERP systemimplementation. The first approach is where a company goesfor the plain vanilla version of ERP. Here the enterprise has toreengineer the business process to fit the functionality of theERP system which brings with it major changes in the workingof the enterprise. This approach will take advantage of futureupgrades, and allow enterprises to benefit from beststandardized business processes. The second approach is wherethe ERP system is customized to fit the business processes ofthe enterprise. This will not only slow down the implementationbut also will introduce new bugs into the system and makeupgrades difficult and costly.Instead of the hurdles, Indian enterprises both in Private and

Public sector have adopted ERP systems successfully andgetting the competitive advantages. Some of them are HLL,ONGC, IOCL, SAIL, Godrej Soaps, BHEL, HAL, Cadburys,BASF, Telco, TISCO, Tata Motors, Tata Steel, HPCL, MarutiUdyog Ltd., Century Rayon, ACC, Blue Star, Mahindra &Mahindra, Rallis India, Sony India Pvt. Ltd., Ceat Ltd., Jindal,Indal, Ford Motors, Kirloskar, Knoll Pharmaceuticals, Glaxoetc.4. METHODOLOGY:In this research we have used stratified survey method to collectdata from Indian enterprises, both SMIs and large enterprises,who have implemented ERP systems or in the process ofadopting ERP systems. We have categorized the critical issuesand challenges in adopting ERP systems from the survey dataand then we have done causal analysis using fishbone model.This will help Indian enterprises to formulate their strategiesprior to adaptation of ERP systems so that they can implementEPR systems successfully and get the competitive advantagesamong their competitors.4.1 DATA CAPTURE

The objective of this research is to identify the criticalchallenges and issues which can crop up during ERPimplementation in Indian Enterprises. Consequently, we try tounderstand how these significant factors can be mitigated tohelp these organizations in achieving their competitiveadvantage. In order to achieve this, both qualitative andquantitative approaches were considered. The survey methodwas selected to collect data from wide number of organizationsoperating in various verticals like Banking and Finance,Manufacturing, Retail, Telecom, and Utilities etc. The surveywas conducted on both private and public sector enterprises andon large organization as well as small and medium scaledenterprises. Enterprises’ selection is based on the fact that theselarge-size companies are implementing and relying on ERPsystems as their backbone infrastructure for theirfunctionalities. The sample was collected from both theenterprises implementing ERP and the ERP implementers inIndia. A total of 117 samples were collected from both largeenterprises and SMIs, out of which 26 were large enterprisesand 91 were SMIs. The questionnaire was pilot tested with firstIRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

224seventeen firms for content validity and instrument reliability.Based upon the modification the final questionnaire was sent tokey informants within each firm. Fig. 4 shows the Indianenterprises distributions depending on the Industry verticals.Fig. 4 Enterprises by Industry VerticalsDuring survey on Indian enterprises we found differentimplementation stages in different organizations. Fig. 5 showsERP systems implementation stages distributions.Fig. 5 ERP Systems Implementation Stages4.2 FISHBONE ANALYSIS

Fishbone Analysis (also called Ishikawa diagrams as created byKaoru Ishikawa (1990), Causal Analysis or Fishikawa) areanalysis that show the causes of a certain event [9]. We willdraw fishbone diagram with the identified critical factors,triggering delays or failure in implementing ERP systems forIndian enterprises.5. FINDINGS & DISCUSSIONS:

From the our extensive survey conducted on 117 Indianenterprises for last 7 months, we have identified the followingcritical issues which may triggers failure of ERPimplementations.i. Clear scope of Implementationsii. Top management commitmentiii. Proper implementation strategyiv. Vendor Selectionsv. Project managementvi. User training and educationvii. Change ManagementBased upon the modification the final questionnaire in oursurvey, we have seen that some of the above critical issues arein some enterprises, other factors played vital role for otherenterprises. For instance, critical factor Clear scope ofImplementation played role of critical success factor for 16large enterprises and 73 SMIs i.e. total 89 Indian enterprises.Fig. 6 shows the survey data which shows the occurrences ofdifferent critical issues in the Indian enterprises during ERPsystem implementations.Fig. 6 Critical issues in different enterprisesFig. 7 shows the distribution of different critical issues in theform of pie-chart where we can see that there are two prominentcritical factors, i.e. Proper Implementation Strategy and ProjectManagement, which being together contributes nearly 40% oftotal success factor of ERP systems implementations amongIndian enterprises.Fig. 7 Critical factors distribution Pie-ChartFig. 8 in next page depicts the causal analysis having criticalfactors and the sub factors using fishbone model based on theabove critical issues.i. Clear scope of Implementations: Both the ERP Implementersand the enterprises should know the scope of ERPimplementation before the adaptation of ERP Systems.Identify Critical Business Areas: The enterprises, adoptingERP systems, should identify the critical business areas wherethey need to implement ERP systems urgently. This will helpERP implementer to align the best practice with the enterprise’sexisting business processes.Identify the Modules: With the increase of the numberof modules to be implemented, it will increase the investmentsalso. So enterprises should identify the modules depending onIRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

225their budget and the return on investment before going for ERPsystem.Study Internal Weakness: Enterprises should minutelystudy their internal weakness before deciding to implementERP system. In our survey, we had seen that most of theenterprises were not aware of their requirement at all, causinghuge investments without any return on investment.ii. Top Management Commitment: It is the Top Managementwho takes the decision for adapting ERP systems in anyenterprises and need supports throughout the implementationphases.Strong & Quick Decisions: There might be several occasionswhen the top managements need to take strong and quickdecisions for smooth implantations of ERP systems.Strong Leaderships: Top management should show their

strong leaderships and they should act as infrastructurefacilitator for ERP implementers and project team.Motivate & Encourage Manpower: ERP systemsimplementations have always faced strong resistance from theemployees which delayed most of the ERP implementations inIndia where employees have fair to loose jobs due to ERPimplementations.iii. Proper Implementation Strategy: This is another criticalfactor causing delays and failure of ERP implementations.There should have proper implantation strategies for successfulERP adaptations.Type of Implementations: There are two approaches ofERP Implementations: Vanilla implementations andCustomized ERP implementation.Vanilla Implementations: Enterprises should take strategicdecisions whether to go vanilla implantations where they thestandardized business processes as embedded in the ERPsystems.Minimal Customizations: Customizations in ERP systemsare required when the existing business processes can not be fitor mapped with the standardized processes provided by ERPsystems. Government enterprises, irrespective of their sizes, aremore resistant to change their years old business processes.These cause huge customizations which in turn increaseinvestments and reduce stabilities and quickness of the ERPsystems.Fig. 8 Fishbone Analysis for Successful ERP implementations in the context of Indian EnterprisesProper Planning: Proper planning is requiredfor successful ERP implementations otherwise itcauses delays and sometimes failure in spite of hugeinvestments.Clear Communications: There should haveclear communications between ERP implementers,EPR vendors and the enterprises for successful EPRImplementations.iv. Vendor Selections: Vendors selections areanother critical factor for successfulimplementations of ERP systems.ERP systems Market Surveys: Enterprises shoulddo market surveys before choosing ERP vendors.Internal & ERP Capabilities: Enterprise shouldstudy their business process minutely and the ERPcapabilities before going for ERP implementations.Analysis Cost-Effectiveness: Cost is thecritical factors for choosing ERP vendors.Enterprises should analyze competitive costeffectivenessof the ERP systems and finally choosethe best one.v. Project Management: There should have properproject management for successful ERPIRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

226implementations. Project team members are theactual implementers of ERP system.Specific Milestones: There should have specificmilestones in place for successful ERP adaptation.Without any milestones, ERP implementation gotdelayed for a long time and sometime causing totalfailure.

Skilled Project Team: ERP systemsimplementations are complex and lengthy process innature. It requires skilled IT professionals withstrong technology and domain knowledge.Timely UAT, SIT and Feedback: Specificmilestones like User acceptance testing (UAT),System integration testing (SIT), phase-wise go-livedates should be set after extensive discussionsbetween enterprise’s management and the ERPimplementers team. It will reduce delay inimplementations and feedback should be takenduring UAT and SIT sessions so that ERP systemscan be implemented to integrate the enterprise’sexisting business process successfully with out anygap.vi. User Training & Educations: As ERP systemsare new to the enterprises, users’ trainings andeducations are necessary to make its users aware ofthe through business processes in the ERP systems.Skilled Manpower: Skilled ERP resources arerequired to run ERP systems. It is managementdiscretion either to use their existing resources afterdetailed trainings and educations or hire skilledprofessionals.ERP Systems Training: System trainings arerequired for increasing awareness of the users aboutthe ERP systems and ERP business processes. Itwill take sometimes for the users to cope up with thenew ERP systems.Hired skilled professionals: If the enterprisesdo not have sufficient ERP professionals, they needto hire experts by conducting recruitment processes.vii. Change Management: The implementations ofEPR systems bring a change in the enterprises interms of business processes and enterprise culture. Itis crucial that changes should be appropriatelymanaged on two levels. First, there are the changesto the organization. Second there are the changesthat are made to the business processes by the use ofthe ERP system.Change Business Culture: ERP systems bringbusiness culture change at the organizational level.Management has to take prompt step to cope upwith the new changing business environment.Standardize Internal Processes: With theimplementations of ERP systems, enterprises adaptstandardized processes that are used by enterprisesacross the globe. It make easy to grow business inglobal markets.Any organizations implementing ERP systems or inthe process of implementing ERP packages shouldconsider all these critical issues and should takenecessary steps to reduce or mitigate these criticalissues during ERP implementations, which, in turn,cause successful ERP implementations.6. CONCLUSION:The findings of this paper are purely survey based.We tried to combine both the quantitative andqualitative approaches to find out the critical factors

affecting ERP implementations in context of Indianenterprises. The causal analysis using Fishbonemodel will be helpful for Indian enterprises to focuson the critical issues like vendor selection, usertraining and education, proper implementationstrategy, clearly defined scope of implementationprocedure, proper project planning and minimalcustomization. The managers and users can bebenefited from this study by identifying those keyissues to make the implementation proceduresmooth without any disruption. Further ERPvendors can take inputs from this study to changetheir implementation approach while targeting smallscale enterprises. A well-designed and properlyintegrated ERP system allows the most updatedinformation to be shared among various businessfunctions, thereby resulting in tremendous costsavings and increased efficiency and providecompetitive advantages.REFERENCE:[1] A. Al-Mudimigh, M. Zairi, M. Al-Mashari, ERPsoftware implementation: an integrative framework,European Journal of Information Systems 10 (4)(2001) 216[2] Ali Noudoostbeni, “To investigate the Successand Failure Factors of ERP implementation withinMalaysian Small and Medium Enterprises, 978-0-7695-3595-1/09 $25.00 © 2008 IEEE, 2009, pp157-160[3] Correll, J. G. (1995),”Reengineering the MRP IIenvironment: The key is successfully implementingchange”, IIE Solutions; Norcross, Vol. 27 No. 7, pp.24-27.[4] Doom, C. and Milis, K. 2008. ‘Critical SuccessFactors of ERP implementation in Belgian’ 2ndWorkshop on 3rd Generation Enterprise ResourcePlanning Systems SME’, Denmark, (2008).[5] F. Jacobs, E. Bendoly, Enterprise resourceplanning: developments and directions foroperations management research, European Journalof Operational Research 146 (2) (2003) 233.IRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563Vol. 2 No.2, April 2012

227[6] Garg Venkitakrishnan, (2006). “ERP Conceptsand Practice”, Prentice Hall India.[7] Hany Abdelghaffar and Reem Hamdy AbdelAzim 2010. “SIGNIFICANT FACTORSINFLUENCING ERP IMPLEMENTATION INLARGE ORGANIZATIONS: EVIDENCE FROMEGYPT”, European, Mediterranean & MiddleEastern Conference on Information Systems 2010.[8] http://www.erp.asia/erp-failures.asp[9] Ishikawa, Kaoru (1990); (Translator: J. H.Loftus); Introduction to Quality Control; 448 p;[10] Jaiswal, M. P. (2002),”Enhancing businessvalue through ERP enabled e-businesstransformation”, Journal of E-Business, Vol. 2 No.2.

[11] Kessler, J. (1991),”MRP II: In the Midst of aContinuing Evolution”, Industrial Engineering;Norcross, Vol. 23 No. 3, pp. 38-40.[12] L. Kerbache, Enterprise resource planning(ERP): the dynamics of operations management,Interfaces 32 (1) (2002) 104.[13] M.L Markus, C. Tanis & P.C Fenma.“Multisite ERP implementations”. Communicationsof the ACM, 43(4), 2000, 42-46.[14] N. Venkateswaran and Dr. V. Mahalakshmi,“ERP Application in India: an Overview”, ,IJEIMS[15] Parijat Upadhyay et al , “An explorative studyto identify the Critical Success Factors for ERPimplementation in Indian small and medium scaleenterprises”, 978-0-7695-3513-5/08 $25.00 © 2008IEEE, DOI 10.1109/ICIT.2008.66 pp 295-299[16] Poon P.-L., Yu, Y.T., 2006, Procurement ofenterprise resource planning systems: Experienceswith some Hong Kong companies, Proceedings ofthe ICSE’06, Shanghai, 561-568.[17] Poonam Garg (2010), Critical Success factorsfor Enterprise Resource Planning implementation inIndian Retail Industry: An Exploratory study,(IJCSIS) International Journal of Computer Scienceand Information Security, Vol. 8, No. 2, 2010[18] Ravi Seethamraju, and Seethamraju, J. 2008.'Adoption of ERPs in a Medium-sized Enterprise -A case study'. The 19th Australasian Conference onInformation Systems.[19] S.C.L. Koh, M. Simpson, J. Padmore, N.Dimitriadis and F. Misopoulos, (2006) "Anexploratory study of enterprise resource planningadoption in Greek companies", IndustrialManagement & Data Systems, Vol. 106 Iss: 7,pp.1033 – 1059[20] S Vijay Venkatesh, ERP for SMEs.http://www.syscon-solutions.com/docs/erp.pdf[21] Vijaya Kumar et al. (2010), ―Application ofAnalytical Hierarchy Process to Prioritize theFactors Affecting ERP Implementation_,

MEs -- the most aggressive adopters of ERP Changing Indian ERP scenario

IN recent times, the ERP scenario in India is witnessing a rapid growth. A number of manufacturing firms, automotive, steel, oil, textile and pharmaceutical companies have already been implemented ERP solution thus making ERP dominating the overall picture in these organizations.

For the early adopters of ERP solution, Finance and Accounting, Sales and Distribution, Materials Management/Purchase, and Manufacturing are the most

popular ERP modules implemented. In recent times Plant Maintenance, HR, Transportation and Service modules are also growing in popularity.

We find different industrial sectors like cement sector, power sector, and food sector are going for ERP solutions. The construction or project companies have also implemented different ERP solutions suitable to their needs.

Currently, the SME segment in India has been one of the most aggressive adopters of ERP software. In fact almost 60 per cent companies in the SME segment have already implemented ERP. This substantial increase in the penetration level in the SME segment is attributed to the introduction of low cost ERP solutions such as eresource ERP which also caters the country-specific localizations and availability of large pool of skilled functional and technical talents.

The primal objectives that the SMEs have for switching to ERP is to get aid in smooth inventory management, timely scheduling of production cycles and shipment of goods, managing human resources and online data communication.

According to estimates, the ERP market in India has witnessed a growth rate of 70 per cent in the last decade. As a result, the market has leapfrogged over the years to a tremendous volume in terms of monetary gains. There were many reports which underlined the tangible quantitative benefits accrued by Indian companies in post-ERP implementation era.

Most of the time these benefits are difficult to prove on statistical grounds as soft benefits like comfort in work life, maturity in planning, attitude changes, transparency, visibility etc are either practically impossible to measure or correlate such improvements to ERP implementation. Companies are supposed to set their objectives prior to implementation followed by measuring of the achievements after implementation, and only then should they conclude about the effects of ERP.

FE » Story

Railways to roll out world’s biggest ERP project by AugA A

Surabhi: New Delhi, May 29, May 30 2008, 21:30 ISTTags: New Delhi, May 29: Indian Railways is gearing up to roll out its ambitious enterprise resource planning (ERP) programme by August this year, which would cover all its 25 lakh past and present employees and is being touted as the biggest such exercise in the world.

“We have about 14 lakh serving workers and another 11 lakh pensioners who would be covered under the programme, making it even bigger than the ERP programme of the US Army which has about 23 lakh employees,” a railway official said.

The ERP programme is aimed at efficient management of its huge human resources and aims to integrate all of the railways’ entire freight, passenger and administrative operations across the country.

The ministry is finalising the tender for selecting the systems provider and the project implementer and is hopeful inviting bids for the contract within the next three months. “We expect that the software provider and the developer will bid together in a combination,’’ the official said. The railway ministry run CRIS has been made responsible for the overall execution of the project.

After finalising the contract by end 2008, the railways plans to hold a one-year long pilot run of the ERP project most probably on the Western railways zone, which has about 1.4 lakh employees. The entire ERP programme would then be rolled out in all the 16 railway zones over the next two to three years. The programme will be implemented on an all India basis by the end of the 11th Five Year Plan.

Exclusive for Indian manufacturers An affordable ERP for SMEs

In a move to assure small business customer in India implements ERP solution, eresource ERP has come out with an ERP exclusively for Indian manufacturers. Eresource ERP iSE, an ERP for Small and Medium Enterprises is affordable, quick to implement and enabling the SME to focus on growth and improving their business rather than worrying about software.

eresource ERP for SME is designed to provide the small and medium enterprises to implement a suitable resource planning which will guarantee a return on investment, thus making it to grow their business beyond their expectations and margins.

Eresource Infotech so far implemented eresource ERP for SME module nearly in 25 customer locations and our client list is growing more and more by day, which indicates the growing popularity of this software.

The key operational factor for SME is to increase operation efficiency, reduce cost of production, supply chain management and deliver product to customer. The major obstacle for the SMEs is the cost element associated with ERP implementation, which are usually very expensive. Eresource ERP is priced at cheaper and be afforded by even very small industrial units.

Moreover, the differentiating factor is that eresource ERP is modular with regard to pricing. Eresource ERP comprises of modules, such as:

Sales and Distribution module Purchase and Supplier Module

Inventory and Material Management Module

Production and Shop Floor Management Module

Total Quality management

Excise management

Accounts and Finance Management

Human Resource Management

eresource ERP benefits Gain Business Visibility, Get accurate, timely information, Make better business decisions

Increase Operational efficiency Gain Business Visibility

Improve Customer Relationship

Streamline Production and Planning

Optimize IT Investments

Comply with Regulations

Cut Costs

Bring product to market sooner

Monitor and control and expenses

Reduce errors

Get accurate, timely information

Support your changing needs

Get a complete view of your business

Make better business decisions

Deliver the right product at the right time

Keep customer promises

Ability to modify/configure statutory changes

Reduced product cost, reduced expediting

Improved closure rates, Increased market share

Improved sales and opportunity visibility better customer relationships, lower customer service costs

Global reach, better inventory visibility, reduced distribution costs, higher      Related Article:

This report describes the ERP implementation project in Indian Oil Corporation. Thewhole project was one of the biggest ERP project in South East Asia. Theimplementation process is tracked right from its inception and to where it standstoday. An analysis of the problems faced during this whole process and the stepstaken by Indian Oil Corporation to bring it parallel with its business strategies is alsodiscussed.Many Firms today are investing into information technology with an objective toimprove their business processes. The use of information

technology is an indicator that information technology is being used to leverage the company¶s resources andthus

create a competitive advantage in the marketplace. Information technologysolutions to Enterprise Resource Planning (ERP) are a big help to many companiesas they help them to improve and standardize their processes, cut down their operating cost and improve decision making capability.COMPANY AND ITS PRODUCTS:Indian Oil Corporation is a major diversified, transnational, integrated energycompany in India, with national leadership and playing a national role in oil security&public distribution. Indian Oil Corporation Ltd. was formed in 1964 with the merger of Indian Refineries Limited and Indian Oil Company Limited. Indian Oil and itssubsidiaries account for 47% petroleum products market share, 40.4% refiningcapacity and 67% downstream sector pipelines capacity in India. It is India's largestcommercial enterprise, with a sales turnover of Rs. 2, 20,779 crore (US $51 billion)and profits of Rs. 7,499 crore (US $1.73 billion) for fiscal 2006. Indian Oil is also thehighest ranked Indian company in the prestigious Fortune 'Global 500' listing. It isalso the 20th largest petroleum company in the world. The total sales of Indian Oilgroup for the year 2006-07 is 57.97 million tonnes of petroleum products, whichincludes 1.63 million tonnes of natural gas and exports of 3.13 million tonnes. TheIndian Oil Group of companies owns and operates 10 out of 19 refineries with a total

Business led approach key to success of ERPMay 20, 2009, 11.56pm IST

To leverage enterprise solution (ERP) to drive business value and derive sustainable competitive advantage, Indian companies who are looking to implement global best practices enterprise solution has to look at it with business approach rather than just looking at it as an advance technology tool. The unanimous voice emerged at the panel discussion at Accenture and The Economic Times forum on "Leveraging Value To Sustain Competitive Advantage" held at Mumbai recently.

The panel discussion which focused on the increasing importance of the supply chain in the chemicals industry was attended by Vijay Mehra, group CIO, Essar, Vikas Gadre, CIO, Tata Chemicals, Bihag Lalaji, vice-president, special projects, Ambuja cements, Ajit Kumar, leader, system integration and technology, Accenture India and Mike Scimo, managing director, chemical and natural resources, global industry, Accenture.

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ABSTRACT

Manufacturing processes work out of required materials for the manufacturing processeswith unwanted

materials not finding a place. This type of ERP will advocates smoothflow of information between all

stages of the production cycle. It also ensures less probability of errors in subsequent stages of

production and reduction in lead time. Everymanufacturing process aims to produce ‘A’ quantity of

product within a given time. AFMCG company can easily achieve this by shortening the production

cycle time with thehelp of appropriate ERP software. Automation is an inherent feature of almost all

the process based manufacturing ERP. Integrating all manufacturing processes ensure thatthe

chances of errors due to human intervention are minimized.Enterprise resource planning (ERP) is an enterprise-

wide information system designed tocoordinate all the resources, information, and activities

needed to complete business processes such as order fulfillment or billing. ERP system supports

most of the businesssystem that maintains in a single database the data needed for a variety of businessfuncti

ons such as Manufacturing, Supply Chain Management, Financials, Projects,Human Resources and Customer

Relationship Management. An ERP system is based ona common database and a modular software

design. The common database can allowevery department of a business to store and retrieve

information in real-time. Theinformation should be reliable, accessible, and easily shared. The modular

softwaredesign should mean a business can select the modules they need, mix and match modulesfrom

different vendors, and add new modules of their own to improve business