7/30/2019 ERP PAPER REVIEW

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

Y A S I R M U H I B | M B A 2 K 1 1 | S E C T I O N A | N U S T B U S I N E S S S C H O O L

INTRODUCTION AND EVOLUTION

The ERP systems cater to the ever increasing information processing, timely and effective communication and

coordination across functional units, Strategic Business Units (SBUs), and with the key stakeholders in the entire supply

chain of an organization. Moreover, ERP systems improve operational efficiency, help reduce costs and hence add value

to the entire business operations for achieving competitive advantage. Two major benefits of ERP systems are; a unified

and integrated view of all organizational departments; and an enterprise-wide database which can be accessed by any

functional units as per its pertinent needs and thus adds to improved communication and cooperation.

The ERP systems evolved out of the Inventory control systems of 1960s aiming at conveniently satisfying customerdemands. In 1970s, Materials Resource Planning (MRP) systems were introduced to assess material requirements and

requisition time with the help of computer-aided automation. MRP coupled with enhanced technology transformed into

Manufacturing Resource Planning (MRP II) in the 1980s. The expansion of MRP II to the entire enterprise led to the

development of ERP in the early 1990s.

SCOPE OF ERP AND ITS PROS AND CONS

ERP systems represent a One-for-all solution to several different information processing needs of different functional

units such as Financial, HRM, Supply Chain and Operations, and Marketing and Sales.

However, ERP has both its pros and cons: They integrate the flow of information across subunits of an enterprise and

hence result in greater coordination and operational efficiency. This, in turn, saves millions for organization. On the other

hand, there are additional training, maintenance and upgradation costs associated with ERP. Moreover, they can disruptthe organizational culture and return on investment (ROI) may not be realized for extended periods of time.

CRITICAL FACTORS FOR ERP IMPLEMENTATION

ORGANIZATION must define the objectives of ERP implementation and the key expectations and deliverables from the

system. Moreover, ERP should be implemented with the input of suppliers and with consideration of customers. The

implementation also requires commitment and dedication on the part of top management and development of proper

work plan and resource plan. Most importantly, the organization must be flexible enough to redesign its processes as per

the ERP infrastructure. The implementation team should comprise of skilled and experiences employees and the

resources necessary should be readily available to them. Correct data entry is the key to overall performance of an ERP

system. Moreover, the old system must be creatively destructed gradually and everyone should be using the ERP. For

achieving this purpose and for benefiting fully from the ERP, proper training programs need to take place. Certain

objective performance measures should be used to evaluate the effectiveness and overall impact of an ERP system.

Pertinent performance measures may include inventory turnover, vendor performance, on-time delivery to customers

etc. Despite all the critical factors, ERP may initially turn the productivity down as due to the complexity of the system.

However, management needs to be consistent and patient to reap the benefits of ERP system.

ERP SELECTION AND IMPLEMENTATION

For an ERP system to be successful, it must be aligned with the organizations existing business processes and

procedures. More than half of ERP systems fail due to lack of such alignment of organizations infrastructure with the ERP

technology architecture. ERP systems are not typical softwares and need to upgraded. Moreover, the hardware

components also need to be upgraded for smooth running of ERP. Umble et al (2003) suggest 12 step procedure for ERP

selection which starts with creating vision, feature / function list, and software candidate list, the list is then narrowed

down to four to six candidates and a RFP is made for the potential suppliers; the proposal are reviewed and two or three

finalists are shortlisted; the finalists demonstrate their packages and winner is decided; investment is justified as per the

cost benefit analysis and the contract is negotiated; finally a pre-implementation pilot is being run and the investmentjustification is validated.

Finally, there are certain implementation steps comprising of: reviewing the overall pre-implementation process; installing

and testing new hardware; installing the software and performing the room-pilot; attending system training; training the

conference room pilot; establishing security and necessary permissions; ensure that data bridges and rubost and data are

accurate; documenting policies and procedures; making the entire organization on-line; celebrate and strive for

continuous improvement.

Umble, E. J., Haft, R. R. and Umble, M. M. (2003). ERP Implementation Procedures And Critical Success Factors. European Journal of Operational Research,Vol. 146, Issue: 2006, pp. 241-157

1960s

Inventor Control

1970s

Materials Resource Plannin

1980s

Manufacturing Resource Planning

1990s

Enter rise Resource Plannin