Week Four – Case Study:
ERP Implementation
- Consider the role of a work group manager during an ERP implementation. The work group could be accounting, shipping and receiving, etc. It is unlikely that the work group manager would have influence over the entire ERP implementation. How could you as a work group manager use the strategic success factors and sub-factors to positively impact an ERP implementation?
ERP implementation may be one of the largest information technology transitions that a company can make. Some have likened it to a nervous system transplant (Johnson, 2002). Nearly every aspect of business is affected by the change in processes and even the flow of work. With such a large scale change each manager must do anything that is in their realm of responsibility to make the implementation as smooth as possible. Dowlatshahi (2005) looked through much of the research performed on ERP implementation prior to his paper and found that very little had been written to support companies and managers who are designing or implementing an ERP system. His answer to that lack of information was the “strategic success factors” (and sub-factors) as outlined in Strategic success factors in enterprise resource-planning design and implementation: a case study approach. Some of these can be used very successfully by the midlevel manager to make the implementation smooth.
The first factor of success is the Cost of ERP Implementation (S1). Midlevel managers should be able to evaluate the needs of their particular department as they pertain to the ERP system. Once the needs are identified, they need to be clearly and succinctly communicated to the software selection team. If each manager is able to give a reasonably accurate description of what processes they are involved with and determine any opportunities to streamline, the software team will be able to make an accurate requirements list to evaluate potential suppliers to. Selecting the right system is one way of reducing costs by eliminating the majority of customization needed. If the software is set up to be configured by the administrator it will significantly reduce the cost of changes that may otherwise need to be sourced to a consultant at a cost of up to 60 percent of implementation budget (Robey, 2002). Next, managers should accurately understand what data needs to be transferred to the new system. Data may be held and used in several legacy systems and may be up to 50 percent corrupt (Rettig, 2007). Getting this data translated and formatted in a usable form can be time consuming and costly. The last cost related sub-factor that a manager should carefully consider is how many users from the department need to access the ERP system. Since ERP cost is typically a function of the number of users, it is most cost effective to utilize as few licenses as is realistic. They should make sure not to skimp and entrench new bottlenecks, but it may be worth objectively considering if a change in work flow could eliminate the need for redundancy, which is one of the core rationalizations behind ERP concepts (Wailgum, 2008).
The next factor of successful implementation of ERP is (ROI) return on investment (S2). Since many ERP systems do not show a positive ROI for the first several years it is important that managers understand the objectives in terms of increased efficiency and reduced labor. Managers must set measurable goals for what they expect the implementation to achieve. To set goals it is imperative to understand the present state of the department before any changes are made. Goals should be evaluated periodically to identify any problems; are we meeting, beating or exceeding expectations? These metrics will prove invaluable when the accountants are trying to establish real ROI. The last portion of this factor is how to ensure cultural acceptance in the department. Managers must show how the new processes will benefit the company, the department and the employee. Weather it is reducing mistakes and rework or giving higher probability of added profit sharing potential, the personal connection is critical. If the department views the project as a “directive from the guys at the top who don’t really know what we do”, it is doomed to be less successful than if everyone can be convinced of the benefits.
The third factor is employee training (S3). Dowlatshahi (2005) points out that all ERP systems require the user to have a good grasp on basic computer skills. When those skills are lacking, basic training must be implemented before users ever look at the ERP environment. If low computer competency employees were set up to start using the system, many, if not all, would become discouraged and would harbor ill feelings about the new system. Many people get to know just the basics to get around and accomplish the necessary tasks, but when faced with an unfamiliar environment will start negative attitudes that will perpetuate throughout the department and the rest of the company (Kemp, 2004). The last sub-factor that affects the usability of the ERP system is how it will be trained. Many software providers have training that is built to help users become familiar with the environment and how each process works within the system (Dowlatshahi, 2005). When users are able to efficiently accomplish the tasks associated with their responsibility, success of implementation can be measured. Training is the key for bringing people up to efficient operation. It not only provides confidence in employees but if it is structured carefully it will have documentation for the processes that can serve as a reference in the future. The last aspect of training would be for the manager to ensure that a specialist is available upon roll-out to answer any questions users have once the ERP system is live.
The last factor of success is how well ERP is integrated into the company (S4). Based on the basic tenants of ERP; organizations will be the most successful when ERP is used in every area (Wailgum, 2008). Enterprise Resource Planning theory is based on the fact that any information in the company can be used to make better decisions, analyze data and remove redundancy of data entry. By ignoring any part of the company we lose the inherent benefits of ERP and thus reduce the measurable success.
In short managers have the responsibility to support the direction of the company. ERP implementation can be a high risk activity so it is critical that all midlevel managers support their employees with the expectation that it will be painful but in the end worth the challenges. By providing adequate training and post implementation support they can give confidence to their staff in an uncomfortable time of change. Next, managers need to provide clear vision about the goals of the implementation and give progress reports periodically that show the improvements. The final portion managers can improve roll-out is proper planning to reduce the overall costs in the long run and the headaches of finding problems during implementation. By focusing on these activities managers can have a dramatic impact on the successful implementation of an organization wide ERP system.
- As you consider #1 above please be very specific. For example, sub-factor 2 of factor 2 discusses corporate culture. As a work group manager you probably will not impact the entire culture of a corporation. However, what are your responsibilities in your work group regarding culture and employee acceptance of the ERP? I hope you are already aware of the fact that telling people they must accept a new IS or that they have no choice but to use a new IS are seldom successful strategies.
Answered in the previous response.
References:
Dowlatshahi, S. (2005). Strategic success factors in enterprise resource-planning design and implementation: a case study approach. International Journal of Production Research, 43(18), 3745-3771.
Johnson, S. J. (2002). ERP: payoffs and pitfalls, Harvard Business School: working knowledge for business leaders. Retrieved July 6, 2008 from: http://hbswk.hbs.edu/archive/3141.html
Kemp, Sid (2004). Project management demystified. New York: McGraw Hill.
Rettig, C. (2007). The trouble with enterprise software, MIT Sloan Management Review. 49 (1) SMR259.
Robey, D., Ross, J.W., & Boudreau, M. (2002). Learning to implement enterprise systems: An exploratory study of the dialectics of change. Journal of Management Information Systems, 19(1), 17-46.
Posts
No comments:
Post a Comment