Is Erp An Evil Business? Paper By Jayabalaji Sathiyamoorthi

Is ERP an Evil Business? What causes ERP, a business promoter to an administrative evil

Production Management Systems – Term Paper Summer 2008 Submitted by Turdpoom Pookusmas 5019656 Jayabalaji Sathiyamoorthi 5019665 SS 2008, Masters in Technical Management Submitted to Prof. Dr. Agnes Pechmann 04 May 2008

Production Management Systems

Acknowledgement We are indebted to our professor Dr. Agnes Pechmann for providing such a topic on ERP. It is certainly an opportunity to study and understand the underlying concepts of ERP over PPS. It was such a wonderful learning experience for each one of us, in the course of writing this paper. Besides that it was a good opportunity to both of us to improve inter-cultural skills. We thank our beloved parents who have motivated in terms of money and support that they have rendered in sending us to Germany for our higher education. A special thanks to the FH Emden library staffs for fetching the necessary journals on time. And we also we thank our friends who assisted in reviewing and brainstorming our concepts and ideas.

Jayabalaji and Turdpoom

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Table of Contents Acknowledgement ........................................................................................................................................ 2 Abstract ........................................................................................................................................................ 6 1.

.2

3.

4.

5.

Introduction .......................................................................................................................................... 7 1.1.

Definition of ERP ........................................................................................................................... 7

1.2.

History of ERP................................................................................................................................ 7

ERP Systems .......................................................................................................................................... 8 2.1.

ERP implementation - Incremental Approach .............................................................................. 9

2.2.

The Components of an ERP System ............................................................................................ 10

Critical Success factors of ERP in organizations .................................................................................. 10 3.1.

Significant success factors of ERP ............................................................................................... 11

3.2.

Reduced operating costs............................................................................................................. 12

3.3.

Easy Day-to-Day Management ................................................................................................... 12

3.4.

Strategic Planning Support.......................................................................................................... 12

3.5.

ERP implementation strategy ..................................................................................................... 12

3.6.

Common ERP Challenges: Why Projects Fail .............................................................................. 12

ERP Life Cycle Implementation Process .............................................................................................. 13 4.1.

Pre evaluation Screening ............................................................................................................ 13

4.2.

Evaluation Package ..................................................................................................................... 13

4.3.

Project Planning .......................................................................................................................... 13

4.4.

GAP analysis ................................................................................................................................ 13

4.5.

Reengineering ............................................................................................................................. 14

4.6.

Team training .............................................................................................................................. 14

4.7.

Testing ......................................................................................................................................... 14

4.8.

Post implementation .................................................................................................................. 14

Impact from ERP implementation ...................................................................................................... 16 5.1.

ERP’S impact on stakeholders ..................................................................................................... 16

5.2.

Impact on Implementation Process ............................................................................................ 16

5.3.

Impact on Departments .............................................................................................................. 17

5.4.

Impact on the organization as a whole ....................................................................................... 17

5.5.

Impact on Employment............................................................................................................... 17

5.6.

Impact on the nature of Job and information access ................................................................. 17 Is ERP an evil business..? | Acknowledgement

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5.7. 6.

Impact on the individual employees ........................................................................................... 17

ERP issues over PPS ............................................................................................................................. 18 6.1.

Project team formation............................................................................................................... 18

6.2.

Ease of change ............................................................................................................................ 18

6.3.

Measurement of success ............................................................................................................ 18

6.4.

Project phase problems .............................................................................................................. 18

6.5.

Software modifications ............................................................................................................... 19

6.6.

Changes in Employees Attitude .................................................................................................. 19

6.7.

System Integration issues ........................................................................................................... 19

6.8.

Expensive – Implementation and Support.................................................................................. 19

6.9.

Problems with product and implementation consultants .......................................................... 20

6.10. 7.

Cutting end-user training ........................................................................................................ 20

Measures to avoid administrative Issues............................................................................................ 20 7.1.

Improved Training – Hierarchical Method .................................................................................. 20

7.2.

Building maintenance & support team ....................................................................................... 21

7.3.

Use of single vendor package ..................................................................................................... 21

7.4.

Access to accurate information .................................................................................................. 21

7.5.

Simplification and standardization ............................................................................................. 21

7.6.

Knowledge transfer from Consultants ........................................................................................ 21

7.7.

Top management involvement. .................................................................................................. 22

7.8.

Defined metrics ........................................................................................................................... 22

8.

Change Management and ERP Implementation ................................................................................. 22 8.1.

What is Change management? ................................................................................................... 22

8.2.

Change Management Aspects .................................................................................................... 23

8.3.

Component of Change Management ......................................................................................... 23

9.

Case Study ........................................................................................................................................... 25

10.

Discussion........................................................................................................................................ 26

11.

Summary and conclusion ................................................................................................................ 27

References .................................................................................................................................................. 28 Appendix ..................................................................................................................................................... 29

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Table of Figures Figure 1: ERP Vendors (Source: AMR Research, 2005) ..................................................................... 8 Figure 2: ASAP Methodology (Copyright, SAP AG.) .......................................................................... 15 Figure 3: Key ASAP Deliverables (Copyright, SAP AG.) ................................................................... 16

Segregation of Work SNO 1 2

NAME Turdpoom Jayabalaji

SECTIONS HANDLED 1, 2,3,4,5,8,10,11 5, 6, 7, 9, 10, 11

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Abstract

Enterprise Resource Planning systems (ERPs) integrate (or attempt to integrate) all data and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules In this paper we try to analyze whether ERP systems leads to administrative evil 1 or acts as a promoter for the business operation. In the first phase, we study the implementation concepts of the ERP and the importance of having an ERP system in the production planning. Then we discuss about the success factors of the ERP system in PPC. Later we discuss the various scenarios of ERP implementation, which causes problems for individual and organization called as “Administrative Evil”. In which it is considered that individual and moral responsibility gets turmoil by technical responsibility. We propose ideas on how to avoid so called evils and also provide more information on change management and effective ERP implementation. Most of the companies adapted similar strategies and were very successful in terms of the return on investment and streamlining production planning. We support this with the help of a case study. Ultimately, the influence of the people and practices makes the success of the ERP tools, unplanned activities causes the evil which make employees illiterate of their work using ERP tools. So with the proper training, simplifying and standardizing the ERP tool will have a long term beneficial influence on any organization. Keywords: ERP, Administrative evil, Change management, success factors, ERP lifecycles

1

Enterprise resource planning systems: A physical manifestation of administrative evil, Jesse F.Dillard, Linda Ruchala, Kristi Yuthas, International journal of accounting information systems, Volume 6 issue 2, 2005 Is ERP an evil business..? | Abstract

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1. Introduction “More than 85 percent of respondents agreed or strongly agreed that their ERP systems were essential to the core of their businesses and that they could not live without them2.” After reviewing the paper3, we would like to discuss on whether ERP is an administrative evil or a business facilitator. We provide the reasons for what makes ERP a business promoter to an administrative evil. As a frontage we present the history, theory and knowledge of ERP implementation.

1.1.

Definition of ERP

ERP systems are commercial software packages that enable the integration of transactions oriented data and business processes throughout an organization. The Enterprise Resource Planning system is an enterprise information system designed to integrate and optimize the business processes and transactions in a corporation. The ERP is an industry-driven concepts and systems, and is universally accepted by the industry as a practical solution to achieve integrated enterprise information systems4. An ERP system can include software for manufacturing, capturing orders, accounts receivable and payable, general ledger, purchasing, warehousing, transportation and human resources. The major ERP vendors are SAP, PeopleSoft, Oracle, Baan and J.D. Edwards. Lawson Software specializes in back-end processing that integrates with another vendor's manufacturing system. (See Figure 1)

1.2.

History of ERP

The history of ERP dates back to the 1960's, the main focus in those days was towards inventory control. A major part of the software's developed were based on traditional 2

Thomas W, Why ERP Systems Are More Important Than Ever, 2008 ERP: A physical manifestation of administrative evil, Volume 6 issue 2, 2005 4 Young B. Moon , Management and Enterprise Development, Vol. 4, No. 3, 2007 3

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inventory concepts. The next decade witnessed a shift of focus towards Material Requirement Planning (MRP). The purpose of MRP's was to translate the schedule for individual units. The 1980's brought the concept of MRP-II (Manufacturing Resource Planning). This system helped in optimizing the entire production process. MRP-II was later extended to include areas such as Finance, HR, Engineering, Project Management etc. This gave birth to ERP (Enterprise Resource Planning). Its job was to integrate core business areas. In the past, ERP software was not used to its full potential. Today, the business model of an organization (domestic or global) is based on ERP. It is used as a management tool and gives organizations a great competitive advantage.

Figure 1: ERP Vendors (Source: AMR Research, 2005)

2. ERP Systems Is ERP an evil business..? | ERP Systems

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ERP is an acronym meaning Enterprise Resource Planning. It is a software package/solution most often used within the manufacturing environment. ERP is a business tool that management uses to operate the business day-in and day-out. It is comprised of several modules such as financial module, distribution module, HR module or a production module. Each of these modules share information that is stored within the database structures on which the ERP system was programmed. ERP helps to break down barriers between departments within a company. For example, many times the sales department may be selling 25% more product than the production department can produce. By utilizing an ERP system, the sales department, production department, operations management, shipping, financial department, purchasing department all have access to the up-to-date information that is needed to operate smoothly within any manufacturing environment. Additionally this facilitates supply chain management. ERP is more of a business methodology than a piece of application software, although it does incorporate several software applications, brought together under a single, integrated framework.

2.1.

ERP implementation - Incremental Approach

An ERP implementation can cost a huge sum of money to create, and may take several years to complete. An ERP system likely represents a company's largest IT investment, so some companies prefer to implement ERP in a more incremental fashion rather than all at once. Some ERP vendors provide modular software units together with a unified interface to allow for this gradual approach. Once implemented properly, the ERP system brings tremendous advantages. Because all systems are joined together, all departments can, more easily share information. The workflow that takes place between departments can become much more automated, and ultimately, customers are better served because the individual using the customerfacing applications will have access to every bit of information regarding each relevant process.

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2.2.

The Components of an ERP System

The components of an ERP system are the common components of a Management Information System (MIS)5. 2.2.1. ERP Software Module based ERP software is the core of an ERP system. Each software module automates business activities of a functional area within an organization. Common ERP software modules include product planning, parts purchasing, inventory control, product distribution, order tracking, finance, and accounting and human resources aspects of an organization. 2.2.2. Business Processes Business processes within an organization falls into three levels - strategic planning, management control and operational control. ERP has been promoted as solutions for supporting or streamlining business processes at all levels.

2.2.3. ERP Users The users of ERP systems are employees of the organization at all levels, from workers, supervisors, and middle level managers to executives.

2.2.4. Hardware and Operating Systems Many large ERP systems are UNIX based. Windows NT and Linux are other popular operating systems to run ERP software. Legacy ERP systems may use other operating systems as well.

3. Critical Success factors of ERP in organizations “Even though much of ERP success has been in facilitating operational coordination across functional departments, successful implementation of ERP systems benefit strategic planning and management control one way or other6 .“

5 6

Dr. Bruce Z, ABCs of ERP,2005 Anthony R A, 2005 Is ERP an evil business..? | Critical Success factors of ERP in organizations

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3.1.

Significant success factors of ERP

There is a numerous business benefits of implementing a new age ERP application in the right environment and the most prominent of these are listed below 1. Improved Organizational efficiency due to Process integration and standardizing across various departments and division of an Organization 2. Capability for external process Integration through ERP integration framework, with the key business entities like customers, suppliers, Partners, Banks etc. to manage the business operation in a controlled, automated, online and real time mode 3. Leverage the latest technology to carry on organizational operations in more efficient way. 4. Minimizing redundant data – by providing universal and single version of truth around all masters and transactional data. 5. Visibility of real time information across the entire breadth of processes. Information accessibility for right decision offered by an ERP solution is perceived as big advantage by the management of any organization. 6. Increase in Employee productivity (Over a period of time higher employee satisfactions have been achieved with ERP solution)and reduction in head count/ possibility of redeployment of people 7. Well traceable and faster processes like Order to Cash, Procure to Pay, Shipping, Receiving, use of statistics tool for reliable forecasting, Improved and informed Scheduling, improved inventory turnaround time, reduced process cycle times etc. all leads to improved organizational efficiency. 8. Reduction in operation costs such as Inventory carrying cost, Analysis cost, Management Reporting cost, lost opportunity, cost of customer dissatisfaction, etc. 9. Adaptability to latest manufacturing model and ever driven market needs. 10. Highly Improved Control and Audit capabilities for compliance with governance rules

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3.2.

Reduced operating costs

ERP software attempts to integrate business processes across departments onto a single enterprise-wide information system. The immediate benefit from implementing ERP systems we can expect is reduced operating costs, such as lower inventory control cost, lower production costs, lower marketing costs and lower help desk support costs.

3.3.

Easy Day-to-Day Management

The implementations of ERP systems nurture the establishment of backbone data warehouses. ERP systems offer better accessibility to data so that management can have up-to-the-minute access to information for decision making and managerial control. ERP software helps track actual costs of activities and perform activity based costing.

3.4.

Strategic Planning Support

Strategic Planning is a deliberate set of steps that assess needs and resources; define a target audience and a set of goals and objectives; plan and design coordinated strategies with evidence of success; logically connect these strategies to needs, assets, and desired outcomes; and measure and evaluate the process and outcomes.

3.5.

ERP implementation strategy

An ERP implementation strategy is necessary using which millions of companies around the world used the process to much success. This strategy is a way for the company to clearly identify the areas where they need help, and find solutions to meet those needs. Creating an ERP implementation strategy should be one of the first steps. Identifying problem areas is always not an easy job. Consider a company with over 10,000 employees, who work in accounting, marketing, manufacturing, and a number of other departments. In such a case it is important that the company poll their employees, or find some other way to make sure that all the problem areas are identified.

3.6.

Common ERP Challenges: Why Projects Fail

The following are few of the common ERP challenges involved in any project. Failing to handle any one of the below factors might lead the project to fail. 

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

Failure to consider key business requirements during vendor selection process



Too little focus on optimizing business processes



Poor project management and project cost controls



Lack of focus on organizational change management, communications, and training



Failure to measure performance / ROI and to conduct post-implementation audit

4. ERP Life Cycle Implementation Process ERP lifecycle highlights the different stages involved in the implementation of ERP. They are as follows.

4.1.

Pre evaluation Screening

Once the company has decided to go for the ERP system, the search for the package must start as there are hundreds of packages. This stage will be useful in eliminating those packages that are not suitable for the business process. 4.2. Evaluation Package This stage is one among the important phases of the ERP implementation, as the package that one selects will decide the success or failure of the project. As implementation of an ERP involves huge investments and it is not easy to switch between different packages.

4.3.

Project Planning

This phase deals with the implementation process. It is in this phase that the details on how to go about the implementation are decided. The plan is developed, roles are identified and responsibilities are assigned. It will also decide on the project milestones.

4.4.

GAP analysis

This is considered the most crucial phase for the success of ERP implementation. This is the process through which the companies create a complete model of where they are now, and in which direction will they opt in the future. It has been estimated that even the best packages will only meet 80% of the company‟s requirements. The remaining 20% presents problematic issues for the company‟s reengineering. Is ERP an evil business..? | ERP Life Cycle Implementation Process

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4.5.

Reengineering

It is in this phase that human factors are taken into consideration. While every implementation is going to involve a significant change in number of employees and their job responsibilities, as the process becomes more automated and efficient, it is best to treat ERP as an investment as well as cost cutting measure.

4.6.

Team training

Training is also an important phase in the implementation, which takes place along with the process of implementation. This is the phase where the company trains its employees to implement and run the system. Thus, it is vital for the company to choose the right employee who has the right attitude- people who are willing to change, learn new things and are not afraid of technology and a good functional knowledge.

4.7.

Testing

This is the phase where one tries to break the system. One has reached a point where the company is testing the real case scenarios. The system is configured and now you must come up with extreme test cases like system overloads, multiple users logging on at the same time, users entering invalid data, hackers trying to access restricted areas and so on. This phase is performed to find the weak link so that it can be rectified before its implementation.

4.8.

Post implementation

Once the implementation is over, the vendor and the hired consultants will go. To reap the fruit of the implementation it is very important that the system has wide acceptance. There should be enough employees who are trained to handle problems those crops up time to time. The system must be updated with the change in technology. The post implementation will need a different set of roles and skills than those with less integrated kind of systems. We would like to present one methodology which is very well-known that is ASAP methodology

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Figure 2: ASAP Methodology (Copyright, SAP AG.) ASAP is a simply a tool designed to speed up the implementation process. However, there are always other factors which could affect the speed of an implementation Phase 1- Project preparation: Initial planning and preparation. Phase 2 - Business Blueprint: documentation of the business process requirements of the company. Phase 3 - Realization: implement all business and process requirements based upon the business blueprint. Phase 4 - Final Preparation: complete testing, user training, system management and cut-over activities. Phase 5 - Go-Live & Support: transition from implementation production.

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Figure 3: Key ASAP Deliverables (Copyright, SAP AG.)

5. Impact from ERP implementation The positive and negative impacts on the ERP implementations are discussed as follows.

5.1.

ERP’S impact on stakeholders

Impact of ERP on the role of managers or organization or stakeholders can be best studied and understood if the subject is analyzed right from the implementation stage. Nevertheless it has a strong influence on the business process itself as soon as it is gripped and decides major issues for employees, customers and other stake holders. 5.2. Impact on Implementation Process ERP has a significant impact right from the time it is conceived in the organization. Firstly it facilitates the members in the organization to arrive at a consensus. It paves way for restructuring in organizations sticking to traditional and conventional values. ERP is an eye-opener for such organizations because they get to realize the tinge and factors involved in modifying the business process.

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5.3.

Impact on Departments

This helps to bring about interactions and tends to nurture healthy relationships among departments in organizations which would have otherwise remained isolated. The problems of co-ordinations faced by each department are made known to the company. They can arrive at a better means of doing things on such group discussions.

5.4.

Impact on the organization as a whole

The ERP consultant will able to identify the flaws and guide the organization in devising better procedures. It helps organizations to adapt and adjust to change right from the implementation process.

5.5.

Impact on Employment

ERP creates job opportunities for many individuals, whom the organizations hire at the implementation process. They even realize the need to retain them on permanent rolls once ERP goes full-fledged in the organization. The good news is that it gives another room of employment for the existing IT professionals in the country. They were able to update themselves on ERP modules and continue serving the organization in terms of enhancing user interface with ERP applications.

5.6.

Impact on the nature of Job and information access

ERP has directly and indirectly helped to redefine functions in the organization. Anything that people wanted to know about the company was available by a click of the mouse. There was no more relying on the department of internal communications even for single information. Outsiders don't have the hassle of obtaining permission and following stringent procedures to access information.

5.7.

Impact on the individual employees

ERP provided more freedom, authority and responsibility to the individual employees which were mutually beneficial to the management. Each employee became more aware of his/her function while ERP has given the confidence to execute it individually and successfully Above all it resulted in transparency and accountability. This has resulted in easing the process of handling and answering customer queries and undertaking clientele orders. Is ERP an evil business..? | Impact from ERP implementation

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6. ERP issues over PPS In the production planning systems, we have certain demerits which were complimented by ERP systems. The physical manifestation of the technology is termed to as “Administrative Evil7 “. They are as follows,

6.1.

Project team formation

In ability to acquire/retain employees and external advisers with requisite expertise in ERP, project management and supporting technologies. Because IT products and services Žfirms are growing rapidly, they find it difficult to provide continuity in personnel assigned to adopter projects and adopters strongly value continuity in personnel.

6.2.

Ease of change

If the project encounters major changes immediately after the start of the project, then decision makers might terminate it. So such major changes in project scope are not feasible to embed. A modification that doesn‟t work is not easy to change.

6.3.

Measurement of success

There is no specific entity to measure success. More often objectives, expectations and perceptions are set as the standard for defining and measuring success. In the first place, it is hard to normalize them across individuals and organizations, thus making comparisons difficult. The success of the ERP system is defined only when, (1) Users have learned how to use the system well, (2) Managers have used the data collected by the system in order to make business decisions and plan improvements in business processes, and (3) Ease of incorporating additional changes in business processes, practices, software configuration, etc.

6.4.

Project phase problems

The most challenging project phase problems reported so far involved software modifications, system integration, product and implementation consultants and turnover

7

Administrative behavior depriving innocent people of their humanity like dignity, justice, rights, safety, health etc., Is ERP an evil business..? | ERP issues over PPS

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of project personnel. There is no ready to use ERP tool to cater a business. It has to be customized to serve the business objectives and needs.

6.5.

Software modifications

Almost every analyst of the ERP strongly advises companies to avoid modifying the software. Companies are advised to live with existing ERP functionality and to change their procedures to adapt to it. ERP packages are selected on a centralized basis in order to fit the majority of corporate needs

6.6.

Changes in Employees Attitude

Many IT specialists thrive on project work and view assignment to a „competence centre‟ (support unit) as unpleasant maintenance work. Though IT products and services companies are growing rapidly, they find it difficult to provide continuity in personnel assigned to support and maintenance activities.

6.7.

System Integration issues

ERP systems are sold as „integrated packages‟, implying that they contain everything one needs and that ERP software configuration (plus tailoring) is the major activity of the project phase. ERP system needs to be integrated with the computing platform on which it will run. But companies have great difficulty integrating their enterprise software with a package of hardware, operating systems, database management systems software and telecommunications systems suited to their particular organization size, structure and geographic dispersion. They reported having difficulty finding experts who could advise them on the precise operating requirements of their ERP configuration.

Most of the companies are forced to retain some legacy systems that performed specialized functions which are not available in ERP packages.

6.8.

Expensive – Implementation and Support

Incorporating specialized functions to the ERP packages is possible. However in that case the companies have to bear a very high cost. Further the maintenance and support of such software are too expensive. Alternatively, they can acquire specialized

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software from third parties. These systems needed to be interfaced with ERP systems, again this process that is both challenging and expensive.

6.9.

Problems with product and implementation consultants

ERP implementations are socially complex activities. As many as a dozen or more external companies – including the ERP vendor, vendors of ERP product extensions, vendors of supporting hardware, software and telecommunications capabilities, implementation consultants and so forth – may be involved in different aspects of an organization‟s ERP experience. Coordinating the efforts of all these firms is, to put it mildly, a challenge. Companies were often rightly reluctant to cede authority for project management to an outside party, even when they were willing to pay the steep fees for outside assistance.

6.10. Cutting end-user training In some companies, training was not budgeted as part of the ERP project itself, but was left to the budgets and discretion of operating managers. This management policy increased the likelihood of inadequate end-user training. Schedule pressures affect training as well as scope because end-user training is typically one of the last activities to occur in the project.

7. Measures to avoid administrative Issues 7.1.

Improved Training – Hierarchical Method

Imparting complete formal training on the ERP system is very important. All the companies need to develop a detailed plan for training users. ERP systems are very complex and hierarchical; this means training also needs to be hierarchical, with heavy users receiving more intense training early in the process. In fact, the more successful firms involved their heavy end users throughout the implementation process instead of providing training at the very end. Another feature of successful training programs was that the lead users were trained first, in turn becoming trainers for those further down in the hierarchy. Hence the training programs shouldn‟t be taken for granted due to time constraints. The training can be formal class room trainings and on-job trainings. Is ERP an evil business..? | Measures to avoid administrative Issues

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7.2.

Building maintenance & support team

ERP consulting companies can have a separated team for support and maintenance activities. This might help the employees to seek help instantly. The employees‟ attitude issue also gets resolved. In this method developers or consultants are not forced to do the support and maintenance job.

7.3.

Use of single vendor package

A single-vendor solution is a possible way to reduce complexity and cost. Certainly, it may not have all the functionality required, but it will be easier to implement. The tradeoffs between the single and multiple vendor solutions are fairly simple. A multivendor solution can provide the best functionality for each module, but implementing it becomes more complex because of the interfaces that need to be established. So using a single vendor solution reduces the complexity and helps in simplifying and standardizing them. Furthermore these also ease the expected future upgrades to be a much easier.

7.4.

Access to accurate information

Right information has to be accessed by right person in right time. This is one among the key tasks, so that interactions and communications with customers and suppliers could be improved. Most of the companies need to have this as a strategic priority.

7.5.

Simplification and standardization

Working smarter is always the better way than laboring with an activity. The underlying motivation for ERP is to improve business processes. That is, an ERP system is generally adopted to improve the firm's overall productivity; it is viewed as a business solution rather than an IT solution. Hence simplification and standardization is also a key factor.

7.6.

Knowledge transfer from Consultants

The companies need to establish clear guidelines on how to use outside consultants. Additionally, providing a knowledge transfer sessions from consultants to in-house experts for both system configuration information and long-run maintenance, will be of added advantage. The consultants had to work with and depend on the company's staff

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to complete the project, which in turn forced the internal staff to learn more about the implementation, thereby retaining the knowledge in the company.

7.7.

Top management involvement.

Senior management has to thoroughly involve in the project activities from the onset and establishing clear priorities. Several of the companies viewed their ERP project as a major investment as that of a new plant or an acquisition. Thus, it was given the same level of commitment. Additionally a cross-functional implementation team with a more senior management leader helped to take care of the assignments and took on extra responsibilities for the ERP implementation.

7.8.

Defined metrics

Clear guidelines have to be laid out on measuring performance. These metrics were not just technical ones but also included business operations. Organizations have to set the standards for defining and measuring success. In the first place, it is hard to normalize them across individuals and organizations, thus making comparisons difficult.

8.

Change Management and ERP Implementation

Change management is one of the biggest tasks involved in the business. This doesn‟t only require a significant amount of funding but also require unappealing commitment throughout the whole business component.

8.1.

What is Change management?

Change management is a deliberate approach to bring major changes towards people‟s expectations to move the business forward smoothly. The main concept of change management in ERP implementation is bringing an understanding that in post-industrial phase business should be customer oriented rather than production oriented. Business should prioritize the point on “what final product is preferred by customers and how to deliver the product in the right time” above “how to produce cheap, high volume sellable products8 “.

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Lukman Susanto, Change Management and ERP Implementation: Side-by-side , 2003 Is ERP an evil business..? | Change Management and ERP Implementation

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8.2.

Change Management Aspects

As many other types of system implementation, change management in ERP implementation are established to build an understanding throughout business components so that they are well prepared to accept the change and clearly understanding how the changes may affect them9. There are various aspects that may involve in change management and they vary for different systems. Specifically with ERP implementation, change management will be required in separately functional areas where the system will be applied such as financial department, human resources or manufacturing. Change management will be more than likely happen locally within those departments. However, if the implementation involving a more complex area such as applying ERP system in all major departments in company or many company within enterprise this certainly

require

collaborated

participation

and

support

throughout

business

components including higher management areas and executives.

8.3.

Component of Change Management

There are various tasks available as part of the change management strategy. They are defined as follows: 8.3.1

Communications Strategy

The strategies are preparing project plan, project costs analysis, progress report and some other important issues such as preparing trainings for employees. The important point in delivering information is timing. As each component of the business may have different priorities, working in collaboration will result a better outcome. Managerial levels as the decision makers are often enforced to make such decisions which may not make everyone happy. That is why it would be wise if they keep their hands open for possible cooperation. Another important part in communication strategy is allotting the correct messenger to the audience in order to the get the message through. Different personnel will have different approach which will be suitable for different audiences.

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Island Consulting, Change Management, July 2007 Is ERP an evil business..? | Change Management and ERP Implementation

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8.3.2

Impact Analysis

This is a method to thoroughly determine the current business system and analysis on how ERP system will affect the business environment. Current business processes needs to be systematically documented especially for the area which may be affected by the new system. As a standard method of documentation, many experts are using data flow / work flow diagram. From all above information, business can start to analyze how significant the ERP implementation may affect the system, which will be the most affected by the implementation and what training may be required to ensure the smoothness of this new system implementation. 8.3.3

Skills Analysis

One of the main issues during ERP implementation is training. As this is a new system, most of the operator / user will require a certain specific training for their job purposes. To find out who needs to be trained and what kind of training required, the companies need to perform skills analysis. Every individual employee who may work in ERP system will be audited their qualification, skills, internal and external experiences to find the best position for each of them and to find out whether the company will need to hire new staff or external consultants to ensure the business operates adequately. Many people are assuming that change management is part of ERP implementation. In fact, because of the level of complexity of the system, change management has always been a continuing process required throughout ERP implementation. Some experts are agree that ERP will not be successfully implemented without “a massive dose of change management otherwise the organization will likely not be positioned to best use the new system10 “. ERP is an integrated complex cross-departments application. That is why its implementation is a very costly process and yet most of the companies implemented.

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Gerald T & Winford H, Change Management critical to making ERP work, May 2001 Is ERP an evil business..? | Change Management and ERP Implementation

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The main issue in any new system implementation especially ERP is changing the existing system with a new one.

9. Case Study To illustrate how ERP helped in optimizing the production process, we study the case of Ms BAYER MATERIALSCIENCE11, which is one among the leading international manufacturer of polymers. They used the SAP® Advanced Planning & Optimization Component to Streamline Production planning, scheduling and Optimize Stock Levels

Key Challenges To achieve such a streamline production planning, they have to face a number of challenges. Among which the key challenges involved are, • To improve ability to manage complex 24-hour production processes involving more than 40,000 tons of Product formulations and 100 product variants on different production lines • To provide more transparent production information to enable more effective planning and scheduling • To improve communications with external service providers Project Objectives • To extend use of SAP Advanced Planning & Optimization to enable transparent and detailed scheduling • To eliminate manual tasks so employees can focus more on production processes and less on coordinating the supply chain • To extend the planning horizon Solution and Services SAP Advanced Planning & Optimization They have chose SAP solution to achieve the above tasks. For the fact that using SAP they can easily integrate into existing SAP software environment and also best practices model established for other implementation projects

Key Benefits achieved The outcome of the project is they got a single platform for all planning data. Also they have achieved significant benefits, they are listed

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Bayer Material Science is a leading international manufacturer of Polymers, Head quarters at Leverkusen, Germany. Is ERP an evil business..? | Case Study

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• 33% reduction in planning time and effort • Improvements in delivery reliability • Extension of planning horizon from 4 to 7 weeks • Less coordination time • No integration gaps • Automatic creation of filling orders “The employees are relieved of routine activities and always have an integrated view of what is going on in production and planning.12” This illustrates the success of ERP system in production planning and control.

10.

Discussion

After reviewing the article, we have to analyze on “why ERP is said to be a physical manifestation of administrative evil” and also to know the solution for the question “Is ERP an evil business?” Certainly, ERP is not to turmoil the business activities. How organization and individual employees are getting affected by ERP? To answers these question we need to understand that ERP is just software/package tool for using or helping you in business operations. Reality is ERP isn‟t a completely software where you install and use it. It has to be customized to fit the requirements of the organization. The new system may not be easy to work with, but the employees need to be more open minded to accept and adapt to the new change. Before developing an ERP system, every individual need to put their inputs for the implementation. To do so, the involving team members, have to discuss and provide relevant information to the consultant. An employee team has to work closely with the ERP consultant group, so that the requirement are shared and there is no gap in communication

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Dr. Eric Bischof, Global Product Manager for Coatings, Adhesives and Sealants, Bayer Material Science AG Is ERP an evil business..? | Discussion

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Normally companies have people, from different cultural backgrounds. These people have their own idea and opinion, which can be for or against the ERP implementation. In such a scenario, if an organization implements ERP to streamline its production process. Then employees shouldn‟t get abased by it. Instead they should make up their mind and embrace change and posses the quest for learning the new tools. In the current technological world, change is inevitable. So organizations have to be strong enough in Change Management. So it is very important to communicate with every employee, in a project, that company will undergo change and new systems will be in place in the future. Also organizations have to schedule training programs to train the new system & process and try to migrate to the new system in an increasing fashion. Make your employee to be friendly with the system. If they know the benefits of ERP and know how ERP helps them to do the job easily, they will accept ERP. If the employees are reluctant to adapt the changes, in the organization, then we can claim it to be more than EVIL.

11.

Summary and conclusion

Consolidating our learning in this paper, we justify that ERP is not an administrative evil. Regardless of how a company approaches it, ERP is sure to bring significant changes to how a company does business. It helps to modify the workflows, and alters longstanding processes. Companies often meet with resistance on the part of employees who are reluctant to let go of their proven methods. Employees may also fear for their jobs; since ERP makes such radical changes to business processes, it's not unusual for job descriptions to change or be eliminated altogether. But the underlying truth is that if right people with positive attitude are involved in the ERP implementation, then there is NO EVIL BUSINESS. The new system is meant to ease the tiresome process and streamline the production planning systems.

Is ERP an evil business..? | Summary and conclusion

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Hopefully change management will play a major role to soothe employees to embrace change and they can travel together with company without any evil. We believe that the ideas presented in this paper might give more knowledge about ERP implementation and represent the solution how to bring company and employee success together, with their strategies will certainly demonstrate that “ERP is NO Evil business”

References 1. F. Robert Jacobs and F.C. „Ted‟ Weston, Jr., Enterprise resource planning (ERP) A brief history Journal of Operations Management, Volume 25, Issue 2, March 2007, Pages 357-363 2. Thomas Wailgum , Why ERP Systems Are More Important than Ever, January 29, 2008, http://www.cio.com/article/177300 accessed on 20th April 2008. 3. Jesse F.Dillard, Linda Ruchala, Kristi Yuthas, Enterprise resource planning systems: A physical manifestation of administrative evil, International journal of accounting information systems, Volume 6 issue 2, 2005 4. Kevin Reilly AMR Research Releases ERP Market Report, June 14, 2005 http://www.amrresearch.com/Content/View.asp?pmillid=18358&docid=12642 accessed on 24th April.

5. Dr. Bruce Zhang, ABCs of ERP, 2005, http://www.sysoptima.com/erp/erp_definition.php accessed on 25th April. 6. Lukman Susanto, Change Management and ERP Implementation: Side-by-side, 2003, http://www.susanto.id.au/papers/ChangeMngt.asp accessed on 26th April 7. Island Consulting, Change Management, July 2007, http://www.islandconsulting.com.au/IChange.htm accessed on 28th April 8. John P. Kotter, Leading Change, Harvard School Press 1996 9. Gerald Thompson, Florida Power & Light & Dr. Winford (Dutch) Holland, Holland & Davis., Change Management critical to making ERP work, May 2001. 10. Neville Turbit , ERP Implementation :The Traps , 1995

Is ERP an evil business..? | References

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11. Mabert, Vincent A. Soni, Ashok Venkataramanan , Enterprise Resource Planning: Common Myths Versus Evolving Reality, M.A. Business Horizons; May/Jun2001, Vol. 44 Issue 3, p69, 8p, 1 diagram, ISSN 0007-6813 12. Sergio Lozinsky , Enterprise-Wide Software Solutions: Integration Strategies and Practices, Addison-Wesley, 1998

Appendix ERP – Enterprise Resource Planning MIS – Management Information Systems PPS – Production Planning Systems

Is ERP an evil business..? | Appendix

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