Victoria University

Enterprise Resource Planning Systems (BCO6603)

Semester 2, 2017

Assessment 4

Going Life Is Not The End Of The ERP Journey

 Name: Diana Contreras Rodriguez

 Student ID: S4567202

 Tutor: Scott Blingley

 Going Life Is Not The End Of The ERP Journey

In the last few years, there has been a revolution in the companies where the
implementation of Enterprise Resources Planning system have the intention to
integrate information and standardize the process to have an effetely
management of all the company. “ERP is a packaged business software system
that allows a company to: automate and integrate the majority of their
processes, share common data and practices across the entire enterprise, and
produce and access information in a real-time environment” (DeloitteConsulting,
1999). ERP also is the most popular software, which helps to big and medium
companies to reduce the limitations of fragmented and incompatible legacy
systems (Robey, et al., 2002). As example of the magnitude of ERP System, a
survey by IDC showed the increment of 6.7% overall annually in the license and
maintenance in the Enterprise Resources Planning system of companies from
2002 to 2007 (Haa & Ahnb, 2014). Knowing the currently importance of the
system implementation in companies in the world, this report will highlight the
ERP system focus, in the benefits, the barriers and drivers that companies face
moving from one stage to the next and possible answers why ERP systems
journey may never end.

Enterprise Resource Planning

ERP was mentioned for first time by The Gartner Group to name the next
generation of MRP II software (Nazemi, et al., 2012). ERP implementation
system is able to minimize costs of inventory, manufactory, shipping, human
resources, IT maintenance and a better competitive edge in terms Leary,
Sandoe et al. and Bharadwaj et al cited Shaul & Tauber, 2013). Furthermore,
the ERP design is integrated by modules as finance, human resources,
materials management, sales, and distribution which are connected each other
sharing the same database and also works managing different currencies and
languages (Robey, et al., 2002). For these reasons, companies are seeking to
systematize and accelerates the process, systematizes information of human
resources, integrate the economic information, the customer order information
and minimize inventory (Nazemi, et al., 2012). Thefore, Pawlowski (cited in
Robey et al, 2002) claimed that ERP implementation is related with labor
flexibility in order to created individual awareness, creativity and innovation
nevertheless ERP is target to be less flexible in contrast with the legacy system.

For this reason is important for companies to realize about the challenges and
benefits before ERP system implementation. For example, the Implementation
of this system is an expensive investment and the transition is not easy and

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immediately (Robey, et al., 2002). As Akkermans et al, Prahalad and Krishnan
(cited in Nazemi, et al., 2012) mentioned that the implementation takes about
12 to 33 months depending side of the organization. Robey et al. (2002) pointed
out that the effects that a company would have of another could be different and
the benefits of some companies can have an immediately in contrast with
others as well as these benefits could be positives or negatives.

Knowing, the important amounts of money that companies are investing in TI

with the idea to develop their technology solutions. It is important to realize the
future risks. For example, in 2011 the prediction of the expenses for TI was
been in 3.6 billons by Garthner, the UK invested the same year 45000 millions
of pounds with the intention to get a better performance. A survey to 14000
companies in UK directed by Professor Clegg of Sheffield University found the
lack of performance goals. Where he reported that approximately the ten or
twenty percent of all investment for the companies were successful. Diferente
from the forty percent was deemed outright failures and the other forty percent
was partial successful. In addition, it is not the unique survey with similar
conclusion. The Royal Academy of Engineering and the British Computer
Society in 2014 pointed out that “Less than 25% of IT projects will deliver hard,
monetary benefits that exceed the cost of the implementation” and the 30% to
40% are companies with lack of benefits and cause of the none completely
understood of how works the systems. In addition, Garner reported that the
27% of companies do not measure the benefits and the 64% measure ‘some’ of
the benefits (SeanCuley, 2011). On the other hand, authors as Nah et al.
asserted that for have a successful implementation is necessary to have a good
interaction between purchaser and costumer, workers confidents and harmony
in the work place (Kim, et al., 2015). Ferrat et al. did a study to 70 ERP
implementation projects, finding as the principal factors the management and
support of project as well as the contribution of main manager (Kim, et al.,
2015). Authors recognized the importance of the factors that involve the
implementation and the selection of software, the IT participation, the support,
capability, change management program and culture (Kim, et al., 2015).

The possible stages in an ERP systems journey

Studies have showed that there are different models to describe the ERP
transition having three, four, five and six stages (Robey, et al., 2002). Even
thought, there are different divisions of stages. Every model has accepted that
the process involve a planning, an implementation, a stabilization stages and
the stage where new systems are maintained and development (Robey, et al.,
2002). For instance in 1999, Deliot Consulting divided the ERP implementation
in three waves where in the second wave is subdivided in three stages. “Kwon
and Zmud also introduced a six-stage of IS innovation diffusion based on
Lewin’s theory of organizational changes. The six stages are: initiation,

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adoption, adaptation, acceptance, routinization and infusion” (Haa & Ahnb,
2014). Holland and Light (2001) did survey to US and Europe Company’s with
the intention to recognize the challenges, the drivers and the barriers that
companies face in each of 3 stages.

First stage: is the moment when the company does the transition between
legacy system and an ERP project. The survey found that twenty five percent of
the companies were using the system and simultaneously they have problem
with their costs. Therefore, they have a limited number of users, not enough
training to the employees and concerned employees about few precision of the
reports. For instance, the drivers of purchase were perturbed in relation with the
new changes and the most costs that involve this implementation were a crucial
problem. In addition, the company feel unhelpful the system because when they
realize that correct mistakes takes more time than before. Furthermore, they
think that a half of day per week correcting all mistakes is a waste of them. The
company had found that the implementation is a problem and they feel that
started the implementation, they can give up. Thus, they realized the needed to
know how works the system and extend the implementation geographically and
functionally (Holland & Light, 2001). This stage is also called “the first wave” or
ERP Implementation (DeloitteConsulting, 1999). In addition, If at the start there
are not an appropriate implementation, It could result in overflow of costs and
time, lack of stability in the installation or an none favorable organizational
attitude towards the system and not good effect a long term (Haa & Ahnb,
2014).

Second stage: when the company finished the implementation and the
organization start exploring the ERP system. In this stage companies do not
appreciated the system in total, they are unsure about the decisions. Even
thought, they consider that had been a progress in the implementation of the
system but still not realized the strategic potential. Also the company realized
that even employees have knowledges about the system still required to IT
personal to manage high levels of the system. In this step, the company is
engage to increase the data in the system to get more value. The company
gets the reduction of costs, the substitution of the system, improvement and
management of information. In this stage recognized the benefits but they do
not know how use appropriated the information. Thus, they recognized that it is
a challenge that has to face with training managers and the correct use of the
reporting mechanisms. At this level, the company has control of supply chain
but they realized the needed of a system to control the process base on
benefits (Holland & Light, 2001). Hong and Kim mentioned the quality of the
appropriated installation of this stage is necessary to achieve to future
effective’s results in the atmosphere of the organization (Haa & Ahnb, 2014). In
addition, Deloitte Consulting (1999) called to this stage the second wave which
is subdivided by “three stages”.

 First stage (stabilize), when the domination and definition of the new
changes are the challenges for companies whereas the benefits after 3
to 9 months are the reduction of costs and times. (DeloitteConsulting,
1999).
 The second stage (synthesize). This stage has as challenges: reach

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 specific skills and benefits base on the ERP, improve the process and
the training and encouragement to workers for the next step. Such as
benefits after 18 months, companies could take better decisions based
on the new capabilities. (DeloitteConsulting, 1999)

 The third stage (Synergize) This stage is a superior level of flexibility to

the change the company where companies can face the adaptation of
new competencies, changes in the commercial process. Also, this stage
is "transformational in nature" using new strategies and developing new
association. Companies in this stage could implement new changes
successful. (DeloitteConsulting, 1999)

Third stage: is when the system has been normalized into the company and
they are compromised with the futures values that they can obtain through other
systems. This stage the company knows the drivers and where they want to
achieve. At this point, company trust in the information and all the company had
access to the data. In this stage the challenge is IT innovation and development
and companies in this stage have new competencies as dynamic and adaptable
and also all the processes are redefined (Holland & Light, 2001).

Another division of the ERP development is mentioned by Accenturing (2013)

where showed a scale of the process in a graphic where these stages are
named:
 “Foundation” where companies have the challenge to consolidate the
bases of the system based on one unique platform and as benefits they
face savings and reduction of risk (Accenturing, 2013).
 “Level 1”, where companies have the challenge to make simple process,
normalize the processes and automatize the system helped with the
enterprise technology moreover, the efficiency and effectiveness
development of the system (Accenturing, 2013).
 “Level 2”, where the focus is the optimization of the system and the
benefits are the able solutions but they also require extra enterprise
transformation and a challenge is the quality of the operations
(Accenturing, 2013).
 “Level 3”, where the companies are requiring innovation to created new
benefits and the challenge is create the competitive advantages
(Accenturing, 2013).

Example of the implementation ERP system in the company: Mesfine

Industrial Engineering (MIE)

In 1992 MIE Company was founded 1992. Five system they used before work
implement the ERP system where those systems were expensive, difficult to
manage and complex to develop. The last system used was MERLIN. This
system helps to areas as warehouse, human resources and logistics. The
problem with this system was down fall of the system. Also, sometimes when
they introduce the data, sometimes the other areas could not find the

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information transferred. As consequences they had inventory problems. In order
to get a better manage of in the inventory they had to use other additional
system (CCA). MIE realized the need the need to have a ERP system where
they can have all the silos together. The Microsoft Dynamics SL solution was
chose for MIE to start the project of implementation of ERP. Microsoft Dynamics
SL planted 7 stages that company has to past for the implementation.

This stage is basically the first stage was a study to determine the scope
project. They create ´ERP Core Team’ to manage and oversee the operations.
The second was about reviewing data flow an also they defined external
external system interface. In the 3 stage, they did implementation of ERP and
the structure . They realized that was a large stage so they divided in 2 waves:
the first was about replace the legacy systems and the second was about the
implementation, requirement, purchase, and inventory. Stage 4 , they
implement 3 pilots which took 1 year. Stage 5 was about straining users about
all the modules of the system. Stage 6, in this stage they face the last
implementation: ´ Final preparation´ and ´go-live´. In this stage they had at the
end the production they could see the new information in real time. The last
stage is ´Go Live´, in stage the difficulty was the transference of data from
legacy system. At the end this stage is possible see all the data completely.

Why an ERP systems journey may never end

Companies in order to implement new system by the before millennium

developed their own business system. Nowadays, ERP have given the option to
companies to take the control of their business system in order to support and
support efficiently their needs. Base on needs of the market (companies), ERP
has created different software. (Smedley & Zimmerman, 2005). (Anon., s.f.)

Lawton, said The impact of internet has made a transcendental impact in

many aspect of the IT as well as in the sector of ERP systems being more
available for the internet. (Rashid, et al., 2002). Internet gives the facilities to
access systems resources at any time. “ERP vendors extend their legacy ERP
to integrate with external modules as supply chain management, customer
relationship management, sales force automation (SFA), advanced planning
and scheduling (APS), business intelligence (BI), and e-business capabilities”
(Rashid, et al., 2002).

Therefore, the backbone of companies that works by online transaction is being

ERP. The development of SCR and CRM had made that companies have
more internet-based in singular solutions in marketing , logistics, payments
etc. Companies can put together all knowledge of their customers. At the same
time it give the opportunity to companies evaluate the values and costs in
whatever time of cycle of company with the idea to take decisions and have
more understanding. This new tools for small companies had made that ERP
vendors have a market because the big systems do not offer to small
companies these access to manage their process (Rashid, et al., 2002)

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CONCLUSION

Nowadays, the information technology has an important role in business

strategies because companies are changing the way of manage their process.
ERP is an integral system that was designed to model and automatized the
movements in the company (finance, commercial, logistics, production, etc.).
Where the system allows achieving advantage in differences forms as
coordinating value-added activities in locations across a broad geography or by
creating new relationship with other businesses, expanding the reach of
organizations, and this are the principal drivers. ERP has benefits as the
management of data on real time, integration of functions, reduction costs, a
good vision of the reports and the easier way to take decision based on the
reports. On the other hand, this system has challenges that companies has
to face as the cost of the implementation, the time, possible changes in the
structure of the process, training for employees and etc. The report found that
the benefits for the implementations are not the same for all the companies. In
addition, many companies that are using ERP system still without a total
understanding of the process and it is the main factor to do not achieve
successful benefits. In addition, the implementation is a process that takes time
and involves some stages. The stages are named by differences authors as
waves and stages but at the end, these stages are the same. The report found
that the most important is fallow some process that are essential as the
planning, implementation, stabilization of implementation, maintenance and
development.

In Conclusion, the report realized that there are important percent of companies
without much successful benefits but they still investing in ERP implantation.
They know that important benefits that they can get after an appropriate
implementation. Companies also should realize that ERP always is developing
as well as the companies. Therefore, ERP systems never finish. In addition,
ERP is giving the opportunity to small companies to get different range of
software where they can manage and required only what they want. This also
is a strategy by ERP in order to never end.

Words. 2744

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