Pramod Kumar et. al.

/ International Journal of Engineering Science and Technology

Vol. 2(7), 2010, 3218-3224

SUCCESSFUL IMPLEMENTATION OF
ERP IN A LARGE ORGANIZATION
Prof. Pramod Kumar
(Deptt. of Computer Sc.)
Tula’s Institute ,Dehradun(UK),INDIA
Emailid- drpramoderp@live.com
prypanwar@yahoo.com
mobile no-+91-9897772077
Dr. M.P.Thapliyal(Deptt. Of Computer Science)
HNBGarhwal University,Srinagar(UK)INDIA
mp_thap@yahoo.com
mobile no- +91-9412964905
Abstract

ERP is the process of integrating all the business functions and processes in an organization to achieve numerous
benefits. It is especially important for companies who are “intimately connected “ to their vendors and customers,
and use electronic data interchange (EDI) to process sales transactions electronically. Therefore, the implementation
of ERP is exceptionally beneficial to business such as manufacturing plants that mass-produce products with little
changes.

Keywords : ERP, Training , Business Organization, data integrity

Introduction to ERP

Information in large organizations is often spread across numerous homegrown computer Systems, housed in
different functions or organizational units. While each of these “information islands” can ably support a specific
business activity, enterprise-wide performance is hampered by the lack of integrated information. Further , the
maintenance of these systems can result in substantial costs.

While the Y2K bug has been fixed over time (at an estimated cost of $600 billion worldwide), the lack of integration
is a pervasive problem. Consider, for example, Boeing , which relies on hundreds of internal and external suppliers
for the millions of components needed to build an airplane. The goal of putting the right parts in the right airplane in
the right sequence at the right time was managed at Boeing by four hundred systems that were designed in the
sixties and were all but integrated. Information inconsistencies were prevalent and the systems were not
synchronized. As a result, parts often arrived late, idling partially-built airplanes on Boeing’s assembly lines. In
1997, as Boeing faced unprecedented demand for its aircraft, these problems became unbearable, and the company’s
manufacturing ground Enterprise Resource Planning (ERP) system based on commercial, off-the-shelf software.

With the advent of E-Business and the need to leverage multiple sources of information within the enterprise, ERP
software has emerged as a major area of interest for many businesses. Back-office enterprise software has its roots in
the 1960s and 1970s, as computing power became affordable enough for companies to automate materials planning
through MRP and financial processing through payroll and general ledger software. MRP, short for Material
Requirements Planning, was developed in the early 1960s at IBM and had become the principal production control
paradigm in the U.S.MRP consists of a set of procedures that convert forecasted demand for a manufactured product
into a requirements schedule for the components, subassemblies and raw materials comprising that product.

What is ERP

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ERP is a software architecture that facilitates the flow of information among the different functions within an
enterprise. Similarly, ERP facilitates information sharing across organizational units and geographical locations. It
enables decision-makers to have an enterprise-wide view of the information they need in a timely, reliable and
consistent fashion.

ERP provides the backbone for an enterprise-wide information system. At the core of this enterprise software is a
central database which draws data from and feeds data into modular applications that operate on a common
computing platform, thus standardizing business processes and data definitions into a unified environment. With an
ERP system, data needs to be entered only once. The system provides consistency and visibility or transparency
across the entire enterprise. A primary benefit of ERP is easier access to reliable, integrated information. A related
benefit is the elimination of redundant data and the rationalization of processes, which result in substantial cost
savings.

The integration among business functions facilitates communication and information sharing, leading to dramatic
gains in productivity and speed. Cisco Systems, for example, harnessed ERP to help it become the market leader in
the global networking industry. Cisco’s ERP system was the backbone that enabled its new business model Global
Networked Business based on the use of electronic communications to build interactive, knowledge-based
relationships with its customers, business partners, suppliers and employees. In the process,
Cisco doubled in size each year and reaped hundreds of millions of dollars in both cost savings and revenue
enhancements. Autodesk, a computer-aided design software company, reported a decrease in its order fulfillment
times from two weeks to 24 hours after installing an ERP system. Similar examples abound in today’s business
environment.

An ERP Implementation Plan The flow chart in the given figure depicts several activities that must be
performed before implementing an ERP system.

Step 1: Managers must conduct a feasibility study of the current situation to assess the organization’s needs by
analyzing the availability of hardware, software, databases, and in house computer expertise, and make the decision
to implement ERP where integration is essential. They must also set goals for improvement and establish objectives
for the implementation, and calculate the break-even points and benefits to be received from this expensive IT
investment.

Step 2: The second major activity involves educating and recruiting end users to be involved throughout the
implementation process.

Step 3: Managers form a project team or steering committee that consists of experts from all functional areas to lead
the project.

Step 4: After a decision is made to implement ERP, a team of system consultants will be hired to evaluate the
appropriateness of implementing an ERP system, and to help select the best enterprise software provider and the
best approach to implementing ERP. In most situations, the consultant team also recommends the modules that are
best suited to the company’s operations (manufacturing, financials, human resources, logistics, forecasting, etc.),
system configurations, and Business-to-Business applications such as supply-chain management, customer
relationship management, e-procurement, and e-marketplace.

Step 5: Adequate employee and manager training must be provided to all business, stakeholders, including
managers, end users, customers, and vendors, before the system is implemented. Such training are usually
customized and can be provided by either internal or outside trainers.

Step 6: The system installation process will address issues such as software configuration, hardware acquisition, and
software testing.

Step 7, 8 & 9: Data and information in the databases must be converted to the format used in the new ERP system
and servers and networks need to be upgraded. A post implementation review is recommended to ensure that all

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business ob jectives established during the planning phase are achieved. Needed modifications are tackled during
this phase too.

Study Organization’s needs Step1

Recruit end user involvement Step 2

Assemble Project Team

Step 3

NO
Need ERP?
Stop

YES

Hire Consultants to select software and approach

Step 4

NO
Recommend Modules and
Options Stop

YES

Pre-implementing training
Step 5

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Install ERP system Step 6

Configure system
Step 7

Convert data and test Step 8

Maintain system
Step 9

Flow chart of ERP implementation

Issues on ERP Implementation

Implementing an ERP causes massive change that needs to be carefully managed to reap the benefits of an ERP
solution. Critical issues that must be carefully considered to ensure successful implementation include fundamental
issues, organizational change process , people , and implementation cost and time and employee morale. The
pertinent issues are :
1. Fundamental Issues
Implementation of an ERP system can be long, costly, and labor-intensive and can affect an organization’s bottom
line if done incorrectly. To ensure the success of any ERP implementation project , a project team consisting of an
ERP consultant, internal auditing, and IT staff familiar with the company’s business operations should be
established and their role must be defined.
(a) Role of Manager
Manager must consider the fundamental issues of systems integration by analyzing the organization’s vision and
corporate objectives.

■ Does management fully understand its current business processes , and can it make implementation decisions in a
timely manner?

■ Is management ready to undertake drastic business process reengineering efforts to yield dramatic outcomes?

■ Is management ready to make any change in the structure , operations, and cultural environment to
accommodate the options configured in the ERP system?

■ Is the organization financially and economically prepared to invest heavily in an ERP implementation?
(b) Role of an Auditor
Auditors play a proactive role in helping the organization laying the foundation for an initiative’s success with their
knowledge of internal control practices, compliance requirements, and business processes. In particular , internal
auditors can :

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■ Document abbreviations and their function.

■ Identify documents used in the organization’s daily operations.
■ Compile a list of the organization’s master data sets.
■ List the internal controls that are applied and adopted during each business process stage.
■ Create a list of currently used and recently generated management information reports.
(b) Top Management Commitment
Management needs to exploit future communication and computing technology issues in order to integrate the ERP
systems with e-business applications in their organization to decide on the key related implementation and business
issues. Due to enormous impact on the competitive advantage of the company , top management must consider the
strategic implications of implementing an ERP solutions keeping in mind the size of the company and the modules
installed. Management must ask several questions before embarking on project.

■ Does the ERP system strengthen the company’s competitive position ? How might it erode the company’s
competitive position ?

■ How Does ERP affect the organizational structure and the culture ? What is the scope of the ERP implementation
--- only a few functional units or the entire organization?

■ Are there any alternatives that meet the company’s needs better than an ERP system?

■If it is a multinational corporation , the management should be concerned about whether it would be better to roll
the system out globally or restrict it to certain regional units?

(2) Organizational Change Process

ERP implementation requires organizations to reengineer their key business processes reengineering of the existing
processes , integration of the ERP with other business information systems, selection of right employees on the new
systems.
(a) Reengineering of the existing process
Implementing an ERP system involves reengineering the existing business processes to the best business process
standard which at the end must conform to the ERP model . ERP systems are built on best practices that are
followed in the industry , though the cost and benefits of aligning with an ERP model and customizing could be very
high. The more the customization , the greater the implementation costs.
(b)Integration of ERP with other BIS
The benefits of an ERP application is limited unless it is seamlessly integrated with other information systems.
Some of the major concerned areas would be:

■ Integration of ERP Modules

■ Integration of E-Business Applications

■Integration with Lagacy Systems

(c ) Selection of Right Employees

Companies intending to implement an ERP system must be willing to delicate some of their best employees to the
project for a successful implementation. Internal resources on the project should exhibit the ability to understand the
overall needs of the company and should play an important role in guiding the project efforts in the right direction.
Companies should consider comprehensive guidelines while selecting internal resources for the project . Lack of
proper understanding of the project needs and the inability to provide leadership and guidance to the project by the
company’s internal resources is a major reason for the failure of ERP projects .
(d)Training Employees
Training and updating employees on ERP is a major challenge as it is extremely complex and demanding. It is
difficult for trainers or consultants to pass on the knowledge of ERP package to the employees in a short period of
time. This knowledge transfer gets hard if the employees lack computer literacy or have computer phobia. In
addition to being taught ERP technology ,employee have to be taught their new responsibilities.

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3.Implementation cost and Time

Implementation Cost : Even though the price of prewritten software is cheap compared with in-house
development , the total cost of implementation could be three to five times the purchase price of the software . The
implementation costs would increase as the degree of customization increases. After training the selected
employees, strategies such as bonus programs, company perks , salary increases ,continual training and education ,
and appeals to company loyalty work to retain them. Other intangible strategies such as flexible work hours
,telecommuting options, and opportunities to work with leading-edge technologies are also being used.

Implementation Time : ERP systems come in modular fashion and do not have to be implemented entirely at once
. ERP packages are very general and need to be configured to a specific type of business and may follow a phase-in
approach with one module implemented at a time. Some of the most commonly installed modules are sales and
distribution(SD), materials management (MM), production and planning (PP), and finance and controlling(FI)
modules. The length of implementation is affected by the number of modules being implemented , the scope of the
implementation , the extent of customization , and the number of interfaces with other applications. The more the
number of units , the longer the implementation time. Further as the scope of implementation grows from a single
business unit to multiple units spread out globally , the duration of implementation increases .
4) Employee Morale Employees working on an ERP implementation project put in long hours (as much as 20
hours per day) including seven-day weeks and even holidays. Even though the experience is valuable for their career
growth, the stress of implementation coupled with regular job duties could decrease their morale rapidly.
Leadership from upper management and support and caring acts of project leaders would certainly boost the morale
of the team members . Other strategies , such as taking the employee on field trips , could help reduce the stress
improve the morale.

CONCLUSION
ERP solutions are revolutionizing the way companies produce goods and services . ERP systems bring lot of
benefits to organizations by tightly integrating various departments of the organization.
ERP systems are very large and complex and require a careful planning and execution of their implementation.
They are not mere software ; they affect how a business conducts itself.The top contributor for a successful ERP
implementation Is strong commitment from upper management ,as an implementation involves significant
alterations to existing business practice as well as an outlay of huge capital investment.
Selecting and managing consultants pose continuous challenge due to the shortage of skilled consultants in the
market. Organizations could reduce the total cost of implementation if they reduce customization by adapting to the
ERP‘s built in best practices as much as possible .selecting the right employees to participate in the implementation
process and motivating them is critical for the implementation success. Finally, it is important to train the employees
to use the system to ensure the proper working of the system. A well -designed and properly integrated ERP
systems allows the most updated information to be shared among various business functions, thereby resulting in
tremendous cost saving and increased efficiency.

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