Enterprise Resource Plannin

Qamar Wajid Ali

Qamar Wajid Ali ERP system Enterprise Resource Planning

 Table of Contents

1. Abstract...................................................................................................................................................2

2. Introduction.............................................................................................................................................3

3. Little about ERP.......................................................................................................................................4

3.1 Understanding ERP............................................................................................................................7

3.2 Core Components of ERP...................................................................................................................8

3.3 Top ERP vendors................................................................................................................................8

4. Critical Success Factors............................................................................................................................9

4.1 The Implementation Methodology....................................................................................................9

4.2 Reviewing on each implementation phase......................................................................................10

4.3 Executing Implementation Activities...............................................................................................10

4.4 Gathering information before implementation...............................................................................11

4.5 ERP systems can be complex and difficult to implement.................................................................11

4.6. CSF’s & Organizational Culture (Independent Variables)................................................................12

4.6.1. Business process with ERP Package.........................................................................................12

4.6.2. Training of End Users...............................................................................................................12

4.6.3. Commitment of the organization from all quarters.................................................................12

4.6.4. Senior Management Support & Involvement..........................................................................12

4.6.5. Project Management Effectiveness.........................................................................................13

4.6.6. Support from External Sources................................................................................................13

4.7. ERP Implementation Success Index (ERPISI)...................................................................................13

5. Results and Discussion...........................................................................................................................14

6. ORACLE..................................................................................................................................................15

7. Recommendation..................................................................................................................................17

8. Conclusion.............................................................................................................................................18

9. References.............................................................................................................................................19

9.1. Pictures References........................................................................................................................19

ERP system 1
1. Abstract

This paper Advances in information technology, expansion of the Internet and electronic
business as well as an ever-growing global competition have made running a successful business
more difficult than ever before. Currently, a popular approach to the development of an
integrated enterprise-wide system is the implementation of an enterprise resource planning
system.

ERP system 2
2. Introduction
An enterprise resource planning (ERP) system is an integrated set of programs that provides
support for core organizational activities, such as manufacturing and logistics, finance and
accounting, sales and marketing, and human resources. An ERP system helps the different parts
of an organization share data and knowledge, reduce costs, and improve management of business
processes. In spite of their benefits, many ERP systems fail.

Failure has been common among ERP implementations are not new to the business world. The
business world has seen ERP implementations fail in big companies.

So, how can we increase the possibility of an ERP implementation being successful and realize
its benefits? The success of ERP implementations is assumed to be the fault of the software a
company purchases, but in reality, 95% of a project's success or failure depends on the company
implementing the software rather that the software vendor.

Market analysis reports show that the high percentage of ERP implementation success are due to
many reasons and are sometimes discovered very late during the implementation phase. ERP
implementations require highly skilled consultants who have worked on a number of projects
and are familiar with mapping of various business processes or an organization to the ERP
package. The key is to understand the big picture and align the ERP implementation to the
vision, goals and objectives of the organization. Every ERP implementation project should
ideally have some consultants with experience.

ERP system 3
3. Little about ERP
The definition of Enterprise Resource Planning (ERP) from APICS Dictionary is: “ERP predicts
and balances demand and supply. It is an enterprise wide set of forecasting planning and
scheduling tools, which:

 Links customers and suppliers into a complete supply chain.

 employs proven processes for decision making, and
 coordinates sales, marketing operations, logistics, purchasing, finance, product
development, and human resources.

Fig 1.1: Figure above shows how information is integrated into a typical organization using an ERP system

The Enterprise Resource Planning (ERP) system is a unified set of programs and applications
that provides support for core organizational activities such as supply chain, operations,
manufacturing, distribution, finance and accounting, sales and marketing and human resources
(Prasad Bingi, 1999).

ERP system 4
The following figure shows basic ERP system:

Fig 1.1.1

What we need to understand here is that Enterprise Resource Planning (ERP) is not software.
Software Packages such as this help in efficient resource planning and cannot be completely
depended upon for accuracy. These packages not only contain resource planning but also contain
other business processes. As a matter of fact, they do not come as a complete package which
helps in streamlining its operations entirety unlike ERP packages.

Therefore, we need to coin another side that does refer to software: ES. This stands for
Enterprise System or Enterprise Software. In the book “Mission Critical” (Davenport, 2000)
author Thomas H. Davenport describes enterprise systems as “packages of computer applications
that support many, even most, aspects of a company’s information needs.” This is more relevant
to today’s business scenario. Another distinctive feature is that: Not all ERP business functions
are contained in the typical Enterprise Software (ES) Suite. ERP packages address the entire
range of business processes that are required for operating an organization. Figure 1.1 represents
this in totality:

ERP system 5
 Figure 1.2 ERP Business Functions (Davenport, 2000)

As the above figure graphically shows, the typical Enterprise System contains software support
and components for business processes that are not a part of ERP. There are three areas on the
above diagram. ERP packages generally include functions like:

 Finance which in turn can capture modules like General Ledger, Accounts Payable,
Accounts Receivables, Cash Management etc
 Manufacturing which captures transaction in Bills of Material, Scheduling, Cost
Management etc
 Supply Chain Management (SCM) which captures transaction happening in Inventory,
Order Management, Purchasing etc
 Human Resources (HRMS) having modules like Payroll, Training and other HR related
modules
 Customer Relationship Management (CRM) which can again be categorized into three
sections:
o Marketing
o Sales
o Service having modules like Contracts, Call Center modules

ERP system 6
3.1 Understanding ERP
There are two flows across supply chain, one is product flow, and the other is information flow. In the
past, information system tended to be islands, depending on their functions within the company. For
instance, when orders came from customers, they were processed and recorded by sales department,
and then the sales transferred the information to manufacturing. After the production made the master
schedule, the logistics knew the distribution requirements and then planned the delivery. Finally, the
accounting was able to bill to customers. Under this business process, a lot of problems might occur, like
delay, lost order, input errors and long lead time, which is illustrated by the following chart:

Figure 1. Order fulfillment before ERP [4]

Ideally, everyone should be access to the same real time data through some interface when they are
needed to. This requires a single-point-of-contact system. That is one of the original ideas of ERP. Based
on the identical system and database, the information flow and product flow can be processed
efficiently. To guarantee the effectiveness of ERP implementation, we need to link all the functions of
the chain seamlessly. As mention above, there are walls, barriers between departments. So what we
need to do is to smash the walls, to get connected tightly via the system.

Figure 2. Order fulfillment after ERP [4]

ERP system 7
3.2 Core Components of ERP
ERP totally changed the old computer systems from each separate department, and replaced them with
a single unified software program that can be divided into software modules. The modules roughly
approximate the old stand-alone systems. Since 1990s, ERP software has become flexible enough that
you can install only some modules without buying the whole package. Many companies, for example,
will install only part of ERP modules, like finance, HR, Material Management or Production Planning
module and leave the rest of the functions for the future.

To enable the easy handling of the system the ERP has been divided into the following Core subsystems:

 Sales and Marketing  Shop floor control

 Master Scheduling  Accounts Payable/Receivable
 Material Requirement Planning  Logistics
 Capacity Requirement Planning  Asset Management
 Bill of Materials  Financial Accounting
 Purchasing

3.3 Top ERP vendors

In 2015, the top 10 ERP software vendors accounted for nearly 28% of the global
ERP applications market which grew 1% to approach nearly $82.1 billion in license,
maintenance and subscription revenues. The ERP applications market includes both ERP
Financial Management & ERP Services and Operations applications.

ERP system 8
 Fig 3.1: Top 10 ERP Software Vendors & 2015 ERP Applications Market Shares

Worldwide Enterprise Applications Market Forecast 2015-2020, By Functional Market, $M

Fig 3.1.1: Exhibit 4 Worldwide Enterprise Applications Market Forecast 2015-2020, By Functional Market, $M

4. Critical Success Factors

Enterprise Resource Planning (ERP) systems have always been highly complex information

systems. The first step is to evaluate and explain the impact of a set of interrelated Critical

Success Factors (CSF’s) on the success or failure of an ERP implementation. The second step

ERP system 9
involved prediction of the ERP implementation success rate or index by using the American

Customer Satisfaction Index.

4.1 The Implementation Methodology

ERP implementations are usually set to be in the process of implementation once the package
has been bought but in reality, it starts with the critical steps that an organization takes before
buying the ERP package. Firstly, the end users can change and be ready to move from a manual
to an automatic system. Essentially, the business processes of an organization need to be
reviewed at every step for successful ERP implementation and these steps includes the
following:

 Business requirement planning

 Hardware acquisition
 Design Analysis
 Business process analysis
 Setup and Build
 Data conversion and migration from legacy systems
 Business Simulation
 Pilot test
 User acceptance testing
 Rollout
 Go live

4.2 Reviewing on each implementation phase

The most important thing that an ERP implementation brings about in an organization is change
and this change could be in the way the business functions or in the way the company performs.
Successful implementations are to ensure that a lot of package customization isn’t done since it
is costs a lot of money. Ideally, the business processes should be aligned to meet the
requirements of the ERP package. The ERP applications needs to be changed only when a
particular organizational process cannot be changed. This can be done on each and every step of
implementation and after each implementation review is the important thing. Reviewing means
to recheck the implementation according to the business requirements.

ERP system 10
4.3 Executing Implementation Activities
Even though the odds are always stacked against it, ERP implementations can still succeed by
following the steps that have been used for many a successful implementation projects. These
include:

 Proper 'AsIs' and 'ToBe' analysis

 Effective business process analysis
 Effective change management
 Careful package selection
 FitGap analysis
 Minimal package customizations

Many ERP systems fail inspite of their immense benefits (Roth. A, 1999). Experts feel that the
end user resistance is the major cause of these failures and that successful and effective ERP
implementation entails consideration of an organization's core competencies (Zairi, 2000). One
of these is effective change management but sometimes this too doesn’t ensure success due to
resistance (Edgewater Technology, 2006).

4.4 Gathering information before implementation

Effective change management starts with identifying and understanding the needs and concerns
of the end users. The following information must be gathered before implementation for success
rate:

 Who are the entities resisting the change?

 What are the needs of these entities?
 What expectations do they have in terms of the software package?

The answers to the above questions would set the expectations right and would help in
determining the sources of the end user's resistance to the ERP system.

ERP system 11
4.5 ERP systems can be complex and difficult to implement

ERP systems can be complex and difficult to implement, but a structured and disciplined

approach can greatly facilitate the implementation. Here are some more recommended steps for a

successful implementation:

 Review the pre-implementation process to date.

 Install and test any new hardware.
 Install the software and perform the computer room pilot.
 Attend system training.
 Train on the conference room pilot.
 Establish security and necessary permissions.
 Ensure that all data bridges are sufficiently robust and the data are sufficiently accurate.
 Document policies and procedures.
 Bring the entire organization on-line, either in a total cutover or in a phased approach.
 Celebrate.
 Improve continually.

4.6. CSF’s & Organizational Culture (Independent Variables)

4.6.1. Business process with ERP Package

Organizational fit of ERP package is defined as "congruence between the original artifact of ERP
and its organizational context"{M. Lynne Markus, 2000). It has always been seen that the ERP
packages are developed with the industry best practices in mind and they have their own
definition of best business practices. Additionally, every organization has its own set of best
practices that is a part of their organizational culture. Therefore, it requires extreme care while
selecting an ERP package. The closer the gap between an organization's business process and the
ERP package, the higher the success rate of the ERP implementation. For this, the mapping
between the organization's business processes and the ERP application should fit into one of the
multidimensional variable of the following Critical Success Factors (CSF’s):

 Prudent ERP package selection

 Business Process Re-engineering
 Customizations

ERP system 12
4.6.2. Training of End Users
An important cause for ERP implementation failure is that the users either are not involved during the
business requirements planning or they are not trained enough to use the system after the implementation.
Either way, it translates into user resistance which is very detrimental for the organization as it ultimately
leads to failure. End user's involvement is required in the definition and the implementation phase and is
very critical (Liang Zhang, 2003).

4.6.3. Commitment of the organization from all quarters

ERP systems after successful implementation affect all the stakeholders and are instrumental in
integrating the information as well as the business processes within an organization. Hence it is
required that the implementation gets support from all quarters and functional units of the
organization.

4.6.4. Senior Management Support & Involvement

It has been noticed that majority of ERP implementations fail, cancelled or delayed when the top
management delegates project management and status evaluation of the project to the technical
team members who don't have the requisite expertise in terms of clear organizational vision and
objectives (CheeChuong Sum, 1997). Management’s support is paramount as it assures monetary
and staffing resources which are very important for any ERP implementation to go on smoothly.
ERP implementations bring about a cultural change in the organization and top managers are
needed to oversee that the change is aligned to the goals and objectives of the organization.
Hence their involvement in every stage of the ERP implementation is required (Pollyanne
S.Frantz, 2002).

4.6.5. Project Management Effectiveness

ERP implementations are never short term initiatives. It comprises of long drawn events of
business processes reengineering involving all the business units and their staff. The complexity
of the ERP implementations is increased by the involvement of many factors like human
resources, hardware, software, finances. Project management skills are a must for managing the
hugely complex set up as the system and the process have to be aligned towards the success of
the ERP implementation.

4.6.6. Support from External Sources

ERP implementations are not only about just installing the software and customizing it but also

ERP system 13
about business process mapping, technical support, maintenance and end user training. All these
cannot be done by the ERP vendor or organization single handedly and hence the need for
support from external sources. Organizations also make use of external consultants who facilitate
the implementation process as they have in depth understanding of the product and can map the
business process to the application package. These consultants are highly skilled and experts in
their field and organizations should use them optimally for the best outcome as they bring with
them a process oriented approach for ERP implementations.

4.7. ERP Implementation Success Index (ERPISI)

There are various methods of estimating the ERP implementation success index. Some models estimate it
by considering the variance of failure and some use the variance of success. We have used the latter
approach. The general form of the ERPISI is proposed as follows (Bouchaib Bahli, 2005):

Fig 4.7: General ERP ISI Formula (Bouchaib Bahli, 2005)

The variables are calculated from the results of the survey and are used for calculating the Min
and Max values and subsequently the ERP Implementation Success Index. The equation helps us
in calculating the success index and also the reasons for failure and success.

5. Results and Discussion

Our results demonstrate that ERP implementation success is a function of a set of interrelated
Critical Success Factors (CSF’s) and organizational culture. While CSF’s positively reinforce
implementation success, organizational culture hinders its progress. Most of the research
hypotheses are supported by the returned empirical data. According to the study conducted, it
was found that if the CSF's are taken care of, then it ultimately leads to a successful ERP
implementation. But on the other hand, if the organizational culture is not aligned properly, then
it could lead to a failed implementation.

Surprisingly, User's involvement and training are not found to have direct influence on the
implementation success. Finally, empirical data revealed the negative impact of organizational
culture on implementation success. Successful ERP implementation in enterprises faces major

ERP system 14
challenges such as centralized decision making, hierarchical structure, communication gaps, and
access to top management and ill-defined documentation cycle.

This market survey could have taken other variables for consideration. These variables were not
considered explicitly because they broadly fell into one or the other variable already considered
in this research paper. They might be broadly categorized as the following:

1. The Right Core

2. Creating BuyIn
3. Setting the Target
4. The Proving Ground
5. Right Sizing
6. Common Pitfalls

6. ORACLE
Almost thirty years ago, Larry
Ellison and his co-founders, Bob
Miner and Ed Oates, realized there was
tremendous business potential in the
relational database model--but they
may not have realized that they
would change the face of business
computing forever [17].
Today Oracle (Nasdaq: ORCL) is still at the
head of the pack. Oracle technology can be
found in nearly every industry around the
world and in the offices of 98 of the
Fortune 100 companies. Oracle is the first
software company to develop and
deploy 100 percent internet-enabled
enterprise software across its entire
product line: database, business
applications, and application

ERP system 15
development and decision support tools. Oracle is the world's leading supplier of software for
information management, and the world's second largest independent software company [17].

Oracle has always been an innovative company. It was one of the first companies to make its
business applications available through the internet--today, that idea is pervasive. Now Oracle is
committed to making sure that all of its software is designed to work together--the suite
approach--and other companies, analysts, and the press is beginning to acknowledge that Oracle
is right. What's in store for tomorrow? We will continue to innovate and to lead the industry--
while always making sure that we're focused on solving the problems of the customers who rely
on our software [17].

ORACLE Merger History

•On Dec13, 2004, Oracle Corporation announced that it has signed a definitive merger agreement to
acquire PeopleSoft, Inc., for $26.50 per share (approximately $10.3 billion)[18].

•On Jul 18, 2003, PeopleSoft Inc. announced it had completed its $1.8 billion acquisition of J.D. Edwards
& Co.[19],

After a succession of acquisitions, Oracle prides itself on innovation and forward thinking.
PeopleSoft acquired competitor JD Edwards. Oracle acquired PeopleSoft, and therefore, the
rights to JD Edwards applications. In addition, Oracle acquired Siebel. Each company had its
own uniqueness and brought that uniqueness to the culmination, yielding a diverse set of
application options for Oracle customers.
Options with Oracle include the following:

ERP system 16
7. Recommendation
At some point or other an organization contemplates on doing away with their heterogeneous
legacy systems and implementing an ERP package. The options are many namely SAP, Oracle
Applications or erstwhile PeopleSoft or JD Edwards. Successful ERP implementations not only
demands the right package selection but also aligning the business processes. Some
organizations undertake this initiative to streamline their operations while others to have
effective business intelligence. But it has been found that there are 5 areas where ERP projects
are most vulnerable. These are:

 Understanding what integration means

 Managing communication
 Knowing the decision-making process
 Testing and managing infrastructure
 Living with the ERP

Whether it is ERP or any comparable initiative, if a company is taking on a high impact

implementation that could result in organizational shifts, there are things to be remembered.

 Change Management Program

 Secure Management Support and Commitment
 Picking the Implementation Team Wisely

ERP system 17
8. Conclusion
There is no formula for ERP implementation success and the failure or success does not depend
on a single factor. Each step of the ERP implementation has to be carefully monitored so that all
the business processes are properly mapped to the ERP package. The committee should be watch
enough to ensure proper checks and balances. This can be done by studying the potential causes
of resistance and using proven and effective strategies for ERP implementation. The key here is
to keep main of the entire change management process. At no point in the entire ERP
implementation process should the top management lose track of the progress.

ERP and supply chain management are both interrelated and go hand in hand. For the well-
prepared, new supply chain management systems based on ERP have become significant
competitive differentiators. Apart from quick implementation time, operational benefits are key
indicators of success. The new ERP system should start showing quantifiable benefits
immediately. Since the ERP package keeps track of all the business process at each and every
stage across all business units, it would be easier for an organization to know if their customers
are satisfied or not.

To sum up, the key to successful implementation of an enterprise software solution is to apply
people, process and product initiatives within a structured methodology framework. The most
difficult task in an ERP implementation is to bring all the above together and align them toward
the goals of an organization.

ERP system 18
9. References
Critical Success Factors of ERP Implementation 2012
http://www.igi-global.com/book/encyclopedia-information-science-technology-first/361

Mission Critical” (Davenport, 2000) by Thomas H. Davenport ISBN:0875849067

http://dl.acm.org/citation.cfm?id=518799
ERP Business Functions (Davenport, 2000) by Daveport

9 Critical Success Factors in ERP Implementation Dr. Muddassir Ahmed, Ph.D

https://www.linkedin.com/pulse/9-critical-success-factors-erp-implementation-ahmed-ph-d

Critical Success Factors in Implementation of ERP Systems by Stephen Coady

http://www.slideshare.net/StephenCoady/critical-success-factors-in-implementation-of-erp-systems

Gartner: Address Six Key Factors for Successful ERP Implementations by Analyst Denise Ganly
https://www.gartner.com/doc/1603415/address-key-factors-successful-erp

Information Systems Reengineering for Modern Business Systems: ERP, Supply chain by Raul Valverde,
Malleswara Rao Talla
https://books.google.lv/books?id=5qCeBQAAQBAJ&pg

Top 10 ERP Software Vendors and Market Forecast 2015-2020 By Albert Pang - June 28, 2016
https://www.appsruntheworld.com/top-10-erp-software-vendors-and-market-forecast-2015-2020/

A Market Perspective Critical Success and Failure Factors of ERP Implementations by Pijush Gupta
https://www.academia.edu/9040178/
Critical_Success_and_Failure_Factors_of_ERP_Implementations_A_Market_Perspective_Critical_Succe
ss_and_Failure_Factors_of_ERP_Implementations

9.1. Pictures References

Fig 1.1: Figure above shows how information is integrated into a typical organization using an ERP
system

http://www.managementstudyguide.com/images/erp.gif
Figure 1.2 ERP Business Functions (Davenport, 2000)

Fig 3.1: Top 10 ERP Software Vendors and Market Forecast 2015-2020 By Albert Pang - June 28, 2016
https://www.appsruntheworld.com/wp-content/uploads/2016/06/Exhibit-4-Worldwide-Enterprise-
Applications-Market-Forecast-2015-2020-By-Functional-Market-M.png
Fig 3.1.1: Exhibit 4 Worldwide Enterprise Applications Market Forecast 2015-2020, By Functional
Market, $M
https://www.appsruntheworld.com/wp-content/uploads/2016/07/Top-10-ERP-Software-Vendors-2015-
ERP-Applications-Market-Shares.png
Fig 4.7: General ERP ISI Formula (Bouchaib Bahli, 2005)

ERP system 19