Sample Management Report
“The appeal of ERP may
come less from any cash benefits and more from its ability to untangle and
integrate business practices and systems “
ERP systems were initially implemented to replace many of the disparate legacy systems and the associated issues. Discuss the issues associated with disparate systems and how ERP systems overcome these issues. Vendors argue that integration issues occur at the people, process, and application levels.
Discuss these statements using case study examples (from literature searches) to demonstrate different company’s experiences.
Your paper should include the following areas:
• Importance of integration to companies
• Issues which occur due to lack of integration (people, process, application)
• How do ERP systems address these integration issues?
• What benefits can companies achieve when this integration occurs?
• Case Studies of companies and the issues they faced due to lack of integration and how ERP systems helped overcome these. (Minimum 3)
Your task is produce a 3500 – 4000 word research paper which discusses the issues relating to the above. The paper should demonstrate a depth and breadth of reading and should be appropriately referenced. The paper should be referenced using the Harvard referencing standards
Enterprise Resource Planning
The international competitive environment has changed and, therefore organizations also need to change. In the recent years, markets have also changed in a manner that demands companies to act more responsibly to their clients, markets and to strengthen communication systems in order to survive in this highly competitive business environment. In such a competitive and globalized environment, Enterprise Resource Planning (ERP) has today turned to be the key focus of organizational management and operations. Moreover, ERP not only deals with information technology issues; it also solves other problems related to finance, human resource management, marketing, organizational culture, and customer relationships.
Additionally, effective implementation of ERP systems helps to enhance and improve organizational performance significantly. It is on the basis of this background that this paper attempts to investigate some of the benefits associated with the implementation of a new ERP system to replace disparate, old systems. To achieve this objective, this research paper discuses some disparate legacy systems with the help of various real case studies. Moreover, this research paper discusses how the newly ERP systems implemented in the discussed case studies shall overcome these issues.
Many companies around the world have started implementing proposals to integrate Enterprise Resource Planning (ERP) systems into their business operations. Most of them are enticed by guarantees of enhanced organizational productivity, reduced cost of production, and streamlined organizational operations. The current business environment has been marked by high competition and globalization thereby creating an impetus for growing interest in the integration of ERP systems with business operations. ERP is a system used in business management that has the ability to integrate different resources of an organization such as sales, planning, marketing, finance and manufacturing.
ERP systems are changeable information packages that can integrate organizational processes and information within and across the functional areas in an organization. Today, it is evident that initiating an ERP system demands extensive efforts. Moreover, implementing these systems is not just a procedure of buying a technology and installing it, it requires an assistance of an ERP expert. According to Kraemmerand (2003), it is believed that there are many barriers to the implementation of that system. This means that ERP systems have are beneficial but they may also pose some business risks.
On one hand, ERP enables organizations to change their incompatible and old systems with new integrated systems that can bring improvement within an organization. On the other hand, the application of enterprise resource planning is cumbersome, time consuming and expensive, and it leads to change resistance and conflict within an organization (O’Brien, 2011). Therefore, because many companies do not have internal professionals, external consultants are required while implementing ERP in order to address procedural and technical challenges.
Most of the past researches on ERP have focused on interaction between managers and ERP implementers during the ERP installation process. In the present research paper, though, attempts are made to fill the existing research gap by highlighting the importance of implementing ERP systems and issues that might occur due to lack in integration. Additionally, this paper will investigate how ERP systems address these integration issues and the benefit that an organization can achieve by focusing on various case studies relating to ERP implementation.
Importance of Integration
Many organizations are investing funds in installing enterprise resource planning software with the aim of integrating their business functions. Additionally, many of these organizations want to be internationally recognized. ERP systems assist in the management of a business or organization. They facilitate the provision of essential information (Wagner & Monk, 2008). Organization’s networking efforts help employees to stay up-to-date on the issues unfolding within and outside the company. This implies that one department will be aware of what is happing in other department’s progress or needs. This is essential for the growth of a company that desires to expand its products or services to other markets around the world.
Another benefit of integration is that ERP, if well implemented, can greatly enhance the effectiveness and quality of business operations (Yakovlev, 2002). This can be done by maintaining and an organization’s internal business processes operating smoothly. Thus, ERP can be a good source for better outputs that are advantageous to the organization such as manufacturing and effective customer service. Additionally, ERP system can offer support to top level management by enabling them have vital information for use in decision making. Such information enables the top-level management make effective managerial decisions that will improve the business growth. Lastly, integrating ERP systems into the business processes facilitates the development of a more agile organization that can adapt to different situation better and change accordingly. As a result, ERP systems allows companies to operate less rigidly and with flexible structures that enables the different areas of an organization to be more unified, leading to improved business both externally and internally (O’Brien, 2011).
Issues associated with disparate legacy systems
For many organizations, the business-as-usual technique is not the best approach anymore (Al-Mashari, 2003). In case these organizations want to integrate modernized functionality, position their products and services for success, and enhance their competitiveness, they need to change or upgrade their existing systems. The key purpose of ERP system was to replace many of the disparate systems in order to improve productivity. ERP vendors suggest that the integration of ERP systems into the organizational functions should occur at process, people as well as application levels.
The issues associated with these disparate legacy systems are numerous. Firstly, these old systems assess different resources separately. This might take more time as well as cost, which might lead to losses and low productivity. For instance, old systems analyze sales functions separately without combining them with other elements such as marketing. In contrast, ERP systems assess both the sales and marketing, thus allowing an organization to understand what techniques lead to decreases in sales and which ones lead to an increase. Moreover, ERP systems make this process a simple and less time-consuming one. In contrast, the disparate systems analyze and derive conclusions separately and fail appreciate the relationship between marketing and sales.
Another drawback of using old systems is that they fail to indicate how a single resource impacts on another, or even how to integrate resources in order to increase profits. The modern ERP systems enable organizations to integrate all assets into a single group and work toward achieve the same objectives. In addition, the modern ERP systems assist companies to develop the best methods for organization expansion and effectiveness of decisions made.
Case Study One: Air France
At a time when the airline sector is still struggling from market forces such as high competition, high fuel prices, as well as geopolitical instability, Air France has a strong business performance. The company announced revenues of 20 billion Euros in 2005 (Wagner & Monk, 2008). The company continues to change and upgrade its internal systems with the aim of controlling its expenses through standardization of human resources, finance and purchasing, and the merger with KLM group. This move was expected to have a major effect on business processes as well as the essential controls that these airlines used in the optimization of an international fleet of more than 500 airplanes that transported over 64 million clients (Wagner & Monk, 2008).
Previously, Air France had been implementing a SAP (Systems Applications and Products) ERP product since 1998. The SAP ERP system enabled the airline to standardize its financial and purchasing initiatives. Moreover, the company standardized its internal business processes. The SAP software solved the problem of the entire organization where hundreds of users were involved in conducting a wide set of business processes such as accounting payable to budgeting, as well as purchasing to repair of its aircrafts. In 2005, the airline invested heavily in an initiative of upgrading its SAP R/3 system to the current SAP ERP that integrated the entire organization. With the help of internal and external experts, the project was completed successfully under the proposed budget in December 2005.
By upgrading their old system, Air France was able to gain advanced and new capabilities, reduce costs of operation, and enhanced end-user operation. One of the additional benefits that Air France obtained as a result of the upgrade of the ERP systems include effective satisfaction and usability for it thousands employees with regard to intranet as well as other Web features such as bookmarking. They also helped reduce time and improve reporting to create business reports among different departments. Moreover, they reduce maintenance and repair costs through reduction of over 100 customized systems. There was also easier access of financial information by business analysts, shareholders, and buyers.
The effectiveness of upgrade of SAP ERP system indicates how an organization the size of Air France can enhance and simplify the operations, and optimize the importance of the new technologies that would lead to achievement of sustainable business processes. While a number of companies could continue using their old systems, the decision to change and integrate to a new system strengthens the desire for these companies to change for better and retain a competitive edge.
Air France’s decision to implement the new ERP system stemmed from the need to offer essential, timely, and role-based information to all its employees, clients, and suppliers. The process proved to have the capability of benefiting all the stakeholders involved from the point of view of scalable and stable information technology platforms that offer instinctive user interface that enhance completion of operations.
Another important experience by Air France from the implementation of ERP system entailed the maximization of synergistic benefits as a result of its merger with KLM group. This increased synergy is being applied in the different operation centers in Holland, France as well as other part of the world in a more integrated manner. For instance, the airline is planning to have a common supplier or a common warehouse for its airplane parts. In this case, Air France will only need to build a common warehouse that will create consolidate inventories for easy access. This will be advantages as the airline will cut down operation costs by categorizing different stocks into a single group.
Case Study 2: Champlain Cable
Champlain Cable Corporation is one of the leading designers and manufacturers of quality cables and wires that are installed in harsh environments. By offering products of unparalleled as well as engineering services to a number of industries such as motor vehicle and telecommunications, Champlain Industry shines at offering solutions for processing and application issues. Champlain was founded in 1955, and since then, it has developed a solid reputation of manufacturing tough cables and wires that are meant for the harshest of environments. Therefore, many companies rely on Champlain to develop their cables.
The newly designed AXIOM ERP has enabled Chaplain Cable, a leader designer and manufacturer of cables and wires, to achieve high returns on its investment. Following the implementation of AXION ERP, the company has experienced a significant improvement in its operations, active-functional support for its different plants, and effective system support that drives business growth.
Upon becoming independent in 2003, Champlain had to design and implement its own support system. Moreover, the organization felt the need to upgrade its existing El Paso warehouse into an effective production plant with the aim providing effective services to its clients. The plan of the company was to move products among their multi-plants and operations with minimum paper work and overheads. This could be achieved by establishing online operating system, lineups, shop travelers, and dispatch lists, which are supported both in real time and through scheduled updates. Therefore, Champlain opted to upgrade its old version of AXIOM ERP to the newly progress-based AXIOM ERP system, whose installation and support was done in consultation with a company known as Consona.
The company managers knew that for it to grow, they required expanded capabilities as well as other functionalities to be included in the new version of AXIOM ERP system. Above that, Champlain also acknowledged that they required a strong relationship with their system vendors to provide an effective IT infrastructure. Quality control and documentation functionality that are meant to satisfy telecommunication and automobile sectors were both essential for the company’s upgrade system. It was hoped that the new version of ERP would tackle these issues. The new version of AXIOM ERP provided an effective and strong quality functionality that ensured the products were in accordance with quality standards.
Additionally, Champlain required easy access to data. The top-level management needed an urgent report with the old ERP, the programmer had to write, and this would take few days. However, with the latest version of AXIOM ERP in place, the top level management can effectively pull out the data into one page and work it themselves. This indicates that they no longer require the programming resources needed to perform this task, and information is always available in the company’s database. In turn, this new system of ERP saves time and cost, which is one of the benefits of having an enterprise resource planning.
Another reason behind the implementation of the newly AXIOM ERP system is to offer support to the company’s growth strategy. In last couple of years, the company had been expanding significantly. With the current system of AXIOM ERP in place, the company obtained the much-needed essential flexibility as well as effectiveness in access to information. Even though the company has many plants, it has only one team IT staff, and yet it is able to offer better and effective services to the organization. This is largely because the newly version of AXIOM ERP offers effective solutions that the company needs in its day-to-day operation.
In terms of results, Champlain Corporation changed to a newly AXIOM ERP system that provided better services that resulted to cost reduction. The upgrade process was effective as a result of internal and external experts. Nevertheless, significant improvements were felt immediately while accessing information of the different plants. Today, Champlain can be able to share its critical information among different departments more effectively. Moreover, financial information can be pulled out by the top management without having to consult any programming resources. This offers better management style, and in turn, high productivity.
Case Study 3: The Newly introduced ERP System at Shoe-D-Vision
Shoe-D-Vision is a premier designer and producer of shoes in Denmark. With its headquarters in Arhus, Denmark, the company aims at improving its system of communication within its departments as well as overall effectiveness of production. In addition, the Shoe-D-Vision aims at enhancing, consulting and promoting IT solutions and logistics to all its affiliates’ member boutiques. With more than 1,500 staff members, the company is also looking for ways to integrate them to make them work effectively.
The first ERP system at Shoe-D-Vision was implemented in 1992. This system has facilitated the sharing of information more effectively and quickly. In order to attain its leadership position in Europe, and especially, in Denmark, Shoe-D-Vision had to change its working and logistic strategy in order to start reducing costs and enhances efficiency of its business style. The strategy would assist over 300 retail stores that are currently selling Shoe-D-Vision products. Therefore, Shoe-D-Vision had to establish and implement an e-business application to improve their logistics processes. The ERP e-business system was specifically developed to enhance ordering processes, stock transfers and inquiries, issues invoices, sharing of information, data collection, and reporting.
The IT department at Shoe-D-Vision was responsible for designing the necessary system for providing support to all its shoe boutiques. The design was effective with the help of an external contractor hired to offer support to the IT department on the issues involving ERP. Moreover, three additional employees were employed to offer support such as training, installation, and repair for different retail stores. The company opted to have in-house solution in order to establish a set of applications for its entire network as well as for all its affiliated stores.
The company’s internal IT team was responsible for the development of an ERP system which was named ‘SHOEerp’. The initial system was developed in one year through the assistance of LANSA Inc. for in the installing of the so-called ‘iSeries’ application. During this period of 1992, LANSA was the only vendor that could offer Shoe-D-Vision the required system support services. SHOEerp was essential for the company because the way in which its business entailed retailing shoes in different stores.
The company uses its buying power to source shoes manufactured in Italy, Hong Kong, Portugal and Taiwan. Therefore, it has to place large orders every year as well as smaller shoe orders in the course of the year. To enhance coordination and logistics within Shoe-D-Vision, its suppliers, and customers, it was necessary to have a system where retail stores could easily order, inspect quality, get invoices, and check delivery of their goods within the shortest time possible.
Therefore, with the development and implementation of SHOEerp the Shoe-D-Vision was able to order their stock any time as opposed to the older approach of faxing, calling, and e-mailing the central service center. Moreover, all invoices were no longer delivered by post. This reduced the cost of sending as well as the time taken to deliver one invoice. Additionally, all vendors were allowed access to ERP system through the enabled SHOEweb where invoices were stored for customers. The ERP system also enabled the company to have automated ordering system that was meant for promotional purposes.
In terms of results, it was clear that the newly designed ERP system for e-business solution was found to have a positive effect on Shoe-D-Vision’s business. It contributed to the building business relationships with its clients, coordination, logistics, and inventory management. Firstly, the SHOEerp solution allowed the company to change its paper-based postings of over 270,000 invoices every year, thereby saving the cost of stamps as well as that of work hours. The delivery, invoicing, and payment system became more effective, considering that previously, mail used to take days to arrive. With the new ERP system, the delivery of customer’s invoices takes few seconds to be delivered upon preparation through the SHOEerp enterprise resource planning system.
Benefits of ERP to companies
According to Ben (1999), ERP has always had the impact of strengthening communication within an organization. For instance, after the implementation of ERP, reporting of accounting information at the end of the financial year can now be completed immediately. In turn, high-level management and shareholders can receive the financial information in time. This is because such information could not be easily delayed or hidden. The new system of integration allows employees to become more conversant with organizational processes. Thus, the idea of motivating employees becomes effective. For example, employees are empowered if they understand that there are some limits to extent to which they are supervised.
According to (Summer, 2004), with the help of ERP systems, the information available to all staffs is more complete as well as easy to obtain. For instance, while processing an order, a staff member can easily determine whether the required orders were available or not simply by conducting a simple search in the computer system. The same case applies to account receivables as well as details on correct address for shipping the products. In short, through integration process, it is easy for an employee to respond directly to customer’s queries, and thus, carry out business operations effectively. On the other hand, the user of such information has no need to master all critical information.
Overall, the ERP system implementation procedures provided in the three case studies discussed in this paper have helped the companies to save costs, improve internal and external communications, as well as streamline inventory and logistics management. With the help of the different ERP systems discussed, many companies have expressed their satisfaction and support for the new system as a replacement to the old disparate systems.
In this research, it is evident that most of the newly or upgraded ERP systems saves not only time, but also cost. In addition, the new ERP system were initially developed and implemented in order to replace some of the disparate old systems. Some of the issues associated with old system discussed in this paper include poor communication system that lead to confusion and conflict, lack of reduction of costs of operations, poor logistics and inventory management, lack of effective coordination between an organization, customers, and suppliers, as well as poor financial control mechanisms. In the above case studies, it is evident that these ERP issues relate closely to aspects of process, people and application.
On the basis of these case studies, the
main benefits arising from the implementation of the ERP systems include a decrease
in efforts for the gathering and input of information, and uniformity as well
as discipline in working techniques and processes, overcoming geographic
barriers and integrating different functions within departments. Moreover,
proper ERP application aids in decision-making. For instance, proper recording
of inventories leads to effectiveness in delivery of services to the client.
Al-Mashari, M, 2003, ‘A Process Change-Oriented Model for ERP Application’, International Journal of Human-Computer Interaction, Vol. 16, No. 1, pp. 39-55.
Ben, L, 1999, ‘Realizing the Potential of ERP Systems’, Electronic Markets, Vol. 9, No. 4, pp.1-2.
Kraemmerand, P. (2003) ‘ERP implementation: An integrated process of radical change and continuous learning’, Production Planning & Control, Vol.14, No. 4, pp. 228–248.
O’Brien, J, 2011, Management Information Systems (MIS), New York, McGraw-Hill, Irwin.
Summer, M, 2004, Enterprise Resource Planning, Princeton University Press, Princeton.
Wagner, B, & Monk, E, 2008, Enterprise Resource Planning, Free Press, New York.
Yakovlev, I, 2002, ‘An ERP implementation and business process reengineering at a Small University’, Educause Quarterly, Vol. 2, No. 3, pp. 52–57.
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