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Chapter: Business Science - Enterprise Resource Planning

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Issues to be consider in planning design and implementation of cross functional integrated ERP systems

The problem with ERP packages is that they are very general and need to be configured to a specific type of business. This customization takes a long time, depending on the specific requirements of the business.

Issues to be consider in planning design and implementation of cross functional integrated ERP systems:

 

The problem with ERP packages is that they are very general and need to be configured to a specific type of business. This customization takes a long time, depending on the specific requirements of the business. The extent of customization determines the length of the implementation. The more customization needed, the longer it will take to roll the software out and the more it will cost to keep it up-to-date.

 

For small companies, SAP recently launched Ready-to-Run, a scaled-down suite of R/3 programs preloaded on a computer server. ERP vendors are now offering industry-specific applications to cut the implementation time down. SAP has recently outlined a comprehensive plan to offer 17 industry-specific solutions, including chemical, aerospace and defense, insurance, retail, media, and utilities industries. Even though these specific solutions would able to substantially reduce the time to implement an application, organizations still have to customize the product for their specific requirements.

 

Implementation Costs

 

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. The cost of hiring consultants and all that goes with it can consume up to 30 percent of the overall budget for the implementation.

 

Once the selected employees are trained after investing a huge sum of money, it is a challenge to retain them, especially in a market that is hungry for skilled SAP consultants. Employees could double or triple their salaries by accepting other positions. Retention strategies such as bonus programs, company perks, salary increases, continual training and education, and appeals to company loyalty could work. Other intangible strategies such as flexible work hours, telecommuting options, and opportunities to work with leading-edge technologies are also being used. Many companies simply strive to complete the projects quickly for fear of poaching by head-hunting agencies and other companies.

ERP Vendors

 

As there are about 500 ERP applications available and there is some company consolidation going on, it is all the more important that the software partner be financially well off. Selecting a suitable product is extremely important. Gartner Group has BuySmart program, which has more than 1700 questions to help a company choose a suitable ERP package. Top management input is very important when selecting a suitable vendor. Management needs to ask questions about the vendor, such as its market focus (for example, midsize or large organization), track record with customers, vision of the future, and with whom the vendor is strategically aligned.

 

For a global ERP rollout, companies need to be concerned about if the ERP software is designed to work in different countries. Also, the management must make sure the ERP vendor has the same version of the software available in all the countries the company is implementing the system. Vendor claims regarding global readiness may not be true, and the implementation team may need to cross-check with subsidiary representatives regarding the availability of the software. Vendors also may not have substantial presence in the subsidiary countries. It is important to evaluate if the vendor staffers in these countries are knowledgeable and available. If there is a shortage of skilled staff, bringing people from outside could solve the problem, but it would increase the costs of implementation.

 

Selecting the Right Employees

 

Companies intending to implement an ERP system must be willing to dedicate some of their best employees to the project for a successful implementation. Often companies do not realize the impact of choosing the internal employees with the right skill set. The importance of this aspect cannot be overemphasized. Internal resources of a company should not only be experts in the company's processes but also be aware of the best business practices in the industry. 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.

 

Most of the consulting organizations do provide comprehensive guidelines for selecting internal resources for the project. Companies should take this exercise seriously and make the right choices. 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. Because of the complexities involved in the day-to-day running of an organization, it is not uncommon to find functional departments unwilling to sacrifice their best resources toward ERP project needs. However, considering that ERP system implementation can be a critical step in forging an organization's future, companies are better off dedicating their best internal resources to the project.

Training Employees

 

Training and updating employees on ERP is a major challenge. People are one of the hidden costs of ERP implementation. Without proper training, about 30 percent to 40 percent of front-line workers will not be able to handle the demands of the new system. The people at the keyboard are now making important decisions about buying and selling -- important commitments of the company. They need to understand how their data affects the rest of company. Some of the decisions front-line people make with an ERP system were the responsibility of a manager earlier. It is important for managers to understand this change in their job and encourage the front-line people to be able to make those decisions themselves.

 

Training employees on ERP is not as simple as Excel training in which you give them a few weeks of training, put them on the job, and they blunder their way through. ERP systems are extremely complex and demand rigorous training. It is difficult for trainers or consultants to pass on the knowledge 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, the employees now have to be taught their new responsibilities. With ERP systems you are continuously being trained. Companies should provide opportunities to enhance the skills of the employees by providing training opportunities on a continuous basis to meet the changing needs of the business and employees.

 

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 (many times employees still spend 25 to 50 percent of their time on 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 employees on field trips, could help reduce the stress and improve the morale.

 

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