Successful ERP Systems

Jack G. Nestell, David L. Olson

• Publisher: Business Expert Press
• Year: 2017
• Print ISBN: 9781631578458
• eBook ISBN: 9781631578465
• Topic: Business
• Subtopic: Information Management
• Index: Business

This book brings a unique combination of years of experience in academics research and studies in regards to "ERP systems" with years of experience from a practitioner's perspective. Each year billions of dollars are spend by organizations to implement, manage, and maintain ERP systems. A simple browse through the Internet will demonstrate how challenging ERP implementations can be. Success rates are seen as quite low with time, costs, and effort typically being above planned and often significantly. Law firms make a living from ERP's gone badly. Academia is investing more and more time and research into developing success models that not only attempt to objectively determine ERP success or failure but also attempt to be a proactive in that effort. But why? If ERP systems (and all their inherent functionality) can bring a true ROI to business, why are they so challenging? Why do they often deliver as advertised? And, why are they often seen as failing?

CHAPTER 1

The History and Evolution of ERP

In the early 1970s, business computing relied on centralized mainframe computer systems. Today, almost all large firms use ERP systems to manage operations. These systems have proven their value by providing a systematic way to measure what businesses did financially. The reports these systems delivered could be used for analysis of variance with budgets and plans and served as a place to archive business data. Computing provided a way to keep records much more accurately and on a massively larger scale than was possible through manual means. But, from our perspective, at the beginning of the 21st century, that level of computer support was primitive.

In the 1980s and 1990s, large firms hired many (thousands) systems analysts who generated uncounted numbers of useful computer applications to do things better. In conjunction with the appearance of affordable personal computers, this led to just about every department of a large organization developing their own computer applications. Inevitably, this led to high levels of duplicated effort, as well as diverse sets of data giving different managers different opinions about what was going on in their organizations. While this was going on, SAP carefully developed a system expandable into an enterprise-wide system, enabling the integration of applications, so that there could be more of a shared vision of organizational performance metrics. Other firms such as BAAN and JD Edwards built their own competitive systems. Meanwhile, Oracle developed highly effective database systems, and PeopleSoft developed a human resources product, both ultimately expanding into the ERP market as well. The ability to integrate software within enterprises was marketable because of the very large IT staff budgets. Using integrated software such as ERP could be funded by eliminating these diverse efforts, today, relying upon SAP, Oracle, INFOR, Microsoft Dynamics, and other products.

Enterprise resource planning (ERP) systems continue to be one of the largest, fastest-growing, and most influential commercial software products. ERP is a term used to describe multi-module application software that helps an organization in business functions, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, customer service, and tracking orders. ERP also includes application modules for the finance and human resources aspects of a business. Characteristically, an ERP system uses or is integrated with a relational database system. The deployment of an ERP system can involve considerable business process analysis, employee retraining, and new work procedures.

Prior to 2000, ERP systems catered to very large firms that could afford the rather high costs of purchasing ERP systems. Even focusing on a selected few modules would typically cost firms five million dollars and up for software. After 2000, demand dropped, in part because firms were often concerned with Y2K issues prior to 2000, which motivated many ERP system acquisitions. Demand noticeably dropped off after 2000 came and went. Vendors reacted in a number of ways. First, the market consolidated, with Oracle purchasing PeopleSoft (that had earlier acquired JD Edwards). Microsoft acquired a number of smaller ERP software products, consolidating them into Microsoft Dynamics, which caters to a smaller priced market, thus serving a needed gap in ERP coverage for small businesses. Notably, SAP advertises that they can serve small business too. But, it appears that they are more valuable in the large-scale enterprise market. There, in addition, are many other systems, to include open-sourced ERP systems (at least for acquisition) such as Compiere in France. Many countries, such as China, India, and others, have thriving markets for ERP systems designed specifically for local conditions, although SAP and Oracle have customers all over the globe.

ERP systems have been credited with reducing inventories, shortening cycle times, lowering costs, and improving supply chain management practices. ERP systems are designed to integrate all of an organization’s information system computing. ERP increases the speed with which information flows through a company. ERP has also been credited with:

• Creating value through integrating activities across a firm,

• Opportunity to obtain best practices for each business process,

• Standardization of processes within organizations,

• One-source data resulting in less confusion and error, and

• Online access to information.

All of these features facilitate better organizational planning, communication, and collaboration.

The ERP concept is not applied merely for the manufacturing environment, but for all kinds of enterprises. Early ERP systems focused on manufacturing, although they quickly expanded to support all sorts of organizations. ERP facilitates enterprise-wide integrated information systems covering all functional areas and performs core corporate activities and enlarges customer service. ERP is a business management system that seeks to combine all aspects of the organization. It is capable of taking care of planning, manufacturing, sales, and marketing. The concept is to integrate legacy systems within a coordinated integrated system. Typically, an ERP system uses database systems, which are integrated with each other.

Common ERP Features: An ERP system is not merely the integration of diverse enterprise processes mentioned earlier, but also can possess key characteristics to meet the requirements. Features often found in ERP include:

• Best business practices: Incorporation of processes evaluated as the best in the world.

• Comprehensive: Integrating as many business computing functions as possible, with a single database.

• Modular: An open-system architecture allowing incorporation of those modules needed for the organization.

• Flexible: Capable of response to changing enterprise needs, to include Open Database Connectivity (ODBC).

• External linkage: Capable of linking external organizations, especially within supply chains.

Among the many reasons to adopt ERP, they offer an integrated system shared by all users rather than a diverse set of computer applications, which rarely can communicate with each other, and with each having its own set of data and files. ERP provides a means to coordinate information system assets and information flows across the organization. The main benefit is the elimination of suborganizational silos that focus on their own problems, rather than serving the interests of the overall organization. On the downside, ERP systems impose one procedure for the entire organization, which requires everyone to conform to the new system. ERP systems are, thus, less flexible. But, the benefits of integration are usually much greater than the costs of conformity.

Data can be entered once, at the most accurate source, so that all users share the same data. This can be very beneficial, because shared data is used more and by more people, which leads to much more complete and accurate data. As errors are encountered, users demand corrections, but this is limited because a set of procedures is needed to insure that changes do not introduce new errors. This makes it harder to make corrections, but again, this added inconvenience is usually well worth the gains of data integration.

ERP systems also can provide better ways of doing things. This idea is the essence of best practices, a key SAP system component. The downside to best practices is that they take a great deal of effort in identifying the best way to proceed with specific business functions, and that they often can involve significant change in how organizational members do their work. Further, as with any theory, what is considered best by one is often not considered best by all.

ERP systems are usually adopted with the expectation that they are going to yield lower computing costs in the long run. Ideally, adopting one common way of doing things is simpler and involves less effort to provide computing support to an organization. In practice, savings are often not realized due to failure to anticipate all the detailed nuances of user needs, as well as the inevitable changes in the business environment that call for different best practices and computer system relationships. Training needs are typically under-budgeted in ERP projects. Furthermore, these training budgets do not usually include the hidden costs of lost productivity as employees cope with complex new systems. Table 1.1 recaps these pros and cons of ERP syst...

Table of contents

• Cover
• Half-title Page
• Title Page
• Copyright
• Contents
• Testimonials
• Foreword
• Outline of the Book
• Introduction
• Chapter 1 The History and Evolution of ERP
• Chapter 2 ERP Structure
• Chapter 3 External Software Options
• Chapter 4 Business Process Reengineering
• Chapter 5 ERP System Selection
• Chapter 6 ERP Software Installation
• Chapter 7 User Training
• About the Authors
• Glossary
• Index
• Backcover