Discuss about the Challenges to Enterprise System Management.
The case study provided to us, talks about two companies namely the Oil Co., and the Explore Co. Oil Co. is supplier of a wide range of petroleum products and the Explore Co. on other hand focuses on oil and gas production. Recently both the companies have taken up new policies to match-up the global demand and stay ahead in business. The enterprise resource planning strategy (ERP) has been taken up by the company within its business strategy to improve the output produced within the respective companies (Nath and Phookan 2015).
The term Enterprise Resource Planning refers to the process taken up by any firm, company or organization to integrate and manage the entire functioning of the business (Amini and Sadat Safavi 2013). The concept of ERP comes from the theory of management where all the basic components of an industry’s functioning are co-ordinated (Schniederjans and Yadav 2013). The functioning includes the planning, the decision of purchasing, managing a healthy inventory and looking after the marketing and finance of the company.
Through this report the ERP process of the two big oil and petroleum producing companies have been analyzed. Both the companies possess some degrees of similarities and some degrees of dissimilarities between them. These characteristics of the companies have been highlighted to show the ways in the strategy of ERP has been successfully implemented.
Oil Co. is an Australian based company dealing with the marketing of petroleum products within the territory of Australia and other 11 distinguished nations in the Pacific regions. This company with an asset worth of $2 billion provides employment to roughly 2000 people. In order to sustain in the global market, the company had been taking up steps to accomplish assimilation and automation of the business through restricting their existing system.
Explore Co. is an oil and gas producing company of South-West Australia. It is an affiliated under Oil Co. It deals with production and exploration of offshore oil and gas. The company has been facing the need to restructure their entire system and has been planning to implement the ERP strategy. The company is tensed to provide training to its employees as they might leave the job after being trained or charge higher wages for their developed skills.
Similarities:
The given case study suggests that both Oil co. and Explore Co. have been trying to restructure their existing business strategies and models and trying to implement the newly developed robust system of ERP. In order to reach their targets the companies have been focusing on the up-gradation of their individual software systems.
Dissimilarities:
Along with only the basic similarity, there exists a great deal of dissimilarities within these two companies.
Firstly, Oil Co. tries to modernize and upgrade a system that was never used before in oil industry. At the same time, Explore Co. was focused with their procedure and techniques of implementation.
Secondly, there was lack of continuity in Oil Co.’s system whereas the other company has followed the hands-on approach.
Thirdly, different system of grading exists in both the companies. This difference in the grading system accounts for the high performance of Explore Co. when compared to Oil Co.
Fourthly, meeting deadlines with a strong base and fulfillment of requirement is the forte of Explore CO. and was lacking in the other company.
Through this discussion about the two companies, the basic concept of ERP and its existence in the market has been highlighted. The next part of the report highlights the issues that come up with implementation of this dynamic system.
Few factors influencing the implementation of ERP process can be discussed under following sub-headings namely, the commitment of the top-level management of the company, the integration process, the cost and time of implementation and few other aspects (Ahmad and Cuenca 2013).
Any company takes up the decision to implement ERP when they are in their transitioning stage (Dey, Clegg and Cheffi 2013). Whenever the company is trying to adapt to the global system and to expand its business in external environment, there is a need to implement ERP. According to the researchers, it has been found that implementation of the system of IT and ERP requires the existence of a strong management with sustainability of their senior management leaders (Edgar, Rajemi and Nadaranjan 2015).
According to theory, it is the responsibility of the top-level management to look after the ways to raise funds for proper implementation of the system of ERP. In addition, they must take into consideration the capability of the MNCs to adapt to the changes in the business culture and develop their system accordingly (Ahmad and Cuenca 2013).
Integration:
Integration of each unit within an organization is mandatory for the smooth and efficient functioning of the organization. It has been a trend of the companies to follow a common view. According to this view, the effort of the employees in dealing with the consumers has been tried to reduce through ERP. As per the views provided by Zach, Munkvold and Olsen (2014), there have been several cases where there is existence of mismatch between the software and the middleware appliance. This type of unsynchronized tools within the ERP system leads to its failure (Karlson and Flink 2014).
Associated Costs:
The primary focus of any organization is to reduce its cost of operation. It has been seen that there are multiple costs associated with implementation of software. Initially the soft ware needs to be installed, and then it needs to be maintained. The cost associated with implementation of in-house software is often five times more than the cost of using ERP software (Ram, Corkindale and Wu 2013). Along with it, if the company tries to customize the in-house software according to their demand, then the cost of customization and wages of the experts gets included in their total cost of operation.
There is no fixed time within which a company can implement its ERP system with its business. It is obvious that more the time taken for implementation of the software, the greater the cost associated with it. Often the wages per day charged by a single expert goes up to $1850. Usually it is seen, that the average time associated in installing and implementing the ERP software is more than a year with a large team of experts (Marsh et al. 2014). Therefore, Oil Co. and Explore Co. have to consider these factors as well while implementing this new system in business.
ERP systems are introduced within those companies, organizations and industries, which faces the need for some serious development. Any business usually tries to follow the high standard process within its system of mechanism so that they can remain at par with other competing organizations. This implementation of ERP within the system requires a dramatic change in the form of reengineering through which the company tries to attain the unmatched level of performance. Reengineering also occurs even if the company tries to improve its system of existing ERP into an upgraded version (Nath and Phookan 2015). In our case, the implementation of ERP is new for both Oil Co. and Explore Co. However, the Oil Co. requires more restructuring and reengineering within its system of operation than the company does.
The concepts of ERP system have cropped up within the organizations in a drastic way. This sudden rise in the demand thus created a major problem in the in the industry. There has been dearth of skilled consultants in the market. There are various skill components in the system of ERP. Often the problem faced by the company is not scarcity of knowledgeable consultant but mismatch between the particular skill required in the company and that possessed by the hired consultant (Carlson and Flink 2014). Hence, the main issue faced in implementing ERP is of the availability of consultant with the required skill.
The work culture within the company is ambidextrous in nature. Hence, the people at managerial level remain unwilling to engage their best performer in projects relating to ERP system. This is because by engaging those into ERP projects would mean that they are going to remain occupied for a long duration and would not be available in urgent projects (Gajic et al. 2014). The failure of most of the ERP projects is due to misunderstanding of the exact requirements. The people engaged in this product should be able to focus on the practices within the global industries even while operating within their own company.
The system of ERP being complex in nature requires a huge time in understanding. The employees who are involved or been given the duty to look after the process and working of ERP is often demoralized due to the complexity of the system. They need to devote huge amount of time and effort in order to grasp the doings of the system. The people need to put in extra effort while operating in this system. This is a continuous process as ERP is dynamic in nature. Hence, those engaged in using ERP should be provided with some kind of refreshment and counseling so that they do not get depressed as during implementation of ERP it may so happen that they might not get leave for continuous 7 days or in holidays. Hence, only an efficient and highly focused leader should be given the duty to manage the group and motivate them (Dey, Clegg and Cheffi 2013).
Abridgement of proper training about the ERP system will result in the mismatch between the requirement and the production. This can result in the collapse of the entire structure and hence there is a need to provide a meticulous and exhaustive training to the people engaged with this process (Esteves 2014). People with sound knowledge of computer can only handle the complexity of this ERP system after attaining an exhaustive training procedure.
Conclusion:
After going through the case study and constructing this report it can be concluded that there is complexity within the system of ERP. Successful implementation of this system within the domain of management can enhance the economic performance of the company whereas simple missteps taken while implementation can be disastrous for them. In the given cases there have been satisfactory results after implementing ERP in both Oil Co. and Explore Co. Under this system, Oil Co. faced the problem of overboard budget and time constraints whereas Explore Co. was successful in solving both these issues.
From the entire study it is recommended that Oil Co. should try to develop a separate team with highly efficient workers trained in the ERP process so that they can deliver service on time. This would in turn give assurance of reduction of the company’s cost of operation. Also it is advisable for Oil Co. to strengthen their leadership skills which can enhance in quick decision taking and operation system within the economy. From this basic study the flaws of Explore Co. could not be properly highlighted and hence no such prescribed recommendations can be provided for them in this report.
References:
Ahmad, M.M. and Cuenca, R.P., 2013. Critical success factors for ERP implementation in SMEs. Robotics and Computer-Integrated Manufacturing, 29(3), pp.104-111.
Amini, M. and Sadat Safavi, N., 2013. Review paper: critical success factors for ERP implementation. International Journal of Information Technology & Information Systems, 5(15), pp.1-23.
Dey, P.K., Clegg, B. and Cheffi, W., 2013. Risk management in enterprise resource planning implementation: a new risk assessment framework. Production Planning & Control, 24(1), pp.1-14.
Egdair, I.M., Rajemi, M.F. and Nadarajan, S., 2015. Technology Factors, ERP System and Organization Performance in Developing Countries. International Journal of Supply Chain Management, 4(4).
Esteves, J.M., 2014. An empirical identification and categorisation of training best practices for ERP implementation projects. Enterprise Information Systems, 8(6), pp.665-683.
Gajic, G., Stankovski, S., Ostojic, G., Tesic, Z. and Miladinovic, L., 2014. Method of evaluating the impact of ERP implementation critical success factors–a case study in oil and gas industries. Enterprise Information Systems, 8(1), pp.84-106.
Karlsson, R. and Flink, E., 2014. Changes and Challenges of ERP Implementation in the Context of Procurement and Supply Chain Processes. Department of Industrial Management and Logistics, Lund University.
Marsh, J.L., Soroka, A.J., Davies, P., Lynch, J. and Eyers, D., 2014. Challenges to sustainable manufacturing resource planning implementation in SMEs: an exploratory study. KES Trans. Sustain. Des. Manuf, 1(1), pp.291-302.
Nath, U. and Phookan, J., 2015, October. Drill Site Surface Facilities Readiness: Systems Improvement through Use of IT (An Upstream Oil & Gas Company’s Approach). In SPE/IATMI Asia Pacific Oil & Gas Conference and Exhibition. Society of Petroleum Engineers.
Ram, J., Corkindale, D. and Wu, M.L., 2013. Implementation critical success factors (CSFs) for ERP: Do they contribute to implementation success and post-implementation performance?. International Journal of Production Economics, 144(1), pp.157-174.
Schniederjans, D. and Yadav, S., 2013. Successful ERP implementation: an integrative model. Business Process Management Journal, 19(2), pp.364-398.
Zach, O., Munkvold, B.E. and Olsen, D.H., 2014. ERP system implementation in SMEs: exploring the influences of the SME context. Enterprise Information Systems, 8(2), pp.309-335.
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