Discuss about the Enterprise Resource Planning Implementation Oilco.
A business exists to earn profits and reduce costs. Technology is rewriting the way of human living, and this affects businesses also. Computers, software, databases are common and have been integrated into operations of businesses. However, the older implementations are silo-based i.e. the systems supported only their individual business functional areas (Monk and Wagner, 2012). The silo-based systems hurt competitiveness by introducing barriers to fast, automated and error-free information exchange among departments, with suppliers and with customers. But, the business processes need to be organized in such a way that they provide a faster and higher return on investment (ROI) on the finite resources (Ganesh et al., 2014).
An ERP eliminates the isolated silos of the various branches of the organisation and integrates the operations company-wide based on a shared database, with the added benefit of current data and processes throughout the business (Monk and Wagner, 2012). ERP is considered one of the biggest revolutions in running a business, and as mentioned above moved the functioning from the level of a department to the enterprise (Ray, 2011). However, an ERP implementation is a very challenging task (Momoh, Roy and Shehab, 2010), with less than 10% of projects completing within budgeted time and expense, and matching the functionality proposed (Momoh, Roy and Shehab, 2010).
This paper reviews two case studies – OilCo and ExploreCo (Motiwalla, 2008) and looks into issues in implementation of these ERP Projects, reasons for success, lessons to be learnt, any recommendations for improvements.
An ERP implementation seeks to rewrite the operations of the entire enterprise at every level. Such a change is always a risky proposition. Challenges, in general, can come at technical, business processes or staff level. A literature review of the field of ERP suggests that some characteristics are common in most of the implementation attempts that have a significant bearing on the success or failure of the endeavour. The top issues are support and commitment from the top management, evaluation and administration of the project, re-engineering the business process to align with the information technology, minimum customizations, and competence of the ERP team.
Both the case studies of this paper were a success, but they faced their share of concerns as per the decisions made before starting the project and later on due to the leadership and any industry-specific requirements. OilCo went significantly over time and over budget in its implementation of ERP system (Motiwalla, 2008). OilCo handed over the duties and tasks for the mission to staff which was already on duty for other tasks. Additionally, OilCo had to develop an oil industry-specific module, for which endless report generation delayed actual progress (Motiwalla, 2008). OilCo took the ERP implementation as an opportunity to restructure its business and experts believe that this could also be an issue which made OilCo’s project runaway.
Both the case studies of this paper (eventually) achieved their goals. However, one of them was over-budget and delayed by years while other was delayed by two weeks only. An analysis of the similarities and differences of the implementation of ERP in both may be helpful in understanding the possible reasons for the staying near the projected timeline or missing it by years.
Both projects identified same Critical Success Factors (CSFs). These CSFs were management support, a project champion, a balanced team, a commitment to change, implementing a Vanilla ERP (which has more chances of successful implementation), empowered decision makers, having the best people available full-time, well-defined scope and goals, and deliverable dates. Also, both had plans for minimum customisation, which is almost always a predicate to a successful implementation.
OilCo decided to work out a new and streamlined operations process for the entire enterprise for the implementation of the ERP, while ExploreCo stood by this decision. ExploreCo also identified performance indicators. Though the CSFs were identical, the method of achieving them was poles apart. OilCo did not have a clear policy, or an official project champion, or a show and reality of top-management commitment by having a board-level member in the implementation, or full-time and balanced team. However, ExploreCo had all of these.
Both the case studies succeeded in achieving their goals. However, OilCo violated the budget and time predictions by a much higher margin than ExploreCo. While OilCo got delayed by years, ExploreCo got delayed by weeks, tough this could partly be justified on the relative sizes of the original projects. Some authors consider OilCo’s implementation to be a failure, though the company began reaping the benefits of the new system from the fourth year of application onwards (Yick, 2011). Both the projects identified CSFs which are in line with the literature findings and have been elsewhere in this report. These top issues are support and commitment from the top management, evaluation and administration of the project, re-engineering the business process to align with the information technology, minimum customizations, competence of the ERP team. Thus, this helped them move in the right direction. Also, both projects did not seem to have any shortage of funds or people to meet the goals. Targets were well-defined, and skill-sets were available for the companies to throw at the problems.
The case studies provide lessons to be learnt in ERP implementation, confirms the literature as to the precursors to a successful implementation, showcases the importance of people, and the benefits of sticking to the schedule. In detail, the outstanding success of ExploreCo validates the importance of a board-level member in the team. This leadership by a top-management member makes the power of the group visible and official in that the decisions can be decided and enacted by the team without having to move up and down the hierarchy of the company. Also, having the employees on team full-time is a strong contributor to the success of the ERP implementations, and probably any large-scale initiative. Some companies may want to save on expenses and load their staff with additional duties without decreasing the current workload and without increasing their compensation. The businesses can do that, but the extraordinary success of ExploreCo ERP confirms otherwise. Having employees work on one project full-time allows them to focus and also prevent any feelings of discontent. The customizations were minimum in both case studies but followed in only one. The company which stuck to its guns and did not add to the original plan was successful in implementation. To be fair, OilCo had to develop an industry-specific module and this decision could not have been cancelled. Also, a plain vanilla ERP has more chances of success rather than some convoluted functionality as ERP is already a very complex initiative.
Comparing the two case studies and reviewing the literature available on ERP provides some takeaways for a better implementation. Successful projects have common themes, and these align with the CSFs identified throughout this paper and in the literature (Dezdar and Sulaiman, 2009), (Momoh, Roy and Shehab, 2010). Management support is crucial. This support is required not only in words but real authority. Successful ERP implementations have a genuinely motivated person at the helm of affairs. No doubt such a person is called the project champion and in the successful ERP implementation of ExploreCo was given this title. Unlike the OilCo implementation of the ERP (which was over budget and late by four years) there should not be a de-facto project champion, but an explicit and powerful (with official authority) project champion. Successful projects have balanced teams and individuals who can focus full-time on the ERP implementation. Additionally, the team members of successful ERP projects are competent and know their roles with a sufficient amount of on-the-job experience. Implementing an ERP is an opportune time to renew and re-invent the business processes to align with the information technology techniques and practices to remove the manual processes with the faster, automated and error-free processes. Customizations are minimum in a successful implementation as ERPs by definition shake the routine of the business from the core and change is always difficult. A minimum customised ERP (vanilla ERP) stands more chances of not exceeding the budget or time and meeting the stated requirements.
Conclusion
This paper analysed the case study of ERP implementation of two companies in Australia. One of the projects took years longer than originally planned and was way over budget, while the other, though smaller in scope and size, was only two weeks over budget. This selection of the ERP implementation projects allows for comparing and contrasting the two to learn about how and why two ERP implementations in the same industry and the same country could have such differing management and professional lessons. To be sure, both implementations are considered successful from a business point of view (increase profits and decrease costs). OilCo, whose project was delayed by years took four long years before reporting having starting to reap the benefits of the implemented ERP system. The fundamental differences in the two case studies were in the human factors rather than the technical factors. To be fair, OilCo had to develop an industry-specific module, and this cost it more time and was not included in the original estimations. This paper also looked into issues facing ERP implementations, did a brief literature review throughout this report, identified lessons to be learnt, and made recommendations for improvements.
References
Dezdar, S. and Sulaiman, A. (2009). Successful enterprise resource planning implementation: taxonomy of critical factors. Industrial Management & Data Systems, [online] 109(8), pp.1037-1052. Available at: https://www.researchgate.net/profile/Shahin_Dezdar2/publication/220671948_Successful_enterprise_resource_planning_implementation_Taxonomy_of_critical_factors/links/5636011208ae88cf81bcd7cc.pdf [Accessed 12 Jan. 2017].
Ganesh, K., Mohapatra, S., Anbuudayasankar, S. and Sivakumar, P. (2014). Enterprise Resource Planning. 1st ed. Cham: Springer International Publishing.
Momoh, A., Roy, R. and Shehab, E. (2010). Challenges in enterprise resource planning implementation: state?of?the?art. Business Process Management Journal, [online] 16(4), pp.537-565. Available at: https://www.academia.edu/download/35547641/Challenges_in_enterpreise…_-_artigo_-_2010.pdf [Accessed 12 Jan. 2017].
Monk, E. and Wagner, B. (2012). Concepts in Enterprise Resource Planning. 4th ed. Cengage Learning.
Motiwalla, L. (2008). Enterprise Systems for Management. 1st ed. Pearson Education India, pp.128-131.
Ray, R. (2011). Enterprise resource planning. 1st ed. New Delhi (India): Mcgraw-Hill Pub., p.4.
Yick, J. (2011). Implementing Vanilla ERP Systems: Factors to Consider in Strategy, Business Alignment, and Customization. 1st ed. [ebook] University of Oregon (Applied Information Management Program). Available at: https://scholarsbank.uoregon.edu/xmlui/bitstream/handle/1794/11401/Yick-2011.pdf?sequence=1&isAllowed=y [Accessed 12 Jan. 2017].
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