Enterprise systems are significant business innovations that have a substantial impact on various aspects of a company. Enterprise systems are termed as adjustable software that enables management of corporate activities and data in a unified manner (Leon, 2014). There is a rising awareness in today’s globalized world of the necessity to derive worth from the business ventures in information technologies (Basoglu, Daim and Kerimoglu, 2007). This report analyses a case study of the worldwide engineering organization, ENGCO, how it implemented an enterprise system to resolve an identified business problem and the challenges it faced in the process.
ENGCO is an international engineering company that offers services for heavy plants globally. As a result of a period of economic stagnation of the market its made-to-order products, ENGCO had unfavorable financial conditions (Ko, Kirsch and King, 2005). ENGCO identified its IT capability as one of the biggest impediment to its financial success. The IT system had to improve to realize the organizations goal to be a leading global EPC company.
Selecting An ERP System
When selecting an Enterprise Resource Planning (ERP) system, ENGCO had to consult and review cases of firms that had applied an ERP system. Advisors from ICTCO laid emphasis on SAP ERP as the system that would provide great benefits for the company. For instance, SAP offers processes for monitoring and estimating expenditures using cost controlling module while providing core functions for schedule organization. After consulting the firm selected SAP as the ERP vendor.
Selecting The Project Team
ENGCO picked personnel from every business section to form an ERP project team and hired from ICTCO. Also, employees in the IT department who were responsible for legacy systems associated with ERP practices were included in the task force. The IT division workers were required to examine company’s activities that were essential when implementing the new ERP system and collaborate with consultants to script system specifications.
Process Standardization
Top administration and the task group were for the view that ENGCO had to embrace SAP system since SAP had globalized standards and the best practices (Gargeya and Brady, 2005). However, because SAP modules were typically on the basis of the interests of the manufacturing industry ENGCO, as a company that makes items based on order had to modify its SAP processes to meet its corporate needs. ENGCO adapted six modules from SAP. The table below shows the modules the company adopted.
|
Module Adapted |
SAP Standard Utilization |
|
Sales and Distribution |
40% |
|
Material Management |
15% |
|
Financial |
90% |
|
Project System |
40 |
|
Cost Controlling |
80% |
|
Treasury |
70% |
Table 1: SAP utilization by modules in ENGCO
Project Scheduling
In the previous system, ENGCO was using the Work Breakdown Structure to classify projects with regard to their costs. Nonetheless, SAP used Work Breakdown Structure for scheduling and determining costs of projects. ENGCO’s Work Breakdown Structure could not communicate program data; the firm had to use substitute software for scheduling (Kakouris and Polychronopoulos, 2005). The organization had to change its standard WBS and not apply it in scheduling projects.
Material Codes As Master Data
Also the material codes used in the manufacturing industry are different from those used in the EPC business production. ENGCO had its own specification and material codes since EPC industry is on the basis of made-to-order production. On the other hand, manufacturing industry uses the identical material code since it manufactures the same product during the product’s lifecycle. SAP classifies material codes as primary data and standardizes them by the rule of the manufacturing industry, (Monk and Wagner, 2012) thus existing ENGCO material codes were different from the SAP system’s standard code. However, ERP experts maintained that in order for ENGCO to manage material data as master code, the firm had to implement SAP ERP.
Lack Of Experiences Of The Task Force Group
The personnel who had been selected from the business and IT departments had no prior knowledge of the ERP systems and needed training. To respond to this necessity, the ERP experts had to offer a couching program for T/F group on basic systems design and key features of modules. They as well had to train employees from the IT division on advanced business application programming. Although the ERP consultants had prior ERP system experience with different customers including governments and other business clients, they were not familiar with the custom-made production EPC business (Kerzner, 2013).
User Tutelage
ERP execution timeline for ENGCO was six months. Due to a tight schedule, the organization did not have time to couch users when implementing the new system. ENGCO prepared comprehensive online guides for the new system after implementing the new system. The guides were disseminated via intranet. Later ENGCO started providing ERP system user coaching periods for its workforce. Global user tutelage was finalized six months after the initial unveiling.
Efficient Project Running
The SAP ERP used WBS as a standard form to communicate across modules. Communication across modules facilitates project managers to plan, control and monitor budgets for their projects comprehensively in a single system. Integrated functions enable managers to examine a program budget resulting to increased accuracy of estimates and improved risk management. With the new system in place automatically collected data from ongoing projects made it easier for business administrators to generate profit and loss reports. The information collected was used by the company in decision making (Bradley, 2008).
Faster And Integrated Corporate Management Process
The employed ERP system significantly reduced ENGCO duration for closing. The corporate administrators could predict entire business comprehensively and more precisely. Understanding dealings of foreign money is vital in the administrative system. In depth information from global projects provided business administrators at ENGCO the capacity to handle dealings with foreign money.
Enhanced Communication
The new SAP system implemented an electronic authorization structure. In the previous system, approval was in the form of a piece of paper signed by the relevant administrators. The approval process was time consuming because the number of people required to approve ranged from two to ten. However, the ERP system provided a solution by making it possible for decision-makers to receive an approval request via the intranet system. Hence, the amount of time between request and approval was reduced. Also, the system eliminated inconsistencies related to human error and variation.
Knowledge Curve
The workforce at ENGCO had no prior knowledge of the new ERP system. Also, variety of aspects made the system difficult for new users at the organization. First, SAP’s static client screens did not satisfy users accustomed to interactive web pages. Also, in the new system, the instant a particular operation ensued it would go across all elements within the structure. Consequently, there was the need for a standard change or cancel (Nah and Delgado, 2006).
More Tasks For IT Staff
As a result of most staff having no experience with the new ERP system, IT staffs involved in the enactment of the ERP project more workload. The tasks included continuing running the previous system, ensuring quality, scripting guidelines and delivering to subcontracting developers. Handling both systems at once was challenging for the IT personnel. To ensure smooth running of the system the IT staff had to fix system errors. Another challenge was that there was inadequate time to conduct comprehensive tests in various cases (Kim, Lee and Gosain, 2005). Also, there was delayed client service provision since majority of the IT workforce were not familiar with the ERP system. Whenever they encountered a challenge they had to request for help thus taking more time in service delivery.
More Tasking Report Writing
The corporate managers had anticipated the system to reduce their tasks considerably by using combined real-time info. However, the system produced static records; the ERP conventional layout of reports was not in line with the administrator’s needs (Moon, 2007). Static records made developing reports in the ERP system to take substantially more time compared to the previous system. Also, because the reports required information from across units, to develop a report an administrator had to collaborate with other managers handling the various modules to analyze the layout, diverse data and effects on connected systems. The business administrative team resolved to embrace an additional reporting tool for their needs.
Conclusion
Organizations are seeking ERP benefits which include increased productivity, reduced costs and access to dependable data by integrating different legacy systems and reinventing business practices (Jacobs, 2007). However, since ERP affects the whole organization such as people and systems there are challenges in the implementation process.
Basoglu, N., Daim, T. and Kerimoglu, O. ( 2007) ‘ Organizational adoption of enterprise resource planning systems: A conceptual framework ‘, The Journal of High Technology Management Research, pp. 18(1), 73-97.
Bradley, J. (2008) ‘ Management based critical success factors in the implementation of Enterprise Resource Planning systems ‘, International Journal of Accounting Information Systems, pp. 9(3), pp.175-200.
Gargeya, V.B. and Brady, C. ( 2005) ‘Success and failure factors of adopting SAP in ERP system implementation’, Business Process Management Journal, no. 11(5), pp. pp.501-516.
Jacobs, F.R. (2007) ‘Enterprise resource planning (ERP)—A brief history’, Journal of Operations Management, pp. 25(2), pp.357-363.
Kakouris, A.P. and Polychronopoulos, G. (2005) ‘ Enterprise resource planning (ERP) system: An effective tool for production management ‘, Management Research News, pp. 28(6), pp.66-78.
Kerzner, H. (2013) Project management: a systems approach to planning, scheduling, and controlling , John Wiley & Sons.
Kim, Y., Lee, Z. and Gosain, S. ( 2005) ‘Business process management journal’, Business process management journal, vol. 11, no. 2, pp. pp.158-170.
Ko, D.G., Kirsch, L.J. and King, W.R.. ( 2005) ‘ Antecedents of knowledge transfer from consultants to clients in enterprise system implementations ‘, MIS quarterly, pp. pp.59-85.
Leon, A.. ( 2014) Enterprise resource planning, McGraw-Hill Education.
Monk, E. and Wagner, B. (2012) Concepts in enterprise resource planning, Cengage Learning.
Moon, Y.B. (2007) ‘Enterprise Resource Planning (ERP): a review of the literature’, International Journal of Management and Enterprise Development, pp. 4(3), pp.235-264.
Nah, F.F.H. and Delgado, S. ( 2006) ‘ Critical success factors for enterprise resource planning implementation and upgrade’, Journal of Computer Information Systems, pp. 46(5), pp.99-113.
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