Discuss about the Implementation of ERP Software in the Business Systems.
The enterprise resource planning is one of the emerging technologies in the information system discipline with scientific approaches. The new development is also coming in the market which makes the firm to keep their business updated, risk free and efficient in the market. The ERP is growing its demand in the market because of the high use of system in the medium and large scale companies. It is seen in the recent news articles that pharmaceutical industries is holding highest percentage of ERP system implementation in their business operations and processes (Financial Times, 2013). The use of ERP is growing from last couple of years as many companies are implemented in business operations to make their business information sharing, and networking much stronger and efficient(Khazanchi and Munkvold, 2000, pp. 32).
There was a corporate scandal, where enormous business was failing because of no security on the information share with the shareholders. The corporate scandal has led to SOX act in 2002 which is making some of the rules and regulation which corporates should abid in terms of sharing, security and transmission (PCAOB, 2002). The company has kept the use of the ERP software to integrate the business systems and also ensure risk which is foreseen when the change in management took place of process engineering.
The ERP system makes the business systems integrates with much other activity. It helps business management to plan the process and activities accordingly to finish the task in accomplishing time and targets.
The main reason for implementing the ERP in the business is because it is helping firms to integrate is all application in the single system software. This integration can make the firm run more smoothly and effectively in the operational and business activities. Kumar and van Hillegersberg (2000, pp. 23) argues that the ERP helps firm to manage, transmit, store, and share their data in their own networks In much faster and eco-friendly manner. The ERP system is functioning in each and every stage of business. The ERP system helps large and medium firms to achieve the economies of scale in regard to enhancement, development and maintenance for their product and services (Sumner, 2015).
Further, in addition it is observed that ERP is that systematic software which is meeting the requirements of many clients or large scale businesses (Nilsson, 2012). It is also covering the business solutions for the activities like planning of product and its development, marketing and distribution, financing the projects, HR policy and practices, managing accounting, HRM, logistics and supply chain, manufacturing and sales control etc. The business activities are included in either part of full module in the central database provided by the ERP systems. It integrates these parts and modules with the whole system in the central database (Davenport, 1998).
With the moving time the reason is becoming more and more for implementing the ERP in the business systems of the large and medium scale companies. It is also known that the implementation of ERP is complex (Davenport, 1998).The business houses still need to fulfilthe requirement to handle its core functioning of its business functions. The needs are so high that companies go with the ERP software implementation in their units (Van Everdingen et al., 2000). The real reason where obtain in the research by Al-Mashari (2002) which has addressed the ERP literature gap and provided the satisfactory reason of implementing the ERP in the business which was not focused by any IT practitioners and research scholars. The three functional area needs were shown by the Al-Mashari (2002) in its research which are the role of ERP in business management process, ERP and competitiveness in the market and the roles of IS functions in the implementation of the ERP business unit.
The pharmaceutical companies are growing much higher on improving its products and making development in the health and life of the humans. The high use of ERP is done by the pharmaceutical companies. It is known from the fact that 89% pharmaceutical companies in the globe are having the ERP software implemented in the business (BBC, 2009). The use of ERP goes on increasing day by day in pharmaceutical companies, as the growth figure is 1.25% on average per year (Financial Times, 2013). There are large companies like GSK, Pfizer, Glen mark, Dr. Reddy’s and Torrent etc. has implemented the ERP software to integrate all its business functioning.
The reason behind heavy use of ERP software in there IS functioning or IT functioning is because they are the manufacturer of the vast product lines. The products are much small and huge in numbers. So, to keep on track records of each product line, products in terms of their expiry and manufacturing date, batch numbers, suppliers and shipping information, invoice and accounting information the products whose payment is received and which payment is kept pending(Stratman and Roth, 2002). The other reason obtainedin the research conducted by the SEC (2005) where 96% of pharmaceutical companies are having their warehouse in different locations, so to maintain the stocks, inventory and storing the companies required strong systemprotocol to get them all the units integrated and updated with each other. So, pharmaceutical companies implement the ERP in their business systems.
The pharmaceutical products are having time conscious, if the time expires of the product then it will of no use, or it might be dangerous. So to keep update track of each and every product is essential in this industry. McClenahen (2007) argues that thedecisions in the industry are also taken by the ERP software, where the companies can plan and schedule their products to win competitiveness in the market. The decisions taken from ERP are effective and correct because it is having all the awareness of the internal and external business operations and functions of the company. Mabert et al., (2003) observes that the use of ERP is growing in the Pharmaceutical companies because of the providing corrective decision when it’s timely requires.
According to Hawking et al., (2004) the empirical research has presented the report obtain from the computer economics stating that 76% of pharmaceutical manufacturer, 35% of insurance and health care companies and lastly 24% of the federal government agencies are using the ERP system in their business and still the percentage of installation of ERP implementation is growing in the this industries.
The Act has been developed in much later time when the corporate scandal of Enron has come up with 2001. The reason behind implications of this SOX act 2002 has been known that many companies fail to create the security protocol at time of sharing the information on their networks because of the high system hacking and virus attacking the system on irregular terms (PCAOB, 2002). It is conveyed that SOX acts protect the third parties and companies for obtaining the secure information. The information should be reliable and accurate with the improved security laws (PCAOB, 2002).
The act has also established to address all those issues which were faced in the corporate. In regards to the issues, one of the major issues is to bribe officials for leaking the confidential information to others. The other major issues companies faced is the financial risk in the business (Chan, 2004; Ramos, 2004). This risk has come up from the change management and process engineering happening in the company. The SOX Act 2002 also protects from such a financial and business risk. The Act has developed the COBIT (Control Objectives for Information and Related Technology) for protecting the risk which is faced by corporate while implementing the systems like ERP, SAP, MIS in their business houses (Luftmanet al., 2004). The SOX act has also been approved by the SEC (Stock Exchange commission). The SEC helps to register those firms which are meeting the SOX standards. It displays that the SEC has imposed the requirement of SOX on the legal system and senior management levels (Mead and McGraw, 2004). If the SOX requirements are not fulfilled than compliance measure will be also taken in that case. However, it is also argued that private companies are also implementing the SOX regulation and legislation in their business (Heffes, 2005).
It is believed that SAP (2005) has presented the evidence where all most 80% of fortune 500 companies are having the ERP implemented in their business systems. The markets of ERP are also getting saturated because of high demand from private limited companies too. The Act has built to introduce the security rules. These rules and regulations were met by the SAP ERP system by developing such a business solution which integrates and automates the business process through sharing and transmitting the data with a database and relevant networks. Practices across the network and business organisations are approved by the real – time environment (Deloitte &Touche 2005).
The SAP develops to integrate and automate the systems of business. It also launches the protection for data sharing on the common platform and ensures the business is risk free and safe in terms of information transmitting (Kaarst-Brown and Kelly, 2005). The SAP model is going to improve the system efficiencies by providing the appropriate control and continuously monitoring facilities to clients. The SAP helps to publish the complete business reports with full accuracy and generosity. However, under the section 404 it is observed that Public Company Accounting Oversight Board (PCAOB) with their standard rule -2 can only publish those statements which are having the auditors seal. So, the company has to do audits of their accounts through auditors and internal control management staff. The SAP helps to provide management statements which are effectively observed by an internal control team and auditors. The information should be correct and genuine is only going to publish. The SAP ERP is supporting the ERM framework which is developed by the Committee of Sponsoring Organizations (COSO) in order to protect the organisations from the risk that business houses takes in order to win over their competitors or to achieve success in launch their product and services (COSO, 2005). The ERM model is much different from the other models of risk assessment and risk management, so indulging this model in ERP software approves that business process is risk free. The ERP needs to provide the risk free information in the business networks (Decker and Lepeak, 2003). The risk – free information can be obtained when the-from the firms employing the ERM in their systems. Many firms manage the operational activates and processing assessment using only the ERP. The SOX act goes with ERP, the operational and off-line management processes and legacy processes, but these processes are much critical factors for the company. As under section 404 the firms use an ERP Oracle version[1] which is making the ERP centred to risk management application. The ERP can also integrate the system by Movaris in which companies can integrate its system to test and configure the continuous change. It is a diagnostic tool for monitoring which is helping ERP to integrate (Proctor, 2004).
In this report the two cases are discussed from one of the case is successful implementation of ERP and other case is a failure of ERP implementation in the business operations. These two cases are Cadbury and Hershey’s. In this report, the Cadbury case has successfully implemented the ERP system in their business operation and Hershey’s case has failed to implement the ERP.
The Cadbury group in recent time implemented the ERP 6.0 system in their business operations which is reducing their business operational cost[2]. The 11,000 employees of Cadbury Company is putting and sending data on the transparent portal of the company were 1078 applications are linked (Cadbury, 2011). Further, the Cadbury has also implemented the SAP’s master data management solution, NetWeaver, with an eye toward integrating legacy systems. The Cadbury has implemented the Five years IT based project naming “Probe” which is having ERP implementation in order to integrate the Supply chain, distribution, sales and marketing, purchasing and manufacturing for the Cadbury Schweppes on a global SAP based ERP platform (Cadbury, 2008).
The Cadbury project Probe is making the business dealing more smoother and flexible for the company on international grounds. It has helped the company to achieve its aim of gathering huge saving in the business (SAP 2005). There are various benefits which Cadbury has enjoyed after implementation of ERP in their business operation and activities(Hawking et al., 2004).
The implementation of ERP in the Cadbury has seen tremendous growth in the fast paced market where the Cadbury faces many issues because of its inefficiencies. The ERP has added much of efficiency in the Cadbury company to achieve faster growth.
The ERP implementation in the Cadbury company has also developed their warehouse management system. It has also made changes in structure of branch offices and depots to save the transportation and storing cost. The ERP system has made Cadbury to build more competitive in the market[3]. Initially there are many problems observed in the implementation of ERP such as not proper communication and information sharing methods. But with time, the change happening in Cadbury structural and functional business operation is taking ERP in easy way (Sumner, 2005). The Cadbury has also implemented the robust regular feedback system which is monitoring the changes happening in the company with its initial planning of change to restructure. The vendors were selected by the company were the best because only those vendors where choose who has the ERP implemented in their business system. The ERP in Cadburyhas brought their cost down and increase their saving a lot because of choosing good and healthy supplier from their vendor connect portal (Kaarst-Brown and Kelly, 2005).
The Hershey’s group has implemented the ERP in their business operations, but the system doesnot effectively work on achieving the organisational goals. In year 1996 the ERP was implemented in the company for the managing integration of the supply chain management and CRM. The company has installed the SAP’s R/3 ERP software, Manugistics SCM software and Seibel’s CRM software with IBM Global Service in order to integrate all these three software. The project was taken under the name of “Enterprise21”. The company was needing this only for a specific time, so instead of phased approach the company has initiated the system with a big bang approach. The ERP system in the Hershey’s group has observed various problems and these problems are much technical and non-technical.For e.g. late delivers to whole-sellers and retailers, losing credibility in the market and increase the inventory by 25% from the previous year[4].The company has faced the malfunctioning problems because of their faulty computer system. The changing the system in whole company has cost the company US $150 million.
The reason for the unsuccessful implementation of ERP was their selection of the wrong approach. The Hershey’s has employed big bang approach instead of phased approach. The Hershey’s has made a huge mistake for not testing their systems for the sake of expediency. The company has also cut out many important activities and went go-alive in the systems in their busy schedule which also mismatched the ERP settings. The company over squeezed its implementation of schedules which disturb the flow of the system in the business organisations.
The company has learned much from the reason of failure in the ERP’s implementation in the business operation. It is learned that the company should always work on testing procedures ensure that system are effective and efficient in the using. The company should not cut activities in the busy periods because this is going to kick the system in much badly way. The company should learn curves about the operational performance dips while installing the new implementation of system in the business operation. In a low working climate the system can be steadily moving to the good functioning ahead. The employees of the company can also learn about the system.
Conclusion
Lastly,it is concluded that ERP has good demand in the market of the pharmaceutical industry. The ERP system makes the business a system integrates with much other activity. It helps business management to plan the process and activities accordingly to finish the task in accomplishing time and targets. It is also observed that the large and medium companies have implemented the ERP system in their business operations in order to win its customer over their competitors. The ERP should be meeting the SOX act standard rules in order to make the business process and legacy process running smoothly. SOX acts protect the third parties and companies for obtaining the secure information. The information should be reliable and accurate with the improved security laws.The ERP implementation in the business systems makes business successful because of gaining cost leadership and differentiation strategy in their business management. There are firms in which implementation of ERP is successful, but some firms also have an ERP implementation failure, because of miss management and the big band theory approached.
References
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