Potential Challenges In Implementing Enterprise Resource Planning (ERP) System – Critical Evaluation And Strategies

Challenges in Implementing ERP System

Question:

Discuss about the Enterprise Relationship and Market Focus.

Every emerging or new technology has its own pros and cons. In the same way, ERP has numerous benefits like cost effective, improved organizational efficiency and also consist of several challenges in implementation. The proper implementation of ERP in organizations is a demanding task. Although the ERP packages are being widely used amongst the organizations worldwide, often organizations remain aware of the potential challenges associated with the implementation of the ERP system amongst the organizations. Added responsibility, change in business philosophy, technical issues, lack of skilled and technologically trained employees in the organization as well as huge expenditure are some of the common challenges involved with ERP implementation at workplace. Due to the presence of certain generic challenges associated with ERP implementation at workplace, it is highly important to identify the challenges, anticipate the consequences and adopt effective strategies in order to combat the same.

In this report, I have gathered and analysed some articles about the obstacles in ERP implementation. After identifying the possible challenges, some of the organizations have even introduced important managementconcepts such as Knowledge Management, Change Management, as well as Innovation Management so as to help them in moderating and handling the ERP implementation issues. The purpose of the present report is to critically discuss and evaluate the potential challenges, analyze the probable consequence on the organizational operations and recommend effective strategies to eliminate each challenge.

ERP is a type of Information systems process that integrate various organizational departments and functions of the specific company into one integrated whole which serves the needs of each department in an organized way ().The present research report intends to critically discuss the challenges faced by the organization in implementing enterprise resource planning meant to enhance organizational productivity. In this study, the major focus is on the on the following areas.

The movement of data across the organization is referred to as knowledge management (). Knowledge management usually involves the creation, storage, retrieval and transfer of data and information in an organization. Specifically, Knowledge (data and information) is the most important for all enterprises (Tseng, 2014). However, success is determined by the way the management authority is managing and using this knowledge. In ERP, knowledge management is an integral component in the success of ERP implementation. So many researchers had studied about the importance of knowledge management in ERP.   In case an organization chooses to use KM activities throughout the ERP implementation phase then it will help in ensuring low implementation costs as well as user satisfaction ().Besides, it will provide strategic and competitive business advantages through effective product and process innovation.( Ramburn, Seymour, & Gopaul, 2008, as cited in Sedera et al., 2004).

Knowledge Management and its Importance in ERP Implementation

Knowledge can be acquired in two ways; first of all, one can obtain it by reviewing the case studies of organizations that have enjoyed successful ERP implementations, while the subsequent way is gathering it from failed ERP implementations (Zhang et al., 2017).Knowledge can be two types a) explicit knowledge=its formal and systematic b) tacit knowledge=its context-specific knowledge and difficult to communicate (Fjermestad & Romano, 2016).Knowledge creation is a process which may involve the development of new knowledge or replacement of the existent knowledge. Strategic enterprise resource management(SERUM) is an agent-based approach that can handle traditional ERP systems, technology management, corporate level strategic planning and customer relationship management(CRM) (Humphries & Gibbs, 2016). It might be interesting to note here that in most of the cases, an organization implementing ERP system at its workplace is likely to face two kinds of knowledge management challenges- configuration knowledge gap challenge and assimilation knowledge gap challenge. In case of the former, the management authority as well as the employees lack professional expertise to handle ERP software, and consequently fail to understand how to configure the ERP system in order to match the organizational needs (Mezger & Rauschecker, 2014). On the other hand, in case of the latter, the employees lack technical knowledge to be able to successfully handle and utilize the benefits of the ERP software. While often the consultants are unwilling to pass on their knowledge of their ERP system to the employees, at other times, the employees themselves refuse to enrol themselves in training and communication process that impedes effective knowledge management needed for installation of the ERP software (THannhuber et al., 2017).

Chan once proposed a three dimensional model of knowledge management where he has stated that in order to ensure proper knowledge management, an organization must ensure effective project management, business management and technical skill management. The two major things chiefly contributing to  ERP failure in an organization is usually the  inadequate project management and inaccurate choice of implementation team(Ramburn et al, 2008) . It includes change management, business process re-engineering, management support etc. Those above-mentioned aspects discussed later on this report. The third one identified by Chan is technical knowledge that includes process re-engineering, programming, system administration and hardware/network(Ramburn et al, 2008).

Change management can be defined as any set of strategies which enable the people to adapt with the change which is necessary to accomplish any required business outcome (Harris, 2017).In fact, it is one of the most critical areas where organizational attention is needed while implementing enterprise resource planning. Specifically, the ERP projects will fail if the change management is not effective enough.

Challenges in Knowledge Management during ERP Implementation

Change management is the primary concerns of ERP implementation and a well-planned strategy is to be developed to avoid instability and confusion among employees. (Ramburn, Seymour  & Gopaul,  2008).

(Lee & Lee, 2004) Observed that when an organization’s operating environment changes then the management system and operational process also need some modifications. Organizational structure, business processes, and core competencies are the areas that require broad changes in case of an ERP implementation.

(Schroeder, 2008) Conducted a case study on the aspects like organizational readiness for change, ERP success and project management on a company named New spice. This study adopted large organizational change and explored the impact of ORC and project management on the success of a new spice undertaking a major ERP implementation.(Weiner, 2009) Stated that large-scale organizational change is defined as “multiple, simultaneous changes in staffing, workflow, decision-making, communication, and rewards systems” (This is a quotation and should be omitted while calculating the plagiarism %). .In caswe of ERP implementation, such large-scale change is required, or else organizational success is doomed. .This study used plenty of methods(quantitative and qualitative  explored) to identify the co-relation between  OCR and PM in erp. Out of the two hypotheses tested the first one or is needed for ERP success obtained statistical support. However, pm for ERP success is supported moderately.

(Leavitt & Whisler,1958, as cited in, Morton, Hu, 2008) argued that the IT could exercise a huge impact on the organizational structure. Making decisions by involving the swenior management level employees is more recommended rather than involving the middle management. (Donaldson, 2001, as cited in, Morton, hu,2008). There was a lot of structural dimensions, and they may vary in their definitions, identifying it is a critical problem without the context and objectives. The dimensions of the organizational structure are specialization, formalization, differentiation and decentralization. In this paper, ‘‘formalization” has been defined as the standardization of the work process and documentation in an organization. (Donaldson, 2001, as cited in, Morton, hu,2008). ‘‘structural differentiation” refers to the difference in orientation on the one hand and the structural formality of the organizational units on the other (Lawrence & Lorsch, 1967, as cited in, Morton, hu,2008) and ‘‘decentralization” has been defined as the extent to which the decision-making power in a particular company can be dispersed amongst its employees. (Mintzberg, 1980, Morton, hu,2008) in fact, distinction is not always made because of high relation formalization and specialization. (Fry, 1982, as cited in, Morton, hu,2008) to use in technology the formalization and specialization combined into the single dimension of formalization. (Mintzberg, 1980,) in order to analyze the fit between organizational structure and Enterprise Resource Planning system, it is useful to categorize and calssify the dimensions of the structure into the common kinds which are usually found in organizational structure literature. ERP is suitable for the organization that has high formalization, low structural differentiation and low decentralization because of co-related task and possibility of uncertainty in tasks. These qualities possess organizations have a high rate of implementation success and also low resistance to change Morton & Hu (2008).

Change Management and its Role in ERP Implementation

(Christofi, Nunes, Chao Peng, & Lin, 2013) This study mainly focused on reviewing the business process before implementing ERP in small and medium-sized industries. More specifically focused on improving business processes before starting ERP projects. The study also reveals that there were so many inherent problems like insufficient business processes and internal problems in SME’S these issues need to be addressed in the preparation stage itself of ERP. If they neglect those issues, they will have to pay in the long run. So it’s important to address these in order to ensure the success of ERP. The problems and recommendations drawn are different for each company.

AS far as ERP implementation is concerned, change management also includes the human perspective area. Change management largely concerns itself with the human aspect of ERP implementation. The stakeholders as well as the employees need to be kept informed about the status of the ERP project at hand as well as how the same is likely to affect them personally. Besides, a highly comprehensive plan needs to be developed so as to accommodate the change while planning for effective change management. Above all, the communication of change policies to the concerned stakeholders is the most important factor determining the success of the ERP implementation. (Okrent & Vokurka, 2004).

There is no gain stating the fact that the very reason why most of the organizations encounter failure in the process of ERP implementation is that the organizations fail to manage and cope up with the technical as well as cultural change that accompany the implementation of ERP process (Ahmad & Cuenca, 2013). Most of the ERP projects in a company are run by the employees of the organization who must essentially possess comprehensive knowledge about the facts, data sheets and budgets. Prior to the implementation of this system, the employees usually do not possess the technical skills and hence need to be trained once the same is implemented. Since all of a sudden, the organization demands greater employee dedication, the employees often refuse to work for longer hours (Abdinnour & Saeed, 2015). This form of resistance needs to be combated by effectively communicating the scope and employee benefits of the ERP implementation program, or else organizational success can get easily doomed. Apart from the lack of technical competence of the employees in a changed scenario, the absence of effective change and resistance management of the organization, absence of project communication and project sponsorship and lack of employee training often leads to organizational failure. It should also be remembered that with the implementation of ERP procedure at workplace, often some of the work profiles become redundant and employees handling these profiles often start feeling insecure and this is likely to lead to high employee turnover rates (Kanaane et al., 2015). Hence, these employees require periodical counselling by the management authority so that they do not feel insecure leading to low employee retention rate. However, at the same time, ERP implementation itself involves too much expenditure, and yet offering employee training or arranging employee counselling, both in-house and through third-party involvement will imply additional expenditure, that might lead the organization t financial burden (Bintoro et al., 2015).

Organizational Structure and its Impact on ERP Implementation

(Mustafa & Hani, 2017) Conducted a study based on the advantages to users on implementing Enterprise Resource Planning system in Saudi Arabia to estimate the effect on user adaptation. There are different positive effects on Enterprise Resource Planning system user based on the user adaption.

Conclusion

In conclusion, the paper had discussed various challenges related to ERP implementation. The success of the ERP implementation in this case study was influenced by various factors like organisational structure, business processes, knowledge management etc.

Of these factors, each one has its own significance. As a company starts implementing ERP, a research conducted to identify the possible challenges is highly important.

The company can learn from failed or success ERP implementation as found in other organizations. In my opinion, the major areas to be considered are knowledge management and change management.

Reference List:

Abdinnour, S., & Saeed, K. (2015). User perceptions towards an ERP system: Comparing the post-implementation phase to the pre-implementation phase. Journal of Enterprise Information Management, 28(2), 243-259.

Ahmad, M. M., & Cuenca, R. P. (2013). Critical success factors for ERP implementation in SMEs. Robotics and Computer-Integrated Manufacturing, 29(3), 104-111.

Bintoro, B. P. K., Simatupang, T. M., Putro, U. S., & Hermawan, P. (2015). Actors’ interaction in the ERP implementation literature. Business Process Management Journal, 21(2), 222-249.

Christofi, M., Nunes, M., Chao Peng, G., & Lin, A. (2013). Towards ERP success in SMEs through business process review prior to implementation. Journal of Systems and Information Technology, 15(4), 304–323. https://doi.org/10.1108/JSIT-06-2013-0021

Eid, M. I. M., & Abbas, H. I. (2017). User adaptation and ERP benefits: Moderation analysis of user experience with ERP. Kybernetes, 46(3), 530-549. Retrieved from https://ezproxy.eit.ac.nz/login?url=https://search-proquest-com.ezproxy.eit.ac.nz/docview/1881411480?accountid=39646

Fjermestad, J., & Romano Jr, N. C. (2016). Journal of Enterprise Information Management-Vol. 17 No. 6, 2004: E-commerce relationship marketing.

Harris, R. (2017). An Exploratory Study of the Relationship among Organizational Readiness for Change, Project Management, and ERP Success (Doctoral dissertation, Lawrence Technological University).

Humphries, A., & Gibbs, R. (2016). Enterprise Relationship Management: A Paradigm for Alliance Success. Routledge.

Kanaane, R., Akabane, G., Peterossi, H., & Endler, D. C. N. (2015). Organizational Change Management in a Strategic Perspective. American Journal of Management, 15(2), 88.

Karim, J., Somers, T., & Bhattacherjee, A. (2007). The Impact of ERP Implementation on Business Process Outcomes: A Factor-Based Study. Journal of Management Information Systems, 24(1), 101–134. https://doi.org/10.2753/MIS0742-1222240103

Lee, S., & Lee, H. (2004). The importance of change management after ERP implementation: An information capability perspective. ICIS 2004 Proceedings, Paper 76.

Mezgár, I., & Rauschecker, U. (2014). The challenge of networked enterprises for cloud computing interoperability. Computers in Industry, 65(4), 657-674.

Morton, N. A., & Hu, Q. (2008). Implications of the fit between organizational structure and ERP: A structural contingency theory perspective. International Journal of Information Management, 28(5), 391–402. https://doi.org/10.1016/j.ijinfomgt.2008.01.008.

Morton, N. A., & Hu, Q. (2008). Implications of the fit between organizational structure and ERP: A structural contingency theory perspective. International Journal of Information Management, 28(5), 391–402. https://doi.org/10.1016/j.ijinfomgt.2008.01.008

Musa, U., & Usman, Z. (2012). K m s erp s. International Journal, 3(1), 21–28.

Mustafa Ismail  Mustafa Eid,  Hani I. Abbas , (2017) “User adaptation and ERP benefits: moderation analysis of user experience with ERP”, Kybernetes, Vol. 46 Issue: 3, pp.530-549, https://doi.org/10.1108/K-08-2015-0212

Ramburn, A., Seymour, L., & Gopaul, A. (2008). Learning From a Failed ERP implementation?: The Case of a Large South African Organization. European Conference on Information Management & Evaluation, 215–223.

Schroeder, K. E. (2008). Lawrence Technological University. Business, 162.

Thannhuber, M. J., Bruntsch, A., & Tseng, M. M. (2017). Knowledge management: managing organizational intelligence and knowledge in autopoietic process management systems–ten years into industrial application. Procedia CIRP, 63, 384-389.

Tseng, S. M. (2014). The impact of knowledge management capabilities and supplier relationship management on corporate performance. International Journal of Production Economics, 154, 39-47.

Weiner, B. J. (2009). A theory of organizational readiness for change. Implementation Science, 4. doi:10.1186/1748-5908-4-67

Zhang, D., Zhang, D., Li, S., Li, S., Zheng, D., & Zheng, D. (2017). Knowledge search and open innovation performance in an emerging market: Moderating effects of government-enterprise relationship and market focus. Management Decision, 55(4), 634-647.