Project Report

ERP: An Overview and Challenges in

Implementation

Submitted by:

Hansika Kalluri MBA2019-045

Nitin Mathuria MBA2019-091
Rohit Badnaware MBA2019-112
Soumali Ghosh MBA2019-145
Sruthi V S MBA2019-148
Supriya Bharti MBA2019-154
Table of Contents

Introduction ............................................................................................................................. 2
The Evolution of ERP .............................................................................................................. 2
Benefits of ERP ....................................................................................................................... 4
Implementation of ERP ........................................................................................................... 5
Challenges in ERP Implementation ....................................................................................... 7
Overcoming Challenges of ERP Implementation ................................................................. 8

REFERENCES ......................................................................................................................... 9

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ERP: An overview and Challenges in Implementation
1. Introduction

Enterprise resource planning software is becoming a necessity for firms to implement and be
at par with competitors, not if ahead at least. ERP implementation transforms a business into
digital ready business. ERP is a software which can be utilised by each type of industry and
business. ERP is a best solution irrespective of form size, be it a small organization or large
enterprises, to manage operations and efficiently achieving organisational goal. Daily activities
involving accounting, inventory management, production planning, logistics etc. are efficiently
managed by using enterprise resource planning software. ERP system are designed as per
defined data structures and authorized users provide access to data. It has central data base,
consisting all of the data and distributes same as per the function and process. This centralised
database structure promotes trust in data accuracy among management and other stakeholders.

Source: Enterprise Resource Planning Implementation Failure: A Case Study from Jordan, Journal of Business
Administration and Management Sciences Research Vol. 3(5), pp. 079-086, May, 2014

There are several vendors available in market coming up with new modules as per requirements
and can be integrated with ERP. These modules enable ERP to deliver the industrial
requirements. Organisations now a days avoid separate solutions for different functionalities.
ERP software solutions are growing industry and business specific nowadays, with varying
functionalities and features from industry to industry. Businesses just need to identify their
needs and specification and the best fit solution can be integrated with ERP without
compromising onto business core necessities perquisites, and business functionality.

Though ERP systems are intended to deliver operational efficiency but systems generally fail
to deliver the purpose that were the influencer for installation. One of the reasons for failure
account to company’s reluctance to discard old working processes, which are not compatible
with implemented ERP solution.

The purpose of this report is to highlight the challenges faced by organisations in implementing
ERP solution and the factors which could ultimately lead to a failure of ERP implementation.

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ERP: An overview and Challenges in Implementation
2. The Evolution of ERP

ERP system is one of the important parts of large business and current move by vendors is to
repackage them to small and medium enterprises (SMEs). To understand history and evolution
of ERP system and current architectures we have go through many consequences by migration.
To penetrate in new market, we should know the impact advantage and disadvantage of ERP
system. The management of the organization needs efficient information system to improve
competitiveness by cost reduction.
From 1980 and beginning of 1990 new software system we know it as enterprise resource
planning (ERP) have introduce in market whose main target is large and complex business
organization. The evolution of ERP system leads to the spectacular development of computer
hardware and software system

Source: The Evolution of ERP Systems: A Historical Perspective

By automating inventory control system and using inventory control packaging (IC) in 1960
organization used to design develop and implement centralized computing system. This are
legacy system based on programming language such as COBOL, ALGOL AND FORTRAN.
Then after that Material requirement planning (MRP) developed in 1970 involved mainly
planning product and part requirement according to master production schedule. By get through
this new software system known as manufacturing resources planning (MRP II) which mainly
focus on optimizing manufacturing process by get together the material with production
requirement. MRP II have areas such as shop floor and distribution management, project
management, finance, human resource and engineering
Technological foundations of MRP and MRP II, ERP systems amalgamate business processes
including, inventory management, , human resource management, project management service
and maintenance, and transportation, providing accessibility, visibility and consistency across
the enterprise ,manufacturing, distribution, accounting, financial.
During 1990 ERP vendors introduce more functional modules “add-on” to core model result
in “extended ERPs”. Advance planning and scheduling (APS), e-business solution such as
customer relationship management (CRM) and supply chain management (SCM).

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ERP: An overview and Challenges in Implementation
Extended ERP continuing ERP trends include capabilities for cloud, mobile, analytics. In 21st
century ERP II like system evolved to support inter organization business process across the
supply chain. ERPII is strategy pooled with operational and functional process internally and
further on the enterprises. Multi-enterprise business model like value customer centric network,
collaboration network that coordinate all player in supply chain, are becoming well liked as we
enter in 21st century. These new business model more focuses on external integration. This
result in movement away from Client-Server System to Internet Based Architecture.
Such system has ability to operate an entire organization quickly, accurately and consistency.
It quickly delivers information to people who need it. Which employees can use certain pieces
of information is defined by establishing security roles and rating that is manages by ERP II.
By making the solution web based it help employees to address the issue of multiple location,
so employees can excess the system worldwide.

3. Benefits of ERP

Considering the complexity and costs of implementation of ERP, choosing to have an ERP
system is a big decision for any organization. However, its benefits definitely outweigh its
costs.
A few of its benefits can be summarized as below:

1. Integrated Information-ERP helps one to integrate information across separate

databases into a single central hub. This improves efficiency and saves time. It also
improves accuracy and prevents inconsistent data. This helps in the prevention of errors
in not only data entries but also decisions which are made on the basis of this data.

2. Improved Process Efficiency-ERP improves overall efficiency of the organisation by

cutting down on repetitive processes and manual entry of data. This helps the
employees and managers focus on using the data to achieve organizational objectives
rather than focussing on collection and entry of data.

3. Accurate Forecasting-ERP ensures accuracy of data which in turn ensures accuracy of

forecasts. This helps in cutting down the costs of inaccurate forecasts. Eg: A good
example is of how the bullwhip effect in supply chain management has been avoided
in a lot of manufacturing-based supply chains due to using ERP systems.

4. Competitive Advantage-Considering that firms in all industries have adopted and

implemented ERP, it is difficult for an organization to stay ahead of its competition
without having an ERP system. Thus, it is essential for all organizations to implement
ERP if they want to stay ahead of the game.

5. Scalable Resource-An existing ERP system can be scaled up to add new users as an
organization grows. There is no requirement to get a new ERP system to facilitate
growth as it grows with the organisation.

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ERP: An overview and Challenges in Implementation
 6. Mobility-ERP gives in-office as well as road sales representatives the same features
as well as opportunities, thereby providing consistency of service. It does away with
constraints that could have troubled the users otherwise, by facilitating mobility.

7. Department Collaboration-ERP allows sharing of information across departments, thus

allowing them to work in a collaborative manner and achieve organisational goals
rather than focussing only on individual departmental goals.

8. Cost Savings-ERP helps in saving costs by cutting down on administrative and

operational expenses that are not needed and focussing on more crucial processes of
the organization. It ensures return on investment for the investment made by the
organisation.

9. Streamlined Processes-ERP helps users navigate through complex processes, avoid

inconsistency and redundancy of data, thereby streamlining into a single path which
users can use. It avoids loss in efficiency due to complexity.

10. Flexible Systems-ERP systems are flexible and unique to the needs of a business. They
are not standardized systems which have the same features for users of different
industries and firms. There can also be flexibility within a firm as new features can be
added in the form of modules as the organization grows or diversifies into a different
line of business.

11. Data Reliability-ERP systems ensure accuracy of data by preventing data inconsistency
and data redundancy. Data pertaining to one department can be readily accessed by
other departments without requirement for verification of its accuracy. ERP also
ensures data security by building additional firewalls and built-in protection resources.

12. Customized Reporting-ERP allows customized reporting where complex data

requirements can be entered more accurately and easily as opposed to when there is an
absence of ERP. All users can prepare reports even in the absence of support from IT.

13. Increasing Productivity-ERP systems help in increasing productivity by removing

redundant processes such as manual entry of data. By increasing efficiency and
improving accuracy, it helps an organization increase its overall productivity and focus
on more important projects.

4. Implementation of ERP

Today ERP has come a long way and established itself well in and become an integral part of
the industry. It has, undoubtedly, helped in boosting the business process and increasing the
efficiency. It plays a very significant role in integrating different functions of an organization.

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ERP: An overview and Challenges in Implementation
The performance of an ERP depends a lot upon how the ERP is implemented. Its success
depends a lot upon its execution or implementation.

Here are the steps for a successful implementation of ERP:

1. Study organizational needs: This is the first step in implementation of ERP. It involves
identifying the problems or needs for which ERP will be implemented. The main
question is ‘what should be ERP implemented for’. The organization must define the
problem/s it is aiming to solve or change through ERP. It must set realistic goals it
wants to achieve.

2. Assemble project team: The composition of team involved in implementation of ERP

plays a significant role. The team must comprise of members who are capable of
handling implementation process as it might involve a complete change in the
information system of an organization. So along with intricacies, it must be very clear
with the strategies it is going to adopt.

3. Selecting an ERP: There are many ERP software available solutions such as custom
build or custom based industry specific or customized cloud-based solution. The
organization must gather detailed information about all the ERPs then decide which
one to choose. Not all the ERP software are suitable for the organization, so such a
vendor should be chosen who would assist in this transformation in order to achieve the
objectives.

4. Installation of ERP: Once the right ERP is selected, next step is to install it in the
organization’s system. It is the actual process of replacing or modifying the existing
system with this new ERP system.

5. Data migration: Once the right ERP system is decided, the data is entered into
spreadsheet. The spreadsheet is then entered into a database, while taking care of no
duplication of data. All important information must be transferred in this step such that
it can be retrieved from system whenever needed.

6. Staff training and education: Although it is not a very core part of ERP implementation,
training is required for its proper usage. Employees should be given knowledge about
it’s working as they will be the one using it later.

7. Deployment: This is the final stage and go-live stage of implementation process. This
is the step-in which ERP is put into use. Feedback of its functioning and uses follows
this step.

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ERP: An overview and Challenges in Implementation
5. Challenges in ERP Implementation

1. Training: The end users need to be trained on the usage of the ERP. Most of the times,
the managers fail to understand the needs of each employee and fail to give proper
training. The users need to be trained on the basics of ERP, overview of the systems
and how it works and the processes. Since ERP implementation is more of a people
project, it is necessary to do proper training for the end users.

2. Customization: Customization is altering the system according to the needs of the

organization. But that can be a challenge sometimes because ERP implementation
happens over a period of 3-10 years. So technical changes keep happening and the
system module needs to be updated frequently and each of the module needs to be
tested for any bugs and if there are any bugs, it needs to be changed again. This
involves a lot of time and cost. Hence, customization can be a challenge.

3. Over reliance of the consultants: Most ERP projects involve consultants for the
technical expertise and the resources they bring in. But there can be instances when
there is over reliance on the consultants for the knowledge transfer to the end user.

4. Poor Go live Support: Go Live support is the final stage in any ERP implementation.
It is the transition stage from testing to user stage. If the company is using Big Bang
Implementation, there is huge risk involved. Data conversion and untrained users can
make the implementation a failure. If the company is using Parallel implementation,
there is huge cost, time and efforts involved. It results in a stage where any of the
system are not given proper attention. Hence, Poor Go live support is a challenge.

5. Ambiguity in the need and usage of ERP: Most of the times, when the organization is
in the planning stage of the ERP implementation, they fail to communicate the usage
and the need to implement ERP in the organization to the end users. As a result, the
end users don’t understand why ERP is being used and how helpful it can be which
makes them uninterested in acquiring the knowledge.

6. Lack of top management commitment and communication: When ERP is being

implemented in the organization, the employees fear about losing their jobs. So, the
top management needs to assure the employees about their jobs, clear any doubts and
explain why the ERP system is a necessity for the organization. Also, there is a constant
conflict between time and budget for training. So, the end users end up not getting
properly trained.

7. Inadequate Resources: The budget for the ERP implementation are exceeded most of
the times because it goes on for a long period of time and as a result, most of the times
the resources are scarce. This happens because there is improper allocation of
resources.

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ERP: An overview and Challenges in Implementation
 8. Heavy cost: ERP Implementation happens over a period of 3-10 years. It involves huge
cost and budget. Also, ERP licenses from reputed vendors like SAP, Microsoft is very
expensive.

6. Overcoming Challenges of ERP Implementation

1. Intensive Planning: It is necessary for every organization to do detailed planning in the

planning stage to meet the company’s individual needs. A team can be formed to
supervise the selection, implementation processes and also help employees in
preparing them for the solution-based software.

2. Commitment and transparency from the top management: The top management has
to actively collaborate with the other employees and communicate the needs of an
ERP and how beneficial it can for the organization. The top management should make
sure that there is no communication gap between the employees. The CEO or any
other top manager can sponsor the ERP project in order to demonstrate the
commitment.

3. Multiple testing: It is really important for the team to constantly test the software and
check if there are any bugs. A sufficient amount of testing needs to be carried out in
ERP implementation to ensure it will be performed when it is live.

4. Proper Budgeting: When the budgeting for the ERP implementation is done, it is
necessary to take into the account all the financial costs, the hidden costs and ERP
project team members’ time.

5. Reduce the dependability on Consultants: Too much reliance on the consultants make
the team redundant. Hence it is necessary for the companies to have control over the
key business decisions, the major processes, selection methodology and have a clear
plan to transfer the knowledge from the consultants to the internal employees
effectively.

6. Proper user training: Since ERP project is more of a people project, the real hard part
is in the training of the employees. Even if the software is perfect without any bugs
and if people are not well versed with it, it is still a failure. Hence the employees must
be educated to use the software as a tool to make their jobs easier and beneficial. The
project team should make sure the employees understand the basics of the ERP and
how it works. If user training is given properly, the Go live support will be successful
as well.

7. Understanding the needs of the company: To overcome the challenges in

customization, it is necessary for the company to understand its needs and make
changes accordingly. Because over customization adds time and costs.

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ERP: An overview and Challenges in Implementation
REFERENCES

Randa Mazzawi, Enterprise Resource Planning Implementation Failure: A Case Study from
Jordan, Journal of Business Administration and Management Sciences Research Vol. 3(5), pp.
079-086, May, 2014, http://www.apexjournal.org

Samwel Matende and Patrick Ogao, Enterprise Resource Planning (ERP) System
Implementation: A case for User participation, CENTERIS 2013 - Conference on Enterprise
Information Systems / ProjMAN 2013 - International Conference on Project Management /
HCIST 2013 - International Conference on Health and Social Care Information Systems and
Technologies

Mohammad A. Rashid, Liaquat Hossain, Jon David Patrick, The Evolution of ERP Systems:
A Historical Perspective, Copyright © 2002, Idea Group Publishing.

C.K.M. Lee, Linda Zhang, P.X. Lee and K.O. Au, Using ERP Systems to Transform Business
Processes: A Case Study at a Precession Engineering Company, International Journal of
Engineering Business Management, Vol. 1, No. 1 (2009)

Li-Man Liao, Ching-Jen Huang, Xiang-Yu Lin, Applying Project Management Perspective for
ERP Implementation: A Case Study, Proceedings of Engineering and Technology Innovation,
vol. 8, 2018

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ERP: An overview and Challenges in Implementation