Is ERP an Evil Business? paper by Jayabalaji Sathiyamoorthi

Is ERP an Evil Business? What causes ERP, a business promoter to an administrative evil

Production Management Systems – Term Paper Summer 2008

Submitted by

Turdpoom Pookusmas 5019656 Jayabalaji Sathiyamoorthi 5019665

SS 2008, Masters in Technical Management

Submitted to

Prof. Dr. Agnes Pechmann

04 May 2008

Production Management Systems

Is ERP an evil business..? | 2

Acknowledgement

We are indebted to our professor Dr. Agnes Pechmann for providing such a topic on

ERP. It is certainly an opportunity to study and understand the underlying concepts of

ERP over PPS. It was such a wonderful learning experience for each one of us, in the

course of writing this paper. Besides that it was a good opportunity to both of us to

improve inter-cultural skills.

We thank our beloved parents who have motivated in terms of money and support that

they have rendered in sending us to Germany for our higher education. A special

thanks to the FH Emden library staffs for fetching the necessary journals on time. And

we also we thank our friends who assisted in reviewing and brainstorming our concepts

and ideas.

Jayabalaji and Turdpoom


Is ERP an evil business..? | Acknowledgement 3

Table of Contents Acknowledgement ........................................................................................................................................ 2

Abstract ........................................................................................................................................................ 6

1. Introduction .......................................................................................................................................... 7

1.1. Definition of ERP ........................................................................................................................... 7

1.2. History of ERP ................................................................................................................................ 7

2. ERP Systems .......................................................................................................................................... 8

2.1. ERP implementation - Incremental Approach .............................................................................. 9

2.2. The Components of an ERP System ............................................................................................ 10

3. Critical Success factors of ERP in organizations .................................................................................. 10

3.1. Significant success factors of ERP ............................................................................................... 11

3.2. Reduced operating costs ............................................................................................................. 12

3.3. Easy Day-to-Day Management ................................................................................................... 12

3.4. Strategic Planning Support.......................................................................................................... 12

3.5. ERP implementation strategy ..................................................................................................... 12

3.6. Common ERP Challenges: Why Projects Fail .............................................................................. 12

4. ERP Life Cycle Implementation Process .............................................................................................. 13

4.1. Pre evaluation Screening ............................................................................................................ 13

4.2. Evaluation Package ..................................................................................................................... 13

4.3. Project Planning .......................................................................................................................... 13

4.4. GAP analysis ................................................................................................................................ 13

4.5. Reengineering ............................................................................................................................. 14

4.6. Team training .............................................................................................................................. 14

4.7. Testing ......................................................................................................................................... 14

4.8. Post implementation .................................................................................................................. 14

5. Impact from ERP implementation ...................................................................................................... 16

5.1. ERP’S impact on stakeholders ..................................................................................................... 16

5.2. Impact on Implementation Process ............................................................................................ 16

5.3. Impact on Departments .............................................................................................................. 17

5.4. Impact on the organization as a whole ....................................................................................... 17

5.5. Impact on Employment ............................................................................................................... 17

5.6. Impact on the nature of Job and information access ................................................................. 17



5.7. Impact on the individual employees ........................................................................................... 17

6. ERP issues over PPS ............................................................................................................................. 18

6.1. Project team formation............................................................................................................... 18

6.2. Ease of change ............................................................................................................................ 18

6.3. Measurement of success ............................................................................................................ 18

6.4. Project phase problems .............................................................................................................. 18

6.5. Software modifications ............................................................................................................... 19

6.6. Changes in Employees Attitude .................................................................................................. 19

6.7. System Integration issues ........................................................................................................... 19

6.8. Expensive – Implementation and Support .................................................................................. 19

6.9. Problems with product and implementation consultants .......................................................... 20

6.10. Cutting end-user training ........................................................................................................ 20

7. Measures to avoid administrative Issues ............................................................................................ 20

7.1. Improved Training – Hierarchical Method .................................................................................. 20

7.2. Building maintenance & support team ....................................................................................... 21

7.3. Use of single vendor package ..................................................................................................... 21

7.4. Access to accurate information .................................................................................................. 21

7.5. Simplification and standardization ............................................................................................. 21

7.6. Knowledge transfer from Consultants ........................................................................................ 21

7.7. Top management involvement. .................................................................................................. 22

7.8. Defined metrics ........................................................................................................................... 22

8. Change Management and ERP Implementation ................................................................................. 22

8.1. What is Change management? ................................................................................................... 22

8.2. Change Management Aspects .................................................................................................... 23

8.3. Component of Change Management ......................................................................................... 23

9. Case Study ........................................................................................................................................... 25

10. Discussion ........................................................................................................................................ 26

11. Summary and conclusion ................................................................................................................ 27

References .................................................................................................................................................. 28

Appendix ..................................................................................................................................................... 29



Table of Figures

Figure 1: ERP Vendors (Source: AMR Research, 2005) ..................................................................... 8

Figure 2: ASAP Methodology (Copyright, SAP AG.) .......................................................................... 15

Figure 3: Key ASAP Deliverables (Copyright, SAP AG.) ................................................................... 16

Segregation of Work

SNO NAME SECTIONS HANDLED

1 Turdpoom 1, 2,3,4,5,8,10,11

2 Jayabalaji 5, 6, 7, 9, 10, 11


Is ERP an evil business..? | Abstract 6

Abstract

Enterprise Resource Planning systems (ERPs) integrate (or attempt to integrate) all

data and processes of an organization into a unified system. A typical ERP system will

use multiple components of computer software and hardware to achieve the integration.

A key ingredient of most ERP systems is the use of a unified database to store data for

the various system modules

In this paper we try to analyze whether ERP systems leads to administrative evil1 or

acts as a promoter for the business operation.

In the first phase, we study the implementation concepts of the ERP and the importance

of having an ERP system in the production planning. Then we discuss about the

success factors of the ERP system in PPC.

Later we discuss the various scenarios of ERP implementation, which causes problems

for individual and organization called as “Administrative Evil”. In which it is considered

that individual and moral responsibility gets turmoil by technical responsibility.

We propose ideas on how to avoid so called evils and also provide more information on

change management and effective ERP implementation. Most of the companies

adapted similar strategies and were very successful in terms of the return on investment

and streamlining production planning. We support this with the help of a case study.

Ultimately, the influence of the people and practices makes the success of the ERP

tools, unplanned activities causes the evil which make employees illiterate of their work

using ERP tools. So with the proper training, simplifying and standardizing the ERP tool

will have a long term beneficial influence on any organization.

Keywords: ERP, Administrative evil, Change management, success factors, ERP

lifecycles

1 Enterprise resource planning systems: A physical manifestation of administrative evil, Jesse F.Dillard, Linda

Ruchala, Kristi Yuthas, International journal of accounting information systems, Volume 6 issue 2, 2005


Is ERP an evil business..? | Introduction 7

1. Introduction

“More than 85 percent of respondents agreed or strongly agreed that their ERP systems

were essential to the core of their businesses and that they could not live without

them2.”

After reviewing the paper3, we would like to discuss on whether ERP is an

administrative evil or a business facilitator. We provide the reasons for what makes ERP

a business promoter to an administrative evil. As a frontage we present the history,

theory and knowledge of ERP implementation.

1.1. Definition of ERP

ERP systems are commercial software packages that enable the integration of

transactions oriented data and business processes throughout an organization.

The Enterprise Resource Planning system is an enterprise information system designed

to integrate and optimize the business processes and transactions in a corporation. The

ERP is an industry-driven concepts and systems, and is universally accepted by the

industry as a practical solution to achieve integrated enterprise information systems4.

An ERP system can include software for manufacturing, capturing orders, accounts

receivable and payable, general ledger, purchasing, warehousing, transportation and

human resources.

The major ERP vendors are SAP, PeopleSoft, Oracle, Baan and J.D. Edwards. Lawson

Software specializes in back-end processing that integrates with another vendor's

manufacturing system. (See Figure 1)

1.2. History of ERP

The history of ERP dates back to the 1960's, the main focus in those days was towards

inventory control. A major part of the software's developed were based on traditional

2 Thomas W, Why ERP Systems Are More Important Than Ever, 2008

3 ERP: A physical manifestation of administrative evil, Volume 6 issue 2, 2005

4 Young B. Moon , Management and Enterprise Development, Vol. 4, No. 3, 2007


Is ERP an evil business..? | ERP Systems 8

inventory concepts. The next decade witnessed a shift of focus towards Material

Requirement Planning (MRP). The purpose of MRP's was to translate the schedule for

individual units. The 1980's brought the concept of MRP-II (Manufacturing Resource

Planning). This system helped in optimizing the entire production process. MRP-II was

later extended to include areas such as Finance, HR, Engineering, Project Management

etc. This gave birth to ERP (Enterprise Resource Planning). Its job was to integrate core

business areas.

In the past, ERP software was not used to its full potential. Today, the business model

of an organization (domestic or global) is based on ERP. It is used as a management

tool and gives organizations a great competitive advantage.

Figure 1: ERP Vendors (Source: AMR Research, 2005)

2. ERP Systems


Is ERP an evil business..? | ERP Systems 9

ERP is an acronym meaning Enterprise Resource Planning. It is a software

package/solution most often used within the manufacturing environment. ERP is a

business tool that management uses to operate the business day-in and day-out. It is

comprised of several modules such as financial module, distribution module, HR

module or a production module. Each of these modules share information that is stored

within the database structures on which the ERP system was programmed.

ERP helps to break down barriers between departments within a company. For

example, many times the sales department may be selling 25% more product than the

production department can produce. By utilizing an ERP system, the sales department,

production department, operations management, shipping, financial department,

purchasing department all have access to the up-to-date information that is needed to

operate smoothly within any manufacturing environment. Additionally this facilitates

supply chain management.

ERP is more of a business methodology than a piece of application software, although it

does incorporate several software applications, brought together under a single,

integrated framework.

2.1. ERP implementation - Incremental Approach

An ERP implementation can cost a huge sum of money to create, and may take several

years to complete. An ERP system likely represents a company's largest IT investment,

so some companies prefer to implement ERP in a more incremental fashion rather than

all at once. Some ERP vendors provide modular software units together with a unified

interface to allow for this gradual approach.

Once implemented properly, the ERP system brings tremendous advantages. Because

all systems are joined together, all departments can, more easily share information. The

workflow that takes place between departments can become much more automated,

and ultimately, customers are better served because the individual using the customer-

facing applications will have access to every bit of information regarding each relevant

process.


Is ERP an evil business..? | Critical Success factors of ERP in organizations 10

2.2. The Components of an ERP System

The components of an ERP system are the common components of a Management

Information System (MIS)5.

2.2.1. ERP Software

Module based ERP software is the core of an ERP system. Each software

module automates business activities of a functional area within an organization.

Common ERP software modules include product planning, parts purchasing,

inventory control, product distribution, order tracking, finance, and accounting

and human resources aspects of an organization.

2.2.2. Business Processes

Business processes within an organization falls into three levels - strategic

planning, management control and operational control. ERP has been promoted

as solutions for supporting or streamlining business processes at all levels.

2.2.3. ERP Users

The users of ERP systems are employees of the organization at all levels,

from workers, supervisors, and middle level managers to executives.

2.2.4. Hardware and Operating Systems

Many large ERP systems are UNIX based. Windows NT and Linux are other

popular operating systems to run ERP software. Legacy ERP systems may

use other operating systems as well.

3. Critical Success factors of ERP in organizations

“Even though much of ERP success has been in facilitating operational coordination

across functional departments, successful implementation of ERP systems benefit

strategic planning and management control one way or other6 .“

5 Dr. Bruce Z, ABCs of ERP,2005

6 Anthony R A, 2005



3.1. Significant success factors of ERP

There is a numerous business benefits of implementing a new age ERP application in

the right environment and the most prominent of these are listed below

1. Improved Organizational efficiency due to Process integration and standardizing

across various departments and division of an Organization

2. Capability for external process Integration through ERP integration framework,

with the key business entities like customers, suppliers, Partners, Banks etc. to

manage the business operation in a controlled, automated, online and real time

mode

3. Leverage the latest technology to carry on organizational operations in more

efficient way.

4. Minimizing redundant data – by providing universal and single version of truth

around all masters and transactional data.

5. Visibility of real time information across the entire breadth of processes.

Information accessibility for right decision offered by an ERP solution is

perceived as big advantage by the management of any organization.

6. Increase in Employee productivity (Over a period of time higher employee

satisfactions have been achieved with ERP solution)and reduction in head count/

possibility of redeployment of people

7. Well traceable and faster processes like Order to Cash, Procure to Pay,

Shipping, Receiving, use of statistics tool for reliable forecasting, Improved and

informed Scheduling, improved inventory turnaround time, reduced process cycle

times etc. all leads to improved organizational efficiency.

8. Reduction in operation costs such as Inventory carrying cost, Analysis cost,

Management Reporting cost, lost opportunity, cost of customer dissatisfaction,

etc.

9. Adaptability to latest manufacturing model and ever driven market needs.

10. Highly Improved Control and Audit capabilities for compliance with governance

rules



3.2. Reduced operating costs

ERP software attempts to integrate business processes across departments onto a

single enterprise-wide information system. The immediate benefit from implementing

ERP systems we can expect is reduced operating costs, such as lower inventory control

cost, lower production costs, lower marketing costs and lower help desk support costs.

3.3. Easy Day-to-Day Management

The implementations of ERP systems nurture the establishment of backbone data

warehouses. ERP systems offer better accessibility to data so that management can

have up-to-the-minute access to information for decision making and managerial

control. ERP software helps track actual costs of activities and perform activity based

costing.

3.4. Strategic Planning Support

Strategic Planning is a deliberate set of steps that assess needs and resources; define

a target audience and a set of goals and objectives; plan and design coordinated

strategies with evidence of success; logically connect these strategies to needs, assets,

and desired outcomes; and measure and evaluate the process and outcomes.

3.5. ERP implementation strategy

An ERP implementation strategy is necessary using which millions of companies

around the world used the process to much success. This strategy is a way for the

company to clearly identify the areas where they need help, and find solutions to meet

those needs. Creating an ERP implementation strategy should be one of the first steps.

Identifying problem areas is always not an easy job. Consider a company with over

10,000 employees, who work in accounting, marketing, manufacturing, and a number of

other departments. In such a case it is important that the company poll their employees,

or find some other way to make sure that all the problem areas are identified.

3.6. Common ERP Challenges: Why Projects Fail

The following are few of the common ERP challenges involved in any project. Failing to

handle any one of the below factors might lead the project to fail.

Unclear business rationale for implementing ERP


Is ERP an evil business..? | ERP Life Cycle Implementation Process 13

Failure to consider key business requirements during vendor selection process

Too little focus on optimizing business processes

Poor project management and project cost controls

Lack of focus on organizational change management, communications, and

training

Failure to measure performance / ROI and to conduct post-implementation audit

4. ERP Life Cycle Implementation Process

ERP lifecycle highlights the different stages involved in the implementation of ERP.

They are as follows.

4.1. Pre evaluation Screening

Once the company has decided to go for the ERP system, the search for the package

must start as there are hundreds of packages. This stage will be useful in eliminating

those packages that are not suitable for the business process.

4.2. Evaluation Package

This stage is one among the important phases of the ERP implementation, as the

package that one selects will decide the success or failure of the project. As

implementation of an ERP involves huge investments and it is not easy to switch

between different packages.

4.3. Project Planning

This phase deals with the implementation process. It is in this phase that the details on

how to go about the implementation are decided. The plan is developed, roles are

identified and responsibilities are assigned. It will also decide on the project milestones.

4.4. GAP analysis

This is considered the most crucial phase for the success of ERP implementation. This

is the process through which the companies create a complete model of where they are

now, and in which direction will they opt in the future. It has been estimated that even

the best packages will only meet 80% of the company‟s requirements. The remaining

20% presents problematic issues for the company‟s reengineering.



4.5. Reengineering

It is in this phase that human factors are taken into consideration. While every

implementation is going to involve a significant change in number of employees and

their job responsibilities, as the process becomes more automated and efficient, it is

best to treat ERP as an investment as well as cost cutting measure.

4.6. Team training

Training is also an important phase in the implementation, which takes place along with

the process of implementation. This is the phase where the company trains its

employees to implement and run the system. Thus, it is vital for the company to choose

the right employee who has the right attitude- people who are willing to change, learn

new things and are not afraid of technology and a good functional knowledge.

4.7. Testing

This is the phase where one tries to break the system. One has reached a point where

the company is testing the real case scenarios. The system is configured and now you

must come up with extreme test cases like system overloads, multiple users logging on

at the same time, users entering invalid data, hackers trying to access restricted areas

and so on. This phase is performed to find the weak link so that it can be rectified before

its implementation.

4.8. Post implementation

Once the implementation is over, the vendor and the hired consultants will go. To reap

the fruit of the implementation it is very important that the system has wide acceptance.

There should be enough employees who are trained to handle problems those crops up

time to time. The system must be updated with the change in technology. The post

implementation will need a different set of roles and skills than those with less

integrated kind of systems.

We would like to present one methodology which is very well-known that is ASAP

methodology



Figure 2: ASAP Methodology (Copyright, SAP AG.)

ASAP is a simply a tool designed to speed up the implementation process. However,

there are always other factors which could affect the speed of an implementation

Phase 1- Project preparation: Initial planning and preparation.

Phase 2 - Business Blueprint: documentation of the business process requirements of

the company.

Phase 3 - Realization: implement all business and process requirements based upon

the business blueprint.

Phase 4 - Final Preparation: complete testing, user training, system management and

cut-over activities.

Phase 5 - Go-Live & Support: transition from implementation production.


Is ERP an evil business..? | Impact from ERP implementation 16

Figure 3: Key ASAP Deliverables (Copyright, SAP AG.)

5. Impact from ERP implementation The positive and negative impacts on the ERP implementations are discussed as

follows.

5.1. ERP’S impact on stakeholders

Impact of ERP on the role of managers or organization or stakeholders can be best

studied and understood if the subject is analyzed right from the implementation stage.

Nevertheless it has a strong influence on the business process itself as soon as it is

gripped and decides major issues for employees, customers and other stake holders.

5.2. Impact on Implementation Process

ERP has a significant impact right from the time it is conceived in the organization.

Firstly it facilitates the members in the organization to arrive at a consensus. It paves

way for restructuring in organizations sticking to traditional and conventional values.

ERP is an eye-opener for such organizations because they get to realize the tinge and

factors involved in modifying the business process.


Is ERP an evil business..? | Impact from ERP implementation 17

5.3. Impact on Departments

This helps to bring about interactions and tends to nurture healthy relationships among

departments in organizations which would have otherwise remained isolated. The

problems of co-ordinations faced by each department are made known to the company.

They can arrive at a better means of doing things on such group discussions.

5.4. Impact on the organization as a whole

The ERP consultant will able to identify the flaws and guide the organization in devising

better procedures. It helps organizations to adapt and adjust to change right from the

implementation process.

5.5. Impact on Employment

ERP creates job opportunities for many individuals, whom the organizations hire at the

implementation process. They even realize the need to retain them on permanent rolls

once ERP goes full-fledged in the organization. The good news is that it gives another

room of employment for the existing IT professionals in the country. They were able to

update themselves on ERP modules and continue serving the organization in terms of

enhancing user interface with ERP applications.

5.6. Impact on the nature of Job and information access

ERP has directly and indirectly helped to redefine functions in the organization.

Anything that people wanted to know about the company was available by a click of the

mouse. There was no more relying on the department of internal communications even

for single information. Outsiders don't have the hassle of obtaining permission and

following stringent procedures to access information.

5.7. Impact on the individual employees

ERP provided more freedom, authority and responsibility to the individual employees

which were mutually beneficial to the management. Each employee became more

aware of his/her function while ERP has given the confidence to execute it individually

and successfully Above all it resulted in transparency and accountability. This has

resulted in easing the process of handling and answering customer queries and

undertaking clientele orders.


Is ERP an evil business..? | ERP issues over PPS 18

6. ERP issues over PPS

In the production planning systems, we have certain demerits which were complimented

by ERP systems. The physical manifestation of the technology is termed to as

“Administrative Evil7 “. They are as follows,

6.1. Project team formation

In ability to acquire/retain employees and external advisers with requisite expertise in

ERP, project management and supporting technologies. Because IT products and

services Žfirms are growing rapidly, they find it difficult to provide continuity in personnel

assigned to adopter projects and adopters strongly value continuity in personnel.

6.2. Ease of change

If the project encounters major changes immediately after the start of the project, then

decision makers might terminate it. So such major changes in project scope are not

feasible to embed. A modification that doesn‟t work is not easy to change.

6.3. Measurement of success

There is no specific entity to measure success. More often objectives, expectations and

perceptions are set as the standard for defining and measuring success. In the first

place, it is hard to normalize them across individuals and organizations, thus making

comparisons difficult.

The success of the ERP system is defined only when,

(1) Users have learned how to use the system well,

(2) Managers have used the data collected by the system in order to make business

decisions and plan improvements in business processes, and

(3) Ease of incorporating additional changes in business processes, practices, software

configuration, etc.

6.4. Project phase problems

The most challenging project phase problems reported so far involved software

modifications, system integration, product and implementation consultants and turnover

7 Administrative behavior depriving innocent people of their humanity like dignity, justice, rights, safety, health

etc.,


Is ERP an evil business..? | ERP issues over PPS 19

of project personnel. There is no ready to use ERP tool to cater a business. It has to be

customized to serve the business objectives and needs.

6.5. Software modifications

Almost every analyst of the ERP strongly advises companies to avoid modifying the

software. Companies are advised to live with existing ERP functionality and to change

their procedures to adapt to it. ERP packages are selected on a centralized basis in

order to fit the majority of corporate needs

6.6. Changes in Employees Attitude

Many IT specialists thrive on project work and view assignment to a „competence

centre‟ (support unit) as unpleasant maintenance work. Though IT products and

services companies are growing rapidly, they find it difficult to provide continuity in

personnel assigned to support and maintenance activities.

6.7. System Integration issues

ERP systems are sold as „integrated packages‟, implying that they contain everything

one needs and that ERP software configuration (plus tailoring) is the major activity of

the project phase. ERP system needs to be integrated with the computing platform on

which it will run.

But companies have great difficulty integrating their enterprise software with a package

of hardware, operating systems, database management systems software and

telecommunications systems suited to their particular organization size, structure and

geographic dispersion. They reported having difficulty finding experts who could advise

them on the precise operating requirements of their ERP configuration.

Most of the companies are forced to retain some legacy systems that performed

specialized functions which are not available in ERP packages.

6.8. Expensive – Implementation and Support

Incorporating specialized functions to the ERP packages is possible. However in that

case the companies have to bear a very high cost. Further the maintenance and

support of such software are too expensive. Alternatively, they can acquire specialized


Is ERP an evil business..? | Measures to avoid administrative Issues 20

software from third parties. These systems needed to be interfaced with ERP systems,

again this process that is both challenging and expensive.

6.9. Problems with product and implementation consultants

ERP implementations are socially complex activities. As many as a dozen or more

external companies – including the ERP vendor, vendors of ERP product extensions,

vendors of supporting hardware, software and telecommunications capabilities,

implementation consultants and so forth – may be involved in different aspects of an

organization‟s ERP experience. Coordinating the efforts of all these firms is, to put it

mildly, a challenge.

Companies were often rightly reluctant to cede authority for project management to an

outside party, even when they were willing to pay the steep fees for outside assistance.

6.10. Cutting end-user training

In some companies, training was not budgeted as part of the ERP project itself, but was

left to the budgets and discretion of operating managers. This management policy

increased the likelihood of inadequate end-user training.

Schedule pressures affect training as well as scope because end-user training is

typically one of the last activities to occur in the project.

7. Measures to avoid administrative Issues

7.1. Improved Training – Hierarchical Method

Imparting complete formal training on the ERP system is very important. All the

companies need to develop a detailed plan for training users.

ERP systems are very complex and hierarchical; this means training also needs to be

hierarchical, with heavy users receiving more intense training early in the process. In

fact, the more successful firms involved their heavy end users throughout the

implementation process instead of providing training at the very end. Another feature of

successful training programs was that the lead users were trained first, in turn becoming

trainers for those further down in the hierarchy. Hence the training programs shouldn‟t

be taken for granted due to time constraints. The training can be formal class room

trainings and on-job trainings.


Is ERP an evil business..? | Measures to avoid administrative Issues 21

7.2. Building maintenance & support team

ERP consulting companies can have a separated team for support and maintenance

activities. This might help the employees to seek help instantly. The employees‟ attitude

issue also gets resolved. In this method developers or consultants are not forced to do

the support and maintenance job.

7.3. Use of single vendor package

A single-vendor solution is a possible way to reduce complexity and cost. Certainly, it

may not have all the functionality required, but it will be easier to implement. The trade-

offs between the single and multiple vendor solutions are fairly simple. A multivendor

solution can provide the best functionality for each module, but implementing it

becomes more complex because of the interfaces that need to be established. So

using a single vendor solution reduces the complexity and helps in simplifying and

standardizing them. Furthermore these also ease the expected future upgrades to

be a much easier.

7.4. Access to accurate information Right information has to be accessed by right person in right time. This is one

among the key tasks, so that interactions and communications with customers and

suppliers could be improved. Most of the companies need to have this as a strategic

priority.

7.5. Simplification and standardization Working smarter is always the better way than laboring with an activity. The

underlying motivation for ERP is to improve business processes. That is, an ERP

system is generally adopted to improve the firm's overall productivity; it is viewed

as a business solution rather than an IT solution. Hence simplification and

standardization is also a key factor.

7.6. Knowledge transfer from Consultants

The companies need to establish clear guidelines on how to use outside consultants.

Additionally, providing a knowledge transfer sessions from consultants to in-house

experts for both system configuration information and long-run maintenance, will be of

added advantage. The consultants had to work with and depend on the company's staff


Is ERP an evil business..? | Change Management and ERP Implementation 22

to complete the project, which in turn forced the internal staff to learn more about the

implementation, thereby retaining the knowledge in the company.

7.7. Top management involvement.

Senior management has to thoroughly involve in the project activities from the onset

and establishing clear priorities. Several of the companies viewed their ERP project as a

major investment as that of a new plant or an acquisition. Thus, it was given the same

level of commitment. Additionally a cross-functional implementation team with a more

senior management leader helped to take care of the assignments and took on extra

responsibilities for the ERP implementation.

7.8. Defined metrics

Clear guidelines have to be laid out on measuring performance. These metrics were not

just technical ones but also included business operations. Organizations have to set the

standards for defining and measuring success. In the first place, it is hard to normalize

them across individuals and organizations, thus making comparisons difficult.

8. Change Management and ERP Implementation

Change management is one of the biggest tasks involved in the business. This doesn‟t

only require a significant amount of funding but also require unappealing commitment

throughout the whole business component.

8.1. What is Change management?

Change management is a deliberate approach to bring major changes towards people‟s

expectations to move the business forward smoothly. The main concept of change

management in ERP implementation is bringing an understanding that in post-industrial

phase business should be customer oriented rather than production oriented.

Business should prioritize the point on “what final product is preferred by customers and

how to deliver the product in the right time” above “how to produce cheap, high volume

sellable products8 “.

8 Lukman Susanto, Change Management and ERP Implementation: Side-by-side , 2003



8.2. Change Management Aspects

As many other types of system implementation, change management in ERP

implementation are established to build an understanding throughout business

components so that they are well prepared to accept the change and clearly

understanding how the changes may affect them9.

There are various aspects that may involve in change management and they vary for

different systems. Specifically with ERP implementation, change management will be

required in separately functional areas where the system will be applied such as

financial department, human resources or manufacturing.

Change management will be more than likely happen locally within those departments.

However, if the implementation involving a more complex area such as applying ERP

system in all major departments in company or many company within enterprise this

certainly require collaborated participation and support throughout business

components including higher management areas and executives.

8.3. Component of Change Management

There are various tasks available as part of the change management strategy. They are

defined as follows:

8.3.1 Communications Strategy

The strategies are preparing project plan, project costs analysis, progress report

and some other important issues such as preparing trainings for employees. The

important point in delivering information is timing. As each component of the business

may have different priorities, working in collaboration will result a better outcome.

Managerial levels as the decision makers are often enforced to make such decisions

which may not make everyone happy. That is why it would be wise if they keep their

hands open for possible cooperation. Another important part in communication strategy

is allotting the correct messenger to the audience in order to the get the message

through. Different personnel will have different approach which will be suitable for

different audiences.

9 Island Consulting, Change Management, July 2007



8.3.2 Impact Analysis

This is a method to thoroughly determine the current business system and analysis on

how ERP system will affect the business environment. Current business processes

needs to be systematically documented especially for the area which may be affected

by the new system.

As a standard method of documentation, many experts are using data flow / work flow

diagram. From all above information, business can start to analyze how significant the

ERP implementation may affect the system, which will be the most affected by the

implementation and what training may be required to ensure the smoothness of this

new system implementation.

8.3.3 Skills Analysis

One of the main issues during ERP implementation is training. As this is a new system,

most of the operator / user will require a certain specific training for their job purposes.

To find out who needs to be trained and what kind of training required, the companies

need to perform skills analysis.

Every individual employee who may work in ERP system will be audited their

qualification, skills, internal and external experiences to find the best position for each of

them and to find out whether the company will need to hire new staff or external

consultants to ensure the business operates adequately.

Many people are assuming that change management is part of ERP implementation. In

fact, because of the level of complexity of the system, change management has always

been a continuing process required throughout ERP implementation.

Some experts are agree that ERP will not be successfully implemented without “a

massive dose of change management otherwise the organization will likely not be

positioned to best use the new system10 “.

ERP is an integrated complex cross-departments application. That is why its

implementation is a very costly process and yet most of the companies implemented.

10

Gerald T & Winford H, Change Management critical to making ERP work, May 2001


Is ERP an evil business..? | Case Study 25

The main issue in any new system implementation especially ERP is changing the

existing system with a new one.

9. Case Study

To illustrate how ERP helped in optimizing the production process, we study the case of

Ms BAYER MATERIALSCIENCE11, which is one among the leading international

manufacturer of polymers. They used the SAP® Advanced Planning & Optimization

Component to Streamline Production planning, scheduling and Optimize Stock Levels

Key Challenges

To achieve such a streamline production planning, they have to face a number of

challenges. Among which the key challenges involved are,

• To improve ability to manage complex 24-hour production processes involving more

than 40,000 tons of Product formulations and 100 product variants on different

production lines

• To provide more transparent production information to enable more effective planning

and scheduling

• To improve communications with external service providers Project Objectives

• To extend use of SAP Advanced Planning & Optimization to enable transparent and

detailed scheduling

• To eliminate manual tasks so employees can focus more on production processes and

less on coordinating the supply chain

• To extend the planning horizon Solution and Services SAP Advanced Planning &

Optimization

They have chose SAP solution to achieve the above tasks. For the fact that using SAP

they can easily integrate into existing SAP software environment and also best practices

model established for other implementation projects

Key Benefits achieved

The outcome of the project is they got a single platform for all planning data. Also they

have achieved significant benefits, they are listed

11

Bayer Material Science is a leading international manufacturer of Polymers, Head quarters at Leverkusen, Germany.


Is ERP an evil business..? | Discussion 26

• 33% reduction in planning time and effort

• Improvements in delivery reliability

• Extension of planning horizon from 4 to 7 weeks

• Less coordination time

• No integration gaps

• Automatic creation of filling orders

“The employees are relieved of routine activities and always have an integrated view of

what is going on in production and planning.12”

This illustrates the success of ERP system in production planning and control.

10. Discussion

After reviewing the article, we have to analyze on “why ERP is said to be a physical

manifestation of administrative evil” and also to know the solution for the question “Is

ERP an evil business?”

Certainly, ERP is not to turmoil the business activities. How organization and individual

employees are getting affected by ERP? To answers these question we need to

understand that ERP is just software/package tool for using or helping you in business

operations. Reality is ERP isn‟t a completely software where you install and use it. It has

to be customized to fit the requirements of the organization. The new system may not

be easy to work with, but the employees need to be more open minded to accept and

adapt to the new change.

Before developing an ERP system, every individual need to put their inputs for the

implementation. To do so, the involving team members, have to discuss and provide

relevant information to the consultant. An employee team has to work closely with the

ERP consultant group, so that the requirement are shared and there is no gap in

communication

12

Dr. Eric Bischof, Global Product Manager for Coatings, Adhesives and Sealants, Bayer Material Science AG


Is ERP an evil business..? | Summary and conclusion 27

Normally companies have people, from different cultural backgrounds. These people

have their own idea and opinion, which can be for or against the ERP implementation.

In such a scenario, if an organization implements ERP to streamline its production

process. Then employees shouldn‟t get abased by it. Instead they should make up their

mind and embrace change and posses the quest for learning the new tools.

In the current technological world, change is inevitable. So organizations have to be

strong enough in Change Management.

So it is very important to communicate with every employee, in a project, that company

will undergo change and new systems will be in place in the future. Also organizations

have to schedule training programs to train the new system & process and try to migrate

to the new system in an increasing fashion. Make your employee to be friendly with the

system. If they know the benefits of ERP and know how ERP helps them to do the job

easily, they will accept ERP. If the employees are reluctant to adapt the changes, in the

organization, then we can claim it to be more than EVIL.

11. Summary and conclusion

Consolidating our learning in this paper, we justify that ERP is not an administrative evil.

Regardless of how a company approaches it, ERP is sure to bring significant changes

to how a company does business. It helps to modify the workflows, and alters long-

standing processes.

Companies often meet with resistance on the part of employees who are reluctant to let

go of their proven methods. Employees may also fear for their jobs; since ERP makes

such radical changes to business processes, it's not unusual for job descriptions to

change or be eliminated altogether.

But the underlying truth is that if right people with positive attitude are involved in the

ERP implementation, then there is NO EVIL BUSINESS. The new system is meant to

ease the tiresome process and streamline the production planning systems.


Is ERP an evil business..? | References 28

Hopefully change management will play a major role to soothe employees to embrace

change and they can travel together with company without any evil. We believe that the

ideas presented in this paper might give more knowledge about ERP implementation

and represent the solution how to bring company and employee success together, with

their strategies will certainly demonstrate that “ERP is NO Evil business”

References

1. F. Robert Jacobs and F.C. „Ted‟ Weston, Jr., Enterprise resource planning (ERP)

A brief history Journal of Operations Management, Volume 25, Issue 2, March

2007, Pages 357-363

2. Thomas Wailgum , Why ERP Systems Are More Important than Ever, January

29, 2008, http://www.cio.com/article/177300 accessed on 20th April 2008.

3. Jesse F.Dillard, Linda Ruchala, Kristi Yuthas, Enterprise resource planning

systems: A physical manifestation of administrative evil, International journal of

accounting information systems, Volume 6 issue 2, 2005

4. Kevin Reilly AMR Research Releases ERP Market Report, June 14, 2005

http://www.amrresearch.com/Content/View.asp?pmillid=18358&docid=12642

accessed on 24th April.

5. Dr. Bruce Zhang, ABCs of ERP, 2005,

http://www.sysoptima.com/erp/erp_definition.php accessed on 25th April.

6. Lukman Susanto, Change Management and ERP Implementation: Side-by-side,

2003, http://www.susanto.id.au/papers/ChangeMngt.asp accessed on 26th April

7. Island Consulting, Change Management, July 2007,

http://www.islandconsulting.com.au/IChange.htm accessed on 28th April

8. John P. Kotter, Leading Change, Harvard School Press 1996

9. Gerald Thompson, Florida Power & Light & Dr. Winford (Dutch) Holland,

Holland & Davis., Change Management critical to making ERP work, May 2001.

10. Neville Turbit , ERP Implementation :The Traps , 1995

http://www.cio.com/author/100458/Thomas+Wailgum+

http://www.cio.com/article/177300

http://www.amrresearch.com/Content/View.asp?pmillid=18358&docid=12642

http://www.sysoptima.com/erp/erp_definition.php

http://www.susanto.id.au/papers/ChangeMngt.asp

http://www.islandconsulting.com.au/IChange.htm


Is ERP an evil business..? | Appendix 29

11. Mabert, Vincent A. Soni, Ashok Venkataramanan , Enterprise Resource

Planning: Common Myths Versus Evolving Reality, M.A. Business Horizons;

May/Jun2001, Vol. 44 Issue 3, p69, 8p, 1 diagram, ISSN 0007-6813

12. Sergio Lozinsky , Enterprise-Wide Software Solutions: Integration Strategies and

Practices, Addison-Wesley, 1998

Appendix

ERP – Enterprise Resource Planning

MIS – Management Information Systems

PPS – Production Planning Systems

Documents

Is ERP an Evil Business? paper by Jayabalaji Sathiyamoorthi