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Critical Success Factors in Implementation of ERP Systems

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Project Report published for a Masters Degree Course research on Critical Success Factors in the Implementation of ERP Systems. A literature review of journals was used to develop the research …

Project Report published for a Masters Degree Course research on Critical Success Factors in the Implementation of ERP Systems. A literature review of journals was used to develop the research questionnaire answered by managers and executives involved in the process of selection of an ERP System.

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  • 1. - 1 - CRITICAL SUCCESS FACTORS FOR IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING SYSTEM PROJECT REPORT PREPARED BY STEPHEN COADY
  • 2. - 2 - TABLE OF CONTENTS LIST OF FIGURES..............................................................................................................................3 LIST OF TABLES ...............................................................................................................................3 Acknowledgements ..............................................................................................................................3 Executive summary..............................................................................................................................4 Introduction......................................................................................................................................4 Literature Review.............................................................................................................................4 Critical Success Factors in ERP Implementations ...........................................................................4 Evaluation of the Critical Success Factors in the Company at ERP System Pre-implementation Stage.................................................................................................................................................5 Implementation and other factors influencing successful implementation......................................7 Conclusions......................................................................................................................................7 Recommendations ............................................................................................................................8 Introduction..........................................................................................................................................9 Overview of study organisation .......................................................................................................9 Enterprise Resource Planning Systems..........................................................................................10 Market Perspective - ERP Systems Usage, Implementation Success and Failure.........................13 Critical Success factors ..................................................................................................................14 Literature Review...............................................................................................................................15 Critical Success Factors in ERP Implementations .............................................................................19 Top Management Support..............................................................................................................21 Project team competence................................................................................................................22 Inter-departmental cooperation ......................................................................................................22 Clear goals and objectives..............................................................................................................22 Project Management.......................................................................................................................23 Inter-departmental communication ................................................................................................24 Management of expectations..........................................................................................................24 Project Champion...........................................................................................................................24 Ongoing vendor support.................................................................................................................24 Careful selection of appropriate package.......................................................................................24 Data analysis and conversion.........................................................................................................25 Dedicated Resources ......................................................................................................................25 Steering Committee........................................................................................................................25 User training and education............................................................................................................25 Education on a new business process.............................................................................................26 Business Process reengineering .....................................................................................................26 Minimal customisation...................................................................................................................26 Defining the architecture................................................................................................................27 Change Management......................................................................................................................27 Vendor / customer partnerships......................................................................................................27 Use of vendors’ development tools................................................................................................28 Use of consultants ..........................................................................................................................28 Evaluation of the Critical Success Factors in the Company at ERP System Pre-implementation Stage...................................................................................................................................................28 Method ...........................................................................................................................................28 Results............................................................................................................................................29 Discussion ......................................................................................................................................31 Conclusions of survey results.........................................................................................................35 Implementation and other factors influencing successful implementation........................................35 Implementation...............................................................................................................................36 Multi site implementations.............................................................................................................36 Business Process Reengineering....................................................................................................37 Conclusions........................................................................................................................................39
  • 3. - 3 - Recommendations ..............................................................................................................................40 References ..........................................................................................................................................42 Appendices.........................................................................................................................................44 Appendix 1: Detailed results..........................................................................................................45 Appendix 2: Responses to Question of Company Strategy in Implementing an ERP System......55 Appendix 3: Top CSFs by ERP Implementation Stage .................................................................60 Appendix 4: ERP Critical Success Factor Questionnaire ..............................................................61 Appendix 5: Implementation..........................................................................................................68 LIST OF FIGURES Figure 1: ERP process vs Enterprise Systems....................................................................................10 Figure 2: Comparison of ERP vs MRP showing extent of ERP planning.........................................11 Figure 3: Typical ERP System...........................................................................................................12 Figure 4: ERP core process flows ......................................................................................................17 Figure 5: A suggested framework for managing change associated with ERP .................................19 Figure 6: Taxonomy for ERP critical factors.....................................................................................20 Figure 7: "The Proven Path" Implementation Program .....................................................................36 LIST OF TABLES Table 1: Summary of Reviewed Articles on Critical Success Factors of ERP Implementation........21 Table 2: Critical Success Factors – results and comparison to Somers and Nelson (2001) ..............30 Table 3: Detailed Critical Success Factors – Results and comparison to primary CSF results .........32 Acknowledgements I would like to acknowledge the following contributions to the completion of this project. 1. The “company” made the work related project possible. 2. Many colleagues and managers of the Company, whose replies to the questionnaire provided opinions of a group of knowledgeable Company managers and employees regarding the Critical Success Factors of ERP implementation, the benefits and functional requirements of the ERP system, and understanding of the Company implementation strategy. Without this contribution there would be no results. 3. XXX1, CEO of the Company, for emphasising the results were also of benefit to the Company and its ERP implementation project thereby assisting in soliciting responses to the questionnaire. 4. XXX2, Academic Director UNSW MBT program, for his useful advice, supervision of the project and patience. 5. XXX3, Executive General Manager “Company” Engineering, for his comprehensive review of the original version of this report. The comments which identified potential improvements which have been incorporated in this “business report” revision. Notes 1. All references to the company name have been removed and replaced with “Company”, including from the replies received concerning company strategy which have been included in appendix 2. 2. The discussion of the results and opinions expressed are those of the writer only, based on results of responses received and available information. It is possible that persons in possession of additional information may reach different opinions and conclusions.
  • 4. - 4 - Executive summary The research project was undertaken for a Masters Degree course; however the selection of the course and topic was made to develop knowledge of the implementation of ERP systems prior to the expected implementation at the company. The study was predominantly a literature review to develop an understanding of the application of Critical Success Factors to the implementation of an ERP system. The project sought to evaluate, at the pre-implementation stage, the perceptions of a group of employees of the Critical Success Factors identified from the literature review. Introduction • Background information on the company and a summary of its existing information systems which introduces the requirement for an ERP system to replace the existing management information system. • A description of ERP systems. Understanding what is meant by Enterprise Resource Planning Systems can be fundamental to determining the expectations about selection, implementation and business process results of a system. The current definition of an ERP system has broad scope, for example “comprehensive package software solutions seek to integrate the complete range of a business processes and functions in order to present a holistic view of the business from a single information and IT architecture”. The description includes historical development of ERP systems to current usage and functionality. • A description of the market perspective of ERP systems; The ERP software market is one of today’s largest IT investments worldwide. The development of the market for ERP software includes a history of spectacular failures. Whilst current software is more stable and the implementations more refined, the marketing of ERP software and consequently the increasing demand from smaller organisations has created a risk. Smaller organisations are less likely than large organisations to survive a failed implementation of an expensive ERP system and may have limited resources, experience or staffing skills with which to overcome these issues. The high failure rate of ERP implementations calls for a better understanding of its critical success factors. • Defines Critical Success Factors: elements that are vital for a strategy, organization or project to be successful, and are strongly related to the mission and strategic goals. They focus on the most important areas and get to the very heart of both what is to be achieved by an organisation, strategy or project and how to achieve it. Literature Review The literature review identifies the sources which were used in the compilation of the report. These articles were selected from a wider range of sources to provide the best synthesis of information pertaining to the research topic. Through a brief description of each source article and its relevance to the topic the literature review provides a general overview of critical success factors and other related aspects which were required to their application in the implementation of an ERP system. Critical Success Factors in ERP Implementations The implementation of an ERP system is known to be a project which includes a high level of risk to an organisation. It is therefore worthwhile to examine the factors that to a great extent, determine whether the implementation will be successful. Al-Mashari et al. developed the taxonomy for ERP critical factors which shows the inter- relationship between the ERP benefits, implementation and ERP success. They stated that the link between ERP benefits and strategic goals, objectives or critical factors is a relative one rather than in absolute terms of what specifically can be expected. This defines success or failure is linked through implementation to the goals established. In the light of Lyttinen and Hirschheim’s (1987) definition of failure, success in IT projects can be seen as:
  • 5. - 5 - • Correspondence success, where there is a match between IT systems and the specific planned objectives. • Process success, when IT project is completed within time and budget. • Interaction success, when users’ attitudes towards IT are positive. • Expectation success, where IT systems match users’ expectations. The critical success factors identified by various authors and articles were analysed and the relationships evaluated. The number of factors considered in the various articles differed, but when the factors are compared it is identified that this is merely an indication of whether the factors are narrowly or broadly defined in terms of depth and the degree of detail that the author considered appropriate for the study. The critical success factors identified by Somers and Nelson (2001) were considered to be the appropriate level of detail for this study and were therefore selected as the primary measure of the factors which were important to the successful implementation of an ERP system. Those articles which considered a greater number of factors provided more detail on particular aspects, but could be grouped together within the 22 factors defined by Somers and Nelson. The critical success factors defined by Somers and Nelson were then defined and described and their application and importance to implementation was evaluated. These descriptions provide a fundamental understanding of important requirements for successful ERP implementation and how they should be applied. Evaluation of the Critical Success Factors in the Company at ERP System Pre- implementation Stage Research was conducted with a group of employees of the Company which was at the pre- implementation stage of a project for the implementation of an ERP system. The group were all people that had been used by the Company in the process of evaluation of selected ERP software packages. The intention was to evaluate the opinions and perceptions of those employees with regard to the Critical Success Factors which were identified by the literature review. The primary aim of the study was to determine the opinions of these persons regarding the expected effect of critical success factors on the implementation process, in the current position of pre- implementation of the ERP system. The analysis of the literature review identified that many detailed factors presented in literature and previous studies could be grouped in association with the primary CSFs at the level considered in the primary section. These would provide an additional level of evaluation and therefore a deeper understanding of the expected effects of the critical success factors on the implementation. A compilation of these more detailed critical success factors from various literature sources was developed and grouped as subsets of the Somers and Nelson CSF’s and presented in a second section of the questionnaire. Further sections in the questionnaire were based on the integrated nature of strategic objectives, goals, benefits and implementation to achieve and measure successful outcomes, therefore additional sections evaluated:- • The reasons for requirement for the ERP system. • The benefits expected from the system. • The relative importance of the modules and functions expected to be available in an ERP system. • The Company strategic requirements of the ERP system; the respondent’s description of the strategic goals of implementing the ERP system which was required to determine if there was a common understanding of these strategic goals. This question was intended to test the hypothesis that there was no commonly agreed or clearly communicated strategic vision and goals for the project.
  • 6. - 6 - The main results for the overall group, ranked in order of the mean score for each of the primary Critical Success Factors are presented in Table 2. The corresponding results achieved by Somers and Nelson are shown for comparison. The results show very strong support and agreement that each of these is a critical success factor. The average score of the overall group is 4.41 which verges on indicating that the whole group of 22 critical success factors are extremely important for success. Twelve of the twenty two factors were considered extremely important for success and the remainder were important for success. Critical Success Factor Overall Somers & Nelson (2001) Mean Stddeviation Rank Mean Stddeviation Rank Top Management Support 4.85 0.37 1 4.29 1.16 1 User training 4.81 0.40 2 3.79 1.16 14 Project Management 4.81 0.40 3 4.13 0.96 5 Project Team Competence 4.81 0.40 4 4.20 1.07 2 Project Champion 4.75 0.53 5 4.03 1.58 8 Clear goals and objectives 4.73 0.45 6 4.15 1.14 4 Change Management 4.67 0.92 7 3.43 1.34 19 Education on new business processes 4.65 0.49 8 3.76 1.18 15 Dedicated resources 4.64 0.57 9 3.81 1.25 12 Careful package selection 4.58 0.58 10 3.89 1.06 10 Steering committee 4.50 0.65 11 3.79 1.95 13 Inter-departmental Co-operation 4.50 0.76 12 4.19 1.20 3 Vendor support 4.38 0.75 13 4.03 1.60 9 Management of expectations 4.33 0.87 14 4.06 1.37 7 Inter-departmental communication 4.31 0.62 15 4.09 1.33 6 Data analysis and conversion 4.24 0.72 16 3.83 1.27 11 Minimal customization 4.08 1.09 17 3.68 1.45 17 Vendor Tools 4.04 0.77 18 3.15 1.57 21 Vendor Partnership 4.00 0.69 19 3.39 1.21 20 Business Process Re-engineering 4.00 1.00 20 3.68 1.26 16 Architecture choices 3.87 0.97 21 3.44 1.19 18 Use of Consultants 3.58 0.95 22 2.90 1.20 22 Table 2: Critical Success Factors – results and comparison to Somers and Nelson (2001) The top few critical success factors; top management support, User training, project management, project team competence, project champion and clear goals and objectives, show that there is a very strong awareness of the importance of these factors in generating a success outcome of an ERP implementation project. Apart some from minor variations the analysis detailed critical success factors shows good correlation with the primary critical success factors. The overall result does indicate that the critical success factors are also supported in the same manner at the more detailed level. The overall results for inter-departmental cooperation achieves a higher result than the primary CSF itself and is an indication that when the detailed level factors are considered directly they provide some insight into issues that have to be addressed and hence may achieve strong support at the
  • 7. - 7 - detailed level. This is also indicative of the fact that all of the primary factors were considered to be important. The results of the detailed questions provide the implementation project team strong support to pursue the requirements of these detailed critical success factors and provide some insight into the opinions regarding the relative importance of factors. The responses on the concerning each individual’s understanding of the Company’s ERP strategy in considering the implementation are presented in appendix 2, which presented 25 different interpretations which do not present a common understanding of company ERP implementation strategy. Since the ERP implementation strategy provides the foundation upon which the goals, expectations and implementation plans of the project should be developed, it would be expected that in order to make critical decisions regarding the ERP system selection and to commence planning for implementation that an agreed strategy should have been developed and communicated to those involved. This seems to identify a crucial element of weakness in the proposed implementation. Implementation and other factors influencing successful implementation Critical Success Factors were found to have a major influence on the implementation of an ERP system, however in the process of the research two factors were identified which were considered to be significantly influential to ERP implementation by the company; Business Process Reengineering and multi-site implementations. All of these factors interact in the implementation process, therefore a section was included to provide an overview of these issues and how they influence implementation of an ERP system. This can be summarised:- • Implementation: the identification of the critical success factors raises the question of how these matters are adequately addressed in implementation. This is clearly a case of requiring an implementation plan which addresses the issues. The section provides and overview of one example of such a process and a summary of additional extracts from the book are included in Appendix 5. • Multi-site implementations: These implementations present special concerns. The manner in which these concerns are addressed may play a large role in the ultimate success of the ERP implementation. The section identifies key issues such as the desired degree of individual site autonomy, ERP fit, variation of culture between sites and the implementation cutover strategy. • Business process reengineering (BPR): This was identified as a critical success factor; however BPR is a business process in itself and is a concept which has been given new life as a result of the advent of ERP systems which define business processes, creating a critical link between ERP systems and BPR that is difficult to ignore. Al-Mashari and Zairi stated “BPR is an indispensable and core component of SAP R/3 implementation and SAP R/3 itself can be considered as the missing IT link to BPR”. It is therefore important to develop an understanding of the relationship between ERP systems and BPR. This section presents an overview of Business Process Reengineering and its inter-relationship with ERP systems. Conclusions The outcome of the study of the organisation at pre-implementation stage acknowledges the importance of the critical success factors to successful implementation. This is further supported identifying the relative importance of more detailed factors which were grouped in support some of the primary factors. The responses to both the primary and detailed factors identified that the majority of respondents understand the importance of what is required to be done to complete a successful implementation. The challenge therefore is whether the organisation is able to support this understanding with required actions in performing the implementation. The study identified top management support and the clear goals and objectives as being extremely important critical success factors. The combination of these critical success factors requires clear and strong leadership with commitment and participation by executive and top management and
  • 8. - 8 - places with top management the responsibility to define and communicate the ERP strategy and implementation plan, which provides a clear understanding of goals and objectives, including expectations and deliverables, and an ERP implementation business plan and vision. The writer concluded that the array of perceptions on the question of Company ERP strategy and goals supported the hypothesis that of an ERP strategy and goals did not exist or had not been communicated to those involved. These are the foundation of the potential success or failure of the implementation of an ERP system and it is therefore essential that this weakness be addressed in the short term. The relationship between BPR and ERP is often not well understood. ERP systems are essentially developed as instruments for improving business processes and are designed to function around an established business process model, therefore whilst some customisation is possible, major modifications are complex, impractical, and extremely costly, therefore the business process must often be modified to fit the system. This is achieved through an exhaustive analysis of current business processes to identify potential chances of reengineering, rather than designing an application system that makes only the best of bad processes. It is therefore essential that the element of BPR is considered in the implementation planning. Multi-site, variable process implementations present additional complexity to an ERP implementation. Gatticker (2002) identified the issue of “process standardisation”; the imposition of organisational standards and ERP configuration on multiple sites without taking into account the variations in business process and culture between sites. This has led failures of some ERP system implementations; therefore it is essential that a total organisation outlook be adopted from the outset of the implementation. This should ensure that common elements support the operation of all business units whilst identifying critical success and differentiating factors of individual business units which present arguments configuration and customisation to support successful practices. Recommendations The report concludes with some recommendations which are based on the requirements established by the critical success factors which have been identified and agreed as being extremely important. These are based on the example presented by Wallace and Kremzar and are suggested as a starting point in preparation for the project launch. The order of these recommendations is important as it is not possible to properly plan the project without an adequate, ERP educated team to plan and implement the project. Refer to the example project process (p36 and in more detail Appendix 5 – p68) which meets all the requirements of the Critical Success Factors. The preparation for launch should also include consideration of the implementation timescale which should take into account the complexity of the multi-site variable process structure of the organisation.
  • 9. - 9 - Introduction Overview of study organisation The organisation is a rapidly growing, diversified engineering company which operates business units at various locations in Australia and New Zealand. The company has grown from a business initially situated in Bunbury, Western Australia through organic growth and acquisitions. The program of growth and acquisition has developed a diversified structure based on three main pillars of Engineering workshops (including equipment manufacture), Construction and Maintenance (site projects) and Energy Systems. The nature of engineering work includes for example:- • Major construction projects, • Design and manufacture of equipment for materials handling, mineral processing and energy (boilers and associated equipment), • Processing of materials such as laser cutting and heat treatment, • Engineering jobbing work in steel fabrication, machining and rubber work (lining and conveyors), • Site maintenance and labour hire, • Equipment repair and overhaul. This diversified work presents an array of multi-site, multi-division, multiple work types and range of magnitude of work from small limited time jobbing work to major equipment manufacture and construction projects. This presents a challenging environment in which to implement an ERP system which requires some degree of standardisation. This makes multi-site and inter-departmental cooperation issues more critical than might commonly be the case. The company uses a DOS based management information system known as QARMS in which the majority of financial and job management functions are recorded and managed. This management system software has served the purpose for which it was originally intended – accounting, financial management and job costing including integrated payroll and purchasing management. Although the software does provide real time financial and job costing information, it does not offer adequate solutions for capacity planning and management and job and project resource management. Whilst the software has some import / export capacity which can be used to interface with other systems they are cumbersome and difficult to use and time consuming. The user interface and integration with other software has fallen far behind current industry standards. The QARMS software has not been developed and the growing company has now outgrown the use of this application as a core management information system. The QARMS system was initially installed at all new acquisitions; however some newer acquisitions have been allowed to continue to operate existing systems. This creates integration and legacy issues in consolidating results to the extent required of a publicly listed company and also in accessing relevant decision making information for management. The company operates a modern IT infrastructure and wide area network. A number of other systems are used in conjunction with the core QARMS management information system:- • An intranet as a repository and accessible source of current management system procedures, including safety, quality and other management policies and procedures and for distribution of current information. • Use of the Microsoft Office suite of software for e-mail, database, word processing, spreadsheet calculations, etc. Many functions such as design and cost estimating are performed in these programs and manually transferred into QARMS when required. They are also used to manipulate data from QARMS, integrate with other sources and develop usable management reports as required. • Project planning software, Microsoft Project and Primavera P3, for planning and management of projects. These do not provide the opportunity to interface or integrate with the financial and purchasing management of jobs and projects.
  • 10. - 10 - • Use of both electronic document management systems and the windows file structure for knowledge management and record keeping relating to quotations, current projects and intellectual property. • VSAFE safety management system. • Design and drafting software (Strand FEA, Autocad, Autodesk Inventor, Microstation, Mathcad) for engineering. The company is currently investigating the investment in an ERP application. The selection process has reached the point where the IT manager and executive managers have identified a short list of potential application providers, the leading contenders have been reviewed by members of operating units, and a selection of preferred vendor has been reached. Enterprise Resource Planning Systems Understanding what is meant by Enterprise Resource Planning Systems can be fundamental to determining the expectations about selection, implementation and business process results of a system. Wallace and Kremzar (2001) make a very clear distinction at the start of their book, ERP: Making IT Happen, “This book is not about software. This is not a book about how to select software and install it on your computers. Rather, it’s a book about how to implement superior business processes in your company – processes that yield competitive advantage.” Many systems that are labelled ERP systems are Enterprise Systems – packages of computer applications that support many, even most, aspects of a company’s information needs.” This distinction is depicted in figure 1. Figure 1: ERP process vs Enterprise Systems (Reproduced from ERP: Making It Happen (Wallace & Kremzar, 2001) The definition of Enterprise Resource Planning (ERP) from APICS Dictionary is: “ERP predicts and balances demand and supply. It is an enterprise wide set of forecasting planning and scheduling tools, which: • Links customers and suppliers into a complete supply chain. • employs proven processes for decision making, and • coordinates sales, marketing operations, logistics, purchasing, finance, product development, and human resources Its goals include high levels of customer service, productivity, cost reduction, and industry turnover, and it provides the foundation for effective supply chain management and e-commerce. It
  • 11. - 11 - does this by developing plans and schedules so that the right resources – manpower, materials, machinery and money – are available in the right amount when needed. ERP is a direct outgrowth and extension of Manufacturing Resource Planning and, as such includes all of MRP II’s capabilities. ERP is more powerful in that it: a) applies a single set of resource planning tools across the entire enterprise, b) provides real time integration of sales, operating and financial data, and c) connects resource planning approaches to the extended supply chain of customers and suppliers.” (Wallace & Kremzar, 2001) Figure 2: Comparison of ERP vs MRP showing extent of ERP planning (Reproduced from Wikipedia, 2007) MRP vs. ERP — Manufacturing management systems have evolved in stages over the past 30 years from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP)
  • 12. - 12 - Enterprise Resource Planning (ERP) systems 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 (Wikipedia, 2007). The term ERP originally implied systems designed to plan the use of enterprise-wide resources. Although the acronym ERP originated in the manufacturing environment, today's use of the term ERP systems has much broader scope. ERP systems typically attempt to cover all basic functions of an organization, regardless of the organization's business or charter. (Wikipedia, 2007) Figure 3: Typical ERP System (Reproduced from Shebab et al, 2004, p359 – 386) Rosemann (1999) defines ERP systems as customisable, standard application software which includes integrated business solutions for the core processes (e.g. production planning and control, warehouse management) and the main administrative functions (e.g. accounting, human resource management) of an enterprise. Slightly differently, Gable (1998), however, defines it as comprehensive package software solutions seek to integrate the complete range of a business processes and functions in order to present a holistic view of the business from a single information and IT architecture. (Al-Mashari et al., 2003, p352) However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need
  • 13. - 13 - for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database). An ERP system is a packages business software system that enables a company to manage the efficient and effective use of resources by providing a total, integrated solution for the organisations information processing needs. It supports a process oriented view of the business as well as business processes standardised across the enterprise. Among the most important attributes of ERP are its abilities to: • Automate and integrate an organisation’s business processes; • Share common data and practices across the entire enterprise; and • Produce and access information in real time environment. (Nah et al, 2001, pp 285 – 296) An important feature of ERP is that it is the first approach that integrally combines business management and IT concepts. Its strength stems from its ability to provide comprehensive business functionality in an integrated way using a state of the art IT infrastructure. In one example, SAP’s client / server software package R/3, offers the potential to integrate the complete range of an organisations operations in order to present a holistic view of the business functions from a single information and IT architecture perspective Indeed, enterprise systems have improved the organisational information flow through the supply chain to such a degree that they have become an effective operating standard. One significant feature of ERP software is that core corporate activities, such as manufacturing, human resources, finance and supply chain management are automated and improved considerably by incorporating best practices, so as to facilitate greater managerial control, speedy decision making and huge reduction of business operational cost. (Al- Mashari et al., 2003, p352) Market Perspective - ERP Systems Usage, Implementation Success and Failure The ERP software market has become one of today’s largest IT investments worldwide. It continues to be one of the largest, fastest growing and most influential players in the software industry in the next decade. (Shebab et al, 2004, p359 – 386) It is projected that over 70 % of Fortune 1000 companies have or will soon install ERP systems and that ERP systems are penetrating the small to medium size companies with gross revenue less than US$250m. (Ehie and Madsen, 2005, pp545 – 557) Market penetration of ERP varies considerably from industry to industry. Major ERP vendors are increasingly targeting small and medium sized enterprises to generate new sales. Vendors and users are also moving beyond core applications to extend ERP systems to support Web-based applications, e-commerce, customer-relationship management, and business planning. (Somers and Nelson, 2001) The benefits of a properly selected and implemented ERP system can be significant leading to considerable reductions in inventory cost, raw material costs, lead time for customers, production time and production costs. (Somers and Nelson, 2001) ERP packages touch many aspects of the company’s internal and external operations. Consequently successful deployment and use of ERP systems are critical to organisational performance and survival. (Shebab et al, 2004, p359 – 386) Although ERP systems have gained major prominence in corporations throughout the western world, successful implementation of ERP in business processes continues to elude many companies despite high implementation costs that run as high as 3% of annual revenue. These failures are not because the ERP software was coded incorrectly, rather companies failed to match the true organisational needs and system required to resolve the business problems (Ehie and Madsen, 2005, pp545 – 557). In seeking to explain why some firms succeed in their implementation while others fail, it is critical to understand that, although the technical capabilities of ERP systems are relatively well proven, implementing these systems is not a simple matter of purchasing and installing the technology. Muscatello, Small and Chen, 2003, pp 158 – 170) A number of prominently publicised failures have underscored the frustrations and even total meltdowns that enterprises go through implementing ERP systems . (Kim et al, 2005). The ERP
  • 14. - 14 - implementation learning curve saw many of the early installations being unstable, several of which failed spectacularly, including Foxmeyer and Hershey Foods (Plant and Willcocks, 2007). FoxMeyer Drug, a US$5 billion pharmaceutical company, recently filed for bankruptcy. FoxMeyer argued that major problems generated by a failed ERP system, which created excess shipments resulting from incorrect orders (Muscatello et al, 2003). Hershey Food Corp. has also held SAP accountable for order processing problems that hampered its ability to ship candy and other products to retailers around the peak Halloween season (Kim et al, 2005). Dell Computer scrapped their ERP system claiming that it was not flexible enough to handle their expanding global operations. (Muscatello et al, 2003) Allied Waste industries , Inc. decided to pull the plug on a US$130 million system built around SAP R/3, while another trash hauler Waste Management, Inc., called off an SAP installation after spending about US$45 million of an expected US$250 million on the project (Kim et al, 2005). While there have been examples of successful ERP implementations e.g. Cisco, it has been estimated that 90% of all early ERP projects were either late or over budget. Organisations such as Volkswagen, Cleveland State University, Whirlpool and W.L.Gore have suffered similar problems. Failures and problems during implementation itself have been subject of extensive literature and while high visibility failure is no longer as common at large organisations as it has been in the past, application integration problems do still occur, especially when organisations attempt to customise their ERP systems. (Plant and Willcocks, 2007, pp 60 - 70) Over the past few years, however, ERP systems developers, systems integrators and consultants have consistently been turning their sights on smaller enterprises. These smaller manufacturers can be adversely affected if they fail to upgrade their information technology with systems that can communicate with their larger supply chain partners or with corporate headquarters (Muscatello et al, 2003). With increased demand for ERP systems by smaller organisations, cost overruns or failures in process design can cause significant problems as these new adopters may have limited resources, experience or staffing skills with which to overcome these issues (Plant and Willcocks, 2007). Smaller firms with their limited resources are less likely than their larger counterparts to survive or quickly overcome a failed implementation of an expensive ERP system. (Muscatello, Small and Chen, 2003, pp 158 – 170) As increasing numbers of organisations across the globe have chosen to build their IT infrastructure around this class of off the shelf applications there has been a greater appreciation for the challenges involved in implementing these complex technologies. Although ERP systems can bring competitive advantage to organisations, the high failure rate in implementing such systems is cause for concern (Kim, Lee & Gosain, 2005, pp 158 -170). According to the Gartner Group, 70 percent of ERP projects fail to be fully implemented, even after three years. Typically there is no single culprit responsible for “failed implementation”, and no individual reason to be credited for a successful one. Even the definitions of failure and success are gray areas, lending to interpretation. There are generally two levels of failure: complete failures and partial failures. (Gargeya and Brady, 2005, pp 501 -516) The high failure rate of ERP implementations calls for a better understanding of its critical success factors (Somers and Nelson, 2001). Critical Success factors Critical Success Factor (s) (CSF) is a business term for an element which is necessary for an organization or project to achieve its mission. Critical success factors are elements that are vital for a strategy to be successful (Wikipedia, 2007). For example, a CSF for a successful Information Technology (IT) project is user involvement (Rockart, 1979, pp81-93). Critical Success Factors are strongly related to the mission and strategic goals of your business or project. Whereas the mission and goals focus on the aims and what is to be achieved, Critical Success Factors focus on the most important areas and get to the very heart of both what is to be achieved and how you will achieve it. (Mindtools, 2007)
  • 15. - 15 - The concept of "success factors" was developed by D. Ronald Daniel of McKinsey & Company in 1961 (Daniel, 1961, p111-121). The process was refined by Jack F. Rockart in 1986 and Rockart and Bullen presented five key sources of CSFs: the industry, competitive strategy and industry position, environmental factors, temporal factors, and managerial position (Wikipedia, 2007). Rockart defined CSFs as: "The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization's efforts for the period will be less than desired." He also concluded that CSFs are “areas of activity that should receive constant and careful attention from management.” (Mindtools, 2007) Literature Review The literature review commenced with a wide objective of seeking information relating to the proposed company ERP system implementation project with a broadly defined scope covering how a company or business unit could extract the maximum benefit from implementation of an ERP system, how the implementation of the ERP system could improve business processes and the relationship between business process re-engineering and ERP implementation. The scope was narrowed for the purpose of the project to evaluation of the critical success factors related to implementation of the ERP system. The topic has been reviewed by a large number of researchers, therefore after identifying relevant articles it was necessary to select particular articles that provided the best information and remove those that did not add anything further. Some articles were selected because extended knowledge of particular aspects which were found to be critical to the success of ERP system implementations. Critical Success Factors or Impediments to success in ERP implementation Finney and Corbett (2007, pp 329 – 347) developed a compilation of 26 critical success factors for ERP implementation supported by descriptions from analysis of 45 journal articles and categorised them as strategic or tactical factors (presented in a useful table). The intention was to identify gaps that might exist in research. The areas which were identified as a result were to study were; the identification of CSF’s from the perspective of key stakeholders and the need for more in depth research into the concept of change management. A limitation identified was the occurrences of duplication of success factors in the frequency table, which was attributed to the use of secondary research as the main methodology in a large number of articles. Shebab et al (2004, p359 – 386) conducted a comprehensive review and classification of literature related to ERP systems, providing a good overview of existing articles and an integration of descriptions of the selection and implementation phases. The article provided an overview and diagrammatic description of ERP modules, identification of the drawbacks of ERP systems, identification of ERP selection criteria and a representation of the ERP implementation critical success factors produced by comparison of the various articles reviewed. Somers and Nelson (2001) synthesised a comprehensive list of 22 critical success factors from previous research and then analysed these through research with companies that had recently completed or were in the process of completing ERP implementations. The responses of 86 organisations resulted in a ranking of the critical success factors to suggest and order of importance and also analysed the variation of importance of the CSF’s through the six identified stages of ERP implementation. Plant and Willcocks (2007, pp 60 - 70) used the critical success factors as identified by Somers and Nelson (2001) as the basis of two case studies of international ERP implementations to examine the perceptions of ERP implementation project managers and compared these perceptions pre- and post- implementation. Umble et al (2003, pp 241 – 258) analysed the interaction of implementation procedures and critical success factors to identify the success factors, software selection steps and implementation
  • 16. - 16 - procedures critical to a successful implementation. A case study of a successful implementation is presented and discussed in terms of these key factors. Nah et al (2001, pp 285 – 296) identified 11 factors which are critical to ERP implementation success through a comprehensive literature review. The factors were classified into the respective phases in the Markus and Tanis’ ERP life cycle model and the importance of each factor was discussed. Gargeya and Brady (2005, pp 501 -516) analysed published articles on SAP implementations of ERP system in 44 companies to investigate the success and failure factors and identified six common factors that are indicative of successful or non-successful SAP implementations. The 11 factors that were identified by Nah et al (2001) as critical to ERP implementation success were used as the basis of the investigation. They also identified that ERP is not intended for every business and therefore a business case must be developed to provide an understanding of ERP and formally assess the benefits the company expects to achieve. A listing of tangible and intangible benefits of ERP systems was included. Ehie and Madsen (2005, pp545 – 557) reported the results of an empirical research study of the critical issues affecting successful ERP implementations. The study provided a good overview and identification of critical success factors used a case study approach to assess 38 factors. The study identified eight factors that attempt to explain 86% of the variances that impact ERP implementation and concluded that there was strong correlation between successfully implementing ERP and six out of the eight factors identified. Kim, Lee & Gosain (2005, pp 158 -170) studied the impediments to a successful ERP implementation process to identify 47 impediments and concluded that the most critical impediments are from functional coordination problems related to inadequate support from functional units and coordination among functional units, the project management related to the business process change and change management related to resistance of users. They used a good categorisation and description of the impediments with empirical analysis and compared the effect of impediments on more successful vs. less successful implementations. Al-Mashari et al. (2003, p352) presents ERP system implementation in a visually represented taxonomy that shows the interaction between the ERP benefits, the ERP implementation process (setting up, implementation and evaluation) and the evaluation of ERP success and includes an evaluation and description of each of thee components. ERP implementation Muscatello, Small and Chen (2003, pp 158 – 170) identified that ERP system vendors are turning their attention to small and medium-sized manufacturers, which would be more severely impacted in the event of an implementation failure. A case study approach involving four companies was used to investigate the implementation process in small and medium-sized manufacturers and compares implementation factors in groups by implementation phase. Haung et al (2004, pp 101 – 110) identified the increasing use by ERP package vendors to apply the “Best Practice” concept to transfer past successful experience to new ERP projects to make implementation more efficient and effective. The study investigated the influence of best practice in transplanting “Best Practice” from parent companies to subsidiaries and revealed positive impacts on ERP implementation through reducing cultural discrepancies, boosting project efficiency and empowering coordination of systems integration. This is true provided the same company cultures are applicable, but may not necessarily be applicable to a different company or industry. The study also verified that practical and theoretical studies gained similar CSF which verified that companies which posses the verified CSF can launch ERP successfully. Relationship of Business Process to ERP implementation Schniederjans & Kim (2003) determined that such factors as the use of Business Process Reengineering (BPR) and establishing a Total Quality Management (TQM) culture play important
  • 17. - 17 - roles in ERP implementation. They focussed on the survey of research to identify the successful implementation sequences of BPR and TQM with ERP and found that the both the sequence of implementation and the strategies selected to initiate ERP systems can significantly impact business performance success. Chen (2001, pp 374 -386) determined that many ERP failures could be attributed to inadequate planning prior to installation therefore chose to analyse several critical planning issues including needs assessment and choosing a right ERP system, matching business process with the ERP system, understanding the organisational requirements and economic and strategic justification. Okrent & Vokurka (2004, pp 637 – 643) describes process mapping and its significance to the success of an ERP implementation, highlighting “As-Is” and “To-Be” process mapping. An excellent figure showing key business flows with a description of six core processes and supporting technology impacted by ERP. They also include discussion of the project implementation team preparations and change management. Figure 4: ERP core process flows (Reproduced from Okrent and Vokurka, 2004) Kwasi (2004, pp 171 – 183) determined that the factors determined to be important for the successful implementation of ERP systems were generally based on the perceptions of senior members within the organisations implementing the systems. The perceptions of managers and end- users on selected implementation factors were studied and differences were found between the groups. It was identified that implementers should be aware of and understand these differences in order to develop appropriate intervention mechanisms such as training and communication to ensure successful ERP implementation. Al-Mashari & Zairi (2000, pp 156 – 166) describe a proposed model of best practice for SAP implementation. The central theme argues that a fully balanced perspective has to be taken for an effective SAP R/3 implementation. A focus on technical aspects at the cost of change management elements has proved to be far from successful. The article covers the major steps and essential competencies for SAP implementation and includes descriptions of model key element roles and strategic considerations in SAP R/3 implementations. Arif et al. (2005) compared alternative approaches to the implementation of enterprise information systems to examine the questions of whether the implementation of an enterprise information system was an information systems effort performed to support the business processes or a process re-engineering effort required to implement the pre-packages software system. They reached the conclusion that at the conceptual design level the process driven document solution to an enterprise information system was smaller, less complex and more flexible.
  • 18. - 18 - Gibson et al. (1999) identified that system development methodologies have evolved from technical approaches to an increased emphasis on Business Process Reengineering and that with the advent of Enterprise Resource Planning software packages are entering a new phase of maturity which pose different types of problems, centred on the alignment of the business processes with the standard software package and the project management of the implementation. Haung et al (2004, pp 101 – 110) identified the increasing use by ERP package vendors to apply the “Best Practice” concept to transfer past successful experience to new ERP projects to make implementation more efficient and effective. The study investigated the influence of best practice in transplanting BP from parent companies to subsidiaries and revealed positive impacts on ERP implementation through reducing cultural discrepancies, boosting project efficiency and empowering coordination of systems integration. This is true provided the same company cultures are applicable, but may not necessarily be applicable to a different company or industry. The study also verified that practical and theoretical studies gained similar CSF which verified that companies which posses the verified CSF can launch ERP successfully. Berchet &Habchi (2005, pp 588 – 605) presented a case study of the ERP implementation and deployment at Alcatel with a particular focus on the planning process in an ERP system. The article proposes a five stage deployment model, outlines the main results together with presentation of the risks and dysfunctions and the reasons for them. Includes a detailed model of the planning process that was built and used as a tool by key users at different stages of the planning process. Multi site implementation Gatticker (2002, pp 96 – 105) presents a case study of the implementation and effects of an ERP system in a manufacturing facility. The article presents the case that many of the publicised ERP related difficulties are due to the effect of ERP on business processes which is at the level of the individual manufacturing facility where the business processes actually take place. The analysis was according to a research model that attributes the effect of ERP’s on organisations to two classes of factors: implementation factors and ERP specific factors. The article presents some good insights, particularly into multi–site issues, and supports some success factors. Three important conclusions are reached: ERP implementations are business level initiatives, not IT projects, and it imperative that management view them as such, involving users has been recognised as an important factor for ensuring successful implementation of ERP and that two types of effects must be considered when thinking about ERP fit – the existence of package standards is fairly well acknowledged, but the fit between the plant and the ERP configuration which the organisation rather than the ERP software imposes on all of its plants, referred to as process standardisation and particularly relevant for multi- site, variable process organisations. Project management in ERP systems White (2005, pp 6 – 7) argued that ERP systems do not live up to claims to provide a project management solution and that projects have unique requirements that should not be compromised by the limitations of an ERP system. Knowledge Transfer Since the fit between the system and the processes in the business is critical to the implementation ERP implementation, Wang et al (2007, pp 200 – 212) proposed that knowledge about the ERP system must flow from those implementing the system to those responsible once in production. A model of knowledge transfer composed from existing theories of learning explains the effective knowledge transfer is assisted by the absorptive capacity of the learner (client) and the competence of the knowledge holder (consultant). The research findings were that a firm with greater internal knowledge stock will have a more successful ERP implementation, however it is also necessary to disseminate knowledge throughout the organisation. Management needs to foster the build up of internal knowledge stocks in order to stimulate the flow of knowledge transfer.
  • 19. - 19 - Change Management Aladwani (2001, pp. 266 – 275) identifies that ERP implementations commonly face an unwanted resistance to change from potential users, generally arising from habits and perceived risk. This article recommends that top management should deal proactively with this problem rather than reactively confronting it. An integrated, process oriented approach, based on marketing theories, for facing the problem of workers resistance to ERP is presented. The recommended approach includes studying the structure and needs of the users and causes of potential resistance among them; deal with the situation using appropriate strategies and techniques in order to introduce ERP successfully - a framework of change management strategies in phases, awareness strategies, feelings strategies and adoption strategies is suggested; and evaluate the status of change management efforts. Figure 5: A suggested framework for managing change associated with ERP (Reproduced from Aladwani, 2001) Critical Success Factors in ERP Implementations Implementing an ERP system is not an inexpensive or risk free venture. In fact 65% of executives believe that ERP systems have at least a moderate chance of hurting their businesses because of the potential for implementation problems. It is therefore worthwhile to examine the factors that to a great extent, determine whether the implementation will be successful. (Umble et al, 2003, pp 241 – 258) Plant and Willcocks in their literature review summarised the prior research relating to critical success factors: “A key research question in examining the deployment of ERP systems is centred on determining the critical success factors that lie behind a successful implementation. In fact the subject has been subject to a significant amount of prior research. Nah, Lau and Kuang undertook a literature search of ERP implementations and identified 11 CSF’s and considered their relationship to Markus and Tanis’s process-oriented ERP life cycle model. Gulledge and Sommer examined the issues around scoping business processes when splitting SAP instances. Parr and Shanks built on their earlier research into CSFs, identifying ten enabling factors, then using further case research to construct a project phase model for ERP implementation. Meanwhile an influential study by Somers and Nelson also examined literature for CSFs and took Cooper and Zmud’s six stage IT implementation process model as a basis for ranking and to categorise them by stage. The Somers – Nelson CSF classification was extended by Akermanns and van Helden who, through the application of a longitudinal case study, showed that inter-dependencies both direct and indirect exist within the success factors and importantly that “they all influenced each other in the same
  • 20. - 20 - direction i.e., all positive or negative, leading to a self perpetuating or cycle of good or poor performance”.” Figure 6: Taxonomy for ERP critical factors (Reproduced from Al-Mashari et al., 2003, p352) Al-Mashari et al. (2003, p352) developed the taxonomy for ERP critical factors which shows the inter-relationship between the ERP benefits, implementation and ERP success and is shown in the figure above. They stated that the link between ERP benefits and strategic goals, objectives or critical factors is therefore a relative one rather than in absolute terms of what specifically can be expected, and classified ERP benefits into five groups based on Shang and Sneddon (2000). In respect ERP success, they stated: “One of the major conditions for ERP systems to yield the desired benefits is how well they serve the delivery of the CFs. In the light of Lyttinen and Hirschheim’s (1987) definition of failure, success in IT projects can be seen as: • Correspondence success, where there is a match between IT systems and the specific planned objectives. • Process success, when IT project is completed within time and budget. • Interaction success, when users’ attitudes towards IT are positive. • Expectation success, where IT systems match users’ expectations.” The success and failure of ERP system implementations has been researched from all directions, Critical Success Factors, Impediments to success and Causes of Failures. The research has been conducted by various methods, developing lists of success and failure factors from first principles, analysis of existing literature, case study and response from implementers. Review of the results of the wide body of research indicates the factors remain the same but are viewed from different perspectives. A comprehensive analysis of the factors included in the articles detailed in the literature review determined that whether the literature reviewed success factors, causes of failure or impediments the factors considered are inherently similar. The number of factors considered in the various articles differed, as summarised in Table 1, but when the factors are compared it is identified that this is merely an indication of whether the factors are narrowly or broadly defined in terms of depth
  • 21. - 21 - and the degree of detail that the author considered appropriate for the study. Those articles which considered a greater number of factors provided more detail on particular aspects, but could be grouped together within the 22 factors defined by Somers and Nelson (2001) and these were considered to be the appropriate level of detail for this study. Source Secondary source (where applicable) Direction of focus Number of factors considered Somers & Nelson, 2001 Critical Success Factors 22 Nah, Lau & Kuang, 2001 Critical Success Factors 11 Umble, Haft & Umble, 2003 Critical Success Factors 9 Al-Mashari, Al-Mudimigh & Zairi, 2003 Critical Success Factors Huang, Hung, Chen & Ku, 2004 Critical Success Factors 9 Fang & Patrecia,2005 Nah, Lau & Kuang, 2001 Critical Success Factors 11 Gargeya & Brady, 2005 Nah, Lau & Kuang, 2001 Success / Failure Factors 6 Kim, Lee & Gosain, 2005 Impediments to success 47 Ehie & Madsen, 2005 Critical Success Factors 38 Finney & Corbett, 2007 Critical Success Factors 26 Plant & Willcocks, 2007 Somers & Nelson, 2001 Critical Success Factors 22 Table 1: Summary of Reviewed Articles on Critical Success Factors of ERP Implementation The importance of particular CSFs also varies dependant on the phase of the implementation in progress. This was also an important element of the research by Somers and Nelson (2001) whose investigation was conducted with various organisations at different stages of the implementation process from early implementation to companies that had completed implementation a year before with similar numbers in each stage, and resulted in the identification of the top five CSFs in each of the six phases of implementation process as defined by Cooper and Zmud (1990). The comparative table of these results has been extracted from the article and is shown Appendix 2 for reference. Plant and Willcocks (2007) also considered the changes of ranking of CSFs as the implementation moves through various implementation phases in two case studies and presented the results for each case. In order to consider the effect of the critical success factors on ERP implementation and to evaluate how they should be used in the implementation process it is necessary to describe the nature and application of each of the critical success factors being used. The factors are detailed below in order of importance according to the results of Somers and Nelson (2001) Top Management Support The commitment of top management to the diffusion of innovations throughout an organisation has been well documented. In particular, early in a project’s life, no single factor is as predictive of its success as the support of top management. The roles of top management in IT implementations include developing an understanding of the capabilities and limitations of IT, establishing reasonable goals for IT systems, exhibiting strong commitment to the introduction of IT and communicating the corporate IT strategy to all employees. Research on project failures shows that project cancellations occur when senior management delegates progress monitoring and decisions at critical junctures of the project to technical experts. (Somers and Nelson, 2001) Top management support is needed throughout the implementation. The project must receive approval from top management and align with strategic business goals. Top management needs to publicly and explicitly identify the project as a top priority. Senior management must be committed with its own involvement and willingness to allocate valuable resources to the implementation effort. (Nah et al, 2001, pp 285 – 296) Successful implementations require strong leadership, commitment and participation by top management. (Umble et al, 2003, pp 241 – 258) Support from top management encourages support
  • 22. - 22 - from others in the organisation and helps overcome resistance. Management involvement may be particularly critical for ERP success because of the massive transformations required by these systems. (Gatticker, 2002, pp 96 – 105) As in many major change efforts, objections and disagreements arise in the process of reengineering and ERP implementation can only be solved through personal intervention by top management. (Chen, 2001, pp 374 -386) Project team competence Another decisive element of ERP implementation success or failure is related to the knowledge, skills, abilities, and experience of the project manager as well as the selection of the right team members, which should not only be technologically competent but also understand the company and its business requirements. The skills and knowledge of the project team is important as is the use of consultants to provide expertise in areas where team members lack knowledge. (Somers and Nelson, 2001) Management commitment should look beyond the technical aspects of the project to the organisational requirements for a successful implementation. (Chen, 2001, pp 374 -386) The implementation team must span the organisation and possess a balance of business and IT skills. (Finney and Corbett, 2007, pp 329 – 347) The team should be cross functional and have a mix of consultants and internal staff so the internal staff can develop the necessary skills for design and implementation. The team should be familiar with the business functions and products so they know what needs to be done to support major business processes. (Nah et al, 2001, pp 285 – 296) The team should have the necessary skills to probe for details when conducting the planning phase of the implementation. Once the team has been established it might be necessary to train the individuals. (Finney and Corbett, 2007, pp 329 – 347) Top management must recognise that ERP implementations require the use of some of the best and the brightest people in the organisation for a notable period of time. Top management must identify those people, free them from present responsibilities, organise them into an interdisciplinary team, and empower then for the responsibility of the project. (Chen, 2001, pp 374 -386) These people should be entrusted with critical decision making responsibility. Management should constantly communicate with the team, but should also enable empowered rapid decision making. (Umble et al, 2003, pp 241 – 258) Inter-departmental cooperation A key factor for the successful implementation of ERP systems requires a corporate culture that emphasises the value of sharing common goals over individual pursuits and the value of trust between partners, employees, managers and corporations. As ERP systems cross functional and departmental boundaries, cooperation of all involved appears to be critical. ERP potential cannot be leveraged without strong coordination of effort and goals across business and IT personnel (Somers and Nelson, 2001). Users (rather than the IS function acting alone) having an active role in information systems projects results in communication and consideration of their business needs. Broad representation on planning and implementation teams is associated with the successful implementation of other types of advances manufacturing technologies as well. (Gatticker, 2002, pp 96 – 105) Another aspect which can be considered as an impact on inter-departmental cooperation in the implementation of an ERP system is the multi-site issues that arise. These have been considered separately. Clear goals and objectives The goals and objectives which are required are two-fold - in the short term the project implementing the ERP system and in the long term the operation of the ERP system resulting in the operating benefits to the organisation. Both aspects are critical to the management of the project and the system and to identifying the associated expectations which will have to be managed. The
  • 23. - 23 - vision, goals, objectives and expected benefits are crucial to the success of the ERP system since it will be difficult to achieve the many interrelated critical success factors to support, manage, communicate and train without clearly stated and communicated vision, goals and objectives. The initial phase of any project should begin with a conceptualisation of the goals and possible ways to accomplish those goals. Goals should be clarified so that they are specific and operational and indicate the general directions of the project (Somers and Nelson, 2001). The organisation must carefully define why the ERP system is being implemented and what critical business needs the system will address. ERP implementations require that key people throughout the organisation create a clear, compelling vision of how the company should operate in order to satisfy customers, empower employees, and facilitate suppliers for the next three to five years (Umble et al, 2003, pp 241 – 258). Understanding corporate objectives, order qualifiers and winners, process choices and support infrastructure provides the ERP team valuable knowledge for developing business cases, performance measurements (current and future), long term strategic and tactical goals and package selection techniques (Muscatello, Small and Chen, 2003, pp 158 – 170). The vision and business knowledge must be used to develop a clear business plan and vision to steer the direction of the project throughout the ERP life cycle. A business plan that outlines proposed strategic and tangible benefits, resources, costs, risks, and timeline is critical. This will help focus on the business benefits. (Nah et al, 2001, pp 285 – 296) The short term aspect of the requirements of vision, goals and planning for installation and implementation are addressed in more detail under project management, but in short as stated by Somers and Nelson (2001): “The triple constraint of project management specifies three often competing and inter-related goals that need to be met: scope, time and cost goals. Many ERP installations face scope creep as a result of lacking a clear plan.” Project Management The importance project management in IT projects is well documented. Project management activities span the life of the project from initiating the project to closing it. Project planning and control is a function of the project’s characteristics such as project size, experience with the technology and the project structure. The vast combination of hardware and software and the myriad of organisational, human and political issues make many ERP projects huge and inherently complex. (Somers and Nelson, 2001) Successful ERP implementation requires that the organisation engage in excellent project management. This includes a clear definition of objectives, development of both a work plan and a resource plan, and careful tracking of the project progress. And the project plan should establish aggressive, but achievable schedules that instil and maintain a sense of urgency. (Umble et al, 2003, pp 241 – 258) The project must be formally defined in terms of its milestones and the critical paths determined. Timeliness of the project and the forcing of timely decisions should be managed. (Nah et al, 2001, pp 285 – 296) Clear definition of the project objectives and a clear plan will help the organisation to avoid “scope creep” which can strain the ERP budget, jeopardise project progress, and complicate the implementation. The project scope must be clearly defined at the outset of the project and should identify the modules selected for implementation as well as the affected business processes (Umble et al, 2003, pp 241 – 258). Customisation increases the scope of an ERP project and adds time and cost to an implementation. The minimal customisation strategy discussed later, which allows little if any user suggested changes and customisations, is an important approach to managing the scope of an ERP project (Somers and Nelson, 2001). Any proposed scope changes and scope expansion requests should be assessed in terms of the additional time and cost and be evaluated against business benefits and as far as possible implemented at a later stage (Nah et al, 2001, pp 285 – 296). One of the challenges with ERP implementation is that it demands multiple skills covering functional, technical and inter-personal areas. If these skills are found in a consulting firm then it becomes another challenge to manage such a consultant. (Al-Mashari et al., 2003, p352)
  • 24. - 24 - Inter-departmental communication Effective communication is critical to ERP implementation. Expectations at every level need to be communicated. Management of communication, education and expectations are critical throughout the organisation. (Nah et al, 2001, pp 285 – 296) Communication has to cover the scope, objectives, and tasks of an ERP implementation project (Al-Mashari et al., 2003, p352) and includes the formal promotion of project teams and the advertisement of project progress to the rest of the organisation. (Nah et al, 2001, pp 285 – 296). User input should be managed in acquiring their requirements, comments, reaction and approval. Communication is one of the most challenging and difficult tasks in any ERP project. (Al-Mashari et al., 2003, p352) Slevin and Pinto identified communication as a key component across all ten factors of their Project Implementation Profile and maintained that “communication is essential within the project team, between the team and the rest of the organisation, and with the client”. (Somers and Nelson, 2001) Management of expectations Information system failure has been defined as “the inability of an IS to meet a specific stakeholder group’s expectations” and successfully managing user expectations has been found to be related to successful systems implementation. Expectations of a company may exceed the capabilities of the system. Careful deliberations of success measurement as well as management of expectations by the implementation manager are important factors (Somers and Nelson, 2001). The measures should indicate how the system is performing, but must also be designed so as to encourage the desired performance by all functions and individuals. Such measures might include on-time deliveries, gross profit margin, customer order to ship time, inventory turns, vendor performance, etc. (Umble et al, 2003, pp 241 – 258) Umble et al (2003) also identified that due to complexity of the systems, performance and productivity may decline after implementation, before improving as users become familiar with the system. This is another aspect of expectations to be managed. Project Champion The project should be spearheaded by a highly-respected executive level project champion. (Umble et al, 2003, pp 241 – 258) Somers and Nelson stated “The success of technical innovations has often been linked to a champion who performs the critical functions of transformational leadership, facilitation and marketing the project to users. Project champions should own the role of change champion for the life of the project and understand the technology as well as the business and organisational context. One advantage of positioning the champion high in the organisation is associated with the authority to move large and complicated projects through the transition.” Muscatello et al (2003) stated that executives that used a proactive approach to ERP implementation were the most successful, focussing on the longer term contributions to the system over the next three years and refuse “short term” corporate expectations by saying no when the expectations on evaluation, risked the ERP project goals. Ongoing vendor support ERP systems are a way of life and may be a lifelong commitment for many companies. There will always be new modules and versions to install and better fits to be achieved between the business and the system. Consequently, vendor support represents an important factor with any packages software including extended technical assistance, emergency maintenance, updates and special user training. (Somers and Nelson, 2001) Careful selection of appropriate package Careful selection of the appropriate package involves important decisions regarding budgets, timeframes, goals and deliverables that will shape the entire project. Choosing the right ERP packages software that best matches the organisation information needs and processes is critical to
  • 25. - 25 - ensure minimum modification and successful implementation and use. Selecting the wrong software may mean a commitment to architecture and applications that do not fit the organisation’s strategic goal or business processes. (Somers and Nelson, 2001) Data analysis and conversion A fundamental requirement for the effectiveness of ERP systems is the availability and timeliness of accurate data. Data problems can cause serious implementation delays, and as such, the management of data entering the ERP system represents a critical issue throughout the implementation process. Within the company, the challenge lies in finding the proper data to load into the system and converting all those disparate data structures into a single, consistent format. Conversion can be an overwhelming process, especially if companies do not know what needs to be included in the new systems and what needs to be omitted. In addition, the interfaces with other internal and external systems require the ability to handle complex data sources and legacy data types. (Somers and Nelson, 2001) Dedicated Resources Dedicated resources are critical to realize the benefits associated with an ERP package. Resource requirements need to be determined early in the project and often exceed the initial estimates and the inability to secure resource commitments up front may doom project efforts. (Somers and Nelson, 2001) The successful project team is cross-functional, consisting of the most knowledgeable people in the organisation. The ERP project should be their top and only priority and their workload should be manageable, therefore team members need to be assigned full time to the implementation (Nah et al., 2001). Lockheed Martin, a leading aeronautical group, stated one of the keys to success was “assembling a team capable of making and executing” the changes required. (Gargeya and Brady, 2005, pp 501 -516) Steering Committee Since executive level input is critical when analysing and rethinking existing business processes, the implementation should have an executive level planning committee that is committed to the enterprise integration, understands ERP, fully supports the costs, demands payback and champions the project. (Umble et al, 2003, pp 241 – 258) To make ERP succeed, it is necessary to form a steering committee or group of “superusers”. A project management structure with a steering committee consisting of senior managers from across different corporate functions, project management representatives, and end users who will have daily contact with ERP, is an effective means of ensuring appropriate involvement. A steering committee enables senior management to directly monitor the project teams decision making by having ratification and approval rights on all major decisions, thereby ensuring that there are adequate controls over the team’s decision making processes. (Somers and Nelson, 2001) User training and education Education and training is probably the most widely recognised critical success factor, because user buy-in and understanding is essential (Umble et al, 2003, pp 241 – 258). The role of training to facilitate implementation is well documented in the MIS literature. Lack of user training and failure to completely understand how enterprise applications change business processes frequently appear to be responsible for problem ERP implementations and failures. At a minimum, everyone who uses ERP systems need to be trained on how they relate to the business process early on in the implementation process. (Somers and Nelson, 2001). ERP implementation requires a critical mass on knowledge to enable people to solve problems within the framework of the system. If employees do not understand how the system works, they will invent their own processes using the parts of the process they are able to manipulate. (Umble et al, 2003, pp 241 – 258) ERP training should address
  • 26. - 26 - all aspects of the system, be continuous and based on knowledge transfer principles wherever consultants are involved (Al-Mashari et al., 2003, p352). Muscatello et al (2003) determined that training should include fundamental education on ERP systems and technical training in the usage of ERP software. Much of the learning process comes from hands on use under normal operating conditions therefore there should be ongoing contact with all system users and also post-implementation training. Periodic meetings of system users can help identify problems with the system and encourage exchange of information gained through experience and increasing familiarity with the system. (Umble et al, 2003, pp 241 – 258) Executives often underestimate the level and associated costs of education and training necessary to implement an ERP system and an adequate allowance should be made in the ERP budget. There is a suggestion that reserving 10 – 15% of the total ERP implementation budget for training will give the organisation an 80% chance of implementation success. (Umble et al, 2003, pp 241 – 258) Education on a new business process When considering implementation coupled with business process reengineering, it is imperative for managers to educate and communicate their goals and long term perspectives in order to win support of all members of the organisation affected by the changes. (Somers and Nelson, 2001) Business Process reengineering Somers and Nelson (2001) summarised the relationship of ERP and BPR: “One of the problems associated with implementing packaged software is the incompatibility of features with the organisations information needs and business processes. To achieve the greatest benefits provided by an ERP system, it is imperative that the business processes are aligned with the ERP system. Both the reengineering literature and the ERP literature suggest that an ERP system alone cannot improve organisational performance unless an organisation restructures its business processes. According to Willcocks and Sykes, the new business model and reengineering that drives technology is an enabling factor that can contribute to ERP success. In order to maximise the benefits of ERP investments, the supplementary redesign of the business processes promises the highest ROI, bust also increases the level of complexity, risks and costs.” By its very nature ERP has given rise to competing ERP software packages that serve as enterprise information systems, each with its own known list of ideal business processes. (Arif et al., 2005) Thus, buying an ERP package means much more than purchasing software, it means buying into the software vendor’s view of best practices for many of the company’s processes. A company that implements ERP must for the most part accept the vendor’s assumptions about the company and change the existing processes and procedures to conform to them. (Umble et al, 2003, pp 241 – 258) The real competitive advantage brought by the ERP systems appear to hinge on who can achieve a tighter, smoother fit between its business processes and the ERP system. (Chen, 2001, pp 374 -386) Minimal customisation Minimal customisation which involves using the vendor’s code as much as possible even if this means sacrificing functionality has been associated with successful ERP implementations. (Somers and Nelson, 2001) It has been identified that each ERP model has been developed to function around a particular integrated business model. Whilst customisation is possible, there are clear arguments for minimising customisation by re-engineering the business operation to maximise the use of the business model of the selected ERP package, which makes the fit between the package and the business an important criteria in the selection phase. This is emphasised by Somers and Nelson (2001) who quoted a survey of Fortune 1000 companies regarding ERP customisation policies which indicated that 41% of companies reengineer their business to fit the application, 37% of companies choose applications that fit their business and customise a bit and only 5% customise the application to fit their business. Gargeya and Brady (2005) stated: “Successful companies have recognised the importance of “cleaning up” their operations, which will allow them to implement “vanilla” SAP – with minimal
  • 27. - 27 - customisation. Even though the so-called “vanilla” approach is adopted by two thirds of implementing companies, some customisation will always be required to meet individual needs. The key it appears is to know how much to customise. Colgate-Palmolive, a US$9 billion consumer products manufacturer, implemented SAP in 41 countries in 1998 and CIO Ed Toben puts the requirement in clear terms: “This is complicated stuff, you have to do everything you can to simplify it”.” The arguments for minimal customisation are predominantly based on maintaining the functionality and upgradeability of the package and minimising the scope of work and hence cost of the implementation. Somers and Nelson (2001) concluded: “Because customisations are usually associated with increased information systems costs, longer implementation time and the inability to benefit from vendor software maintenance and upgrades, customisation should only be requested when essential or when the competitive advantage derived from using non-standard processing can be clearly demonstrated. Management has the ultimate choice of changing the process to fit the system or changing the system to fit the process.” Defining the architecture Somers and Nelson (2001) stated: “While successful ERP implementation is often determined by business and organisation changes, architecture choices deserve thorough consideration through the system procurement phase. Key architectural considerations, which should occur very early in the implementation process revolve around centralisation or decentralisation, compatibility of existing tools within the enterprise with the ERP system, and the identification of bolt-ons such as data warehouses. Feeny and Willcocks identified architecture planning as a core IT capability and stressed that this cannot be cast aside to ERP suppliers.” Change Management Managing change is a primary concern of many involved in ERP implementations. It is estimated that half the ERP implementations fail to achieve expected benefits because companies “significantly under-estimate the efforts involved in change management”. (Somers and Nelson, 2001). Unfortunately, many chief executives view ERP as simply a software system and the implementation of ERP as primarily a technological challenge. They do not understand that ERP may fundamentally change the way in which the organisation operates. The ultimate goal should be to improve the business – not to implement software. (Umble et al, 2003, pp 241 – 258). ERP systems introduce large scale change that can cause resistance, confusion, redundancies and errors. Aladwani (2001, pp. 266 – 275) identifies that resistance to change from potential users, generally arises from habits and perceived risk and recommends that top management should deal proactively with this problem rather than reactively confronting it. Research has shown that effective change management is critical to successful implementations of technology and business process reengineering. (Somers and Nelson, 2001) The concept of change management refers to the need for the implementation team to formally prepare a change management program (Nah et al, 2001) and be conscious of the need to consider the implications of such a project. One key task is to build user acceptance of the project and a positive employee attitude. This might be accomplished through education about the benefits and need for an ERP system. (Finney and Corbett, 2007, pp 329 – 347). Umble et al (2003, pp 241 – 258) identified that through the use of proper change management techniques, the company should be prepared to embrace the opportunities presented by the new ERP system – and ERP will make available more information and make attainable more improvements than at first seemed possible. The organisation must be flexible enough to take full advantage of these opportunities Vendor / customer partnerships Somers and Nelson (2001) stated: “Vendor / customer partnerships are vitally important to successful ERP projects. Research has shown that a better fit between the software vendor and user organisation is positively associated with packaged software implementation success and that organisations should attempt to maximise their compatibility with their vendors. The relationship
  • 28. - 28 - between the software buyer and the vendor should be strategic in nature with the ERP provider enhancing an organisation’s competitiveness and efficiency.” Use of vendors’ development tools Somers and Nelson (2001) stated: “There are indications that rapid implementation technologies and programs provided by the vendors can significantly reduce the time and cost of implementation of ERP systems. An additional goal of implementation tools is the transfer of knowledge with respect to using the software, understanding the business processes within the organisation, and recognising industry best practices. Accelerators provided by vendors include business-process modelling tools that link business models to the software, templates for industry specific business practices, and bundling of server hardware with ERP software, or offering combined packages of software, services and support.” Use of consultants Somers and Nelson (2001) stated: “Many organisations use consultants to facilitate the process. Consultants may have experience in specific industries, comprehensive knowledge about certain modules, and may be better able to determine which suite will work best for a given company. Consultants may be involved in various stages of the implementation: performing requirements analysis, recommending a suitable solution, and managing the implementation. While opinions vary with respect to what third parties should be able to control, the company should keep full control and accept full responsibility for all phases of the project.” Evaluation of the Critical Success Factors in the Company at ERP System Pre- implementation Stage Research was conducted with a group of employees of the Company which was at the pre- implementation stage of a project for the implementation of an ERP system. The group were all people that had been used by the Company in the process of evaluation of selected ERP software packages. The intention was to evaluate the opinions and perceptions of those employees with regard to the Critical Success Factors which were identified by the literature review. Method Following review of the literature on critical success factors and related issues a questionnaire was developed to solicit opinions regarding:- • The importance of critical success factors in the implementation of an ERP system. • The reasons for requirement for the ERP system. • The benefits expected from the system. • The relative importance of the modules and functions expected to be available in an ERP system. • The Company strategic requirements of the ERP system. The questionnaire was distributed by e-mail to a group of managers and colleagues that had been involved in evaluating the demonstrations by potential vendors ERP software packages which had been short-listed by the company. The group included executive managers, managers, IT personnel and users. The primary aim of the study was to determine the opinions of these persons regarding the expected effect of critical success factors on the implementation process, in the current position of pre- implementation of the ERP system. The selection of 22 critical success factors developed and used by Somers and Nelson (2001) in their study was considered to provide the optimum description of CSFs. These critical success factors were selected to be the basis of the primary section of the questionnaire. This also presented the opportunity to compare the results from this questionnaire to
  • 29. - 29 - those previously obtained by Somers and Nelson, thus providing a direct comparison between our current situation and the theoretical knowledge arising from the literature review. The analysis of the literature review identified that many detailed factors presented in literature and previous studies could be grouped in association with the primary CSFs at the level considered in the primary section. These would provide an additional level of evaluation and therefore a deeper understanding of the expected effects of the critical success factors on the implementation. A compilation of these more detailed critical success factors from various literature sources was developed and grouped as subsets of the Somers and Nelson CSF’s and presented in a second section of the questionnaire. The taxonomy of critical success factors developed by Al Mashiri identified an inter-relationship between ERP implementation, critical success factors and ERP benefits. It was therefore considered pertinent to consider the opinions on expectations of the ERP system in the study. The preliminary section of the questionnaire was therefore developed as a compilation of various reasons for requirement for an ERP system, the potential benefits of the ERP system and the expected functions which the ERP system should perform. In order to avoid influence of the selections made by respondents all sections of the questionnaire were sorted in alphabetical order. The questionnaire also included two other preliminary questions: • The role performed by the respondent - to be used to analyse any variation between different staff groups, and • The respondent’s description of the strategic goals of implementing the ERP system which was required to determine if there was a common understanding of these strategic goals. This question was intended to test the hypothesis that there was no commonly agreed or clearly communicated strategic vision and goals for the project. The questionnaire was distributed by e-mail to a group of 34 managers and colleagues that had participated in evaluating ERP software vendor demonstrations. The group covered a range of company personnel including executive managers, managers, IT personnel (including managers) and users. Results Responses were received from 30 members of the group, a very high response rate of 88.2%, with one of the non-respondents having left the company. The high response rate was advantageous because the initial size of the sample was small. The responses included four responses from members that did not consider they were sufficiently knowledgeable or qualified to complete the questionnaire. There was also one shared response from two participants. This provided 25 completed and valid questionnaires (73.5%). The results were classified by company position, with only one position being used even though some members could technically fit in two groups, and included responses as follows: Executive managers, 4; Managers, 14; IT personnel, 3 and users, 5. The results calculated and ranked for each question were the mean and the standard deviation, primarily as an overall group and then also for each of the four groups based on role. These were ranked in order of the mean for each group. The main results for the overall group, ranked in order of the mean score for each of the primary Critical Success Factors are presented in Table 2. The corresponding results achieved by Somers and Nelson are shown for comparison. The detailed analysis of the primary critical success factors and the secondary results of evaluation: the reasons for requirement for an ERP system, the expected benefits, ERP functional requirements and the more detailed level Critical Success Factors, including the results for each position group are presented in Appendix 1.
  • 30. - 30 - Critical Success Factor Overall Somers & Nelson (2001) Mean Stddeviation Rank Mean Stddeviation Rank Top Management Support 4.85 0.37 1 4.29 1.16 1 User training 4.81 0.40 2 3.79 1.16 14 Project Management 4.81 0.40 3 4.13 0.96 5 Project Team Competence 4.81 0.40 4 4.20 1.07 2 Project Champion 4.75 0.53 5 4.03 1.58 8 Clear goals and objectives 4.73 0.45 6 4.15 1.14 4 Change Management 4.67 0.92 7 3.43 1.34 19 Education on new business processes 4.65 0.49 8 3.76 1.18 15 Dedicated resources 4.64 0.57 9 3.81 1.25 12 Careful package selection 4.58 0.58 10 3.89 1.06 10 Steering committee 4.50 0.65 11 3.79 1.95 13 Inter-departmental Co-operation 4.50 0.76 12 4.19 1.20 3 Vendor support 4.38 0.75 13 4.03 1.60 9 Management of expectations 4.33 0.87 14 4.06 1.37 7 Inter-departmental communication 4.31 0.62 15 4.09 1.33 6 Data analysis and conversion 4.24 0.72 16 3.83 1.27 11 Minimal customization 4.08 1.09 17 3.68 1.45 17 Vendor Tools 4.04 0.77 18 3.15 1.57 21 Vendor Partnership 4.00 0.69 19 3.39 1.21 20 Business Process Re-engineering 4.00 1.00 20 3.68 1.26 16 Architecture choices 3.87 0.97 21 3.44 1.19 18 Use of Consultants 3.58 0.95 22 2.90 1.20 22 Table 2: Critical Success Factors – results and comparison to Somers and Nelson (2001) The responses concerning each individual’s understanding of the Company ERP system strategic goals have been presented in Appendix 2. The mean value provides a result which identifies the level of support for each factor or agreement or disagreement with a question. These have been ranked by mean value to identify the relative importance of each factor. The standard deviation provides a means to evaluate and compare the degree of agreement between respondents on each factor. Lower values of standard deviation indicating a high degree of agreement on the mean value whilst higher standard deviations indicate a broader range of values included in the responses. The term score will be used to describe the result which is the mean value for each group. In order to make general comparisons between groups, an average score per group for each range of questions has been calculated. As a general indication based on the scoring values and the use of averages, for the critical success factors, which were scored on a 1 to 5 scale, the results can be interpreted as follows:- • A score of greater than 4.5 shows that the majority opinion was that the factor or question was considered extremely important for success.
  • 31. - 31 - • A score of 3.5 to 4.5 indicates the factor was considered important for success. • A score of 2.5 to 3.5 indicates the factor was considered neutral. • Scores less than 2.5 indicate the factor was not considered important. The questions relating to reasons for use, the benefits and functions of the ERP system used a scoring range of 1 to 10. Scores above 5 indicate agreement with the question, the higher the score the greater the degree of agreement, and scores below 5 indicate disagreement and the lower the score the stronger the disagreement. With a few minor exceptions and anomalies, there was found to be agreement in general terms between the four selected groups. Some minor differentiation is identified in values and ranking, but for the most part the results are generally similar. In the small group sizes, there were some concentrations of results at very similar values. Variation between the opinions of the groups has therefore been ruled out for the purposes of the study and the remainder of the analysis will concentrate on the overall group as the indicator of values. It was noted that the scores are often very close together and that very minor differences affect the ranking of results. However it was also identified that there is reasonable correlation on the ranking in that the top factors and bottom factors are in similar groups of results. Discussion Primary Critical Success Factors The results show very strong support and agreement that each of these is a critical success factor. The average score of the overall group is 4.41 which verges on indicating that the whole group of 22 critical success factors are extremely important for success. Twelve of the twenty two factors were considered extremely important for success and the remainder were important for success. The results support the critical success factors more strongly than the Somers and Nelson results in 2001, with an average score of 4.41 compared to 3.81 and also the closer agreement on each factor and the overall results, as indicated by the average standard deviation of 0.68 compared to 1.30 for Somers and Nelson. The stronger agreement with these critical success factors may be caused by a number of factors: • Increased knowledge of ERP systems has been developed and published over recent years making managers more aware of the critical issues. • General changes in management awareness and thinking. • Influence from ERP software vendors, themselves be more knowledge and aware of published research, educating potential clients on these issues during the process of negotiation and evaluation demonstration of their products. The top few critical success factors; top management support, User training, project management, project team competence, project champion and clear goals and objectives, show that there is a very strong awareness of the importance of these factors in generating a success outcome of an ERP implementation project. There was some degree of correlation between the rankings in the two studies, although some changes in ranking are also evident. Top management support was the highest ranking factor in both of the studies and project management, project team competence, project champion and clear goals and objectives all rank very highly in both. In this study, user training and change management have both achieved much higher rankings which is probably indicative of increasing awareness of the critical importance of these two factors. Detailed Critical Success Factors The following table summarises the averages scores of the groups of detailed critical success factors. Apart some from minor variations this shows good correlation with the primary critical success factors. Some detailed questions affect the average results for some factors, such as the
  • 32. - 32 - questions regarding the use of a “big bang” approach resulted in strong disagreement. The overall result does however indicate that the critical success factors are also supported in the same manner at the more detailed level. Critical Success Factor Average of detail CSF groups Overall Mean Std deviation Rank Mean Std deviation Rank Top Management Support 4.47 0.60 1 4.85 0.37 1 Inter-departmental Co-operation 4.46 0.62 2 4.50 0.76 12 Clear goals and objectives 4.28 0.78 3 4.73 0.45 6 Project Management 4.07 0.81 4 4.81 0.40 3 Project Team Competence 4.03 0.70 5 4.81 0.40 4 Change Management 4.02 0.82 6 4.67 0.92 7 Business Process Re-engineering 3.88 1.08 7 4.00 1.00 20 Table 3: Detailed Critical Success Factors – Results and comparison to primary CSF results The overall results for inter-departmental cooperation achieves a higher result than the primary CSF itself and is an indication that when the detailed level factors are considered directly they provide some insight into issues that have to be addressed and hence may achieve strong support at the detailed level. This is also indicative of the fact that all of the primary factors were considered to be important. The results of the detailed questions provide the implementation project team strong support to pursue the requirements of these detailed critical success factors and provide some insight into the opinions regarding the relative importance of factors. Top Management Support The results of the detailed questions clearly support the fact that this ranks highest amongst the critical success factors and it is worth highlighting the three of these: the project requires strong leadership, commitment and participation by top management and executives is critical and the requirement for top management to define the strategic factors and overall implementation strategy, and further, communicate these to the organisation which is essential to define the expectations against which the outcome of the implementation will eventually judged. Inter-departmental Co-operation This factor ranked twelfth of the primary critical success factors (4.50). It was second (4.46) when the detailed factors were considered, which indicated that when the detailed requirements of the primary critical success factors are investigated they may provide a deeper insight into the importance to the implementation. The detailed factors included many important considerations, particularly with a multi-site and division structure, and highlighted the importance of communication as part of cooperation and the implementation of mechanisms to resolve cross- functional differences which are likely to occur. Two factors were considered extremely important; communication between the project team and functional units and communication between the project team and consultants. All other factors were considered important, particularly the remainder of the top five factors which all verged on being rated extremely important; communication between functional units and stakeholders, management of conflicts of interest between functional units and the willingness to accept changes from other units. Clear goals and objectives This factor ranked sixth in the primary critical success factors (4.73) and third amongst the detailed CSFs (4.28), indicating that the detailed factors also supported the importance to success of
  • 33. - 33 - implementation. Two factors were considered extremely important; clear understanding of strategic goals including expectations and deliverables (4.58) and the ERP implementation plan and vision (4.50) and the other two factors were both considered important; performance measures for the system and to a lesser degree evaluation of the return on investment of the system. The importance of strategic direction and understanding the expectations of deliverables as well as the implementation business plan should be evident as normal management function. It is not possible to achieve the objectives of a project if it is not known what those objectives are and at the end of the project, how will it be measured as a success of failure if the expectations were unknown when the project commenced. This was raised in the questionnaire as a direct question to evaluate the understanding of the team members of the strategy and goals and those results are important and considered in a separate section. Project Management The results of detailed critical success factors that were related to project management confirm the primary critical success factor score as an important factor. The score has been distorted by the inclusion of questions relating to the implementation process using “big bang” or phased method, particularly the “big bang” approach with which the majority of respondents disagreed. Disregarding those two factors increases the average detailed score to 4.26 which still ranks 4th . Thirteen of the 16 factors in this group were considered to be important, including five that were considered extremely important for success: Educate the team about ERP implementation, Use excellence in project management, the composition and teamwork of the implementation team, ownership of the project by the team and maximum use of in-house expertise. A further important factor which verged on extremely important was project team solely dedicated to ERP implementation which is an important consideration in selecting the team and balancing this project with the fact that the existing staff members likely to have the most to contribute will also be important to the normal operations of the organisation. Project Team Competence Project team competence ranked fourth in the primary critical factors with a score of 4.81 indicating that it was considered extremely important. With a score of 4.03 it ranked 5th in the detailed critical factors therefore supporting its importance and all except one of the factors rated important or above. The top five factors included two considered extremely important; team includes people with knowledge of financial and manufacturing processes (4.54) and a great implementation team is required (4.50) and three that were considered important but close to the top end of the scale; balanced and empowered team (4.46), selection of the right employees (most knowledgeable and dedicated) (4.35) and resources to be committed from functional units (4.23). These are therefore some critical decisions to be made prior to start of implementation. Change Management Change management ranked 7th in primary critical success factors and 6th in the average of the detailed factors. Change management is an extremely important factor. The first detailed factor, requirement for a change management program and culture was considered extremely important whilst most of the remainder of factors were considered important. The results did not favour IT department, top down or consultant driven implementations. Business Process Re-engineering This ranked last of the groups of detailed critical success factors which were evaluated. This corresponds to the fact that it ranked 20th of the 22 primary CSFs, but with scores that still considered it to be an important factor for success at both the primary and detailed level. This seems to reflect that business process reengineering is not considered amongst the primary reasons for implementing an ERP system, but is known to have an effect on the implementation process. This requirement is highlighted in the top detailed factors being standardisation of business processes to the extent possible and that the company business processes must be aligned to those of the ERP
  • 34. - 34 - system in order to be most successful. The majority of the detailed factor scores were in the important range, with only the last which questioned the ERP software being integrated into the existing business processes being considered neutral which corresponds to the fact that this is not a recommended approach. Reasons for requirement for the ERP system The responses offered strong support for the reasons which reflected the requirements expressed by many of the respondents in the questions on company ERP strategic goals. These mostly reflected the planning for future growth, requiring an integrated information system which supports the requirements of the organisation including resource and project planning capabilities not available in the existing system. At the bottom end of the scale, the ability to compete globally was the least supported reflecting the company position as a national rather than international organisation. These responses provide a good basis for establishing more formal statements strategy, goals and expectations. Potential Benefits – tangible and intangible The range of possible benefits, both tangible and intangible, were well supported at an above average to high levels. At the top end of the scale these reflect the need for improvements in information flows in support of planning and decision making, productivity and resource / project management improvements and visible integrated information which is credible and accurate supporting customer service improvements. The least supported benefits are those which are already well controlled by exiting system; personnel and inventory reductions, procurement and logistic cost reductions or which are not improvements expected from the system in product differentiation, business innovations and globalisation. ERP Functions The standard ERP functions are all very highly supported as reflected by the lowest score being a relatively high 7.16. The ranking of the functions will be of use in determining the relative importance with the highest focus on financial management and high levels of interest in quoting and proposals management, project and resource management, planning, scheduling and control. Company ERP Strategy The responses concerning each individual’s understanding of the company strategy in considering the implementation are presented in appendix 2, which presented 25 different interpretations. Some of these are short, others longer and including more detailed goals, and to some extent include a few common themes. The responses were grouped into logical sections to identify any common themes in the groups. Most significantly, apart from similarities between two executive general managers of two of the main Strategic Business Units within the company operations, the executive general manager group responses do not present a common understanding of company ERP implementation strategy, and it follows that none of the other groups do either. There is an element of the importance of the level of strategic goals as opposed to detailed goals and deliverables which is open to discussion. Clear goals and objectives have been identified as a critical success factor. This identifies the importance of strategic direction and understanding the expectations of deliverables as well as the implementation business plan. It is not possible to achieve the objectives of a project if it is not known what those objectives are and at the end of the project, how will it be measured as a success of failure if the expectations were unknown when the project commenced. Communication is also an essential element. It is the writers’ opinion that the development of strategic goals into a business plan, goals and deliverables for the project, based on a grounding in ERP education is an essential foundation for making critical decisions regarding the ERP system selection and to commence planning for implementation. This seems to identify a crucial element of weakness in the proposed implementation.
  • 35. - 35 - Conclusions of survey results The results for the primary Critical Success Factors show very strong support and agreement that each of these is a critical success factor. Twelve of the twenty two factors were considered extremely important for success and the remainder were important for success. The top few critical success factors; top management support, User training, project management, project team competence, project champion and clear goals and objectives, show that there is a very strong awareness of the importance of these factors in generating a success outcome of an ERP implementation project. Apart some from minor variations the detailed level success factors show good correlation with the primary critical success factors. The overall result indicates that the primary critical success factors. The results concerning reasons for the requirement for an ERP system, the potential benefits and ERP functional requirements The question regarding the company strategy in considering the implementation resulted in 25 different interpretations with limited common themes. There is an element of the importance of the level of strategic goals as opposed to detailed goals and deliverables which is open to discussion. It was the writers’ opinion that this result from a group of 34 members including executive level managers that have been involved in the ERP selection process supported the hypothesis that an ERP strategy and implementation plan did not exist or had not been communicated to those involved in the process. Implementation and other factors influencing successful implementation The research project literature review commenced with a wider view of ERP system implementation, including particularly the interaction of business process reengineering and ERP implementation. Critical Success Factors were found to have a major influence on the implementation of an ERP system, however in the process of the research two other factors were identified which were considered to be significantly influential to ERP implementation by the company; Business Process Reengineering and multi-site implementations. The following sections are intended to provide an overview of these issues and how they influence implementation of an ERP system:- • Implementation: the identification of the critical success factors raises the question of how these matters are adequately addressed in implementation. This is clearly a case of requiring an implementation plan which addresses the issues. The section provides and overview of one example of such a process and a summary of additional extracts from the book are included in Appendix 5. • Multi-site implementations: These implementations present special concerns. The manner in which these concerns are addressed may play a large role in the ultimate success of the ERP implementation. The section identifies key issues such as the desired degree of individual site autonomy, ERP fit, variation of culture between sites and the implementation cutover strategy. • Business process reengineering (BPR): This was identified as a critical success factor, however BPR is a business process in itself and is a concept which has been given new life as a result of the advent of ERP systems which define business processes and creates a critical link between ERP systems and BPR that is difficult to ignore. Al-Mashari and Zairi stated “BPR is an indispensable and core component of SAP R/3 implementation and SAP R/3 itself can be considered as the missing IT link to BPR”. It is therefore important to develop an understanding of the relationship between ERP systems and BPR. This section presents an overview of Business Process Reengineering and its inter-relationship with ERP systems.
  • 36. - 36 - Implementation Wallace and Kremzar (2001) provide an example of an implementation strategy. Although they make the distinction between Enterprise Resource Planning and Enterprise Systems, distinct from the broader definition of an ERP system which currently prevails (Enterprise System includes ERP) which is probably no longer compatible with the current ERP systems, the book presents an implementation strategy which fulfils the requirements presented by the Critical Success Factors identified. The elements of the implementation process, which they term “the proven path”, described in the book and summarised in the figure below could be considered as an example in developing an implementation plan which achieves the requirements determined by the literature review and subsequent research of employee perceptions as critical success factors. Some extracts from the book are provided in Appendix 5 as “a primer” and a summary for reference. Figure 7: "The Proven Path" Implementation Program (Reproduced from Wallace and Kremzar, 2001) Multi site implementations Multi-site implementations present special concerns. The manner in which these concerns are addressed may play a large role in the ultimate success of the ERP implementation. The desired degree of individual site autonomy may be a critical issue which depends on two factors: (1) the degree of process and product consistency across the remote sites, and (2) the need or desire for centralised control, over information, system set-up, and usage. One of the objectives of an ERP implementation may be to increase the degree of central control through the implementation of standardised processes. Alternatively the implementation may be undertaken in order to provide the remote sites with capabilities that allow them to fine tune their processes to their unique situations (Umble et al, 2003, pp 241 – 258). Gatticker (2002, pp 96 – 105) presents some good insights into multi–site issues, and supports some success factors. Particular emphasis was placed on an issue relevant for multi-site, variable process organisations being that of ERP fit. The existence of package standards is fairly well acknowledged, but the fit between the plant and the ERP configuration which the organisation rather than the ERP
  • 37. - 37 - software imposes on all of its plants, referred to as process standardisation is a key issue to be considered in planning the implementation and the configuration of the system. The variation of culture between sites in an organisation adds complexity which must be considered in multi-site implementations. The fundamental issue here is one of corporate standardisation versus local optimisation. Corporate standardisation brings with it simplified interfaces among diverse parts of the organisation, ability to move people and products between sites with minimal disruption, and relative ease in consolidating data across the entire organisation. On the other hand, local optimisation may result in more effective and efficient operation. (Umble et al, 2003, pp 241 – 258) In a multi-site implementation cutover strategy becomes a consideration. The organisation must choose between an approach where implementation takes place simultaneously in all facilities (“big bang”) and a phased approach by module, by product line, or by plant with pilot implementation at one facility. In a multi-site implementation, a phased approach is generally considered to be preferable. This is partly because the success or failure experienced on the first attempt at implementation often decides the fate of the entire project. The management team can gain momentum by selecting a pilot site that has a high likelihood of success. The phased approach allows lessons learned at early sites to be used to improve the implementation at later sites (Umble et al, 2003, pp 241 – 258). There is no evidence that any one way is better than another as a whole; however, one approach will be better for companies on an individual basis. (Gargeya and Brady, 2005, pp 501 -516) Business Process Reengineering Business process reengineering (BPR) has been a common business practice which was not always as successful as expected. The advent of ERP systems which define business processes has given the concept new life. It is therefore important to develop an understanding of the relationship between ERP systems and BPR. BPR is defined by Hammer and Champy (1993) as “the fundamental rethinking and radical re- design of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as, quality, service and speed”. (Al-Mashari & Zairi, 2000, pp 156 – 166). The outcomes of software projects often deliver disappointing organisational results, even if the information systems work well technically. One explanation is that companies use technology to automate old, ineffective processes. Instead Hammer advocates that the power of modern technology should be used to radically re-design business processes to achieve dramatic improvements in their performance. (Gibson et al., 1999) The focus of ERP projects is therefore much more on BPR activities than more traditional systems development projects that still typically retain a high technical component. (Gibson et al., 1999) Originally, the demand for ERP systems was triggered by the advent of client / server computing, combined with the growing demand for business process reengineering (BPR) to address changing business imperatives (Al-Mashari & Zairi, 2000, pp 156 – 166) Whilst not all companies planning the implementation of ERP systems consider BPR, this origin and the defined business process nature of ERP systems creates a critical link between ERP systems and BPR that is difficult to ignore. One of the major benefits of ERP comes from its enabling role in reengineering the company’s existing way of doing business. All the processes in the company must conform to the ERP model. Organisations that do not adopt this philosophy are likely to face major difficulties. However ERP implementation results in significant benefits engendered from the integrated nature of the system as well as from reengineering business processes and the change in business culture. This however results in the scale of business process reengineering (BPR) and customisation tasks involved in the software implementation process being major reasons for ERP dissatisfaction. (Al-Mashari et al., 2003, p352)
  • 38. - 38 - To better understand the attraction and potential dangers of ERP systems, we need to realise the problem they are designed to solve: the fragmentation of information over many legacy systems in large business organisations. When developing information systems in the past, companies would first decide how they wanted to do business and then choose a software package that best supported their proprietary business process. The sequence is, however, reversed with ERP systems (Davenport, 1998). Therefore the business process must often be modified to fit the system. While firms can choose to customise their ERP installation to a certain degree because the systems are modular, major modifications are complex, impractical, and extremely costly. Modifications can also jeopardise the key benefits of integration as well. As a result, most companies that succeed in installing ERP systems reengineer their business processes to fit the system requirements. (Chen, 2001, pp 374 -386) To take full advantage of ERP software, business process re-design is a prerequisite. Because ERP systems are essentially developed as instruments for improving business processes such as manufacturing, purchasing and distribution, ERP implementation and BPR activities should be closely connected. This is achieved through an exhaustive analysis of current business processes to identify potential chances of reengineering, rather than designing an application system that makes only the best of bad processes. (Al-Mashari et al., 2003, p352) In presenting a proposed model of best practice for the effective application of SAP R/3, Al- Mashari and Zairi, (2000, pp 156 – 166) went further in stating “BPR and SAP R/3 are interdependent in the sense that BPR must be supported by integrated and process oriented IT systems such as SAP R/3, and SAP R/3 implementation forces BPR. In other words, BPR is an indispensable and core component of SAP R/3 implementation and SAP R/3 itself can be considered as the missing IT link to BPR”. They went on to say, “In SAP implementation, BPR should follow a systematic and structured methodology that provides the necessary working plans, techniques and software tools to help redesign business processes, map them and ensure their alignment with SAP processes”. Organisations like Owens Corning, the State of Kentucky, Eastman Kodak, RTL Television, Farmland, Du Pont, NEC Technologies have all integrated BPR into their implementation of SAP. (Al-Mashari & Zairi, 2000, pp 156 – 166) Muscatello et al (2003) described the results of successful reengineering involved in two case studies: “Reengineering operations designed to lay the groundwork for streamlining their business operations to more closely match their customers current and expected future requirements for quality, timeliness, innovation and customisation. As suggested by Hammer and Champy (1993) the reengineering activities were focussed on identifying and improving the efficiency of critical operations, on restructuring important non-value adding operations and eliminating inefficient processes. Significant emphasis was also placed on mapping information flows related to operation processes and procedures. Detailed mapping of and analyses of external transactions with customers and suppliers were also carried out, paying particular attention to their impact on internal functional and inter-functional transactions. Special emphasis was also placed on mapping information requirements and information flows between functional managers and managers on the shop floor. A direct consequence of the reengineering efforts of both of these companies was significant streamlining of work and information flows, departmental redesigns, reductions in paperwork transactions and combination of tasks that had previously been performed by different people.” An important element of matching the ERP system to business processes is by process mapping. Okrent and Vokurka (2004, pp 637 – 643) provide a good review of the process. “Process mapping is similar to flow-charting for a traditional computer program. However, in the case of a business process map the participants in the process are usually identified as well. This is done using a more hierarchical approach and a perspective for the model that is not found in the computer program flow chart. There are three major phases in process mapping and consequently business process reengineering: creating the “As-Is” model, creating the “To-Be” model, and “Bridging the Chasm,” or in other words, getting from the here and now to the future state.” Schniederjans & Kim (2003) investigated the relationship between BPR, ERP and Total Quality Management and found that firms that succeeded tended to adopt a single ERP package approach in
  • 39. - 39 - their ERP implementation. The proper integration sequence that most organisations reported started with BPR for the purpose of making radical change, followed by the implementation of the ERP system and then followed with a TQM program whose purpose is to slow the change down and record quality improvements. The selection of the BET and TBE sequences and their logical “step by step” strategy for implementation are well supported in literature of managing planned organisational change. Clearly BPR which precedes ERP in both sequences is a great unfreezing strategy to get the organisation ready for ERP. In the case of the dominant BET sequence, TQM could be employed to complete the third phase of re-freezing gradually. Conclusions Critical Success Factors are elements that are vital for a strategy, organization or project to be successful, and are strongly related to the mission and strategic goals. They focus on the most important areas and get to the very heart of both what is to be achieved and how you to achieve it. Implementing an ERP system has at least a moderate chance of hurting a business because of the potential for complete or partial implementation failure. There is an increased demand for ERP systems in smaller organisations that are less likely than their larger counterparts to survive or quickly overcome a failed implementation. These organisations may have limited resources, experience or staffing skills with which to overcome these issues. It is therefore essential that organisations examine, understand and adopt critical success factors that to a great extent, determine whether the implementation will be successful. The critical success factors identified by Somers and Nelson (2001) were selected as the primary measure of the factors which were important to the successful implementation of an ERP system. The outcome of the study of the organisation at pre-implementation stage acknowledges the importance of the critical success factors to successful implementation. This is further supported identifying the relative importance of more detailed factors which were grouped in support some of the primary factors. The responses to both the primary and detailed factors identified that the majority of respondents understand the importance of what is required to be done to complete a successful implementation. The issue therefore is whether the organisation is able to support this understanding with required actions in performing the implementation. There is a relationship between ERP benefits and strategic goals, objectives or critical factors and ERP success. Al-Mashiri et al stated “One of the major conditions for ERP systems to yield the desired benefits is how well they serve the delivery of the CFs”, which they stated in terms of Correspondence success, Process success, Interaction success, and Expectation success. These interpretations of success must be considered in developing the ERP strategy and planning implementation as form the basis of measuring success or failure. The results of the study of reasons for ERP requirement, potential benefits and expectations of functionality provide a basis for developing the ERP vision and implementation plan. The study identified top management support (score 4.85, ranked 1st ) and the clear goals and objectives (score 4.73, ranked 6th ) as being extremely important critical success factors. The combination of these critical success factors requires clear and strong leadership (score 4.85) with commitment and participation by executive and top management (score 4.77) and places with top management the responsibility to define and communicate the ERP strategy and implementation plan (score 4.62), which provides a clear understanding of goals and objectives (score 4.58), including expectations and deliverables, and an ERP implementation business plan and vision (score 4.50). The presentation in appendix 2 of 25 individual perceptions from a group of 34 members including executive level managers that have been involved in the ERP selection process supported the hypothesis that of an ERP strategy and implementation plan did not exist. These are the foundation of the potential success of the implementation of an ERP system and it is therefore essential that this weakness be addressed in the short term. The responses in appendix 2 provide preliminary input to the development of the required strategy. Although considered an important critical success factor (score 3.68), business process re- engineering (BPR) achieved a low rank (20 of 22) and was also not ranked highly as a reason for
  • 40. - 40 - the requirement for the ERP system. The relationship between BPR and ERP is often not well understood. ERP systems are essentially developed as instruments for improving business processes and are designed to function around an established business process model, therefore whilst some customisation is possible, major modifications are complex, impractical, and extremely costly, and therefore the business process must often be modified to fit the system. This is achieved through an exhaustive analysis of current business processes to identify potential chances of reengineering, rather than designing an application system that makes only the best of bad processes. Al-Mashari and Zairi, (2000, pp 156 – 166) stated “BPR is an indispensable and core component of SAP R/3 implementation and SAP R/3 itself can be considered as the missing IT link to BPR” It is therefore essential that the element of BPR is considered in the implementation planning. Multi-site, variable process implementations present additional complexity to an ERP implementation. Gatticker (2002) identified the issue of “process standardisation”; the imposition of organisational standards and ERP configuration on multiple sites without taking into account the variations in business process and culture between sites. This has led failures of some ERP system implementations; therefore it is essential that a total organisation outlook be adopted from the outset of the implementation. This should ensure that common elements support the operation of all business units whilst identifying critical success and differentiating factors of individual business units which present arguments configuration and customisation to support successful practices. Recommendations Based on the requirements established by the critical success factors which have been identified and agreed as being extremely important and using the example presented the following recommendations can be made as a starting point in preparation for the project launch. The order of these recommendations is important as it is not possible to properly plan the project without an adequate, ERP educated team to plan and implement the project. Refer to the example project process (p36 and in more detail Appendix 5 – p68) which meets all the requirements of the Critical Success Factors. This also includes consideration of the implementation timescale which should take into account the complexity of the multi-site variable process structure of the organisation. The following recommendations are made for implementation of the ERP system. 1. Selection and appointment of an executive level project champion. a. Refer to description page 24. Refer to page 121 Wallace and Kremzar: key requirements – high enthusiasm for the project, top management focal point, rallies support from executives where required, top management conscience for the project, transformational leadership, facilitation and marketing the project to users, change champion, understand the technology as well as the business and organisational context, proactive approach to ERP implementation, refuse “short term” corporate expectations by saying no when the expectations on evaluation, risked the ERP project goals. Which executives have educated themselves in the requirements of this project? 2. Steering committee identified 3. Project leader a. Refer to notes in Appendix 5, Refer to page 109 - 116 Wallace and Kremzar. Refer Project team competence page 22 4. Selection and first training of the ERP implementation project team. a. Refer to page 116 Wallace and Kremzar. Refer Project team competence page 22 b. A balanced and empowered team. c. Most knowledgeable and dedicated employees. d. Cross functional and representative of operating divisions throughout the company.
  • 41. - 41 - e. Includes people with knowledge of financial and manufacturing processes f. Dedicated to the ERP implementation. 5. Development by of the ERP strategy, goals and objectives, expectations and deliverables, performance measures and implementation plan. a. Produced by the implementation team, with ratification by the executive steering committee and top management. 6. Review and mapping of business processes and information flows through the company. a. Identify standardised processes that can be applied to all functional units. b. Identify special cases where special business processes are required to maintain competitive advantage or other benefits and resolve how these are tackled. c. Identify existing and required information flows and resolve existing discontinuities. 7. Review of selected software business process and analysis of ERP fit to company. 8. Plan configuration and customisation requirements to match software to planned business processes and prepare software for installation.
  • 42. - 42 - References [1] Aladwani AM, 2001, ‘Change management strategies for successful ERP implementation’, Business Process Management Journal, Volume 7, No 3, pp 266 - 275 [2] Al-Mashari M & Zairi M, 2000, ‘The effective application of SAP R-3 a proposed model of best practice’, Logistics Information Management, Volume 13, number 3, pp 156 - 166 [3] Al-Mashari M, Al-Mudimigh A & Zairi M, 2003, ‘Enterprise resource planning: A taxonomy of critical factors’, European Journal of Operational Research, Vol. 146 Issue 2, p352, 13p [4] Arif M, Kulonda D, Jones J & Proctor M, 2005, ‘Enterprise information systems: technology first or process first’, Business Process Management Journal, Vol. 11 No. 1, pp 5 - 21 [5] Berchet C & Habchib G, 2005, ‘The implementation and deployment of an ERP system: An industrial case study’, Computers in Industry, Volume 56, Issue 6, Pages 588-605 [6] Chen IJ, 2001, ‘Planning for ERP systems: analysis and future trends’, Business Process Management Journal, Volume 7, No 5, pp 374 -386 [7] Daniel DR, 1961, ‘Management information crisis’, Harvard Business Review, Vol. 39 Issue 5, p111-121, 11p [8] Ehie IC & Madsen M, 2005, ‘Identifying critical issues in enterprise resource planning (ERP) implementation’, Computers in Industry, Volume 56, Issue 6, Pages 545-557 [9] Fang L & Patrecia S, ‘Critical success factors in ERP implementation’, Jönköping University Undergraduate thesis D-level, Jönköping International Business School (2005), 10 p <http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-219> [10] Finney S & Corbett M, 2007, ‘ERP implementation: a compilation and analysis of critical success factors’, Business Process Management Journal, Volume 13, Issue 3, pp. 329-347 [11] Gargeya VB & Brady C, 2005, ‘Success and failure factors of adopting SAP in ERP system implementation’, Business Process Management Journal, Volume 11, Issue 5, p. 501-516 (16 pp.) [12] Gattiker TF, 2002, ‘Anatomy of an ERP implementation gone awry’, Production and Inventory Management Journal, Volume 43, Issue. 3/4; pg. 96 - 105 [13] Gibson N; Holland CP & Light B, 1999, ‘Enterprise resource planning: A business approach to systems development’, Proceedings of the 32nd Annual Hawaii International Conference on System Sciences, p 260 [14] Huang SM, Hung YC, Chen HG & Ku CY, 2004, ‘Transplanting the Best Practice for Implementation of an ERP System: A structured inductive study of an International Company’, Journal of Computer Information Systems, , Vol. 44 Issue 4, p101-110, 10p [15] Kim Y, Lee Z & Gosain S, 2005, ‘Impediments to successful ERP implementation process’, Business Process Management Journal, Volume 11, Issue 2, p. 158- 170 (13 pp.) [16] Kwasi AG, 2004, ‘ERP implementation factors: A comparison of managerial and end- user perspectives’, Business Process Management Journal, Volume 10 No 2, pp 171 – 183.
  • 43. - 43 - [17] Muscatello JR, Small MH & Chen IJ, 2003, ‘Implementing enterprise resource planning (ERP) systems in small and midsize manufacturing firms’, International Journal of Operations & Production Management, Volume 23 No 8, pp 850 - 871 [18] Nah FFH, Lau JLS & Kuang J, 2001, ‘Critical factors for successful implementation of enterprise systems’, Business Process Management Journal, Vol. 7, No. 3, pp 285 – 296. [19] Okrent MD & Vokurka RJ, ‘Process mapping in successful ERP implementations’, Industrial Management & Data Systems, 2004, volume 104, No 8, pp 637-643 [20] Plant R & Willcocks L, 2007, ‘Critical success factors in international ERP implementations’, Journal of Computer Information Systems, Vol. 47 Issue 3, pp 60-70, 11p [21] Rockart JF, 1979, ‘Chief executives define their own data needs’, Harvard Business Review, Vol. 57 Issue 2, pp81-93, 13p [22] Schniederjans MJ & Kim GC, 2003, ‘Implementing enterprise resource planning systems with total quality control and business process reengineering’, International Journal of Operations & Production Management, Volume 23, No 4, pp 418 - 429 [23] Shehab EM, Sharp MW, Supramaniam L & Spedding TA, 2004, ‘Enterprise resource planning: An integrative review’, Business Process Management Journal, Volume 10, Issue 4, p. 359-386 [24] Somers TM & Nelson K, 2001, ‘The impact of critical success factors across the stages of enterprise resource planning implementations’, Proceedings of the 34th Hawaii International Conference on System Sciences [25] Umble EJ, Haft R & Umble MM, 2003, ‘Enterprise resource planning: Implementation procedures and critical success factors’, European Journal of Operational Research, Vol. 146 Issue 2, pp 241 258 [26] Wallace TF & Kremzar MH, 2001, ERP: Making It Happen: The Implementer’s Guide to success with Enterprise Resource Planning, John Wiley and Sons, [27] Wang ETG, Lin CCL, 2007, Jiangand JJ & Klein G, ‘Improving enterprise resource planning (ERP) fit to organizational process through knowledge transfer’, International Journal of Information Management, Volume 27, Issue 3, June, Pages 200-212 [28] White M, 2005, ‘ERP systems: Do they work as project controls solutions?’, Cost Engineering, Volume 47, Issue 6; pp 6 - 7 [29] Wikipedia, Enterprise Resource Planning, Accessed November 2007, <http://en.wikipedia.org/wiki/Enterprise_resource_planning> [30] Mindtools, Critical Success Factors, Accessed November 2007, <http://www.mindtools.com/pages/article/newLDR_80.htm> [31] Wikipedia, Critical Success Factors, Accessed November 2007, <http://en.wikipedia.org/wiki/Critical_success_factor#_ref-0>,
  • 44. - 44 - Appendices
  • 45. - 45 - Appendix 1: Detailed results Somers & Nelson (2001) Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Critical Success Factor Top Management Support 4.29 1.16 1 4.85 0.37 1 4.75 0.50 2 4.86 0.36 1 5.00 0.00 1 4.80 0.45 3 User training 3.79 1.16 14 4.81 0.40 2 4.75 0.50 3 4.79 0.43 4 5.00 0.00 7 4.80 0.45 6 Project Management 4.13 0.96 5 4.81 0.40 3 4.75 0.50 4 4.79 0.43 3 5.00 0.00 4 4.80 0.45 5 Project Team Competence 4.20 1.07 2 4.81 0.40 4 4.75 0.50 5 4.71 0.47 7 5.00 0.00 2 5.00 0.00 1 Project Champion 4.03 1.58 8 4.75 0.53 5 4.50 1.00 8 4.77 0.44 5 5.00 0.00 5 4.75 0.50 7 Clear goals and objectives 4.15 1.14 4 4.73 0.45 6 4.50 0.58 9 4.79 0.43 2 4.67 0.58 12 4.80 0.45 4 Change Management 3.43 1.34 19 4.67 0.92 7 5.00 0.00 1 4.77 0.60 6 5.00 0.00 11 3.75 1.89 19 Education on new business processes 3.76 1.18 15 4.65 0.49 8 4.50 0.58 10 4.64 0.50 9 5.00 0.00 9 4.60 0.55 9 Dedicated resources 3.81 1.25 12 4.64 0.57 9 4.75 0.50 6 4.62 0.51 10 5.00 0.00 6 4.40 0.89 10 Careful package selection 3.89 1.06 10 4.58 0.58 10 4.50 0.58 11 4.57 0.65 12 4.00 0.00 19 5.00 0.00 2 Steering committee 3.79 1.95 13 4.50 0.65 11 4.00 1.15 14 4.57 0.51 11 5.00 0.00 8 4.40 0.55 11 Inter-departmental Co-operation 4.19 1.20 3 4.50 0.76 12 4.00 0.82 15 4.64 0.50 8 5.00 0.00 3 4.20 1.30 12 Vendor support 4.03 1.60 9 4.38 0.75 13 4.50 0.58 12 4.21 0.89 16 4.67 0.58 15 4.60 0.55 8 Management of expectations 4.06 1.37 7 4.33 0.87 14 4.67 0.58 7 4.36 0.84 15 4.67 0.58 14 3.75 1.26 18 Inter-departmental communication 4.09 1.33 6 4.31 0.62 15 3.75 0.50 17 4.50 0.52 13 4.67 0.58 13 4.00 0.71 14 Data analysis and conversion 3.83 1.27 11 4.24 0.72 16 4.00 0.82 16 4.43 0.76 14 4.00 0.00 20 4.00 0.82 15 Minimal customization 3.68 1.45 17 4.08 1.09 17 4.50 0.58 13 4.00 1.04 21 5.00 0.00 10 3.40 1.52 20 Vendor Tools 3.15 1.57 21 4.04 0.77 18 3.50 0.58 21 4.07 0.83 19 4.33 0.58 17 4.20 0.84 13 Vendor Partnership 3.39 1.21 20 4.00 0.69 19 3.75 0.50 18 4.00 0.68 20 4.33 0.58 16 4.00 1.00 17 Business Process Re-engineering 3.68 1.26 16 4.00 1.00 20 3.50 0.58 22 4.15 1.21 18 4.00 1.00 21 4.00 0.71 16 Architecture choices 3.44 1.19 18 3.87 0.97 21 3.75 0.50 19 4.17 0.72 17 3.67 1.53 22 3.25 1.50 22 Use of Consultants 2.90 1.20 22 3.58 0.95 22 3.75 0.50 20 3.43 1.09 22 4.33 0.58 18 3.40 0.89 21 Average values 3.81 1.30 4.41 0.68 4.29 0.59 4.45 0.65 4.65 0.30 4.27 0.78
  • 46. - 46 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Reasons for ERP requirement Planning for future growth 9.12 1.18 1 9.25 0.96 3 9.14 1.17 1 8.00 2.00 4 9.60 0.55 1 Development of a unified system not possible with existing system 8.69 2.15 2 9.75 0.50 1 8.43 2.68 3 8.00 1.00 5 9.00 1.73 3 The growth of the organisation and subsequent incompatibility of several information systems 8.62 1.44 3 9.00 1.41 4 8.71 1.68 2 7.67 0.58 6 8.60 1.14 4 Requirement for an integrated information system 8.46 1.50 4 9.00 0.82 5 8.36 1.91 4 8.33 1.53 2 8.40 0.55 6 Inability of the existing system to support organisational needs 8.15 2.22 5 9.75 0.50 2 7.93 2.20 5 6.33 3.79 9 8.60 1.52 5 Globalise and standardise the entire company 8.12 1.99 6 8.75 1.26 6 7.86 2.38 6 8.67 0.58 1 8.00 2.00 8 Require resource planning and project management capabilities 8.12 2.05 7 8.75 0.96 7 7.50 2.56 9 8.33 0.58 3 9.20 0.84 2 Use of multiple points of input with duplicated effort in the existing system 7.40 2.08 8 7.00 1.41 9 7.77 2.49 7 6.33 2.08 10 7.40 1.52 9 Replacement of legacy systems 7.36 2.04 9 7.50 1.73 8 7.57 2.24 8 7.33 2.89 7 6.50 1.29 13 The inability of employees to respond easily to questions or information requested by key customers or suppliers 7.27 2.01 10 6.25 0.96 11 7.50 2.10 10 6.00 3.00 13 8.20 1.48 7 The consideration of an enterprise to re-engineer its business process 6.85 1.74 11 6.25 2.22 12 6.79 1.72 11 7.00 1.00 8 7.40 2.07 10 Competitive pressure 6.50 1.88 12 7.00 2.45 10 6.36 2.13 13 6.33 1.53 11 6.60 1.14 12 The requirement of extensive resources for maintenance and support 6.20 2.04 13 5.25 1.26 13 6.54 2.03 12 4.00 1.00 14 7.40 2.07 11 Ability to compete globally 5.88 2.63 14 4.75 2.06 14 5.93 3.05 14 6.33 1.15 12 6.40 2.70 14 Average values 7.62 1.92 7.73 1.32 7.60 2.17 7.05 1.62 7.95 1.47
  • 47. - 47 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Potential Benefits Tangible benefits Improved management and planning decision making 8.65 1.35 1 9.00 1.41 2 8.50 1.56 1 9.00 1.00 2 8.60 1.14 5 Improved project management 8.65 1.72 2 9.50 0.58 1 8.00 2.04 4 9.33 1.15 1 9.40 0.89 1 Revenue / Profit increase 8.50 1.61 3 8.50 1.73 4 8.21 1.89 2 8.33 0.58 4 9.40 0.89 2 Productivity improvements 8.27 1.59 4 8.00 1.41 5 8.07 1.90 3 8.67 1.53 3 8.80 0.84 4 Improved resource planning 8.19 1.65 5 8.00 1.41 6 8.00 2.04 5 8.00 1.00 5 9.00 0.71 3 Financial cycle improvements 7.80 2.00 6 8.75 0.96 3 7.36 2.53 7 8.00 1.41 6 8.20 0.45 8 Improvement of information flow between departments 7.65 1.72 7 7.75 2.06 7 7.57 1.79 6 6.67 2.31 10 8.40 0.89 6 Order Management improvements 7.50 1.68 8 7.50 2.08 9 7.36 2.02 8 7.67 0.58 8 7.80 0.84 11 Quality improvements 7.35 1.70 9 6.25 0.96 11 7.29 1.82 9 8.00 1.00 7 8.00 2.00 10 Maintenance reductions On time delivery improvements 7.08 2.17 10 7.75 1.71 8 6.50 2.44 12 6.67 2.31 11 8.40 1.14 7 Cash management improvement 7.04 2.29 11 6.50 3.70 10 6.86 2.41 10 7.67 0.58 9 7.60 1.52 12 Information technology cost reduction 6.46 2.63 12 5.75 0.96 13 6.57 2.90 11 4.00 2.00 16 8.20 2.05 9 Inventory reduction 6.00 2.26 13 5.00 2.16 16 6.29 2.52 13 4.67 1.53 15 6.80 1.79 14 Procurement cost reduction 5.92 2.28 14 6.00 0.82 12 5.64 2.82 15 5.67 2.08 13 6.80 1.64 15 Transportation /logistics cost reduction 5.92 1.87 15 5.25 2.06 15 5.93 2.02 14 5.00 1.00 14 7.00 1.58 13 Personnel reduction 5.44 2.50 16 5.50 1.73 14 5.46 2.99 16 6.00 1.73 12 5.00 2.55 16 Average values 7.28 1.94 7.19 1.61 7.10 2.23 7.08 1.36 7.96 1.31
  • 48. - 48 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Potential Benefits Intangible benefits Integration 8.46 1.48 1 8.75 0.96 3 8.07 1.77 5 8.33 0.58 5 9.40 0.89 1 Information visibility 8.42 1.81 2 8.75 0.96 4 8.36 1.82 1 9.33 0.58 1 7.80 2.77 10 Customer service improvement 8.35 1.32 3 7.75 0.96 10 8.36 1.60 2 8.33 1.15 6 8.80 0.84 3 Increase data accuracy and credibility 8.35 1.70 4 9.25 0.50 1 8.00 2.18 6 8.67 0.58 3 8.40 0.89 6 Standardisation 8.35 1.44 5 8.50 1.00 5 8.00 1.80 7 8.33 0.58 7 9.20 0.45 2 System usability 8.27 1.46 6 8.00 1.41 9 8.14 1.61 3 8.67 1.53 4 8.60 1.34 5 Increase data accessibility in time 8.15 1.59 7 9.00 0.82 2 8.14 2.03 4 8.00 0.00 8 7.60 0.89 12 New / improved processes 8.04 1.64 8 8.50 1.29 6 7.93 1.77 8 7.33 1.15 10 8.40 1.95 7 Business performance 7.88 1.61 9 8.25 1.50 7 7.43 1.65 10 9.00 0.00 2 8.20 1.92 8 Customer responsiveness 7.81 1.98 10 7.50 2.08 12 7.86 2.28 9 8.00 1.00 9 7.80 1.92 11 Cost reductions 7.65 2.02 11 7.75 2.87 11 7.36 2.13 12 7.00 1.73 12 8.80 0.84 4 Dismantling inefficient legacy systems 7.65 1.55 12 8.25 2.36 8 7.43 1.40 11 7.33 2.52 11 8.00 0.71 9 Facilitates business learning 7.19 1.33 13 7.00 0.00 13 7.21 1.53 13 6.67 0.58 13 7.60 1.67 13 Supports business alliances 6.88 1.66 14 7.00 0.00 14 7.14 1.79 14 5.33 2.08 17 7.00 1.58 15 Flexibility 6.77 1.61 15 7.00 0.82 15 7.00 1.66 15 5.00 1.73 18 7.00 1.58 16 Supply / demand change 6.63 2.16 16 5.67 1.15 18 6.71 2.46 16 6.50 3.54 16 7.00 1.58 17 Building business innovations 6.58 2.02 17 6.00 2.58 16 6.43 2.24 17 6.67 1.15 14 7.40 1.52 14 Globalisation 6.04 2.57 18 6.00 3.37 17 6.07 2.73 18 6.67 1.53 15 5.60 2.61 19 Generates product differentiation 5.27 2.43 19 4.50 3.42 19 5.57 2.31 19 3.67 2.08 19 6.00 2.24 18 Average values 7.51 1.76 7.55 1.48 7.43 1.94 7.31 1.27 7.82 1.48
  • 49. - 49 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank ERP Functions Financials (GL, FA, AP, AR) 9.42 0.64 1 9.75 0.50 1 9.43 0.65 1 9.00 1.00 4 9.40 0.55 3 Payroll/Personnel 8.96 1.28 2 9.50 0.58 2 8.64 1.55 2 9.00 1.00 5 9.40 0.89 4 Quotation & Proposal Management 8.64 1.25 3 9.50 0.58 3 8.36 1.39 4 8.50 2.12 9 8.80 0.84 11 Project Management 8.60 1.55 4 9.25 0.50 6 7.93 1.77 9 9.67 0.58 1 9.50 0.58 1 Costing 8.50 1.88 5 9.25 0.50 7 8.21 2.33 6 8.00 2.00 11 9.00 1.00 5 Shop Floor Control and Work In Process 8.44 1.50 6 8.50 1.29 11 8.07 1.77 7 9.33 0.58 2 9.00 0.82 6 User Interface and Reporting 8.40 0.96 7 8.25 0.96 15 8.31 1.03 5 9.00 0.00 6 8.40 1.14 17 Implementation Plan 8.36 1.73 8 8.75 0.96 8 8.38 1.85 3 6.67 1.53 20 9.00 1.73 7 Master Production Scheduling 8.24 1.45 9 8.25 1.50 16 8.00 1.75 8 8.67 0.58 8 8.75 0.50 14 Capacity Requirements Planning 8.24 1.74 10 8.25 1.50 17 7.64 1.95 14 9.33 0.58 3 9.50 0.58 2 Bill of Materials 8.15 1.76 11 8.75 1.26 9 7.79 2.04 10 7.67 2.08 15 9.00 0.71 8 Time & Attendance 8.13 1.78 12 8.50 1.29 12 7.77 2.17 12 8.00 0.00 12 9.00 1.41 9 Business Process Documentation 8.12 1.17 13 9.50 0.58 4 7.69 1.03 13 7.33 0.58 17 8.60 1.14 15 Procurement 8.12 1.48 14 9.50 0.58 5 7.79 1.53 11 8.00 0.00 13 8.00 1.87 20 Sales Order Placement and Follow-up 7.96 1.46 15 8.00 1.41 18 7.57 1.60 16 8.33 1.53 10 8.80 0.84 12 Demand Management/ Forecasting 7.92 1.89 16 8.50 1.29 13 7.54 2.11 17 7.33 2.08 18 9.00 1.41 10 Engineering Change Control 7.87 1.69 17 8.75 1.26 10 7.31 1.89 22 9.00 1.41 7 8.25 0.96 18 Material Requirements Planning 7.81 1.44 18 7.75 0.96 20 7.50 1.56 18 7.67 0.58 16 8.80 1.64 13 Quality Assurance 7.60 1.61 19 8.00 1.15 19 7.46 1.56 19 6.67 1.53 21 8.20 2.17 19 Inventory Control 7.56 1.66 20 8.50 1.29 14 7.07 1.59 23 6.50 2.12 22 8.60 1.52 16 EIS/Business Intelligence 7.48 1.48 21 7.50 0.58 21 7.62 1.26 15 8.00 0.00 14 6.80 2.68 22 Electronic Commerce 7.25 1.29 22 6.25 1.50 23 7.38 1.33 21 7.00 1.00 19 8.00 0.82 21 Customer Relationship Management (CRM) 7.16 1.40 23 7.00 0.82 22 7.45 1.44 20 6.33 1.15 23 6.75 1.50 23 Average values 8.13 1.48 8.51 0.99 7.87 1.62 8.04 1.04 8.63 1.19
  • 50. - 50 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Business Process Re-engineering Standardise business processes to the extent possible 4.31 0.79 1 4.50 0.58 1 4.21 0.89 3 4.67 0.58 1 4.20 0.84 2 Business process should be aligned to the ERP process 4.08 0.98 2 3.75 1.26 3 4.36 0.50 2 3.00 2.00 6 4.00 0.71 4 ERP integrated with other management information systems 4.00 1.10 3 4.00 0.00 2 4.07 1.21 5 3.00 1.73 7 4.40 0.55 1 ERP software functionality should support existing business processes 3.92 1.06 4 3.25 1.50 4 4.14 0.77 4 4.00 1.73 3 3.80 1.10 6 Existing business processes should be mapped 3.92 1.16 5 3.00 1.41 5 4.43 0.65 1 2.67 2.08 8 4.00 0.71 5 Simplify (re-engineer) business processes in the initial stage 3.88 1.03 6 3.00 0.82 6 3.93 1.21 6 4.33 0.58 2 4.20 0.45 3 ERP software should be customised or configured to meet organisation needs 3.50 1.30 7 2.75 1.50 7 3.71 1.27 8 3.33 1.53 5 3.60 1.34 7 ERP software integrated into existing business processes 3.42 1.21 8 2.25 0.50 8 3.79 0.89 7 3.67 1.53 4 3.20 1.79 8 Average values 3.88 1.08 3.31 0.95 4.08 0.92 3.58 1.47 3.93 0.93 Change Management Change management program and culture required 4.69 0.55 1 4.75 0.50 1 4.79 0.43 1 5.00 0.00 1 4.20 0.84 2 Manage resistance of users to new systems 4.42 0.64 2 4.50 0.58 2 4.50 0.65 2 4.67 0.58 2 4.00 0.71 3 Organisational change management expertise is required 4.19 0.69 3 4.00 0.82 5 4.07 0.73 4 4.33 0.58 3 4.60 0.55 1 Technical infrastructure, business processes and human resources require flexibility to change 4.15 0.97 4 4.50 0.58 3 4.14 1.10 3 4.33 1.15 4 3.80 0.84 4 Performance measures should be adopted to ensure the organisation changes 3.92 0.74 5 3.75 1.26 6 4.00 0.78 5 4.00 0.00 5 3.80 0.45 5 Top down or consultant driven implementations 3.65 1.02 6 4.25 0.96 4 3.79 1.05 6 3.33 1.15 6 3.00 0.71 7 IT department driven implementations 3.12 1.11 7 2.50 1.29 7 3.14 1.03 7 2.67 1.53 7 3.80 0.84 6 Average values 4.02 0.82 4.04 0.85 4.06 0.82 4.05 0.71 3.89 0.70
  • 51. - 51 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Clear goals and objectives Clear understanding of strategic goals, including expectations and deliverables 4.58 0.64 1 4.75 0.50 1 4.64 0.50 1 4.67 0.58 1 4.20 1.10 2 ERP implementation business plan and vision 4.50 0.65 2 4.50 0.58 2 4.64 0.50 2 4.00 1.00 2 4.40 0.89 1 Performance measures for system 4.27 0.60 3 4.25 0.50 3 4.36 0.63 3 4.00 0.00 3 4.20 0.84 3 Return on investment on the ERP implementation should be determined 3.77 1.21 4 3.50 1.29 4 4.14 1.23 4 3.33 1.15 4 3.20 1.10 4 Average values 4.28 0.78 4.25 0.72 4.45 0.71 4.00 0.68 4.00 0.98 Inter-departmental Co-operation Communication between project teams and (user) functional units 4.62 0.50 1 4.25 0.50 3 4.71 0.47 1 4.67 0.58 1 4.60 0.55 2 Communication between internal project teams and consulting teams 4.58 0.50 2 4.25 0.50 4 4.64 0.50 3 4.33 0.58 4 4.80 0.45 1 Communication among functional units and among different stake-holders 4.46 0.71 3 3.75 0.50 9 4.71 0.47 2 4.33 1.15 5 4.40 0.89 5 Management of conflict of interest among different functional units 4.46 0.51 4 4.25 0.50 5 4.57 0.51 4 4.33 0.58 6 4.40 0.55 6 Willingness to accept changes from other functional units 4.46 0.86 5 4.50 0.58 2 4.43 1.09 9 4.67 0.58 2 4.40 0.55 4 Cross-functional team approaches required 4.42 0.64 6 4.75 0.50 1 4.57 0.51 5 4.33 0.58 7 3.80 0.84 9 Mechanisms to resolve multi-site issues required 4.42 0.58 7 4.25 0.50 6 4.50 0.65 6 4.00 0.00 8 4.60 0.55 3 Management of increase in organisational conflict 4.38 0.57 8 4.25 0.50 7 4.50 0.52 7 4.00 1.00 9 4.40 0.55 7 Effective coordination mechanism to resolve cross-functional differences 4.35 0.69 9 4.00 0.82 8 4.50 0.65 8 4.67 0.58 3 4.00 0.71 8 Average values 4.46 0.62 4.25 0.54 4.57 0.60 4.37 0.62 4.38 0.62
  • 52. - 52 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Project Management Properly educate the team and key individuals about the ERP implementation 4.65 0.49 1 4.50 0.58 2 4.71 0.47 1 5.00 0.00 1 4.40 0.55 2 Excellent Project management required 4.62 0.57 2 4.25 0.96 8 4.71 0.47 2 4.67 0.58 3 4.60 0.55 1 ERP teamwork and composition is important 4.54 0.58 3 4.50 0.58 3 4.64 0.50 3 4.33 1.15 6 4.40 0.55 4 Project team members should take ownership 4.54 0.71 4 4.50 0.58 4 4.57 0.76 5 4.67 0.58 4 4.40 0.89 3 Maximise utilisation of in-house expertise 4.50 0.58 5 4.50 0.58 5 4.50 0.52 8 5.00 0.00 2 4.20 0.84 5 Project team solely dedicated to the ERP implementation 4.46 0.65 6 4.50 0.58 6 4.50 0.65 9 4.67 0.58 5 4.20 0.84 6 Detailed project plan (what activities to cover at what stage) including appropriate deadlines / milestones 4.38 0.90 7 4.75 0.50 1 4.64 0.50 4 4.00 0.00 9 3.60 1.67 11 Implementation cost very closely monitored 4.35 0.89 8 4.50 0.58 7 4.57 0.65 6 3.67 1.53 11 4.00 1.22 8 Tight focus / control on the ERP implementation 4.35 0.69 9 4.00 0.00 9 4.57 0.65 7 4.33 0.58 7 4.00 1.00 7 Utilise progressive roll-out through each site in turn 4.15 0.83 10 3.75 1.26 13 4.50 0.65 10 3.67 0.58 12 3.80 0.84 10 ERP project team members should organise the ERP implementation 4.04 0.77 11 4.00 0.00 10 4.50 0.52 11 3.00 0.00 13 3.40 0.89 13 Incentives, empowerment and feedback for the project team 4.04 0.87 12 4.00 0.82 11 4.14 0.86 13 4.33 0.58 8 3.60 1.14 12 Operate in one or a few locations 4.00 0.76 13 4.00 0.00 12 4.23 0.73 12 4.00 1.00 10 3.40 0.89 14 Step by step implementation (one ERP function implemented at a time) 3.42 1.24 14 2.00 0.82 14 3.79 1.25 14 2.67 0.58 14 4.00 0.71 9 All employees should be in the implementation 3.00 1.23 15 1.50 0.58 15 3.43 1.28 15 2.33 0.58 15 3.40 0.55 15 Utilise big bang approach - install each function at all sites simultaneously 2.04 1.18 16 1.25 0.50 16 2.43 1.34 16 1.33 0.58 16 2.00 1.00 16 Average values 4.07 0.81 3.78 0.56 4.28 0.74 3.85 0.55 3.84 0.88
  • 53. - 53 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Project Team Competence Project team includes people with strong knowledge of financial and manufacturing processes 4.54 0.51 1 4.50 0.58 1 4.50 0.52 2 4.67 0.58 1 4.60 0.55 1 A great implementation team 4.50 0.58 2 4.00 0.82 4 4.64 0.50 1 4.67 0.58 2 4.40 0.55 2 Balanced and empowered implementation team 4.46 0.58 3 4.25 0.50 3 4.50 0.65 3 4.67 0.58 3 4.40 0.55 3 Selection of the right (i.e. most knowledgeable and dedicated) employees for the ERP project team 4.35 0.75 4 4.00 0.82 5 4.36 0.74 5 4.67 0.58 4 4.40 0.89 4 Human resource commitment from different functional units 4.23 0.65 5 4.50 0.58 2 4.14 0.66 6 4.67 0.58 5 4.00 0.71 5 Project team includes people experienced in previous implementations 4.08 0.93 6 3.50 1.00 9 4.43 0.51 4 4.33 0.58 6 3.40 1.52 13 Value the technical support provided by the consultant group 4.00 0.57 7 4.00 0.00 6 4.00 0.55 7 4.00 1.00 7 4.00 0.71 6 Deep understanding of the key issues relating to ERP implementations 3.92 0.56 8 4.00 0.00 7 3.93 0.62 9 4.00 0.00 8 3.80 0.84 10 Value the managerial support provided by the consultant group 3.92 0.63 9 4.00 0.00 8 3.86 0.66 10 4.00 1.00 9 4.00 0.71 7 Organisational experience of similar scale IT or organisational change projects 3.77 0.71 10 3.50 0.58 10 4.00 0.68 8 3.33 1.15 11 3.60 0.55 11 Utilise outside consultant group only when in-house expertise was not present 3.58 0.86 11 3.50 1.00 11 3.36 0.93 13 4.00 0.00 10 4.00 0.71 8 Require in-house human resources with large-scale, enterprise-wide project management skills 3.54 0.76 12 3.00 0.82 13 3.57 0.65 12 3.33 0.58 12 4.00 1.00 9 Complexity of ERP means only a few people understand system beyond a single module, making overall design decisions difficult 3.48 1.00 13 3.25 0.96 12 3.85 0.90 11 2.00 0.00 13 3.60 0.89 12 Average values 4.03 0.70 3.85 0.79 4.09 0.66 4.03 0.55 4.02 0.78
  • 54. - 54 - Overall Exec Managers IT Users Name Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Mean Stddeviation Rank Top Management Support Strong and committed leadership 4.85 0.37 1 5.00 0.00 1 4.86 0.36 1 4.67 0.58 2 4.80 0.45 1 Executive and top management commitment and participation 4.77 0.43 2 4.75 0.50 2 4.79 0.43 2 5.00 0.00 1 4.60 0.55 4 Define strategic factors such as ERP strategy and overall implementation strategy 4.62 0.57 3 4.25 0.96 4 4.71 0.47 3 4.33 0.58 3 4.80 0.45 2 Carefully constructed business case well communicated to relevant parties 4.42 0.76 4 4.00 0.82 9 4.64 0.50 4 3.33 1.15 10 4.80 0.45 3 Ensure close cooperation between IT and business managers 4.42 0.58 5 4.25 0.50 5 4.50 0.65 6 4.33 0.58 4 4.40 0.55 6 Ensure adequate monitoring and feedback 4.38 0.57 6 4.50 0.58 3 4.50 0.52 7 3.67 0.58 8 4.40 0.55 7 Managers use system generated information to improve organisational performance 4.38 0.57 7 4.25 0.50 6 4.36 0.63 9 4.33 0.58 6 4.60 0.55 5 Risk management and contingencies (failure or delay of implementation, cost exceeds budget, etc) 4.38 0.70 8 4.25 0.50 7 4.50 0.65 8 4.33 1.15 5 4.20 0.84 8 Good understanding of enterprise system capabilities and limitations 4.31 0.74 9 3.75 0.96 10 4.57 0.51 5 4.33 0.58 7 4.00 1.00 9 Management of stakeholder politics 4.12 0.77 10 4.25 0.50 8 4.36 0.74 10 3.67 0.58 9 3.60 0.89 10 Average values 4.47 0.60 4.33 0.58 4.58 0.55 4.20 0.64 4.42 0.63
  • 55. - 55 - Appendix 2: Responses to Question of Company Strategy in Implementing an ERP System Respondent 1 To provide a management tool to allow personnel to control the business area in which they operate, ERP must be able to add value to what the business does and allow the operator to undertake their decisions with all the facts at their disposal. Respondent 2 • To enable integration of business systems across existing and new business units • To enable future acquired/merged business units to integrate seamlessly with Corporate head office • To enhance operational capability especially in regard to projects, shop floor control and work flows • To provide a platform to enable Company to grow into a Top 200 ASX listed company • To ensure the ERP system generates the requisite “bottom line” level of return for the investment. Respondent 3 • To provide a system that can be utilised across all business units within the company. • To provide a system to handle large projects both cost plus and lump sum with the ability to provide reports in the financial and resource areas based on data input. • The ability to handle financial data at a business unit level and a corporate level for reporting as an ASX company. • It shall provide real time reporting and roll up overviews to different levels of management. • The system shall provide most sub-systems internally within its own structure and remove the requirements for ‘bolt on’ software packages. • The system shall allow for further expansion as the company grows. Respondent 4 To stay in business Respondent 5 • Support business goals o Company has a stated aim of becoming an ASX200 company o Growth, current and future Company is no longer a small business and needs to change its mentality o Requirement to support business for next 10 years Long-term support and development • New technology • SOA, familiar interface, etc • Risk o Current systems inadequately support the business o Exposure to risk as a result This is significant for major projects Disparate financial systems bring corporate governance risk • Functionality • Automation • Ease of use and training • Integration of acquisitions • Opportunity to standardise processes to best practice • Better Management Information and Reporting o Consolidated across entire business
  • 56. - 56 - o One version of the truth Respondent 6 • To provide a comprehensive tool for operations to better plan resources and therefore increase customer satisfaction • To facilitate aggregation and consolidation of all financial and operational data therefore enabling timely decision making and corporate reporting • To mitigate the risk of using a comparatively small financial systems partnering company Respondent 7 • To understand the requirements from each of the Operating and Admin Entities within the company. • To enable each entity to grow / expand by having the available tools and infrastructure. • To have a transparent system. – easily accessible for management information from low-end uses. • Must meet and exceed our current Qarms system. • Must have finite scheduling capabilities. • Needs to meet the needs of most managers and core users. • Must allow integration and cross company operational duties. • Needs to appear simple but allows complex analysis, streamlined production and consistent procedures. Respondent 8 To upgrade our existing system to a modern and world renowned system Respondent 9 Goal: To ensure a common management process is used across the organisation enabling the company to deliver better value to our customers Respondent 10 • Total Cost Management • Procurement • Budget Control • Planning and Workflow Management • Document Management • Financial Control and History • Inventory Management • Quotation Control and Development • Safety Statistics Respondent 11 My understanding is that Company want to introduce an ERP system which incorporates operational and financial functionality to manage the day to day business, providing appropriate reporting tools and information. Respondent 12 My understanding is only from listening at presentations and appears to be fit the different business models and is the right size to cater for the business. Respondent 13
  • 57. - 57 - The strategic goals of implementation of an ERP system are:- • Replacement of the current management information system with an integrated enterprise system which incorporates:- o Modern Enterprise Resource Planning functionality including; forecasting and demand management; sales and operations planning; materials, resources and supplier planning, scheduling and workflow control; and capacity planning. o Ability to control work from customer order to delivery, including financial management , in the full range of work types required by the different business units across multiple plants, supporting some or all processes simultaneously in individual business units, including:- Simple direct sales to users Make and repair to order Make to stock, with inventory control Design and manufacture to order of complex equipment Complex construction projects. o An integrated management information system which supports the information flow throughout the business process from forecasting and demand management to financial reporting. o Information access and manipulation tools internally but have the capacity to transfer and integrate information seamlessly with external applications where required. o The means to produce decision making reports as required at all levels of the organisation based on real time information. o Integrated facilities to authorise transactions and workflow within the company’s management policies and procedures. o Opportunity to incorporate processes to manage company Health, Safety, Quality and Environmental policies and procedures, with recording and reporting supporting continuous improvement processes. o Modern data management practices o A functional graphical user interface that is comparable with modern practices which facilitate familiarity and operation by computer uses based on knowledge of the standard “Windows” based interface. • The system must have the upgrade and growth path that matches the system to the growth of the company though expansion and acquisition and allows seamless incorporation of new business units into the organisation and information structure. Respondent 14 • Company is looking for a fully encompassing Enterprise resource planning system. • This system would need to allow the integration of multiple business units who are at this stage operating from quite different individual systems of their own. • The system would need to be able to grow with the existing business of today into where Company are aiming for, My understanding of this is 1 billion AUD$ with-in 4 years and acquisition of additional new businesses will be a major part of this growth. • The ERP system needs to be able to function across the Company range of business units which are now quite diverse and as above will continue to further diversify. • The system needs to be able to function for individual business units with different operational requirements, such as a “project” functional business with a “manufacturing” business unit operating with-in. There are quite different requirements in regard to tracking & reporting between projects & manufacturing and if the system isn’t flexible enough (as per our current one) we will get a great deal of conflicting information coming through in reports. • The system needs to be flexible and functional to all levels of users. • We need to be able to set different levels of accessibility into the system for various staff & various functions.
  • 58. - 58 - • From my business requirements we need the ability to have quite specific project reports and I have provided examples of these to James King previously. • We need to consider the flexibility of the developers & the communication capabilities they have with NZ & Australian cultures Respondent 15 To engage a vendor who will provide Company with a computerised system capable of taking us to the next level and beyond, in respect to planning and management of ALL of our resources Respondent 16 Company’s strategic goal in implementing an ERP system is: To establish an enterprise-wide integrated system which will - offer a truly integrated solution to the customer through development of inter-divisional synergies; - increase its ability to manage complex projects more effectively, thus improving customer trust and market share; - enable Company employees to maximise their potential, reduce wastage and achieve job satisfaction, thus improving the work culture; - ensure establish a robust system which will weather Company through highly competitive times on the global scene. Respondent 17 We are after at system which is best fit to our diversified organisation, our friendly, well supported in Australia. Something which will improve efficiency to be easily integrated with the best of the Company Systems. Respondent 18 Bring data used to operate the company into a single unified system hopefully facilitating increases in operating efficiency. Respondent 19 Basically Company is choosing and implementing an ERP system which they deem suitably an improvement and upgrade to what we currently have in Qarms. There are basic requirements that the new system meets or exceeds the current capabilities we have with Qarms. And that we are able to implement across all groups with as little impact as possible. This will of course include (but not only) cover the following area’s: • Accounts R P • Payroll • Order entry Sales • Inventory Management • Project Management • Job Costing • Purchase Ordering Receiving • Etc…. Respondent 20 Provide better management information which, in turn, will improve the bottom line Respondent 21 • The alignment of all business units on one system.
  • 59. - 59 - • Create a system that can support human resources issues, safety measures, production planning, job costing and financial metrics. Respondent 22 Company is a rapidly expanding organisation and to assist with this growth the group must utilise the technology that is available. While QARMS may have been adequate in the past, the diversity and complexity of the business is now beyond its capabilities. In addition, the ERP systems now available provide tools which will increase efficiencies, provide more useful management information and create a solid base from which the group can grow from over the coming years. Respondent 23 1) Overcome existing weakness on current ERP system 2) Create coverson for all of Company 3) Consistent business practices with Company 4) Tighten control over Company Business Practices 5) Provide more information Respondent 24 The main goal that Company is trying to obtain is a fully integrated system allowing for all aspects of our business to be done in one system. Also allowing the purpose of all quoting to be done and then electronically downloaded into the accounting system. Respondent 25 Growth, standardisation, efficiency, improved bottom line performance, inventory reduction, delivery improvement, quality improvement. Respondent 26 Fully integrated system that will cater for the future growth of the many and varied business units of Company.
  • 60. - 60 - Appendix 3: Top CSFs by ERP Implementation Stage
  • 61. - 61 - Appendix 4: ERP Critical Success Factor Questionnaire Name of Respondent Please select one of the following as the most applicable description of your position Position Description Selection Executive Management Management Information technology team member Operational user Strategic Goals Please describe your understanding of the strategic goals of Company in the selection and implementation of an ERP System Ranking reasons for requirement for an ERP System Please rank the following reasons for requiring an ERP System according to importance to Company requirements (by scoring each element: 1 = Not at all important to 10 = Critical) Reasons for ERP requirement Degree of importance Ability to compete globally Competitive pressure Development of a unified system not possible with existing system Globalise and standardise the entire company Inability of the existing system to support organisational needs Planning for future growth Replacement of legacy systems Require resource planning and project management capabilities Requirement for an integrated information system The consideration of an enterprise to re-engineer its business process The growth of the organisation and subsequent incompatibility of several information systems The inability of employees to respond easily to questions or information requested by key customers or suppliers The requirement of extensive resources for maintenance and support Use of multiple points of input with duplicated effort in the existing system Reasons for ERP System requirements were extracted from a combination published articles
  • 62. - 62 - Ranking potential benefits of an ERP System Please rank the following potential benefits to Company an ERP System (by scoring each element: 1 = Not at all important to 10 = Critical) Potential Benefits Degree of importance Tangible benefits Cash management improvement Financial cycle improvements Improved management and planning decision making Improved project management Improved resource planning Improvement of information flow between departments Information technology cost reduction Inventory reduction Maintenance reductions On time delivery improvements Order Management improvements Personnel reduction Procurement cost reduction Productivity improvements Quality improvements Revenue / Profit increase Transportation /logistics cost reduction Intangible benefits Building business innovations Business performance Cost reductions Customer responsiveness Customer service improvement Dismantling inefficient legacy systems Facilitates business learning Flexibility Generates product differentiation Globalisation Increase data accessibility in time Increase data accuracy and credibility Information visibility Integration New / improved processes Standardisation Supply / demand change Supports business alliances System usability Potential Benefits of ERP Systems were extracted from a combination published articles
  • 63. - 63 - Ranking functional elements of an ERP System Please rank the following Elements of an ERP System (by scoring each element: 1 = Not at all important to 10 = Critical or N/A Not qualified to score) according to their projected FUTURE operation of the ERP system Functions to score Degree of Importance Customer Relationship Management (CRM) Sales Order Placement and Follow-up Quotation & Proposal Management Procurement Engineering Change Control Quality Assurance Business Process Documentation Demand Management/ Forecasting Bill of Materials Inventory Control Material Requirements Planning Master Production Scheduling Shop Floor Control and Work In Process Capacity Requirements Planning Project Management Costing Financials (GL, FA, AP, AR) Payroll/Personnel Time & Attendance EIS/Business Intelligence User Interface and Reporting Electronic Commerce Implementation Plan Acknowledgement: This section was extracted from the software package evaluation questionnaire developed by James King
  • 64. - 64 - Ranking Critical Success Factors of an ERP project - Pre-implementation Please rank the following Critical Success Factors (by placing an X in the most appropriate box) according to their projected FUTURE potential contribution towards a successful ERP implementation project Critical Success Factor Extremely Important for Success Important for Success Neutral Somewhat Important for Success Not Important for Success (5) (4) (3) (2) (1) Architecture choices Business Process Re- engineering Careful package selection Change Management Clear goals and objectives Data analysis and conversion Dedicated resources Education on new business processes Inter-departmental communication Inter-departmental Co- operation Management of expectations Minimal customization Project Champion Project Management Project Team Competence Steering committee Top Management Support Use of Consultants User training Vendor Partnership Vendor support Vendor Tools CSF's taken from: Somers TM & Nelson K, 2001, The Impact of Critical Success Factors across the stages of Enterprise Resource Planning Implementations, Proceedings of the 34th Hawaii International Conference on System Sciences
  • 65. - 65 - Ranking Detailed Critical Success Factors of an ERP project - Pre-implementation Please rank the following Critical Success Factors (by placing an X in the most appropriate box) according to their projected FUTURE potential contribution towards a successful ERP implementation project Critical Success Factor or Question Extremely Important for Success Important for Success Neutral Somewhat Important for Success Not Important for Success Alternatively Strongly agree Agree Neutral Disagree Strongly disagree (5) (4) (3) (2) (1) Business Process Re-engineering Business process should be aligned to the ERP process ERP integrated with other management information systems ERP software functionality should support existing business processes ERP software integrated into existing business processes ERP software should be customised or configured to meet organisation needs Existing business processes should be mapped Simplify (re-engineer) business processes in the initial stage Standardise business processes to the extent possible Change Management Change management program and culture required IT department driven implementations Manage resistance of users to new systems Organisational change management expertise is required Performance measures should be adopted to ensure the organisation changes Technical infrastructure, business processes and human resources require flexibility to change Top down or consultant driven implementations Clear goals and objectives Clear understanding of strategic goals, including expectations and deliverables ERP implementation business plan and vision Performance measures for system Return on investment on the ERP implementation should be determined Detailed critical success factors were extracted from various literature sources and combined and grouped according to the relationship to the CSF's defined by Somers and Nelson
  • 66. - 66 - Critical Success Factor or Question Extremely Important for Success Important for Success Neutral Somewhat Important for Success Not Important for Success Alternatively Strongly agree Agree Neutral Disagree Strongly disagree (5) (4) (3) (2) (1) Inter-departmental Co-operation Communication among functional units and among different stake-holders Communication between internal project teams and consulting teams Communication between project teams and (user) functional units Cross-functional team approaches required Effective coordination mechanism to resolve cross-functional differences Management of conflict of interest among different functional units Management of increase in organisational conflict Mechanisms to resolve multi-site issues required Willingness to accept changes from other functional units Project Management All employees should be in the implementation Detailed project plan (what activities to cover at what stage) including appropriate deadlines / milestones ERP project team members should organise the ERP implementation ERP teamwork and composition is important Excellent Project management required Implementation cost very closely monitored Incentives, empowerment and feedback for the project team Maximise utilisation of in-house expertise Operate in one or a few locations Project team members should take ownership Project team solely dedicated to the ERP implementation Properly educate the team and key individuals about the ERP implementation Step by step implementation (one ERP function implemented at a time) Tight focus / control on the ERP implementation Utilise progressive roll-out through each site in turn Utilise big bang approach - install each function at all sites simultaneously
  • 67. - 67 - Critical Success Factor or Question Extremely Important for Success Important for Success Neutral Somewhat Important for Success Not Important for Success Alternatively Strongly agree Agree Neutral Disagree Strongly disagree (5) (4) (3) (2) (1) Project Team Competence A great implementation team Balanced and empowered implementation team Complexity of ERP means only a few people understand system beyond a single module, making overall design decisions difficult Deep understanding of the key issues relating to ERP implementations Human resource commitment from different functional units Organisational experience of similar scale IT or organisational change projects Project team includes people experienced in previous implementations Project team includes people with strong knowledge of financial and manufacturing processes Require in-house human resources with large-scale, enterprise-wide project management skills Selection of the right (i.e. most knowledgeable and dedicated) employees for the ERP project team Utilise outside consultant group only when in- house expertise was not present Value the managerial support provided by the consultant group Value the technical support provided by the consultant group Top Management Support Carefully constructed business case well communicated to relevant parties Define strategic factors such as ERP strategy and overall implementation strategy Ensure adequate monitoring and feedback Ensure close cooperation between IT and business managers Executive and top management commitment and participation Good understanding of enterprise system capabilities and limitations Management of stakeholder politics Managers use system generated information to improve organisational performance Risk management and contingencies (failure or delay of implementation, cost exceeds budget, etc) Strong and committed leadership
  • 68. - 68 - Appendix 5: Implementation Wallace and Kremzar (2001) provide an example of an implementation strategy. Although they make the distinction between Enterprise Resource Planning and Enterprise Systems, distinct from the broader definition of an ERP system which currently prevails (Enterprise System includes ERP) which is probably no longer compatible with the current ERP systems the book presents an implementation strategy which fulfils the requirements presented by the Critical Success Factors identified. The following extracts are provided as a summary for reference and the elements of the implementation process described in the book should be considered as an example in developing an implementation plan. Extracts from ERP: Making It Happen The ABCs of Implementation Based on the ABC approach to inventory control, derived from the Pareto Principle, where A items are very significant, B items less significant and C items whilst essential are the least significant, the ABC of implementing ERP is C is the computer (hardware and software), B is the Data (inventory, bills of material, routings, etc) and A is the people, the most important element in making it happen. Class ABCD Based on the range of reactions to the implementation of MRP in the 1970s, Oliver Wright, a leading pioneer in the field, developed the ABCD classification which still applies:- • Class D: Information inaccurate and poorly understood by users; providing little help in running the business – The people in the company failed to implement the set of tolls correctly. • Class C: Operated primarily as better methods for ordering materials; contributing to better inventory management – The company has not changed the way it runs, reduced inventory and probably better able to manage engineering changes. • Class B: Supported by top management; used by middle management to achieve measurable quality improvements – Dramatically improved ability to deliver on time, minimise plant shortages, avoid unplanned overtime, reduce inventories, cope with changes. • Class A: Effectively used company wide; generally significant improvements in customer service, productivity, costs – Yields class B benefits and more; the business is managed with one set of consistent numbers throughout, financial reports used to run the business are based on highly accurate operational numbers, extensive use is made of simulation performing what-if analysis using the ERP database. The implementation challenge There is an apparent catch 22 in successfully implementing ERP successfully, which is the reason why many companies never get beyond Class C 1. It’s a lot of work Represents a major shift in thinking; learning an entirely new way to deal with supply and demand issues, ERP’s new approach and speed of information flow. That means a lot of work. 2. It’s a do it yourself project Successful implementations are done internally. Consultants can have a role in providing expertise, but only company people know the company well enough and have the authority to change how things are done. When implementation responsibility is de-coupled from operational responsibility; who can be accountable for the results. Companies that achieved
  • 69. - 69 - Class A or Class B and achieved greatest bottom line benefits are the ones where users implemented ERP themselves. Key implementation principle: IMPLEMENTERS = USERS The people who implement the various tools are those that will operate them after they are implemented. 3. Its not priority number one The problem is the people who need to do it are already very busy with their first priority; getting customer orders, making shipments, keeping equipment operating, running the business. All other activities must be subordinate. Implementing ERP cannot be priority number one, but it must be high priority, preferably number 2, right after running the business. Other issues • It is people intensive • It requires top management leadership and participation • It involves virtually every department within the company • It requires people to do their jobs differently An Aggressive Implementation Schedule Some companies achieve Class A implementation in less than 12 months, but not many: there are too many things that need to be done – massive education, data integrity, changing the way the business is run, all whilst its not priority number 1. On the other hand for an average sized company if it takes more than 2 years then it is probably not being done correctly. The odds of achieving superior results decrease sharply with time: it becomes difficult to maintain the intensity, enthusiasm, drive and dedication required. Therefore plan on a full implementation taking 18months; early successes are important and should be identified and aggressively pursued. The most important early win is typically Sales and Operations planning and another is accurate inventory record. Intensity and enthusiasm Because ERP implementation is by people running the business, their first priority and full time job in itself, responsibilities for implementing ERP require more work and more hours beyond running the business. With a long implementation they will become discouraged – with an aggressive schedule and early progress they can see they can expect improvement within a short space of time Operating people respond favourably to tangible gains. Priority ERP cannot hold the necessary high priority over an extended period; companies like people have limited attention span. Establish a high priority, implement quickly and successfully and then capitalise on it, use it to run the company better. Unplanned change Changes in people and changes in operating environment represent threats to the ERP project. A short project diminishes the likelihood of these effects. Schedule slippage Tight, aggressive schedules are less likely to slip. Benefits Taking longer than necessary defers the benefits; delays cost money in lost opportunity cost.
  • 70. - 70 - Uses the concept of three knobs to achieve the aggressive schedule – three primary variables, amount of work to be done, the time available (calendar time, not person years) and the resources available. The workload is constant to implement ERP, if the time is considered fixed at 18 months then the only variable is resources – if there s not enough time or the team is already stretched thin by existing work then a successful implementation isn’t on the cards. The Proven Path Introduces the concept of the proven path as method to implement ERP. Consists of a number of discrete steps to be covered to achieve the desired outcome. Figure showing implementation program recommended by Wallace and Kremzar Audit / Assessment 1 An analysis of the company’s current situation, problems, opportunities, strategies, etc. Addresses questions such as: Is ERP the best step to take now for competitive advantage? If so the best way to implement? Serves as the basis for putting together a short term plan to bridge the time period until the detailed project schedule is developed. First Cut Education A group of executives and operating managers must learn how ERP works; what it consists of; how it operates; and what is required to implement and use it properly. This is necessary to effectively prepare the vision statement and cost / benefit analysis. These leaders need to learn their roles in the process, because all significant change begins with leadership. • What is ERP? • Is it for us? Does it make sense for our business? • What will it cost?
  • 71. - 71 - • What will it save? What are the benefits we will get if we do it the right way and get Class A? • What are the linkages with Enterprise System and should we do it at the same time? Cost / Benefit Analysis A process to generate a written document that spells out the costs of implementation and the benefits of operating Enterprise Resource Planning successfully, and results in a formal decision to proceed with ERP or not. Go / No-go decision Vision Statement A written document defining the desired operational environment to be achieved with the implementation of ERP. It answers the question: What do we want this company to look like after the implementation? Performance goals Agreement as to which performance categories are expected to improve and what specific levels they are expected to reach. Project Organisation Creation of an Executive Steering Committee; an operational level project team, consisting mainly of managers of operating departments throughout the company; and the selection of the full time project leader and other people who will work full time on the project. Implementing Sales and Operations Planning Demand Management, Planning and Scheduling Processes Data Integrity Finance and Accounting Processes – process definition and implementation Software selection and Software configuration Installation Audit / Assessment II Ongoing Education Project launch Project Organisation Project leader • Should be full time • Should be someone from within the company: it will take longer for an outsider to learn about the company, products and processes than an insider to learn about ERP. An outsider will cause employees to sit back rather than participate. • Should be from an operational background: from an operating department within the company, involved in a key function regarding the products. Avoid selecting an IT person to lead the project – it sends the message “this is a computer project” instead of this is a business project.
  • 72. - 72 - • Should be the best available person for the job from within the ranks of operating managers. Often executives are reluctant to assign that excellent operating manager totally to ERP, whilst they realise the critical importance of ERP and a heavyweight to manage it they are concerned about the impact on priority number one (running the business). If it doesn’t hurt to free up the person who will be your project leader then you probably have the wrong person. If you select the person you can least afford to free up then you probably have the right person. An early and important test of management commitment. • Should be a veteran – someone who has been with the company for a good while. • Should have good people and communication skills, respect and trust of peers and a good track record. Project team Responsible for implementing the system at an operational level. Has full time members (project leader, assistant project leader, systems analyst and ES project leader) and part time members (Operational managers) responsible for: establishing ERP project schedule; reporting performance identifying implementation problems; activating spin off groups to solve those problems; making appropriate decisions on priorities, resources, etc; make recommendations to steering committee; doing whatever is required to achieve successful implementation at operational level. Executive Steering Committee Project Champion Professional guidance Performance Goals Initial Education Objectives of Education for ERP Two critically important objectives: Fact transfer and behaviour change. Criteria for a program to accomplish behaviour change 1. Active visible and informed top management leadership and participation 2. Line accountability for change 3. Total immersion for key people 4. Total coverage throughout the company 5. Continuing reinforcement 6. Instructor credibility 7. Peer confirmation
  • 73. - 73 - 8. Enthusiasm The Change Process Create the team of experts Reach the Critical Mass Process Definition Creating the Project Schedule The ERP schedule is the basic control tool used to manage the project to a timely and successful conclusion • Aggressive but attainable • Complete, covering all tasks • In sufficient detail to manage effectively • Specific in defining accountability
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