Chaoyang University of Technology


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Chaoyang University of Technology

  1. 1. Critical Issues of ERP Systems: A Practitioner’s Perspective By Chuck C. H. Law Department of Information Management, Chaoyang University of Technology
  2. 2. Table of Content <ul><li>Objectives </li></ul><ul><li>Literature Review </li></ul><ul><li>Frequently Encountered Problems </li></ul><ul><li>Case Study: Tradeco </li></ul><ul><li>Professional Practice </li></ul><ul><li>Conclusion </li></ul>
  3. 3. Introduction <ul><li>Objectives: </li></ul><ul><ul><li>What are the critical issues related to ERP system adoption and management? </li></ul></ul><ul><ul><li>What are the problems encountered in ERP adoption in the business world? </li></ul></ul><ul><ul><li>What are considered sound professional practice in addressing these problems ? </li></ul></ul>
  4. 4. Literature Review – Critical Issues – Academic Perspective Study Findings Bingi et al. (1999) * Identified 10 critical issues for ERP implementation, including BPR, and senior management support. Hong and Kim (2002)   * Relationship between organizational fit of ERP and ERP success (supported) * Moderating effects of ERP adaptation and process adaptation (supported) Yang et al. (2000)   * Relationship between the extent of business process redesign and ERP benefits. (not supported) Gattiker and Goodhue (2002)   * Positive relationship between ERP adoption and process changes (supported). * Relationship between process changes and the organizational impact of ERP (not supported). Kumar et al. (2002) * 14% of respondents regarded ERP-business process fit as important.
  5. 5. Literature Review – Critical Issues – Academic Perspective Study Findings Hitt, Wu, and Zhou (2002) * Relationship between ERP adoption and firm performance (supported) * The impact of ERP varies with the level of implementation. Shang and Seddon (2002) * Qualitative study * Reviewed 233 cases of ERP adoption to identify tangible and intangible benefits of ERP systems. * Interviewed managers of 34 organizations. Murphy and Simon (2002) * Case study on intangible benefits of ERP adoption, and showed how such benefits were considered in project evaluation.
  6. 6. Literature Review – Critical Issues – Academic Perspective Study Findings Ein-Dor and Segev (1978) * seniority of IT leader, management support, & organizational structure Davenport (1998) * management support, steering committee chaired by senior business executives Li and Ye (1999) * Reporting distance between CEO and CIO Grover et al. (1995) * management support critical for BPR Sumner (2000) * management support
  7. 7. A Summary of Critical Issues <ul><li>impact of ERP, intangible & tangible benefits, justification </li></ul><ul><li>business process improvement / re-engineering </li></ul><ul><li>business process – ERP fit </li></ul><ul><li>process adaptation versus ERP adaptation </li></ul><ul><li>senior management support of IT & BPI projects </li></ul><ul><ul><li>reporting relationship between CEO/CIO, & organizational structure </li></ul></ul><ul><ul><li>strategic intent </li></ul></ul><ul><ul><li>process re-engineering approach </li></ul></ul><ul><ul><ul><li>revolutionary versus evolutionary </li></ul></ul></ul>
  8. 8. Practical Problems <ul><li>Justification of investment </li></ul><ul><li>Management support </li></ul><ul><li>User involvement </li></ul><ul><li>Business process-ERP fit </li></ul><ul><li>Business process re-engineering </li></ul><ul><li>Cultural Issues, for instance, </li></ul><ul><ul><li>Data ownership </li></ul></ul><ul><ul><li>Territorialism </li></ul></ul>
  9. 9. Practical Problems <ul><li>Organizational issues, for instance, </li></ul><ul><ul><li>Organizational structure </li></ul></ul><ul><ul><li>Seniority of IT leader / reporting relationship </li></ul></ul>
  10. 10. Case Study - Tradeco <ul><li>A Hong Kong-listed firm </li></ul><ul><ul><li>Established by Hong Kong/Singaporean families in mid-1960’s </li></ul></ul><ul><ul><li>Listed in late 1990’s </li></ul></ul><ul><ul><li>American conglomerate acquired 60% of ownership in 2000. </li></ul></ul><ul><li>Attempted to replace legacy system by ERP </li></ul>
  11. 11. Case Study – Tradeco Problems/Mistakes <ul><li>Lack of Management Support </li></ul><ul><ul><li>Package evaluation and selection was poorly executed. </li></ul></ul><ul><ul><li>Managing director ignored recommendation of MIS Manager and selected an ERP package (X) which did not fit business practice and process </li></ul></ul><ul><ul><li>Steering Committee was not attended by MD and other directors </li></ul></ul><ul><ul><li>MD carried no leadership role in the project. </li></ul></ul><ul><li>Lack of User Involvement/support </li></ul><ul><ul><li>Participation in analysis/design sessions is low </li></ul></ul><ul><ul><li>Divisions and teams were represented only by junior staff (such as sales assistants and secretaries) </li></ul></ul><ul><ul><li>Resistance to BPR </li></ul></ul>
  12. 12. Case Study – Tradeco Problems/Mistakes <ul><li>Lack of fit between Tradeco and ERP Package Selected </li></ul><ul><ul><li>Actual costing not supported by ERP package </li></ul></ul><ul><ul><li>Business process not re-engineered to fit ERP, but instead the ERP was customized </li></ul></ul><ul><li>Cultural-organizational factors </li></ul><ul><ul><li>Territorialism </li></ul></ul><ul><ul><ul><li>fierce competition among teams </li></ul></ul></ul><ul><ul><li>Data ownership </li></ul></ul><ul><ul><ul><li>Each team and staff (including senior management) believe that they owned the data resulted from business transactions. </li></ul></ul></ul><ul><ul><ul><li>Such concept precluded any co-operation and information sharing along ERP processes – an obstacle to BPR. </li></ul></ul></ul><ul><ul><ul><li>Misuse of ERP security features. </li></ul></ul></ul>
  13. 13. Case Study – Tradeco Problems/Mistakes <ul><li>Cultural-organizational factors (cont’d) </li></ul><ul><ul><li>Company and MIS have no exposure to ERP adoption. </li></ul></ul><ul><li>Consultant Management </li></ul><ul><ul><li>Mistakes in recruiting qualified consultants </li></ul></ul><ul><ul><li>Mistakes in managing consultants’ activities and time. </li></ul></ul><ul><li>Skills and Training </li></ul><ul><ul><li>Poorly defined and managed training plan </li></ul></ul><ul><ul><li>MIS and users were offered only standard training courses, which did not cover Tradeco’s processes. </li></ul></ul>
  14. 14. Case Study – Tradeco Problems/Mistakes <ul><li>Methodology & QA </li></ul><ul><ul><li>Milestones, deliverables, and responsibilities not clearly defined and enforced. </li></ul></ul><ul><ul><li>Control measures were not enforced at milestones such as review of specification, testing … </li></ul></ul><ul><ul><li>GAP analysis not conducted </li></ul></ul><ul><ul><li>BPR not conducted </li></ul></ul><ul><ul><li>Lacks overall strategy and planning from selection to implementation </li></ul></ul>
  15. 15. Professional Practice <ul><li>Cultural-Organizational Factors </li></ul><ul><ul><li>Senior management support/leadership </li></ul></ul><ul><ul><li>Steering committee chaired by CEO, and attended by senior staff </li></ul></ul><ul><ul><li>Promote and manage project as a company initiative, but not an IT/MIS project </li></ul></ul><ul><ul><li>IT leadership must be positioned high in the committee and in the organization structure </li></ul></ul>
  16. 16. Professional Practice <ul><li>ERP-Business Process Fit and Process Management </li></ul><ul><ul><li>Gap analysis </li></ul></ul><ul><ul><li>Business process re-engineering </li></ul></ul><ul><ul><ul><li>Always strive to improve and simplify process </li></ul></ul></ul><ul><ul><li>Process-oriented approach, rather than function-oriented approach </li></ul></ul><ul><ul><li>Responsibilities of process owners </li></ul></ul>
  17. 17. Professional Practice <ul><li>Methodology and QA </li></ul><ul><ul><li>well defined project plan </li></ul></ul><ul><ul><li>Milestones, deliverables, and responsibilities specified. </li></ul></ul><ul><ul><li>Gap analysis – fit between ERP and process </li></ul></ul><ul><ul><li>Business process re-engineering </li></ul></ul><ul><ul><li>Project organization structure must be defined and members empowered. </li></ul></ul>
  18. 18. Professional Practice <ul><li>Human Resources & Consultants Management </li></ul><ul><ul><li>Must staff project team with internal skills in </li></ul></ul><ul><ul><ul><li>project management </li></ul></ul></ul><ul><ul><ul><li>systems/process analysis </li></ul></ul></ul><ul><ul><ul><li>ERP skills </li></ul></ul></ul><ul><ul><ul><li>(do not rely totally on consultants) </li></ul></ul></ul><ul><ul><li>Must screen consultants carefully </li></ul></ul><ul><ul><ul><li>Review resume and references </li></ul></ul></ul><ul><ul><li>Must clearly define tasks and deliverables assigned to consultants </li></ul></ul><ul><ul><li>Time report approval – consultant time must be reviewed according to estimates </li></ul></ul>
  19. 19. Professional Practice <ul><li>Training Management </li></ul><ul><ul><li>Needs a long-term perspective in training beyond the project development period </li></ul></ul><ul><ul><li>Appropriate training should be offered to various categories of stakeholders in the project </li></ul></ul><ul><ul><li>Training must address company’s business processes </li></ul></ul><ul><ul><ul><li>Vendor’s standard training courses were insufficient/inadequate </li></ul></ul></ul><ul><ul><ul><li>Joint efforts between vendor & users in training development </li></ul></ul></ul><ul><ul><ul><li>Train the trainer approach </li></ul></ul></ul>
  20. 20. Conclusion <ul><li>ERP is challenging to most organizations </li></ul><ul><li>Critical issues/factors must be managed properly to achieve satisfactory outcomes. </li></ul>
  21. 21. <ul><li>Thank you! </li></ul><ul><li>Any Question ? </li></ul>