2. 2
ERP systems characteristics
1. data integration
one integrated register can be created, which satisfies the
requirements of the marketing, warehouse as well as the credit
management department. Employees who need the data can be
given access, and for one customer data like name and address can be
combined with shipped orders or open invoices. The departments can
agree upon the responsibility for the accuracy and completeness of
the data, and in many cases the ERP system can automatically update
the data
As a result of data integration, ERP can make double work redundant
and stimulate efficiency. But maybe more importantly, it can stop the
search for and explanation of differences between the various
registers and definitions, and make the organisation rely on one
shared source of data.
3. 3
ERP systems characteristics
2. ERP systems is support for best practices
A best practice is a generally accepted way of working that has been adopted
by many organisations and has proven its practical value
Organisations can embed the best practices of the ERP system in their
business processes. They can introduce best practices directly when they start
using the ERP system, or they can let the ERP system support their current
ways of working. They can also gradually improve their business processes by
increasing their use of the best practices supported by the ERP system
*Because of their two most important characteristics, data
integration and best practices, ERP systems can
substantially improve business processes
4. 4
Organisations that use ERP
1. ERP has been used by large multinational
companies
an overview is presented of companies with a listing on the Belgian BEL20
stock exchange that were mentioned in press releases about ERP
implementations between 1995 and 2009. In these fifteen years, 53
companies have had a BEL20 listing, 24 of which worked on ERP during this
period.
2. ERP is also used by governmental organisations
and agencies
In The Netherlands, both the Ministry of Education, Culture and Science and
the Ministry of Finance have used ERP for several years. Decentralised
governments, such as the provinces of North Holland and North Brabant, as
well as the Dutch Vehicle and Driving Licence body have implemented ERP
systems.
5. 5
Organisations that use ERP
3. ERP has been used by large small and medium
sized organisations
Recent developments however bring ERP systems within the reach of small
and medium-sized businesses. Firstly, ERP has become less demanding for
the computer hardware; in its early days, ERP could only be implemented on
mainframes, whereas today a small server or even a personal computer is
sufficient. Secondly, ERP has spread so far in large organisations that this
market has become saturated and suppliers that want to grow have to adapt
their systems to fit the requirements of smaller organisations. Lastly,
knowledge of information technology is increasing also in smaller
organisations, which means that the benefits of ERP are being recognised in
this market
6. 6
Expected benefits from ERP
Data Integration
1. The efficiency of data gathering can be improved
obsolete administrations and registrations can be abolished, and it
becomes simpler to guarantee the timeliness and completeness of the
data
2. The effectiveness of decision making can also be
improved:
because of a higher quality of the underlying data, a better
understanding of the organisation’s management and operations is
created, and therefore a better foundation for decision making
3. improved cohesion in the internal processes
when departments start using each others’ data, they get a better
awareness of the importance of their work for other parts of the
organisation, which creates higher synergies between departments
7. 7
Expected benefits from ERP
support for best practices
1. ERP implementation as a starting point for a
redesign of their business processes
business process redesign can lead to improvement of existing
processes, or to completely new ways of working
An organisation that implements ERP can select those best practices
that best fit its business management and operations.
2. ERP implementation can be reaping the benefits
of a modern IT architecture
8. 8
Impact of ERP
1. Poston & Grabski [2001],
They analysed the effect of ERP implementation on costs. They followed
the financial performance of fifty American companies from a variety of
industries who had published a press release in which their ERP
implementation was announced. Using statistical analysis, they found
that three years after the ERP introduction announcement, ERP had a
significant positive effect: direct costs of goods sold decreased and
employee productivity as a percentage of revenue increase
2. Hunton et al. [2003]
They carried out a comparison of economic performance of pairs of
companies in the same industry. In every pair, one company was an
adopter of ERP, and the other was a similar- sized company from the
same industry that had not adopted ERP. The authors found that the
adopting companies had a significantly better overall return on
investment
9. 9
Impact of ERP
3. Ranganathan & Brown [2006] , Sneller [2010]
found a positive impact of ERP implementation announcements on
share prices around the day of such announcements
10. 10
ERP horror stories
1. Fox Meyer Drugs
When the ERP system went live under high pressure, it could only
handle ten thousand of the required forty-two thousand transactions
per day. The failure to handle transactions eventually led to the
bankruptcy of Fox Meyer Drugs in 1996
2. Dell in the mid 1990s
The ERP implementation did not progress according to plan. After
two years of adaptations to the standard ERP system, CIO Jerry
Gregoire decided to terminate the implementation project. In
these years, Dell had introduced a revolutionary business model
of direct distribution to customers via the Internet, without the
dealer network that was customary in the industry at that time.
ERP is based on the use of best practice processes, while Dell
developed company-specific innovative processes.
11. 11
ERP horror stories
3. Hagemeyer
After initial successful go-lives in various countries, the implementation
in the largest market, the UK, did not work out. Insight into inventory
positions was lacking because the information in the integrated ERP
system was unreliable, which for a trading company of course is an
untenable situation. The company’s revenue shrank with 34 percent in
four years [Hagemeyer, 2005], and the company had to write off at least
one hundred million Euro of its ERP investment. In 2004 bankruptcy
could only just be avoided
*ERP implementations that cost more than ever expected and
even endangered the continuity of the organisation that
attempted to implement ERP the horror stories show that an
ERP implementation should not be started lightly. ERP
implementations are complex, and they involve financial,
operational and reputation risks
