PPT on erp

1. Chaoyang University of Technology 1
Critical Issues of ERP Systems: A
Practitioner’s Perspective
By
Chuck C. H. Law
Department of Information Management,
Chaoyang University of Technology

2. Chaoyang University of Technology 2
Table of Content
 Objectives
 Literature Review
 Frequently Encountered Problems
 Case Study: Tradeco
 Professional Practice
 Conclusion

3. Chaoyang University of Technology 3
Introduction
 Objectives:
 What are the critical issues related to ERP system
adoption and management?
 What are the problems encountered in ERP adoption in
the business world?
 What are considered sound professional practice in
addressing these problems ?

4. Chaoyang University of Technology 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. Chaoyang University of Technology 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. Chaoyang University of Technology 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. Chaoyang University of Technology 7
A Summary of Critical Issues
• impact of ERP, intangible & tangible benefits, justification
• business process improvement / re-engineering
• business process – ERP fit
• process adaptation versus ERP adaptation
• senior management support of IT & BPI projects
• reporting relationship between CEO/CIO, & organizational
structure
• strategic intent
• process re-engineering approach
• revolutionary versus evolutionary

8. Chaoyang University of Technology 8
Practical Problems
 Justification of investment
 Management support
 User involvement
 Business process-ERP fit
 Business process re-engineering
 Cultural Issues, for instance,
 Data ownership
 Territorialism

9. Chaoyang University of Technology 9
Practical Problems
 Organizational issues, for instance,
 Organizational structure
 Seniority of IT leader / reporting relationship

10. Chaoyang University of Technology 10
Case Study - Tradeco
 A Hong Kong-listed firm
 Established by Hong Kong/Singaporean families in mid-1960’s
 Listed in late 1990’s
 American conglomerate acquired 60% of ownership in 2000.
 Attempted to replace legacy system by ERP

11. Chaoyang University of Technology 11
Case Study – Tradeco
Problems/Mistakes
 Lack of Management Support
 Package evaluation and selection was poorly executed.
 Managing director ignored recommendation of MIS Manager and
selected an ERP package (X) which did not fit business practice
and process
 Steering Committee was not attended by MD and other directors
 MD carried no leadership role in the project.
 Lack of User Involvement/support
 Participation in analysis/design sessions is low
 Divisions and teams were represented only by junior staff (such as
sales assistants and secretaries)
 Resistance to BPR

12. Chaoyang University of Technology 12
Case Study – Tradeco
Problems/Mistakes
 Lack of fit between Tradeco and ERP Package Selected
 Actual costing not supported by ERP package
 Business process not re-engineered to fit ERP, but instead the ERP
was customized
 Cultural-organizational factors
 Territorialism
 fierce competition among teams
 Data ownership
 Each team and staff (including senior management) believe that they
owned the data resulted from business transactions.
 Such concept precluded any co-operation and information sharing
along ERP processes – an obstacle to BPR.
 Misuse of ERP security features.

13. Chaoyang University of Technology 13
Case Study – Tradeco
Problems/Mistakes
 Cultural-organizational factors (cont’d)
 Company and MIS have no exposure to ERP adoption.
 Consultant Management
 Mistakes in recruiting qualified consultants
 Mistakes in managing consultants’ activities and time.
 Skills and Training
 Poorly defined and managed training plan
 MIS and users were offered only standard training courses, which
did not cover Tradeco’s processes.

14. Chaoyang University of Technology 14
Case Study – Tradeco
Problems/Mistakes
 Methodology & QA
 Milestones, deliverables, and responsibilities not clearly defined
and enforced.
 Control measures were not enforced at milestones such as review
of specification, testing …
 GAP analysis not conducted
 BPR not conducted
 Lacks overall strategy and planning from selection to
implementation

15. Chaoyang University of Technology 15
Professional Practice
 Cultural-Organizational Factors
 Senior management support/leadership
 Steering committee chaired by CEO, and attended by senior staff
 Promote and manage project as a company initiative, but not an
IT/MIS project
 IT leadership must be positioned high in the committee and in the
organization structure

16. Chaoyang University of Technology 16
Professional Practice
 ERP-Business Process Fit and Process Management
 Gap analysis
 Business process re-engineering
 Always strive to improve and simplify process
 Process-oriented approach, rather than function-oriented approach
 Responsibilities of process owners

17. Chaoyang University of Technology 17
Professional Practice
 Methodology and QA
 well defined project plan
 Milestones, deliverables, and responsibilities specified.
 Gap analysis – fit between ERP and process
 Business process re-engineering
 Project organization structure must be defined and members
empowered.

18. Chaoyang University of Technology 18
Professional Practice
 Human Resources & Consultants Management
 Must staff project team with internal skills in
 project management
 systems/process analysis
 ERP skills
 (do not rely totally on consultants)
 Must screen consultants carefully
 Review resume and references
 Must clearly define tasks and deliverables assigned to consultants
 Time report approval – consultant time must be reviewed
according to estimates

19. Chaoyang University of Technology 19
Professional Practice
 Training Management
 Needs a long-term perspective in training beyond the project
development period
 Appropriate training should be offered to various categories of
stakeholders in the project
 Training must address company’s business processes
 Vendor’s standard training courses were insufficient/inadequate
 Joint efforts between vendor & users in training development
 Train the trainer approach

20. Chaoyang University of Technology 20
Conclusion
 ERP is challenging to most organizations
 Critical issues/factors must be managed properly
to achieve satisfactory outcomes.

21. Chaoyang University of Technology 21
Thank you!
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