Seminar 10

Seminar 10 Challenges of ERP Implementation

While keeping talking about the benefits and solutions that ERP system could bring to the organizations, people might forget that ERP system is not so easy-to-use. The implementation process is a large-scale and costly project that covers most departments of a company, and it might be risky. If the strategy is not chosen correctly, ERP may add some new problems or even ruin your business.

Case studies – Learn from failure

James told us to read some real life cases regarding ERP implementation, and to share the implications with classmates. The case that I’ve read was about FoxMeyer, once the fourth largest pharmaceutical distributor in the US. It decided to implement SAP system and integrate it with another warehouse automation system in 1994, when ERP system implementation had just got some success precedents. I can understand the aspiration to strive to be the first to apply new beneficial technology among the competitors, but haste makes waste. Without experienced consultants and effective control over the situation, the company seemed under pressure that caused by the project. The hardware system became over stressed, and employees were also afraid of losing jobs. The warehouse workers even deliberately destroyed the inventories and refused to fill in the orders. They should have halted the project, but due to profit overestimation, blind overconfidence, and social image maintenance, they chose to let it go. Finally, an overlarge contract eventually drove it into bankruptcy.    

From the cases that the classmates have shared with me, including Hershey, HP and Nike etc., there are some other problems that companies might encounter when implementing ERP system. I have consolidated them and as listed below.

1. Not enough time spent on the project.
2. Lack of experienced and knowledgeable consultants or technicians.
3. Problems with the change of organizational structure.
4. Hard to use SAP to centralize different sub-companies.
5. Incorrect transaction volume estimation.
6. Unsymmetrical information between the implementation team and the business process executives.

……

Some of the implications are also listed below:

1. Think more before deciding to implement two systems together.
2. Don't rush through the implementation process.
3. Should not overly rely on external consultants.
4. Effective trainings should be provided for any employees involved.
5. Strong internal control should be applied to guide people to accept the changes.
6. Back up plans should be prepared especially for peak hours.

……

Mini Debates

We then had some mini debates, which were also regarding ERP implementation. One of the motions seemed to be uncontroversial at all: Big bang approach is better than phase in approach when implementing ERP system. Maybe resulted from the unsuccessful cases above, we all became cautious and thought big bang approach should not be applied. But actually, these two approaches are just like blitzkrieg and seesaw battle, and you can’t say which one is better, because it needs to fit in some contexts. For example, big bang approach can be applied for a low cost project on a single site or multiple interdependent sites. And I found that the number of companies that applied big bang approach was roughly the same as the number of companies that applied phase in approach.

                                                                                              http://blog.softwareadvice.com

Another one that I thought interesting was: Consultants are friends, not foes. If you have learned organizational behaviour, you would say of course they should be treated as friends. But the opposite house stated that the consultants represent their own benefits, so they might provide wrong suggestions sometimes. Therefore, if you trust them as friends, you might get hurt.  But James said in reality, consultants are not treated friendly, because they are not deemed to belong here, and especially when they are young and getting paid better than the company’s manager. Having said that, I still think consultants should be treated as friends, because they are paid to be a strategic helper for the company. If they are feeling trusted, they might devote more and help more; otherwise, they might just finish their work and never think more from the company’s perspective.

The lessons have reached the end to some extends, and I think I’ve gained an understanding over the whole process, so that I would basically know what to do with SAP no matter which position I’m at in a company. And I think I’m going to gain more during the preparation of the SAP certificate test. More importantly, I’ve learned to be observant in daily life, so I believe I would get more insights regarding ERP with experiencing more in the near future J .