Respond to the following: ERPs are often touted as providing ‘best practice’ in functionality and business processes. However, many organizations have their own business processes and often do not want to change. If an organization is unwilling to change its business processes, can it gain any value from an ERP? How could this be achieved? What are the risks?
Enterprise resource planning (ERP) is a cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company (Wikipedia, 2013). ERP applications have been developed after thorough research and effort of best practices in different industries. When an ERP application is released, changes are rarely made before release of any other updates. Thus when applying a new ERP system in any organization, they have to rethink about their business process to match the best practices that the new ERP system has implemented. However, all the businesses might not be willing to do so either to maintain their competitive advantages or because of several other reasons. Later in this article I will be focusing on following issues:
- Can an organization gain any value from an ERP without changing its business processes?
- How can that value be achieved?
- What are the risks in doing so?
Ekran, in 2009, performed a research involving two pharmaceutical organizations who have implemented new ERP system. Firm A implemented ERP after doing BPR (Business Process Re-engineering), whereas Firm B followed big bang theory in ERP implementation. Both the companies have achieved some improvement in
- Cycle Time
- Order Fulfillment Time
- Inventory Level
- Inventory Turnover
- Order to Cash Rate
But, it was noticed that Firm A, after suitable changes in their business processes, has achieved greater improvements in all the 5 aspects with compared to Firm B. So it can be said that a company can gain value even without changing their existing business process; but, it is advisable to make suitable changes in business processes if the company wants to gain greater value from an ERP.
Now, in order to achieve value without making changing in business process an organization must still follow good practice of ERP implementation. So, while implementing ERP an organization must have:
- Clear understanding of strategic goals
- Commitment by top management
- Excellent project management
- Organizational change management
- A great implementation team
- Data accuracy
- Extensive education and training
- Focused performance measures
- Multi-site issues (Ekran, 2009)
However, there are risks involved in implementation of ERP without suitable changes in business processes. It might result in:
- Implementation of ERP which does not meet the business requirement of an organization.
- Additional heavy costs in modifying ERP.
- Additional time consumed in modifying ERP.
- Additional work around paths to make use of ERP.
Conclusively, the direct implementation of ERP may improve the performance of an organization, but it can also introduce many risks. Plus, the organization will not be able to get the value of new system to its fullest. Thus, it is advisable to embrace suitable changes in business processes while implementing ERP.
Ekran, T E 2009, ‘BPR Effect on ERP Implementation: a Comparative Case Study’, World Academy of Science, Engineering and Technology, viewed 3 October 2013, http://www.waset.org/journals/waset/v30/v30-242.pdf
Wikipedia 2013, Enterprise resource planning, viewed 3 October 2013, http://en.wikipedia.org/wiki/Enterprise_resource_planning