An ERP implementation takes many years to complete and requires a large amount of IT investment and their effectiveness is so hard to evaluate. As of now organizations of any magnitude have implemented or in the process of implementation of Enterprise Resource Planning (ERP) in order to reap the benefits of integration and to remain competitive in the marketing field. It has also been noted that the dispersion of ERP systems at large and small-medium scale enterprises (SME) has been, largely, the most pertinent phenomenon since Nineties, in the sector of the business processes of a company, and helps organizations Information technology (IT). To achieve all of this, companies have realized the necessity of implementing ERP software. When properly integrated, ERP supports process-oriented businesses effectively. It is argued that more than 65% of the managers believe that ERP project failure will damage a firm. The complexity of ERP, high costs and implementation problems force numerous organizations to reconsider their new plans in relation to this enterprise system. A recent study in this matter finds SME companies focusing on growth strategies and customer services sometimes balancing between the two, but more often focusing exclusively on one or the other. As companies grow in size and improve performance, they are most likely to have invested in ERP system that will grow with them. As mid size companies grow, they must learn to operate in distributed environment and often experience proliferation of ERP and other enterprise applications. A number of publications have highlighted the failures and the frustrations that enterprises gone through in implementing ERP systems. A Gartner group study was carried out among 1300 European and American companies and being found that 32% of ERP projects were delivered late and thus unable to achieve the true benefits of implementation. Also by doing comparative analysis between the identified issues for companies in NCR Some issues are proved to be crucial for small companies but not for large enterprises such as proper system implementation strategy, clearly defined scope of implementation procedure, proper project planning and minimal customization of the system selected for implementation, because of some limitations faced by the small companies as compared to large enterprises. Such a scenario raises some serious questions: Are IT Companies informational needs as well as other issues are different from that of large IT Companies? Is it possible to identify a relationship between organizational climate and ERP adoption in companies of different size? Can certain factors or issues be identified that can be considered critical in context to Small Companies but not for large organizations so that managers can focus on those key issues to make the implementation process smooth? ERP implementations usually involve broad organizational transformation processes, with significant implications on the organization’s management model, structure, management style and culture, and particularly, on people
SIGNIFICANCE & SCOPE OF THE STUDY
To Explores and validates the existing literature to find out the critical success factors that lead to the success of ERP in Indian companies. The findings of the results provide valuable insights for the researchers and practitioners who are interested in implementing Enterprise Resource Planning systems, how best they can utilize their limited resources and to pay adequate attention to those factors that are most likely to have an impact upon the implementation of the ERP system. ERP systems provide firms with two new and different types of functionality: a transaction processing function, allowing for the integrated management of data throughout the entire company, and a workflow management function controlling the numerous process flows within the company. ERP facilitates the flow of information between all the processes in an organization. ERP systems can also be an instrument for transforming functional organizations into process-oriented ones. When properly integrated, ERP supports process-oriented businesses effectively.
OBJECTIVE OF THE STUDY
The Implementation of new technologies and manufacturing philosophies in industrial sector with good success rates is crucial in a nation’s economic growth and prosperity. ERP is one such system for which a lot of resistance is offered in organizations for implementation due to higher investments and more failures associated with it. The study of ERP implementation issues is necessary to encourage and persuade small and medium scale industries to go for ERP implementation as ERP is vital in their future growth. The objective of this paper is identified and validates the critical success factors for ensuring successful implementation of Enterprise Resource Planning (ERP) packages in companies.
• To analyse the Implementation of ERP and IT industries in India.
• To identify the factors, issues &challenges in ERP Implementation
The benefits of ERP in any organization are beyond doubt. Some of the key benefits are listed below:-
- Ø Reduced Planning cycle time
- Ø Reduced manufacturing cycle time
- Ø Reduced inventory
- Ø Reduced error in ordering
- Ø Reduced requirement of manpower
- Ø Enables faster response to changing market situations
- Ø Better utilization of resources
- Ø Increased customer satisfaction
- Ø Enables global outreach
ISSUES AND CHALLENGES
Though the market for ERP seems to be growing, there are several issues and challenges one has to contend with when implementing an ERP system in the SME segment. Some of these are:
- Awareness: There is a low level of awareness amongst SMEs for ERP vendors,
applications etc. most of the time they do not even know what ERP systems are
and what they can do. They consider ERP systems to be a magic wand, which will
help solve all their business Problems, be it in terms of quality, or process
defects.ERP brings in a more disciplined execution of business process giving more
transparency and visibility to the working of the organization.
- Perception: SMEs have the perception that ERP is meant only for large firms mainly
owing to the high costs of acquisition, implementation and maintenance as also the
complexity. Some of the SMEs even feel they do not need ERP.
- Earlier Implementations: SMEs have heard of the much-publicized failures in ERP
implementation, which have led firms to bankruptcy. Some SMEs who have implemented ERP earlier have failed. This has led SMEs to believe that ERP implementations are a waste of time and effort and can even lead to the demise of company.
- Approach to implementation: ERP vendors advice SMEs to mould the business to ERP’s way of working. Considering that ERP systems will bring it best business practices. This is the plain vanilla approach that was mentioned earlier, which would bring down the cost of implementation. But most SMEs have processes that they have evolved over time and hold very dear to their hearts. As a result, SMEs are having the entire ERP system customized to meet their requirements. This would increase the overall cost of implementation. A good approach would be to keep the customization to a minimum.
- Cost: SMEs have less of capital than their larger counterparts.
- Change management: One of the major reasons why ERP implementations nationwide have been known to fail is due to the implementation being considered as an automation project instead of one that involves change management. This results in the system being put in place but not being used effectively due to people not ready to accept the change.
- Limited resources: Most SMEs do not have an in-house IT team. Due to this they have to rely on external agencies to help them and this adds to the implementation costs.
FACTORS AFFECTING ERP IMPLEMENTATION
The major factors can be classified into four subheadings namely, the top management, training, the data collection & Software design and Testing. The 8 factors affecting the ERP implementation are determined. The consensus among the ERP team and top management is very important to indicate the need for application framework. The factors are can be illustrated as follows:-
- 1. Data provided: Adequate and correct data should be provided it had to be collected from the distributed Tally 7.0 Servers, had to be reconciled, mapped into the ERP System in its standard format and finally the data had to be uploaded into the system. A strong management direction is needed for the managers at each of the branches so that adequate and appropriate data is duly provided.
- 2. Parallel systems: When issues began to crop up after implementation of ERP in
Finance module, sales and distribution module was completely ignored, they shifted work with these modules back to the old system. This hampered the proper integration of organization data and led to data mismatch in other modules as well. As a result, support system provided by the vendor became obsolete and difficult to implement. Hence, use of parallel systems should be avoided outright.
- 3. Training and testing: Training and testing of the system should be done properly
by the ERP Consultants, that is, the vendor is provided as part of the implementation procedure to only a 30% group of people from the clients’ side known as the Core Team. This core team in turn trains a rest of people who are actually responsible for day-to-day transactions called the End Users. It was observed that the 50% second leg of training which is provided to the end users was not carried out mainly due to lack of computer literacy, not will to accept the
responsibility this triggered a strong resistance to change for the new system being installed and caused reduction in employee motivation.
- 4. Expectations from the ERP System: Clarity in management objectives and expectation from the ERP System are clearly stated to the vendors. This led to a belief of the systems’ power to integrate the company actual functions. According to the vendor, management expected a quick return on investment which was not practical since it takes around three to four months to notice any significant returns. Hence, top management should be patient with the new system and any fear of failure should be done with for a successful running system.
- 5. Employee Retention: It was observed that after the completion of ERP training provided to the staff and within some days of the system going live, many of the trainees from the organization quit the company causing great losses to organization in the form of shortage of key resources i.e. trained staff. This was a big percentage of employee attrition rate and it is not possible for a company to hold back any of its employees even with the most stringent contract.
- 6. Design & Testing: is a very important part of software testing and should not be neglected the computer work stations are set up in a room to represent each of the major tasks of customer service /order entry, planning, goods-in, stores and finance. A simplified data set is loaded and the company operations run through. The data is gradually increased as first the project team, then managers and finally users get more familiar with the software. This is conducted just before the ERP becomes fully functional in the organization.
- 7. Customization should be less than 30% – Customization Services involves any modifications or extensions that change how the out-of-the-box ERP system works. Customizing an ERP package can be very expensive and complicated. Some ERP packages have very generic features, such that customization occurs in most implementations. Customization work is usually undertaken as “changes requested beforehand” software development on a time and materials basis. But ideally, experts in the ERP implementation field have suggested that customization should be less than 30%. The level of customization in the case of Multiplex exceeded beyond this and posed a great deal of problems when key applications were run and found to be not working as they were intended to.
- 8. Stakeholders shall be identified in the initial phase including customers and vendors: Stakeholders are all those who are directly or indirectly affected by a company implementing any new ERP system be it organizations like those of the supplier as well as the vendors. A failure to identify the stakeholders gives the implementing company a major setback when the concerned people or organizations work against the new system. So identification of all stakeholders has to done in advance.
THE COMMON FACTORS THAT CONRTIBUTE TO SUCCESS
- Top level management support for the project. It is important that there is clear, executive level support for the project, and that this support continues throughout the project.
- User training and education. ERP systems invariably change the way that people work throughout the company, so it is important that the users are educated about the changes, and trained to use the new system.
- Project management. Managing an ERP system implementation can be tricky,
because there are often unanticipated events that increase the overall cost of the project. Making sure that the organisational structure and management are aligned can be particularly important where several subsidiary organisations are being brought together in the ERP system.
- Project team competence. The project team needs to be made up of the people who are best suited to the job of implementing an ERP system, and ideally have experience of doing so.
- Clear, agreed goals and objectives. It is important to build a business case for the ERP implementation. The business processes that need to be supported, and the requirements that the system needs to meet have to be specified. The way that the business processes are going to be aligned with the best practice model embedded in the ERP system needs to be identified. The measures for determining success should be laid out at the start of the project and be agreed by the system stakeholders.
- Change management. It is crucial that changes are appropriately managed on two levels. First, there are the changes to the organisation. Second there are the changes that are made to the programme of implementation of the ERP system (which will be part of the larger organisational change project).
Ostensibly, these factors look like a list of important factors for the success of any development project, and this could be where some of the particular problems of ERP projects lie. So, for example, if people try to apply traditional (i.e., bespoke system development) project management techniques to an ERP system development project they may not work.
The commitment of top management has been recognized as one of the most important elements in the successful implementation of ERP system. Since the primary responsibility of top management is to provide sufficient financial support and adequate resources for building a successful system, Implementing an ERP package is a complex and costly undertaking, so it’s essential to choose the appropriate vendor, adequate scalability features, suitability of H/W and user friendliness of product depending on the size and structure of an organization Project management related factors like Clear goal and objective, Effective project management, Reasonable expectation, Other dept. participation, Change request, Implementation strategy, Data conversion, Clear & effective communication are very critical for a successful ERP implementation. Team member should understand the inner workings of their respective departments thoroughly. And the team must have can do attitude.