Discuss the statement above and identify the factors contribution to benefit realisation such as people factors, process and technology. The benefits realised may include operations excellence, competitive advantage, customer convenience etc. You should use case study examples (from literature searches) to demonstrate different company’s experiences.
Benefits of Implementing ERP SAP system
One of the most important developments in the corporate information system is enterprise resource planning (ERP). The associated benefits with the implementation and utilization of ERP system helps in explaining the business interest in such systems. Most of benefits associated with system stems from the structure of organization, work processes, integration of operative and administrative activities, organizational improvement arising from global standardization of work practices that is supported by technology. Implementing the EREP system is a difficult and costly experiment for organization. ERP system implementation is regarded as perhaps the world largest experiment in business change for most of organizations. Objectives of many organizations were to strive for standardized and homogenous corporate information system. Nonetheless, there has been prevalence of business needs that laid the fundamentals that helps in approaching the associated large-scale systems (Chou et al. 2014).
ERP SAP is an enterprise resource planning software that incorporates the key business functions of organization. German company develops software and SAP is a market leader in providing enterprise resource planning and service solutions. The legacy system of organisation has been replaced by ERP that has become a de factory standard of industry. Moreover, they have been perceived by many large organizations in public as well as private sectors as a form of business computing. ERP is considered as the worldwide configurable information system packages that helps in integration of functional areas and information based process within organization.
It also assist in seamlessly integrating all the flow of information within organizations by integration of information based processes within and across several departments in organization such as finance, accounting, distribution and manufacturing. Medium and small-scale industries have been increasingly deploying the ERP that provides them with tailored products and contributing to the success of business. Successful implementation of ERP system helps in bringing substantial benefits to organization as they have the potential to improve the productivities and effectiveness of organization. Nonetheless, implementation of ERP SAP involves some complexities, this leads to large capital outlay, long implementation period, and they are prone to failure. Organizations implementing the ERP system need to systematically evaluate the benefits and cost associated with the system (Draijer and Schenk 2016).
There are a large number of conference papers and journal articles relating to the valuation, selection, implementation of ERP systems. Explaining the benefits of ERP SAP system depicts that such benefits have been constantly reported and advocated by ERP consultants and vendors. Performances of ERP system post its implementation supports the associated benefits.
Three means helps in in achieving the benefits from the implementation of ERP system ns this involves data, information system integration and processes among different organizational unit and business processes. Some of the basic operational benefits of ERP system is reduction of cycle time and cost. It has been depicted by various studies that implementation of such system helps in increasing the volume of operations, speeding up the process automating the transactions and labour substitutions. Project based organizations are provided with the advantages of reducing errors and duplicates and enhancing and increasing their responsiveness to needs of customers and thereby help in retaining the customers and leading to productivity improvement.
Complexities and Challenges of Implementation
Some of the additional benefits provided by SAP ERP is reducing business risks faced by organization. Senior executives and project managers are able to manage the resources in a better way by system capability of built in data analysis that leads to managing and string of data in a centralized database. Organization are able or achieve strategic benefits with the implementation of such system and this can be listed down as cost leadership, differentiation, innovation, alliance and growth (Götzfried et al. 2013). The standardized and integrated application architecture of ERP system helps in reducing the cost of information technology, making business flexible for future and current changes and all this helps in supporting the infrastructure and thereby leading to new applications economic implementation.
It has been suggested by research that most of international organizations along with several small and medium enterprise have begun the implementation of the SAP ERP system. Throughout the globe, organizations have began to implement the ERP system known as SAP. However, these organizations uses the similar system of ERP, they have the inclination of several advantages and values levels along with some disadvantages by identifying factors that lead to improper handling of the system. Some of specific factors contribute towards the process by benefits realising of the SAP ERP system. In spite of the fact that there are several advantages of the system such as considerable capital investment and organizational profits, implementation of ERP system many not be always successful.
Some of associated downside of the system is increased financial budget and delay in implementation of the system. ERP is one of the famous system with the business management that provides the organization with the benefits of achieving time capabilities and maintaining beneficial communication. Factors leading to clarify the consideration of organization for the system implementation involves user training and involvement, software designs, project control, organizational fit and technology planning (Augustin and Kiran 2014).
One of the most widely used and known system in the literature of benefits management is Benefits realization Cranfield process model. The main element for realizing the benefits in this model is the network of beneficiary dependency. Associated factors are considered in the model for realizing the benefits. Framework of model is designed in such a way for achieving the objectives of investments and benefits acknowledgement resulting from link in structural manners relating to business operations according to business requirements.
Effective realization of benefits of the ERP system are faced with various barriers that can be obtained by using benefit management models. Model comprise of factors such as lack of change management, inadequacy of discipline, misplacing ownership advantages, inadequacy support, poor utilization of resources, poor management applications. One of the merging problems in the implementation of ERP system is the complexities of the nature of technology that are faced along with the standardization and compatibility. Furthermore, there are some issues attributable from the human resources such as workers resistance toward change, culture of organization, incompatibility of process of business, management commitment towards any particular project, mismanagement of any project (Liepold and Ritter 2014).
Factors influencing the benefit realization of SAP ERP
The Business case for SAP ERP can be examined by some stories of Nestle. Nestle SA is a transnational food and drink company headquartered in Switzerland. Organization decided to leverage its size in year 2000 and regarding this, it signed a contract with SAP for rolling out an ERP system in eighty countries all around world. An additional $ 80 million was spent by organization on upgrading, consulting and maintenance of system. It was realised by organization that if it wanted to be competitive there needs to be standardization of business processes.
Some of the implementation of the system involves SAP.com financials, production management, accounts payables, account receivables, modules of business intelligence, supply chain, direct procurement and planning. Implementation of ERP system has already been done in its United Kingdom branch and this was done prior to the implementation is SA. British subsidiary implemented SAP R/3 over the period of five years. This was the largest ERP system implemented with over 6000 users. Goals of organization for the implementation were mainly related to the tightening of the supply chain, leveraging organization size and re-engineering of processes and work practices. Another story of implementing SAP ERP was in USA that leads to the establishment of own ERP project that is Business excellence through system technology. There was implementation of five SAP modules that run over the course of six years and this involves accounts receivable, sales and distribution, financials, purchasing and accounts payable. Unification was the main objective behind the implementation of this ERP system (Umar et al. 2016).
Organization has twenty-eight points of customer entry and nine-journal ledger prior to the implementation of the system and the objective of the system was to reduce the number to one. For all divisions, the objectives of the implementation of system were similar. Driving goal concerning implementation was the consolidation of different locations so that organization is able to leverage their size and buying power. Furthermore, it was required to control and centralise data for making reporting, financials and forecasting more accurate and consistent (Gordon and Dyer 2014). During the and prior to the system implementation, competitive disadvantage was prevailing and implementation of such one system has helped in surviving them in global economy and becoming more efficient.
Adidas is a global leader in sports industry and is a well-respected and highly recognized organization. A single warehouse of Adidas is operated in Mulgrave, Victoria that assist in distributing the sports apparel products and sporting goods to retailers across Australia. A significant investment was made by organization in an enterprise wide SAP R/3 ERP system and the Australian office was the first to implement such system. Implementation of SAP in Australia was mainly related to functionality of management of warehouse for footwear products and apparels along with data regarding size, colour and style. One of the integral part of organization is warehousing and functionality inclusion was the main priority of organization (Wamba and Edwards 2014). Some of the needs that were recognized by Adidas involved using wireless handless devices for collecting data automatically.
Moreover, a need for flexibility was also recognized for accommodating the future changes into the system and for future growth. The key to internal inventory management and efficient logistics is the functionality of collecting data seamlessly. For gaining solution of automotive data collection, organization has turned to DSI (Data system International). Some of the functionality of the system includes zone-picking implementation for working with the infrastructure of material management.
It also involves communicating the operation of warehousing into the SAP system. Customized developments are provided by the implementation of DSI and this involves integration of data between handheld radio frequency devices and wireless devices and transactions of SAP that involves good movement, put ways, cycle counting, despatch, zone picking and replenishment. Some of value added labelling price and tagging of security at an offsite locations was also accommodated by enabling the solution of DSI in association with consignment note printing and despatching label. Furthermore, organization has also up gradated the installation of SAP global client.
Mobility software was provided by DSI that help business in carrying out their operating activities anywhere and provided access to data on any devices. SAP functions was splatted by the ability of dCLINK that helps in maintaining regulations of occupational health and safety and this also involves the replenishments from bulk to pickface. With the upgrading of SAP in year 2013 lead to further expanding the solution involving, roll-in of Adidas Australia (Ahmadi et al. 2015).
Oilco is a marketer and refiner of a broad range of petroleum products in Australia. Organization owns assets worth approximately A$2 billion employs 2000 people being one of the major industrial companies in Australia that enjoys a considerable share of market. It is the Australian subsidiary of largest multinational oil companies in the world. Global oil industry witnessed increasing competition and underwent significant restructuring in the late eighties. A new information system was implemented by Oilco in light of this competition for improving the customer service; achieve fully integrated automation processes and facilitating the restructuring of planned business. Mainframe base solutions’ of ERP was selected by organization for meeting the requirements of business.
A major change was brought in to the processes of business of organization due to the implementation of system so that they are aligned with the processing method of ERP. Oilco intended to streamline the existing process of company and simultaneously maximizes the integration of benefits of ERP while identifying the changes in the process of business. Implementation of ERP has been in operations for five years. Implementation of SAP ERP has helped organization in better sales forecasting, streamlining business process, automating the delivery, ordering processes, real time data, and improving them. Implementation of software was realigned and the scope of project and budget were considerably strong (Akagic and Hodzic 2014).
Cadbury did one of the largest global ERP implementation in recent years and implemented the SAP (System analysis and program development). The implementation was done by Kraft that credited the system with reducing cost of operations. Master data management solution was also added by SAP. Excess of chocolate bars were built up after a new SAP based enterprise resource planning was installed by organization. ERP implementation provided organization with several benefits such as transformation of warehouse management system and building on the strengths that helped organization to stay competitive (Hejazi et al. 2103). This is one of the case of successful implementation of ERP system.
Grupo Modelo undertook an ambitious project for becoming a process-oriented organization and the objective was to ensure that rules and process of business are consistent worldwide. Organization would get better insight into their operations by making organizational processes standardized across different business units such as convenience stores, distribution centres and breweries. Implementation of SAP solutions was undertaken by business during year 2012 having an initial scope of risk management, managing corporate governance along with legislation management. A SAP solution was implemented for making it run in existence with SAP ERP system having primary focus on process control and managing risks. Monitoring and measuring the risk of organization from a single dashboard involve several challenges (Okungbowa 2015).
Corona Extra is the Australia’s largest premium beer having a market share of 4.2%. The objective of organization was to align the internal processes across the business for transforming the organization to the entity that is process oriented. It was thought by the organization that this would be done by adopting and implementing the SAP solutions for risks, compliance and governance. The associated benefits from the implementation of the system is mitigation control in assignment, lessening the conflicts arising from the segregation of duties, monitoring and internal control of pending tasks in workflows, allowing decision making by monitoring of risks using a single dashboard. The implementation of SAP Access control 10.0 would help in reducing the conflicts of mitigating segregation risks (Schniederjans and Yadav 2013).
Various risks are there to which the system of ERP is exposed. Some of the risk factors in the implementation of the system involves ineffective management of project involvement of low top management support and inadequate in business process reengineering.
Successful implementation of ERP requires the alignment between business and ERP system such as SAP. However, there is constant change in technological and business environment, it is difficult to achieve complete alignment between the business process and system implementation. Realization of benefits is continuously aligned with the process and strategy of organization with ERP. Implementing ERP is a high risk and high cost venture. An organization is capable of making reasonable decision about risks, cost and benefits performing the implementation of the system in stages. An organization would receive more benefits in long-term and additional investment would be required if there is iterative approach of realising the benefits (Ahmad and Cuenca, R.P., 2013).
In today’s competitive world, it is required by business to streamline the process for lowering cost, increasing productivity, enhancing productivity and gaining flexibility. Core objective of ERP system is to integrate data across and within the business processes that would enable business to achieve greater value from their system of interpretation. Organization implement the system of Enterprise resource planning for dealing with the complexities of doing business sin today’s world. One of the important issue relating with the implementation of the SAP ERP system is assess the advantages and disadvantages that are faced by business.
Benefits can be derived in the context of globalization while considering managerial people and shareholders. Organization are able to compete globally and system enables supporting financial, compliance and legal issues. The study conducted concludes that organization is required to consider some of important critical success factors while implementing the SAP system of ERP. It was ascertained by reviewing the literature from several sources that implementation of ERP system was a success in some companies while other organization witnessed failures.
Implementation of the SAP ERP in most of then organizations discussed above was basically due to the factors that helped them in starting competitive and overcome various business challenges. There is a plethora of research depicting that most of top Australian companies have implemented the SAP ERP system. It was found that most of the implementation was related with handling the business process and their information system management.
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