Critical Success Factors For ERP Implementation In SMES

Discuss about the Critical Success Factors For ERP Implementation In SMES.

In the following report, a case study has been evaluated.  The case study mentions an ERP failure implementation in a bottling industry.  Four tasks related to the case study has been evaluated in the report. The report mentions several flaws in the decision making of the company. The recommendations are also mentioned in one task.

In the given case study, Frolick and Barkley has described an IT implementation failure of a bottler company. The analysis of the different types of failure related to the given case study has been mentioned in three criteria: interaction failure, correspondence failure and process failure

In this failure criteria, the end user usage levels are assessed related to the ERP system. Some of the measures of information system usage are frequency of use, the amount of transferred data, user satisfaction and user altitudes. Still, heavy usage does not equal into more user satisfaction (Ahmad & Cuenca, 2013). The heavy usage of the ERP system can also come from persuasion or lack of alternatives to use another system than the existing one.

In the mentioned case study, the interaction failure occurred at the beginning of the ERP implementation. After the implementation process, a lot of work needed to be done by the bottler. No matter the size of the company, an ERP implementation is a not an easy task. The prospective company did not heed the advice of consulting independent experts regarding the proper implementation of the ERP. During the analysis phase, these consultant have helped bottler to choose the right ERP system.  The bottler undertook the ERP implementation phase on its own with a bunch of inexperienced information system experts. The employees were provided a lot of time consuming tasks without any proper compensation. These led to communication problem and distrust among them. Here, the end users were already affected during the project initiation which decreased the customer satisfaction rate instantly leading to the interaction failure. The bottler company even ignored the help that was advised by the independent consultants again after seeing the condition of the employees. The do it philosophy of the company was one critical reason why the implementation of The ERP system failed so drastically.

Process failure occurs when the information system cannot be developed due to the time schedule, allocated budget or over allocation of resources. The failure leads to two results primarily (Beheshti et al. 2014). First of all, the failure happens when no proper workable solution cannot be developed. The second result leads to the creation of the information system with over allocated cost spending in resources.  This unsatisfactory performance of the system leads to project failures.

Interaction failure

In the mentioned case study, the bottler considered the ERP implementation after the management system decided to implement the system to improve the decision making tools and financial analysis. As the issues related to the mentioned criteria were important enough to change all the business processes, the bottler decided on implementing the ERP system for the benefit of the company. The company started to research on viable ERP solutions. It spent a whole lot of money and time on the research options, feasible studies and outline attributes that its personnel have to work hard for several months in developing the proper expenditure of the implementation phase. The company spent so much money on the initiation phase that it failed to analyse the future consequences of its actions. Granted that the company was trying to justify its inherent need for an entirely new integrated ERP system and that too urgently, but that does not justify the rampant use of resources (Teittinen, Pellinen & Järvenpää, 2013). This action directly resulted in the low compensation rate for the employees who were working in the bottler company after the implementation of the ERP. The company had to make its workers work for more than 60 hours without any extra pay as it invested a lot of money in implementing the It technology.

Correspondence failure occurs when the objectives of the system are not met properly.  It is normally believed that the measurements of success for a system and its requirement s and goals can be measured beforehand (Nour & Mouakket, 2013). For managerial board, a cost benefit analysis is made for performance measures. If the system fails to meet its goals, then the users will not accept the system properly.

In the mentioned case study, several reasons of ERP implementation failure of a bottling company has been specified. The objective of the entire implementation was to facilitate the communication procedure across separate departments of the company. The ERP system has several modules like HR, Inventory control, supply chain management and more that are installed in several departments. This enables the company to facilitate its decision making process. But the implementation phase instead resulted in lack of communication between the personnel. The personnel were invested in a technology that they were using for more than 10 years now. Giving them a new technology destroys everything that they believed in. Project leaders failed to overlook certain aspects of the project. The consistency of the information was not perfect. Everyone was blaming each other at the end of the day due to inconsistencies which led to the wastage of time and money. Effective communication was destroyed in the entire process. High resistance to change and high turnover added to the company’s issues.

Process failure

First of all, the bottling company invested a lot of time and money in its research process. This led to a wastage of resources in an aggravated way. Although analysis must be conducted for each and every company before the implementation of an IT system (ERP system), the company overdid it. It spent a lot of months in research and analysis and made its employees work for long hours.

Moreover, the company also did not take the advices from the independent consultants and decided to follow its “do it yourself” ideology. The company was already filed with a lot if inexperienced professionals and did not have much IT staffs. Also new members of a team helps in increasing the coordination and better functioning of a team, in this case, the ERP implementation proved too much for them (Ranjan, Jha & Pal, 2016). The independent consultants even told about helping them but the company again ignored their advices. Even after the implementation phase, the company kept on working with its untrained professionals and did not hire extra experts for advising them on the implementation phase of the ERP.

Thirdly, the ineffective communication led to the termination of the project leader. A verbal miscommunication between the project leader and a department head led to the firing of the team leader which caused a great deal of problem in the upper management level. The company was already facing huge issues in communication problem. The employees were already frustrated due to the long working hours and lack of proper royalty for their actions and the firing of the leader aggravated the basic foundation of team communication.  Proper communication of a team is crucial for company to implement the project as a whole (Hustad & Olsen, 2014). The team leader was responsible for this and he was also in charge of enforcing the idea of a new ERP system and its advantages in the company. The employees were reluctant to use the new system and caused issues that should have been handled by the project leader. Absence of that role in the initial days of ERP implementation was one of the main reason of failure for the ERP system.

Fourthly, the lack of training of its employees was another reason for the ERP failure on the bottling company. Most of the employees on the company were untrained and had the joined the company just a few month ago. Many were just out of school and had management information degree without any prior practical knowledge. The team members were new to the whole business scenario of the organization and were hardly trained to carry on the day to day activities of the bottling company. Putting such a huge pressure of implementation proved to be ineffective for the company (Barker & Frolick, 2003). Instead the company decided on making them overwork to make up for the lack of proper technical skills. There were some expert technicians in the team but they were not adequate. If the company would have trained the employees properly then a communication and technical gap would not have been created.

Correspondence failure

There were other minor issues too that led to the failure of the ERP implementation but these four critical factors contributed immensely in the failure of the system. The company initially started their ERP implementation from a mistake and made continuous mistakes in the process. Hiring an expert would have solved this issue but the do it yourself attitude of the company ultimately led to its demise (Harwood, 2017). Proper analysis should have been done in not only choosing the correct ERP but also in checking if the current organizational structure can handle such a large scale implementation effectively.

The four critical factors can be differentiated into three criteria namely cultural, technological and managerial. The cultural factors include the problems due to the human factors. The behaviour and cultural effect on the community are considered in this factor. The managerial factor considers the decisions taken by the management in making the failure scenario and the technological factor takes into account the issues that happened due to technicality during the implementation phases (Garg & Garg, 2013).

The managerial factor can be applied to the leaving of the project leader. The project leader was terminated as he took art in a miscommunication with another leader of a department. This led to his firing which affected the entre management team. For a company to promote ERP implementation effectively, proper decisions need to be taken and consulted by all members of the management team (Barker & Frolick, 2003). For a team to function properly, proper coordination between members are important. The firing of the project leader disturbed this entire scenario. The workers were already tired of extra work and without a proper project leader, the scenario depreciated.

The technological factor comes from the analysis and development of the ERP. The analysis was done for months but the tem failed to figure out a proper way to deliver the ERP. The team failed to identify the proper requirements of the company which they should have deciphered during the analysis process of the company. Moreover, the lack of technical personnel was another technology related factor. The company should have considered trained professionals for facilitating the ERP process.

The cultural factor comes from the miscommunication issues of the team members. Another factor that aggravated the issue was the reluctance of the workers to adopt the new system (Barker & Frolick, 2003). The workers have been accustomed to the age old business system of the company that has been continuing for the past 10 years. Issuing them a new system changed their cultural belief which they did not intend in doing.

The Four Main Critical Factors

The two lessons that can be learned from this ERP failure is that employees need to be trained adequately before an IT system is implemented. The second lesson is that employees should be properly paid with compensation if they are going to do extra hours for the company.

The first action would have been to understand the conditions of the employees. The desire of the employees to get involved in a project should have been analyzed. In the case study, the CIO did not pay attention to the needs of the employees. He made them work overtime without any extra compensation (Ravasan & Mansouri, 2014). An organization should never jeopardize with its existing personnel just because it is not in a position to hire someone else.

Doing the business processes internally in an organization is justifiable but an external help would have helped the organization in dealing with a new system that they were not familiar with (Schniederjans & Yadav, 2013). In the given case study, the management system denied the involvement of experts who had the analysis knowledge about the implementation of the ERP system. The next action would be to consult with independent consultants or experts about the best possible ways of implementing ERP system in the mentioned company.

Conclusion 

To conclude the report, it can be stated that the failure in implementing the ERP system was mainly due to bad decision-making of the bottling company. In the report, several tasks has been completed based on the given case study. The tasks has mainly focused on the issues related to the failure of the implementation system and has evaluated it effectively.

References

Ahmad, M. M., & Cuenca, R. P. (2013). Critical success factors for ERP implementation in SMEs. Robotics and computer-integrated manufacturing, 29(3), 104-111.

Barker, T., & Frolick, M. N. (2003). ERP implementation failure: A case study. Information Systems Management, 20(4), 43-49.

Garg, P., & Garg, A. (2013). An empirical study on critical failure factors for enterprise resource planning implementation in Indian retail sector. Business Process Management Journal, 19(3), 496-514.

Harwood, S. (2017). ERP: The implementation cycle. Routledge.

Hustad, E., & Olsen, D. H. (2014). ERP Implementation in an SME: a Failure Case. In Information Systems for Small and Medium-sized Enterprises (pp. 213-228). Springer, Berlin, Heidelberg.

375. Beheshti, H., K. Blaylock, B., A. Henderson, D., & G. Lollar, J. (2014). Selection and critical success factors in successful ERP implementation. Competitiveness review, 24(4), 357-375.

Nour, M. A., & Mouakket, S. (2013). A classification framework of critical success factors for ERP systems implementation: A multi-stakeholder perspective. In Competition, Strategy, and Modern Enterprise Information Systems (pp. 98-113). IGI Global.

Ranjan, S., Jha, V. K., & Pal, P. (2016). Literature review on ERP implementation challenges. International Journal of Business Information Systems, 21(3), 388-402.

Ravasan, A. Z., & Mansouri, T. (2014). A FCM-based dynamic modeling of ERP implementation critical failure factors. International Journal of Enterprise Information Systems (IJEIS), 10(1), 32-52.

Schniederjans, D., & Yadav, S. (2013). Successful ERP implementation: an integrative model. Business Process Management Journal, 19(2), 364-398.

Teittinen, H., Pellinen, J., & Järvenpää, M. (2013). ERP in action—Challenges and benefits for management control in SME context. International Journal of Accounting Information Systems, 14(4), 278-296.