Systems, Applications and Products in Data Processing (SAP) is a market leader of the enterprise application software industry and is recognised as an innovation master that help its clients run their business process in a much organised way which finally leads to high profitability and market share (SAP SE, 2015).Founded in year 1972 SAP today has around 65,000 employees working in 130 countries. It has reported a customer base of 253,500 present in 188 countries. With $16.82 billion of annual revenue SAP enjoys a market share of 24.46% with its prime competitor being Oracle Corporation, Microsoft Corporation and IBM (SAP Investor Relations, 2014). SAP has developed solutions for all industry types and almost all major markets. It serves organisations irrespective of their sizes.
This report analysis the implementation of a single-instance ERP system by Nike who is the World’s largest supplier of sports apparels and shoes and manufacture of various sports equipments. Nike was founded by Phil Knight and Bill Bowerman in year 1964 in Beaverton, Oregon. It was initially named as Blue Ribbon Sports which in 1972 introduced Nike to the world’s athletic footwear market. Nike witnessed remarkable growth in the athletic footwear industry and by 2005 it reported annual revenue of $13.7 billion, 26,000 employees. It has facilities in Tennessee, Oregon, Netherlands and North Carolina; it has more than 12 women stores, 200 factory stores and more than 100 administrative and sales offices. The company provided job opportunities to 650,000 individuals of local communities at its 104 factories in EMEA, 137 in Americas, 238 in South Asia and 252 in North Asia. The report conducts an in-depth analysis of Nike need for an ERP system and how it proceeded towards a successful implementation process and stabilisation post implementation.
ERP system implementation is a complicated process and needs huge capital, time and human resources investment. As depicted in the case some of the factors that made Nike adopt for the implementation of an ERP system are:
Reach: Nike became a global company with large number of factories; manufacturing plants and sales offices in different parts of the globe thus it was in urgent need of a real-time and centralised system. It needed a system that could enhance its reach. An ERP system owing to its high integration enables organisations to use a centralised system in multiple geographies (Addo-Tenkorang & P.Helo, 2011).
Information: Nike managed factory contracts, product design and distribution from its headquarters in Beaverton, Oregon. They had 27 order management systems that did not talked to each other and to the home office. Thus the home office did not receive real-time data and day to day operations was becoming difficult. ERP systems enable an organisation gain access to multitude of company information on a real-time basis (E.O'Leary, 2004). This information is found to be more effective as they are comparatively more accurate and relevant.
Productivity: Nike has a manufacturing cycle of nine months which was not being controlled properly and they wanted to reduce that cycle to six months. ERP systems owing to their integrated system architecture help enhancing overall productivity (Leon, 2013). ERP systems integrate processes and data from several locations and departments thus they help organisations in moving their products faster, quickly process orders, rapidly invoice customers and rapidly reconcile shipments.
ERP system implementation becomes a complex process if not handled properly. It is concerned with selecting the most suitable software and implementation strategy and simultaneously managing risks in order to ensure that the desired business goals are met and project remains within the allocated time frame and budget (Motiwalla & Thompson, 2011). The implementation process starts with accurate, open and honest assessments of organisation’s culture, environment, overall employee skills and readiness.
While selecting an implementation strategy it is essential to identify and plan implementation components accordingly (Motiwalla & Thompson, 2011). Hardware, Software and human resources are the three primary ERP components. Any physical hardware used by the ERP system comprises its hardware components. It includes servers that must be powerful enough to support development, testing and production environments. It consists of clients/people who use the ERP systems and other peripherals like printers, print servers, networking hardware etc. Software components of ERP system refers to the programs that control and direct the functions performed by hardware. System Software, database management system and application software are three key software components of an ERP system. People resource components in an ERP system implementation include end-users like vendors, employees, clients and other people who use the system, IT specialists like developers, database administrators, change managers, IT operations support and trainers and most important the project manager who makes the teams work in coordination with each other.
Virtualisation is the next important decision while implementing an ERP system (Lech, 2011). It is a technique that enable multiple and isolated virtual servers to run on a single physical device, this process helps organisations in greatly optimising hardware usage. Hardware virtualisation and para-virtualisation are the two many virtualisation models. Microsoft, Oracle and SAP are there vendors that provide virtualisation services.
Governance is also an important approach to successful ERP system implementation (Motiwalla & Thompson, 2011). It is concerned with defining and outlining workgroups and committees that handle different components of implementation process, the way these components interact with each other and making important decisions. Each role within Governance is assigned specific responsibilities; various roles include owners, project executive, steering committee, application steward, chairperson, project management office, project teams, project team leads and cross functional team. These committees and work groups must meet on regular basis. Some sample set of meetings include steering committee meetings, project sponsors meetings, issues meeting etc.
Selecting the correct implementation methodology is greatly essential for successful ERP system implementation otherwise it results in missed deadlines and functionality failures. The two main ERP implementation strategies are; Vanilla implementation wherein organisations choose to make almost zero or very little customisation, they prefer to change their business processes and practices in a way that it fits the system (Motiwalla & Thompson, 2011). This strategy is generally implemented by businesses whose business practises are not unique or they do not have expert IT resources. Chocolate implementation wherein organisations prefer to customise the ERP system to fit their business practices (Motiwalla & Thompson, 2011). It is generally preferred by business with strong IT resources.
The case depicts the use of Chocolate implementation strategy by Nike Inc. to implement the single-instance ERP system. Single-instance ERP systems are easier to maintain and support. It helped Nike to minimise the risk associated with ERP implementation enabling it to access organisational change while the system was being modifies to meet business needs.
Vendor selection is the most crucial step towards successful ERP system implementation (Addo-Tenkorang & P.Helo, 2011). It is important to select a vendor that best suits companies needs and understands its ultimate business goals. At times specialised consulting firms are also hired to select the most suited vendor. The ERP product must fit the business process and should have strong market performance in order to be selected. The ERP purchase process is quite tiring and involves tough decision making. It is a eight step process that starts with vendor research and gathering related information, vendor demonstration and evaluation, assessments of needs and requirements, request for bid development, analysis and selection of vendors which is a lengthy process that is subdivided into tasks of bids evaluation, technical and functional evaluation, vendor demonstrations, reference verifications and development of total cost of ownership. Next step is vendor negotiation that involves reviewing contract and incorporating changes if needed. Overall prices related to software, maintenance, support and consulting are included in the contract. If all terms and conditions appear relevant last step of vendor selection involve purchasing the system.
The list of prime ERP vendors include companies like SAP, Oracle, Lawson, SSA Global, Epicor, Great Plains, Infor Visual, and Plex online. SAP is the market leader of world ERP industry and faced tough competition from Oracle. SAP enjoys a market share of 24.46% and develops solutions for business of all types and sizes. The case does not display the name of ERP vendor chosen by Nike Inc, however it appears that SAP would have been their best choice as it helps it helps integrating all business module on a single platform a functionality that best suits Nike’s business processes.
Knowledge transfer is a well-defined process that involves transferring knowledge and skills to employees and team member through the implementation process and post-implementation (Motiwalla & Thompson, 2011). It is essential to create a repository of documents of project monitoring and tracking process, subject matter expertise, collaboration and communication and lessons learned. A well-defined knowledge transfer plan should be in place to monitor the transition from one phase of implementation to another that helps ensuring smooth transfer of knowledge. An effective knowledge transfer plan is one which facilitates quicker learning, makes sure that knowledge is retained, enhances system capabilities, reduce trouble shooting problems, ensure that the system is used correctly and supports in reduction of overall cost of support owing to reduced number of support calls. As depicted in the case Nike ensured that knowledge transfer process was carried effectively during and post-implementation. Training sessions were increased wherein each customer service representative received 140-180 hours of training and they were not allowed to use the system till it was confirmed that they have completed full training course.
Apart from a strong leadership team, choice of suitable implementation strategy, focused vendor selection and well-controlled and monitored knowledge transfer there are some other factors that are critical for the overall success of ERP system implementation. Some of these factors are:
Decision making process: A well-defined decision-making process throughout the project implementation cycle is effective in reducing various issues and risks related to efficiency, scope and productivity. As depicted by the case Nike had a well defined decision making process that helped them in smooth implementation of ERP system even though their implementation of demand planning system was a failure.
Scope: Scope of a project helps in deciding what actually the project must deliver. Any changes identified in the scope means the project is not going ahead in right direction. Nike had developed a well-defined scope for both the demand planning system and ERP system however the demand planning system presented a change in scope due to a number of factors like end-users were not given adequate training.
Team Work: ERP system implementation is a complicated process and need teams to work in close coordination with each other. Project team for implementation include existing and new hired employees and external consultants that need to work in coordination with each other to achieve common goals. ERP system implementation at Nike was supported by a strong team work which was the prime reason behind its success.
Change Management: ERP system implementation brings about numerous changes in organisations ways of working at times it changes organisations operations completely. Effective change management strategies are needed to handle resistance to change shown by employees as they are adopted to the old ways of working. It is essential that project manager communicate the need for change to employee, share companies vision with them through effective communication. All information must be shared with employees to keep their uncertainty level low. Employee engagement through training, effective communication and employee support and empathy are primary aspects of effective change management. Change management was effectively carried out the Nike to minimise resistance to change during ERP system implementation. They kept the employees engaged by providing those 140-180 hours of training. Organisation vision was effectively communicated to employees showing them the change needed was urgent. Further business process reengineering helps them defined clear and realistic performance based goals that increased employee motivation and commitment.
Implementation and Executive teams: Success of an ERP system implementation greatly depends on program and project manager. Implementation team can be build by choosing individuals from either internal IT organisation or vendors that provide package software or from a consulting organisation. Support and commitment of executive management team is very important for success of the project. Nike had developed strong implementation teams that included employees from internal IT organisation and its executive management team was highly committed and extended full support to ERP system implementation project. In order to successfully handle the project Nike had exceptional buy-in for the project.
Organisational commitment is the key to successful ERP implementation. It needs strong commitment and will of senior management and team members to make the project success by facing numerous problems that come on the way. A well-defined communication plan and an Organisational Project Management Maturity Model (OPM3) is key focus area to ensure high organisational commitment. A communication plan help reducing resistance to change and employee uncertainty associated with the project. OPM3 model helps in continuous evaluation of strategic objectives against best practices. It is a continuous process that include three steps namely; knowledge, assessment and improvement. Nike displayed high organisational commitment; they had a well-defined communication plan which informed everyone within the company about overall business plan for all the systems and the need for a highly complex system. In spite of the initial failure faced with their demand planning system they has exception buy-ins that helped them make adjustments in the system and continue with the implementation process. Nike’s aim was to ensure that business goals are met through implementation and was in no hurry to get the systems up and running.
Nike choice of implementation strategy best suited its business processes. As their primary aim was to meet business goals through implementation and not to rush for getting the systems running a phased rollout was best suited. However as Nike is a large company with huge number of employees and wide geographic presence it would have been beneficial if they hired external consultants who have more experience of IT system implementation. Knowledge transfer is an important part of implementation process and it is important to ensure that it is carried out effectively throughout the process and post implementation. It is also important to ensure that end-users are exposed to enough training hours before the go-live date. It is essential to ensure that system testing is planned effectively and has full capabilities to find faults with system interfaces. However instead for implementing two different systems it would have been better if they looked for implementation of an ERP system like SAP which integrate all business modules together and is very effective in increasing operational efficiency and productivity.
Reflective practice is a process that enables learners to evaluate their own actions and according plan improvements. SAP is the market leader of world’s enterprise resource planning industry. It enjoys a market share of 24.46% and has Oracle, Microsoft and IBM as main competitors. SAP software can be evaluated over five end user criteria as described below:
Usability: Usability is defined as the measure of end-user’s perception about how easy its applications are to use. SAP software is highly user friendly; it’s easy to navigate in the software using specified T-codes. SAP Easy Access screen and menu bar itself carries all the required information and is a complete tutorial in itself. SAP software in itself has complete information regarding its functionality.
Transactional efficiency: It is the measure of user’s perception about the ease of executing repeated and common tasks. SAP with its specific T-codes and navigation paths have high transactional efficiency. SAP functionality makes it very easy for users to execute repeated commands. It also creates a log of recent activities performed, T-codes run and reports extracted which is greatly helpful to users. T-code that are run repeatedly can also be saves a favourites.
Flexibility: It is measure of user’s perception about the ease of executing unusual tasks and handling unexpected problems. SAP is highly flexible software which itself contains all information about its functionality. Just with use of different T-codes and navigation paths users can move from one business module to another. SAP software that kept things very simple and also prepares a log to recent activities performed.
Business Insight: It is measure of user’s perception about the ease of comprehensive reporting, cross departmental information visibility and access to real-time information. SAP is recognised for its high degree of business insight. It is very easy to full out comprehensive reports in SAP using simple T-codes or navigation paths. These reports real-time information and provide high visibility to cross departmental information. SAP integrates all business modules together thus enabling easy communication of different business departments. It’s easy to share data with different departments and review their work. SAP allows easy communication with vendors, clients and partners.
Speed: It is measure of user’s perception about the software’s response time, how long it takes to execute codes, queries and pull reports. SAP software has a very low response time. T-Codes are executed in very less time depending on the amount to data to be displayed. At times it is seen that extracting SAP reports take quite long time however it is also understood that they present highly accurate and real-time data which shows information related to almost all functional modules. For example a sales order not only give information about the sales orders only but it gives complete information related to customer, pricing, material, shipping plants, distribution centres etc.
All these factors reveal that SAP software is a highly user friendly software that delivers accurate and real-time information which helps increasing overall efficiency and productivity.
Addo-Tenkorang, R. & P.Helo, (2011) Enterprise Resource Planning (ERP) : A Review of Literature Report. Proceedings of the World Congress on Engineering and Computer Society, 2(1), pp. 1-10.
E.O'Leary, D., (2004) Enterprise Resource Planning(ERP) Systems: An Empirical Analysis of Benefits. Jounal of Emerging Technologies in Accounting, 1(1), pp. 63-72.
Lech, P., (2011) Knowledge Transfer Procedures From Consultants to Users in ERP Implementations. Electronic Journal of Knowledge Management, 9(4), pp. 318-327.
Leon, (2013) Enterprise Resource Planning. New Delhi: Tata McGraw-Hill Education.
Motiwalla, L. & Thompson, J., (2011) Enterprise Systems for Management. Essex: Pearson Education.
SAP Investor Relations, (2014) Innovation and Profitable Growth – SAP´s Capital Market Story. [Online]
Available at: https://www.sap.com/corporate-en/about/investors/stock/capital-market-story.html
SAP SE, (2015) SAP at a glance: company information. [Online]
Available at: https://www.sap.com/corporate-en/about/our-company/index.html
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