ERP Implementation: Challenges and Strategies

1. The company wanted to make a drastic change to their existing system where they wanted an integrated system that used SAP/R3 application suite and client server architecture. Therefore, the existing information system was being replaced by package software solutions, and the goals of the company were as follows:

• Establishing a single supply chain across the company in all their divisions
• Streamlining the business processes through reengineering of all the functional areas
• Improvement in gross margin using new supply chain efficiencies
• Replacing the existing legacy software because of Y2K date related issues
• Saving around $80 million by 2002 by closing old distribution units and corporate restructuring

Discussion questions

This was a four year plan with a budget of $112 million but the company faced issues as they lacked high ranking IT executive for taking proper decisions in implementing the plan.  The company tried to implement the overall system to fast resulting as it required discarding of the old system completing and implementing new system namely: SAP/R3 enterprise application suite, Siebel Systems and Manugistics. This made the overall implementation of the process extremely complex.

2. The major complexity of the project was integrating SAP/R3 enterprise application suite with Siebel Systems and Manugistics, and the company had to drop the implementation. The project delays and Y2K resulted in implementing a direct cut over strategy from the IT department instead of choosing a phased-in approach during the peak sales seasons. Moreover, data entry in the new ERP system was also an issue as SAP is a very rigid software in terms of data entry and the previous legacy system was flexible in terms of data entry and tracking, and management.
3. The employees at Hershey’s were not trained to manage the rigid data entry system resulting in a major crisis when the new system was used for the Halloween season. The company missed various consumer orders even if they had significant inventory at their hand.  System workaround was also a major issue for the company and there was lack of extra capacity in warehouse space that was not documented into the new SAP system resulting in failure in communication between the IT and the logistics.  The company also lacked a top IT management executive that played a key role in the enterprise project 21 and the hands off approach taken by the management also did not help in making effective decisions.
4. The main learning for Hershey’s was that management’s involvement within such projects that requires complete restructuring of the process is required. Moreover, an efficient, experienced and effective high level IT executive with vast ERP experience is required for understanding the magnitude of the project and set realistic goals, and time line for implementation. The company moved too fast into a complex transformation which was difficult to achieve in such a short time.
5. Therefore, ERP implementation is a gradual process considering the total change is being made where the employees and the management have to adjust to the new processes. In this case, the knowledge and decision of the high level management plays a key role.  The management was unaware of the amount of effort needed for the project which can only be achieved through experience.

Hershey was able to achieve their goal once George Davis was appointed as the CIO at Hershey’s and achieved their original goal through gradual implementation of the new processes.

1. Surety bonds are only useful for contract lawyers as they always end up engrained with litigation of thousands of dollars. The surety will always result in a dispute when a claim is being filed by Jackson Lab for the full penal sum. It results in a dispute because the principle feels at all times that they not receive what they bargained for, and surety bond is an effective way of making additional profits. However, in case of IT projects and in case of the Jackson Lab, lack of standardisation and commonality in IT projects will result in a complex litigation.
2. Unless the project implemented is simple and easy to understand for the clients they will have a lack of understanding of the contracts.  Therefore, it only works with clear and identifiable goals within the project and in the IT industry, quantification of the project goals is difficult to achieve. In case of accountability of implementing an IT system, surety bond will definitely hurt as the party developing the software knows that surety bond comes between them and the law suit.  Therefore, the party accountable to Jackson lab for implementation will be less worried of doing a good job as the surety bond will protect them when they are sued. It also discourages the employees at the lab in fully committing to their work for making the ERP system successful.
3. Jackson Lab took a phased approach for reducing the overall risk and phasing ensures that core team can emphasise on training the employees on various functionality within the company. It also allows in identifying bugs in the system that can be identified and resolved before the ERP system goes live. Moreover, the company receives less resistance from the employees as the core team is able to provide support and focus on the functionalities that are going live.  Therefore, it can be said that the phased implementation was the right choice and it was an effective choice as the company was implementing an ERP system for the first time.  A big bang approach will have definitely disrupted the day to day processes. The phased approach helped in training and implementation of ERP so coping with the changes were easier.

1. Governance is responsible for defining the committees and work groups for identifying the different components of implementation, and the way different groups are interacting and making decisions including escalating different procedures. The different components of governance consist of aspects such as installation of hardware, software, communications, functional components, project management, change management, sponsors, reporting, budget management, owners and escalation process.

On the other hand, methodology is significantly important for ERP implementation as provides instructions for achieving success. It facilitates in achieving deadline, manage budget, meet the goals and manage risk aspects.

.2.  The different infrastructural components are as follows:

• Hardware
• Software
• People resources

Hardware consists of all the computer peripherals and devices for running the ERP system including servers, production and testing environments.  Software include set of logic and operating instructions, also known as programs that can direct and control the hardware.  It helps in running all the functions, and without it all the computers are useless. It includes database management systems, system software and application software, and each have a difference purpose for the organisation.  People resources includes the workforce that have knowledge and skills that can understand whether the program is a failure or a success.

1. The Welch’s food has narrowed down between Oracle and SAP while choosing ERP systems. Even though, the company has already made their decision regarding their choice, they will utilise the opportunity to get a discount from each of the vendors as these vendors are eager to get the business opportunity so they are trying to set up a bidding war. However, the company chose Oracle over SAP not only because of the discounted price but the functionality, flexibility and ease of implementation.
2. TCO is also known as the total cost of ownership which is the total cost for implementing an ERP system starting from purchase to management (Phelan, 2018). It is essential to evaluate the different aspects provided by any vendor along with the platform used by them that includes both hardware and software (Phelan, 2018). TCO is difficult to use when compared to ERP due to marginal accuracy in ERP implementation. Moreover, different vendors use different platforms based on the organisational requirement so compatibility is an issue.

1. The process of stabilisation begins during the production of the ERP system where it takes around 60-90 days to complete the stabilisation process (Rouhani & Mehri, 2018). The IT staffs monitor the infrastructure for checking the response times and ensuring that backups have been made properly. SMEs are also present for helping the users for using the system correctly.  Post production support is about operationalising the ERP where the production, users and IT staffs should be aware the expectations on a daily, weekly and monthly basis (Demi & Haddara, 2018).
2. Knowledge transfer process is important for the implementation of the project and the reasons behind it are as follows:

• Reducing the support cost as the number of support calls are reduced which implies that more transfer of knowledge within the organisation reduces the support required from the vendor (Haddara, 2018)
• Retention of knowledge is ensured so that the knowledge can stay within the organisation
• Facilitating quick learning processes as the staffs will be using the same ERP system and sharing knowledge will increase enthusiasm within them (Demi & Haddara, 2018).
• Ensuring that the system has been used correctly where all the employees need to be aware of the exact process of using the system.

References

Demi, S., & Haddara, M. (2018). Do cloud ERP systems retire? An ERP lifecycle perspective. Procedia computer science, 138, 587-594.

Haddara, M. (2018). ERP systems selection in multinational enterprises: a practical guide. International Journal of Information Systems and Project Management, 6(1), 43-57.

Phelan, P. (2018). The World of Enterprise Applications is Changing: Is it time to reroute your ERP Roadmap (pp. 1-16). Research Report, Rimini Street.

Rouhani, S., & Mehri, M. (2018). Empowering benefits of ERP systems implementation: empirical study of industrial firms. Journal of systems and information technology.