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Technological advances have provided business with undeniable opportunity and growth. As technology develops, business processes change, and the maintenance of information is imperative. Total informational access and integration amongst members within any given supply chain has become a challenging necessity in order for organizations to create/maintain a competitive advantage.

Enterprise resource planning (ERP) systems evolved specifically to fill the role of integration. This software links information across departments from accounting to shipping and receiving to human resources to finance, so that these departments are basing critical decisions off the same information. ERP systems have evolved from older methods of information tracking and management to include several application software tailored for use across different decision making entities within a business.

Despite these benefits, change is an unwelcome notion by many and an ERP system is only as strong as its operators. The implementation process of an ERP system is a growing pain within any business (or sometimes the downfall) and depends on multiple critical success factors (CSF). Companies range from hundreds of employees to thousands of employees across different borders and oceans presenting companies with yet another challenge in today’s technological market place. This paper aims to provide its reader with comprehensive information related to the history of ERP systems and the trials of implementation and creating value from them as related to CSFs and critical failure factors (CFF).

Through several case studies of ERP systems successfully adopted by companies ranging from small to large, we also demonstrate how these systems actually use information to augment critical decisions made by given members throughout an organization. ERP systems use a single comprehensive database to ensure separate decision making software applications in different departments are basing their solutions from the same information. We exhibit the trails of ERP implementation, the cause and effect, the value of ERP and real-world application through models, definitions and case studies.

Enterprise Resource Planning systems are the result of the evolution of systems used by companies to perfect and integrate business processes into one platform. This was not simply a product of the computerization of business. In fact, the process began as early as the 1960’s when organizations were still using ROP (Re-order Point) systems manually (Snapp, 2012). Early computer systems gave rise to MRP (Materials Requirement Planning) systems that began to rely more heavily on the computing power of the time, which was still limited to basic arithmetic and cumbersome hardware/software. As the cost of hardware/software began to decline and the pace of technological advancement increased, the MRP system gave way to the MRP II system. The MRP II system is commonly known as the immediate predecessor to the modern ERP (Enterprise Resource Planning) system that is widely used today. Today’s ERP systems encompass manufacturing, technical, financial and human resources departments.

It is generally agreed that MRP is not only the predecessor to ERP but is also the framework. In the 1960’s, prior to the emergence of the MRP system, manufacturing strategies were focused on the product and cost using ROP systems. The advent of MRP is credited to a joint effort of a construction equipment manufacturer, J.I. Case, and IBM, as a method of planning and scheduling materials for complex manufactured products (Snapp, 2012). Computing power at the time was basic, cumbersome and required rare and specific skills to operate, so MRP was not all-encompassing. By the early 1970’s, RAM (Random Access Memory) mainframes became more available but were still very large and expensive to operate (Jacob & Weston, 2006). Still, MRP systems grew and became commonplace, but were not always being used efficiently. According to Orlicky’s Materials Requirements Planning (Plossl 1984), not enough emphasis was being placed on:

-          Master Scheduling

-          Structured Bills of Materials

-          Getting Accurate Data

-          Shop Floor Control

-          Capacity Planning and Control

In the later 1970’s, marketing became the primary competitive emphasis and MRP was a perfect fit (Jacob & Weston, 2006).  With the focus now being on target-market strategies and emphasizing production integration and planning, Orlicky’s list of shortcomings were now being addressed and MRP systems were being implemented to their full capacity.

Technological advancements in computer software and hardware in the late 1970’s and early 1980’s gave way to the next step closer to current ERP systems: MRP II. Often MRP II and MRP are mistakenly used interchangeably but in fact MRP II is an extension of the earlier MRP systems. MRP II is a more qualitative system that puts a higher focus on the process while still carrying out the same functions of the earlier MRP systems (Snapp, 2014). Computer systems introduced by companies like IBM continued to become smaller and more efficient thus making MRP seem archaic by comparison. By 1978, IBM had included such modules as  manufacturing,  accounts payable, order entry and invoicing,  accounts receivable, sales analysis, payroll, data collection systems support, product and production definitions, inventory management, materials requirements planning, production monitoring and control capabilities, forecasting, capacity requirements planning, purchasing, and full-scale master production schedule (Jacob & Weston, 2006).Other software developers such as the Germany based SAP (Systemanalyse und Programmentwicklung), Oracle, and The Baan Corporation began to market the enterprise technology more commensurate with the current technological advancements (Jacob & Weston, 2006). In the early 1980’s MRP II came to mean Manufacturing Resource Planning II rather than the previously coined Material Requirements Planning.  This was in keeping with the new initiatives of the qualitative focus. However, many found MRP II to be excessively sophisticated as software companies became enamored with their technological advancements and gave less attention to training on its operation (Snapp, 2014). Nevertheless, MRP II was a useful tool and precursor to the current ERP systems.

The Birth of ERP

By the end of the 1980’s, MRP II had been defined as a “Standard System” that could be built upon with additional modules to integrate all operations needed for a business. The “Standard System” included planning and scheduling functions. Integration of additional functionalities are the core of the new ERP systems. ERP was a term coined in the early 1990’s by the Gartner Group mainly to further differentiate the capabilities of MRP II from its predecessor MRP (Jacob & Weston, 2006). But ERP was truly the product of the globalization trend. With international software releases by companies such as Baan, SAP and PeopleSoft in the late 1990’s, ERP became a worldwide offering. It was the Y2K event that was arguably the consolidation point for ERP. As the Y2K scare approached, many companies saw the implementation of the new Y2K compatible software as the upgrade/fix (Jacob & Weston, 2006). As a result, at the turn of the millennium ERP systems became the international standard. Currently, as a result of several mergers or acquisitions of previous key players, new key players have emerged and thrive today. The current major ERP software companies are Microsoft, Oracle, SAP, and Infor, all of which are continuing to build upon their products (Shaul 2016).

The comprehensive nature of a well-functioning ERP system requires that all of the elements within the system seamlessly work together to provide efficiency and accessibility between departments.  This requirement necessitates that the implementation of an ERP system is paramount, because the integration of enterprise systems are challenging, difficult, expensive, and risky.  Implementation defined is the process of putting a decision or plan into effect, but regards to information system components, it refers to the implementation of an information system as well as the business processes that use the system (Kroenke & Boyle, 2015). Because an ERP system aims at integrating all of the departments and information systems across an organization,  the system conversion needs to be carefully planned to avoid potentially disastrous results.  This section will cover key success and failure factors that influence the successful implementation of an ERP System.

Viewing an ERP system as software technology that must be implemented via Technology Transfer from a transferor (an organization that conducts R&D and sells ERP software) to a transferee (a client organization that wants to implement ERP software) , there are a multitude of Critical Success Factors (CSF) that fall under five main factors that contribute to successful ERP implementation: Culture, Organizational Structure, Project Management, Support Activities and Training Issues, and the Interaction between Transferor and Transferee. (Soltanzadeh & Khoshsirat, 2012).  

Although each individual ERP package may have its downfalls or customization problems, the bulk of ERP problems stem from an implementation that is not handled properly (Barker, Frolick, 2003). This is because the process is often complex and includes a number of  differentiating factors, such as the high cost of implementation and consultancy, the level of integration of business functions, the extent of configuration of software representing core processes, the management of change and political issues associated with Business Process Reengineering (BPR) projects, and the requirement for enhanced user training and familiarization.  With all of these factors in consideration, there are a number of challenges that organizations face during implementation that need to be carefully considered, such as an appropriate plan for end-user education, ensuring compatibility and flexibility, and management's commitment to integrating business processes. (Skok & legge,2002;  Gupta, 2000; Hong and Kim, 2002; Ross and Vitale, 2000; Scott and Vessey, 2000 as cited in Amani & Fadlalla, 2016).  Shirouyehzad,  Dabestani, &  Badakhshia (2011) explored Critical Failure Factors (CFF) of ERP implementation using the Failure Mode & Effects Analysis (FMEA) method, which determines and investigates weaknesses in a system product or process with a methodology that considers all the ways a system failure can occur. They used this method because it aims at preventing undesirable failures from affecting the customer and also helps management allocate their resources more efficiently. This study found similar key factors as previously mentioned, such as  Project Management, Software System Design, User Involvement and Training, and Technology planning,  all of which contribute to failure effects resulting in exceeded time, costs, and customer & employee dissatisfaction.

Considering ERP systems are used in companies ranging from under one hundred employees up to thousands in size, the scope of the ERP implementation problem magnifies when larger numbers of employees are forced to change their processes to successfully utilize the new system.  The end-users of ERP technology are typically the employees at an organization, so it is dependent on the willingness of the employees to accept the BPR and other significant changes that an ERP implementation is both successful and sustainable. This can be leveraged using a combination of processes of Project Management, as well as inter-organizational entrepreneurship on technical and Human Resources levels due to the multifaceted challenges associated with changing business processes on a large scale.  Many organizations struggle to implement innovative strategies along with the tried-and-true project management techniques, such as those found in the Project Management Body of Knowledge (PMBOK). Yet, implementation of best practices and highly advanced technologies do not succeed if the employees are not satisfied with the new changes, so fostering a creative and entrepreneurial culture can combat resistance to change and encourage employees to help the implementation by innovating new business processes with the knowledge and experience they already possess in their department. (Al-Dhaafri, Al-Swidi, & Yusoff, 2016). The undesired result of a lack of implementing these ‘soft’ considerations is resentment, a lack of trust, and therefore underutilization of the system and prevention of its full benefits.  (Gholamzadeh, Goni, Ismail, 2016).

ERP systems function as an information integration tool, linking financial transactions between sources and customers, inventory tracking,  as well as forecasting to augment planning. ERP systems such as Oracle and SAP have evolved to offer functions of application software that were once outside of ERP as modules now within the system. Additional functionalities include incorporation of: advanced planning system (APS), warehouse management system (WMS), transportation management (TMS), and manufacturing execution system (MES) (Olson,  2014). The four aforementioned software applications are critical to an organization’s decision making process and profitability. Globalization presents organizations with immense opportunities but also the mammoth task of maintaining accurate data readily accessible for decision support. Companies with successful ERP implementation achieve reduced cycle times and faster information processing,  in addition to less data and operation redundancy (Amani & Fadlalla, 2016). Successful implementation is dependent upon several critical success factors as previously noted. Businesses range from small to large and from the private to the public sector. In this section, we demonstrate through case studies the benefits of ERP systems and how companies go about choosing which system best fits their needs.

The specific problem Sona faced was the lack of warehouse organization. Before Sona adopted a WMS, inventory was not placed in the warehouse in any specific way. This created confusion when trying to locate a product for sale, resulting in inefficient order tracking, inventory inaccuracy, and made it difficult to measure performance. As Sona Enterprises began to grow, so did the diversity of Sona’s inventory. Sudeep Patel, the company’s information technology expert, reached a point where Sona’s lack of organization was affecting customer service. Management decided to implement an ERP system as well as a Warehouse Management System to improve efficiency, performance, and accuracy.

Analysis: Sona first began allocating inventory, and recording the placement of stock in the warehouse.  The WMS kept a record of the exact location of each product in the warehouse, which was more efficient than the memory-based system used before. The implementation of the WMS and ERP system helped Sona Enterprises gain product insights by making it easier to monitor a particular product and its turnover, as well as the ability to analyze why it was or wasn’t performing as expected. In addition, stock levels were kept current which enabled for better purchasing decisions. Sona Enterprises found picking and put-away products were much more efficient and faster. Further, Sona Enterprises could cut back on labor without experiencing any picking and put-away delays (Sona Enterprises Finds Accellos Warehouse Management System (WMS) Software Implementation Fast, Easy, 2013). The use of WMS and an ERP system allows companies to optimize production and profitability by maintaining an efficient, organized warehouse as it did with Sona.  This is all in the name of fostering a competitive advantage in their highly competitive industry.

In 2013, Neenah was evaluating options to improve the customer service experience and reduce costs. The business began to look at what they did well, and analyze how to further improve these areas.. Neenah believed that same day shipment is a crucial part of customer service and sets them apart from the competition, but understood the many challenges the service provides. In May of 2013, Neenah decided to adopt a transportation management system (TMS) that integrated with the already utilized Oracle ERP system. By August of that year, the Fine Paper and Packaging company fully implemented the TMS system (Neenah’s Transportation Management Journey, 2015).

Analysis: The goal Neenah set out to accomplish was to improve the same day shipping service. Neenah was able to improve this service with the help of a TMS system integrated into the existing ERP system. The major advantage Neenah experienced was the reduction of human error. Jamie Dutter, head of the transportation department at Neenah Paper, stated, “the systems take the human element out of it. A human can forget to notify the carrier, forget to tell them about a change. The system to system connections ensure that the information is accurate because it comes right out of customer service.” He goes on to say that “there’s no opportunity for error” with an ERP and TMS system (Neenah’s Transportation Management Journey, 2015). Within the first few months, Neenah Paper experienced improved communication between Neenah and the carriers. The system created a channel for shipment data to pass through the Oracle ERP system to the TMS system resulting in quicker and higher data accuracy when new stops, late orders, or order changes occurred. Overall, the TMS system along with the ERP system allowed Neenah to efficiently manage the transportation process while delivering desired service and cost savings (Neenah’s Transportation Management Journey, 2015).

Analysis: Once Killdeer Mountain Manufacturing implemented their MES system that integrated with their ERP, they found their documentation system for product quality improved greatly. With this system, they were about to provide part traceability and document storage capabilities which assisted the aerospace manufacturer in maintaining regulatory compliance. This is key because Killdeer Mountain Manufacturing has strict regulatory compliance with the government on their products. The MES system organized their documentation system by taking the data from the ERP system. Without the ERP system’s data, the MES system would not be able to operate.

Above we see the several layers of variables that APS systems take into consideration for decision making at each of the three horizons.

Analysis: SSAB carefully chose a suite of supply chain management software seeking to field excess demand and improve delivery performance of several tons of product exported to over 40 countries. While they leaned heavily on the application of APS software, the overarching theme of the entire system implementation was the integration of several data entries across 100 sales regions. The foundation of SSAB’s success is directly attributed to the ability of the ERP system to aggregate the data into a comprehensive database. Only then could the APS organize the data into actionable recommendations, ultimately reducing inventory levels while improving delivery performance and communication throughout the supply chain.

Recommending ERP is almost an obvious solution when thought about from only the perspective of the benefits and organization could achieve. In our research we have found that while ERP pose as a fantastic data management software, there is a rigorous process in regards to when a company should choose to adopt one, which software it should adopt, and how they will adopt it. In deciding to implement an ERP system, the organization is not simply “updating” its data management, it is revitalizing and restructuring its processes down to the daily task of data input and such a change, if not carefully planned and executed can mean disaster. Culture, organizational structure, project management, support activities and training issues are five premier CSFs an organization must take into account when considering this massive change. Other factors to be considered still, are the high costs associated, choosing the degree of integration and overall management of BPR. In respect to these considerations, we have found that careful planning coupled with the cultivation of creativity and entrepreneurship, businesses can effectively steer their culture and employees through this crucial process.

After proper implementation, we have found positive impact in numerous businesses, each attaining their success through a different method of ERP application. The applications within ERP are a key aspect when choosing which ERP software to use. APS, TMS, WES, and WMS were just four examples of applications within an ERP system used by their respective companies to combat specific problems at a time when the businesses faced high inefficiencies. The advantage of an ERP system is certainly a result of comprehensive data integration within the organization but ERP is inadequate to make decisions alone.

The end user (employees) are ultimately responsible for choosing the correct software and then allocating the data to answer the right questions through select applications. Organizations should be weary and honest with themselves when considering the necessity of ERP. While it is a perfect and even necessary solution for many companies, it can be the demise if not appropriately executed. ERP itself, is not a solution, but rather a remarkable tool in finding solutions. ERP systems will continue to evolve with technology and companies will be forced to adapt as well to account for changes in processes, demands, markets and data.

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Sona Enterprises Finds Accellos Warehouse Management System (WMS) Software  

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