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JOURNAL OF TELECOMMUNICATIONS, VOLUME 6, ISSUE 1, DECEMBER 2010
19
Effect of critical factors in the development of
Enterprise Resource Management System
Hasan Asil, Mahdi Allah Verdi Zadeh, Atefeh Asil, Amir Asil
Abstract— Enterprise resource planning (ERP) are high complex information systems. The implementation of these systems is difficult
and high cost, many ERP systems implementation have been classified as failure because they did not implement according to schedule and
implementation factors. There are essential features for ERP successful implementation, that can increase implementation success percentage. This paper is a review of these factors, that can help organization to detect the best way to surmount ERP problems and most important
implementation ways according to these critical factors. This article reviews the problems in trying to implement an ERP. Barriers to study
these problems have been classified. Then, based on comments developers of each erp effect has been studied.
Index Terms— Enterprise resource planning (ERP), critical success factors, business process reengineering.
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1 INTRODUCTION
T
he business environment is dramatically changing.
Companies today face the challenge of increasing
competition, expanding markets, and rising customer
expectations. this increases the pressure on companies to
lower total cost in the entire supply chain, shorten
throughput times, drastically reduce inventories, expand
production choices, provide more reliable delivery dates
and better customer services, improve quality, and efficiently coordinate global demand, supply , and production [3,10]. This demands led to a significant development
in information systems (Is) known as enterprise resource
planning (ERP) systems.
ERP provide two major benefits that do not exist in
non-integrated systems; (1) a unified enterprise view of
the business that encompasses all function and departments; and (2) an enterprise Database where all, business
transaction are entered, recorded, processed, monitored,
and reported [5,3].
This paper is a review of ERP implementation factors,
base demands and critical factors, especially success factors.
2 ERP EVOLUTION AND DEFINITIONS
Like many newer fields in IS, ERP has been defined by
various authors but not with much differences. Rosemann
defines ERP systems as customizable, standard application software which includes integrated business solution
for the core processes and the main administrative function of an enterprise [1]. Or "An Enterprise Resource
————————————————
H. Asil is with the Department of Computer, Islamic Azad University,
Tabriz branch (azarShahr), Tabriz, Iran.
M. A.V.Zadeh is with the Islamic Azad University, East Azerbaijan
Science and Research branch, Tabriz, Iran.
At. Asil is with the Islamic Azad University, Tabriz branch, Tabriz, Iran
A. Asil is with the Department of Computer, University of Tabriz, Tabriz,
Iran
Planning (ERP) software application package is a suite of
pre-engineered, ready-to-implement, integrated application modules, gathering to all the business functions of an
enterprise and possessing the flexibility for configuring
and customizing dynamically the delivered functionality
of the package to suite the specific requirements of the
enterprise. ERP enables an enterprise to operate as an
integrated, enterprise wide, process-oriented, information-driven, and real-time enterprise" [1].
Since the focus of manufacturing systems in the 1960s
was on traditional inventory control concepts, most of the
software packages were limited generally to inventory
based on traditional inventory processes [2].due to the
need for software designed specifically for manufacturing, system have moved to material requirement planning(MRP)systems [3]. in 1980's, the MRP systems has
been extended from a simple MRP tools to become the
standard manufacturing resource planning (MRP2) [3,2].
MRP2 evolved to incorporate the financial accounting
systems and the financial management system along with
the manufacturing and materials management systems
[3].
By the 1990's, continuing improvements in technology
allowed MRP2 to be expanded to incorporate all resource
planning for the entire enterprise. Areas such as product
design, information warehousing, materials planning,
capacity planning, communication systems, human resources, finance, and project management could now be
included in the plan. Hence, the term, ERP Was coined.
ERP could combine both business process in the organization and IT into one integrated solution witch MRP and
MRP2 were not able to provide[3]. In the 2000's internet
added to ERP package that made world's focus on ERP
systems [2].
© 2010 JOT
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JOURNAL OF TELECOMMUNICATIONS, VOLUME 6, ISSUE 1, DECEMBER 2010
20
"The basic architect of an ERP systems builds upon on
one Database, one application, and unified interface
across the entire enterprises" [4]. An ERP software also
benefits are: speed decision-making, reduce cost, and give
manager control over globally distributed business operation [4,3].
3
ERP YES OR NO?
Enterprise systems appear to be a dream coming to the
true. The commercially available software package promise seamless integration of all information flows in the
company, financial and accounting information, human
resource information, supply chain information, and customers information, for mangers who have struggled, at
great expense and with great frustration, and incompatible information system [3]. This integration makes organization able to take quick reaction to competitive pressure
and market opportunities, be more flexible product configuration, achieve reduced inventory, etc [8,2].
ERP benefits can be classified into tangible and intangible. Tangible benefits refer to inventory reduction, reduce
of personnel, increase productivity, improvement in order management and cash flow management. Intangibles
refer to the new or improved business process, improve
responsiveness to customers, standardization of computing platforms, improve management process, etc [9]. Despite these significant benefits that ERP provide, they are
very expensive. The cost of an ERP software itself can
range from hundreds of thousands of dollars to several
million dollars. On the other hand it is just a part of implementation costs, company must spend more dollars on
education, cultural change, human resource, new hardware, and other steps [2,9]. Company must spend
23mounts or more for implementation project to complete. Moreover, according to Standish Group research,
90% of ERP implementation end up late or over budget,
with one to three years pay back period [2].
In fact every company that want implement ERP systems enter a big gambling, that can win with a little intelligence. It is no surprise that business organization have
been beating path to the doors of ERP, as researches show
70% of big company installed ERP systems[3,2].
4 CRITICAL FACTORS FOR SUCCESSFUL ERP
IMPLEMENTATION
Implementing an ERP systems is not an inexpensive or
risk free venture. in fact, 65% of executives believe that
ERP systems have at least a moderate chance of hurting
their businesses because of implementation potentials [3].
This paper cheeked much implementation factors for
ERP. It is therefore worthwhile to review the successful
implementation factors. The most prominent of these are
described below.
4.1 clear understanding of strategic goals
ERP implementation require that key people throughout
the organization create a clear vision of how the company
should operate in order to satisfy customer, empower
employees and facilitate supplier for the next three to five
years. There must also be clear definition of goals, expectation, and deliverables. Finally, the organization must
carefully define why the ERP systems are being implemented [3]. And the important questions; is ERP the best
way to reach organization goals? And company can fan
out ERP many function and problems?
4.2 Commitment by top management
Successful implementation require strong leadership,
commitment, and participation by top management [3]
top management should sense needs, commitment, and
understanding ERP, fully supports costs, demand payback, and so on [2].
ERP implementation may have big changes in organization structure, so top management should be able to
overview with all new changes [2,10].
4.3 organizational change management
The existing organizational structure and processes found
in most companies are not compatible with the structure,
tools and type of information provided by ERP systems.
even the most flexible ERP systems imposes its own logic
on company's strategy, organization, and culture. thus,
implementation an ERP systems may force the reengineering of key business processes and/or developing new
business processes and base need tools to support the
organization's goals [2].
Unfortunately, "many chief executive view ERP as simply a software systems and the implementation of ERP as
primarily a technological challenge. They do not understand that ERP may fundamentally change the way in
which the organization operates".
As researches show ERP implementation may trigger profound changes in corporate culture. If people are not
properly prepared for the imminent changes, the denial,
resistance, and chaos will predictable consequences of the
changes created by the implementation. The organization
must be flexible enough to take full advantage of these
opportunities [2].
4.4 project management and a great implementation team
Successful ERP implementation requires that the organization engage in excellent project management. This include a clear definition of objective, development of both
work plan and a resource plan, and careful tracking of
project progress [7,3]. And the project plan should establish aggressive, but achievable, schedules that instill, And
maintain a sense of urgency [7].
This requires an excellent implementation team. Implementation team should be composed of top-notch
people who are chosen for their skills, experience, and
knowledge. Past accomplishment, reputation, and
flexibility. These people should be entrusted with critical decision making responsibility [2,7 ,3].
© 2010 JOT
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21
"The implementation team is important because it is responsible for creating the initial, detailed project plan or
overall schedule for the entire project" [3,7]. Team people
should be familiar with organization culture and system
and also with country business. someone who worked for
years in company [7].
The team also make sure that all necessary will be available as needed [3,7]. And do not forget the team will work
in three level, setting up, implementation, and evaluation.
So team need skilled people for all levels.
4.5 education and training
Education/training is probably the most widely recognized critical success factor, because user understanding
and buy-in is essential. ERP implementation require a
critical mass of knowledge to enable people to solve problems within the framework of the system [6]. if someone
enter the wrong data, the mistake can have a negative
domino effect throughout the entire enterprise. Or if employees do not understand how a system works, they will
not be convinced to use system, or continue to old ones
[7,3].
"The ERP systems also require that everyone in the organization must work within the system, not around it" [6,2],
and the benefits of ERP cannot be realized until end users
are using the new system properly. to make end user
training successful, the training should start early, before
the implementation begins [6]. There are different ways to
educate people but the best one is that people are familiar
with. Implementation team must find the best ways according to organization culture.
top management must be fully committed to spend adequate money on education and end-user training and
incorporate it as a part of ERP budget. It has been suggested that reserving 10-15% of the total ERP implementation budget for training will give an organization an
80% chance of implementation success [3].
4.6 implementation time
Implementation time is really important, implementation
must start, when organizational process are in minimum
level, here top manager and employee are free to face
with new system problems, needs, and implementation
steps.
Implementation schedule must define excellent, and implementation steps must be matching the criteria used by
schedule table [3,6,2].
5 CRITICAL FACTORS EVALUATION
Various factors in the previous section for ERP implementation was evaluated. In this section, using polls and surveys carried out by three of the effect of each factor to be
determined.
For review has tried to comment in more than 70 people
who have the role of ERP implementations were investigated. After reviewing the results in a form specified.
This shape effect of each factor as a percentage of the
hundreds of shows.
Fig1. Critical factors evaluation
6 CONCLUSION
ERP systems can be complex and difficult to implement,
but a structured, correct factors and disciplined approach
can greatly facilitate the implementation.
This article is classified under the critical factors for implementation of the erp. These include: clear understanding of strategic goals, commitment by top management,
organizational change management, project management
and a great implementation team, education and training,
implementation time. Based on the assessment based on
the most influential factor has been the commitment by
top management.
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