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BCO6603 Enterprise Resource Planning Systems Paper Editing Services
Enterprise Resource Planning (ERP) systems have basically transformed the work of IT organizations. The absolute size and various complexities in implementing ERP have posed problems in managing these projects. There are two important and foremost sides of managing ERP which includes people and technology. The ERP package is concerned with the entire company and has significant impact on each and every employee. Sometimes there are situations in which the project manager himself does not know who all will be affected by the implications of ERP. It becomes very difficult to get a clear understanding of technological portion involved in the implementation as there is enormous combination of hardware and software in it. The project leads and mangers face some major problems which includes the project size, risk management issues, irrational deadlines issues, company politics, issues relating to funding, unexpected gaps and interfaces and many more. This report has been prepared to state the various types of costs and issues that are involved in the execution of the ERP system. The challenges relating to the issues have been discussed. It has also been stated how these challenges and their optimistic impact will help in flourishing performance of this system.
Research report on ERP systems
Enterprise Resource Planning (ERP) is the internal management tool of main business processes, it is frequently done by information technology and includes many business activities like planning of the product, purchases, planning regarding the production and manufacturing, sales and managing the stock, logistics and shipments and finance. ERP is denoted as a tool or a part of management of business which in a form of software which helps the organization to store, manage and collect the data from a number of business tasks. ERP is a frequently updated tool which uses the databases which are taken care by the database management system. ERP keeps a record of the resources in the business and shows what is the performance or the status of the business. The ERP softwares are linked to all the divisions of the business (purchase, sales, accounting, finance, etc.). ERP also allows the flow of information to all the functional areas of the business and connects it to the external stakeholders. ERP is a huge industry which provides auxiliaries to the businesses (Seddon, et. al., 2010).
Implementation of ERP Systems
Implementation of ERP systems is a long and vast process and it usually takes involvement of many personnel. The main services which help in implementation of ERP systems are accessing, customization and backing. Implementation of ERP systems in depends on the extent on which the business is performing, number of units, customization, and the choice of procedure modifications and willingness of the consumer to purchase the ownership of the business. ERP system is installed in stages. A large business approximately takes about 168 days to complete and takes about a staff of around 160 people to do it.
In implementing ERP requirement of modifications in the current running business procedure is required. The main reason for failure is the lack of understanding of procedures. The hardships involved which ERP systems face in implementation are linked with business procedures, setup, guidance and absence of incentives.
It is important that the business firms check their procedure before succeeding to implement the ERP system. Study can show the procedure for developing. This also starts the testing of the running procedures involved with the ERP system. Study also shows the dangers of the procedures of the business which are fallen by the attaching of the running procedures to the businesses plans and objectives; study the relevancy of each procedure, studying the current systems (Abugabah & Sanzogni, 2010).
Implementation of ERP’s are noticeably harder in distributed businesses as various procedures are used in these types of business, laws are different, confusions in the data, power of approval and judgment midpoints. This also builds up the need of shifting some parts of the business to prevent the postponement of work over the required modifications of each division.
A big flaw is assuming the procedures as usual can generate to a loss of viable benefits. Loss in one division id reduced can fully bring to a good gain.
Arranging an ERP system is mainly the material of harmonising the technique the business need the system to perform and work for which it was designed to perform. ERP systems basically comprise of many procedures that customize the software processes. A business can have various types accounting methods and to recognize them altogether ERP systems work and in all divisions the results can be displayed according to the needs of the different divisions (Staehr, 2010).
Two Layer enterprise resource planning
A two-layer ERP system provides business to work equally of two ERP systems in just one. One is at the business level as whole and the other is at the different unit level. An example can show Qantas is working on an ERP system, using sovereign global and local supply chains, manufacturing and deals centres, and after sales service to provide help to their consumers, this shows that the ERP of the company is at two levels but is working as one on all the levels of the business.
Assumed the truths of globalization, businesses frequently research on how they can improve their local, functional units, manufacturing procedures to achieve objectives and decrease the time required so that it increases the money-making capacity of the business. The two-level ERP, in local supply chains, manufacturing, distributions and after sales service units can work independently at their own levels using the two-level ERP system.
Issues are there which interrupt the business to assent two-level ERP systems are:
Producing globally in different economies, not suitable for small companies and specialization is required to perform on the two-level ERP system (Haddara & Zach, 2011).
ERP systems are supposedly built on business performances, the developers of ERP systems focus that businesses use them as it is basically developed. ERP developing companies although share their offering telling customers their modification choices which allows the business to take modifications according to their business needs, although some flaws are always left even after fully developing modified ERP systems.
Organizations have a hand full of selections to correct feature flaws with them and have both advantages and disadvantages of correcting them. These flaws can be solved by developing a part of the software again, programming an element to work with the existing ERP system and locating an outside system. These modifications comprise huge changes in modification and these very expensive to carry out and develop. Modification can also be done by making changes in the business practices itself so that they are compatible with the existing ERP software.
There are many differences between formation and modification these are:
1. Modification is not mandatory, but software has to be configured.
2. Software is made to multitask and can run in any allowable configuration.
3. Configuration is the responsibility of the ERP provider whereas modification is the responsibility of the business itself.
Configuration updates to new softwares, modifications cannot be upgraded.
Modification has various advantages:
1. Progresses the need of the customer.
2. Provides an advantage to the customer by not using only the standard features of the software of ERP.
Modification has various disadvantages:
1. Involves the usage of more time to develop.
2. More talks are being made by the vendor and the customer to use the current ERP.
3. Can involve any amount of money that the vendor can charge to develop the ERP again according to the customer’s want (Sedera & Gable, 2010).
ERP systems can be additionally used via third-party system. ERP developers basically give the allowance to data and structures through the system. The additional offerings include:
b. Seizing transactional data
c. Admission to particular data and dexterities
d. Progressive preparation and arrangement
e. Handling services
Data Transfer is a method of moving, doubling and rearrangement of data from a current ERP system to the new ERP system. Moving of data is a very sensitive to complete and it needs a proper planning. As data transfer is the final stage it if often foreseen. Data transfer involves various steps:
a. Locate the data to move.
b. Find out the time required to transfer.
c. Make data patterns
d. Make of the setups for the data being transferred.
e. Give the data opening methods to the ERP system (Ling Keong, et. al., 2012).
Case Study on an Australian company using ERP system
The case study is on an Australian company Oilco, who is refiner and a marketer of a wide range of petroleum related products in Australia and eleven other countries in the Pacific Ocean. Oilco is one of the largest industrial companies in Australia, Oilco currently employees two thousand people and has assets of about AUD 2 billion. Oilco is a subsidiary a large oil company. Oilco has a network of eighteen hundred locations in Australia itself, it is also the major oil producing company of Australia and has a huge market shared in Australia. In the 18th century when the oil companies faced a change in their structure and major competition started in this industry. So, Oilco decided to start a new system to get automation and provide improved product services to the customers and to restructure their business again. To overcome these needs Oilco decided, in 1989 mainframe based ERP system, which will have over 1600 users in Australia, New Zealand and the Pacific Islands, the ERP system is the world’s largest and the most complex mainframe implementation in the world. It has the capacity to process 30,000 transactions per hour and it has the capacity to handle 1,000 orders per day of Oilco. After implementing this system in Oilco the company faced a huge change in their procedure because the of ERP processing methods (Ifinedo, 2010) .
While Oilco recognised the needs of changing some things in the business procedure, Oilco made an objective to integrate benefits of the ERP system and with this doing the company’s existing work simultaneously. It has now been 4 years since the ERP system has been implemented in Oilco and has benefitted Oilco in its business procedures. By having changes and development in areas like forecasting of the sales, automated ordering system and delivery systems, current financial data depiction, increased in the quality of data and a clean lined business procedure. Hence, since the implementation of ERP system in Oilco it has experienced regular changes in its ERP system and its improved business procedures (Ifinedo, 2010).
Costs associated with implementation of ERP system
Large companies in Australia have started using enterprise resource planning system (ERP) rather than using applications of accounting software. These large companies prefer to use this ERP system as along with handling the accounting tasks it is very helpful in managing the entire business. ERP system effectively performs all the business tasks which involve accounting, development and forecast of product and management of sales and inventory. ERP system not only involves its licensing fees but also includes cost related to implementation, maintenance, upgrading costs, cost for training and support, development and process designing.
Implementation cost:Various professionals are needed by the company to set up and put together the ERP system. So these costs are included in the overall price of the ERP system. For effective functioning of the ERP system in the company is very important to change the operating systems and the servers and hardware and software needs to be changed. The company will also require developing a test environment so that implementation of ERP system can be tested without affecting the original information of the company (Mo & Nemes, 2013).
Customisation development:ERP system facilitatesout of the box functionality which is not sufficient for the effective and efficient operating of the business. Development of modified reports incurs costs at the same time helps the workers of the company in performing their daily and monthly easily and efficiently. Capacity to store information is adequate in this system but only limited amount of information can be assessed by the users.
Training costs:ERP system is a multifaceted software application that includes many software programs which are well-suited with one another. This system is not easy to use like a basic accounting software program, training need to be provided to employees to operate this complex system. Employees need sufficient time and training to learn to operate this system. Specialists and experts have hired to provide training for operating the ERP system. Thus these additional costs should be taken into consideration while focusing or reviewing the ERP systems for the purpose of purchasing (Zeng & Skibniewski, 2013).
Cost for process resigning:Company at time of upgrading its software programme from accounting to ERP will have to redesign its variety of processes. The companies which used accounting software program has to perform many task manually or by using excel application after the acquisition of ERP system in these companies these tasks are automatically performed by the system software with increased accuracy and efficiency (Ram, et. al., 2014).
Maintenance cost:The ERP system needs proper maintenance. ERP costs cover cost of labour, network and hardware so as to ensure proper and efficient running of the system.
Upgrades:Like other software programmes ERP software also demand timely up gradation. So while reviewing purchase of ERP Systems, company should also consider the cost incurred for upgrading the software. Supplementary hardware and software are required so as to ensure smooth running of system after undergoing up gradation.
Support:sometimes several issues and trouble are faced while using the ERP system so adequate technical support is needed by the company to resolve such issues. This cost may be charged in addition or it may be included in the licensing fee (Galliers & Leidner, 2014).
Issues and challenges faced in ERP system
Market of ERP system is continuously growing and developing, still some challenges and issues are faces in its implementation. These have been quoted below:
Insight:Companies have an inner perception that ERP software system is meant only for the large companies because its cost of implementation, maintenance and acquisition is very high. So small companies feel acquiring this system is of no use.
Awareness:The small companies are less aware of the ERP system and applications. These companies even do not have basic knowledge about these systems. They think it is a magic stick which can solve all the business related problems. This system ensures transparency and visibility in the working of the company.
Former execution:Earlier companies have heard from the general public that due to failure in ERP system companies has undergone bankruptcy. So these companies started thinking that implementation of such system is a squander of time and efforts which leads to termination of the company.
Change management:This system is facing failure as its execution is thought as automatic. This system is not used effectively as people deny accepting changes.
Limited resources:Small companies do not have much capital.Due to lack of internal team they have to depend upon outside agencies which add on to the cost of implementation.
Approach to implementation:The small companies have to customize the entire system of ERP to fulfil their requirements and this will have direct impact on the cost of implementation. Adoption of better approach can minimise the need for customisation (Wynn, et. al., 2013).
Implications, advantages and disadvantages of execution of ERP system
1. It helps in improving and increasing efficiency in the business. It helps in running internal business process of the company smoothly and can lead to better outputs.
2. It provides information for decision making to the top level management.
3. Due to this system, company can easily adapt changes. It provides company with flexibility which enhances the business of the company internally and externally.
4. It enhances security of data and provides opportunities for collaboration (Tarhini, et. al., 2015).
Advantages from integration:
1. Determining of sales in accordance to inventory.
2. Full detail of every transaction using relevant data in each field where ever needed.
3. Tracking of orders and acceptance of it by screening the inventory.
4. Tracking of revenue from bills and receivables.
5. Fulfilling purchase orders.
Advantages from centralization:
1. Eliminates the need of using multiple soft wares.
2. Gets transparency to the data.
3. Provides help in naming and coding of a product.
4. Gets availability of the current data and position of the business and its procedures.
5. Protects the data which needs to be secured by consolidating it to the SSL system (Nagy, et. al., 2010).
1. Modification can create problems.
2. Can decrease the competitiveness of the business by re-modification of the ERP systems.
3. Have high costs in switching.
4. Sometimes secure information gets disclosed.
5. Can create dependencies which are not required by the business.
6. High training is required to understand how to work and control these ERP systems.
7. Maintaining peace in ERP systems can be a enormous task (Hvolby & Trienekens, 2010)
One of the important elements involved in the successful implementation of the ERP system has been the commitment from the top management in the company. For building a successful ERP system adequate financial and other resources are needed in the company. For ensuring adequacy top management is responsible. Companies incur huge costs for implementing the package of ERP. Implementation of such an intricate system needs to focus on certain important elements which includes choosing suitable seller, ample features of scalability, depending upon the size and company make-up the product should be user friendly. Successful ERP implementation needs effective and efficient management of product, participation of various other departments, strategies for the implementation of the system and proper communication. Team members should have understanding of working of their respective departments.
Large companies in Australia like Woolworth uses ERP system and they have successfully adopted proactive approach towards ERP system. These large companies consider this system as a solution to their various business problems. This system is used by large Australian companies to incorporate their business processes and help these companies in gaining competitive advantage. Evaluation of usefulness of the system is very difficult.
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