2.1. Theoretical Literature review
Theoretical literature review analyzes, evaluate, and summarize scholarly materials which focus on the challenges and opportunities of ERP implementation. It reviews definitions of ERP from different scholars, explain the evolution of ERP, the challenges and critical success and failure factors, and lastly review the factors affected the implementation of ERP.
2.2. Definition of ERP
ERP system is a packaged business software system that allows a company to automate & integrate the majority of its business processes, and share common data and practices across the entire enterprise (Seddon, Shanks & Willcocks, 2003). Klaus (2000) further defined the concept of ERP in an easy-understood way. It can be viewed from a variety of perspectives. First, and most obviously, ERP is a commodity, a product in the form of computer software. Second, and fundamentally, ERP can be seen as a development objective of mapping all processes and data of an enterprise into a comprehensive integrative structure. Third, it can be identified as a key element of an infrastructure that delivers a solution to business. This concept indicates that ERP is not only an IT solution, but also a strategic business solution. As an IT solution, ERP system, if implemented fully across an entire enterprise, connects various components of the enterprise through a logical transmission and sharing of data (Balls, Dunleavy, Hartley, Hurley & Norris, 2000).Cited in ( li Fang & Sylvia Patrecia, 2005)
When customers and suppliers request information that have been fully integrated throughout the value chain or when executives require integrated strategies and tactics in areas such as manufacturing, inventory, procurement and accounting, ERP systems collect the data for analysis and transform the data into useful information that companies can use to support business decision-making. They allow companies to focus on core and truly value-added activities (Nah, 2002). These activities cover accounting and financial management, human resources management, manufacturing and logistics, sales and marketing, and customer relationship management. As a strategic business solution, it will greatly improve integration across functional departments, emphasize on core business processes, and enhance overall competitiveness. In implementing an ERP solution, an organization can quickly upgrade its business processes to industry standards, taking advantage of the many years of business systems reengineering and integration experience of the major ERP vendors (Myerson, 2002). ERP systems are important tools to help organizations change business and gain sustained competitive advantages via their opponents. Cited in ( li Fang & Sylvia Patrecia, 2005)
2.3. Characteristics of ERP systems
ERP system has a set of specific characteristics, so these characteristics is derived and based on the literature search on ERP system characteristics in general and the comparisons with traditional IT project. Therefore, in this work the unique features of ERP project were identified and used as a help to understand what they are, what they can do, how they differ from other IT packages, and what characteristics of an ERP development methodology.
This paper identifies the main characteristics of ERP systems such as complexity, integrated and packaged software, which perform number of applications through a number of functions, and manage the organization with the integration of business processes.
For a better understanding, the ERP characteristics regrouped under three dimensions according to their classifications, namely technical, organizational and informational as described below:
Technical dimension includes flexibility, complexity and openness; it refers to the capabilities for applications development offered by ERP systems in comparison to traditional systems. Organizational dimension includes integration, best practices, completeness and change process; it refers to the system’s deployment in the firm that is the best reflect impact of system on organization. Informational dimension includes software package relates to the quality and usefulness of the information provided by the system.
2.4. Evolution of ERP
The legacy systems which were constituted by the early enterprise systems solved particular departmental needs within organizations, but the systems lacked the ability to integrate themselves. Therefore, it was usual to collect and process the same information multiple times in different places, creating a serious challenge when decision makers tried to retrieve the right piece of information in real time. This platform generated serious asymmetries between different functional groups within the same organization (Kang et al, 2008). Organizations realized that those systems should be integrated to gain efficiencies. Manufacturing Resource Planning system, or MRP, was the first response to overcome such problems.
Material requirements planning (MRP) which evolved as the basis of ERP is the dependent demand technique that uses a bill-of-material, inventory, expected receipts and a master production schedule to determine material requirements. Basically MRP were inventory control systems focusing on materials and planning control (Jay Heizer and Barry Render, 2011).
These systems were comprised of a set of decision rules designed to translate a master production schedule into concrete time-phased requirements (Orlicky, 1975). In the early eighties, these systems were expanded in scope and incorporated additional capabilities to support other business functions such as production, marketing, sales and finance. Once a firm has MPR in place, requirements data can be enriched by resources other than just components and when MRP is used in this way, resource is usually substituted for requirements, and MRP becomes MRP II a very extremely powerful technique. In other words MRP II is a system that allows, with MRP in place, inventory data to be augmented by other resources variables. Therefore the extension of MRP was called Manufacturing Resource Planning II (MRP II) (Barker, 2001). But, although MRP II made significant progress in bringing together diverse processes and units within the organization, as Chung et al. (2000) states, it still failed in becoming a real enterprise-wide system, because of issues relating to its interoperability, interfacing, protocol incompatibility and ability to cover additional business processes.
To overcome the insufficiencies of MRP II, mainly those referring to integration flaws, a new generation of information technologies came to the scene and started evolving strongly. These new systems were known as “enterprise resource planning” systems, a term coined by Gartner Group (Ragowsky et al. (2002). ERP systems constituted the natural evolution of Material Resource Planning (MRP) solutions that emerged in the seventies (Davenport, 1998), integrating not only manufacturing processes, but also linking the wide spectrum of business functionalities and processes required within any organization. ERP systems emerged to honor the promise to flawlessly integrate the information from an entire enterprise, including processes such as production, customer orders, inventory, purchasing, sales and distribution, human resources, and supply chain (Kang et al, 2008).
Since then, ERP systems have been acknowledged as one of the most innovative developments in the information technology arena (Al-Mashari, 2003A). By 1999, 70 percent of Fortune 1000 companies had either adopted or were in the process of implementing ERP systems (Brazel et al., 2008) (Cerullo et al., 2000).
Fig 2.1 The evolution of ERP Source: – The Evolution of ERP Systems: A Historical Perspective, Mohammad A. Rashid (P-4, 2002)
2.5. Benefits of ERP
What are some of the perceived benefits that lead corporations to commit to the implementation of ERP in their organizations? As indicated by Olliver and Romm (2002), “in common with other types of investment activity the adoption of an ERP system is a purposive intervention by an organization for bringing about a new state of affairs that is judged to be superior to the current state”. Botta-Genoulaz, Millet, and Garbot (2005), indicate that two distinct streams are observed from the literature. The first one focuses on the fundamental corporate capabilities driving ERP as a strategic concept, and the second, on the details associated with implementing an information system and their relative successes and costs. Problems of sociological and cultural factors influencing the implementation success as well as the implementation steps have been addressed earlier in literature.
As indicated by Chen (2001), “planning for ERP adoption generally occurs when an organization realizes that current business processes and procedures are incompetent for their current and or future strategic needs”. As the result of various external and internal forces, Ross, (1999:11) articulated that that as a business and strategic perspective implementing ERP is seen as way to improve corporation’s effectiveness and efficiency, reduce their operating, personnel, inventory and IT costs, and improve their productivity, business growth, production scheduling, delivery time, customer service, and overall quality. Additionally, data visibility and timely information is important to make better business decisions. It is clear that ERP system investments have been categorized as strategic in nature. Literature review identifies the common goal to be an increase in company sales, reduction in production cost, reduction of lead times, and improvements in customer relationships.
In general ERP systems enhance inter-organization communication and collaboration between different functions and locations for the integrated decision making process. Standardization of the processes across the unit’s works in favor of collaboration as it reduces the number of conflicts between the processes. The single database system encourages communication across locations and functional units through sharing the information. With ERP systems companies are using the same database, which can be accessed on-line, in real-time and simultaneously by many users. Since, virtually all users have access to the same information it improves companies planning and control practices.
And some of the benefits that could be realized in Messebo cement factory environment as a result of ERP implementation could be as follows:
Improved responsibilities in relation to customers, stronger supply chain partnerships, Enhanced organizational flexibility, improved decision-making capabilities, a Reduction in project completion time and cost, opportunity for the enterprise to re-engineer and upgrade its business process.
2.6. Phases of ERP Lifecycle
According the study result of José Manuel Esteves de Sousa ERP lifecycle framework is structured in phases, which consist of the several stages that an ERP system goes through during its whole life within the hosting organization. The stages are:
Adoption decision phase:- this phase is the one during which managers must question the need for a new ERP system while selecting the general information system approach that will best address the critical business challenges and improve the organizational strategy. This decision phase includes the definition of the system requirements, its goals and benefits, and an analysis of the impact of adoption at a business and organizational level.
Acquisition phase: -this phase consists of the product selection that best fits the requirements of the organization. Thus, minimizing the need for customization, a consulting company is also selected to help in the next phases of the ERP lifecycle especially in the implementation phase. Factors such as price, training and maintenance services are analyzed and, the contractual agreement is defined, in this phase, it is also important to make an analysis of the return on investment of the selected product.
Implementation phase: -this phase consists of the customization or parameterization and adoption of the ERP package acquired according to the needs of the organization, usually this task is made with the help of consultants who provide implementation methodologies, knowhow and training.
Use and maintenance phase: – This phase consists of the use of the product in a way that returns expected benefits and minimizes disruption. During this phase, one must be aware of the aspects related to functionality, usability and adequacy to the organizational and business processes. Once a system is implemented, it must be maintained, because mal functions have to be corrected, special optimization requests have to be met, and general systems improvements have to be made.
Evolution phase: -This phase corresponds to the integration of more capabilities in to the ERP system, providing new benefits, such as advanced planning and scheduling, supply chain management, customer relation management, workflow and expanding the frontiers to external collaboration with other parties.
Retirement phase:-this phase corresponds to the stage when with the appearance of new technologies or the inadequacy of the ERP system or approach to the business needs, managers decided if they will substitute the ERP software with other information system approach more adequate to the organizational needs of the moment.
2.7. Dimensions of the ERP life cycle
We defined four areas of concern or viewpoint by which the different phases of the lifecycle should be analyzed.
Product: – This dimension focuses on aspects related to the particular ERP product in consideration, such as functionality and on related technical aspects, such as hardware and base software needs. A thorough understanding of the software tool’s capabilities must exist in order to make an alignment with the business strategy in order to determine whether the software is being used effectively, in accordance with the needs of the organization and how it can best be applied to further the goals of the organization.
Process: – Each organization has its own core capabilities and functionality that must be supported by an ERP system. Also, an ERP system must help to decision making required to manage the resources and functions of the organization. Usually, the main ERP investment focus is on re- engineering processes to enable the organization to adopt the new business models and functional requirements of the ERP system in order to achieve better performance.
People: -This dimension refers to the human resources and their skills and roles in an ERP system lifecycle. These skills and roles must be developed to minimize the impact of the introduction and diffusion of an ERP system, in order to reduce risk and manage complexity, while facilitating organizational change, dealing with contingencies, changing practices, and adapting to a new organizational structure and culture are dome aspects that must be learned.
Change management: -This dimension refers to the body of knowledge that is used to ensure that a complex change, like that associated with a big system, gets the right results, in the right time frame, at the right costs (Holland & Davis, 1998). The change management approach tries to ensure the acceptance and readiness of the new system, allowing the organization to get the benefits of its use. Cited in ( Jose M. Esteves, Joan A. Pastor, 1999)
2.8. Challenges of ERP implementation in Business
Though the implementation of an ERP system is associated with a number of benefits and affects the entire organizations such as process, people, and culture not all ERP implementations have been successful as it is accompanying with a number of challenges that companies may encounter in implementing ERP systems. ERP implementation projects vary in scale and arrangement, each project obliges careful and timely management decisions during its lifecycle phases (M. Lynne Markus and Cornelis Tani.,1972).
ERP system implementations require dedication, commitment, significant amount of resources, and organizational changes. Failures of ERP implementation can be caused by multiple factors like organizational, social, and technical factors. However, there are extensive challenges in the implementation of ERP systems which sometimes turn the project into a complete failure. These challenges affect the success of ERP project in the implementation stage and must be identified (Ahmed Elragal, Moutaz Haddara,2012).
Furthermore, the literature indicates that ERP implementations have sometimes failed to achieve the organization’s objectives and desired outcomes. Much of the research reported that the failure of ERP implementations was not caused by the ERP software itself, but rather by a high degree of complexity from the massive changes ERP causes in organizations. The challenges include organization and human related issues like resistance to change, organizational culture, incompatible business processes, project mismanagement, top management commitment, etc. (M. Lynne Markus and Cornelis Tani.,1972).
2.8.1. Project Plan and Vision
One of the problems faced in ERP projects is justification the huge resources required to implement it. Nah (2003) stated that one of the biggest problems ERP project leaders face comes not from the implementation itself, but from the expectations of board members, senior staff and other key stakeholders. Thus, a business plan that outlines proposed strategic and tangible benefits, resources, costs, risks and timeline is critical (Wee, 2000) to clearly define where the resources are going to be allocated and what are the reasonable returns from it.
An ERP plan should decide in advance what to do, how to do it, when to do it and who is to do it (Koontz et al., 1980). That may include the establishment of an intentional structure of roles though determination of the activities required to achieve goals of an enterprise and each part of it, the grouping of these activities, the assignment of such groups of activities to a manager, the delegation of authority to carry them out, and provision for coordination of authority and informational relationships horizontally and vertically in the organization structure (Koontz, 1980). Cited in (Shatha Hussien Hasan Yousef,2010)
2.8.2. Top Management Support
Top management support has been consistently identified as the most important and crucial success factor in ERP system implementation projects. Top management provides the necessary resources and authority or power for project success. Top management support in ERP implementation has two main facets that is providing leadership and providing the necessary resources. To implement ERP system successfully, management should monitor the implementation progress and provide clear direction of the project. They must be willing to allow for a mindset change by accepting that a lot of learning has to be done at all levels, including themselves (Bhatti, 2005). Cited in ( Jacquiline Wanjiru Kimani, 2013).
According to the study result of Konk Jia Hiui (2005) top management support refers to the executive sponsors invest sufficient time, effort and resources to the project; have a realistic understanding of the capabilities and limitation of the systems; legitimize new goal and objectives and ask questions before the project implemented; establish and approve new organizational structures, roles, policies and responsibilities; monitor project process constantly; and (6) in times of conflict, managers should mediate between parties. The importance of the top management support is agreed by all researchers. The IT literature has clearly documented that for IT projects to succeed top management support is critical.
2.8.3. Training and Education
Training is one of the most cited Critical Success Factors (CSFs) in Enterprise Resource Planning (ERP) implementation projects (Bancroft et al., 1998). In order to realize significant benefits from ERP systems a considerable amount of training is required (Wortmann, 1998). There must be a training plan and it should take into consideration both technical staff and end-users, with its scope depending on the type of implementation approach selected. Some case studies of ERP implementations have shown the importance of effective training at all levels (Kale, 2000). Cohen (2010) points out that implementation and training are the root of an ERP system and businesses that were not supported in this sense developed a negative perception of the system
Coulson et al, (2003) propose a training model that is based on the whole ERP concepts. They emphasize the operators have to understand the entire “Blue Print” of the system continuously so that it can make the quality of the entire ERP usage and efficiency reach to the optimization. They provide with another training strategy and make the users? learning come to all kinds of knowledge levels. After adopting the training model, the users still remind themselves the concepts of ERP. Therefore, the ERP system is implemented into usage efficiently. So, it is necessary to help the enterprises proceed with the training schedule by a decisive model of training. Cited in (Jacquiline Wanjiru Kimani, 2013.)
ERP is a hard system to utilize and even harder to implement even for people who have an IT background. Therefore, users have to be intensively trained to avoid any error or confusion during when implementing and using it. Nah et al., (2003) says that sufficient training can support increase success for ERP systems. Management should focus in training courses and willing to allocate all resources needed for that. By treating resource training with little regard and financial support, it is not hard to realize the reality of delay, confusion and financial ruin that may result. Some companies insist on assigning a fixed cost or percentage to the training effort, regardless of need or variable conditions (Gargeya and Bady, 2005) Cited in (Shatha Hussien Hasan Yousef, 2010)
2.8.4. Systems Security and ITS Infrastructure
According to Bhatti (2005) adequate IT infrastructure, hardware and networking are crucial for an ERP system’s success. It is clear that ERP implementation involves a complex transition from legacy information systems and business processes to an integrated IT infra-structure and common business process throughout the organization. The concept of task-technology fit (Goodhue and Thompson 1995) can be identified as one possible measure for assessing the suitability of a system for a user’s job tasks. This measure describes the correspondence between task requirements and functionality of the technical solution. If the correspondence is perceived high, a user of such a technical solution should be relatively satisfied with the solution (and vice versa). Information systems involve different logic and ways of achieving certain goals. ERP systems are rich in functionality for managing functionally different sorts of tasks and activities almost in all kinds of businesses (Davenport 1998). According to Luo et al, (2004) organizations may be overwhelmed by the required organizational changes to fit the system, and dealing with ever changing ERP technology and its infrastructure. Further, any successful ERP implementation requires a fit between the ERP system and the organizational processes it supports. As technology advances, aspects of systems security emerge and especially the security and privacy of the organization’s system. Information security contains a set of principles, regulations methodologies, techniques and tools. Henderson et al (1999) indicate the emerging importance of privacy and its implications to Information Systems managers. According to Marianne et al (1996), security benefits have both direct and indirect costs to the organization. Direct costs include purchasing, installing and administering security measures. Security measures can also affect system performance, employee morale, or retraining requirements. System security includes: operating system, authorization, network equipment, access, applications, access system functions, data access, virus prevention, interruption monitoring, tracking data changes, the security of data backup and archiving, security management regulations of the host room and so on. Thus, in the implementation of ERP systems, there is widespread phenomenon of no great importance to system security such as users do not pay attention in keeping their password confidential, sharing of passwords, many super-users authorization and so on. A direct consequence of the lack of safety awareness in the security design of the system is that there are loopholes and short comings. In recent years, there have been newspaper reports that banks or corporate computer systems have been illegally invaded the news, this wake-up call to the enterprises (Henderson et al., 1999)
Despite increasing investment in information security and its strategic role in today’s business success, effective implementation of information security strategy still remains one of the top challenges facing global organizations (PricewaterhouseCoopers, 2008). Businesses have been urged to make information security, a strategic issue for organizations to compete and survive in this era of global economy and ever changing enterprise risk (Amaio, 2009). Success in such demanding business environments depends in large part on implementing an effective information security strategy to protect information and information assets. Recent information security literature recommends organizations employ an overall information security strategy that integrates “people, processes, technology, and operations capabilities” to ensure effective defenses across the organization (Allen, 2005). In order to face the challenges and to take advantage of new opportunities brought forth by information technology advances, Caralli (2004) suggests that organizations shift the focus from a technology based information security strategy to an organizational based approach that considers a core set of organizational capabilities. Therefore, the identification and understanding of organizational capabilities is essential to logically recognize the relationship between information security strategy implementation success and organization performance. An organization can benefit from its ability to protect information and the environment in which it exists. Among these benefits are, maintaining compliance with the law, preserving brand strength, and company reputation, increasing customer trust, sustaining business resiliency, and thereby achieving organizational objectives and improving business performance (Ezingeard et al., 2005). Cited in (Jacquiline Wanjiru Kimani, 2013.)
2.8.5. Departmental Communication
The factor of department communication means the employees from different departments have a good reactive information transformation related to the problems or functions in the ERP implementation or usage. Al-Mashari (2002) claimed that the communication should detail several areas including the rationale for the implementation, the business process management change, demonstration of applicable software modules, and briefing of change management strategies and tactics and establishment of contact points. Communication should cover people, objectives and tasks of the projects.
Failing to achieve a fluent and open communication between top management and the system user is a major cause of ERP implementation failure (Huang et al., 2004). Motwani et al. (2005) argue that a company encouraging its employees to participate actively in the implementation is more successful than a company that does not. Furthermore, Motwani et.al (2005) discuss the importance of open communication when sharing the news of the change of ERP systems as well as the ongoing updates regarding the change. Indeed, cross functional and interdepartmental coordination is of utmost importance when implementing an ERP system and having excellent company-wide communication is vital (Chen et al., 2009). Dezdar and Ainin (2011) argue that communication is an important tool to use for management when trying to avoid resistance to change from their employees. Continuous communication with the whole company will let the system users know what is happening, what results are to be expected and if something goes awry, they are directly informed and involved in solving the problem instead of left behind in confusion (Dezdar ; Ainin, 2011). Plant and Willcocks (2007) stress the time aspect of communication; even though continuous interdepartmental communication is considered important both pre-, and post implementation, taking too much time making sure that communication is reaching everyone can be, and often is, a waste. Instead, making sure that the most vital information reaches the employees that are directly affected by it is a better way of dealing with communication (Plant ; Willcocks, 2007). Cited in (Jonathan Arvidsson ; Daniel Kojic, 2017)
2.8.6. Effective Project Management
Nah et al. (2001) state that a good project management is essential in an ERP implementation project. The project management activities span the first four stages of the ERP life cycle from beginning the project until closing it (Somers ; Nelson, 2001; 2004). The approach to project management suggests that the project planning and control is in correlation with the project’s characteristics such as project size, experiences with technology and project structure (Somers & Nelson, 2004; Holland & Light, 1999). An individual or group of employees should be given the responsibility to drive success in the project management (Nah et al., 2001). When the project team is formally established, the team must subsequently be defined in terms of its milestones (Holland & Light, 1999). It includes determining the critical paths of the project, deciding on the timeliness of the project and managing the force of timely decision making (Nah et al., 2001). Hence, the scope should be established, clearly defined and be limited. As ERP projects tend to be huge and inherently complex, due to the extensive combination of hardware and software as well as the countless organizational, human and political issues (Somers & Nelson, 2004). A project scope that is too broad or ambitious can cause problems (Somers & Nelson, 2001). Cited in (Jonathan Arvidsson & Daniel Kojic, 2017)
2.8.7. Change Readiness
Change readiness refers to the preparation for organization change occurred in the ERP implementation period. Esteves (1999) defined the preparation for changes as all the stakeholders and the team readiness for the changes associated with information systems implementation. A good preparation for organization changes will reduce the risk of conflicts and mass in the ongoing implementation. Umble (2003) stated that the existing organizational structure and process should not be compatible with ERP software.
2.8.8. Cultural Adaptability
Culture is defined by Hofstede (2004) as “the collective programming of the human mind that distinguishes the members of one human group from those of another. Culture is a system of collectively held values,” Cultural adaptability is the ability to change so as to be suitable for a different and new cultural context. Globalization is the trend of today’s business, the multi-national companies are faced with the problems in the international cooperation and competition. The cultural gap is a very important factor when making a strategic planning in different organizational context. When ERP is implemented into different areas and regions, it deals with different people in different cultural systems.
Cultural adaptability is an absolute necessity when working across cultures. If the system is not adaptable by people with different cultural background, it means the implementation may meet more conflicts, and as a result, are more likely to fail. Therefore, cultural adaptability is included in the CSFs list in our study.
2.9. Success factors of ERP implementation
According to Umble et al. (2003), a collection of factors that can have a crucial impact on a successful ERP implementation has been recognized by several authors. Umble et al. (2003) have aggregated the most important factors identified by these authors. They continue that based on these factors, it is possible to determine if the implementation process will be successful. These nine essential factors are depicted in Figure below.
Clear understanding of strategic goals: A necessity for an ERP implementation is that the key personnel of the entire company have a distinct, immersive image of the activities the company should exercise so that it can fulfill the needs of customers, empower workers, and facilitate a supply chain for the impending three to five years. Goals, expectancies, and products have to be explicitly recognized. (Umble et al. 2003.) Lastly, the reasons for implementing an ERP solution and what important organizational necessities the software will deal with need to be precisely specified.
Figure 2.2 The nine essential factors affecting a successful implementation of an ERP system (Umble et al., 2003)
Commitment by top management: Top management must demonstrate solid leadership, commitment, and involvement in order to achieve a successful. Due to the crucial input of top management when construing and revising current business procedures, there ought to be a top level administration planning board behind the implementation effort that is engaged with business integration, comprehends ERP, agrees with the costs completely, calls for return on investment, and advocates the project (Umble et al., 2003). Furthermore, there should be a greatly revered, top level project champion in charge of the implementation endeavor (“Crucial success factors in an ERP makeover”, 1999; Krupp, 1998; Maxwell, 1999). Cited in (Jesse Mikkola, 2013).
Excellent project management: To successfully implement an ERP system, it is required that there is an exceptional framework for managing the project (Umble et al., 2003). This encompasses an explicit recognition of goals, developing of an action plan as well as an asset plan, and diligent control of the project plan (Davis ; Wilder, 1998; Laughlin, 1999; Sherrard, 1998). The project timetable should be demanding, but reachable and instill and uphold a feeling of imminence (Laughlin, 1999). Project goals need to be distinctly specified in addition to having an explicit scheme to aid the organization in evading the well-known “scope creep” which can expand the ERP cost estimation, compromise the project advancement, and convolute the implementation process. Cited in (Jesse Mikkola, 2013).
When an ERP project is in a planning phase, the company must decide whether to implement a standardized ERP package and embrace the built-in functionality or to customize the software according to the company requirements (Holland ; Light, 1999). It is imperative that the scale of the project is explicitly determined prior to the execution. Furthermore, the scope should recognize both the implementable modules and the business procedures that are concerned. If there is no need implement more than a basic version of an ERP solution with no notable modifications, the customization of the source code will be minimal. (Umble et al., 2003.) As a result, the intricacy of the project will be diminished and the implementation schedule is easier to follow (Sherrard, 1998). Cited in (Jesse Mikkola, 2013)..
Organizational change management: Many enterprises have existing organizational structure and procedures that are not in accordance with the structure, tools, and forms of data supplied by potential ERP solutions. No matter how adjustable the ERP system is, it still affects the strategy, organization, and culture of a company (Umble et al., 2003.) Hence, main business procedures may need to be reengineered and/or new business procedures may need to be developed to uphold the organizational objectives in order to implement the ERP system (Jarrar et al., 2000; Minahan, 1998). Consequently, redesigned procedures have to be correspondingly adjusted in organizational control to maintain the performance of the reengineering endeavors. Most functional areas and several social practices within the organization are usually affected by this readjustment. As a result, organizational constructions, policies, procedures, and personnel may be considerably impacted. (Umble et al, 2003.) Cited in (Jesse Mikkola, 2013).
Unfortunately, several top managers consider ERP only as a piece of software and the implementation process mainly as a technological challenge. They should come to understand that an ERP solution may substantially alter the operational means of the organization. This is seen as one of the problems when dealing with current ERP software. (Davenport, 1998; Umbleet al., 2003.) Enhancing the business processes should be the eventual objective, not implementing a piece of software (Umble et al., 2003). Instead of having the IT department drive and direct the implementation process, it should be motivated by business and directed by business necessities (Chew et al., 1991; “Crucial success factors in an ERP makeover”, 1999; Minahan, 1998). Cited in (Jesse Mikkola, 2013).
A great implementation team: Teams implementing ERP ought to consist of top-quality people who are skilled, productive, adaptable, and have a good reputation (Umble et al., 2003). These people should be empowered to make crucial decisions (“Crucial success factors in an ERP makeover”, 1999; Davis ; Wilder, 1998; Laughlin, 1999; Minahan, 1998; Sherrard, 1998). There should be continuous information exchange between the management and the team, and the team should be able to make quick decisions (Sherrard, 1998). The team implementing the software has a significant role in creating the initial elaborate project scheme or overall timetable for the whole project, appointing obligations for several operations, and setting deadlines. In addition, the team ensures that there is no lack of resources. (Umble et al., 2003.) Cited in (Jesse Mikkola, 2013).
Data accuracy: Data accuracy is an imperative characteristic of correctly operating ERP software. Since ERP is an integrated system, inputting a wrong kind of data can have a domino impact on the whole company. (Umble et al., 2003.) In order to avoid this, the significance of data accuracy and appropriate data input directives should have a high priority in an ERP implementation process (Steadman, 1999; Stein, 1999). In addition, it is imperative that all the staff in a company utilize the ERP software, not avoid it. The organization has to clearly show to the employees that it is dedicated to employing the new system, will completely shift to the new software, and will disallow further use of the legacy system. In order to strengthen this dedication, every old and unofficial system needs to be disposed of. (Umble et al., 2003.) If concurrent systems are kept on using in the organization, some employees will continue using the out-of-date systems (Hutchins, 1998). Cited in (Jesse Mikkola, 2013).
Extensive education and training: Arguably, the most extensively identified critical success factor is education/training due to the pertinence of user comprehension and buy-in. A critical mass of expertise is needed by an ERP implementation in order to make it possible for the people to resolve complexities within the framework of the software. (Umble et al., 2003.) If the workers do not comprehend the functionality of a system, they will come up with their own procedures utilizing those parts of the system they are able to deal with (“Crucial success factors in an ERP makeover”, 1999; Hutchins, 1998; Laughlin, 1999; Ptak;Schragenheim, 2000; Sherrard, 1998). Cited in (Jesse Mikkola, 2013).
End users must use ERP appropriately so that they can fully benefit from the software. In order to successfully train the people to use the system, the education process should start as soon as possible, preferably plenty of time before the start of the implementation. Often top management tends to drastically underestimate both the amount of education and training and the related costs needed to implement an ERP system successfully. Executives must demonstrate that they are entirely committed to provide sufficient amount of money on education as well as end user training and include it in the ERP cost estimate. (Umble et al., 2003.) Some have proposed that allocating 10-15% of the complete ERP implementation cost estimate for training/education will improve the odds of the organization by up to 80% to successfully implement the system (McCaskey ;Okrent, 1999; Volwer, 1999). Cited in (Jesse Mikkola, 2013).
Focused performance measures: A delicate construction of performance measures to evaluate the effects of the new system is needed. These measures should be able to indicate how well the system performs. It must be taken into account when designing the measures that they stimulate desirable actions by every function and person. The measures could encompass features like on time deliveries, sales margin, customer order-to-ship time, inventory turnovers, and dealer performance. (Umble et al., 2003.)
If some individual has problems trying to achieve a previously set goal, he or she should either accept the offered help or be substituted. When previously set objectives are met, incentives ought to be distributed in a really apparent way. The project needs to be carefully observed until the implementation process is fulfilled. (Umble et al., 2003.) Following the implementation, the system has to be observed and evaluated (Hutchins, 1998).
It is usually expected by management and other personnel that performance will start to improve straight from the moment the ERP software becomes functional. However, due to the intricate and challenging nature of the new system, companies have to be ready for the possibility that the productivity will decrease at first. As soon as the users begin to get acquainted with the new system, the productivity will improve (Umble et al., 2003.) Therefore, it is important to distinctly bring forth the expectations regarding the performance with respect to time frames (Langenwalter, 2000; Oden et al., 1993). Cited in (Jesse Mikkola, 2013).
Multi-site issues: There are special concerns with respect to multi-site implementations. The success of the ERP implementation may depend greatly on the ways these issues are dealt with. The extent of the autonomy of a single site can be a significant concern which depends on two factors: (1) the extent of procedure and deliverable integrity across the remote locations, and (2) the requirement or preference for centrally managed information, system specification, and usage. An ERP implementation may include a goal to achieve more centralized management by implementing unified procedures. It is also possible to implement the system in order to give the remote sites tools to specify their methods to their exquisite needs. (Umble et al., 2003)
Also the culture of the remote site affects the implementation. Company standardization versus local optimization is the essential concern. Along with company standardization come simplified interfaces among diverse areas of the organization, capabilities to shift personnel and articles between different sites with only little interruption, and facilitation in distributing data through the whole company. It is also possible that local optimization efforts induce cost reduction by introducing more potent and efficient operations. (Umble et al, 2003.)
Executing the cutover plan is probably the most challenging matter regarding multi-site implementations. The company has to adopt other one of the following implementation approaches: either the implementation is put in motion at the same time in every facility or a phased method by module, by production line, or by plant with a pilot implementation effort at one facility is employed. Having to invest a great amount of money in software, hardware, and the implementation team, the enterprise may prefer a simultaneous implementation in order to refund its expenses as swiftly as feasible. (Umble et al., 2003.) Cited in (Jesse Mikkola, 2013).
2.10. Empirical studies
The literature on ERP systems is abundant as year’s progress since it is still on its growth phase. According to Victor (2011) the major challenges were lack of clear goals and objectives, lack of dedicated resources, lack of proper change management, lack of training, lack of user involvement and unclear ERP project communication.
Christopher (2011) identified the major factors as non-supportive organization culture, inadequate allocation of resources, resistance to change, ineffective communication, lack of top management support and commitment, high implementation cost, lack of incentive and reward system, inadequate user training and education.
Gatimu (2009) whose research was on the implementation of ERP in Education Sector in KCA University found out that the major challenges in implementation were; lack of preparedness to change by organization; the project manager was not skillful in project management and that performance was not monitored before, during and after implementation . Further, neither a business plan, nor vision was created or followed during the implementation. Other challenges identified were that the project team was not diverse and did not present major areas of the organization, end user training was not effective and that the scope of ERP was not well defined. Gatimu also found out that the implementation was not well staffed to meet the project deadline
Li Fang and Sylvia Patrecia (2005), Studied the Critical success factors in ERP implementation. They stated 11 CSFs from three points of view: strategic, tactical, and cultural. The CSFs are: Top management support and ERP strategy, Business Process Reengineering, Project team & change management, Retain the experienced employee, Consultant and vendor support, Monitoring and evaluation of performance, Problems anticipation (troubleshooting, bugs, etc.), Organizational culture, Effective communication, and Cultural diversity.
Abiot and Gomez (2012) conducted on a successful ERP implementation in an Ethiopian company called Mesfin industrial engineering in which the researchers have obtainable experiences of a successful implementation by conducting a case study method. The main objective of the study was to look at the implementation of ERP system considering the key technical, business and cultural dimensions. The research was carried out within the case company by having a detailed look at the issues behind the process. The researchers finally recommended that it is necessary to study and report more ERP implementations in different Ethiopian companies.
In addition to these studies, Kibebework (2015) also conducted research focusing on the challenges and current status of ERP implementation, the case of Mugher and Derba cement industries. The main objective of this study is to assess the challenges and current status of ERP implementation in both companies, and have used both quantitative and qualitative research approaches. The researcher has found factors that affect ERP implementation, namely; disregarding organizational, people and strategy factors that encompass top management support, users training and education, effective project management, user involvement, suitability of software and hardware communication and data accuracy creates great challenge for the success of an ERP implementation. The researcher also found that, there is an explicit linkage between critical success factors and ERP implementation stages. Knowing such relation and determining which critical success factor are best needed in which ERP implementation stage may enable organizations to successfully implement an ERP.