Challenges in Enterprise Resource Planning (ERP) Implementation Report

This report delves into the multifaceted challenges associated with Enterprise Resource Planning (ERP) implementation within organizations. It begins by outlining the core concepts of ERP systems, emphasizing their role in integrating various business processes such as product planning, manufacturing, and supply chain management. The report highlights the significance of ERP in providing integrated and updated information, streamlining transactions, and enhancing overall organizational efficiency. A significant portion of the report focuses on the people-related challenges in ERP implementation, including resistance to change, the need for skilled resources, and the importance of user training and project management. Case studies, including examples from higher education institutions and engineering companies, illustrate common pitfalls and failures, such as lack of leadership experience, customization issues, and organizational culture clashes. The report concludes by emphasizing the importance of information literacy for managers and the necessity of addressing both technological and human factors to ensure successful ERP implementation.

Running Head: Enterprise Resource Planning 1
Enterprise Resource Planning

Enterprise Resource Planning 2
Table of Contents
Introduction......................................................................................................................................3
People Requirement in Implementation of ERP system..................................................................4
Case Study analysis for Challenges in ERP system Implementation..............................................6
Information Literacy for Management and Success of Implementation.......................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................13

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Introduction
ERP (Enterprise Resource Planning) is a system management methodology which
involves the integration of different business processes with the help of software and technology.
The business activities encompassed in ERP system are product planning, production
management, manufacturing, marketing and raw material management. ERP system refers to the
category of business management software which includes a combination of application for the
collection, storage, management and interpretation of data (Mahdavian, Wingreen & Ghiichlee,
2016).
In the present times, it is almost necessary to implement ERP system within an organization. It is
useful in providing integrated and updated information to the users with the help of different
databases which are managed by the database management system of a business enterprise. The
ERP system must be used for the integration of different information related processes such as
collection, storage and interpretation of business activities. It supports different categories of
business functions and investment. It also facilitates error-free transactions, production and is
targeted at increasing the overall organizational efficiency. It uses different hardware and
network configurations ad use information and database repository. The ERP system is
characterized by different factors, namely, an integrated system, operation in real time, common
database to support all the applications (Al-Mashari & Al-Mudimigh, 2003). It also involves
different functional areas, such as financial accounting, human resources, management
accounting and order processing and supply chain management. However, there are significant
challenges in the application of ERP system. The technological infrastructure of the company
must be capable of incorporating the system smoothly within the organization. Other than that,
there are also several people issues as employees of the organization resist any major change

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within the organization. The current report will examine the major costs and issues associated
with ERP implementation in a business organization. The primary focus of the report will be to
examine the issues related to human resources, which includes issues pertaining to gathering
business requirements, assuring the availability of skilled resources, acceptance of the project by
the team and obtaining support from different team members (Beatty & Williams, 2006). The
report will also discuss the requirement of information literacy for the managers and different
challenges in the employment of ERP system with the help of different case studies.
People Requirement in Implementation of ERP system
Enterprise Resource Planning (ERP) is a common business management and integration
system which provides immediate capabilities and communication possibilities to the employees
in large business organizations. It allows different sections of an organization which have
different needs to communicate with each other by accumulating information in the same system.
It organizes information flow between different departments of the organization by creating a
single transaction system. It can create interoperability within the organization which is difficult
and expensive to establish with a standalone single system. It is an integral part of business
intelligence system of an organization wherein the managers have an integrated view of different
business processes. There has been a continuous technological development in the field of ERP
system which has made it possible to integrate best practices with the changing business needs of
the organization. Although, ERP systems have been widely accepted and there has been
significant growth, several challenges are yet encountered by the organizations while
implementing the system. The primary challenge is the perceived benefit of ERP system. The
multinational companies have successfully implemented ERP system; however, there are a
number of small or middle level companies wherein ERP implementation has not been

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successful. It is common that they have delayed their schedule and exceeded their initial budget.
The ERP system implementation has also failed initial targets and outcomes of the organization.
However, research regarding the failure of ERP system has stated that most of the failures were
not caused by the software, but by the complexity of the software and the inability of the
employees to adapt to the changes caused by software. According to Seo (2013), unlike other
information system, the major challenge with ERP system is not technology related but people
related such as resistance to change issues in organization culture, business processes and project
mismanagement. These issues arise due to different factors such as inappropriate skill mix,
project handling, user involvement, and technology planning and design of the system (Berchet
& Habchi, 2005).
The ERP implementation causes major operation changes within the organization; therefore, it
requires involvement of management of different people within the organization who may
resolve conflicts which may occur with the implementation of the system. The management staff
should be committed to assist in bringing change within the organization. They should equip the
employees using different functions of ERP with clear communication channels. Another major
human resource challenge is the absence of user training which intensifies the risk of confusion,
inaccuracy and eventually reducing the credibility of the system. It is also important that the
organization should have excellent project handling system so that ERP system can be
successfully implemented within the organization. The project should be developed with the help
of clear guidelines and project objectives. A work plan should be developed for the resource
allocation in the ERP system implementation. Team composition is also crucial in ERP
implementation as it integrates different business functions in a single system which leads to the
development of a complex structure. If the project team is unable to comprehend the changes in

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the organization structure, strategy and processes of ERP implementation, it will negatively
impact on the competitive advantage of the organization(Pollock & Cornford, 2004).
Case Study analysis for Challenges in System Implementation
There are several cases in which ERP implementation has failed to succeed or
encountered different human resource challenges. The ERP implementation is considered a
failure if it fails to realize its implementation cost or its initial objectives. Several higher
education institutions have also implemented ERP system in their management and to improve
institutional business processes. Higher Education Institutions spend more than 5 billion USD in
ERP investment. The ERP vendors have also made significant changes in ERP system so that it
can address the market needs of the new customers. The examples of this product are ORACLE
and SAP. Although in spite of significant changes introduced in the ERP system, the
implementation has failed to meet the expected outcomes for the organization. In universities and
higher level institutions, it can raise new organization issues related to identity or perceived
uniqueness of the university (Chang, Cheung, Cheng & Yeung, 2008). It is suggested that
Universities have unique structures and decision-making process which makes ERP system
inappropriate for them. The organization culture is also crucial in implementation of ERP system
(Yusuf, Gunasekaran & Abthorpe, 2004). The ERP system forces an organization to take a
business perspective towards education which includes changes in managerial language and
methods. Therefore, implementation of ERP system indicates a major challenge for the
organization as it does not include the implementation of a new management system but change
in the overall organization culture. In universities, two types of authorities are present, namely,
administrative authority and academic authority. With ERP implementation, administrative

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authority is reinforced as the model of governance which may impact adversely on the operations
of the organization (Hong & Kim, 2002).
It can be critiqued that ERP system is generic solution of the corporate organizations which
create risks for universities. The higher education institutions limit their choice and thee adoption
of generic solution within the organization. The ERP system has dynamic complexity which
makes them difficult to integrate with the management and staff in Universities. It is also
possible that at times, the university dos not possess the management or staff members who are
familiar with different tasks of ERP system (Mandal & Gunasekaran, 2003).
The primary characteristics of ERP system is standardization and integration which may limit the
flexibility of the University operations. If a business organization is losing its flexibility it can
result in staff resistance. Eventually, it will lead the staff members to carry out their previous
processes and increase information gap and create hindrance in the adoption of new system.
Massachusetts Institute of Technology (MIT) also implemented ERP system in 1990s. The
organization has a total staff of 8,000 students and has 10,000 students in various streams. The
organization has significant operating budget problems as the government allocation to research
and development has declined. It has increased the tuition fees and enrollment barriers for a large
number of students. The administrative process is also complex in the organization which results
in numerous errors, repetitive work and wastage of efforts. As a result, the company tries to
implement ERP system to increase the efficiency of organization management (Buonanno,
Faverio, Pigni, Ravarini, Sciuto & Tagliavini, 2005). There were several issues in the
management of the organization such as there was lack of experience in leadership. Although the
leadership was committed to the success of system, there was no second plan if the
implementation of the system fails. The leaders do not have experience in data system design and

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the implementation of new system which resulted in setbacks and delay in the overall project.
Lack of experience also caused delay in decision-making regarding the project. Another concern
with the employment of the system was the customization of the system according to the
requirements of the university. There was significant mismatch between the processes of the
University and the offerings of the vendor. In the University, there are different departments and
each of them has its own organization policies and processes which have an autonomous way of
managing themselves (Akkermans, & van Helden, 2002). Therefore, it was difficult to
implement a single standardized process in which it is accepted by all the departments of the
organization. There was also a fundamental challenge of the lack of understanding regarding
different business operations of the organization. The ERP system also requires increasing the
acceptance of new system and training staff members for the new project. It is important for the
organization to customize the software so that it can become suitable for unique needs of the
organization. As a result of these challenges, there were significant issues in the project outcome
such as delay in the completion of the project, increased workload and limited benefits of the
system for the University (Gargeya & Brady, 2005).
Another case study of Global Engineering Company (ENGCO) has been taken to
examine the issues related to ERP implementation in engineering organizations. ENGCO is
engineering company related to engineering, procurement and construction services. The
business operations of EPC are different as the manufacturing is conducted according to orders
placed beforehand. Therefore, the proper implementation of the project is dependent upon the
ability of the project managers to manage each order of the organization efficiently (Yusuf,
Gunasekaran, & Abthorpe, 2004).

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The ERP initiative was implemented in the organization with the recruitment of new
CEO. It was realized that the organization can improve its capabilities by increasing its IT
capabilities. The organization should be committed to the development of a business system
which can support different business functions such as sales, finance, cost control and other
related processes. The ERP system will result in standardization of processes and increase the
business capacity of the organization (Somers & Nelson, 2001).
In the implementation of ERP system, the company planned to use Work Breakdown Structure
wherein the project is broken down according to its cost structure. In the ERP system, work
breakdown structure will be used for both implementation and scheduling of the task. However,
it is difficult to integrate the principles of ERP with work breakdown structure (Seo, 2013).
It was planned that the whole system will be implemented within the period of six
months. However, in this tight schedule, the project managers were not having the time to
prepare the employees to operate the new system. Once system designing was completed, the
organization should made detailed online manuals and distributed them in the employee internet
system. The system also offered to develop training sessions for the employees to make them
familiar with the system (Mandal & Gunasekaran, 2003).
The implementation of ERP system within the organization resulted in positive outcomes
for the organization. Therefore, it can be critiqued that efficient project management practices
resulted in the successful implementation of ERP system within the organization. ENGCO has
established a work breakdown structure in various departments ranging from sales and
distribution, to material management and cost structure. This method assisted the project
managers of the organization to build the system capability and complete all the projects within

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the specified time limit. It also improved the system capability regarding the risk management
and enhanced accuracy of the project estimate system (Al-Mashari & Al-Mudimigh, 2003). The
ERP system should also focus on the development of improved communication process. The
organization can benefit a lot with improved communication process. An electronic approval
system can be implemented in the organization which can improve the communication system in
the organization.
Information Literacy for Management and Success of Implementation
The application of ERP system is dependent upon the information literacy of the
managers and the success of implementing SAP system. The success of the implementation is
directly correlated with the human resource, their commitment, skills and training. It can also
build competitive advantage of the organization. The human resource management is a strategic
business function of the organization and it is important to learning opportunities to them for the
success of ERP implementation. According to Mahdavian, Wingreen & Ghlichlee (2016), the
competency of the team is an important factor in proper ERP implementation. Diversified teams
are commonly used by the business organizations to increase their efficiency and effectiveness.
They are important in creating competency, skills, team and team managers. A high-performance
team has interchangeable and complementary skills, a sense of purpose, ambition and goals. In
ERP implementation, the success of the project is dependent upon the knowledge and the skills
of the users. A cross-functional team should be developed which draws upon the knowledge and
skills in variety of areas which can enhance the implementation and the use of the system
(Sheu,Chae, & Yang, 2004).
Other than that, the key users also impact on the success of ERP system. In ERP implementation,
different people play different roles such as consultants, project sponsor, project manager and IT

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expert. The key users are the most significant aspect in the success of the system application.
There are two active participants in ERP implementation, internal consultants and the external
consultants (Sheu, Chae & Yang, 2004). The internal consultants comprises of management,
MIS staff and the key users. The key users have a significant role in the success of a project. The
external consultants identify the needs of the system and adapt it according to peculiar needs of
the organization. The end users, also called key users have a crucial role in support activities
related to business application (Pollock & Cornford, 2004).
Knowledge transfer is another significant aspect in ERP system. The implementation
professionals and different employees implement the ERP knowledge and business operations
knowledge and these employees can communicate with each other to increase their efficiency
and boost knowledge transfer. Moreover, they are responsible to share knowledge with the end
users to share their knowledge regarding the ERP implementation process. The key users should
work as trainers, help-desk, advisors and educators.
Conclusion
Summing up the essay, it can be concluded that the ERP system are vital for the growth
and productivity of the organization. It is a software methodology which integrates the
communication and the operations of different departments so that higher efficiency and
productivity can be achieved. In the present times, ERP systems are vital for the growth and
progress of the organization. It streamlines the information obtained from different departments
of the organization. As a result, the information users can access and utilize all the information
from a single platform in a transparent manner. The overall aim of ERP system is that the
organization can access its productivity and efficiency with a single information system. There
are several benefits of ERP system for an organization. However, the successful implementation

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of the system is critical for the organization. The success of ERP system implementation is
dependent upon whether it is implemented within the initial budget and timeline and whether it is
capable to realize its initial objectives. In market, ERP system is available in both standardized
and customized forms. Most of the business organizations use standardized ERP system as they
have similar departments and functionality. Other than that, the system can also be customized
according to the requirements of the organization. In the present essay, two case studies of ERP
implementation in a University and in an Engineering organization have been taken. It is
depicted that the success of ERP implementation is dependent upon several factors. The role of
management and the information sharing is also critical in the success of the system
implementation.