ERP Systems: Reasons for Adoption, Industry Use, SOX, and Case Studies

This report investigates the growing adoption of Enterprise Resource Planning (ERP) systems, particularly within small and medium-sized organizations. It identifies key drivers such as improved customer service, enhanced business performance, and overall growth. The report highlights the industries heavily reliant on ERP, including healthcare and manufacturing, and discusses the implications of the Sarbanes-Oxley (SOX) Act, explaining its origins in the Enron scandal and how MySAP ERP addresses its requirements. Furthermore, the report presents case studies of ERP implementation, examining the successes of Cadbury and the failures of Hershey Chocolate Company, providing valuable insights into the factors influencing the effective implementation of ERP systems.

Running head: ERP SYSTEM
ERP Systems
Name of the Student
Name of the University
Author’s note

1
ERP SYSTEM
Abstract
The main objective of this report is to identify the reasons behind the increasing use of ERP
software by small and medium sized organizations. This report states few factors like improved
customer service, business performance and growth of business that are responsible for the
adoption of ERP systems by several industries. It identifies certain industries like health and
manufacturing as the biggest users of ERP systems. This report shows how the Enron Scandal
led to the creation of SOX Act. It also discusses about the various sections of this Act. This
report points out how these implications are satisfied by MySAP ERP. The Cadbury and
Hershey’s ERP implementation case studies are discussed to point out the success and failure
factors of ERP systems.

2
ERP SYSTEM
Table of Contents
Introduction......................................................................................................................................3
Reasons for adopting ERP software................................................................................................4
Reasons...................................................................................................................................4
ERP software usage in Industries...........................................................................................7
Sarbanes-Oxley Act.........................................................................................................................8
Reason behind the Sarbanes-Oxley Act and Implications......................................................8
MySAP ERP.........................................................................................................................10
Success and Failure of ERP Implementation.................................................................................11
Success Story- ERP Implementation by Cadbury................................................................11
Failure Story- ERP Implementation by the Hershey Chocolate Company..........................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................15

3
ERP SYSTEM
Introduction
Enterprise resource planning or ERP software is considered to be business software that
is responsible for managing the various processes in the business (Chiu et al. 2014). It helps in
automating the functions of the back office and increases the operational efficiency of an
organization. ERP systems are gaining importance with time. These systems are becoming an
essential need of the small and medium sized organizations. ERP is an essential business
innovation. Implementation of ERP systems will benefit enterprises of various sizes. SaaS
model delivers a cost effective solution to the small as well as medium sized organizations. SaaS
ERP solutions provide an option to the SMEs so that they can counter their issues regarding
resource constraints as well as business complexities. ERP systems are being implemented in
every industry.
This report discusses about the reasons and benefits of adopting ERP software by the
small as well as medium sized organizations. It also points out the specific industries that can be
considered to be biggest users among of ERP software. It justifies the reason for adopting ERP
software by that specific industry. This report focuses on the reasons for Sarbanes-Oxley Act
along with its implications. It describes how MySAP ERP meets all the implications of the
Sarbanes-Oxley Act. This report identifies one company which has been successful in
implementing ERP software and also talks about its success story. This report also identifies one
such company which has failed in implementing ERP system and describes its success story.

4
ERP SYSTEM
Reasons for adopting ERP software
Reasons
Environmental or external factors play a significant role in adopting and implementing
ERP solutions. Few examples of external factors are legislative pressure, pressure from most of
the clients and relative advantage over competitors (Seethamraju 2015). Adopting SaaS ERP
solution for service delivery will help the SMEs to reduce resources and hardware for the
purpose of backups, system administration, database administration as well as management. It
will reduce the overall expense of the company.
Figure 1: Conceptual model of SaaS ERP adoption
(Source: Seethamraju 2015, p. 13)
There are several reasons why small and medium sized organizations prefer to
implement and adopt ERP software. Some of the reasons are as follows:

5
ERP SYSTEM
Improvement of business performance: SMEs want to replace their existing legacy
system with advanced ERP systems in order to enhance the productivity and efficiency of the
business (Leon 2014). ERP system is considered to be a business tool that can be used for the
purpose of conducting and executing business functions or processes. It also conducts and
executes business related transactions. There are no intrinsic or internal values present. The only
value that is created is by delivering advantages and benefits to several business organizations.
Figure 2: ERP System
(Source: Leon 2014, p. 10)
Employee jobs are made easier: ERP systems enable the SMEs to work in an easier and
efficient manner. It integrates information from various departments of the organization and
promotes effective decision making in the company (Sustainment 2014). Manual works of the
employees are reduced and replaced by automatic functioning of the ERP systems. Therefore,
the productivity of the employees increases. Real benefits can be obtained from the new system.
Regulatory compliance: ERP systems ensure proper reporting. It facilitates control over
the reporting processes and hence ensures compliance with the regulatory requirements. ERP

6
ERP SYSTEM
system helps the company to comply with the financial regulations and impact on the roles of the
employees.
Integration of systems: Different branches of a company and different departments deal
with separate information (Monk and Wagner 2012). These information need to be integrated for
the purpose of efficient operations in the company. ERP system improves the flow of
information in the organization.
Increased ROI: The existing legacy systems of the SMEs are replaced by new ERP
systems for the purpose of increasing the return on investment. Updated software will improve
the productivity of the company.
Company growth: Smaller organizations find it easier to implement ERP solutions
because it will be less complicated for them to carry out this process. ERP systems will simplify
the tasks of the organization and assists in correct decision making by integrating information
from various departments and branches (Monk and Wagner 2012). It will provide a centralize
database that will be accessible to the authorized internal staffs of the organization. ERP system
will help the SMEs to grow and develop.
Customer service: ERP systems will help the organization to understand customer needs
in an appropriate manner. This will help the SMEs to improve its customer service.
Standardize business operations: ERP systems are able to standardize the various
business operations in the organizations.

7
ERP SYSTEM
Stakeholder requirements: When a company is acquired or receives funding by another
organization then this company will need accounting tools like ERP system for purpose of
standardizing the method of reporting and improve transparency.
Working capital: If the ERP system is used in a proper manner then this will help to
reduce the working capital of the company.
ERP software usage in Industries
ERP systems are gaining importance in every industry. ERP is able to improve the
operational efficiency as well as improve the productivity of the companies present in various
industries.
Health industry: This industry is making extensive use of the ERP systems. ERP
software is playing a significant role in patient care, supplies control as well as the payroll
system of the industry (Poba-Nzaou et al. 2014). This industry has been able to improve the flow
of information among various departments as well as doctors. It helps in integrating real-time
information present in the clinical systems. Health industry is able to reduce its operational cost
and improve the process of decision making for taking proper care of the patients.
Hospitality industry: ERP systems are utilized by the hospitality industry for the purpose
of improving the level of customer service (Azevedo, Azevedo and Romao 2014). This industry
is able to automate the process of workflow resulting in less wastage of time and reduction of
stress (Azevedo, Romão and Rebelo 2012).
Construction industry: The main concerns of construction industries are cost control,
inventory and deadlines regarding any equipment rentals and specialty trades (Mexas, Quelhas
and Costa 2012). This industry is increasing its ERP use because it wants to manage the

8
ERP SYSTEM
inventory and control the cost in an effective manner where the operations will be streamlined
along with automated workflows. ERP systems will enable the supervisors to focus on their jobs
rather than getting involved in paper work.
Manufacturing industry: Global economy is constantly changing along with the needs of
the customers. ERP software allows manufacturers and distributors to keep the inventory, supply
chain and cost under control. This gives competitive advantage and increases the level of
customer satisfaction (Tao et al. 2017). Manufacturing industry is one of the leading users of
ERP systems because it helps to streamline the processes and improves the productivity. It also
prevents delays and disruptions leading to reduction of cost (Xu 2012). ERP software will be
able to adapt to all types of changing business environment. The manufacturers will be able to
gain competitive advantages over other manufacturers by adopting ERP systems.
Sarbanes-Oxley Act
Reason behind the Sarbanes-Oxley Act and Implications
The Sarbanes-Oxley Act was passed in the year 2002 by the U.S Congress for the
purpose of protecting the investors from any possible fraud accounting activities by the
corporations. This act had mentioned strict reforms for the purpose of improving the financial
disclosures from the organizations (Willits and Nicholls 2014). The reason behind the creation of
this SOX Act was the accounting malpractices that had occurred like the Enron Scandal that had
decreased the level of confidence of the investors. This scandal prompted the Congress that there
was an urgent need for a new standard of compliance for the purpose of public auditing and
accounting (The Balance 2017). Enron had taken huge advantage of the deregulation that took
place in the gas and oil industry for allowing more competition. This company had committed

9
ERP SYSTEM
several crimes and the shareholders had suffered huge losses. There were other activities like
corporate funds were embezzlement.
Figure 3: SOX Act
(Source: Willits and Nicholls 2014, p. 12)
The main aim of SOX Act was to improve the reliability and accuracy of corporate
disclosure by closing the loopholes present in the current accounting practices, increasing
disclosure requirements and accountability of corporations especially the public accountant of
the corporations and the corporate executives and strengthening the rules of corporate

10
ERP SYSTEM
governance. Its other objectives are strengthening compliance monitoring and whistle-blower
protections, increasing the requirements for the purpose of corporate transparency and increasing
the penalties for malfeasance. The section 802 of this Act has three rules which deal with
falsification and destruction of records, retention period for record storing and types of records
that required being stored. Some of the sections of this Act are as follows:
Section 302: This section deals with the corporate responsibility related to financial
reports. It mentions that the CFO and CEO are needed to review all the financial reports and are
responsible for the control of the internal accounting system.
Section 401: This section states that the financial statements must be presented in a
correct manner and must contain correct information.
Section 404: This section talks about the need for including Internal Control Report in all
financial reports that are generated annually.
Section 409: This section states that companies must disclose real-time information
regarding material changes, financial conditions as well as operations.
MySAP ERP
MySAP ERP is considered to be a leading ERP solution that suite, meet and support the
company requirements by automation of processes and improvement of productivity in an
effective manner (Chong 2013). This solution enables the companies for deploying internal
controls that are of industry standards. The SOX Act requires the companies to timely,
transparent, accurate and fast in their accounting practices and financial reporting. Organizations
are able to achieve automated tooling and industry standard process by adopting MySAP ERP
software. One sub module of MySAP ERP deals with the internal control management. It deals

11
ERP SYSTEM
with process modeling and documentation of the internal controls. It allows the C-level
executives to access management reports that can be used for the purpose of checking the
internal controls that are used and the accounting state (Mundy and Owen 2013). This complies
with the Section 404 and Section 302 of the SOX Act. MySAP is well known for providing
configurable accounting and financial modules (Willits and Nicholls 2014). It follows the
process of disclosure and transparency. This promotes periodic, accurate, transparent and timely
reporting. This complies with Section 401, Section 302 and Section 409 of the SOX Act. MySAP
helps in improving audit compliance. It prevents any misuse of information. This complies with
the Section 802 which deals with criminal penalties relate to altering of documents (Willits and
Nicholls 2014). MySAP ERP enables to build an audit information system that allows external
and internal firms that are independent to audit reviews in a structured manner. This system
consists of activities and reports that are preconfigured that guides the auditors to go through for
validating required compliance. It also helps to figure out the improvements and gaps. Therefore,
MySAP ERP meets the implications of the SOX Act.
Success and Failure of ERP Implementation
Success Story- ERP Implementation by Cadbury
Cadbury is a multinational confectionery based in United Kingdom. It is known to be the
second largest brand of confectionary. It was founded in the year 1824 by John Cadbury.
Cadbury had implemented and adopted SAP ERP 6.0 and it was considered to be the largest
ERP implementation (Poranki, Perwej and Akhtar 2015). Kraft had also added the master data
management solution provided by SAP. Initially after the installation of SAP ERP 6.0, there
were excess chocolate produced by the end of the year 2005.