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Monday, December 13th, 2010
Critical Success Factors Of Erp Implementation For Small And Medium-Size Companies
Critical Success Factors of ERP Implementation for Small and Medium-Size Companies
Rana Basu, Ritanjana Adhikary
Departmant of Industrial Engineering & Management,Utech,India
Abstract
To improve productivity, quality and overall satisfaction among employee conceptual Enterprise Resource Planning (ERP) is one of the solutions for the small and Medium Enterprises. Small and Medium-size companies are enabling to decide upon proper implementation of commercial ERP systems. Numerous companies have tried to adopt a commercial ERP package in the world-wide. However, most of commercial ERP packages are designed for a large-scaled company so that it is difficult to adopt a commercial ERP package in terms of small and medium-size companies. By using the Unified Modeling Language (UML) small and medium-size companies, especially manufacturing companies, can afford to achieve global business process and to acquire ERP system efficiently.
Keywords: Conceptual ERP, UML, OOT Model, Small and Medium-size Companies
1. Introduction
Recently most companies use ERP system for improving core competency. American Production & Inventory Control Society defines ERP as “an accounting – oriented information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer order”. Gartner Group describes ERP as “a set of application designed to bring business function into balance and represents the next generation of business system”. On the other hand, ERP is a comprehensive packaged software solution that aims for total integration of all business functional areas.The functional scope of ERP systems has further expanded to include various functions such as Electronics Commerce, Supply Chain Management, and Customer Relation Management Therefore, ERP cover all business functional areas has became a core business system in the global companies.
Companies of all size and industries have tried to adopt ERP system in order to improve business processes. But, not all companies achieve their goals by implementing ERP systems, it’s because commercial ERP packages are very large and complicate. The implementation of an ERP system is difficult and not simple activities. It involves a complex set of tasks. For example, nearly half of the large-size companies which adopted ERP system over the past five years have experienced significant time delays and budget overruns. The ERP system is complex system. For small and medium-size companies adopting ERP system are very risky, because there is a lack of resource, including skilled human resource, budget, and time to devote to implementing ERP system.
2. Literature Review
2.1 Object-Oriented Technology (OOT)
Object-Oriented Technology has been gained attention to overcome software crisis. Object-Oriented Technology can be used to develop business information systems. Object-Oriented modeling has proven to be an excellent technique for modeling business process in a company. Object-Oriented modeling is a new area for modeling and has generated a lot of interests among the small and Medium-size Companies.
Modeling a complex system is an extensive and complicate task. Only a single diagram cannot capture all information needed to describe an entire system. For modeling a system, the system can be described with a number of different aspects like: functional, nonfunctional and organizational. Therefore, ERP system may be described in several views, in which each view represents a particular aspect of the system. In UML each view is described in a number of diagrams that emphasize a particular aspect of the system.
UML is an industry standard modeling language adopted by Object Management Group in 1977. UML is a modeling language intended to describe models of systems-real world and software- based on object concept. UML consists of two tools: a notation and a meta-model. The notation is a set of diagramming syntax, which lets you think about and convey your analysis and design. The meta-model is the definition of the notation. UML is rich and complicated notation for describing software system. Perspectives are view of looking at systems and describe different aspects of user’s requirements.
2.2 Factors affecting ERP system adoption
Companies of any size show a critical need for coordination and control of business activities which, in turn, is related to the complexity of the information system. ERP system is considered as the answer to manage the complexity of information flows more effectively.
The Companies whether it’s a small, medium, or large size is one of the issues increasing the need for co-ordination and control of organizational activities.
The market area (local, regional, national) working on wider market area requires the management of more differentiated legal and cultural issues. the membership an industrial group either as the holding or as a controlled firm these variable seems to be strongly related to the co-ordination of dispersed business units, in terms of alignment of processes and procedures both between the holding and the controlled companies and among controlled companies themselves.
The level of diversification in terms of products, markets, technologies operating in different product-market combinations introduces another level of complexity. An increase in the number of business adds information-processing demands by increasing business-unit interdependencies. Because of the greater need for co-ordination and control of activities, complex organizations will tend to have specialized planning departments, employ a large number of planners and consequently devote a substantially large amount of financial resources to strategic planning.
The degree of functional extension means number of activities carried out internally. Many companies prefer to outsource those activities that are not directly related to the business strategies. The degree of function extension refers to the number of strategic functions directly managed within the company, which should be the amount of information to be managed.
2.3 Implementation Strategies
There are two distinctive ways of implementing an ERP found in the literature. These phases are termed as Phased Implementation and Big Bang approach. Depending on the organizational structure, the complexity of the organization, economical issues, strategic partners, time constraints and geographical location the appropriate implementation of should be selected. The big bang approach required simultaneous implementation of multiple modules of an ERP package, while a passed implementation consists of designing, developing, testing and installing different modules of the ERP package.
2.4 Information System
An information system can be defined as a collection of subsystems defined by functional or organizational boundaries that supports decision-making and control in an organisation by utilizing information technology to capture, transmit, store, retrieve, manipulate, or display information used in one or more business process. An ERP system can be seen as a system that integrates all information that runs through an organisation and can be categorized as a large information system.
2.5 ERP System
ERP System can be defined as comprehensive, packaged software solution that seeks to integrate the complete range of a business process and function in order to present a holistic view of the business from a single information and IT architecture. By integrating the business process across the organization and the central database, ERP differ from earlier information systems in its capacity to disseminate information in real-time and increase organizational flexibility. ERP provide the organization windows of opportunity for strategic change. However, due to the integration of large scale, ERP implementation is a complex and highly inter-dependent task.
2.6 Organizational Culture
It can be defined in terms of the way people think, which has a direct influence on the ways in which they behave. Theoretically it can be said that it is a complex system of norms and values that is shaped over time. It is generally understood as the social glue that holds organizational member together and expresses the values and operating beliefs that members share. A firm’s culture therefore, through its values and operating beliefs, exerts commanding influences on how its employees perceive events and how they behave.
2.7 Leadership
Leadership is defined as the use of non-coercive influences to direct and coordinate the activities of group members toward goal attainment. Bases on how leaders motivate followers, we can classify leadership into two categories transformational leadership and transactional leadership. Transactional leadership is based on the motion that the relation ship between leaders and followers is a form of transaction, with the assumption that people are basically instrumental and calculative. Transactional leader are individuals being sensitive to the needs of others, who follow them in return for the satisfaction of these needs. Thus transactional leadership is based on linking efforts to rewards in follower’s mind, setting patterns of desired behavior and keeping the followers on task throughout the process.
SUMMARY
Small and medium-size companies do not have the same organizational structure, capital, and human resource which large-size companies can effort. Commercial ERP systems like Oracle, SAP have numerous modules geared to the needs of large-size companies. There is high risk to apply a commercial ERP package to small and medium-size companies. Therefore, small and medium-size companies need a different approach to ERP systems from large-size companies. Instead of commercial ERP package small and medium-size Company can adopt Unified Modeling Language (UML). The conceptual ERP is an architectural approach to enterprise system. By using the model small and medium-size company can afford to achieve global business process and to acquire ERP system efficiently. When the features of the software application do not correctly fit the business requirement, Then Change the business processes to fit the software with minimal customization and modify the software to fit the processes.
References
1. A conceptual model of ERP for Small and Medium-Size Companies Based on UML
By jae-won Park and Nam-Yong Lee
2. Critical Success Factors for Implementing An ERP System In A University Environment:
A Case Study from the Australian HES.
By Jen Laurits Nilsen BlnfTech
3. Enterprise Resource Planning Implementation in Indian SMEs: Issues and Challenges
By P.T Kale, S. S. Banwait and S. C. Laroiya
4. Factor’s effecting ERP system Adoption – A comparative analysis between SMEs and large
companies.
By G. Buonanno, P.Faverio, F. Pigni, A. Ravarini, D. Sciuto and M. Tagliavini
5. Organizational culture and Leadership in ERP Implementation
By weiling Ke School of Business Clarkson University
Kwok Kee Wei Depatement of Information System City University of Hong kong
About the Author
B.Tech in Computer Sci & Engg
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