Capital Flows To Developing Countries Long And Short-Term Determinants ERP (Enterprise Resource Planning)

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ERP (Enterprise Resource Planning)

The emergence of the Internet, evolving customer requirements, pressure to speed up business processes and the need to establish closer cooperative relationships with key suppliers and business partners are pushing organizations towards ERP solutions. So what is ERP?

Enterprise Resource Planning (ERP) is described as “an information system package that integrates information and information-based processes within and across functional areas in an organization” [1].

Traditional standalone applications were designed for specific customers, with limited functionality and isolated from other applications. On the contrary, ERP is a business tool that integrates all the applications needed by the organization as a whole and connects the organization with other companies in a networked form. It usually consists of several modules such as: financial module, distribution module or production module. Today, ERP has added new features such as supply chain management, product data management, e-commerce and warehouse management. Thus, ERP opens a window of opportunity for companies to compete globally, respond to competitive pressures, and increase revenue.

Features and basic operations of ERP:

ERP enables an integrated information system for the entire company, covering all functional areas such as production, sales and distribution, accounts payable, receivables, inventory, accounts, human resources, purchases, etc.

– ERP performs basic business activities and increases customer satisfaction.

– ERP facilitates the flow of information between different departments or divisions of an organization.

– ERP bridges the gap between business partners and enables continuous cooperation.

– ERP is a good solution for better project management.

– ERP is built as an open system architecture, which means that it enables the automatic deployment of the latest technologies, such as: electronic funds transfer (EFT), electronic data interchange (EDI), Internet, intranet, video conferencing, e-commerce, etc.

– ERP not only addresses the company’s current requirements, but also offers the possibility of continuous improvement and refinement of business processes.

– ERP provides business intelligence tools such as decision support systems (DSS), executive information system (EIS), reporting, data mining and early warning systems (robots) that enable people to make better decisions and thereby improve their business processes .

– ERP monitors a wide range of events in the organization and plans future activities based on these events.

Driving forces of ERP:

1. The need to increase the efficiency of the supply chain.

2. The need to increase customer access to products or services.

3. The need to reduce business costs.

4. The need for a faster and more flexible response to changing market conditions.

Global ERP implementation:

In the past, most international companies managed their systems on a regional basis, as there was no single solution that was globally acceptable.

In today’s dynamic business environment, there is a great need for organizations to become globally competitive. The key to success is customer satisfaction, by understanding customer needs and providing quality goods and services in the shortest possible time. To support a global view, many companies have implemented or are in the process of implementing enterprise resource planning (ERP) systems to improve the level of coordination between national entities of the same company and also with business partners. To achieve this level of coordination, it is important to have a global marketing strategy, common information infrastructure and business processes in place.

The analysis of past global ERP projects emphasizes the importance of harmonizing organizational structure with business processes and business strategy with IT strategy for competitiveness on the international market. ‘Threads’ is a good example of an international company that replaced its old system with ERP. The “threads” had a national organizational structure that operated from country to country.

In order to gain a global perspective, ‘Threads’ decided it was time for a change by transforming the company from a local to a global geographic perspective. Therefore, they turn Europe into a single market for their business operations and also ensure competitiveness by focusing on quality, price and customer service. The envisioned organizational structure and supporting global ERP are shown in [2].

Enabling Technologies: Traditional ERP systems required sophisticated and expensive information technology infrastructure such as mainframes. Nowadays, with the advancement of information technology and the reduction of computer costs, SMEs can consider ERP systems. In addition, the power of the three-tier client-server architecture and scalable relational database management have facilitated the deployment of ERP systems across multiple locations.

ERP implementation

Implementation of an ERP project is a process consisting of several phases. The following step-by-step approach will simplify the process and more likely produce a better result. The usual steps in ERP implementation are as follows:

o Project planning

o Business and operational analysis, including gap analysis

o Renovation of business processes

o Installation and configuration

o Project team training

o Business requirements mapping

o Module configuration

o System interfaces

o Data conversion

o Custom documentation

o End user training

o Acceptance testing

o Post-implementation/revision support

In short, ERP implementation can change the way an organization does business. It helps the company connect its resources, use and deploy them in the best possible way and control them in real time. For example, in the case of ‘Threads’, the transformation from a legacy system to an ERP system resulted in a reduction in data redundancy, a reduction in overhead costs, an increase in customer responsiveness and customer service levels throughout the company. This enabled the implementation of a common global ERP system throughout the European operation.

Critical factors for ERP success:

The successful implementation of an ERP project requires management to plan carefully and have all the necessary human and financial resources available. Below is a list of the top critical factors for ERP success:

1- Top management support:

Among the most important factors for the success of an ERP project is the commitment and support of top management. The role of top management includes developing an understanding of the capabilities and limitations of the proposed system, setting goals, and communicating the corporate IT strategy to all employees. [3].

2- Project management:

Another important factor for the success of ERP is the management of the project life cycle from the initial to the final phase. The Project Manager (PM) has sole responsibility and authority to plan and control the scope of the project to deliver deliverables within the given time frame and budget.

3- Choosing the right package:

Choosing the right package is an important managerial decision. Analysis and evaluation of the organization’s needs and processes help to choose the right choice that best suits the business environment. Careful selection of the right package results in minimal modification and successful implementation and use. On the other hand, choosing the wrong software can mean committing to an architecture and application that doesn’t fit the organization’s strategic goal or business process. [3].

4- Training and education of users:

Quality implementation can be derailed by poorly trained employees who do not know how to properly manage the ERP system. The transfer of knowledge to employees is undoubtedly more important than the quality of the system. Therefore, companies should use consultants to conduct training on how the system works and how they relate to the business process.

5- Renovation of business processes:

Renewal of business processes is a prerequisite for continuing the implementation of the ERP system. An in-depth study of BPR should be done before starting ERP. Business process reengineering uncovers the shortcomings of the existing system and attempts to increase productivity by restructuring and reorganizing human resources and departments and divisions in the organization.

6- Dedicated resources:

One of the main critical factors for ERP success is determining the human and financial resources needed to implement the system. This should be done early in the project. Failure to allocate the necessary resources often results in delayed deadlines and costs.

7- Competences of the project team:

Another key element of ERP success or failure is related to the knowledge, skills, abilities and experience of the project manager and team members. The project team must work in harmony to achieve one goal. Therefore, it is critical that team members have technical and business skills that complement their work.

8- Clear goals and objectives:

Setting clear goals and defining ERP project goals is the third most important success factor. The initial phase of any project should begin with the conceptualization of goals and possible ways to achieve those goals. It is important to set project goals before seeking top management support [3].

9- Permanent support of the seller:

Ongoing support from the manufacturer is an important factor in any software package. ERP systems require constant support from vendors to be updated with the latest modules and version. In addition, vendor support provides technical assistance and maintenance.

10- Interdepartmental communication:

Good communication is a key component for ERP success. Therefore, effective communication between team members and the rest of the organization is essential to keep everything running smoothly.

In conclusion, ERP implementation can become a complex and risky process if not managed properly. Organizations must identify critical issues that affect the implementation process. Such as: choosing the appropriate software package, ensuring the commitment and support of top management, cooperation with business partners, appropriate knowledge among team members, training and informing employees. All of these questions and more can reduce ERP project failure and increase ERP implementation success.

References:

[1] Kumar, K. and Van Hillegersberg, J. ERP Experience and Development, Communication of the ACM, (43:4), p. 23-26, 2000.

[2] Holland C. and Light B. (1999) Global Enterprise Resource Planning Implementation Retrieved 27 August 2005 from: http://csdl2.computer.org/comp/proceedings/hicss/1999/0001/07/00017016.PDF

[3] Somers TM and Nelson K. (2001), The Impact of Critical Success Factors across the Stages of Enterprise Resource Planning Implementations, presented at the 34th International Conference on Systems Sciences Hawaii 2001, Hawaii

[4] Holland CP and Light B. (1999), A Critical Success Factor Model for ERP Implementation, IEEE Software, May/June 1999, p. 30-36

[5] Hammer M. and Champy J. (1994) Reengineering the Corporation, New York, Harper Business.

[6] Kerchevak M. (2005) Five Steps to an ERP Solution, Retrieved 3 September 2005 from: http://archives.tcm.ie/businesspost/2005/06/05/story5254.asp

[7] Robinson S. (2004) A Developer’s Overview of ERP, Retrieved September 1, 2005, from: http://www.developer.com/design/article.php/3446551

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