awareness of applying lean principles in erp ...

Proceedings of the 13th International Conference on Manufacturing Research (ICMR2015)

AWARENESS OF APPLYING LEAN PRINCIPLES IN ERP IMPLEMENTATION Adnan Alturkistani School of Aerospace, Transport and Manufacturing Cranfield University Cranfield Bedford, MK43 0AL, UK [email protected]

Essam Shehab School of Aerospace, Transport and Manufacturing Cranfield University Cranfield Bedford, MK43 0AL, UK [email protected]

Ahmed Al-Ashaab School of Aerospace, Transport and Manufacturing Cranfield University Cranfield Bedford, MK43 0AL, UK [email protected] ABSTRACT The aim of this paper is to measure the awareness level of Lean principles and tools among personal involved in the implementation of Enterprise Resource Planning (ERP) systems. It also addresses the critical success factors (CSFs) for ERP implementation. A survey was distributed to the concerned parties in the ERP industry; Consultants, Vendors and End users. Survey results show that 87.9% of participants believe that there is a need to develop new ERP implementation methodology to address the current high failure rate in implementation projects. From the literature, a list of the most important CSFs has been identified and ranked. Results indicated a moderate awareness level of Lean principle and revealed the perception of the usability of Lean tools in ERP implementation process. This paper addresses an issue that has not been covered in prior research and will be used as a base for developing a Lean-based framework for ERP implementation. Keywords: ERP implementation, Lean, CSF, Framework. 1. INTRODUCTION In the early 60’s Material Requirements Planning (MRP) system was developed in the manufacturing industry to help mange when materials are required and their quantities, advancements in hardware and PC technology brought on significant growth for MRP, which brought it to the stages of MRP II and MRP III. Enterprise resource planning (ERP) evolved from MRP and it did stretch beyond the confines of what it could do for an individual manufacturing firm’s internal use, and began including customers and suppliers. ERP systems cover all functions such as materials and capacity planning, scheduling, shop floor control, finance, HR, customer satisfaction and suppliers relations - almost every aspect of business. ERP systems are complex and their implementation can be a challenging, time-consuming and expensive endeavor that places tremendous demands on corporate time and resources (Alturkistani et al. 2014). ERP implementations commonly experience delays on estimated schedule and overrun an initial budget (Ehie & Madsen 2005), according to (Muscatello & Parente, 2006) 50% of ERP implementations could be classified as failed projects. Continuous innovation in technology has led to numerous changes in the business sector. During the past few years, manufacturing practices have witnessed remarkable transformation as a result of technological changes which led to increases in productivity and efficiency, cloud computing, 3D printing and real-time collaboration are some examples of these innovations. This “technological

Alturkistani, Shehab and Al-Ashaab evolution” also brings added complexity; ERP software has never covered more functions and businesses processes than it does today Parthasarathy and Sharma, (2014). During the past decades, extensive research were conducted on ERP implementation studying and investigating the critical success factors (CSFs) of the implementations (Laghouag. 2012) (Shehab et al. 2004). All of the literature on ERP implementation process improvement addressed the issues from several aspects, but, there are no studies conducted on applying Lean principles to mange ERP implementation process. The high failure rates in ERP implementation and the increased complexity in ERP systems are firm drivers to look for new implementation process to increase the success rate. Toyota Production System (TPS) started in mid 1940s to help Toyota management in facing the challenges and competition of car industry at the time. The term “Lean Production” was first introduced by (Womack et al. 2008) in their book titled “The Machine that Changed the World”, where they built the Lean principles from TPS. Lean is a management system based on identifying value, eliminating waste and fulfilling customers needs. 2. LEAN IMPLEMENTATION IN INFORMATION TECHNOLOGY INDUSTRY Applying Lean principles in industries other than manufacturing still requires the use of the same set of Lean tools ; and Lean methods that are applied in manufacturing organizations throughout the world can be adapted to non-manufacturing environments. In an assembly line, it is easy to see how material and information flows, the steps for doing the operation, and how steps relate (Womack et al. 2008). All of these are physically tangible and visible which make them easier to track, measure and evaluate . However, in the office environment, the processes are invisible and it requires considerable effort to demonstrate that the business processes in the office are not very different from those in manufacturing. Thus, these processes can be studied, measured and improved. Using the Lean principle to improve processes in industries other than

manufacturing has proven to be successful, although it has not been without its challenges. During the last ten years, companies from different industries started the implementation of Lean; service, health care, education, construction, back office, sales, financial and IT organizations have all successfully used Lean methods to streamline their repetitive processes. The movement of Lean principles into non-manufacturing industries is growing and more businesses are implementing the principle in order to experience the benefits. In general, lean could be used in any process to turn the separately managed activities into an end-to-end value stream and to manage the process for continuous improvement. Lean IT has started during the last seven years, this will help the IT industry embrace a culture of continuous improvement, working towards high performance. Eliminating activities of low or no value to the business is one of the basic principles of Lean; such activities could be easily identified in any IT organization. Some examples for waste activities are: re-work and iterations due to unclear requirements, using wrong test data and data migration rollbacks due to unclear specifications. Lean works well within the IT industry, its five principle-model no doubt welcomed by clients and companies alike. Offering full transparency, work can be carried out swiftly, initiating the flow and in line with their customers ‘pull’ but stays within budget (Hurwitz & Demacopoulos, 2009) . The five principles of Lean can easily be translated and applied to software development; where manufacturing sees waste in inventory, software development sees waste in incomplete work. Overproduction in a manufacturing plant is the same as creating extra (unnecessary) features within a program, while task switching is comparable to the waste inherent in transportation (Poppendieck et al, 2003). Turner & Lane (2013) stated that Lean flow principles are highly effective in many instances of software development. The traditional practice in IT organisations is to act carefully and in a slow pace, this is to avoid business disruption. Lean principles support this traditional practice and enhance it by following the attitude of making small improvements in more frequent intervals. Lean principles represent essential core capabilities for all organisations that seek to find ways to remove time and cost from projects without compromising on quality. ERP project managers tend to come from technical backgrounds and are likely to perceive a project as an implementation not a process improvement project. Looking at the current project management

Alturkistani, Shehab and Al-Ashaab approaches used in ERP implementations, large percentage of the tasks can be eliminated using Lean principles, and this is because they add little or no value to the process. 3. RESEARCH METHODOLOGY It is important to evaluate all possible data collection methods and to choose those most appropriate to the research questions and objectives (Robson, 2002). For the purpose of this research, a survey was designed and distributed with its main objective to measure the awareness level of Lean principles and its tools within personal working in ERP implementation projects. The survey targeted ERP industry related experts in areas such as Consultants, ERP vendors and End users. A web based survey solution was used, and a link to the survey was distributed using email list, LinkedIn and Twitter, the survey solution has built in statistical analysis tools. In order to reach to the targeted audiences, a purposive sampling was applied, the reason is that the definition of the research is limited to experts / individuals who are involved in ERP implementation projects. Questionnaire link were sent to a defined list of emails and Tweeter accounts and also published in specialised LinkedIn groups. Following paragraphs illustrates the analysis and key finding of the survey. The sampling methodology used for this research is the Non-probability method, and because of the exploratory nature of the research, the Self-selection technique is the most appropriate technique. (Saunders et al. 2009). A total of 66 respondents participated in the survey and provided response, and the survey was conducted over a period of six weeks. The value of the survey could be considered high because the 66 participants are experts working in the ERP industry covering the different roles of users, providers and consultants. 4. SURVEY RESULTS The first part of the results reflects the demography of the surveyed audiences as shown in Table (1). The distribution of participants roles between ERP vendors (10.6%), Consultants (30.3%) and End users (51.5% ) reflect the normal real life distribution. The participants working experience is presented in Table (1), they ranges between the lest experienced (Less than 5 Year) with 26.8% and the most experienced (Over 15 Years) with 27.7%. Table (1) also indicate that 69.7% of participants have more than 5 years experience in ERP implementation projects with 27.3% have more than 15 years of experience. These results indicate that the surveyed audience have enough experience and their feedbacks should be of high value. The distribution of the number of years of experience is even and normal. Table 1: Demography of Participants Participants Role Consultant System / Solution provider End user Others Years of experience Less than 5 Year 6-10 Years 11-15 Years Over 15 Years Years involved with ERP Less than 5 Years 6 - 10 Years 11- 15 Years Over 15 Years

Response Percentage 30.3% 10.6% 51.5% 7.6% 26.8% 30.3% 15.2% 27.7% 30.3% 25.8% 16.6% 27.3%

Alturkistani, Shehab and Al-Ashaab

Through literature review, the most common critical success factors (CSF) for ERP implementation has been identified. The respondents were prompted to rank the nine CSFs on a scale from 1-5, with 5 being Very Important and 1 Not Important . All the nine factors scored a rating average above 3.6 which indicates that they are important to the respondents . The results indicated that the two most important factors to be; “Top management support” and “Understanding of business implications and requirements” which scored 4.64 and 4.59 respectively. These factors have been addressed successfully in Lean implementation initiatives in industries like manufacturing, healthcare and construction. Table (2) and Figure (1) show the results of this question.

Table 2: Ranking of Critical Success Factors

Factor 9 Factor 8 Factor 7 Factor 6 Factor 5 Factor 4 Factor 3 Factor 2 Factor 1

0.00

1.00

2.00

3.00

4.00

5.00

Figure 1: Importance of Critical Success Factors The following statement “There is a need to develop new methods and techniques for ERP implementation projects” was given to the participant and asked to provide their level of agreement with the statement. The result in Figure (2) indicates that 87.9% answered with “Agree” or “Strongly Agree” and only 4.5% think there is no need for new methods and disagreed with the statement. The rational behind the high percentage of the agreeing participants is the lack of effective methodologies that lead to successful ERP implementation. A list of lean tools were presented to participants and asked to indicate which ones they are aware of, and the results showed that Lean tools are not very popular amongst the audience. 48.5% of participants indicated that they know Value Stream Mapping (VSM), whereas “Obeya” is known by 13.6% only, other Lean tools scored between the maximum of VSM and the minimum of Obeya. The reason that some of the Lean tools are more popular than others is the use of these tools in manufacturing and non- manufacturing industries. These awareness levels are acceptable considering the fact that Lean thinking and practices are new to IT industry, and been introduced during the past seven years only. Figure (3) illustrate the results of this question.

Alturkistani, Shehab and Al-Ashaab

48.5% Strongly Agree

7.6% 4.5%

39.4% Agree 7.6% Neutral 39.4%

48.5%

4.5% Disagree

VSM

50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

Kaizen Kanban 5S A3 Gemba

0.0% Strongly Disagree

Figure 2: Need for Implementation methods

MUDA

Figure 3: Awareness of Lean tools

Figure (4) reflects the perception of ERP expertise on the possibility of using Lean principles in managing ERP implementations, 74.2% of participants answered with “Strongly Agree” and “Agree”, and only 3% disagreed. This high number of agreement reflects that are aware off Lean principles in general more than the specific Lean tools. The audience were requested to provide their perception on the list of Lean tools by indicating which of the tools the think are applicable on ERP implementation process, the answers are reflected on a scale of three; Not Applicable, Maybe Applicable and Applicable. The results in Figure (5) revealed the average rating for all tools between 2 and 2.25, this indicates that the most of the audience are not sure but they think the use of these Lean tools in ERP implementation might be applicable. The answers of this question matches with level of awareness with the tools. 3.0% 22.7%

22.7%

22.7% Strongly agree 51.5% Agree

5S MUDA

VSM Kanban

Gemba

Kaizen

22.7% Neutral

51.5%

A3

Obeya

3% Disagree

Gemba

0.0% Strongly Disagree

5S

Figure 4: Lean principles in ERP implementation

Obeya

A3

Kaizen

MUDA

1.80

Kanban 1.90

2.00

2.10

2.20

2.30

VSM

Figure 5: Lean tools applicability

5. CONCLUSIONS ERP systems are getting more advanced and complex which is adding more challenges to organisations in their implementation processes Hald, and Mouritsen, (2013). It is becoming essential to develop new methods, technics or frameworks that are practical and will lead to higher success rates in ERP implementation. The extensive research on implementation’s critical success factors are valuable assets that could be used to build on new implementation methods (Lau. 2003). The management of IT projects is faced with the need for increased efficiencies, with results expected more quickly, at lower cost, and with higher quality (Momoh et al. 2010). Lean principle has succeeded in the manufacturing industry for decades and now it is proofing success in many other industries including IT industry. Experts involved in ERP implementation are in quest for new technics that help the mange these projects successfully, three quarters of surveyed audience think that lean principles could be used to improve implementation processes. These results will be used to develop a Lean based framework that contains Lean assessment tool, and to encourage exploration of more appropriate implementation strategies. The intended framework could be the base for a standard ERP implementation methodology that is used in successfully managing ERP (and other IT systems) projects with no delays and within planed budget.

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