Enterprise Resource Planning (ERP) - wseas.us

Recent Researches in Applied Economics

Enterprise Resource Planning (ERP) and Product selection in Small and Medium Enterprise (SME) organizations Shapoor Zarei Post-Doc in IT Management, Arab Invention and Innovation Academy Dubai, UAE [email protected] Nikos E.Mastorakis

WSEAS (Research and Development Department) http://www.worldses.org/research/index.html Agiou Ioannou Theologou 17-23 15773, Zografou, Athens, GREECE, [email protected]

Amin Daneshmand Malayeri World Wide Science Academy, Management Science Department, MBA College KL, Malaysia [email protected] Abstract: In this paper we explore aspects of project management and product specifications ERP selection process in small and medium versus large organizations. In today's business environment of competition between firms and the complexity of the network market is growing at a rapid pace. Therefore making efficient use of resources, integration of various departments in the planning and execution is becoming increasingly strategic. Therefore the ERP applications are implemented at an increasing rate in the different scale enterprises. Given the availability of technology and relatively inexpensive equipment, more and more small and medium businesses are using ERP applications. Many different ERP products are available. Thus, the design and implementation process of product selection in an optimal and efficient is essential. In this paper, we address this selection process as a project and identify key characteristics inherent in managing this project. We analyze the product selection process of ERP characteristics of companies and different scales to determine the differences and similarities in their ways of dealing with this problem of project management. Keywords: ERP, project management, product selection, size of company

I.

INTRODUCTION

efficient design of optimal performance of the ERP product selection process is a project management problem where a growing number of companies face every day. Competition in the business world today try to make more efficient use of resources, integrate services and supply chains and act in the most optimal and fastest way possible to maximize their profits. Consequently, more companies make more use of ERP in their organizations.

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Technology and relatively inexpensive equipment availability allows more and more small and medium sized companies to use these applications. Thus, a growing number of companies including small and medium-sized and larger plan to purchase ERP products. The first step and perhaps the most important step for a company to adopt an ERP application is to choose the product that will work. ERP product selection is a dynamic process that also affects the final stages rather than static optimization step. Viewing this

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process in terms of project management provides a great insight into understanding the important characteristics of this process and identifies the measures to be taken to achieve optimal results and efficient. We study the framework of project management ERP product selection process in this paper. We identify the important characteristics and traits. We then compare our results ahead of companies of different sizes and see if there are similarities and fundamental differences. II.

LITERATURE SURVEY

An ERP system can be defined as: "A management software system that allows autonomous organization automate and integrate the majority of its business processes, share data and common practices across the enterprise and produce and access to information in a real-time environment. The ultimate goal of an ERP system is that information must be entered once. "(Marnewick, C. and L. Labuschagne 2005). Therefore, an ERP system is more than a product or software. ERP systems link an organization's strategy, structure and business processes with the computer system (Gibson, N., Holland, CP and Light, B. 1999). ERP market and becomes a process essential to the strategic mission for organizations considering the adoption of an ERP application (X. Franch, Rev. JA). There are different approaches to the selection process of ERP products to solve the selection problem. ERP applications can be considered as COTS (Commercial of the shelf) packages. Research shows that there are methods widely used process for selecting COTS (Navarrete, F., Botella, F., Franch F., 2005). design methods can be increased with the agility to produce a new approach to the management of ERP projects. This agile approach requires analytical tools for making irrevocable decisions in the face of uncertainty in ERP (Alleman, GB 2002). SCARLET (Maiden, N., Kim, H., Ncube, circa 2002), OTSO (Kontio, J. 1996),) CARE (Chung, L. Cooper, K., Courtney, S. 2004, PECA (Dorda, C. Dean, C., Morris, E., Oberndorf, P. 2002), CRE (Alves, C. Castro, J. 2001), STACE (Kunda, D. 2003), Score (COTS Morris, A . 2000), SALT (Mr. Morisio, Reaman CB, VR Basili, AT Parra, SE Kraft, SE Condon. 2002) are some of the

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agile methods implemented widely for the determination of the selection process of commercial software and can also be implemented for ERP packages. PLA is another process of decision analysis that can be used to facilitate the evaluation of a suitable ERP system. It is an attribute of the multiassessment method which comprises three phases: decomposition, comparative judgments, and synthesis of priorities (Saaty, TL, Alexander JM, 1989). Requirements in the selection process are identified in the work of Bernroider & Koch (2000) taking into account four main dimensions inherent in the selection process: organization, decision making, psychosocial and information systems (Bernroider, E ., S Koch, 1999). The results of the study identify key dimensions of the specificity of small and medium enterprises. Despite the extensive literature survey, we have done, what are the findings on methods for selecting the system in the field of project management. A broader investigation related to the broad field of project management has enabled us to develop a framework for a systematic approach to the problem of selecting ERP products in which we could apply our methodology to obtain unique results. III. PART I CONCEPTUAL MODEL The selection process is a draft decision that time, people and resources of the money will be spent in a certain scale. Thus, it should be planned and managed effectively to achieve a positive result. The main drivers of the project must be identified early and they should be in line with the mission and strategy. The new system should be to contribute directly to business objectives. Ideally ERP product project selection team selection of different ministries should be trained. The department has no function and therefore does not need to be represented in the team. The team leader should also be one of the functional departments. The duration and budget of the selection process should be evaluated. The objectives and key drivers of the project must be clearly stated at the outset. This is particularly important for the revaluation project. Periodic reassessments should be done in both these objectives and potential problems since the success and not failure mutually dependent goals. It should

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be noted that the ERP product is an important investment for the company rather than a simple computer application to install. Consultants can be used during this process, but they must be used with caution because they have conflicting interests. the main function of adviser should be to provide specific knowledge and domain expertise rather than coordinate the decision process. Determine functional requirements and relating to these requirements is an important step in refining the software vendors to be studied in depth. Have a definition needs to hand will make life easier to evaluate different suppliers because it will form the basis of selection criteria. Different methodologies may be used to evaluate the packages. Some of these methods return cost analysis, testing in different scenarios and compatibility packages to the selection criteria. ERP vendors can also help in the selection process by providing a specific product details and product demonstrations. Site visits to companies using ERP applications of interest is another method that can provide valuable information. The total cost of ownership is also an important criterion. It covers not only the licensing costs, but all sorts of costs of adoption and long-term use of the ERP system such as training costs, maintenance costs or cost of adding an easier to use for the system. As a result of the above measures and assessments of a request for proposal will be given to several suppliers for a detailed cost plan to make the final decision. The decision may be taken by the management of the company, but keep in mind that the knowledge and experience of team leader is very precious. Stages of the selection process are identified above, but keep in mind that there are technical, cultural, political and psychological issues in this process. Company culture, politics and issues of power of different stakeholders are also very important to determine the outcome and success of the decision process in how they shape it. The most immediate steps to successful project management of the selection process can be considered the degree to stay in the field of projection time and within budget and flow of project operations in the enterprise. this is the right choice is made or not can be determined in the long term and is the result of the combination of management expertise and good project management.

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The completed questionnaire in the interviews was prepared following the framework described above. It outlines and describes the main stream of the path that must be followed to maximize the selection process of ERP product. The results presented in the questionnaires are discussed and evaluated in the next section. IV.

RESULTS AND CONCLUSIONS

In this section we present our conclusions based primarily on interviews and questionnaires. On the questionnaires, there are 47 issues from 7 different categories. 7 questions added to collect additional background information about the interviewee and his cabinet. These seven categories are: planning, goal setting, management, functional documentation, evaluation and subjective categories. subjective category is added to raise questions whose answers are linked and depend mainly on the characteristics of the company. The questions in these categories are examined in detail to identify differences or similarities depends on the size of companies. assessment category includes questions in which respondents evaluate the selection process. The other five categories are checked to see if there are real differences exist. Magnitude of Differentiations 16

16

16

50 documentation

functional

management

planning

Figure 1 The differences in the characteristics in terms of categories We found that the functional properties of the selection process vary depending on the size of the enterprise scale. As can be seen from the graph above, the total number of different responses in the functional category has the greatest number. We see that the functional direction of different scale enterprises are not alike. The reason for this difference is the level of activities. Activities that take place in the

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evaluation and implementation target groups are not represented on the chart above, because they

have similar results for the three companies.

Deviations of the Parameters

Percentage Deviation

120 100 Small to Medium

80

Medium Medium to Large

60 40 20 0 Duration (%)

Cost(%) Parameters

Figure 2 differences on measures of success even if the percentage deviation looks great, the The success of the project selection can be scale comes out to be much smaller. In addition, evaluated according to several criteria that for medium-sized enterprises across ERP product action. Deviation from the estimated duration and must perform all the proposed specifications and cost are two of these measures. The long-term budget must be kept relatively constant. Moreover, success is also important, but it has taken measures since workers employed in the selection process of wave can be estimated in the long term. Since we ERP work on other projects at the same time, the do not have access to these data we have specially project is open to the deviation. We have included chosen percentage difference in the cost and this company because this behavior is a duration of monitoring project performance. The prototypical example of small sized enterprises in deviations of the parameters of project success vary Turkey. according to the company level. The gap of the Now we will examine the characteristics of ERP project cost to small and medium enterprises is product selection under various categories in more very small, because they spend a limited budget for detail in a comparative perspective. The first this process. They can tolerate differences on both category is planning. This includes activities such the duration or scope of the project, but they as monitoring of projects, anticipate future impacts strictly observe the estimated project cost. This and the determination of the checklist change in behavior that increases the size of the requirement. On average across all businesses, we company. The deviations become more bearable have considered seem to meet the requirements of category. The second category is costs and differences in time become less this tolerable. The largest difference over time is documentation. It encompasses all activities related observed in stroke SONY; one medium to large to the appropriate documentation of the company linked to a multinational corporation process. Again, all three companies said they have headquartered abroad. The reason for this appears proper documentation for future reference. The to be the transfer of knowledge from abroad. This third category is the target value. For a project to kind of behavior is unique and common to be completed successfully, some objectives must companies that are linked to a global company be identified early and the process should be from a common ERP software is used around the assessed against these objectives at certain intervals world (IFS in the case of Sony). For these firms, to ensure success. The three companies have set the ERP product selection problem boils down to clear objectives and targets to achieve the ultimate the business of determining the associated modules goal of choosing the right product. The fourth and adapt these modules to the Turkish business category is management. Management should environment. The project duration for the selection explicitly support the project to ensure and adaptation of the module takes less time. So success. management has proposed to give

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promotions to reduce the project duration. In the first two cases, management has supported the project. The fifth category is functional. The functional category includes activities related to positions of individuals, methods and business roles and effects of all stakeholders in the selection process. The total cost of ownership has been studied by each company. In class we collected subjective issues that can have more than one "right" answer in context. We see that the technical and political issues are important. All companies have evaluated their projects and suggested effective ways to improve the process. They mainly emphasized the importance of pre-survey products. V.

products, a selection of the COTS package and a project with a much larger scale. Companies face similar challenges in managing the selection process of ERP product and have much to learn from experience and research in this area.

CONCLUSION

The ERP selection process directly affects organizational processes and the success / effectiveness of businesses. According to the Statistical Institute of Government in Turkey, there are 196,000 businesses in manufacturing, retail businesses and 617,000 wholesale and 14,252 enterprise storage and transportation enterprises 1,075,000. These areas cover much of the industry are potential users of ERP software. If the choices are successfully completed ERP, the GNP of Turkey will be reinforced naturally. We can conclude that Turkish companies do not follow a certain methodology for ERP selection process which has an informal structure. They consider the selection process as project. Documentation, planning and processes in all fields category seem to be fairly structured process. But the gaps on both time and budget seems to say the project's effectiveness can be improved for many. So even if the process seems to be structured must be managed more efficiently. Different scales for enterprises of different sectors, the differences inherent in their size and origin of the direct effects of their choices ERP products. Small businesses prefer solutions that are simpler and less expensive to develop a selection process that focuses on this aspect. Multinational companies which have their origin prefer to use the solutions adopted for the use of all enterprises in the sector and propose solutions for adaptation and integration. For larger companies of Turkish origin, the selection of ERP

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