Professional Documents
Culture Documents
Iris Junglas
October 22, 2003
Table of Contents
Introduction3 Section 1:
Company Overview.............................................................................................................4 Enterprise Resource Planning Definition & Evolution....5 Positive Aspects ..6 Implementation & Challenges.7 Role of Consultants..8
Section 2:
Enterprise Resource Planning at Vandelay Industries.........................................................9 Causes to the Decision..9 Possible Challenges that would be met.10-11
Section 3:
Literature Review.. ERP& Change Management.13 ERP& Knowledge Management...14
Section 4:
Integration with other cases15 Summary & Recommendations16-17 Key Take-Aways18 References..........................................................................................................................19
Introduction
The case study, Vandelay Industries, Inc explores the issues considered by an ICS consultant at the start of a full-scale implementation of SAP software by Vandelay Industries Inc, a major producer of industrial process equipment. The focus of the case is Enterprise Resource Planning (ERP) and the possible challenges that would be faced during the implementation phase, in terms of fundamental associated concepts such as Process Reengineering, Standardization and Change Management. Section 1 provides an overview of Vandelay Industries, Inc, introduces the concept of Enterprise Resource Planning with discussing the causes and challenges of ERP. Section 1 concludes with the role of consultants during the implementation of ERP. Section 2 describes the reasons why Vandelay Industries chose to implement ERP systems and raises possible challenges that would be faced. Section 3 provides literature review in terms of the relationship of ERP with Change and Knowledge Management. Section 4 provides integration with other cases, give recommendations and list the key take-aways.
In this definition the key underlying idea of ERP goes beyond physical computer integration and system. As a salient feature of enterprise integration is business integration. Both computer integration and systems integration are important means of achieving enterprise integration but other coordinating and integrating mechanisms such as standardization of work processes, norms, skills and output, and supervision structure are equally important for realizing the potential benefits of integration. (Kumar V., Maheshwari B. and Kumar U., 2001)An innovation of critical management issues in ERP implementation: empirical evidence from Canadian organizations, Technovation, 2001).
7. Indeed, the main benefits resulting from an ERP installation may actually come from changes in the business processes, organizational structure, the roles and skills of organizational members, and knowledge management activities (Davenport, 1998)
6. The Total Cost of Ownership (TCO) of ERP, as identified by the Meta Group, includes hardware, software, professional services and internal staff costs. TCO is averaged at $15 million per system.
Role of Consultants
ERP combines business processes & IT into one integrated software and provides business development, therefore implementation is not just installing the software. Consultants, either from the ERP vendor itself or from a third party firm with expertise in the selected package, may be hired to assist with the implementation. Consultants can play a key role in transferring external knowledge expertise gained through formal training and prior experience, however the role of the consultants must carefully managed by the management. The more successful companies consistently reported an effectively managed relationship with their consultants by ensuring knowledge transfer and avoiding over dependence. According to Davenport a company has to make sure that the necessary knowledge about the system remains in the company after the consultants leave (Davenport 1998b). Due to time and cost constraints, consultants may not train and educate employees sufficiently during implementation; hence companies might have to invest highly in after-implementation support (Wheatley 2000). In the less successful cases, companies either depended too little on consulting advice or became over dependent.
SECTION 2
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Several business practices across the organization: For the past few decades company has expanded across product lines and global borders, manufacturing on four continents with 30,000 employees. Managing the company had become a greater challenge as having an enterprise wide view of company become extremely difficult. During this expansion, typical Vandelay plants were allowed a high degree of independence as long as they achieved an acceptable profit. Due to these facts, every plant created its own way of business practices which would prevent to have the opportunity to see the whole company as one unit. To manage these problems with the system and business practices, the company decided to implement a single Enterprise Resource planning system throughout the enterprise.
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2. Change Management: A review of the past ten years in IS research highlighted the fact that human factors are at least as important as technological factors . According to Meyerson and Martin organisational cultures are resistant to change (Meyerson and Martin 1987). Leading ERP implementations before and being aware of challenges involved, Kramer place the following issues as challenges at Vandelay Industries for change management: 1. Team Selection: Vandelay and ICS had decided to deploy two teams composed of a joint of client members and consultants as the project requires a variety of skills. However Kramer has not decided how to select participants from Vandelay. She could either ask senior management to choose people who would best suit for the job or mandate to contain one representative from each plant. 2. Centralization vs. Autonomy: There is no way to involve all users in the decisions for implementation. However what should be the degree of centralization versus autonomy? This decision is very challenging especially in an organization like Vandelay Industries, which has promoted innovation and autonomy among its employees. Kramer had a strong belief in input by many, design by few however how she will manage the culture and resistance that would arise during the implementation. How will it affect the enthusiasm towards change if people were not allowed to experiment with system as much as they wanted 3. Standardization and Capability of SAP: Although the R/3 system provided by SAP is considered to be more functional when compared to other competing ERP softwares, it could satisfy the specific business requirements of a companys only up to the 80-95%. The remaining functionality needed by the corporations are obtained in the ways of interfacing R/3 to existing legacy systems, other software packages or developing custom software that extend R/3. Given these options Kramer considers which one to deploy when the functionality of the R/3 does not fit with the desired Vandelay process design. 3. Timeline and the Budget for the Project: ERP is recognized as one of the largest, fastest growing and most influential computer applications. Nonetheless, it bears some problems as reports about cost overruns and lengthy delays in the press have shown. According a research of the PA Consulting Group, 92 percent of companies were disappointed with their ERP-systems in July 2000. The Conference Board survey result shows that when the benefits were achieved, it took about six moths longer than expected. This lag was often due to the pressure to go live. It resulted in substantial post implementation efforts to detect and assess shortcomings and deficiencies (The Conference Board 2001).
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Vandelay has projected the implementation to take 18 months and reserved a total balance of $ 20 million. However based on the scope of the implementation the timeline and budget were very aggressive and will possibly raise a challenge during the implementation. These challenges that are considered by the ICS consultant leader at the start of the implementation, will further be discussed in section 3 by exploring the relevant literature. Recommendations related with these challenges will be provided in section 4.
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Eastman Kodak:
Like Vandelay Industries, during the 1990s, Kodak was facing significant cost pressures from competitors. Company had eliminated more than 4,500 additional jobs, to cut cost but it was still behind its competitors. To manage with the pressures from competitors, Kodak, like Vandelay, has overhauled its existing IT systems. Katherine Hudson, the first head of IT at Kodak believed that Kodak should stick with its core business practices and that they should outsource the non-core IT services. Contracts were signed with vendors; IBM, Business Land, and DEC. consulting firm to assist in the project. Recognizing that defining and managing the outsourcing partnerships was primarily a relationship process, like Vandelay, it had signed a contract with a
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Providian Trust:
Providian Trust, like Vandelay Industries, chose IT to transform its business by reengineering its work processes. However implementation of Providian Trust has not paid off as expected, since Providian Trust has faced some difficulties during the implementation resulting from the resistance to change and leadership issues. Results of the ERP implementation of Vandelay Industries has not been discussed in the case, however due to the large scope of the project, Vandelay would possibly face some challenges. These challenges would more likely arise in the time budget constraints and capability of the software to align with the business processes. Due to the enthusiasm towards to the project, company would probably not face resistance to change.
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infrastructure. Indeed, the implementation of an ERP changes the way organizations do business and how people carry out their work. Entailing business process reengineering, change management and knowledge management, the implementation of ERP would have great impact on Vandelays organization and culture which should be considered before the implementation. Based on the case information and related literature review we provide the following recommendations: Time & Budget Recommendation: Most of the time schedules and budget forecasts cannot be maintained throughout the project. Management should be prepared for an escalation of project cost by putting enough money aside before the project starts. Once the project has begun, it is difficult and expensive to withdraw from it. Change Management Recommendation: Success is dependent on users acceptance. Prior to the implementation phase company must identify necessary training and education to employees, and provide it before and during the implementation phase. Prior training may help resistance to change and increase acceptance. Knowledge Management & Consultants Recommendation: Company has to make sure that the necessary knowledge about the system remains in the company after the consultants leave (Davenport 1998b). Due to time and cost constraints, consultants may not train and educate employees sufficiently during implementation; hence companies might have to invest highly in after-implementation support (Wheatley 2000).
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Key Take-Aways
Enterprise Resource Planning system is an integrated set of software modules, all linked to a common database, handling a host of corporate functions such as finance, human resources, materials management, sales and distribution
ERP system represents more than a change in technical infrastructure. Indeed, the implementation of an ERP changes the way organizations do business and how people carry out their work
Change management refers to the effort it takes to manage people through the emotional ups and downs that inevitably occur when an organization is undergoing massive change
Knowledge Management is concerned with the generation, representation, storage, transfer, transformation, application, embedding and protecting of organizational knowledge and establishing an environment and culture whereby knowledge can evolve.
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References
Davenport, T.H 1998. Putting the Enterprise into the Enterprise System, Harvard Business Review, July-Aug http://www.egecom.net/eng/products.php?software=true Slater, D The Hidden Costs of Enterprise Software CIO Magazine, January 15,1998 Pawlowski, S.D., Robey, D. and Raven, A. 2000. Supporting Shared Information Systems: Boundary Objects, Communities and Brokering Kumar V., Maheshwari B. and Kumar U. An innovation of critical management issues in ERP implementation: emprical evidence from Canadian organizations, Technovation, 2001 Ross, J. 1999b. "Dow Corning Corporation: Business Processes and Information Technology," Journal of Information Technology Holland, C. and Light, B. 1999. A Critical Success Factors Model for ERP Implementation IEEE Software, May/June Davenport, T.H. 1998 Living with ERP, CIO Magazine
Markus, M. L. and C. Tanis (2000). The enterprise system experience From adoption to success.
Martin, M.H. "An Electronics Firm Will Save Big Money by Replacing Six People With One and Lose All this Paperwork, Using Enterprise Resource Planning Software. But Not Every Company Has Been So Lucky," Fortune, 137, 2, February 2, 1998,
Wheatley, M. 2000. ERP Training Stinks, CIO Magazine. Brown, S The Art of Continuous Change, Administrative Science Quarterly Meyerson, D. and Martin, J. 1987 Cultural Change: An Integration of Three Different Views, Journal of Management Studies The Conference Board 2001. ERP Trends. Schultze, U. 1998 Investigating the Contradictions in Knowledge Management International Foundation of Information Processing Disterer, G. 2001 Individual and Social Barriers in Knowledge Transfer
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