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Challenges and Issues in ERP Implementation

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 Challenges and Issues in ERP Implementation

Kalaivani A/P S. Vadivalu

1 Faculty of Information Science and Technology,

Universiti Kebangsaan Malaysia, 43600 UKM, Bangi, Selangor, Malaysia

P112628@siswa.ukm.edu.my
 ABSTRACT

The objective of this case study is to explore the challenges that the industry is facing
in implementing a successful Enterprise Resource Planning (ERP). Challenges may vary
from one company to another but its somehow related and they each have a lesson learnt that
we can grab and improvise on in the next implementations.
In ERP, many entities are merged or rather integrated to give a seamless customer
experience. This report is based on literature analysis to give an overview of the areas that we
should be giving emphasis for a successful implementation. The challenges and critical issues
are discussed to highlight the significance and value. Ultimately, Critical Success Factors
(CSF) are recommended to demonstrate how they important and essential in the
implementation.
Keywords: [Enterprise Resources Planning (ERP), security, fraud detection,
upskilling/reskilling training, project management techniques & methods, knowledge
management]

1. INTRODUCTION

What is ERP?
Enterprise resource planning (ERP) is an integrated business management system
implemented to manage and monitor the ongoing project’s resources and status. It is a
general working platform for all departments of the enterprise provided in a computer
program with management functions of all departments, often run from a cloud server. With
the advances in information technology (IT), it was understood that utilizing this technology
will allow any industry to achieve the power of knowledge. (Gavali & Halder 2020)
Let’s see some of the benefits implementing ERP (Menon 2019).
1) Standardization of process
2) One Integrated System
3) Improved Key Performance Indicators (KPIs)
4) Access to comparable and visible data
5) Improved and Strong Process Improvement
Many companies now are embarking on the implementation of the Enterprise
Resource Planning (ERP) for faster solutions, monitoring and tracking. In terms of
operations, the advantages are we have quicker, accurate and reliable access to information. It
also speeds up the decision-making time as data is available at fingertips. Having a
centralized data system (DB) gives visibility to reports at any time without having to make a
manual request or approval. It is also proven to improve efficiency by reducing manual
operation.
Nevertheless, it also important to understand the setbacks and risks that this system
carries to validate if it is suitable for our business. Besides purchasing or upgrading to a
compatible hardware or software; cost and maintenance of the system can cause a bomb. The
customization of the Business Process takes a lot of time, expertise and money. If not planned
properly, the system may hit a bottle neck. Therefore, it is wise to choose the correct system
depending on the mode of the business.

2.0 LITERATURE REVIEW

Studies (Lin et al. 2003; Kronbichler et al. 2009; Mengistie et al. 2012) have documented
about the Critical Success Factors and challenges which are faced during implementation of
ERP. If these areas are given enough time and attention to understand, a greater success rate
can be achieved.
By diving into these factors, Lakade et al. (2013) describes about how in a Contruction
Company they solved the material management problem through implementation of ERP
which helped to predict and order the resources in advance, so that shortage will be avoided
and, in case of a breakdown of any equipment, till the maintenance of equipment, theyhave
sufcient inventory to carry the work without stoppage (Menon 2019)

2.1Challenges in Security:
One major concern in almost all ERP implementation is the security. Organizations who
are newbies to the cloud services, often feels insure because their data is being stored in an
“open area” now compared to the legacy data storage system when servers are in the
customers local physical location. Data such as financial data and customer details are often
the target to the spies out there.
Therefore, security and privacy policies must be implemented on various level to ensure
that there is a black and white document which states that the company will not compromise
any data leakage and strict action will be taken should there be any abnormal activity
detected. Some companies have their own legal team which makes the process easier as they
do the due diligence before getting into the contract. With this in place the cloud computing
company are tied to a stringent SLAs as long as the security is concerned. This should always
be a priority when signing the contract with the vendors. With this, all data that goes to and
fro should always be encrypted while transfer is happening. Vendors should also time to time
keep track on the latest technology and constantly upgrade/update their monitoring tool to
detect any abnormal activity and send an alert ASAP to the designated PIC so that the in
incident can be stopped and curbed immediately.
 Image 1: An example of SAP security monitoring tool using SIEM

2.2 Fraud Detection:

A fraud scenario can be defined as a set of user activities that indicates the possible
occurrence of fraud (Arthur et al. 2010). Organization these days gives priority to anything
and everything pertaining risk, fraud and security. This is because once their data is breached,
their organization will be under a great threats and risks on many levels. Since in ERP, many
modules and functions are integrated in a single system, it is important to identify any illegal
behaviour or activity before it affects the organization.
A very simple and common way this is done is by forging or duplicating an existing
employee’s signature or ID to login to the system to steal the desired data. Three very
common root cause of this are:
1) The hacker monitors and tracks the pattern of sign in or log in using a third-party
software or a certain algorithm and decrypts it to access the system.
2) Data leaked by own employee when he/she is blinded by a high ransom.
3) Credential sharing between the staffs. Although this is illegal, some staffs still do not
bother.
There are some alternative ways to prevent this:
1) Installing a monitoring tool i.e. “Falcon Eye” to track each and every activity done by
respective user.
2) Data Masking is a definite option in this era of time especially when an employee is
accessing the system remote thru VPN access.
Table 1. Summary of the 7 studies which have implemented a fraud detection system (Khan
et al. 2010)

2.3 User Training and Upskilling:

User Training and upskilling is important during pre and post implementation. ERP can
be quite challenging to learn and understand due to its basic nature – the complexity of the
build. Companies and organization should set aside a certain budget to provide a
comprehensive training program to the employees.
Some elderly employees may have been working in the orgazation for many years using
the old legacy process. It can be quite challenging for understand and pick up the speed of the
new system overnight.
User’s understanding on the system is crucial for their day to operations. Their acceptance
of the new system is essential for the success of the implantation. Their lack of skills in
operating the system end to end will lead them into manipulation certain functions. If this
continues to occur, there can be data discrepancy, data reduncay, and worst case system can
have error.
User perceptions and expectations of the system are sometimes unrealistic, and challenges
are related to supporting the users in adapting the new system and providing appropriate and
effective training approaches and exercises. In many cases, workarounds become an
unfortunate consequence of the abovementioned problems, and the global benefits of
the system were not realized. Trainings should ideally start at the very early stage of the
project and continue till post implementation. This is because users should have adequeat
knowledge on how to operate the system. And also along the way since there are possibility
to have some adhoc changes to the requirement, some functions may vary. Users must be
well equipped on what to do and what not to do when the system is up and ready to use.
User’s progress and skills should be monitored thru an appointed lead. A collaboration,
discussion and knowledge sharing should be held periodically to identify issues or
challenges.
 Nevertheless, organisation should not neglect their own in house SMEs and deplpoyment
team. They should engage in on job training while working side by side with vendors on how
to support and maintain the entire system post deployment. The Learning and Training or the
HR department should engage

2.4Importance of Project Management In ERP Implementations.

It is well known that application of the PM methods and techniques in an implementation
brings effectiveness and efficiency to the project that is being implemented. It also ensures
that the project is on track and no scope creep during the implementation. Through the
documentation of the PM processes, we have visibility of some of project’s crucial
information such as status of project, if we are on time or behind time, if we are under budget
or over budget and if deliverables are met. Through the integration of the project phases, we
can maximise user’s expectation and minimise disaster.
Project Scope Management: This is the first major point that every ERP project owner
should focus on. The goal and objectives are described here. This keeps the team focused on
the right task hence contributing to setting realistic budget and timeline.
Scope creep during ERP implementation causes financial issues to the organization.
Moreover, it delays performance of organizations and returns of ERP implementation. It also
increases the break-even time which needs to be crossed to gain benefits of the software
package. As per Panorama Consulting (2010) every 1 organization out of 3 exceeded time
and budget due to scope creep in ERP implementations.
Project Cost Management: ERP is a large system integration. By implementing the
budget and cost control in this areas, we can control and monitor cost incurred in every phase
by counter checking with the budgeted amount.
This parameter is very crucial as budget overrun causes potential risk to organisations that
go for ERP implementations. Therefore, it is the core aspect that needs to be considered as it
can cause pressure to the implementation team. According to the study made by Panorama
Consulting Group (2010) revealed that only 8.6 percent of ERP implementations in SMEs
could complete in given budget (Khan et al. 2010).
 Table 2: Successful ERP Implementations from The Project Management Perspective (Kiran &
Reddy 2019)

2.5Knowledge management:
In ERP, Knowledge Management (KM) is carefully managed through the ERP lifecycle
to maximise the benefits. The purpose of KM is to facilitate effective transfer of knowledge to
members who have a need for it in carrying out their responsibilities and tasks within the
organization. Other activities such as capturing, storing, and retrieving knowledge and its
meta-data are merely instrumental to the core objective of transferring knowledge to members
of the organization. Organizational knowledge is a concept with wide scope, involving both
people and context (Davenport & Prusak 1998). It also refers to organizational knowledge
attached to artefacts and technical processes (Guzman & Wilson 2005). Similarly, it is an
organizations capability, evolved through time and the experience of its members that is unique
to that collective (Tsoukas & Vladimirou 2001).
A very simple example is when a particular SME resigns. The particular SME may or
may not do a complete buddy/training session with his/her next kin. In order to avoid all the
unnecessary issues, a centralized KM will help the next kin to pull data from the storage
anytime for reference. This also help saves a lot of time and effort for both parties. Furthermore,
in this era of digitalization, KM is a much look forward tool for learning and sharing as
information is available anytime, anywhere to everyone.
In a study conducted by (Sedera et al. 2003) showed a strong positive association
between knowledge and the ERP system success. Therefore, we can conclude that In the
context of Enterprise Resource Planning systems, managing knowledge has been identified as
a critical success factor
 Figure 2: Knowledge management for ERP sucess model (Sedera et al. 2003)

RECOMMENDATION
The demand for ERP implementation is boosting like mushrooms after rain in this era of
digitalization. It not only improvises the current system in terms of speed, data management,
time and cost; it also increases productivity and revenue if implemented in a right organized
manner. To achieve a successful ERP implementation; there are many factors that contributes
to this:
1) Choosing the correct software:
Many software’s out there are putting up big banners to attract customers. But not all
software will suit your organization. There are steps that you can take to select the
best software for your organization:
i) Using an appropriate BPM tool to identify the processes and sub processes
hence moving on form there. Detailing out the processes gives the respective
team an idea of you are expecting.
ii) Choose a software that is already stable in the market and that has excellent
review.
iii) Selecting a vendor who extends support services post implementation.

2) Good communication, Good Leader

A good leader is a good communicator. He/she listens and understands the pain point
and is able to articulate it for problem solving during the ERP Implementations. This
skill is vital as will need to be able to discuss projects and assignments with your
teammates in a constructive manner to make sure the process is as smooth as possible.
With Good communication skill, comes a natural negotiator where knowledge sharing
can happen seamlessly so that the team can learn and grow as whole.

3) Management Plan
The needs should be analyzed based on the plan and vision of the organization before
taking the decision of ERP implementation. They must understand that this is a faily
large, complex and costly project. Therefore all areas of management should be
carefully studied. In addition, training should also be a prt of management plan.
Members who understand the system well can perform better hence will increase
productivity as well as the company’s value in the market. After successful
 implementation, enough testing of the system should be carried out to identify the
errors, if any, before using it. Troubleshooting/alterations should be made accordingly
to tackle the errors. Finally, the maintenance of the whole system should be looked
throughout the life cycle of the system.
(“The_importance_of_knowledge_management_for_ERP_sys_” n.d.)

CONCLUSION
ERP is a platform where many departments come as one virtually. Therefore, the
success of an ERP Project implementation is dependent on the entire team. It is very crucial
to have a strong bonding and a transparent communication amongst the team to address
issues, project phases, budgets, risks and other important criteria time to time which usually
arises on an ad hoc basis.
In this research we have analysed on the challenging and critical issues in managing
the project in the area of security, fraud detection, upskilling/reskilling training, project
management techniques and knowledge management. These are some of the key fields that
one should pay extra attention when comes to ERP Implementation. Thus, it is important to
understand and acknowledge the significance of these areas as they are basically the recipe
for a success or failure of the project implementation. Lastly we can conclude that ERP
implementation is proven profitable for the organization in long run if not also in the short
run in the market (Gavali & Halder 2020).

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