ERP's scope usually implies significant changes to staff work processes and practices. Generally, three types of services are available to help implement such changes: consulting, customization, and support. Small projects can require months; multinational and other large implementations can take years.
Customization can substantially increase implementation times.
Process preparation Implementing ERP typically requires changes in existing business processes. Poor understanding of needed process changes prior to starting implementation is a main reason for project failure. The difficulties could be related to the system, business process, infrastructure, training, or lack of motivation. It is therefore crucial that organizations thoroughly analyze processes before they deploy an ERP software. Analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of current processes with those provided by the ERP system. Research indicates that risk of business process mismatch is decreased by: • Linking current processes to the organization's strategy • Analyzing the effectiveness of each process • Understanding existing automated solutions ERP implementation is considerably more difficult (and politically charged) in decentralized organizations, because they often have different processes, business rules, data semantics, authorization hierarchies, and decision centers. This may require migrating some business units before others, delaying implementation to work through the necessary changes for each unit, possibly reducing integration (e.g., linking via
master data management) or customizing the system to meet specific needs. A potential disadvantage is that adopting "standard" processes can lead to a loss of
competitive advantage. While this has happened, losses in one area are often offset by gains in other areas, increasing overall competitive advantage.
Configuration Configuring an ERP system is largely a matter of balancing the way the organization wants the system to work, and the way the system is designed to work out of the box. ERP systems typically include many configurable settings that in effect modify system operations. For example, in the
ServiceNow platform, business rules can be written requiring the signature of a business owner within 2 weeks of a newly completed risk assessment. The tool can be configured to automatically email notifications to the business owner, and transition the risk assessment to various stages in the process depending on the owner's responses or lack thereof.
Two-tier enterprise resource planning Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems at once: one at the corporate level and one at the division or subsidiary level. For example, a manufacturing company could use an ERP system to manage across the organization using independent global or regional distribution, production or sales centers, and service providers to support the main company's customers. Each independent center (or) subsidiary may have its own business operations cycles,
workflows, and
business processes. Given the realities of globalization, enterprises continuously evaluate how to optimize their regional, divisional, and product or manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability and delivering value. With two-tier ERP, the regional distribution, production, or sales centers and service providers continue operating under their own business model—separate from the main company, using their own ERP systems. Since these smaller companies' processes and workflows are not tied to main company's processes and workflows, they can respond to local business requirements in multiple locations. Factors that affect enterprises' adoption of two-tier ERP systems include: • Manufacturing globalization, the economics of sourcing in emerging economies • Potential for quicker, less costly ERP implementations at subsidiaries, based on selecting software more suited to smaller companies • Extra effort, (often involving the use of
enterprise application integration) is required where data must pass between two ERP systems Two-tier ERP strategies give enterprises agility in responding to market demands and in aligning IT systems at a corporate level while inevitably resulting in more systems as compared to one ERP system used throughout the organization. An alternative to a two-tier approach is to use as an ERP system which allows for multiple workflows to be configured for the same function. This allows each operation or division to have its own workflow, say for order entry. This avoids the need to integrate two ERP systems as all divisions and operations are running within the same ERP system.
Customization ERP systems are theoretically based on industry best practices, and their makers intend that organizations deploy them "as is". ERP vendors do offer customers configuration options that let organizations incorporate their own business rules, but gaps in features often remain even after configuration is complete. ERP customers have several options to reconcile feature gaps, each with their own pros/cons. Technical solutions include rewriting part of the delivered software, writing a homegrown module to work within the ERP system, or interfacing to an external system. These three options constitute varying degrees of system customization—with the first being the most invasive and costly to maintain. Alternatively, there are non-technical options such as changing business practices or organizational policies to better match the delivered ERP feature set. Key differences between customization and configuration include: • Customization is always optional, whereas the software must always be configured before use (e.g., setting up cost/profit center structures, organizational trees, purchase approval rules, etc.). • The software is designed to handle various configurations and behaves predictably in any allowed configuration. • The effect of configuration changes on system behavior and performance is predictable and is the responsibility of the ERP vendor. The effect of customization is less predictable. It is the customer's responsibility, and increases testing requirements. • Configuration changes survive upgrades to new software versions. Some customizations (e.g., code that uses pre–defined "hooks" that are called before/after displaying data screens) survive upgrades, though they require retesting. Other customizations (e.g., those involving changes to fundamental data structures) are overwritten during upgrades and must be re-implemented. Advantages of customization include: • Improving user acceptance • Potential to obtain competitive advantage vis-à-vis companies using only standard features. Customization's disadvantages include that it may: • Increase time and resources required to implement and maintain • Hinder seamless interfacing/integration between suppliers and customers due to the differences between systems Extensions offer features such as: • Identify the data to be migrated. • Determine the migration timing. • Generate data migration templates for key data components • Freeze the toolset. • Decide on the migration-related setup of key business accounts. • Define
data archiving policies and procedures. Often, data migration is incomplete because some of the data in the existing system is either incompatible or not needed in the new system. As such, the existing system may need to be kept as an archived database to refer back to once the new ERP system is in place. • Sales forecasting, which allows
inventory optimization. • Chronological history of every transaction through relevant data compilation in every area of operation. •
Order tracking, from acceptance through fulfillment • Revenue tracking, from
invoice through cash receipt • Matching
purchase orders (what was ordered), inventory receipts (what arrived), and
costing (what the vendor invoiced) ERP systems centralize business data, which: • Eliminates the need to
synchronize changes between multiple systems—consolidation of finance, marketing, sales, human resource, and
manufacturing applications • Brings legitimacy and transparency to each bit of statistical data • Facilitates standard
product naming/coding • Provides a comprehensive enterprise view (no "islands of information"), making real–time information available to management anywhere, anytime to make proper decisions • Protects sensitive data by consolidating multiple security systems into a single structure
Benefits • ERP creates a more agile company that adapts better to change. It also makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the business—internally and externally. • ERP can improve data security in a closed environment. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised. This changes, however, with a more open environment, requiring further scrutiny of ERP security features and internal company policies regarding security. • ERP provides increased opportunities for
collaboration. Data takes many forms in the modern enterprise, including documents, files, forms, audio and video, and
emails. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems.
Disadvantages • Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization's lowest common denominator needs, forcing the organization to find workarounds to meet unique demands. •
Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities. • ERP can cost more than less integrated or less comprehensive solutions. • High ERP
switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses. • Overcoming resistance to sharing sensitive information between departments can divert management attention. • Integration of truly independent businesses can create unnecessary dependencies. • Extensive training requirements take resources from daily operations. • Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money.
Adoption rates Research published in 2011 based on a survey of 225 manufacturers, retailers and distributors found "high" rates of interest and adoption of ERP systems and that very few businesses were "completely untouched" by the concept of an ERP system. 27% of the companies survey had a fully operational system, 12% were at that time rolling out a system and 26% had an existing ERP system which they were extending or upgrading. == Postmodern ERP ==