A practical model on controlling the ERP implementation risks
Introduction
Taking a closer look at the inception process of many companies in Europe and the United States, it becomes apparent that setting up a seamless IT infrastructure has always taken precedence before any other manufacturing or operational activities such as deployment of machineries, production line, and or any other related industrial or service activities. This strategy will allow the companies to define their internal and external operational processes based on a solid foundation, resulting in optimal efficiency and effectiveness in line with their strategic policies [1].
IT as a new industry in Iran has not found its rightful place within the organizations, as mangers are still adamant and adhere to the traditional management systems, and show resistance to the required organizational and infrastructural changes. Cultural and human resource complexities within an organization are the two main factors impacting the development of IT systems, which need to be addressed with a new perspective [2]. Cultural changes are not apart from the people who have created, so the starting point for the changes must come from within the management system, the people who are involved in defining and implementing corporate policies, whose behavior and decisions have direct impact on the performance and attitude of the employees, and also their supply chain partners [3]. Therefore, corporate culture not only forms and impacts the internal operation but also constitutes the type of relationship and services received from the external partners.
The IT system, specifically the ERP systems, provides the right foundation for organizations to control and exploit their internal and external operation and resources in an effective and efficient manner [4]. Considering the above-mentioned factors, this paper will try to outline the roadmap for facilitating the decision-making process involved in acceptance or rejection of an ERP system.
Section snippets
Research methodology and objects
About the research approach we follow a more qualitative and scientific research approach. This kind of research provides the understanding of a problem through research instruments that are oriented towards searching/determining/finding/analyzing the fact and giving significance to the context and usage.
The manner of the research method chosen for this research project is of a qualitative [5] nature through an interpretive case study [6], [7], where data collection techniques [5] consist of a
Literature review and framework
Limited study has been conducted in the ERP Implementation Risk area, with most research consisting of Implementation case studies in individual organizations (such as Motwani et al. [8], and Chatfield and Bjørn-Andersen [9]). A major problem with such ERP implementation studies is that very few threat and risk of implementation failures are recorded in the literature, perhaps because few companies wish to publicize their implementation failures. Thus, the risks of implementation were not
Strategic modeling for evaluation and selection of the ERP system
The proposed model will look at the decision-making process involved in acceptance of ERP implementation from 3 different perspectives: Strategic, Tactical and Executive, each having its own modeling steps. This paper will focus on pre-ERP decision-making and implementation activities. However, as most readers might be familiar with pre-implementation activities, the paper will also cover the implementation and post-implementation activities (see Fig. 1). The ERP acceptance processes are
Phase 1: ERP as the corporate strategic objective
In this phase of the model, it will be determined whether the company has taken steps towards ERP. The main question that will set the stage for the next stage is: Has ERP implementation been introduced as part of a corporate strategic objective?
In order to find the answer to the above question, the following documents with regard to corporate strategy and planning need to be examined:
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Corporate Mission, Strategy, Objectives, and Planning documents
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IT Master Plan
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Business Plan
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Strategic Plan
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Phase II: evaluating the effectiveness of ERP in the organization
In this phase of the modeling, we will analyze and evaluate the effectiveness of deploying an ERP system in such an organization, whether the ERP system would be able to bring about the desired operational efficiency, and what benefits it brings along.
To proceed further, we need to carefully address the following questions:
- (1)
Is ERP deployment beneficial to the company?
It is important to carefully answer such a critical question, as it will decide the next phase of the operation. A negative
Phase III – organizational readiness
After confirming that ERP could effectively improve company operation (Phase II), now, we are ready to move to Phase III, to evaluate company readiness for accepting ERP, finding out whether the company has the right resources, technology and overall foundation (culture, management team), for such a movement.
The key question raised in this section is – Is the company ready to accept ERP?
The affirmative answer to this question means that we are ready to move to Phase 4 of operation, which
Phase IV: evaluation of ERP risk and success factor
In this phase, we will take into account the risks surrounding the ERP implementation at an organizational level to evaluate the ERP success rate. As the financial and resource investment is quite considerable for implementation of such system, it is important to analyze the risks involved and to be able to minimize them during the implementation process, if deciding to proceed.
For efficient assessment and minimization of the risks, they are divided into different categories as follows.
Conclusion
In this paper, we tried to introduce a strategic modeling plan, and its roadmap process, for evaluation and selection of the ERP system in Iranian companies. The model was implemented in Bahman Motors, one of the most prominent auto companies in Iran, which could be used as a perfect example for implementation of the ERP system. After in-depth analysis of each phase, and its corresponding implementation phase in Bahman, it was concluded that it is absolutely essential for Bahman to implement
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