Executive Summary

Machine Translated by Google
EXECUTIVE SUMMARY
ENTERPRISE RESOURCE PLANNING
By:
Jun Han
Rongbi Liu
Brandon Swanner
Shicheng Yang
Advances in information technology, expansion of the Internet and electronic

business as well as an ever-growing global competition have made running a
successful business more difficult than ever before. Currently, a popular approach
to the development of an integrated enterprise-wide system is the implementation
of an enterprise resource planning system.
What is ERP?
Enterprise Resource Planning (ERP) is software that attempts to integrate all
departments and functions across a company onto a single computer system that
can serve all those departments’ particular needs. ERP allows a company to
automate and integrate the majority of its business processes, including product
planning, purchasing, production control, inventory control, interaction with
suppliers and customer, delivery of customer service and keeping track of orders,
to share common data and practices across the entire enterprise, and to produce
and access information in a real-time environment. ERP enables decision-makers
to have an enterprise-wide view of the information they need in a timely, reliable
and consistent fashion. ERP applications market grew to $25.4 billion in 2005, and
will reach $29 billion in 2006. Over the next five years, the market will grow at an average of 10%.
Advantages of ERP
With ERP to automate processes, the benefits are as
follows: • Increase inventory turns • Increase
inventory accuracy rate • Reduce inventory costs •
Improve customer service • Reduce setup times
• Reduce paper work.

• Provide a unified customer database usable by all
applications • Provide greater and effective control on
account. • Faster response and follow ups to customers •
Improves supply demand linkage with remote locations and branches in different
locations
• Higher quality, less re-work
1
• Timely revenue collection, improved cash flow
Risks of ERP
There was 70% percent of all ERP projects fail to be fully implemented, even after
three years. Few companies are making full use of their ERP systems, despite the
high cost of the software and the length of time an implementation can take. Once
installed, more than 50% of companies said it was hard to make changes to ERP
software in order to meet any changes in business processes or requirements.
More than 50% of the companies did not measure their return on investment from
business applications. The failure rates for ERP projects are relatively high and could lead to the ban
Challenges of ERP Implementation

• Customization Related Challenges
• Redesigning Business Processes
• Cost of upgrades/updates •
Training • Little flexibility in
adapting to business processes • High integration
costs • High maintenance costs • Lengthy or
incomplete integrations
Critical Success Factors of Implementing ERP

Critical factors to ERP implementation
success: • ERP teamwork and composition;
• Change management program and
culture; • Top management support; •
Business plan and vision; ' • Business
process re-engineering and minimum customization; •
Effective communication; • Project management; • Software
development, testing, and trouble shooting; • Monitoring and
evaluation of performance; • Project champion; and •
Appropriate business and information technology legacy
systems.
2
ENTERPRISE RESOURCE PLANNING

CONTENTS
EXECUTIVE SUMMARY ................................................................................................ 1 1 1
What is ERP? ..................................................................................................................
Advantages of ERP Risks .........................................................................................................

of ERP Challenges...................................................................................................................
of 2
ERP Implementation ................................................................................ 2 Critical Success Factors of Implementing

ERP .............................................................. 2
INTRODUCTION .............................................................................................................. 4 WHAT IS ERP?

.................................................................................................................. 4
Definition of ERP ........................................................................................................... 4
Understanding ERP Core ......................................................................................................... 4
Components of ERP Evolution of ............................................................................................... 5
ERP Interface of ............................................................................................................ 6
Modules ....................................................................................................... 7 8
WHY IS ERP? ....................................................................................................................
Key Motivating Factors .................................................................................................. 8 Tangible and intangible

Benefits .................................................................................... 9 The Percentage and Age of ERP
Implementations ......................................................... 9 The Number of ERP Packages
Implemented .................................................................. 9 Factors Affecting Upgrade
Decisions. .......................................................................... 10 Factors Impacting ERP
Strategies ................................................................................ 11 Plan of
Action ............................................................................................................... 11 12 12
HOW TO IMPLEMENT ERP? ........................................................................................
Buy or Make ERP Software ..........................................................................................

ERP Implementation Challenges and Responses ......................................................... 12 ERP Implementation -
Considerations.......................................................................... 12 Critical Success Factors of Implementing ERP 13
............................................................
Measuring Success ........................................................................................................ 13 ERP
Software ................................................................................................................ 14
ORACLE................................................................................................................... 16 mySAP
ERP .............................................................................................................. 17 Comparison of ERP
Software .......................................................................................
STUDIES ...............................................................................................................
18 CASE 19 Case 1 - Failed
ERP Gamble Haunts Hershey .............................................................. 20 Case 2 -
KV ................................................................................................................... 21 Case 3 - Business Transformation Through
ERP Comparisons of the Three Cases................................................................................... 30 THE FUTURE OF ERP

31
REFERENCES ................................................................................................................. 31
......................................................... 23
....................................................................................................
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INTRODUCTION
Advances in information technology, expansion of the Internet and electronic
business as well as an ever-growing global competition have made running a
successful business more difficult than ever before [1]. To remain successful and
to be competitive, managers of manufacturing and service organizations must
use technology to improve information flow, reduce costs, streamline business
processes, offer product variety, establish linkage with suppliers, and to reduce response time to cu
Corporate-wide technology integration allows information users of the company
to have access to the needed information in a timely fashion and make intelligent decisions.
Currently, a popular approach to the development of an integrated enterprise-wide
system is the implementation of an enterprise resource planning (ERP) system,
also called enterprise system [1].
WHAT IS ERP?
Definition of ERP
Enterprise Resource Planning (ERP) is software that attempts to integrate all
departments and functions across a company onto a single computer system that
can serve all those departments’ particular needs [2]. Evolving out of the
manufacturing industry, ERP implies the use of packaged software rather than
proprietary software written by or for one customer. ERP modules may be able to
interface with an organization's own software with varying degrees of effort, and,
depending on the software, ERP modules may be alterable via the vendor's
proprietary tools as well as proprietary or standard programming languages [3].
As we all know, a company consists of many function departments, such as
finance, HR, purchasing, manufacturing and logistics etc. Because application of
information technologies is more and more popular than before, each of these
departments typically has its own computer system optimized for the particular
ways that the department does its work, not only for office automation, but also
for helping people to analyze data and make right decision. Not building a single
software program that serves the needs of specialized functions, ERP combines
them all software together into single, integrated software program that runs off a
single database so that the various departments can easily share information and communicate wit
Understanding ERP
There are two flows across supply chain, one is product flow, and the other is
information flow. In the past, information system tended to be islands, depending
on their functions within the company. For instance, when orders came from
customers, they were processed and recorded by sales department, and then the
sales transferred the information to manufacturing. After the production made the
master schedule, the logistics knew the distribution requirements and then
planned the delivery. Finally, the accounting was able to bill to customers. Under
this business process, a lot of problems might occur, like delay, lost order, input
errors and long lead time, which is illustrated by the following chart:
4
Figure 1. Order fulfillment before ERP [4]
Ideally, everyone should be access to the same real time data through some
interface when they are needed to. This requires a single-point-of-contact system.
That is one of the original ideas of ERP. Based on the identical system and
database, the information flow and product flow can be processed efficiently. To
guarantee the effectiveness of ERP implementation, we need to link all the
functions of the chain seamlessly. As mention above, there are walls, barriers
between departments. So what we need to do is to smash the walls, to get connected tightly via th
Figure 2. Order fulfillment after ERP [4]
Core Components of
ERP ERP totally changed the old computer systems from each separate
department, and replaced them with a single unified software program that can
be divided into software modules. The modules roughly approximate the old stand-alone systems
5
ERP software has become flexible enough that you can install only some modules
without buying the whole package. Many companies, for example, will install only part
of ERP modules, like finance, HR, Material Management or Production Planning module
and leave the rest of the functions for the future.
To enable the easy handling of the system the ERP has been divided into the following
Core subsystems [5]:
• Sales and Marketing • • Shop floor control •

Master Scheduling • Accounts
Material Requirement Planning • Payable/Receivable
Capacity Requirement Planning • • Logistics • Asset
Bill of Materials • Purchasing Management • Financial
Accounting
Evolution of ERP
The evolution of Enterprise Resource Planning (ERP) through the perspective of the
historical development of business integration concepts. Business integration concepts
commonly connected to the development of ERP include Inventory Control (IC), Material
Requirements Planning (MRP), Manufacturing Resource Planning (MRPII), and Computer
Integrated Manufacturing (CIM). This review of the development of business integration
concepts depicts the process that has led to the development of the modern ERP
applications and thus, helps to better understand the nature of present-day ERP
software.
The history of ERP can be traced back to the first inventory control (IC) and
manufacturing management applications of 1960s [6, 7]. These first applications for the
manufacturing were generally limited to IC and purchasing, which was due to the
origins of these applications in the accounting software [6, 7]. The accounting, with its
definition based around generally accepted standards, had been one of the first
business functions to be computerized and the first applications for the manufacturing
were created as by products of accounting software driven by the desire of the
accountants to know the value of the inventory [6, 7].
During the 1970s, MRP packages were extended with further applications in order to
offer complete support for the entire production planning and control cycle. This led to
the next stage in the evolution of ERP, which was the introduction of the concept of
Manufacturing Resource Planning (MRPII). The concept of MRPII emerged as a logical
consequence of the development in earlier approaches to material control. MRPII seeks
to improve the efficiency of manufacturing enterprises through integration of the
application of information and manufacturing technologies [7]. MRPII approach was
extended in the 1980s towards the more technical areas that cover the product
development and production process, and that these functions were named with various
CA- (Computer Aided) acronyms and included [7].
6
The Gartner Group introduced the term Enterprise Resource Planning (ERP) in the
early 1990s. The ERP evolution implies an extension of MRPII with enhanced and
added functionality, encompassing functions that are not within the traditional focus
of MRPII, such as, decision support, supply chain fmanagement, maintenance
support, quality, regulatory control, and health and safety compliance [7]. Today, ERP
is the foundation of businesses domestically and globally. It is used as a management
tool and gives organizations a great competitive advantage.
As e-business becomes business as usual, sharing accurate real-time information
about orders and inventory is critical to success. Now, business needs to move that
information across a supply chain. A new term to describe the enterprise systems
for the 21st century: ERP II, has been introduced.
The expansion process can be showed as following figure,
MRPÿ
ERP
MRP
IC
1960s 1970s 1980s 1990s
Figure 3: Evolution of ERP
Interface of Modules
ERP-Interface module manages the import and export data for the higher-level systems.
Interfaces to all popular ERP systems are available; e.g. SAP, Navision, infor,
proALPHA, BAAN. The software package combines two individual modules, the
communication module ERP-Export/Import and the ERP-Interface module.
All CROS modules [8] are related to each other, all users working simultaneously
through the network, using the same data, according to their attributions and access
7
rights.
- There are direct connections between different modules, without data's imports and
exports and without data redundancy [8].
- The system brings together universally accepted models for all the organization
processes, adapted and developed as a result of successful implementations in Romanian
organizations [8].
- The data flows within the informational system are faster and better organized with CROS,
this representing an important support for organization management [8].
Figure 4: All CROS modules [8]
WHY IS ERP?
Key Motivating Factors
When asked to identify the motivating factors behind the ERP decision, the key decision
makers and MIS directors at all three companies mentioned similar factors[9]:
• Standardize supply chain practices across multiple sites.
• Simplify the software environment by replacing multiple, highly customized
legacy systems with a single “fleet” solution.
8
• Support corporate-level visibility and control of key supply chain processes, such
as procurement and production scheduling.
Tangible and intangible Benefits
The analysis must consider not only the obvious cost/benefit analysis, but also the
non financial factors. Non-financial benefits include information visibility and
flexibility. A more complete listing of tangible and intangible benefits is provided in Table 1 [10].
Table 1: Tangible and intangible benefits.
The Percentage and Age of ERP Implementations

ERP systems and their MRP (Material Requirements Planning) predecessors have
been implemented for a long time. • 91% of the sample (nÿ500) has implemented ERP
(including MRP). • 31% are more than 10 years old. • 24% of them still had the first
ERP system implemented • 42% of their current ERP had replaced home-grown
or custom developed
applications
• Only 34% of their current implementation as a replacement of another ERP.
Figure 5: Age of ERP implementation

(Nÿ500) [11]
The Number of ERP Packages

Implemented
As ERP implementations have been

aging, they also been proliferating
9
• 71% of large companies have two or more ERP packages implemented across the
enterprise.
• 26% with four or more. (large company is the revenue over 1b,small company with
revenues less than $50M.)
Figure 6. ERP’s across enterprises (Nÿ500).
Factors Affecting Upgrade Decisions.

A large percentage (45%) of respondents indicated plans to upgrade to the latest release of
their software within the next 12 months. However, a full 77% of respondents were not
currently implemented on the latest release (Figure 8). While 14% intend to replace ERP at
selected installations, this still leaves a large percentage intending to be one or more
releases behind [11].
Figure 7: Current ERP Release Status
(Nÿ500) [11].
There are many reasons to delay the upgrade

process [11] and skip one or more releases. These
companies eventually play leap frog and catch up,
but at any point in time, they are equally or more
likely to not be at the latest release.
Figure 8:
Reasons
to delay
ERP
upgrading (Nÿ500) [11].
10
Factors Impacting ERP Strategies

No manufacturing company today is immune from the impact of globalization or
the acceleration of change. Most companies are looking for demonstrable business
value from ERP, and view the need to improve customer service as a key driver as
well. Few companies viewed the growth, either organically or through mergers and
acquisitions as a driving factor impacting ERP decisions [11].
Figure 9: Business Drivers impacting ERP strategies (Nÿ500) [11].
Plan of Action
Intentions to upgrading current ERP software vary with the level of maturity of the
ERP implementation. 40% anticipate keeping current versions of existing
implementations at status quo, but there is also significant activity planned (Figure
11). A surprising 14% across all companies have a replacement strategy at selected
locations and almost half (45%) plan to upgrade to the latest release [11].
Figure 10: Planned ERP actions within the next 12 months (Nÿ500) [11].
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HOW TO IMPLEMENT ERP?

Buy or Make ERP Software ERP package
The attractions of buy option are
In house development well documented by the solutions vendors.
Although make what you need provides The advantages include:
the ultimate in control, there are three • Ready made projects
fatal limitations to use this as primary • Needs only customization •
strategy: investment, discipline and Documentation is part of
support [12]. Other concerns include: system • Company takes
• Time consuming • Documentation care of • EDI compatible •
is difficult • Maintenance depends
The package itself is
on individuals • EDI modification to designed as enterprise package
be taken of • Each unit follows
• Constant updates assured
different software option • Latest
Because, while we can do both,
developments to be we really need to be good at
“assemble” if we’re to own our own
application and data destinies [12].
studied before implementation
ERP Implementation Challenges and Responses

Standing in the way of optimized ERP implementations is the alignment of software
capabilities with business processes often producing customization related
challenges (Table 2).
Table 2: ERP Implementation Challenges and Responses (Nÿ500).
ERP Implementation - Considerations

According to The Gartner Group, 70 percent of all ERP projects fail to be fully
implemented, even after three years. Typically, there is no single culprit responsible for
a "failed implementation", and no individual reason to be credited for a successful one.
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Even the definitions of failure and success are gray areas, lending to interpretation.
There are generally two levels of failure: complete failures and partial failures. In a
complete failure, the project either was scuttled before implementation or failed so
miserably that the company suffered significant long-term financial damage. Those
implementations considered partial failures often resulted in tenuous adjustment
processes for the company; creating some form of disruption in daily operations. In
the same vein, an ERP success can be a complete success - one in which everything
goes off without a hitch, or one in which there are few alignment problems, resulting
in minor inconvenience or downtime. Frequently, these situational circumstances
that have to be ironed out in the weeks and months after the "go-live" date are not
severe enough to disrupt the daily operations [10]. The challenge for ERP II is 2-fold.
First it is to aggregate and manage the data surrounding all the transactions of an
enterprise as accurately as possible in real time. Then it is to open up the system to
make that information available to trading partners. ERP is all about sharing
information and collaboration. Management is under constant pressure to improve
competitiveness by lowering operating cost and improving logistics. Organization
therefore have to be more responsive to the customer and competition [13].
Critical Success Factors of Implementing ERP
Nah et al. [14], based on a study of earlier papers (most of which

were normative/prescriptive in nature), identified 11 factors that were
critical to ERP implementation success. The 11 factors noted by them are [10, 14]
• ERP teamwork and • Effective communication;
composition; • • Project management; •
Change management Software development, testing, and
program and trouble shooting; • Monitoring
culture; • Top management and evaluation of performance; •
support; • Business plan Project champion; and •
and vision; • Business Appropriate business and information
process re engineering technology legacy systems.
and minimum customization
Measuring Success
ERP implementation is a complex process. Success or failure depends on many
factors, and it is difficult to plan for all potential pitfalls. Comparable to the difficulty
in identifying the source of success or failure is the difficulty in arriving at a clear
definition of either term. Despite the fact that this distinction may intuitively seem
simple, across companies and professionals, no agreement can be reached on a
definition of success or failure [10].
A complete failure may be a project that was discarded prior to implementation or
one that is so fraught with difficulties that the company is affected for a significant
amount of time (e.g. financially, etc.) Similarly, a partial failure is one in which the
operations of the company experience significant slowdowns or stoppages, though
the difficulties are eventually overcome [10].
13
On the other hand, a complete success is an implementation which experiences

virtually no problems or only problems that are quickly overcome. A partial success
is characterized by more problems but ones which are overcome in the short term [10].
Ultimately, it may be useful for a company in the planning phase to determine what
will constitute a success or failure, partial or complete. This will help in making
decisions about how to proceed when problems arise [10].
More than one factor contributed to the outcome of a project. The 44 companies
listed a total of 81 occurrences of these factors. For the 29 firms where SAP was
"successfully" implemented, the six factors were listed 60 times and the in the 15
firms where SAP implementation was "unsuccessful" the six factors were listed 21
times. Table 2 shows a listing of each factor, and its relative percentage of frequency [10].
Table 3: Frequency of factors reported by the "Successful" and "Unsuccessful"

implementation firms [10].
Generally speaking the respondents had a hybrid approach to measuring success

(Figure 5). Most individuals selected a combination of metrics that measured
business value but combined these with some measurement of cost and time to gain those benefits [11
Figure 11: A hybrid approach to measuring success (Nÿ500) [11]
ERP Software
A report that stated the enterprise resource planning (ERP) applications market grew
to $25.4B in 2005, and will reach $29B in 2006. Over the next five years, the market
will grow at an average of 10% [15].
14
The ERP market continues to benefit from a widespread acceptance of the idea that
businesses must have integrated information systems to be competitive. Management
and IT organizations are realizing that the most effective way to satisfy this need is
to purchase an ERP package that features broad functionality and pre-built integration [15].
Table 4: ERP vendor ranked by 2005 application revenue (include est. ’06 growth) [15].
ERP vendors ranked by 2004 worldwide ERP license revenue can be seen in the
chart below. The top ten ERP vendors by revenue include the following companies [16].
Table 5: ERP vendor ranked by 2004 application revenue (include est. ’05 growth) [16].
The report revealed several trends that affected the ERP market in 2004, including:
The ERP market is entering another major technology transition phase. Service
Oriented Architectures (SOA) may have the same disruptive effect that other
technologies have had on the market, such as the emergence of client-server systems had in the 1990
The pace of acquisitions shows no sign of slowing down. Oracle’s recent purchase
of Retek makes it very clear that PeopleSoft was simply the first of what is likely to
be a series of purchases. Vendors like Sage Group, SSA Global, Infor Global Solutions, and
15
Epicor have all been very active in the Merger and Acquisitions (M&A’s), and as a
result have all been growing more rapidly than the overall ERP market.
ERP buyers have moved away from large, upfront purchases. Now most tend to
license user seats and functional ERP modules incrementally as they deploy a
product. Along with widespread discounting, this has led to smaller average deal sizes.
ORACLE
Almost thirty years ago, Larry

Ellison and his co-founders, Bob
Miner and Ed Oates, realized there
was tremendous business potential
in the relational database model--
but they may not have realized
that they would change the face of
business computing forever [17].
Today Oracle (Nasdaq: ORCL) is
still at the head of the pack. Oracle
technology can be found in nearly
every industry around the world
and in the offices of 98 of the
Fortune 100 companies. Oracle is
the first software company to
develop and deploy 100 percent
internet-enabled enterprise
software across its entire product
line: database, business
applications,
application
and
development and decision support
tools. Oracle is the world's leading
supplier of software for information
management, and the world's
second largest
software
independent
company [17].
Oracle has always been an

innovative company. It was one of
the first companies to make its
business applications
through theavailable
internet--
today,
that idea is pervasive. Now Oracle
is committed to making sure that
all of its software is designed to
work together--the suite approach--
and other companies, analysts,
and the press is beginning to
acknowledge
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that Oracle is right. What's in store for tomorrow? We will continue to innovate and
to lead the industry--while always making sure that we're focused on solving the
problems of the customers who rely on our software [17].
ORACLE Merger History

•On Dec13, 2004, Oracle Corporation announced that it has signed a definitive merger
agreement to acquire PeopleSoft, Inc., for $26.50 per share (approximately $10.3
billion)[18]. •On Jul 18, 2003, PeopleSoft Inc. announced it had completed its $1.8
billion acquisition of J.D. Edwards & Co.[19],
After a succession of acquisitions, Oracle

• Oracle e-Business Suite
prides itself on innovation and forward thinking.
PeopleSoft acquired competitor JD Edwards. • PeopleSoft Enterprise •
Oracle acquired PeopleSoft, and therefore, the JD Edwards Enterprise
One
rights to JD Edwards applications. In addition,
• JD Edwards World
Oracle acquired Siebel. Each company had its
own uniqueness and brought that uniqueness • Siebel
to the culmination, yielding a diverse set of
application options for Oracle customers.
Options with Oracle include the following:
mySAP ERP
Founded in 1972 as Systems Applications and Products (SAP) in Data Processing,

SAP is the recognized leader in providing collaborative business solutions for all
types of industries and for every major market [20].
Serving more than 36,200 customers worldwide, SAP is the world's largest business
software company and the world's third-largest independent software provider overall.
Today, SAP employs more than 38,400 people in more than 50 countries. Our
professionals are dedicated to providing the highest level of customer service and
support [20].
The best ERP software --SAP R/3.

SAP R/3 is provided by world’s
largest enterprise software
company SAP AG.
SAP R/3 is acronym for Systems
Applications and Products in data
processing. R/3 means Runtime
System, Three Tier Architecture.
Figure 12: ERP software shares in 2005 [21]
17
SAP R/3’s Advantages:

• Faster Speed •
Integrated • Global
Basis • Knowledge
Sharing • Flexibility
for
changes(Business
and IT) • Can be
implemented as
an individual module.
Figure 13: SAP Business Modules [22]
SAP offers several software packages:

• mySAP Business Suite – All-in-One •
mySAP Business One • Duet (a
collaboration with Microsoft) • SAP
xApps – specifically designed software for individual company needs
Comparison of ERP Software
Out of 268 respondents, only 23 percent of respondents say they are very satisfied
with their ERP implementation, which suggests the absence of a viable alternative.
Who wants to rip and replace core applications and relive the tremendous disruption
and expense of another big bang? Actually, many of our readers might, if they could
escape high ERP licensing fees. In answer to a question we asked out of curiosity, a
stunning 53 percent of respondents say they would consider an open source alternative
to their current ERP system. The catch: No such system exists [23].
Meanwhile, in the real world, when we asked readers which vendors they had chosen
to supply their ERP software, Oracle, PeopleSoft, and SAP got the most mentions.
Applications from SAP earned the most "functions well" ratings in all but the human
resources category (see results for additional modules at infoworld.com/1121). A
whopping 69 percent of survey respondents think SAP's core financials function well,
awarding it nearly 20 points more than nearest competitor Oracle. SAP's manufacturing
application also enjoys a similar lead [23].
PeopleSoft's customers seem just as pleased as SAP's; the company was in a

statistical tie with SAP in readers' overall satisfaction with their ERP vendor. A year
into a PeopleSoft implementation, Craig Hunter, director of information technology for
the City of North Vancouver, British Columbia, offers this testimonial: "It's already gotten us payback.
We've installed it in house, and we didn't need a ton of consultants." He also notes his
IT group made a conscious decision to modify PeopleSoft as little a possible [23].
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Figure 14: How Satisfied Are You With Your ERP Vendor?[23]
CASE STUDIES
Although corporate expenditures for ERP (excluding implementation costs) were

530 billion in 2004 and have been growing at about 150 percent per year in recent
years, many firms have had difficulties with implementation. Because it has been
shown to be difficult and expensive for firms to achieve the desired level of
functional interoperability with inhouse developed systems, most firms purchase
"packaged" software from vendors [24].
Before 1998, there was 70% percent of all ERP projects fail to be fully implemented,
even after three years [25]. Few companies are making full use of their enterprise
resource planning systems, despite the high cost of the software and the length
of time an implementation can take, research has revealed. In a survey of 100
global or pan European companies by PMP Research, just 5% of those polled
said they were using their ERP software to its full extent [26]. Most users
customize the software, with only 12% installing ERP packages "out of the box".
Once installed, more than 50% of companies said it was hard to make changes to
ERP software in order to meet any changes in business processes or requirements
[26]. The survey also found that more than 50% of the companies surveyed did
not measure their return on investment from business applications [26]. The failure rates for ERP p
19
the bankruptcy of the corporation. In case of malfunctions ERP software’s are often
blamed and made responsible[27].
Figure 15: SAP

is blamed and
made responsible
[27].
Case 1 - Failed ERP Gamble Haunts Hershey
The Hershey company started at the 1893. Today, The Hershey Company is a leading
snack food company and the largest North American manufacturer of quality
chocolate and non-chocolate confectionery products as well as chocolate-related
grocery products with revenues of over $4 billion and more than 13,000 employees
worldwide. Outside of the US and Canada, the company exports its products to over
90 countries worldwide[28].
It was reported that a $112 million ERP project had blown up in the face of Hershey
Foods Corp in 1999. The malfunction of ERP software made up of parts from SAP,
Siebel, and Manugistics resulted in the order-processing problems that were
hampering the ability to ship candy and other products to retailers [29]. SAP AG's R/
3 provided the main components of the system, Siebel provided the CRM, and
Manugistics provided supply chain management. Analysts and sources in the industry
said the Hershey, Pa., manufacturer appeared to have lost a gamble when it installed
a wide swath of SAP AG's R/3 enterprise resource planning applications, plus
companion packages from two other vendors, simultaneously during one of its busiest shipping season
There were three obvious mistakes in the implementation of ERP system in Hershey
[30]: 1. The project was originally scheduled to take 4 years, but Hershey decided to
squeeze the implementation into 30 months
2. Hershey also decided to go live with the system in July, just in time for orders
to start rolling in Halloween, 3. The 3rd flaw in their plan was to roll out the
system all at once.
Because of these mistakes Hershey was unable to effectively ship candy and other
products to retailers for Halloween and Christmas of 1999. The company took a 19%
hit in candy sales for the 1999 Halloween season and a 12% hit in 1999 revenue [29, 30].
Back in 1999, of course, it was a terrifying new prospect for investors to consider:
Could a failed computer project take down a Fortune 500 company? Hershey's stock price fell
20
more than 8 percent on that September day, and the computer system mystery made
the front page of The Wall Street Journal. Analysts didn't fully trust Hershey's ability
to deliver candy until the following fall, when things had long been back to normal [31].
Even in 1999, however, enough details about the difficulties of other enterprise
software implementations had leaked out that analysts could have seen that
Hershey's only real failure was its timing—the system went live right about the time
when orders were pouring in for Halloween, and they couldn't be fulfilled. Other than
that, Hershey's experience was pretty average. Studies have shown that most
companies that install enterprise software are late, their business processes suffer
temporarily, and their revenue can take a hit for as long as six months [31].
When Hershey issued a press release in August saying that it had completed a
successful upgrade of its SAP ERP system, the company might want to end the 3-
year-old mystery [31]. Enterprise software is hard. It takes a long time. It's hard to
get people to change the ways they work so that the system will function correctly.
But they eventually adapt. And you will have problems in your business at first
because enterprise software isn't just software. It requires changing the way you do business [31].
Lessons learned from Hershey Case [30]
• Take your time. Hershey didn’t seem to need this ERP system implemented so
quickly, and certainly didn’t plan accordingly. At the time Hershey was tight
lipped about the project and its problems and has remained that way, although
I don’t expect Hershey to be discussing the issue at this point. • Don’t rollout
an ERP system before a critical business season. Halloween has got to be one of
the busiest times for a company like Hershey. I can’t imagine why they would
need to speed up the implementation of this system so it could be in place
before Halloween. • For a company of Hersheys size, and the size of the
project ($112 Million), they should have rolled out the components in a more
staggered fashion. Training users on each component, and ensuring the
system was working as planned every step of the way. Implementing a project
this large all at once does not provide the time to learn and test everything
extensively.
Case 2 - KV
KV started more than six decades ago. KV has consistently ranked as one of
America's fastest growing small companies. Today, KV offers many drug
technologies, used in most of the company's more than 100 generic and non-
branded drugs and 15 branded drugs that are sold today [32].
The Business Technology (BT) department is in charge of information technology
(IT). • There are more than 50 employees in IT department. • There are more
than 1000 computers • Today KV has more than 1,000,000 square feet of
predominantly owned facility space located in 15 different locations.
• Vice president (CIO) in Business Technology (BT/IT) reports to senior

vice president and/or CEO
21
JD Edwards World
Today, KV is using JD Edwards World as ERP software that started in 2000 and
finished implementing in 2003. After implementation, all the information from the old
systems was moved into JD Edwards World system. Software license fee was about
1 millions. It has spent about 10 millions on the JD Edwards, including the purchasing
the program, implementing, upgrading and maintaining from 2000 to 2007 fiscal year.
The JD Edwards was successfully implemented at 2003 with spending about 1
millions and the maintaining fee is about 1 million each year.
There are about 900 users in 15 locations connecting to the ERP system.
The following is the interface of KV JD Edwards World ERP system.
Figure 16: The interface of KV JD Edwards World ERP system at KV
22
With ERP to automate processes, the benefits are as

follows: • Increase inventory turns • Increase inventory
accuracy rate • Reduce inventory costs • Improve
customer service • Reduce setup times
• Reduce paper work reduced.

• Provide a unified customer database usable by all applications
• Provide greater and effective control on account. • Faster
response and follow ups to customers • Improves supply demand
linkage with remote locations and branches in different
locations
Case 3 - Business Transformation Through ERP

-A Case Study of an Asian Company [33]
Background of Almab
Almab, a pseudo-name, is a leading newspaper company in one Asian country. It has
it's headquarter in the Capital and 52 offices in more than eleven major cities. The
company publishes more than 67 publications nationwide and has the highest number
of readers among the English publications in the country. It is the number one national
daily in the capital and the third highest read publication nationwide[33].
The industry within which Almab operates is characterized by some growth (annual
growth rate of 6%) and high rivalry (on the basis of reputation, circulation, and readership)
both from within and from alternative media. Over 80% of Almab's revenue is generated
from advertising. Customers have enormous alternatives to advertise not only in the
print but also in the electronic media. Because of ease of switching to rivals, efficient
handling of the advertising process-from booking to billing- has a major impact on
business bottom line [33]. Its survival and competitive advantage depend on its ability to
offer clients with as many packages as possible, with least cost, maximum visibility, and
increased flexibility. Moreover, because of Almab's physical scale of operation, it depends
on a number of advertising agencies to solicit and retain customers. This requires
effective coordination of the activities of the agencies and management of their contracts,
invoices, premiums and relationships[33].
However, back in 1999, the company had serious problems that motivated the
implementation of ERP. Following the implementation, Almab has not only solved its
problems and streamlined its business processes but has managed to double its turnover
to US $400million within three years. This is a significant gain in an industry where total
annual advertising revenue was estimated above US$800 million. As a result, Almab's
senior mangers now believe that the system has provided them with significant
competitive gains in terms of "speed, efficiency and turnaround time" [33].
ERP Implementation
23
In order to provide maximum value to customers, stay profitable and gain strategic
flexibility needed to maintain its competitive position in the industry, Almab decided
to look for solutions that resolve its problems and that meet its core criteria of
"integration, speed and scalability" [33]. After searching the market by employing
the service of a sourcing consultant, the company selected SAP AG and reached a
memorandum of understanding about expectations from the system, resource
commitment and delivery plans [33].
Championed by the top management, the implementation project began in the first
quarter of 2000. The main departments to be integrated via the implementation of
ERP were the Classifieds, Display, Finance, Production and Print departments. A
total of 120 senior managers from all parts of Almab were briefed about the business
change that was to take place. An implementation team comprised of senior
managers, heads of various departments was formed. Users from various
departments were brought to the head office to test the system and participate in
the training of trainers. The system went live on time after 14 months in the 2nd
quarter of 2001. In the following two subsections, the pre and post-ERP profile of Almab using the Sev
Various Perspectives In ERP

Studies 1. Theoretical models and frameworks
development 2. Investigations of the strong-order drivers and second-order
facilitators/inhibitors of ERP adoption and implementation 3. Investigations
of project, change management and other implementation issues 4. Defining
ERP success criteria and investigations of the critical factors that
influence ERP
outcomes 5. Investigations of ERP in different
cultural contexts 6. Analyses of the changes and impacts on organizations as a result of implemen
ERP
This study is in the tradition of the sixth stream of research and direction in
that it investigates the transformative potential of ERP systems [33].
THE SEVEN "S" FRAMEWORK
The role of IT in organizational transformation can be captured in terms of its

influence on key organizational dimensions outlined as Seven "S"s:
1. Strategy: Strategy refers to the mechanisms by which a business allocates
its resources to operate in its environment, propose value to customers and
ensure its survival and profitability [34].
2. Structure: This defines allocation of responsibilities and authority relationships
in an organization that is the skeleton of the organization [34].
3. System: This refers to key processes that support the business, covering
reward, control, information, work flow and feedback mechanisms. Systems
populate the structure and influence how an organization makes decisions,
relates to customers, shares information and rewards its employees [34].
24
4. Staff. The demographic profile of the people working for an organization makes
this dimension. Crucial in this category is the quality of those staff critical to the
success of the business [34].
5. Skill: Skill refers to the core competence and capabilities of an organization [34].
6. Style. Mangers differ in terms of their treatment of information, conflict resolution,
problem solving, communication and motivation of staff. Style reflects the manner
and approach of key managers and leaders of an organization in dealing with
these management issues 7. Shared values. Organizations impose different values
and beliefs (also
commonly known as culture) on their members.
The Seven S framework stresses that organizational effectiveness depends on the

interaction between all the Ss of an organization. These elements are interconnected and
must be coordinated properly to avoid conflicts and bottlenecks Research Questions:
Research questions addressed in this paper are: • 1. What are important contextual
characteristics that influence transformation 2. What are organizational dynamics that
are key indicators that transformation is
happening
3. What key lessons can be drawn in terms of achieving and sustaining Information
Technology (IT)-enabled organizational transformation.
Data Collection and Analysis [33]
The data were collected using retrospective participant observation, unstructured

interview and document analysis [35, 36]. One of the authors of this paper had worked
for Almab and was involved in the ERP project as an officer in the classified and data
processing departments. The observer, based on his experience of working in Almab,
various meetings, seminars and briefings attended and from countless informal
encounters with members of the company over a three-year period produced a
retrospective account of the pre and post ERP scenario. In order to control for possible
observation and retrospective bias, we followed Golden [37] recommendation and the
other author reviewed and questioned the observation data. This process, in itself,
provided an in-depth insight into the firm and its process of ERP implementation but, as
per norms of triangulation, this was supplemented by interview and document analysis
[33, 36].
A total of five interviews were conducted with the Executive Director, Brand Director,
Head of the Department of the Classified Marketing, Head of Operations and Customer
Care and ERP project leader and Head of the IT. Materials reviewed included project
documentation and briefings (which showed the nature of the project, the kinds of
resources, detailed information on the composition of the project team and change
management issues) samples of the ERP managerial reports (which allowed evaluation
and comparison of pre and post ERP information flow) and Intranet documents (which
allowed the examination of help and trainings given to end users) [33].
25
Data were analyzed using qualitative techniques informed by the Seven Ss framework.
Interview transcripts, documents and observation notes were read to produce a pre
and post ERP description for each of the seven S dimensions. These were re-
examined to identify key dimensions that were transformed in the course of
implementing ERP. After data analysis, a draft case report was produced and shared
with the heads of the department of classified marketing and electronic data
processing. They offered helpful comments and verified the analysis and interpretation [33].
Data Transfer
Pre-ERP, each branch had its own centralized mainframe server at the main office
and a different server at each of the sub offices in the same city. Data transfer and
update between branches involved first uploading the data from sub office servers
into branch servers and then transferring it to central server. Because of the
fragmentation of data, it was difficult to generate aggregate reports required by the top management [3
Figure 17: Pre-ERP Data Transfer Between Almab's Branches [33].
26
Post-ERP, Almab moved from the mainframe based computing architecture to

client server technology. IT was centralized at the head office with backup servers
in one of the regional branches. Data transfer and sharing has been enhanced
significantly (see figure 2). This has created easy coordination and organizational
flexibility at the level that could never have been achieved prior to the
implementation of the new system. Clients are offered more options and external
agencies that were responsible for bringing in business were linked via the new
system. This offered increased flexibility, meeting of deadlines and tracking of advertisements [33].
Figure 18: Post-ERP workflow in Almab [33].
Pre and Post-ERP Comparison [33]
The implementation of ERP offered Almab an opportunity not only to diagnose its
strengths and weaknesses but also to clearly communicate its re-assessed
objectives and future directions. It affected back office, financial, editorial,
advertising and press operations. However, because of the focus of the ERP
project, major transformation happened in advertising handling and as a result a
significant proportion of the analysis here is going to focus on that.
27
Table 5: Pre and Post-ERP Comparison of Almab [33].
Theoretical Implications [33]
In terms of theoretical contribution, we have demonstrated the utility of the Seven S

framework in analyzing and understanding potential transformations in key
organizational dimensions following large scale enterprise systems implementation.
The use of the Seven S framework has proven workable and useful in analyzing business
28
transformation during large scale ERP implementation. Almab was successful in

adapting itself and managing the changes needed to benefit from ERP. In fact ERP
served as a platform to successfully introduce other production and marketing
changes. This could relate to the clarity and articulation of expectations from the
system; to the rigorous pre selection process; and to the change management and
project governance practices. The research helps to move beyond a gross
categorization of developing countries to illustrate how and when particular
contextual factors may or may not impact ERP related organizational transformation.
Another contribution is related to the value of using organizational transformation in evaluating ERP o
Practical Implications [33]
This case study represents a successful ERP outcome. This can be related to
Almab's practical approach in implementing ERP. Six practical lessons outline can
be useful to other organizations in transforming themselves during a large scale
enterprise application.
First is mustering the momentum for transformation. The top management of Almab
had a very clear vision as to what exactly was expected from the ERP system and
as a result was able to clearly communicate the vision to the senior managers, who
in turn were responsible for their respective departments. Because of clear vision
and extensive and open communication, the system was developed within time,
within the budget and to the requirements of the business.
Effective managerial coordination is a second lesson that emerged out of Almab's
experience. The objective of the system was to bring together numerous departments
and hence on geographical basis coordinated with each other for the development
of the system. The empowerment of managers make important decisions related to
their respective departments, the system was customized to meet the specification
of business requirements. There was an organizational wide recognition that for the
organization to utilize the ERP systems effectively, they need to develop both the
technical as well as the managerial capabilities.
The third key lesson is the importance of investing in human resources development.
Because of the extensive process of implementing ERP within the organization,
each and every manager and employee understood the role of the systems within the organization.
Almab also spent a lot of time and money on training employees on the system.
Whenever there was an upgrade, the employees were trained and educated about
the functionalities that were made available.
Fourth, the development of ERP systems requires building mutual relationship
within and with partner organizations and understanding of the organizational processes.
The fifth lesson is related to its assimilation of ERP with its routines. Almab
demonstrated a commitment to constantly innovate and introduce new production,
marketing and pricing strategies that were leveraged from its ERP. Hence, ERP
systems played an important role in the development of the complexity of the
organizational processes and routines.
Last but not least is the emphasis placed on organizational learning. The process of
organizational learning not only assisted Almab to implement one system but the process
29
had a dual effect of getting into a habit of coordinative learning and hence shared knowledge across
the organization.
Conclusion [33]
The organizational equilibrium has shifted to a new state after ERP implementation. The
transformation is greatly enabled by ERP but its cause might not necessarily be attributed to ERP
only. The work practices and innovations ERP allowed, the acceptance and assimilation of those
work practices by Almab staff and management coupled with the desire to gain competitive advantage
have all contributed to the transformation of Almab.
A longitudinal approach of observing an organization over an extended period of time would be most
useful to develop a better understanding of organizational transformation "enacted slowly, smoothly
and subtly". The Seven S dimensions provide an effective utility to conduct such observations.
Comparisons of the Three Cases The

comparison of the above three cases is listed below.
Table 6: Cross comparison of the Cases Study Case
1 - Hershey Case 2 -KV ~$4 billion ~$ Case 3 - Almab ~
Revenue 400 million Not clear. Replace
legacy
Replace
legacy $ 1 billion
Reason for ERP systems to systems to provide
globalprovide
integration Replace legacy
business processes processes
million$ 3112
- 5 million systems to provide
Scheduled 4 years ~ 2 years
months
Actually
Malfunction
30 business processes
Cost of ERP N/A

Time 14 month
Outcomes Success Success
Cause order • Provide a unified • Increase in

processing problems customer database inventory turns
usable by all • Reduction in
applications • Faster administration
response and follow costs
ups to • Better order
customers fulfillment rates
• Improves supply
demand linkage •
Increase in inventory
turns
• Reduction in
administration costs •
Better order fulfillment
rates
Business N/A N/A Significant

Transformation
30
THE FUTURE OF ERP

The dream of enterprise resource planning systems is that a single application can
track and monitor all of a business’s functions. In a perfect world, a manager opens a
single ERP app to find data about any aspect of the business, from financials to HR to
distribution schedules [38].
There are still a lot of gaps in ERP systems, particularly in industries where ERP
functionality has grown up from its historic origins in manufacturing. Despite the
challenges, the movement toward a global ERP system is a key factor shaping the
future of enterprise resource planning [38].
Significant shifts are taking place in how ERP vendors generate revenues. Echoing
changes taking place throughout the software industry, the transition is toward
recurring and variable revenue models – with maintenance charges driving industry growth [38].
Figure 19: ERP

Revenue Growth
[38].
Variable revenue schemes are becoming the sweet spot for big ERP vendors. Faced
with scarce possibilities for new large licensing deals, “vendors have adjusted their
pricing models so that they can get incremental license revenue though higher levels
of usage.” [38].
REFERENCES
1. Beheshti, H.M., What managers should know about ERP/ERP II. Management Research
News, 2006. 29(4): p. 184-193.
2. Koch, C., The ABCs of ERP. http:// www.CIO.com.
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4. Andrea, R., S. Sieber, and J. Valor, Introduction of ERP.
http://webprofesores.iese.edu/Valor/Docs/EMBA/Intro%20ERPs.pdf.
5. Enterprise Resource Planning. http://www.erpfans.com/erpfans/erpca.htm.
6. Gumaer, R., Beyond ERP and MRPII – optimized planning and synchronized
manufacturing. IIE Solutions, 1996. 29(9): p. 32-36.
7. Sarpola, S., Enterprise Resource Planning (ERP) Software Selection And Success
Of Acquisition Process In Wholesale Companies. 2003.
8. CROS - Bar codes system integration.
http://www.crisoft.ro/Engleza/prod&serv/cros.html.
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9. Bozarth, C., ERP Implementation: Motivation and Justification.

http://scm.ncsu.edu/public/lessons/less060406.html.
10. Gargeya, V.B. and C. Brady, Success and failure factors of adopting SAP in ERP system implementation.
Business Process Management Journal, 2005. 11(5): p. 501-516.
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Educase Quarterly, 2003(November 1): p. 5-9.
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pps_seiten/sonstiges/erp_engl.htm.
14. Nah, F.F., J.L.a. Lau, and J. Kuang, Critical factors for successful implementation of enterprise systems.
Business Process Management Journal, 2001. 7(3): p. 285-296.
15. Reilly, K., Enterprise Resource Planning Software Will Grow to $29 Billion in 2006.
AMR Research, October 10, 2006.
16. Reilly, K., AMR Research Releases Report Showing Overall European Market for ERP Vendors to Grow 7%
Annually Through 2009. AMR Research, June 20, 2005. 17.
Oracle histry. http://www.oracle.com/corporate/story.html. http://
www.peoplesoft.com/media/en/pdf/jdedwards_pr060203.pdf.
www.oracle.com/corporate/press/2004_dec/acquisition.html.
20. mySAP.18.http://www.sap.com/
19. http://
company/index.epx.
21. SAP Annual Report 2005.

http://www.sap.com/company/investor/reports/annualreport/2005/pdf/2005_SAP_Annual
_Report.pdf.
22. ttp://www.cbe.wwu.edu/misclasses/mis320S06lab/erp/intro_files/intro.htm.
23. Knorr, E., ERP Springs Eternal. InfoWorld, 2004. 26(12): p. 44-54.
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Gillooly, C., Disillusionment 26. ,. Information Week, 1998. February 16: p. 46-56.
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32

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ENTERPRISE RESOURCE PLANNING

Advances in information technology, expansion of the Internet and electronic

• Reduce paper work.

• Timely revenue collection, improved cash flow

Challenges of ERP Implementation

Critical Success Factors of Implementing ERP

ENTERPRISE RESOURCE PLANNING

Advantages of ERP Risks .........................................................................................................

ERP Implementation ................................................................................ 2 Critical Success Factors of Implementing

INTRODUCTION .............................................................................................................. 4 WHAT IS ERP?

Definition of ERP ........................................................................................................... 4

Understanding ERP Core ......................................................................................................... 4

Components of ERP Evolution of ............................................................................................... 5

ERP Interface of ............................................................................................................ 6

Key Motivating Factors .................................................................................................. 8 Tangible and intangible

Buy or Make ERP Software ..........................................................................................

ERP Comparisons of the Three Cases................................................................................... 30 THE FUTURE OF ERP

Figure 1. Order fulfillment before ERP [4]

Figure 2. Order fulfillment after ERP [4]

• Sales and Marketing • • Shop floor control •

The expansion process can be showed as following figure,

1960s 1970s 1980s 1990s

Figure 3: Evolution of ERP

Figure 4: All CROS modules [8]

Tangible and intangible Benefits

Table 1: Tangible and intangible benefits.

The Percentage and Age of ERP Implementations

Figure 5: Age of ERP implementation

The Number of ERP Packages

As ERP implementations have been

Figure 6. ERP’s across enterprises (Nÿ500).

Factors Affecting Upgrade Decisions.

Figure 7: Current ERP Release Status

There are many reasons to delay the upgrade

Factors Impacting ERP Strategies

Figure 9: Business Drivers impacting ERP strategies (Nÿ500) [11].

HOW TO IMPLEMENT ERP?

ERP Implementation Challenges and Responses

ERP Implementation - Considerations

Critical Success Factors of Implementing ERP

Nah et al. [14], based on a study of earlier papers (most of which

On the other hand, a complete success is an implementation which experiences

Table 3: Frequency of factors reported by the "Successful" and "Unsuccessful"

Generally speaking the respondents had a hybrid approach to measuring success

Figure 11: A hybrid approach to measuring success (Nÿ500) [11]

Almost thirty years ago, Larry

Oracle has always been an

ORACLE Merger History

After a succession of acquisitions, Oracle

Founded in 1972 as Systems Applications and Products (SAP) in Data Processing,

The best ERP software --SAP R/3.

Figure 12: ERP software shares in 2005 [21]

SAP R/3’s Advantages:

Figure 13: SAP Business Modules [22]

SAP offers several software packages:

PeopleSoft's customers seem just as pleased as SAP's; the company was in a

Although corporate expenditures for ERP (excluding implementation costs) were

Figure 15: SAP

Case 1 - Failed ERP Gamble Haunts Hershey

Lessons learned from Hershey Case [30]

• Vice president (CIO) in Business Technology (BT/IT) reports to senior