Relevant Areas to the Implementation of an Enterprise-Level Business System - Essay Example

Relevant Areas to the Implementation of an Enterprise-Level Business System Introduction The final stage of implementing an enterprise business system is actually implementing it. This sounds simple enough, but in reality this can be the most difficult stage that requires thorough planning and attention to detail. Details include budget, needs of the users, and timing. There are methods and tools designed for the implementation process that help define various steps and strategies. One common implementation method is spiral implementation that requires testing deliverables at certain junctures before subsequent components are executed. These can be integrated into another method that focuses on milestones. Milestones and sub milestones should result in an enhanced or new function versus waiting until the entire project is implemented. These methods sway management not lose interest in the project because the level of excitement can be maintained, plus one can appreciate that the investment paying off earlier. Because this is focused on an enterprise environment, it is possible that each department will need to be changed one at a time or, departments working closely together may need to be changed simultaneously. This is usually more apparent when using an implementation tool. One popular tool for system implementation is Microsoft Project, an excellent program for an enterprise system or extended project. Milestones and sub milestones, mentioned in methods, are inherent in the application. Another way of using millstones is with metrics. Metrics are used to measure progress and estimate how long a project will take based on industry standard metrics for specific task. Metrics are beneficial because they measure the effectiveness of the phases that have been implemented by starting with a baseline before any of the new components are implemented. Using metrics to measure the impact of given application will communicate the worthiness of the overall project. If one is concerned that a project is not what she hoped or promised, it might be time to jump ship. Professionally this is called change of control. At any time during the implementation process, there may be a need to change the control with minimal interruption. Provided that each phase, especially the implementation phase, has been documented thoroughly, change of control should be a smooth transition. Thorough documentation and a well-defined plan are highly beneficial. It is important for people to know what to expect and begin training. A streamlined cutover will ensure that budget, end users, and time line goals are met. Over the last decade, Enterprise resources planning (ERP) systems have emerged as an essential tool so as to obtain the competitive advantage for most businesses. ERP systems are defined as management information systems (MIS) that integrate primary business applications, including all areas and levels of an organization. Typically, ERP systems consist of applications for accounting and controlling, quality management, production and materials management, sales and distribution, project management and human resources. (Loadstone, 2003). MAS is a system of measuring and providing operational and financial information. ERPS and MAS are interrelated and have a close relationship. As "ERP is at its essence a data management tool"( Schuster & Brock, 2004, p.2) therefore, it can be said that ERP is a tool of MAS in order to give businesses a competitive advantage. The implementation cycle of an ERP system is about organizational change. It is a multi-disciplinary effort and characterized as a complexity, uncertainty and a long time scale. (Harwood, 2003, p.1). The cost and time are very important issues for an organization to consider when implementing an ERP system. ( Granlund and Malmi, 2002, p.304). However, a proper implementation of the system may provide many benefits, depending on the organization integrating the system with its own business processes. An ERP system has many advantages in helping organizational management accounting systems. It integrates all parts of an organization's management processes and each application within an ERP system shares a common set of data and files that is stored in a central database. (Olson, 2004, p.4). Consequently, it may increase the competence and accuracy of the data so as to provide better financial performance and enhance competitive position. (Hayes, Hunton and Reck, 2001). In addition, an ERP system can increase the organization's overall efficiency and effectiveness since all the parts within the ERP system are connected and integrated with each other. (Loadstone, 2003). Subsequently, people may have faster access to the information so that it enhances facilitating decision-making. However, to implement and maintain an ERP system can be costly. As Brakely says "the financial burden of implementing an ERP system can be staggering."(1999, cited in Hayes et al., 2001). Another major cause of the failure of an ERP system is its difficulty in adapting to particular workflow and business process of some companies. There are also some difficulties in using ERP systems properly and effectively and they may cause many problems, especially in the supply chain management. It is clearly indicated that it has to take a lot of efforts and resources on ERP systems so as to gain competitive advantage. When the ERP systems are implemented properly, the benefits always outweigh the deficiencies. This essay is to examine the effects of ERP systems on an organization, that is, to find out whether installing ERP systems adds value to an organization for centralizing corporate data and facilitating decision-making. It also discusses whether the organization being designed around the MAS or the MAS being tailored to the internal and external environment of the organization. The impact of ERPS on the entire organization: Due to the technological advances, an organization is no longer constrained by geographical or time boundaries, progressively, organizations are becoming in favor of adopting a more resource-based view of the firm. Consequently, as Chapman and Chua (2003, p.78) identifies, it is increasingly important that an organization develops an 'integrated and coordinated' approach in relation to knowledge, technology and relationship management, which is called Enterprise Resources Planning System (ERPS). Over recent years, organizations have become increasingly more target driven, which has witnessed the emergence of a correlation with an increasing reliance upon the ERPS, such as SAP, Oracle and PeopleSoft, which have a huge dependency upon information technology. One of the main advantages of ERP systems is to centralize corporate data. It integrates all parts of an organization's management processes. The integrated data and information flows are related to the gain of competitive advantages. As Berretta (2001, cited in Granlund et al., 2002, p.305) indicates it, "ERPS support the management of organizational interdependencies by enabling cross-functional information flows, language sharing and cognitive integration among functional units". Consequently, it may increase the organization's overall efficiency and effectiveness. Furthermore, an ERP system may enable quick response to changes in business operations and environment and make information access and management throughout the company much easier and faster. As a result, it can improve the time and resources for decision-making. An ERP system is such an interactive information system that rely on integrated user-friendly hardware and software designed to assist mangers make decisions related to the efficient and profitable running of the business. (O'Brien, 1997,P31). The major impact of ERP systems on the organization is that they cause the organizational structure change. An ERP system requires the re-engineering of an organization's process and culture. A further support from Walsham (1993, cited in Caglio, 2003, p.128) who states that "a new ERP system may contribute to the redefinition of how organization actors communicate, what behaviors to sanction or reward and how people enact power, possibly being drawn upon in the day-to-day operations by all organizational members in order to make sense of and cope with organizational activity". Thus, it can be said that introducing an ERP system is to reproduce a new organizational structure. Another contrasting view can be seen as on the issues of costs and time consuming. An ERP system requires the re-engineering of an organization's process and culture. The costs of setting up an ERP system are so high that some small businesses may not consider installing it. Moreover, since an ERP system can take a fairly long time to implement into an organization, it may slow down the productivity. Many written work (eg. Granlund and Malmi, 2002; Harwood, 2003; Olson, 2004) have identified these issues. In some cases, the ERP system cannot functionally fit the business processes within the organization. As Olson (2004, p.3) notes, "the business world is dynamic, and a rigid approach has drawbacks". In other words, ERPS are not best for every particular firm. In some cases, a company may find out the software does not support the important business processes, even though it has spend multimillion dollars to implement the ERP projects. As a result of this, it can be said that it is difficult to identify whether the ways of a company doing its business will be suitable within a standard ERP project. Impact of ERP systems on management accounting: Basically, ERP systems are bound up with organizational processes of accounting. (Christopher, 2005, p.685). ERP systems have significant effects on changing the way accounting and business exists within an organization. (Sutton, 1999, p.5, cited in Granlund and Malmi, 2002, p.300). That is, implementing these systems in an organization usually involves changing business processes and thus changing the way people do their jobs, especially accountants. ERP systems co-ordinate and integrate activities all around the organization so that it has more control of its operation. Less confusion and error arises as a consequence of creating a common set of data shared by every process. - The impact of ERPS on management accountants' work: ERP systems replace the role of the traditional accountants within the organization and perform many parts of accountants' daily routines. (Caglio, 2003, p.124). Accountants tend to expand their roles and devote their effort to strategic decision-making, business management and information technology initiatives. Granlund and Malmi (2002, p.311) claim, "the role of accountants has expanded towards more active, business-oriented roles". As a result of the implementation of ERP systems, accountants are more likely to "broaden their range of activities and practices" and "improve their positions and get access to other professional fields". (Caglio, 2003, p.128). Thus, it is critical that accountants understand these systems because they will be members of the teams that will install and operate them in their organizations. - The impact of ERPS on management accounting and control within an organization: An ERP system is a kind of software that needs to communicate across all parts of the business. (Dechow & Mouritsen, 2005, p.691). Usually, many companies with un-integrated accounting systems do not know how much it actually to produce a unit of product. However, with an ERP system, costs throughout the company can be recorded in the enterprise-wide database as they occur. Not only will this simplify the process of adjusting accounts, but also it means that the management can obtain the accurate, up-to-date information any time. (Brady, Monk & Wagner, p.110). Similarly, the financial software can cut an account payable check as soon as the loading dock clerk confirms that the goods have been received in inventory. (Loadstone, 2003). This can actually minimize the amount of human participation and paperwork. ERP aims to replicate business processes in software, guide the employees responsible for those services processes through them step by step and automate as many procedures as desired. Since ERP systems co-ordinate and integrate activities all around the organization, it has no doubt that there may be more control over its operation. As Quattrone & Hopper (2001b, cited in Quattrone and Hopper, 2005) note, "ERP configurations can dramatically affect accounting controls and how actions are made visible". Some multinational corporations believe that once adopting ERPS, they provide many benefits including eliminating the distance between the controllers and controlled, thus a quicker and integrated control can be achieved. Conclusion The challenges that face the business in this changing world are becoming more and tougher. The application of ERP system in a business enriches its competitiveness. ERP gives organizations a vehicle to manage information and use it to their advantages. ERP users can gain competitive advantage from its ability to centralize corporate data and facilitate decision-making. ERP systems also allow users to turn on and off functionality as needed to adapt quickly to changes in their business, where a customized application has to be rebuilt. With an ERP system, it can be seen that once it is customized and fit to the needs of an organization, it will more than likely give the organization a competitive advantage. Works Cited Brady, J., Monk, E. & Wagner, B. (2001), Concepts in Enterprise Resource Planning, Course Technology Thomson Learning: Canada. Caglio, A. (2003), 'Enterprise Resource Planning systems and accountants: towards hybridization' European Accounting Review 12 (2003), issue1, pp.123-154. Chapman, C. & Chua, W. (2003), 'Technology-driven integration, automation and standardization of business processes: implications for accounting', Management accounting in the digital economy, Oxford University Press: Oxford. Christopher S. C., (2005), 'Not because they are New: Developing the Contribution of Enterprise Resource Planning Systems to Management Control Research', Accounting, Organization and Society, volume 30, Issues 7-8, October-November, pp. 685-689. Dechow, N. & Mouritsen, J., (2005), 'Enterprise resource planning systems, management control and the quest for integration', Accounting, Organizations and Society, Volume 30, Issues 7-8, October-November, pp. 692-733. Granlund M. & Malmi, T. (2002), 'Moderate Impact of ERPS on management accounting: A lag or permanent outcome' Management Accounting Research, 13, pp.299-321. Hayes, J. Hunton and J. Reck (2001), 'Market Reaction to ERP Implantation announcements', Journal of Information System. Harwood, S. (2003), ERP, the Implementation Cycle. Butterworth-Heinemann: Britain. Loadstone (2003), 'Using ERP Systems to Gain a Competitive Advantage.' O'Brien, J., (1997), Introduction to information, IRWIN: America. Olson, L.D. (2004). Managerial Issues of Enterprise Resources Planning Systems. 1st Edition, McGraw Hill: New York. Quattrone, P. & Hopper, T. (2005), 'A "time-space odyssey": management control systems in two multinational organizations', Accounting, Organizations and Society, Volume 30, Issues 7-8, October-November, pp. 735-764. Schuster, E.W.& Brock, D.L. (2004). 'Creating an Intelligent Infrastructure for ERP systems: The role of RFID technology', Journal of Business Logistics, Volume 21, Issue 1. Read More