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Lesson Learned from the Adoption of an Enterprise Resource Planning System

Jeannie Pridmore

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2 ABSTRACT Enterprise Resource Planning systems have the potential to integrate all functions of an enterprise under a uniform system and a common database. These types of systems are normally implemented to replace fragmented legacy systems that support different business functions. By removing departmental separation and focusing on business processes, ERP systems have the potential to provide many advantages. However, to gain a competitive advantage from an ERP system requires a great deal of effort by the users to learn and to appropriate. In addition, it depends on the organizations ability to exploit the potential benefits that such a system has to offer. Therefore, researchers have emphasized the importance of looking past the technical implementation of enterprise systems to focus on issues necessary to achieve a competitive advantage such as user empowerment, decision support, and knowledge integration (Baskerville, 1999). The purpose of this study is to go pass the benefits seen in the literature by expanding on the concept of what can be accomplished when an integrated system is implemented.

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3 Introduction Organizations are constantly facing challenges to create and sustain a competitive advantage through the adoption of new technologies such as enterprise software. For example, organizations invest in enterprise technology in an effort to manage data overload and to generate knowledge that can be leveraged as a competitive advantage (Cody et. al, 2002). However, investing in and implementing new technology does not ensure that a competitive advantage will be achieved. The benefit an organization attains depends on how well the organization and its users exploit the investment. In 2001, the market for Enterprise Resource Planning (ERP) solutions generated over $9 billion in sales and is estimated to stay in the $9 billion area through 2006 (Industrial, 2002). Despite huge investments in ERP software, there are many instances of failures and unsatisfactory productivity improvements (Davenport, 1998). A frequently cited cause for ERP failures is end-user unwillingness or reluctance to use or adopt the new system (Barker & Frolick, 2003; Krasner, 2000; Scott & Vessey, 2002; Umble & Umble, 2002; Wah, 2000). The lack of user adoption can lead to basic use of the system, work arounds, and dissatisfied employees. Therefore, a better understanding of users role in the adoption process of an ERP system would be useful to other organizations implementing enterprise systems. Specifically, we are interested in investigating an organization after their implementation of an ERP system to better understand the role that the user plays in the adoption process and ultimate success or failure of an ERP system. Our paper is organized as follows. First, we discuss previous studies regarding ERP and the IT adoption process. A longitudinal case study was executed to investigate

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4 this phenomenon. Then, we discuss the findings and implications of this examination. The paper concludes with a discussion of the limitations and future research directions. Enterprise Resource Planning ERP systems are complex systems that can consist of several different modules. These modules include financials, human resources, production, purchasing, and scheduling. ERP systems have been publicized as systems that involve the managing and planning of an organizations resources in the most efficient, productive, and profitable way (Barker & Frolick, 2003). These systems have the potential to integrate many functions of an enterprise under a uniform system and a common database. ERP systems are normally implemented to replace fragmented legacy systems. By removing departmental separation and focusing on business processes across functions, ERP systems have the potential to provide many advantages. It can be tempting for a company to assume that a technically successful rollout of an ERP system will be accompanied by the appropriate organizational benefits. However, implementing an ERP system does not necessarily give an organization any operational benefits. Obtaining the desired benefits depends on the organizations ability to infuse the system into its culture and its ability to exploit the potential benefits that have been discussed in the ERP literature (Hitt, 1999; Baskerville, 1999, Al-Mashari et al., 2003). Therefore, researchers have emphasized the importance of looking past the technical implementation of ERP systems to focus on issues necessary to realize the benefits of an ERP system such as user empowerment, decision support, and knowledge integration (Baskerville, 1999).

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5 One important issue that has often been discussed, particularly in the practitioner literature, is the failure rate of ERP systems. The failure rate for ERP has been reported as high as 70 in some studies (Lewis, 2004). However, maybe a more important concern than the reporting of a number for failure rate is determining just what is meant by failure. An ERP system can be implemented successfully from a technical standpoint, that is rountinized into regular use by mandatory edict. However, that same system can be a failure from an operational standpoint because users are avoiding use as much as possible, or using the system in some dysfunctional way. The ERP system may simply not provide timely, accurate, or useful information to the user, not to mention other problems that could occur such as lost production and lost revenue. Therefore, to accurately evaluate the success of an ERP implementation, an evaluation of the use of an ERP must be added to the evaluation of the technical implementation to get a true picture of overall success. The high failure rates of ERP implementations coupled with mixed results from ERP systems promote studies that will enhance the understanding of issues involved in gaining benefits from such complex information systems. There are several proposed reasons for the demand of ERP applications: competitive pressures for low cost producing, revenue growth demands, achieving and maintaining a competitive advantage, global competition, and replacing out-of-date technology (Ioizos, 1998). ERP systems have the potential to provide users with greater access to current, accurate data on a timely basis thus increasing employee empowerment and improving decision-making (Hitt, 1999). Baskerville stated (1999) that ERP users are more knowledgeable about what others do, since the users have to share the same knowledge base. Resources could potentially be shifted from busy work such as

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6 inputting, processing, organizing, and validating data, to value-added work such as analyzing, problem solving, and knowledge accumulation. ERP benefits can be divided into tangible and intangible benefits. Tangible benefits include productivity improvements, inventory reduction, reduction of personnel, increased revenue, and reduction in logistic costs (Al-Mashari et al., 2003). Intangible benefits refer to improved business processes, increased customer responsiveness, system integration, and standardization (Al-Mashari et al., 2003). The benefits of an ERP system can be significant. For example, in one case, the median annual savings from ERP systems was $1.6 million based on a study of 63 organizations (Koch et al., 1999). Shang and Seddon (2000) developed a comprehensive framework for classifying the benefits of ERP systems. This framework was developed to focus on the users perspective. To develop this framework, Shang and Seddon began with a review of the IT value literature starting in 1970. Next, they reviewed practitioner-based articles from the trade press and the Internet that related to ERP benefits. Practitioner cases were used because they present the issues from the business users point of view. The framework developed included five main classifications of benefits: 1) Operational 2) Managerial 3) Strategic 4) IT Infrastructure 5) Organizational

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7 The results of the interviews will be discussed in context with the five benefits categories. Next, we will discuss the IT adoption process, and how it relates to ERP system implementations. IT Adoption and Innovation In the IS literature, the model best-known for describing IT adoption and implementation in organizations is the model proposed by Zmud and his colleagues (Kwon & Zmud, 1987; Cooper & Zmud, 1990). The six stages in this model of organizational adoption and implementation are defined as follow (Cooper & Zmud, 1990): 1) Initiation 2) Adoption 3) Adaption 4) Acceptance 5) Routinization 6) Infusion From this stream of research, it has been recognized that technology adoption or even acceptance and routinization may not yield the expected benefits from an ERP implementation when the innovation being studied is mandatory. Mandatory meaning that use of the ERP system is commanded and that the use of the organizations legacy systems has been terminated, leaving the ERP system the only way to access organizational data and reports. The expected benefits in many implementations may only be achieved when an ERP system is used in innovative ways by users to facilitate analyses, problem solving, and knowledge accumulation. Researchers have generally

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8 referred to this as the infusion stage of an innovation (Fichman & Kemerer, 1997). Infusion can be defined as deeply and effectively embedding an IT application within an organization or individuals work system in a more comprehensive and innovative manner (Copper & Zmud 1990) to improve organizational performance (Wynekoop, 1992). It has been argued that ERP systems are mandatory (Brown et al, 2002) since it is usually the only system users have to access daily organizational data and reports. Therefore, a user generally does not have the option to not use the system. In this type of situation, usage does not necessarily equate benefits. Therefore, for the purpose of this study, we ask about the benefits following the adoption and implementation of an ERP system and investigate the steps taken by the organization to push the system into where the most likely benefits are to be found. Technology users are generally treated as passive recipients of IT systems (Satish et al. 1999). In addition, it has been argued that the center of IT creative and IT innovation relies in IT departments; however, recent studies indicate that technology users could represent a large source of IT creativity and innovation within an organization (von Hippel 1988). Prior research has shown that new, powerful, and innovative uses are discovered when business expertise and technical skill converge which is consistent with evidence from high tech industries that indicate technology users can be a highly promising source of innovation (Urban & von Hippel, 1998; von Hippel, 1988). Empirical research in several fields has shown lead users to frequently be the first to develop and use prototype versions of what later becomes commercially

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9 significant products or processes (von Hippel, 1976, 1977, 1988; VanderWerf, 1990; Shaw, 1985). Lead users are defined as having two main attributes (von Hippel, 1986; Urban & von Hippel, 1988): 1) They expect attractive innovation-related profits from a solution to their needs 2) They encounter needs before the majority of the target market In the IS literature, studies concerning user involvement and participation in information technology processes have focused on the requirements analysis process and the implementation view (Cavaye, 1995; Ives & Olson, 1984). The role of the user in other stages of IT innovation and adoption has received little attention (Swanson, 1994). Given that for new products or services to be successful, they must accurately meet the needs of the users, it can be assumed that users possess a significant amount of control of whether or not an ERP system is infused through out an organization. We posit that in order for an organization to move into the infusion stage of the adoption cycle with an ERP system and to experience the desired benefits from that system, a shift in project lead may be necessary. We speculate that in the early stages of the adoption cycle, the IT department will lead the project due to the technical complexity of an ERP system, but then once the ERP system is adopted for use, the project may yield expected benefits much quicker if the project transitions to a user-led process. Research Setting and Methodology An in-depth case study was conducted to investigate how organizational members responded to the companys ERP system after their implementation. The grounded theory research methodology was chosen for the pursuit of this investigation (Glaser and Strauss, 1967; Strauss and Corban, 1990). Grounded theory uses a qualitative approach

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10 and techniques of induction, deduction, and verification to develop or elaborate a theory about a phenomenon (Schwandt 1997). Site Information The selected organization was a division of MeadWestvaco Corporation, headquartered in Stamford, Conn., with annual sales of $8 billion and is a leading global producer of packaging, coated and specialty papers, consumer and office products and specialty chemicals. MeadWestvaco consists of four major manufacturing business units, a forestry and corporate division. It operates in 33 countries, serves customers in approximately 100 nations, employs more than 30,000 people worldwide, and owns 3.5 million acres of forests managed using sustainable forestry practices. Mead Corporation and Westvaco Corporation merged in January 2002. This study was conducted at MeadWestvaco Coated Board Division (CB), located in Phenix City, AL. The Mahrt Mill is the sole manufacturing facility for CB and is located in Cottonton, AL. Coated Natural KraftTM (CNK) paperboard is produced at the mill and is shipped around the world. CNK is converted into folding cartons and beverage carriers. The Mahrt Mill produces over 1,000,000 tons per year at a site that covers nearly 1,400 acres and operates 24 hours a day, seven days a week for approximately 355 days a year. CB was chosen for this study because it had a flawless cut over to SAP (Shaw, 2001), hence a successful technical implementation. MeadWestvacos executive board mandated that its business units would follow a corporate developed model, which specified that all divisions would implement SAPs ERP system in the same way. This standardized configuration would greatly reduce implementation cost, but it also introduced many challenges because the business units

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11 operate in very different ways. For example, some of the facilities are continuous manufacturing operations, which produce one or two product lines while other facilities produce more than ten product lines, which are made to customer order in a batch operating process. To tackle the development and implementation of the ERP system through the MeadWestvaco required model, a corporate core project team was established that consisted of sixty employees and thirty-five consultants. CB dedicated more than 70 employees to assist in the implementation process. The SAP modules chosen include sales and distribution, materials management, financials, asset management, production planning and scheduling, plant maintenance, advanced planning and optimization, quality management, and costing/profitability analysis. CB implemented an ERP system, SAP R3, in May 2000. After the ERP system had been in use for a little over two years, management noticed that the desired operational benefits were not being realized. CB management identified key success factors necessary to obtain these benefits and to reach the next level of operation through the use of SAP. The next level of operation consisted of focusing on the following specific high-level goals: 1. Optimization of current processes and technology 2. Discovery of the potential ways to get information impacting business performance from the system 3. Implementation of ways for Coated Board to work more effectively with partners To accomplish these goals, management launched two initiatives, a business warehouse and training of division IS personnel as SAP report builders. Due to the extensive nature

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12 of a business warehouse and the time needed to design, build, and implement one, the division trained IS personnel to build SAP reports to help fill the gap in SAP until the warehouse was complete. Data Collection Data collection was tightly interwoven with data analysis, as required in grounded theory research (Strauss and Corbin, 1990). The techniques used to collect data were interviews and analysis of documents. Nineteen interviews with organizational members holding a variety of roles within the division were conducted. The selected members were affected by the implementation of the ERP system differently, some used it intensively and others using it indirectly. These members were drawn from different hierarchical levels, with some responsible for clerical work while others were more involved with the companys strategy. The interviews lasted on average, one hour. They were conducted on site and focused on the ERP system and addressed the interviewees role, usage, and attitude towards the ERP system. The interviews were semi-structured in their format, with early interviews having more general, open-ended questions, and the later interviews having questions that were more specific, but still open ended. This increasing specificity reflects two practices of the grounded theory methodology: the circular process of induction and deduction and the theoretical sampling procedure (Boudreau & Robey, 2001). All interviews were recorded and fully transcribed. The follow up interviews were conducted four years after the implementation and two years after managements decision to take steps to reach the next level of operation. Two of the original interviewees were contacted for the follow up interviews. During these interviews, four

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13 additional users were suggested as good contacts for the follow up interviews. These suggestions were based on the functional areas in which the business warehouse had been implemented and on success of the team initiative. Due to the limited implementation of the business warehouse to date, there were only six follow up interviews. However, this overcomes a key limitation of previous studies that companies were in the early stages of adoption. The interviewees were chosen based on suggestions from CB, and each individual was contacted and asked to participate and anonymity was ensured. The interviewees were encouraged to talk about examples to help elaborate on their experiences with the ERP system. In addition, the examples were supplemented with questions probing particular issues. Interviewing the users of the system overcomes another limitation of information about benefits coming from second hand sources.

Data Analysis The analysis of grounded theory is composed of three major types of coding open, axial, and selective (Boudreau & Robey, 2001). Open coding is a method that consists of breaking down, examining, conceptualizing, comparing, and categorizing data. The coding was performed by breaking down the information in the transcripts based on quotes, events, and incidents. Axial coding is used to group the coded comments into one of the five benefit categories identified in the model. The focus of the analysis in this study was the everyday practices of the systems users. The interview questions centered on the benefits expected as outlined by Shang and Seddons (2000) benefit framework. The interview transcripts were examined to

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14 understand what the users have experienced with the system. Each interview was dissected for comments that dealt with the ERP system benefits based on the five-benefit classification framework. Then comments were analyzed and aggregated into their respective category. The number of comments in each category was counted. The semistructured interview process provided a wealth of rich qualitative data. The comments classified in each dimension will help to depict a more in-depth model of the users experiences with the ERP system. Results Initially, a linkage between managements perceived benefits from an ERP system and the benefits experienced by the users were not seen from the respondents comments during the first round of interviews. It was relatively easy to discover this lack of relationship from the organizational stories and the respondents explanations. In addition, it was clear that the users were frustrated by the lack of control they had to innovate new application from the ERP system. Included in each benefit category are comments from the users. This may provide a better understanding of the users experiences and feelings toward the ERP system in the initial stages of adoption and use. Operational Benefits IT literature provides much support that investment in information technology can streamline processes and increase operation outputs (Weil & Broadbent, 1998; Weil, 1990; Brynjolfsson & Hitt, 1996). Since ERP systems automate business processes, the following benefits are expected (Shang & Seddon, 2000). Specific examples include the following:

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15 1. Cost reduction due to automation and removal of redundant processes. a. Labor cost reduction due to reduction of work force in each functional area. b. Inventory cost reduction and improved inventory turns.

2. Cycle time reduction in customer service, order fulfillment, billing, delivery, and monthly reporting. 3. Productivity improvement based on production per employee or based on labor cost. 4. Quality improvement due to error reduction or reliability improvement. 5. Customer service improvements due to ease of customer data access. The respondents explanations of operational benefits ended up with a total twentyfive comments. Of these comments only one was positive. The following comments are included to give a better illustration of the users experience with the ERP system.
I spend about eight hours per week just building logical reports. These reports are not for any specific problem or question. They are necessary reports to operate on a daily basis We do not have the ability in SAP to make comparisons such as roll width. Being able to do these types of comparisons would be beneficial to the bottom line. It would also reduce the time spent with the customer questions, would open up better communication, would help us better manage customer relations, and would improve strategic alignments.

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If you work with the system every day, its OK, but if you go away even just for a short vacation, when you get back most likely you will not remember how to work the system. SAP is a system that you constantly have to re-learn.

The users comments were very negative. The users did not experience the operational benefits that were expected in the initial adoption stages. The ERP actually appeared to hurt their operational efficiencies. There also seemed to be some resentment in transitioning from their legacy systems to the ERP system. Managerial Benefits Since ERP systems have a centralized database and built in data analysis capabilities, ERP systems should present management informational benefits throughout all dimensions (Shang & Seddon, 2000). Managerial benefits include the following: 1. Better resource management such as asset management and workforce management. 2. Better operational and strategic decision making, and improved response time for customer decisions. 3. Better performance control throughout all business levels due to real time cost accounting methods. The total number of managerial comments was twenty-three. Of these comments, two were positive. Comments are included here to give a better understanding of the experience of the user.
SAP was a big negative on inventory management. We lost efficiency. We lost revenue due to poor business decision. There is just so much that we have to keep up with manually.

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It currently takes about three months to see when a customer stops buying our product. If we have a damaged roll at a customer site, there is nothing in the system to help make a decision based on cost, what is best to do with it. We are still relying on tribal knowledge for these decisions.

Again, the users comments were very negative during these initial interviews. The users did not experience the managerial benefits that were expected in the initial adoption stages. The ERP actually appeared to hinder their decision-making processes. Strategic Benefits It has been argued that IT has become an integral part of the way businesses operate (McFarlan, 1984; Earl, 1989). Integrated information systems offer a new opportunity for differentiation for products and services customization at lower costs (Victor & Boynton, 1998), and by supporting a strong link with all related business participants (Venkatraman, 1994). ERP systems could contribute to achieving these five competitive advantages due to their integration capabilities through the following ways (Shang & Seddon, 2000). 1. Support future business growth due to transaction and processing volume capabilities. 2. Support alliances due to standard business practices. 3. Support innovation by building a new process chain. 4. Support for cost leadership due to economies of scale by streamlining services and processes. 5. Create product differentiation through product or service customization. Jeannie Pridmore Page 17 8/19/2013

18 The total number of strategic comments was nineteen. The number of positive comments was one. The following are user comments relating to strategic issues.
SAP is terrible about giving data on a summary level. If you really want a detailed analysis of information from SAP, you need to be very good in Excel. One project took approximately 2000 screens to look up 600 rolls. Then it is almost impossible to share this information internationally. For large product returns, they are tracked back through the system, but since it is so timely, this is not done for small returns.

Based on the users comments is appears they did not experience the strategic benefits that were expected during the early stages of adoption. The ERP actually appeared to be more of a transaction processing system to the users during the initial adoption stages instead of offering any real strategic advantages. IT Infrastructure Benefits One of the fundamental objectives in IT investment is IT infrastructure (Weil & Broadbent, 1998). IT infrastructure includes shareable and reusable IT resources that provide a foundation for present and future business needs (Keen, 1991). ERP systems integrated and standard architecture supports business flexibility, reduced IT costs, and economic implementation of new applications (Shang & Seddon, 2000). Specific examples include the following: 1. Business flexibility due to quick response to internal and external changes. 2. Business stability due to a standardized platform and continuous improvement in processes and technology.

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19 The total number of IT infrastructure comments was thirteen. There were three positive comments. This dimension received the fewest comments of the five. This is due to the fact that the users are customer/process-focused not IT focused, and they were commenting on their experience with the system. The following are a couple of their comments from this dimension.
When problems are found in the system, it is difficult to get them fixed. Only the high or critical issues are usually fixed. These are the issues that we can actually quantify. The other problems tend to never get fixed. It is hard to quantify the significance of some problems because customer service is a more touchy feely issue. The system is set up in a way that we cannot modify or adopt the reports as needed.

The users frustration in dealing with the system was apparent in their comments. The users were not empowered to innovate the system, which appeared to generate some level of resentment among them when using the ERP system. Organizational Benefits IT is a key facilitator for organizational learning, and for empowering users (Baets & Venugopal, 1998). ERP systems integrated capabilities should support employee communication and empower users (Shagg & Seddon, 2000). More specifically ERP systems should support the following: 1. Employee empowerment due to more value-added work and greater employee involvement in management 2. Improve interpersonal communication and a consistent vision across different business levels. 3. Improved employee morale and satisfaction due to better decision-making tools.

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20 The total number of organizational comments was twenty-three. Of these comments, two were positive. Again, comments are included to give a better picture of the users experience.
Even though we have an ERP system, it is not truly an integrated system. Several people have to get someone else to get the data out of the system and into a useful format for them. The data in SAP is not presented in a useable format and a lot of the data is not meaningful. Excel and Access are used to turn data into information because SAP is transactional. A lot of behind the scene stuff is done to generate information, but this is not usually shared.

The users did not see the systems as a truly integrated system due to the arrangement of data and reports. Their experience with the SAP system appeared to be significantly more manual than using their legacy systems were during the initial stages of ERP adoption. Overall None of the dimension from the ERP benefits framework was seen in the user comments at this site. Why were none of these benefits experienced? One respondent made the following comment:
SAP will fit any business unit; however, you cannot build one system that will fit multiple business units. The divisions through out this corporation are too different to run on one system. Dupont did it right. Their finances run together, but each division was able to map to their system to their product and customer needs.

The following is a comment from another interviewee:

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If SAP was what we thought it would be, a truly integrated real time system there would be a lot of positives. This is not the case. We thought we would be able to track cost hour-by-hour and even from operator to operator. The integrated SAP is far, far less than what we thought it was. The system is very invasive and its involved in every business aspect. However, SAPs capability to actually do something useful is far less then we thought several years ago. SAP was really no major improvement to the cost management system from the legacy systems.

Overall, the users comments were very negative during the initial stages of adoption. The majority of users wanted to be empowered to innovate the system as needed to best fit their business process flows. The overwhelming sentiments were that the system must be great for one of the corporations divisions, but it just did not align close enough to their business process needs to be an improvement over their legacy systems or even to offer division benefits from system use. Follow Up Interviews The ERP system implemented did not meet the divisions business flow process needs. During the initial interviews, this was mostly attributed to the development of an ERP system core that had to meet the needs for the entire corporation. The CB system users were very vocal about the problems they were experiencing. To address these issues, the divisions management took the concerns to corporate IS and the corporations executive board. Corporate IS worked with the divisions management to establish a team to focus on getting to the next level of operation with their SAP system. This team was made up of seven division employees and five corporate employees from the emerging information systems group. The seven division employees consisted of mill operations

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22 management, marketing operations management, six sigma management, and special project management. This team worked to validate prior process mapping, match the original system design to the divisions processes, identify critical gaps, and work together for resolution of outstanding system issues. This team was given the following critical success factors as their guide to help make the ERP system operate effectively for their division. 1) Free up resources to do more value added work 2) Generating/having actionable information to run the business 3) Non-expert ease of access 4) Eliminate dissatisfied customer 5) Accessibility to comprehensive data 6) Timely, negotiated response to requests The team set out to identify problems for visibility, to prioritize the problems based on need and payback, and set up a process to address these needs. The process established consists of issue identification, problem identification, impact/justification, and problem solution. The corporate ERP group then took the list and narrowed it down for optimization of the system. Corporate listened to the users feedback and decided to develop a business warehouse. The business warehouse group was established at the corporate level to develop an enterprise warehouse system. Corporate IS also decided to slightly decentralize ERP report development by training three division IS employees to improve SAP reporting deficiencies. The Divisions Team Initiative

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23 Usually during the internalization of the ERP system, the new business flow processes will conflict with pre-existing business rules and it is up to the users to adjust to the conflicts (Lee & Lee, 2000). Due to the time and effort needed to develop an enterprise business warehouse, the division decided to establish teams to address some of the SAP issues without having to wait for the warehouse to be completed and implemented. Currently there are 15 teams working to improve business processes. Each of these teams focused on system shortcomings that had been identified by management, customers, or users after the implementation of the ERP system. These shortcomings were all perceived to be financially significant and were identified as improvements that could impact the organizations bottom line. Teams consisting of systems users were created and rolled out in phases such as diagnostic, breakthrough, and then to report back. The teams were made up of a management sponsor, a project leader, a process area expert, and various other members to serve as resources and support. The teams typically consisted of 6 to 15 people depending on the working phase of the team. In the diagnostic phase, each teams mission was too focused on understanding the business process and the current issues/obstacles that surrounded them. This phase mostly focused on understanding the new business flow process that was created due to the adoption of the ERP system. Once the users understand the workflow process setup by the ERP system then they were able to move to the breakthrough phase. In the breakthrough phase, the teams worked to overcome the identified system obstacles usually through the creation of ERP reports. These reports were developed to meet the needs of the divisions users. During this phase, the users began to feel as if their

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24 opinions and needs did matter and were going to be met by the ERP system. The division has trained three internal IS people to build reports from the SAP system. Having these people on site have greatly improved the response time to user requests. A couple of their comments are listed below. Having IS personnel on-site who can build reports for us has greatly improved the time and accuracy for getting the information we need from the SAP system The division IS personnel who are training to build reports in SAP are great and very quickly respond to our needs Once the new reports are in place and are being routinized by the users, the teams are moved to the report back phase. In the report back phase, the process improvements were monitored so the operational benefits could be accounted for and rationalized to management. These division teams are empowered with the necessary resources to direct the development of reports from the ERP system as needed. A list of the 15 teams and their strategic area of importance is as follows: 1. Wet Rolls Logistics/Inventory Management 2. Venlo Finished Goods Inventory Inventory Management 3. Non-Strategic Blocked Rolls Inventory Management 4. Transit Loss Claim Logistic Management 5. Out of Round Roll Team Logistics/Inventory Management 6. Mode Optimization - Logistic Management 7. Port Inventory - Inventory Management 8. Solid Wood Products Finished Goods Inventory Team Inventory Management 9. Rail Damage to Buena Park Logistics Management

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25 10. On Time Delivery Customer Satisfaction 11. WHOM Inventory - Inventory Management 12. Complete and Accurate Delivery Customer Satisfaction 13. Vehicle Utilization Logistic Management 14. CNK Express Inventory Management 15. 5x4 : SWP Revenue and Recovery Inventory Management Mostly, these teams have strategically focused on the business processes that effect customers and customer satisfaction. The teams set up through out the division have been quite successful. For example, the Out of Round Roll Team worked through the process and found deficiencies in ERP system reporting. They determined what information was needed, where the information proceeded, and how to present it. Through the creation of this key report, daily operations have been greatly improved. The Port Inventory Team worked to reduce the number of days that assets were in on the organizations books. By verifying the data in SAP and understanding the reporting deficiencies in the system, which took about 9 months to fully accomplish, the team was able to reduce the days in inventory by 7 days, which equated to over $800,000 in asset reduction. To maintain this level of operations, a report is generated every Monday morning that provides information on the rolls in inventory at the ports. This reports provides the customer service representative with the needed information to work much more efficiently. So far, these teams have focused on the business side of the division. Work needs to be done to address the integration of the manufacturing side. The Business Warehouse

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26 The business warehouse is being developed and implemented throughout the corporation in functional phases such as financial, sales, etc. The users in the sales group reported that the business warehouse had greatly improved the reporting capability in the Sales department. The users reported that the warehouse was quicker, more user friendly, and easier to understand. Comments from two of the sales people interviewed are listed below. Its the same information as what SAP has, but its in a much more friendly environment. The warehouse gives us the flexibility that SAP lacks Since the business warehouse has been such a success in the functional areas that it has been implemented, the organization is planning on moving all of the reporting from SAP to the warehouse. Therefore, all of the report and data gathering will come from the business warehouse instead of coming from the SAP system directly. During the follow up interviews, the users were positive about the progression of the ERP system and about the strides that had been made over the past year. The overall feeling was that the ERP system was becoming a system that the division could use to improve their business unit. Managements steps to allow the users to take the lead in developing in the use of the ERP system was being seen and felt by the users. Conclusion and Discussion The high cost and lengthy implementation process to customization ERP systems leads most organizations to align their business processes with the ERP provided functionality rather than attempting to customize the package to meet their own current requirements and processes. Forrester Research reported that only 5% of organizations

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27 among Fortune 1000 companies who purchased ERP applications customized them to match their business processes (Davis, 1998). While customization is not impossible, the expansive scope and connectivity of all associated functions make customization quite costly (Davenport, 1998; Davis, 1998). It may be prudent for organizations to consider customization if expected benefits are to be achieved. The organization will have to justify the cost of customization, but it could be that the cost of the ERP system cannot be justified without the additional customization expensive. This study shows the importance of looking past a technically successful implementation. In other words, a technically successful ERP implementation does not imply that an organization will achieve the desired or expected benefits. With systems as large and in-depth as enterprise systems, it is necessary to look past the vendor information to get a true picture of the achievable benefits, and the steps necessary to attain those benefits such as management sponsorship and user-led devilment processes. The results of this study shed light on the importance of user empowerment to infuse new IT uses into an organization, and that the IS department should not necessarily lead the implementation of such IS during the infusion stage. The results could also point to the fact that not only should different industries be treated differently but also even different divisions within the same organization should be treated differently. Alternatively, organizations should at least empower the systems users to lead the development of the system at their division, to innovate the system as necessary to fit their needs, thus supporting the infusion of the system into the organization. For example, just because company A has a successful system and achieved the desired benefits does not mean that company B could achieve the same

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28 results with the same configuration. The success of such a system is greatly dependent on user innovation, user persistence, management support, and continued perseverance. This study shows a very different picture than previous literature on this subject. Even though the data comes from first hand experiences, limitations do exist with the study. First, this is a case based research project. It focused on one division from one corporation. Therefore, further research is needed to improve the generalizability of the findings from this study. Second, cost reductions and cost issues were not considered in this study although implications can be drawn from the users comments. Lastly, there were a limited number of follow up interviews that were conducted. This was due to the early stages of the business warehouse development and implementation. Future research should work on overcoming these limitations. In conclusion, this study opens up several research questions to address. Do the achievable benefits from an ERP system different by industry and even by division within a single corporation? What are the actual benefits a company can expect to achieve from an ERP system? Are the achievable benefits from an ERP system significant to a companys bottom line? Are the costs of customization justifiable and necessary to achieve the desired business benefits? What further steps are necessary to fully obtain organizational benefits from an ERP system?

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29 REFERENCES Al-Mashari, M., Al-Mudimigh, A. and Zairi, M. (2003). Enterprise Resource Planning: A Taxonomy of Critical Factors. European Journal of Operational Research. 146, pp. 352364. Baets, W. and Venugoapl, V. An IT. Architecture to Support Organizational Transformation, in Information Technology and Organizational Transformation, Galliers, R. D. and Baets, W. R. J. Wiley, 1998, pp. 195-222.

Barker, T. and Frolick, M.N. (2003). ERP Implementation Failure: A Case Study. Information Systems Management. 20 (4), pp. 43-49.

Baskerville, R. (1999). Enterprise Resource Planning and Knowledge Management: Convergence or Divergence? Georgia State University Working Paper.

Boudreau, M-C., and D. Robey. Enabling Organizational Transition with Complex Technologies: Understanding Post-Implementation Learning. Proceedings from The Academy of Management Conference, Washington, DC. 2001.

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Cavaye, A. (1995). Participation

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involving users outside the organization. Journal of Information Technology. 10 (3), pp. 135-150.

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30 Cody, W., Kreulen, J., Kirshna, V., and Spangler, W. (2002) The Integration of Business Intelligence and Knowledge Management. IBM Systems Journal, 41 (4), pp. 697-713.

Cooper, R.B., and Zmud, R.W. (1990). Information Technology Implementation Research: A Technological Diffusion Approach. Management Science. 36, pp. 123-139.

Davenport, T. (1998) Putting the Enterprise into the Enterprise System. Harvard Business Review, 76(4), 121-31.

Davenport, T.H. (2000) In Search of ERP Paybacks, Computerworld, 34(8), 42-3.

Davis, J. (1998). Scooping up Vanilla ERP: Off-the Shelf Versus Customized Software. InfoWorld, 20(47), pp. 1-4.

Earl, M. J. The Management Strategies for Information Technology, Prentice-Hall, London, 1998.

Fichman, R.G., and Kemerer, C.F. (1997). The Assimilation of Software Process Innovations: An Organizational Learning Perspective. Management Science. 43(10), pp. 1345-1363.

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31 Gattiker, T. and Goodhue, D. (2000) Understanding the Plant Level Costs and Benefits of ERP: will the ugly duckling always turn into a swan?. Preceedings of the 33rd Hawaii International Conference on System Sciences, Hawii.

Gattiker, T. and Goodhue, D. (2002) Software-drive Changes to Business Processes: An Empirical Study of Impacts of Enterprise Resource Planning (ERP) Systems at the Local Level. International Journal of Production Research. Vol. 40, Issue 18, pg 4799.

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Gory, G. and Scott Morton, M. (1971) A Framework for Management Information Systems. Sloan Management Review. 55-70.

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Hitt, L. Information Technology and Firm Boundaries: Evidence from Panel Data. Information Systems Resource. 1999, 134-149.

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32 Industrial ERP: Poised for Growth? (2002). Modern Materials Handling. pp. 15.

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33 Lee, Z. and Lee, J. (2000) An ERP Implementation Case Study From a Knowledge Transfer Perspective. Journal of Information Technology. 15, pp. 281-288.

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34 Rackoff, N., Wiseman, C. and Ulrich, W. (1985) Information Systems for Competitive Advantage; Implementation of a Planning Process. MIS Quarterly.

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35 Shaw, B. (1985) The Role of the Interaction Between the User and the Manufacturer in Medical Equipment Innovation, R&D Management 15 (4), pp. 283-292.

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36 Urban, G. and von Hippel, E. (1988) Lead User Analyses for the Development of New Industrial Products. Management Science, 33, pp. 569-582.

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37 Von Hippel, E. (1986) Lead Users: A Source of Novel Product Concepts. Management Science, 32 (7), pp.791-805.

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38 APPENDICES

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39 A STUDY OF INFORMATION SYSTEMS BENEFITS INTERVIEW Purpose: Organizations want employees to be empowered and to be able to access data as needed in daily operations. Decision-making occurs on a daily if not an hourly basis. The purpose of this questionnaire is to study the decision making process throughout an organization and to determine the positives and negatives currently taking place due to the information systems. Task: In the survey you will be asked to describe the decisions that you face everyday, how you make decisions, how you use the information systems, and how the information systems assist you in the decision making process. Please be as specific as possible. Directions: These questionnaires are confidential. Please listen fully to each question and answer with as much detail as possible. This is critical for the analyses of these questionnaires. Personal Background: This section contains items regarding your personal characteristics. They are very important for statistical purposes. 1) Describe your primary career field. 2) Approximately how many years have you worked here? How long have you worked at your present job? 3) What is your highest level of education? 4) What is your age group? [21-25] [26-30] [31-35] [36-40] [41-45] [46-50] [51-55] [56-60] [61-65] 5) What is your gender? Female______ Male______

Questions: 1) Do you frequently deal routine business decisions? How much time? 2) Do you frequently deal ill-defined or non-routine business decisions? How much time? 3) Do you frequently deal questions that have not been asked before? How much time? 4) When you are dealing with a business problem what steps do you take to solve it? 5) How much time do you spend gather data in to a useful form? 6) How much time do you spend analyzing the data obtained? 7) How much time do you spend building a knowledge base from the analysis?

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40 8) Do these problems deal with business function overlap? 9) What are the positives when identifying business problems with regard to the current information systems? 10) What are the negatives when identifying business problems with regard to the current information systems? 11) When generating alternatives for the business problem, what are the positives with regard to the current information systems? 12) When generating alternatives for the business problem, what are the negatives with regard to the current information systems? 13) When evaluating the alternatives for the business problem, what are the positives with regard to the current information systems? 14) When evaluating the alternatives for the business problem, what are the negatives with regard to the current information systems? 15) When selecting the solution for the business problem, what are the positives with regard to the current information systems? 16) When selecting the solution for the business problem, what are the negatives with regard to the current information systems? 17) What would you like to be able to get from the information systems you operate for decision support? 18) What information would be must helpful for the decisions you need to make? 19) How would you like to view the information for decision support? 20) In the future, what additional benefits could be derived from a decision support system?

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