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ENTERPRISE RESOURCE PLANNING

MI0029

Name: Roll No:

Rajesh Ratilal Vaya


540911421

Subject Name: Enterprise Resource Planning Subject code: Assignment: MI0029 SET I

Q.1 A.1

Write a scenario to explain the failure of ERP implementation? An ERP system is an integrated software solution, typically offered by a vendor as a package that supports the seamless integration of all the information flowing through a company, such as financial, accounting, human resources, supply chain, and customer information (Davenport, 1998). ERP implementation is a lengthy and complex process, and there have been many cases of unsuccessful implementations (Parr and Shanks, 2000), which have had major impacts on business performance. As ERP plays a very important role in business, ERP implementation and its critical issues, success factors and implementation problems have been investigated in the past (Parr and Shanks, 2000; Majed et al., 2003 The Case Studies The four cases were selected based on the following criteria: firstly, they had completed the ERP implementation process: the details of implementation problems associated with each phase of the ERP life cycle will be discussed in the Appendix section (available upon request from the first author); secondly, they encountered failures and the ERP systems were unable to support their business operations after the ERP go-live date; thirdly, the project team, top management and consultants were willing to share the problems they encountered during the ERP implementation process and identify what they considered were their critical failure factors for our research. As ERP implementation failure experience is not a pleasant experience, in order to protect the participating companies, their information was treated with strict confidentiality. Thus, the project team, top management and consultants were confident in sharing their problems during the case studies. ERP

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ENTERPRISE RESOURCE PLANNING

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related documents could be disclosed for research purposes. An overview of each case is presented in this section, followed by a detailed comparison of four cases. Subsequently, a summary of ERP implementation critical failure factors is presented.

Q.2

A. What is the use of transparency and information access? B. What are the limitations of ERP systems? How ERP packages help in overcoming theses limitations

A.2

It should first be noted that companies that fail to utilize systems such as ERP may find themselves using various software packages that may not function well with each other. In the long run, this could make the company less efficient than it should be. There are a number of processes that a company may need to integrate together. One of these processes is called design engineering. When a company is in the process of designing a product, the process of actually creating it is just as important as the end result. ERP can be useful in helping a company find the best design process. Another area where ERP can be useful is order tracking. When a company receives orders for a product, being able to properly track the orders can allow the company to get detailed information on their customers and marketing strategies. If different software packages are being used, this data may not be consistent. Perhaps one of the most important advantages of ERP is its accounting applications. It can integrate the cost, profit, and revenue information of sales that are made, and it can be presented in a granular way. Enterprise Resource Planning can also be responsible for altering how a product is manufactured. A dating structure can be set up which can allow the company to be informed of when their product should be updated. This is important, because it will allow the company to keep better track of their products, and it can allow the products themselves to be produced with a higher level of quality. Another area where ERP can be an indispensable tool is the

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ENTERPRISE RESOURCE PLANNING

MI0029

area of security. It can protect a company against crimes such as embezzlement or industrial espionage. An Enterprise Resource Planning system replaces the need for different interfaces between two or more applications within an organization. It provides an integrated database to store various parts of a system and increases standardization and reporting capacities. However, with all the advantages that ERP offers, there are a number of disadvantages as well. Perhaps one of the biggest disadvantages to this technology is the cost. At this time, only large corporations can truly take advantage of the benefits that are offered by this technology. This leaves most small and medium sized businesses in the dark. A number of studies have shown that the biggest challenges companies will face when trying to implement ERP deals with investment. The employees must be continually trained on how to use it, and it is also important for companies to make sure the integrity of the data is protected. ERP system implementation, end-user training and data migration requires money and time. In a study done through December 2005 to December 2009 on 1600 ERP implementations worldwide by Panorama Consulting Group, it was found that ERP project costs average around $6.2 million, or 6.9 percent of annual revenue of an enterprise. Employees put time from their regular hours into training, therefore the business lost during this time adds to the cost. ERP systems can be complex to use for some people. And for effective implementation, all users must undergo rigorous training. Donald Burleson of Burleson Consulting points to a training report by Gartner Consulting that found that companies with a training budget of less than 13 percent of overall cost are likely to have less successful ERP projects compared to those who spend at least 17 percent on training. ERP systems are sometimes too inflexible to suit the specific work flows and processes of a company. This can make implementation and adaptation difficult. When a business is growing by acquiring other businesses, there might be a clash of interests between the different systems in place at the acquirer and target ends.

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ENTERPRISE RESOURCE PLANNING

MI0029

Customizing ERP systems for such varied interests and combining them as one is a major challenge. ERP has a number of limitations. The success of the system is fully dependent on how the workers utilize it. This means they must be properly trained, and a number of companies have attempted to save money by reducing the cost of training. Even if a company has enough money to implement ERP, they may not be able to successfully use it if they do not have enough money to train their workers on the process of using it. One of the biggest problems with ERP is that it is hard to customize. Very few companies can effectively use ERP right out of the box. It must be modified to suit their needs, and this process can be both expensive and tedious. Even when a company does begin changing the system, they are limited in what they can do.

Q.3 A.3

What is the use of JIT approach to any organization? Just-in-Time (JIT) is a production strategy that strives to improve a business' return on investment by reducing in-process inventory and associated carrying costs. JustIn-Time production method is also called the Toyota Production System. To meet JIT objectives, the process relies on signals or Kanban between different points in the process, which tell production when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality. JIT inventory systems expose hidden causes of inventory keeping, and are therefore not a simple solution for a company to adopt. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science

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Benefits Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies). The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management. Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed. Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training. Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important. Supplies come in at regular intervals throughout the production day. Supply is synchronized with production demand and the optimal amount of inventory is on hand at any time. When parts move directly from the truck to the point of assembly, the need for storage facilities is reduced. Problems Just-in-time operation leaves suppliers and downstream consumers open to supply shocks and large supply or demand changes. For internal reasons, Ohno saw this as a feature rather than a bug. He used an analogy of lowering the water level in a river to expose the rocks to explain how removing inventory showed where production flow was interrupted. Once barriers were exposed, they could be removed. Since one of the main barriers was rework, lowering inventory forced each shop to improve its own quality or cause a holdup downstream. A key tool to manage this weakness is production leveling to remove these variations. Just-intime is a means to improving performance of the system, not an end. Very low stock levels means shipments of the same part can come in several times per day. This means Toyota is especially susceptible to flow interruption. For that

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reason, Toyota uses two suppliers for most assemblies. As noted in Liker (2003), there was an exception to this rule that put the entire company at risk because of the 1997 Aisin fire. However, since Toyota also makes a point of maintaining high quality relations with its entire supplier network, several other suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. Thus, a strong, long-term relationship with a few suppliers is better than short-term, price-based relationships with many competing suppliers. Toyota uses this long-term relationship to send Toyota staff to help suppliers improve their processes. These interventions have been going on for twenty years and have created a more reliable supply chain, improved margins for Toyota and suppliers, and lowered prices for customers. Toyota encourages their suppliers to use JIT with their own suppliers.

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