mba thesis

i

PARISGRADUATE SCHOOL OF MANAGEMENT

International Executive MBA

I hereby make this declaration that this is my own and does not contain any

unacknowledged work from other sources.

Print Name: JOSEPH ANNAN

STUDENTS REGISTRATION No: WA 09001

TITLE OF DISSERTATION:

“CHALLENGES OF IMPLEMENTING ENTERPRISE RESOURCE PLANNING (ERP) PROJECTS IN MANUFACTURING INDUSTRIES”

WORD COUNT: 18,796

DATE DISSERTATION DUE: 15/11/10

DATE OF SUBMITTING DISSERTATION: 05/11/10

………………………………………….

STUDENT’S SIGNATURE / DATE

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Students Declaration

I hereby declare that the project entitled “Challenges of implementing ERP systems in

manufacturing industries” submitted to Paris Graduate School of Management, is a record of

an original work done by me under the guidance of Dr. F.Y Banuro, Head of Operations and

Management information systems of University of Ghana Business School and Mr. Bernard

Dodoo, ERP Project Manager / Consultant of Ibit soft limited. This project work has not

formed the basis for the award of any degree, diploma, associate ship, fellowship or any other

similar titles.

……………………..

Signature of Student

Supervisor’s Certification

This is to certify that this research project was carried out by Mr. Joseph Annan under my

direct supervision in partial fulfillment of the requirements for the award of International

Executive MBA of Paris Graduate School of Management.

………………………………..

Supervisor Name & Signature

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APPROVAL PAGE

This thesis is hereby approved for defense as part of the requirement for the award of the

International Executive MBA.

……………………………………….

Prof. Mike Wooi

Head, International Executive MBA

Paris Graduate School of Management

France

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ABSTRACT

Improved communications has seen growth in industrial activities globally. In an effort to

improve their operations many companies are implementing information systems in particular

enterprise resource planning systems (ERP). Companies are faced with a number of

complexities when implementing these systems in industries and considerable research has

been conducted on critical success factors associated with ERP implementations, however

very little research has been conducted on manufacturing industries specifically. This

research utilizes a single case study to identify the critical success factors, critical challenges

and the most challenging departments in a manufacturing setting during ERP implementation.

The identified factors and challenging departments provide a guideline for similar companies

and also a foundation for further investigation.

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ACKNOWLEDGEMENT

I would like to express my gratitude to my supervisors, Dr F.Y.Banuro the Head of Operations and

Management Information Systems, University of Ghana and Mr. Bernard Dodoo an ERP project

Manager/Consultant with Ibit Soft Ghana for their support and guidance during the writing of this

thesis. Also I would like to thank my family especially my Dad and Mum, Mr. and Mrs. Annan for

their words of encouragement throughout the thesis. Last but not the least I would like to thank God

for being there for me when I needed him the most.

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TABLE OF CONTENTS

Students Declaration ............................................................................................................. ii

Supervisor’s Certification...................................................................................................... ii

ABSTRACT ........................................................................................................................ iv

ACKNOWLEDGEMENT..................................................................................................... v

TABLE OF CONTENTS ..................................................................................................... vi

LIST OF TABLES............................................................................................................... ix

LIST OF FIGURES .............................................................................................................. x

LIST OF ABBREVIATIONS............................................................................................... xi

INTRODUCTION............................................................................................................. xii

PREAMBLE....................................................................................................................... xii

STATEMENT OF PROBLEM........................................................................................... xiii

SPECIFIC OBJECTIVES .................................................................................................. xiii

RESEARCH QUESTION .................................................................................................. xiii

THE PURPOSE AND SIGNIFICANCE OF THE STUDY ................................................ xiv

PURPOSE.................................................................................................................................. xiv

SIGNIFICANCE ........................................................................................................................ xiv

RESEARCH METHODOLOGY........................................................................................ xiv

SCOPE AND LIMITATION OF STUDY.......................................................................... xiv

ORGANIZATION OF STUDY........................................................................................... xv

1.0 GENERAL OVERVIEW ............................................................................................. 1

1.1 Brief History on ERP............................................................................................................... 1

1.2 Growth of the Enterprise Software Industry ............................................................................. 2

1.3 TOP 5 ERP SOFTWARE VENDORS................................................................................ 3

1.4 OVERVIEW OF ERP ..................................................................................................... 5

1.5 ADVANTAGES AND DISADVANTAGES ERP ................................................................... 6 1.5.1 Industry Wise Advantages ...............................................................................................................6 1.5.2 Advantages in a Corporate Entity.....................................................................................................7 1.5.3 Disadvantages .................................................................................................................................8

1.6 COMPONENTS OF ERP ........................................................................................................ 8

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1.9.1 How can ERP improve a company’s business performance?................................................ 14

2.0 ARTICLE REVIEW ................................................................................................... 16

2.1 ERP IMPLEMENTATION.................................................................................................... 16 ERP implementation process..................................................................................................................19 Strategic ................................................................................................................................................19 Tactical..................................................................................................................................................20

2.2 CRITICAL SUCCESS FACTORS IN E.R.P IMPLEMENTATION....................................... 20 Top Management ...................................................................................................................................22 Business Plan and Vision .......................................................................................................................22 Re-engineering Business Process............................................................................................................23 Project Management and Project Champion............................................................................................23 Teamwork and Composition...................................................................................................................24 ERP System Selection ............................................................................................................................24 User Involvement...................................................................................................................................25 Education and Training ..........................................................................................................................25

2.3 CHALLENGES OF ERP IMPLEMENTATION .................................................................... 26

2.4 BENEFITS OF ERP .............................................................................................................. 28

3.0 CASE STUDY – NEXANS KABELMETAL GHANA LIMITED (NKG)................ 30

3.1 HISTORY ............................................................................................................................. 30

3.2 MISSION OF NKG ............................................................................................................... 30

3.3 VISION OF NKG.................................................................................................................. 30

3.4 COMPANY PROFILE .......................................................................................................... 31 3.4.1 NKG PRODUCTION PROGRAM ................................................................................................31 3.4.2 INDUSTRY SCOPE......................................................................................................................32 3.4.3 MAJOR COMPETITORS OF NKG IN GHANA...........................................................................32 3.4.4 STAFF STRENGTH AND DEPARTMENTS................................................................................32 3.5.1 NKG Strengths rests on: ................................................................................................................33

3.6 SEARCH FOR SOLUTION .................................................................................................. 33

3.7 ERP SELECTION ................................................................................................................. 34

3.8 IMPLEMENTATION OF ERP BY EXTERNAL CONSULTANT (Cbb Business Ltd).......... 35

4.0 METHODOLOGY...................................................................................................... 38

4.1 OVERVIEW ................................................................................................................. 38

4.2 RESEARCH OBJECTIVES .......................................................................................... 38

4.3 RESEARCH DESIGN................................................................................................... 39

4.4 PARTICIPANTS........................................................................................................... 42

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4.8 RESULTS AND DISCUSSIONS .................................................................................. 47 4.8.1 SECTION 1...................................................................................................................................49 4.8.2 SECTION 2...................................................................................................................................53 4.8.3 SECTION 3...................................................................................................................................56 4.8.4 SECTION 4...................................................................................................................................62 4.8.5 INTERVIEWS ..............................................................................................................................65

5.0 CONCLUSION AND RECOMMENDATIONS ................................................... 67

REFERENCES.................................................................................................................. 69

APPENDIX A.................................................................................................................... 72

APPENDIX B .................................................................................................................... 76

APPENDIX C .................................................................................................................... 77

APPENDIX D .................................................................................................................... 78

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LIST OF TABLES

Table 1 CRITICAL SUCCESS FACTORS REFERENCE TABLE................................................. 21

Table 2 SHOWS THE STATUS OF THE 35 QUESTIONNAIRES THAT WERE ISSUED OUT IN NEXANS KABELMETAL. ............................................................................................................ 47

Table 3 REPRESENTS QUESTIONS FROM SECTION 3 WHICH WERE SHORTENED IN THE PRESENTATION......................................................................................................................................................... 49

Table 4 FRIEDMAN’S TEST FOR CRITICAL SUCCESS FACTORS. .......................................................... 50

Table 5 MEAN RANK OF CRITICAL SUCCESS FACTORS........................................................ 51

Table 6 RANKING OF CSF................................................................................................................ 52

Table 7 FRIEDMAN TEST FOR CRITICAL CHALLENGE FACTORS ......................................................... 54

Table 8 QUESTIONS IN SECTION 3 OF QUESTIONNAIRES .................................................................... 56

Table 9 FRIEDMAN’S TEST TO RANK DEPARTMENTS AT NKG .......................................................... 62

Table 10 NKG DEPARTMENTS ......................................................................................................... 63

Table 11 DESCRIPTIVE STATISTICS FOR SECTION1............................................................................ 76



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LIST OF FIGURES

Figure 1 A GRAPHICAL REPRESENTATION OF TABLE 2 ............................................ 48

Figure 2 GRAPHICAL REPRESENTATION OF CRITICAL SUCCESS FACTORS RANKED BY

FRIEDMAN’S TEST ................................................................................................................ 51

Figure 3 GRAPHICAL REPRESENTATION OF CRITICAL CHALLENGES RANKED BY FRIEDMAN’S TEST .................................................................................................................................... 55

Figure 4 MEAN RANK OF CRITICAL CHALLENGES .................................................... 55

Figure 5 GRAPH SHOWING RESPONSES FOR Q1 OF SECTION 3................................................. 57





Figure 10 GRAPH SHOWING RESPONSES FOR Q6 OF SECTION 3............................................... 59




Figure 14 GRAPHICAL REPRESENTATION OF NKG DEPARTMENTS RANKED BY FRIEDMAN’S TEST .................................................................................................................................... 63

Figure 15 MEAN RANKING OF NKG DEPARTMENTS............................................................... 63

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LIST OF ABBREVIATIONS

TMS- TOP MANAGEMENT SUPPORT

UTE- USER TRAINING & EDUCATION

BPR- BUSINESS PROCESS RE-ENGINEERING

TC- TEAM COMPETENCE

PM- PROJECT MANAGEMENT

OC- ORGANISATIONAL COMMUNICATION

CGO- CLEAR GOALS & OBJECTIVES

CM- CHANGE MANAGEMENT

PC- PROJECT CHAMPION

VS- VENDOR SUPPORT

UIP- USER INVOLVEMENT & PARTICIPATION

EC- EXTERNAL CONSULTANT

CT- COMPATIBILITY OF TECHNOLOGY

MG & SS- MARKETING & SALES

FE- FINANCE

WE- WAREHOUSE

C.S.F- CRITICAL SUCCESS FACTORS

C.C- CRITICAL CHALLENGES

PN- PRODUCTION

PG- PURCHASING

AN- ADMINISTRATION

ERP- ENTERPRISE RESOURCE PLANNING

NKG- NEXANS KABELMETAL GHANA

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INTRODUCTION

PREAMBLE

A recent IT innovation that is enhancing organizational performance through providing end-

to-end connectivity is Enterprise Resource Planning (ERP) Systems. ERP attempts to

integrate all departments and functions across a company into a single computer system, it is

one of the fastest growing segments in the software market, and one of the most important

developments in information technology in the last decade. ERP systems have become vital

strategic tools in today’s competitive business environment. In spite of rendering great

services, ERP encounters a great deal of challenges during its implementation stage. ERP

projects generally involve a voluminous investment of time and money. The amount of cash

required would even be more over whelming on the management given the fact that such an

outlay is not a guarantee to the said benefits but subject to proper implementation procedures.

This research study attempts to identify the main ERP challenges and the critical success

factors encountered during implementation. The project topic is about the challenges of

implementing ERP projects in manufacturing industries, specifically Nexans Kabelmetal

Ghana that recently implemented such a project. The objectives and significance of the

project will be stated. The potential challenges that are encountered will be discussed. It will

cover the key activities that constitute the implementation of the ERP project and the major

business drivers behind the ERP implementation. Literature on ERP implementation and

critical success factors will be reviewed after which a case study methodology will be used

identify the major challenges encountered as well as benefits derived from its

implementation. The concluding part will show how this study can guide similar ERP project

implementations in other organizations.

This project will show how with the right integration plan and supporting ERP in place an

organization can streamline and improve its core processes.

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STATEMENT OF PROBLEM

Although ERP projects render a great deal of benefits, their implementation process involves

a voluminous investment of time and money which does not necessarily yield the said

benefits due to implementation challenges. It has become very critical for companies to

understand the possible challenges involved in ERP projects as well as the key success

factors needed to overcome the challenges.

SPECIFIC OBJECTIVES

1. To determine the critical challenges encountered in implementing ERP in Nexans.

2. To identify the most challenging departments.

3. To determine the critical factors needed for a successful implementation.

4. Identify ERP impact in Nexans.

5. To rank the critical successes and critical challenges identified in order of importance

using Friedman’s rank test.

6. To highlight the critical success factors and challenges that would need extra attention

during similar ERP implementation.

RESEARCH QUESTION

What are the challenges of implementing ERP projects in manufacturing industries?

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THE PURPOSE AND SIGNIFICANCE OF THE STUDY

PURPOSE The purpose of this research is to provide a set of guidelines for a successful ERP

implementation in manufacturing industries that decide to embark on an ERP project. It will

also iterate the real time benefits that could be derived from such a project.

SIGNIFICANCE

This study will benefit small and medium enterprises wishing to implement ERP.

The support from the literature and experiences of Nexans Kabelmetal Ghana during

the ERP implementation will add to existing literature on the subject area.

It will also be a source of reference for future work in the subject area.

RESEARCH METHODOLOGY

A single case study methodology will be used due to limited time to address the statement of

problem. Data will be collected through questionnaires and interviews, the data collected will

then finally be analysed by using statistical software.

SCOPE AND LIMITATION OF STUDY

Due to limited time this project was based on a single case study methodology, therefore

findings may be limited to mostly small and medium enterprises. The major hurdle was

capturing the worker’s views from all departments in a relatively short time at the time when

they were focusing on completing a large production order. However, the survey proved to be

an effective method of gathering data given the restricted time frame.

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ORGANIZATION OF STUDY

The study will be organized into five chapters.

The first chapter will give the general overview of .RP systems.

The second chapter shall review relevant literature on ERP implementation, benefits and

critical success factors.

The third chapter will examine NKG as a case study to determine specific objectives.

The fourth chapter will commence with research methodology, going down to presentation

and analysis of data and then finally it will end with discussions and interpretations of

findings.

The fifth chapter will include recommendations, summary and conclusion of the thesis.

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CHAPTER 1

1.0 GENERAL OVERVIEW

1.1 Brief History on ERP Information in large organizations is often spread across numerous homegrown computer

systems, housed in different functions or organizational units. While each of these

“information islands” can ably support a specific business activity, enterprise-wide

performance is hampered by the lack of integrated information. Further, the maintenance of

these systems can result in substantial costs. With the advent of E-Business and the need to

leverage multiple sources of information within the enterprise, ERP software has emerged as

a major area of interest for many businesses. Back-office enterprise software has its roots in

the 1960s and 1970s, as computing power became affordable enough for companies to

automate materials planning through Material Requirements Planning (MRP) and financial

processing through payroll and general ledger software. MRP was developed in the early

1960s at IBM and had become the principal production control paradigm in the U.S.

MRP consists of a set of procedures that convert forecasted demand for a manufactured

product into a requirements schedule for the components, subassemblies and raw materials

comprising that product.

MRP is limited to controlling the flow of components and materials, and does not lend itself

to more complete production control and coordination. The next generation of manufacturing

software, known as MRP II, was developed to address this shortcoming and to further

integrate business activities into a common framework. MRP II divides the production

control problem into a hierarchy based on time scale and product aggregation.

It coordinates the manufacturing process, allowing a variety of tasks such as capacity

planning, demand management, production scheduling and distribution to be linked together.

However, even MRP II is primarily a specialized tool designed to serve the needs of the

manufacturing function within a company. Its data and processes are not integrated with

those in the rest of the enterprise, such as marketing, finance and human resources.

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ERP entered the scene to facilitate information sharing and integration across these different

functions and to operate the enterprise more efficiently and effectively, using a unified data

store and consistent processes.

1.2 Growth of the Enterprise Software Industry

A number of trends drove the growth of the enterprise software market.

First, the integrated information architecture improves business performance. Once a major

company in an industry adopts enterprise software, competitors may be compelled to follow

suit to stay competitive.

Second, there was a major shift towards the use of packaged applications. This was partly

related the European Union’s conversion to a single currency, which induced companies to

replace their legacy systems with packaged software effectively.

Third, many companies were abandoning legacy software due to the demands of electronic

commerce and front office applications on the front end and linking to suppliers and business

partners at the back end. Similarly, the emergence of ERP-based “vertical applications” that

address the enterprise software needs of a specific industry have caused many companies to

purchase ERP packages.

Finally, rapid advances in computer and software technologies combined with the explosive

growth of the Internet led many companies to rethink their business practices, to put a greater

emphasis on their use of IT, and to invest in more robust enterprise architecture.

Competition in the enterprise software business is fierce, with hundreds of software

producers fighting for market share. The market has both companies that offer an integrated

suite of applications and those that address specific business process. The first group consists

of five companies namely J.D.Edwards, Baan, Oracle, PeopleSoft, and SAP AG. This group

was also known as JBOPS for short. These companies attempted to create “end-to-end”

solutions for the entire enterprise, hoping that corporate customers will purchase almost all of

their critical enterprise applications from a single vendor. The reasoning behind this strategy

is twofold.

3

First, it is increasingly important for enterprise applications to communicate and interact

with each other seamlessly. For example, a company can commit to a more reliable delivery

time if its sales order entry and manufacturing software packages are integrated; if the same

vendor produces all of the software, applications can integrate more tightly.

Second, customers may prefer to rely on one major vendor for most of their software needs,

because having a single vendor simplifies contracting and relationship management and

creates a single point of accountability for all software problems. On the other hand, scores of

companies that make innovative products compete to provide software solutions for customer

relationship management, supply chain management, electronic commerce and purchasing.

These companies offer software that can be “bolted on” to the existing ERP backbone and,

together, provide a flexible “best of- breed” portfolio of solutions in different areas. Players

in the area of customer relationship management include Siebel Systems, Clarify, Remedy,

Epiphany, Broadvision and Trilogy. These firms produce software to help with customer

support, product configuration, one-to-one marketing and sales-force automation. Leaders in

ecommerce software are too numerous to list. Some of the larger ERP companies are

acquiring smaller players to fill the gaps in their “end-to-end” solutions, whereas others focus

on developing interfaces at the front and back end of their ERP offerings.

1.3 TOP 5 ERP SOFTWARE VENDORS

2. SAP AG: The leading ERP package vendor, with a 32% market share in 1999, is SAP

AG (SAP stands for “Systeme, Anwendungen, und Prudukte in Datenverarbeltung” or

Systems, Applications and Products in Data Processing). SAP AG was founded in

Germany in 1972 by five engineers. They wanted to produce integrated business

application software for the manufacturing enterprise. Seven years later, the company

launched its first enterprise software, R/2, which was designed around a centralized,

mainframe-based database. SAP’s client/software product, R/3, was introduced in

1992 and quickly came to dominate the ERP software market. In 1999, SAP AG was

the third-largest independent software vendor in the world, serving over 11,000

customers (with more than 20,000 installations) in over 100 countries. Leveraging its

leading position in the ERP market, SAP developed vertical, industry-specific

4

business solutions for 19 industries. These industry “solution maps” provide

functionality from SAP and its partners for complete, end-to-end industry- specific

processes. SAP followed the lead of focused niche players, and in 1999 it extended its

ERP offering to include customer relationship management, data warehousing and

supply chain management modules. SAP recast its entire set of offerings around the

Internet, borrowing the “business portal” concept (called mySAP.com Workplace in

SAP parlance) to organize all information around the user’s role in the enterprise, and

adding functionality for business-to-business and business-to-consumer electronic

commerce. SAP started the mySAP.com Marketplace, an electronic inter-company

trading community for buying, selling and collaborating within and across industries.

3. Oracle: The heavyweight of the database software market, Silicon-Valley-based

Oracle is the world’s second largest software company. It has built a solid enterprise

application business, which accounted for $2.5 billion of the firm’s $9.3 billion 1999

revenues. Second to SAP in the enterprise software market, Oracle applications serve

over 5,000 customers in 140 countries. Oracle has been a leader in refocusing its ERP

solutions around the Internet, and it launched a barrage of electronic-commerce and

Internet-based business-to-business software applications while the other JBOPS

companies were slow to react to the changing marketplace. Further, Oracle was the

first JBOPS Company to integrate front-office applications with its ERP offering.

4. PeopleSoft: Started as a software firm for human resource management in 1987,

PeopleSoft gradually expanded its software to cater to other corporate functions. The

company’s revenues grew to $1.3 billion in 1998, up forty-fold from $32 million in

1992 (sales are expected to remain flat in 1999). PeopleSoft’s ERP system provides

enterprise solutions for finance, materials management, distribution, supply chain

planning, manufacturing and human resources. In 1996, PeopleSoft acquired Red

Pepper, a producer of supply chain management software and in 1999 it acquired

Vantive for its customer relationship management offering.

5. J.D. Edwards: Founded in 1977 by three partners from an accounting firm, Denver

based J.D. Edwards addresses business processes in finance, manufacturing,

distribution/logistics and human resources, and encompasses the entire supply chain

from planning and scheduling through execution. Growing from $120 million in

5

revenues in 1992 to $944 million in 1999, the software maker has served over 5,000

customers in over 100 countries. Its One World system is considered to be more

flexible than its competitors’, and the company made headway in smaller enterprises.

And, rather than build its own customer relationship management system, J.D.

Edwards developed tight integration with Siebel’s leading offering.

6. Baan: The Baan Company was founded in The Netherlands in 1978 making financial

software. Baan’s products have been simpler to use than SAP’s, leading to the

company’s growth in the early nineties. Today, the company operates in 80 countries,

serving more than 2,800 customers. Baan’s net revenues have increased from $47

million in 1992 to $736 million in 1998. The Baan Series is its primary enterprise

system, which incorporates a variety of functionalities from sale order management

and manufacturing to supply chain management. Since October of 1998, Baan

suffered a series of setbacks including management turmoil, accounting irregularities,

multiple-quarter losses and CEO turnover.

1.4 OVERVIEW OF ERP

ERP is a software architecture that facilitates the flow of information among the different

functions within an enterprise. Similarly, ERP facilitates information sharing across

organizational units and geographical locations. It enables decision-makers to have an

enterprise-wide view of the information they need in a timely, reliable and consistent fashion.

ERP provides the backbone for an enterprise-wide information system. At the core of this

enterprise software is a central database which draws data from and feeds data into modular

applications that operate on a common computing platform, thus standardizing business

processes and data definitions into a unified environment. With an ERP system, data needs to

be entered only once.

The system provides consistency and transparency across the entire enterprise. A primary

benefit of ERP is easier access to reliable, integrated information. A related benefit is the

6

elimination of redundant data and the rationalization of processes, which result in substantial

cost savings.

The integration among business functions facilitates communication and information sharing,

leading to dramatic gains in productivity and speed. Cisco Systems, for example, harnessed

ERP to help it become the market leader in the global networking industry. Cisco’s ERP

system was the backbone that enabled its new business Model (Global Networked Business)

based on the use of electronic communications to build interactive, knowledge-based

relationships with its customers, business partners, suppliers and employees. In the process,

Cisco doubled in size each year and reaped hundreds of millions of dollars in both cost

savings and revenue enhancements.

1.5 ADVANTAGES AND DISADVANTAGES ERP

The advantages and disadvantages of ERP is an interesting Study. The foremost advantage of

an ERP system is bringing down the costs and saving the valuable time which would have

otherwise been wasted in procedural maneuvers and unwanted delays. Different software

programs maintained in the departments were proving to be a great hurdle. Since ERP is a

uniform platform it ensures that there is no discrepancy in the information that is processed.

1.5.1 Industry Wise Advantages

Manufacturing Sector: It speeds up the whole manufacturing process thereby

bringing about a significant amount of cost reduction. It also helps improve upon

production planning as well as production stock replenishment.

Distribution and retail Sector: It enables the status of the goods to be accessed by

coordinating the actions of supply chains. It provides both warehouse and logistics

with up to date information at all times to ensure customer satisfaction.

Transport Sector: It provides the possibility of transporting commodities through

online transactions.

Project Service Sector: It facilitates faster compilation of project reports.

7

The advantage of ERP is best understood by studying them under different categories.

Hence the next paragraph presents information on corporate as a whole because the

advantage of ERP systems in a company is different when compared industry wise.

1.5.2 Advantages in a Corporate Entity

Effective use of ERP helps a corporate entity to reduce lead-time and on-time in-full delivery

(OTIF) due to the following advantages:

Reduction in manufacturing cost achieved also as a result of more efficient use of

people and equipment as well as productivity. ERP also helps in making the

maximum use of technological advancements

It also gives the organization information on current status of sales orders, inventory

control, production and finance. The sales department for example will be able to

respond to a customer query immediately by making out the status of the production

order.

It also enables the accounts department personnel to act independently. They don’t

have to depend on the technical persons every time to record to financial transactions.

It ensures quicker processing of information and reduces the burden of paperwork. It

helps in serving the customers efficiently by way of prompt response and follow-up

and disposing queries immediately and facilitating the payments from customers with

ease and well ahead of stipulated time.

It also helps in having a say over your competitor and adapting to the whims and

fancies of the market and business fluctuations. Swift movement of goods to rural

areas and in lesser-known places has now become a reality with the use of ERP. The

database of ERP is user friendly and helps do away with unwanted ambiguity. It is

suitable for global operations as it encompasses all domestic jargons, currency

conversions, diverse accounting standards and multilingual facilities. It helps control

data and facilitates the necessary contracts to acquire competitive advantage. In short

it is the perfect scientific and commercial epitome of the verse “Think local” and “Act

global”.

8

1.5.3 Disadvantages

In spite of rendering marvelous services ERP is not free from its own limitations. ERP calls

for a voluminous and exorbitant investment of time and money. The amount of cash required

would even be looming on the management given the fact that such an outlay is not a

guarantee to the said benefits but subject to proper implementation, training and use. In the

ever expanding era of information theft ERP is no exception. It is alarming to note the time

taken to implement the system in the organization. This means large amounts of workers

have to shun their regular labor and undertake training. This not only disturbs the regular

functioning of the organization but also runs the organization in the huge risk of losing

potential business in that particular period. Further, when one thinks of this information reach

in the hands of undeserving persons who could do more than misuse it, it is evident that there

is no way of ensuring secrecy of information and larger chances of risk will be generated as

long as they are in the public domain.

1.6 COMPONENTS OF ERP

To enable the easy handling of the system, ERP has been divided into the following Core

subsystems:

Sales and Marketing - This module implements functions of order placement, order

scheduling, shipping and invoicing and other marketing functions

Master Scheduling - The Master Scheduling module provides management with the

visibility of future load, inventory investment, production, and delivery commitments.

Material Requirement Planning -It is a production planning and inventory control

module used to manage manufacturing processes.

Capacity Requirement Planning - It is the process of determining the production

capacity needed by an organization to meet changing demands for its products.

Bill of Materials - A structured list of the items used in making a parent assembly that

reflects the actual production process in terms of timing and quantities consumed.

Purchasing - It provides complete purchasing control to generate and track purchase

orders from purchase order issue to receipts.

Shop floor control - It is a module used to control all activities on the shop floor.

9

Accounts Payable/Receivable - are used by businesses to record sales for which they

are not immediately paid, or to record bills that they have received, but might not pay

until later.

Logistics - It is used to manage a database containing the logistics equipment and

supplies.

Asset Management - It is fully integrated with other financial modules to provide the

mechanism to accurately record and track the state’s investment in infrastructure,

capital purchases, historically significant items and valuable donations. It is also used

to add assets, adjust and transfer assets, process depreciation, conduct physical

inventory, and report on agency assets.

Financial Accounting – Performs all the necessary accounting functions of the firm.

1.7 IMPORTANT ISSUES TO CONSIDER BEFORE IMPLEMENTATION

Before integrating business functions, managers must consider several important issues that

will help them decide whether an ERP integration is the right choice for their organization.

These pertinent issues are classified under the following categories: fundamental issues,

organizational change process, people, and the different approaches to implementing ERP.

1.7.1 Fundamental Issues

First, managers must consider the fundamental issues of system integration by analyzing the

organization’s vision and corporate objectives. For instance, does management fully

understand its current business processes, and can it make implementation decisions in a

timely manner? Is management ready to undertake drastic business process reengineering

efforts to yield dramatic outcomes? Is management ready to make any changes in the

structure, operations, and cultural environment to accommodate the options configured in the

ERP system?

Is the organization financially and economically prepared to invest heavily in an ERP

implementation?

Next, management needs to decide on the key related implementation and business issues and

how to proceed. Certainly, ERP is not suitable for companies that are experiencing rapid

10

growth and change in an unstable environment are undergoing change in the corporate

management and philosophy, or that will be experiencing merger or liquidation in the near

future.

Understandably, there will be more foreseeable system integration problems if one of the

merging companies is in the midst of an ERP upgrade because it must deal with scalability, a

new IT infrastructure, and a different corporate culture simultaneously. Further, ERP

integration is not recommended for companies which require a lot of flexibility to succeed or

which manufacture products that are constantly changing (4). Similarly, companies that have

very little experience with formal information systems or have constantly changing

information systems requirements will not benefit from an ERP implementation.

Finally, organizations need to exploit future communication and computing technology to

integrate the ERP system with e-business applications. Oftentimes, additional new hardware

and specialized professionals are needed to run the powerful software system. Depending on

the size of the company and the modules installed, the cost of implementation can range from

one million to five hundred million dollars, and will take as long as two years for a mid-size

company and seven years for a large, multinational corporation to complete.

1.7.2 People

People-related issues such as corporate philosophy and leadership style can play an important

role in the ERP implementation process. Research has concluded that active top management

support and commitment are essential to the success of any system implementation.

Frequently, executive councils and steering committees consisting of top managers are

developed to plan and manage the IT initiatives (8). Such senior managerial involvement

tends to increase the optimization of IT business values.

Employees can be quite wary of any kind of change in the business processes, particularly

during periods of economic downturn. Ill-trained employees who fight the changes in the

business process tend to be poor performers. Therefore, to increase the chance of a successful

ERP implementation and to reduce users’ resistance to change, end users, especially those

who are very knowledgeable with the operations, must be involved in all stages of the

implementation process. Employees must also be educated about the ERP installation. Such

educational endeavor should include a concise introduction to the basic concepts and

architecture of ERP systems, including actual screen shots of the function modules. During

11

these training sessions, it is important to discuss the managerial issues involved and to build a

basic understanding of the integration concepts prior to the actual installation of the ERP

system. Further, any Business-to-

Business initiatives, reengineering projects, alliances, and the introduction of new

technologies should also be addressed.

Project managers must take charge of the implementation process at all times. They must

oversee the reengineering of the key business processes, reassign job responsibilities,

restructure the organization’s chart, and redefine work relationships. Further, they must also

learn how to manage the software vendors and any outside consultants.

1.7.3 The Organizational Change Process

ERP implementation requires organizations to reengineer their key business processes in

fundamental ways, revamping old ways of conducting business, redefining job

responsibilities, and restructuring the organization. For major multinational corporations

(MNC), the ERP systems must be customized to address global issues where different

countries have different ways of doing business, and to incorporate country-specific business

practices pertaining to accounting, tax requirements, environmental regulations, human

resources, manufacturing, and currency conversion into the integrated systems. While

integrating the information systems across various countries, three types of misfits (relating

to data, process, and output) can occur due to incompatibilities between software

functionality and organizational requirements as well as differences in cultural and regulatory

environments (9). The unique context of each country in which an organization operates must

be carefully enmeshed into the traditionally Western-biased business practices inherent in the

ERP systems.

Diese, et al. (2000) describes an eight-level process that managers can use to manage change.

The first step is to create a comprehensive change vision and to make the vision operational.

Then, a change strategy is defined to assess readiness change within the organization, to

select the best change configuration, and to establish change governance. The third process is

to develop leadership, in order to lead the change program and to develop leadership

capability.

12

Commitment from teams is built through communication, managing resistance, and

transferring of knowledge and skills. The fifth process is to manage employee and

stakeholders’ performance by establishing needs, and implementing performance

management and people practices. Business benefits are delivered through the building of

business cases, and quantifying and sustaining benefits. The next process is to develop

culture in the organization by understanding the current culture, and then to design the target

culture and to implement cultural change. The final process is to design the organization by

understanding the current organization, and then to design the target organization and to

implement organizational change.

1.7.4 Different Approaches to Implementing ERP

Another important question for managers to consider is how much to implement. Depending

on the tasks and processes involved in the installation process, there are several approaches to

implementing ERP. For instance, is the organization embarking on an ambitious journey of

revamping the whole enterprise using a complete integration, or is the organization

employing a franchising strategy of implementing a partial integration across a few divisions

with uncommon processes? The complete integration approach was quite popular during the

1990s among the Fortune 500 corporations because ERP implementation was touted as the

perfect solution to the Y2K problem. On the contrary, the franchise approach is employed by

large or diverse companies that do not have many common processes across the

organizations. Individual ERP software packages with its own database are installed in each

business division, while common processes sharing common information are installed across

the organization. This is a good strategy for companies who would like to ease into ERP

implementation, by starting with a pilot installation and slowly moving into other business

units. Another approach is for small companies interested in experimenting with ERP, by

starting with a few key processes or a particular module. Such “canned” processes would

require little reengineering, thereby maintaining minimal disruption to the daily business

operations. However, such IT endeavors seldom result in extensive benefits to the

organizations.

The bigger the organization, the more complex the business processes are and the greater the

difficulties in implementing the ERP system. Organizations considering a partial

implementation must deal with the problems associated with using multiple vendors. They

13

also need to consider simultaneous versus piecemeal implementation because of the ripple

effect caused by decisions made in one module. In general, in order to maintain a smooth

transition of the business processes and operations, simultaneous integration of the whole

system, instead of functional or departmental integration, is highly recommended.

1.8 ERP CHALLENGES

When implementing ERP systems, most organizations will encounter different kinds of

challenges. A problematic ERP implementation in Mid-August of 2002 costs Agilent

Technologies Inc. $105 million in revenue and $70 million in profits. The major problems

encountered by Agilent include the need to convert all orders in the legacy systems to an

Oracle friendly format, problems in the configuration process, and the management’s

inability to prepare for a fundamental transformation of the company’s key business

processes. A-DEC Inc., a dental equipment maker located in Newberg, Oregon, installed

Baan’s ERP system to integrate manufacturing, distribution and financial information

processing. Unfortunately, the company lost a lot of business because employees were falling

behind on processing orders, building products, and shipping goods to dealers. Many of the

people-related problems include employees not understanding the newly installed system,

which subsequently led to low performance; end users resisting and fighting the changes in

the business process; and end users receiving insufficient training. In 1999, a failed company-

wide rollout installation of SAP AG’s

ERP applications caused teddy bear maker Russ Berrie and Co.$10.3 million and three years.

Subsequently, in 2002, Russ Berrie and Co. implemented a new departmental phased

installation using J.D. Edwards & Co.’s OneWorld Xe suite of ERP, CRM, and financial

applications.

1.9 THE ERP IMPLEMENTATION PLAN

The flowchart in Figure 1 depicts several activities that must be performed before

implementing an ERP system. First, managers must conduct a feasibility study of the current

situation to assess the organization’s needs by analyzing the availability of hardware,

software, databases, and in-house computer expertise, and make the decision to implement

ERP where integration is essential . They must also set goals for improvement and establish

objectives for the implementation, and calculate the break-even points and benefits to be

14

received from this expensive IT investment. The second major activity involves educating

and recruiting end users to be involved throughout the implementation process.

Third, managers will form a project team or steering committee that consists of experts from

all functional areas to lead the project. After a decision is made, a team of system consultants

will be hired to evaluate the appropriateness of implementing an ERP system, and to help

select the best enterprise software provider and the best approach to implementing ERP. In

most situations, the consultant team will also recommend the modules that are best suited to

the company’s operations (manufacturing, financials, human resources, logistics, forecasting,

etc.), system configurations, and Business-to-Business applications such as supply-chain

management, customer relationship management, e-procurement, and e-marketplace.

The importance of adequate employee and manager training can never be overestimated. IT

analysts usually recommend that managers reserve 11% of the project’s budget for training.

Different kinds and different levels of training must be provided to all business stakeholders,

including managers, end users, customers, and vendors, before the system is implemented.

Such training are usually customized and can be provided by either internal or outside

trainers.

The system installation process will address issues such as software configuration, hardware

acquisition, and software testing. Data and information in the databases must be converted to

the format used in the new ERP system and servers and networks need to be upgraded.

System maintenance will address issues and problems that arise during operations. A post

implementation review is recommended to ensure that all business objectives established

during the planning phase are achieved. Needed modifications are tackled during this phase

too.

1.9.1 How can ERP improve a company’s business performance?

ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way

your company takes a customer order and processes it into an invoice and revenue—

otherwise known as the order fulfillment process. That is why ERP is often referred to as

back-office software. It doesn’t handle the up-front selling process (although most ERP

vendors have developed CRM software or acquired pure-play CRM providers that can do

this); rather, ERP takes a customer order and provides a software road map for automating

the different steps along the path to fulfilling it. When a customer service representative

15

enters a customer order into an ERP system, he has all the information necessary to complete

the order (the customer’s credit rating and order history from the finance module, the

company’s inventory levels from the warehouse module and the shipping dock’s trucking

schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When

one department finishes with the order it is automatically routed via the ERP system to the

next department. To find out where the order is at any point, you need only log in to the ERP

system and track it down. With luck, the order process moves like a bolt of lightning through

the organization, and customers get their orders faster and with fewer errors than before. ERP

can apply that same magic to the other major business processes, such as employee benefits

or financial reporting.

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CHAPTER TWO

2.0 ARTICLE REVIEW

This chapter reviews articles on ERP projects in four categories.

First and foremost articles on implementation issues of ERP will be reviewed, the review will

continue with articles on key success factors, then third section reviews articles on identified

challenges of ERP implementation and finally articles on the benefits of ERP will be

reviewed.

2.1 ERP IMPLEMENTATION

The implementation of an ERP system in an organisation is a very complex one. The

implementation of such systems is difficult and involves high costs, as well as considerable

time and resources. Organizations contemplating such a project must be aware of the

necessary commitments. Many researchers have proposed stage models of ERP

implementation (Bancroft et al.1998; Davenport, 2000; Langenwalter, 2000; Mandal and

Gunasekaran, 2003; Umble et al., 2003; Gupta et al., 2004; Yusuf et al. 2004 and Kakouris

and Polychronopoulos, 2005) in order to provide guidelines for successful implementation. It

is thus argued that the stages of ERP implementation can be characterized as a journey with

six stages.

The first stage conducts feasibility studies. At this stage, it is vitally important to

examine the practicability of introducing an ERP system into an organization.

The second stage in implementing ERP in an organization is to plan for the system;

this stage should be conducted in an early stage.

The third stage is assessing the various systems available to an organization.

The fourth stage is where organizations should select the right ERP package that

supports their business needs. This is very important in the early stages of ERP

implementation. As no ERP package is completely suitable for any specific business.

17

The fifth stage is the pre-implementation stage, this where the whole project is

planned out along with schedules and deadlines, resources are allocated and all

business is restructured to fit an ERP package (Gupta et al., 2004).

The final stage is the post-implementation process. Following the implementation of

the system, an organization should engage in a post-implementation review.

Nicolaou (2004) classified post-implementation activities for ERP systems into two

major tasks.

1. In the first task, a company may experience a 3 to 6 month productivity

decline, which is overcome by redefining jobs, establishing new procedures,

fine-tuning ERP software, and taking charge of the new streams of

information created by the ERP system.

2. The second task, which lasts from 6 to 18 months, involves skills

development, structural changes, process integration, and add-on technologies

to expand ERP functionality.

Campbell, Doug (2000) wrote an article on Successful ERP Implementation Strategies. In

this article, the author points out an important factor to a successful ERP implementation

project, from an organizational perspective, that is gaining top-down project support. This

includes the CEO and the most important managers of the company. The author argues that

the critical nature and broad potential impact of the ERP system demand attention from the

highest levels of the organization. Anything less simply will not do. Mousseau (1998) wrote

an article titled ERP Projects Call for Multi-Talented Managers. This article identifies

characteristics of good project managers in ERP implementation projects. The author is an

experienced ERP consultant at Ernst & Young. According to him, ERP project managers can

be effective if they are able to do the following:

• Be credible in technical and business knowledge;

• Stay calm under stress and make quick and effective decisions;

• Compromise flexibly when appropriate to accomplish project goals;

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• Manage expectations of managers and end-users properly, i.e., balancing the need to

stimulate project team members and keep project manageable and within scope;

• Demonstrate good people skills in dealing with various factions and coaching own team

members;

• Market the project’s benefits to the entire organization and create positive perceptions of the

project.

Project management can stay only a theory without capable project managers. That’s why the

article is significant to this study because the practices of effective project managers often

equate good project management techniques. In this article, these techniques primarily relate

to expectations, scope, as well as the environment surrounding an ERP project. An ERP

system is much more than just another IT project. Selection of ERP systems must be based

primarily on business needs. Project management does not operate in a vacuum. Working

closely with the CEO and key managers of the company helps the implementation team

understand the scope, needs and expectations of stakeholders, and is therefore critical to ERP

project success. Meanwhile, ERP system is a piece of computer software after all. As a result,

the involvement of the organization’s IT department is necessary. However, a balance must

be stricken to avoid placing too much emphasis on ERP’s IT aspect. The British Computer

Society (2000) published an article on IT Projects titled “sink or swim? “. In this article a

survey was conducted to “identify whether these (IT project) successes are just exceptions, to

understand where failure can occur, to examine whether a single issue repeatedly causes

failure, and to discover what skills a project manager needs to give a project the best chance

of success”. Out of the 1027 IT projects surveyed, only 130, or 12.7% were completed

successfully. The top 3 reasons cited for failure with respect to management activities are

poor scope management, poor project management and poor change management. As to

where the failures occur, the most problematic stages are requirements definition and

implementation. Among the critical success factors cited, survey respondents list clear and

detailed requirements, clear project change control and strong business commitment at the

top. Planning and vendor selection are both crucial foundations to ERP implementation

success. Brown, Jennifer (2001). Wrote a short article based on an interview with an ERP

implementation consultant.

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The main focus is on working with ERP vendors before and during the implementation. The

key points and their relationship to project management problem areas are as follows:

1. Companies should plan carefully before searching for ERP systems. This is equivalent to

establishing a scope of project before getting started.

2. A vendor should be selected only after a thorough review process and their promises must

be documented in writing. As the article points out, implementation consulting can cost as

much as or more than the software licenses. Therefore it’s important to know exactly what

will be delivered before entering into a contract with the vendor. Building on the principle of

managing scope, this point also deals with the relationship between quality and cost of an

ERP implementation project.

Holland and Light (1999a) performed their research by a company case, although they did

not mention CSFs directly, when the analyzed the case. Elements include IT legacy, business

legacy, IT strategic review, project management strategy, business process reengineering

strategy, and IT strategy. In their paper, besides the previous business and management

factors, the IT factors are emphasized, though these IT factors are different from later

researchers’ views. Since Holland and Light only noticed that the legacy system are no longer

efficient, the systems are fragments and need to be combined and improved to meet new

business necessary. They did not comment on the impact of legacy system to implement new

ERP systems. Later Holland and Light (1999b) design a model to group the CSFs into

strategic and tactical factors as shown below.

ERP implementation process

Strategic

• Legacy systems

• Business vision

• ERP strategy

• Top management support

• Project schedule and plans

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Tactical

• Client consultation

• Personnel

• BPC and software configuration

• Monitoring and feedback

• Communication

• Trouble shooting

2.2 CRITICAL SUCCESS FACTORS IN E.R.P IMPLEMENTATION

Critical success factors have become a very important topic when it comes to successful ERP

implementations.

Table1 presents the main factors revealed from the previous articles and have been found to

be vital for successful ERP implementation:

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Table 1 Critical Success Factors Reference table

Critical Success Factor References

Top management support Al-Mashari et al. (2003);

(Umble et al., 2003); Zhang et

al. (2002)

Business plan and vision Loh and Koh (2004);

Schwalbe, (2000); Somers and

Nelson (2004); Nah (2003)

Re-engineering business process Davison (2002); Hammer and

Champy (2001); Somers and

Nelson (2004); Nah (2003);

Murray and Coffin (2001)

Effective project management and project

champion

Zhang et al.,( 2002); Somers

and Nelson (2004); Remus

(2006); Loh and Koh, (2004)

Teamwork and composition Loh and Koh (2004); Al-

Mashari et al., (2006); Remus

(2006); Nah (2003); Rosario

(2000)

ERP system selection Wei and Wang (2004);

Shehab et al., (2004);

Everdingen et al. (2000);

Sprott (2000)

User involvement Esteves et al., (2003); Zhang

el at (2002)

Support Education and training (Woo 2007); Nah et al.,

(2003); Zhang et al. (2002)

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Top Management

Top management support has been identified as the most important success factor in ERP

system implementation projects. According to Zhang et al. (2002) top management support in

ERP implementation has two main aspects: providing leadership and providing the necessary

resources. Additionally, the roles of top management in ERP implementation comprise of

developing an understanding of the capabilities and limitations, establishing reasonable

objectives for ERP system, exhibiting commitment, and communicating the corporate

strategy to all employees (Umble et al., 2003).

Al-Mashari et al. (2003) argued that top management support does not end with initiation and

facilitation, but must extend to the full implementation of an ERP system. Furthermore, top

management support should provide direction to the implementation teams and monitor the

progress of the project.

Business Plan and Vision

A clear business plan and vision is needed to guide the project throughout the ERP life cycle

(Loh and Koh, 2004). Project management identifies three competing and interrelated goals

namely; scope, time, and cost goals (Schwalbe, 2000). The primary stage of any project

should begin with a conceptualization of the goals and possible ways to achieve these goals.

Additionally, goals should be explained so they are specific and operational, and to indicate

the general directions of the project (Somers and Nelson 2004).

Nah (2003) stated that one of the biggest problems ERP project leaders face comes not from

the implementation itself, but from expectations of board members, senior staff, and other

key stakeholders. It is important to set the goals of the project before even seeking top

management support. Many ERP implementations have failed as a result of lacking clear

plans (Somers and Nelson 2004).

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Re-engineering Business Process

Hammer and Champy (2001) defined Business process re-engineering (BPR) as “the

fundamental rethinking and radical redesign of business processes to achieve dramatic

improvements in critical, contemporary measures of performance, such as cost, quality,

service and speed”. Somers and Nelson (2004) stated that BPR plays a significant role in the

early stages of implementation. Furthermore, it is important in the acceptance stage and tends

to be less important when the technology becomes routine.

Nah (2003) noted that reengineering should continue with new ideas and updates to take full

advantage of the ERP system when the system is in use. Organizations should be willing to

change their businesses to fit the software in order to reduce the degree of customizations

(Murray and Coffin, 2001).

Many organizations have made unnecessary, complex customizations to ERP software

because the people making the changes do not fully understand the organization’s business

practices (Nah 2003). According to Somers and Nelson (2004) the new business model and

reengineering that drives technology choice is an enabling factor that can give to ERP

success. Furthermore, Davison (2002) argued that ERP implementation often requires

changes in job descriptions and essential skills.

Project Management and Project Champion

ERP systems implementation is a set of complex activities thus organizations should have an

effective project management strategy to control the implementation process (Zhang etal.,

2002).

Project management activities span from the first stage of the ERP life cycle to closing it.

Project planning and control is a function of the project’s characteristics such as project size,

experiences with the technology, and project structure (Somers and Nelson, 2004).

Remus (2006) noted that project champion is one of the most important factors in the

implementation of ERP systems. Project champions should own the role of change champion

for the life of the project and understand the technology as well as the business and

24

organizational context. Furthermore, project champion must attempt to manage resistance

towards positive change in the old system (Loh and Koh, 2004).

Teamwork and Composition

The ERP team should involve the best people in the organization (Loh and Koh 2004). Al-

Mashari et al (2006) observed that the success of projects is related to the knowledge, skills,

abilities, and experiences of the project manager as well as the selection of the right team

members. Also the team should not only be technologically competent but also understand

the company and its business requirements (Remus 2006).

An ERP project involves all of the functional departments in an enterprise. It demands the

effort and cooperation of technical and business experts as well as end-users (Loh and Koh

2004). Both business experts and technical knowledge are important for success (Nah 2003).

The sharing of information between the implementation partners is essential and requires

partnership trust (Loh and Koh 2004). Moreover, the team should be familiar with the

business functions and products so that they know what needs to be improved to the current

system (Rosario 2000).

ERP System Selection

The selection of a suitable ERP system is a challenging and time-consuming process. Wei

and Wang (2004) stated that there is no one single ERP package that could provide all the

functionalities required for the business. There are various ERP packages in the market with

similar functionality but different designs including, SAP, Oracle, JD Edwards and Baan

(Shehab et al., 2004). Therefore, an organization must select an appropriate vendor that is

able to provide a flexible ERP system. Various authors identified important criteria that need

to be taken into account when selecting a new ERP system. For example, a study by

Everdingen et al. (2000) stressed that the ERP system selected has to closely fit with most of

the current business procedures. Additionally, the system has to be flexible, user-friendly and

easy to implement. Another similar research study by Sprott (2000) reported that

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applicability, integration, adaptability and upgradeability are essential factors that have to be

considered in ERP adoption.

User Involvement

User involvement is one of the most cited critical success factors in ERP implementation

projects. User involvement increases user satisfaction and acceptance by developing realistic

expectations about system capabilities (Esteves et al., 2003). User involvement is essential

because it improves perceived control through participating in the whole project plan.

According to Zhang el at (2002) there are two areas for user involvement when the company

decides to implement an ERP system: user involvement in the stage of definition of the

organization’s ERP system needs, and user participates in the implementation of ERP

systems.

Education and Training

Educating and training users to use ERP is important because ERP is not easy to use even

with good IT skills (Woo 2007). Nah et al., (2003) argued that sufficient training can assist

increase success for ERP systems. However, lack of training may lead to failure. According

to Zhang et al. (2002) the main reason for education and training is to increase the expertise

and knowledge level of the users within the company. To adapt to today’s challenging and

competitive business environment, organizations are implementing ERP systems to achieve a

capability to plan and integrate enterprise-wide resources in order to shorten lead times, and

to be more responsive to customer demands.

Most of the articles stressed that each organization must assess itself, to see if it is ready for

ERP. Many organizations that attempt to implement ERP systems run into difficulty because

such organizations may not be ready for integration and the various departments within it

have their own agendas and objectives that conflict with each other.

Despite the fact that ERP integrates and optimises the flow of information across the entire

organization’s supply chain, the implementation of such software packages can be costly, and

26

may even require reengineering of the entire business operations.

Combinations of factors have to be considered when undertaking an ERP implementation

including: top management support, business plan and vision, re-engineering business

process, effective project management and project champion, careful package selection

process, teamwork and composition, user involvement and also education and training.

2.3 CHALLENGES OF ERP IMPLEMENTATION

Smyth (2001) observed that after most large industrial companies have installed ERP, the

managerial concern is moving to the long-term ERP challenges related to maintenance,

support, continuous improvement and changes, continuous training, continuous learning,

spreading the systems throughout the company beyond first installation, using the system to

its complete potential, and realizing the expected benefits. Although these activities can be

considered as part of the post-implementation phases, they are tightly connected to the way

the initial implementation phases were carried out (Markus et. al. 2000). For instance, how

extensively the ERP was assimilated over initial implementation stages in order to support

continuous improvement and the deployment to further departments and locations (Markus

and Tanis 2000). These types of concerns have resulted in organizations revisiting the

business case for ERP (James and Wolf 2000). An interesting subject related to the

assimilation of the ERP is looking at the implementation as a learning process. The ERP

implementation success metrics should include indicators of organizational learning (Markus

2000). However, little attention has been given to this concern. By looking at the ERP

literature, key learning challenges can be derived. Such challenges are presented below:

1. Learning about skills for carrying out ERP implementation activities. In the terms given by

Kim (1993), this refers to abilities for producing action (know-how). This encompasses skills

such as modelling business processes, configuring and tailoring the system, training end-

users, using the system, and rolling out the system to other locations.

2. Learning about an organization's own business processes and the business practices

embedded in the ERP. Users do not necessarily fully understand the business processes

27

constructed around their own functions. A major learning challenge in designing and

modeling business processes is to understand how the organization actually runs its processes

and what its needs are. At the same time, as the ERP project moves onward, users have to

learn about ERP functionality. It follows that the implementation process requires both

comprehensive understanding of the organizational needs and detailed knowledge of a

complex system (Soh 2000).

3. Learning about the ERP integration philosophy; since cross-functional integration is still a

new concept to many organizations (Markus 2000), users can effectively understand and

apply this concept only after working thorough several learning cycles. Without a clear

understanding of the integration concept, diffusion occurs slowly and ineffectively. In fact,

failure to completely understand how ERP affect business processes appears to be responsible

for many failure ERP implementations (Crowley 1999).

Long-term requirements and challenges are new concerns that require more attention from

scholars and specialists. Mainly, it is the research firms (e.g. AMR Research) that are

considering the topic in depth. AMR's report, signed by Shepherd (2001), proposes the

following important missions to support the long-term ERP requirements and challenges in

organizations:

1) Continue the deployment of the ERP to additional departments, divisions, and locations,

2) Reconfigure and enhance the applications to support changing business processes and

organization structures,

3) Provide continuing education and training for existing and new employees,

4) Monitor new releases and add-on products and evaluate their potential benefit to company,

5) Coordinate internal and external technical support resources,

6) Plan and manage the rollout of periodic release upgrades. For Shepherd (2001)

The above activities should be part of a full-time function and it should not be part of the IT

function. This new function might be also responsible for business process design and

maintenance. In the light of the above evidence it is plausible to claim that the ERP

implementation research is a novel research field with a huge potential and opportunities. In

its short life, considerable progress and important findings have occurred. Most of the

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existing research has borrowed models, theories and constructs from the IS implementation

research (e.g. factors research, emergent process theories, and task-technology fit). This has

allowed ERP implementation research to evolve quickly. However, our understanding of

ERP implementation is yet incomplete. Some criticisms are as follows: There is not a

consistent definition of ERP implementation. Implementation does not seem to have the same

interpretation for everyone. In many cases implementation is considered as constituted just by

the project stage. In addition, other authors have their own model of implementation stages.

The ERP implementation research remains fragmented with most studies following the

factors research stream and descriptive case studies. In addition, some works are focused on a

single stage or phase of the implementation process (e.g. mainly the project phase). Little

research attempts to generalize the findings. In fact, most of the research works are focused

on just one ERP provider (e.g. SAP).

Few works have considered the challenges around the ERP implementation. (E.g. new larger

issues related to diffusion, learning, continuous improvements, and infusion of the ERP

throughout a company). It is not yet known, for example, how widely these technologies have

been diffused and assimilated in organizations, how learning process occurs, how extensively

they are used inside organizations, or how effectively they are used.

2.4 BENEFITS OF ERP

Since the investment and collective efforts required to implement and run ERP systems are

significant to any organisation, the fundamental question of the ERP system’s ultimate

benefits remains a key priority to many organisations. The articles under this theme mainly

address these fundamental questions: Is an ERP system of any value to an organisation? What

benefits does an ERP system brings to an organisation? How do we measure the value of an

ERP system? These articles tend to investigate these issues in a more systematic and rigorous

fashion backed with some statistical evidence, beyond simple enumerating commonly

believed benefits.

The benefits that ERP systems may generate are multifaceted: operational benefits, financial

benefits, benefits for investors, user satisfaction, etc. Sometimes, the value may be measured

by observing market reactions to the mere announcement of the ERP project.

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The value assessment methods can be numerous and complex. For example, the benefits may

be measured by cost savings, return on investment, asset turnover, return on assets,

perceptions by the market, etc. Some articles address relationships between different

measurements while others focus on longitudinal study of the ERP system on company’s

performance.

As more companies have implemented ERP systems and more is known about the

implementation processes and the questions on the benefits of ERP systems seem to be

investigated more often and rigorously. This is an indication that the practices and

understanding of the field have matured enough to warrant some serious reflections on its

fundamental questions.

Several research studies have identified various important benefits the ERP systems bring to

organizations. O’Leary (2000) stated that an ERP system integrates the majority of the

business processes and allows access to the data in real time. Furthermore, ERP improves the

performance level of a supply chain by helping to reduce cycle times (Gardiner et al., 2002).

There are also some intangible benefits that an organization may enjoy by implementing an

ERP system including, better customer satisfaction, improved vendor performance, increased

flexibility, reduced quality costs, improved resource utility, improved information accuracy

and improved decision-making capability (Siriginidi, 2000).

30

CHAPTER 3

3.0 CASE STUDY – NEXANS KABELMETAL GHANA LIMITED (NKG)

3.1 HISTORY

The plant of NKG was opened on 31st July 1970, after feasibility study conducted by a

German company, Planungsgruppe Juergen Richter, with the backing of the National

Investment Bank (NIB) of Ghana.

After the study that also involved Kabel und Metalwerke (Kabelmetal) of Hanover, Germany,

the group recommended that wire drawing and cable manufacture would be a viable

enterprise in Ghana, hence the establishment of NKG.

3.2 MISSION OF NKG

The mission of NKG is to achieve and maintain a reputation for the quality in the

manufacture of electric and telecommunications cables, wires and conductors for domestic,

industrial and general use both in the Ghanaian and international markets.

3.3 VISION OF NKG

The vision of the company is to become the leading producer of electrical cables in Africa

31

3.4 COMPANY PROFILE

Nexans is a global player in the infrastructure, industry, building and Local Area Network

(LAN) markets. As a worldwide leader in the cable industry, it offers an extensive range of

cables and cabling systems to raise industrial productivity, improve business performance,

enhance security, enrich the quality of life, and assures long-term network reliability.

Nexans has industrial presence in 39 countries and commercial activities worldwide, Nexans

employs 22,700 people and had sales in 2009 of 5 billion euros.

In Ghana Nexans is represented by the subsidiary company NKG, the leading cable

manufacturer in this country and the first in West Africa.

3.4.1 NKG PRODUCTION PROGRAM

PVC insulated and PVC insulated and sheathed single core and multi core cables

Unarmoured PVC insulated and sheathed underground cables

High temperature and normal temperature PVC insulated flexible cables

Aerial Bundled Cables (ABC) - Cable de facade

Solid and stranded bare copper and bare aluminium conductors

Overhead line conductors

Welding Cables 10mm2 - 240mm2

Automobile Cables

Earth wires

Binding wires

Internal/External Telephone cables up to 30 pairs

Drop wires for telephone connections

Telecom Jumper wires

Garden hoses

Armoured XLPE insulated and PVC sheathed underground cables

32

3.4.2 INDUSTRY SCOPE

NKG produces cables that are categorized under the following product segments:

INDUSTRIAL – Cables used for installations in industries.

TELECOMMUNICATION – Cables used by telecommunication companies as communication lines.

POWER – Cables used to for power transmission.

BUILDING - Cables used for domestic and house wiring.

3.4.3 MAJOR COMPETITORS OF NKG IN GHANA

TROPICAL CABLES AND CONDUCTORS

REROY CABLES

3.4.4 STAFF STRENGTH AND DEPARTMENTS

NKG has staff strength of 109 workers.

It has 7 departments.

PRODUCTION & MAINTENANCE

MARKETING & SALES

PURCHASING

FINANCE

WAREHOUSE

ADMINISTRATION / HUMAN RESOURCE

QUALITY CONTROL

33

3.5 COMPETITIVENESS

COST – Affordable pricing and flexible payment terms ensures keen competitiveness.

Negotiated part payment is available and the remaining amount is comfortably spread

over a period without any interest.

QUALITY- NKG sets a high priority of meeting the Standards of the International

Electro-technical Commission, Delivering on Schedule and in full and using materials

of the highest quality.

RESPONSIVENESS- Ability to produce any type of cables/conductors within our

production program at short notice. Customers need not stock different types of

products, which could be very expensive. If there are any cables types requested

which are not in its local production program they are ready to import them from any

factory of its mother company.

3.5.1 NKG Strengths rests on:

Highly Qualified and Motivated Staff

The use of First Grade Raw Materials

The Continuous Development of our Production Processes and Product Scope

The Continuous Review and Improvement of our Quality Management System

Global Expertise and Support

3.6 SEARCH FOR SOLUTION

After many years in business, inventory was growing faster than revenue, on-time delivery was slipping and a general lack of information was negatively impacting financial and operational performance. The solution for NKG which is a small-sized manufacturer was Microsoft Navision.

34

Below are the main reasons that propelled the decision:

CORPORATE DECISION- After several years of experience in cable manufacturing, NKG corporate had realized that in order to have a consolidated group, all its subsidiaries must work in the same way to ease knowledge transfer and also to increase efficiency by receiving all the benefits of using an ERP. In view of this, corporate decided to develop a software called cable solution and embedded it into the Microsoft ERP system Navision. This system had been tailored to encompass all the processes in a cable manufacturing industry. This was also a way for the corporate office to ensure that the best practices that yielded high returns would be practiced globally by process re-engineering to suit the ERP system. It also ensured that at anytime they could monitor their investment from their offices overseas with just a click on the button.

TO ELMINATE THE MULTIPLE SYSTEMS THAT WERE BEING USED –

NKG was running multiple systems within the company; this made reconciliation

very cumbersome during stock-taking. The multiple systems also slowed monthly

report generation. Some of the systems in use were:

WAREHOUSE- Oracle

FINANCE- Systematic

PRODUCTION- Excel

TO HAVE A COMPUTER SYSTEM MONITORING MANUFACTURING-When

Nexans decided to implement an ERP system that had a manufacturing module, they

wanted an integrated ERP solution that would support their growth and address a

number of operational problems.

.

3.7 ERP SELECTION

Nexans Corporate was responsible for the selection of the ERP software. The corporate office made their selections with respect to the size of the plant. Small to mid-sized subsidiaries were to use Microsoft Navision, whereas the large subsidiaries used S.A.P. The systems were judged based on overall functionality, ease of use, scalability and underlying technology. In order to ensure a flexible response to changing market conditions, NKG must become

35

customer-focused by supplying customized products and services that match specific customer profiles

.

3.8 IMPLEMENTATION OF ERP BY EXTERNAL CONSULTANT (Cbb Business Ltd)

System analysis and design

Cbb business Ltd. first conducted Business Requirement Analysis with NKG

to define all business requirements for the system. This included:

Assessing the computing infrastructure and platform requirements

Defining system operations processes

Defining functional business requirements

Assessing current data models and how they are used strategically within

NKG.

The system requirements is then analyzed to determine the computing infrastructure

requirements, systems operations processes, interfaces to external services,

interfaces to internal systems and the natural language to be used (screens, reports,

help files, and documentation). The system requirements provided:

A clear understanding of NKG vision and objectives for the final product.

A clear understanding of the required business functionality

A clear list of all requirements for the system.

The goal of the design phase was to blueprint the final solution. This phase

consisted of using information compiled during the analysis of the system

requirements to develop a strategy that constitutes a new system specification. The

design phase included the following major steps:

Defining overall system architecture, in which experts in database and

system operation and technical architecture define the most effective way to

use the architectural options to implement the business requirements.

Documenting design work for business functionality, system operation

36

processes, infrastructure, and external and internal interface requirements.

Writing test scripts or scenarios for each feature being developed.

System Development

During this phase all programs were developed or modified, internal system

interfaces were developed and data conversion programs developed as required.

Meanwhile, continuous unit testing was performed; quality assurance issues were

found, documented, tracked and repaired. The development phase included:

Setting up the development environment

Production of all programs and databases

Establishing operations and overnight procedures (if required) and any

automated tools to conduct these procedures as required.

Creation of a system acceptance test plan.

Training

Training would occur prior to System Installation and going live. It would consist of

training and mentoring during the development process and testing phase, formal

training on operating and maintaining the system, and on the job training after going

live.

Data Integration

Existing data such as customer information, product details etc … were downloaded

from current applications, reformatted and uploaded.

Implementation

This phase included providing project management plans showing all NKG

responsibilities and requirements and a detailed execution plan, software quality

control plan, file creation and conversion plans, change over and handover plans.

System Performance evaluation

37

This phase included testing the solution such that NKG would validate and take

ownership of the developed solution. During this phase user acceptance and

integration testing were completed. These activities were carried out jointly with

NKG staff to ensure that NKG is satisfied that the system met all of their business

requirements. Testing also provided a forum to ensure that NKG staff was familiar

with the operation of the system prior to it going live.

Documentation

Operational documents and flowcharts were produced showing the various processes

and procedures .These documents covered all aspects of NKG operations.

38

CHAPTER 4

4.0 METHODOLOGY

4.1 OVERVIEW

This research is to provide a set of guidelines for a successful ERP implementation in

manufacturing industries that decide to embark on an ERP project. In order to answer these

research goals, the researcher opted to obtain the view of Management and Non management

work force and ERP consultants. Specifically, a total of 20 respondents from Nexans were

randomly selected to make up the sample. Selected participants answered a survey

questionnaire structure in Likert format and also semi-structured interviews with on-site ERP

consultants. Data gathered from this research instrument were then computed for

interpretation. Along with primary data, this research made use of secondary resources in the

form of published articles and literatures to support the survey results.

4.2 RESEARCH OBJECTIVES

To determine the critical challenges encountered in implementing ERP in Nexans.

To identify the most challenging departments.

To determine the critical factors needed for a successful implementation.

Identify ERP impact in Nexans.

To rank the critical successes and critical challenges identified in order of importance

using Friedman’s rank test.

To highlight the critical success factors and challenges that would need extra attention

during similar ERP implementation.

39

4.3 RESEARCH DESIGN

The descriptive method of research was used for this study. To define the descriptive type of

research, Creswell (1994) stated that the descriptive method of research is to gather

information about the present existing condition. The emphasis is on describing rather than

on judging or interpreting. The aim of descriptive research is to verify formulated hypotheses

that refer to the present situation in order to elucidate it. The descriptive approach is quick

and practical in terms of the financial aspect. Moreover, this method allows a flexible

approach, thus, when important new issues and questions arise during the duration of the

study, further investigation may be conducted. Descriptive research on the other hand is a

type of research that is mainly concerned with describing the nature or condition and the

degree in detail of the present situation. This method is used to describe the nature of a

situation, as it exists at the time of the study and to explore the cause/s of particular a

phenomenon. The aim of descriptive research is to obtain an accurate profile of the people,

events or situations. With this research type, it is essential that the researcher already has a

clear view or picture of the phenomena being investigated before the data collection

procedure is carried out. This method of research was used to obtain first hand data from the

respondents so as to formulate rational and sound conclusions and recommendations for the

study. The descriptive approach is quick and practical in terms of the financial aspect.

In this study, the descriptive research method was employed so as to identify the critical

success factors and critical challenges during ERP implementation. This research method was

chosen considering the objective to obtain first hand data from the respondents. The

descriptive method is advantageous for the researcher due to its flexibility; this method can

use either qualitative or quantitative data or both, giving the researcher greater options in

selecting the instrument for data-gathering. The aim of the research is to identify the critical

success factors and critical challenges during ERP implementation so as to provide a set of

guidelines for a successful ERP implementation in manufacturing industries that decide to

embark on an ERP project; the descriptive method is then appropriate for this research since

this method is used for gathering prevailing conditions.

40

For this research, two types of data were gathered. These included the primary and secondary

data types. The primary data were derived from the answers the participants gave during the

survey process. The secondary data on the other hand, were obtained from published articles

that were relevant to this study. With the use of the survey questionnaire and published

literatures, this study took on the combined quantitative and qualitative approach of research.

By means of employing this combined approach, the researcher was able to obtain the

advantages of both quantitative and qualitative approaches and overcome their limitations.

Quantitative data collection methods are centered on the quantification of relationships

between variables. Quantitative data-gathering instruments establish relationship between

measured variables. When these methods are used, the researcher is usually detached from

the study and the final output is context free. Measurement, numerical data and statistics are

the main substance of quantitative instruments. With these instruments, an explicit

description of data collection and analysis of procedures are necessary. An approach that is

primarily deductive reasoning, it prefers the least complicated explanation and gives a

statement of statistical probability. The quantitative approach is more on the detailed

description of a phenomenon. It basically gives a generalization of the gathered data with

tentative synthesized interpretations.

Quantitative approach is useful as it helps the researcher to prevent bias in gathering and

presenting research data. Quantitative data collection procedures create epistemological

postulations that reality is objective and unitary, which can only be realized by means of

transcending individual perspective. This phenomenon in turn should be discussed or

explained by means of data analysis gathered through objective forms of measurement. The

quantitative data gathering methods are useful especially when a study needs to measure the

cause and effect relationships evident between pre-selected and discrete variables. The

purpose of the quantitative approach is to avoid subjectivity by means of collecting and

exploring information which describes the experience being studied.

Quantitative methods establish very specific research problem and terms. The controlled

observations, mass surveys, laboratory experiments and other means of research manipulation

in qualitative method makes gathered data more reliable. In other words, subjectivity of

41

judgment, which is not needed in a thesis discussion, can be avoided through quantitative

methods. Thus, conclusions, discussion and experimentation involved in the process are more

objective. Variables, both dependent and independent, that are needed in the study are clearly

and precisely specified in a quantitative study. In addition, quantitative method enables

longitudinal measures of subsequent performance of the respondents. Fryer (1991) noted that

qualitative researchers aim to decode, describe, analyze and interpret accurately the meaning

of a certain phenomena happening in their customary social contexts. The focus of the

researchers utilizing the framework of the interpretative paradigm is on the investigation of

authenticity, complexity, contextualization, mutual subjectivity of the researcher and the

respondent as well as the reduction of illusion.

Contrary to the quantitative method, qualitative approach generates verbal information rather

than numerical values (Polgar & Thomas, 1995). Instead of using statistical analysis, the

qualitative approach utilizes content or holistic analysis; to explain and comprehend the

research findings, inductive and not deductive reasoning is used. The main point of the

quantitative research method is that measurement is valid, reliable and can be generalized

with its clear anticipation of cause and effect (Cassell & Symon, 1994). Being particularistic

and deductive in nature, quantitative method is dependent on the formulation of a research

hypothesis and confirming them empirically using a specific data set (Frankfort-Nachmias &

Nachmias, 1992). The scientific hypothesis of a quantitative method holds no value. This

means that the researcher’s personal thoughts, subjective preferences and biases are not

applicable to this type of research method.

The researcher opted to integrate the qualitative approach in this study due to its significant

advantages. The use of qualitative data gathering method is advantageous as they are more

open to changes and refinement of research ideas as the study progresses; this implies that

qualitative data gathering tools are highly flexible. Moreover, no manipulation of the research

setting is necessary with this method; rather than employ various research controls such as in

experimental approaches, the qualitative data gathering methods are only centered on

understanding the occurring phenomena in their naturally occurring states. Aside from these

advantages, researchers use qualitative data-gathering tools as some previous researchers

believe that qualitative data are particularly attractive as they provide rich and well-grounded

descriptions and explanations as well as unforeseen findings for new theory construction.

42

One of the notable strengths of the qualitative instruments is that they evoke a more realistic

feeling of the research setting which cannot be obtained from statistical analysis and

numerical data utilized through quantitative means. These data collection methods allow

flexibility in conducting data gathering, research analysis and interpretation of gathered

information. In addition, qualitative method allows the presentation of the phenomenon being

investigated in a more holistic view.

4.4 PARTICIPANTS

In order to determine the critical success factors and critical challenges in ERP

implementation, a total of 35 questionnaires were distributed. To achieve pertinent

information, certain inclusion criteria were imposed. The participants that qualified to receive

the questionnaires were either part of the management team or non management workers that

work directly with the ERP system. This qualification ensured that the participants

understood the nature of ERP challenges and factors that influence its success, making the

survey items easy for them to accomplish. The respondents were selected from seven

departments, thus, a total of five employees were selected for every department.Out of the 35

questionnaires issued only 30 were returned, 25 of the 30 were adequately filled to suit the

purpose of this thesis.Simple random sampling was done for the sample selection. This

sampling method is conducted where each member of a population has an equal opportunity

to become part of the sample. As all members of the population have an equal chance of

becoming a research participant, this is said to be the most efficient sampling procedure. In

order to conduct this sampling strategy, the researcher defined the population first, listed

down all the members of the population and then selected members to make the sample. For

this procedure, the lottery sampling or the fish bowl technique was employed. This method

involves the selection of the sample at random from the sampling frame through the use of

random number tables (Saunders, Lewis & Thornhill, 2003). Numbers were assigned for each

employee in the master list. These numbers were written on pieces of paper and drawn from a

box; the process was repeated until the sample size of 20 was reached.

43

4.5 INSTRUMENTS

The survey questionnaire was used as the main data-gathering instrument for this study (See

Appendix A

4.5.1 Questionnaire

The aim of the survey was to obtain the views of ERP users, so participants selected to

complete the surveys were those who directly used ERP or directly relied on the data from

ERP and therefore a convenient choice. By choosing ERP users, the researcher is almost

guaranteed to get a higher response rate because chance presents itself and is available to the

researcher by virtue of its accessibility allowing the researcher to gather data from

‘convenient’ samples. (Bryman and Bell, 2003) This method was chosen as it appeared to be

the only feasible way of guaranteeing a response from a group users and benefactors. In order

to be selective in a way to ensure the feedback came from a cross selection of departments.

Companywide interviews and surveys are only permitted if approved by top management as a

whole; therefore my strategy was to capture the views of workers during their lunch break, as

this was the only way the researcher could obtain permission to carry out this research.

Conducting a survey was the preferred method for obtaining the views of workers because of

time constraints. Workers were nearing completion of a large project which would have made

it difficult to set up interviews. Using an intranet survey was initially considered but this was

ruled out because of the lack of IT resources available to the shop floor workers, therefore it

decided that it was more appropriate to use a paper based survey which would be user

friendly for all employees.

An introduction at the beginning of the questionnaire informed workers of the researcher’s

name, degree being studied and the purpose of the research. The questionnaire consisted of 3

personal data questions and 4 multiple choice questions which surveyed their responses to the

challenges, critical success factors and impact of ERP system. The personal data questions

were used to inform the researcher of the worker profile. Sections one to three were

structured using the Likert format. In this survey, seven choices are provided for every

question or statement. The choices represent the degree of agreement each respondent has on

the given question. The scale below was used to interpret the total responses of all the

respondents for every survey question by computing with statistical software:

44

Section 1-3

Value Interpretation

6 Absolutely Agree

5 Strongly Agree

4 To Large Extent

3 Fairly Agree

2 Hardly Agree

1 Definitely Not Agree

0 Can’t Say

Section 4

EASY 1 < 2 < 3 < 4 < 5 < 6 < 7 < 8 < 9 < 10 VERY DIFFICULT

The Likert survey was the selected questionnaire type as this enabled the respondents to

answer the survey easily. In addition, this research instrument allowed the research to carry

out the quantitative approach effectively with the use of statistics for data interpretation. In

order to test the validity of the questionnaire used for the study, the researcher tested the

questionnaire to five respondents. These respondents as well as their answers were not part of

the actual study process and were only used for testing purposes. After the questions have

been answered, the respondents were asked for their suggestions or any necessary corrections

to ensure further improvement and validity of the instrument. The questionnaire was then

revised based on the suggestion of the respondents. Irrelevant questions were excluded and

vague or difficult terminologies were changed into simpler ones in order to ensure

comprehension. Data generated from the questionnaires gave an overall view of Critical

success factors, challenges and impact of ERP systems in Nexans Kabelmetal Ghana.

45

4.5.2 Interviews

Semi-structured interviews were the preferred method for obtaining the views of the ERP

consultants because it was easier to arrange a time to sit down and interview them to get

quality in-depth answers rather than rely on answers given on a questionnaire without a lot of

thought. Since Nexans employees were busy rounding up their large production order,

therefore the researcher felt it would be more useful to interview only the ERP consultants

who were on contract and get guaranteed answers rather than risk a handful of responses

from a questionnaire. Two consultants were on site on a full time basis and they both

volunteered to cooperate with the research. A sample of six questions was devised, which

was piloted on one of the consultants; this pilot went very well and required no changes.

Interviewing the consultants allowed me to add value to the set questions whilst leaving room

for the inclusion of areas that may have been missed. Semi-structured interviews were used to

obtain data from ERP consultants on the challenges faced and the most challenging area

during the implementation. The researcher wanted to ascertain if their point of view was

similar to that of the workers. The interviews were also used to ascertain which factors were

most critical during the implementation stage.

ERP consultants involved in the interviews were contacted by telephone to arrange

convenient times to conduct the interviews. They were briefed on the objectives of the

interview and were given the list of questions beforehand in order to allow them to prepare in

advance. Due to their work commitments, all interviews were carried out on site during the

lunch period. Each interview lasted 30 minutes; notes were then fully transcribed by

researcher as soon as possible after each interview had taken place. At the beginning of each

interview, they were asked if they preferred a one-to-one interview or answering a

questionnaire, this was because they knew questionnaires had been carried out with the

employees and were asking questions about why there were differences so the researcher

asked their preference, they all said interviews as they found it more relaxing to be able to

think before answering and clarify questions if they were unsure. Two consultants were

interviewed. (Objectives 1,2,3,5 & 6)

Using semi-structured interviews allowed the researcher to probe more deeply and explore

responses that may have had significance to the research topic but weren’t necessarily in the

46

original questions. Before each interview, staffs were informed that any information that

wasn’t relevant to the questions would not be used.

The use of a questionnaire aimed to capture a large response from workers whilst the use of

semi-structured interviews with on-site ERP consultants allowed the researcher to plan times

and locations and guarantee an in-depth response. Both these methods allowed the researcher

to capture specific answers and also allowed for original input from the participants.

4.6 DATA PROCESSING AND ANALYSIS

After gathering all the completed questionnaires from the respondents, total responses for

each item were obtained and tabulated. In order to use the Likert-scale for interpretation,

Friedman’s rank test was performed by using statistical software called SPSS statistics 17.

As this study required the participation of human respondents, specifically NKG staff, certain

ethical issues was addressed. The consideration of these ethical issues was necessary for the

purpose of ensuring the privacy as well as the safety of the participants. Among the

significant ethical issues that were considered in the research process include consent and

confidentiality. In order to secure the consent of the selected participants, all important details

of the study, including its aim and purpose was relayed to participants. By explaining these

important details, the respondents were able to understand the importance of their role in the

completion of the research. The respondents were also advised that they could withdraw from

the study even during the process. With this, the participants were not forced to participate in

the research. The confidentiality of the participants was also ensured by not disclosing their

names or personal information in the research. Only relevant details that helped in answering

the research questions were included.

4.7 LIMITATIONS OF THE RESEARCH

The major hurdle was capturing the worker’s views from all departments in a relatively short

time at the time when they were focusing on completing a large production order. However,

the survey proved to be an effective method of gathering data given the restricted time frame.

47

4.8 RESULTS AND DISCUSSIONS

The Questionnaires that were given out had 5 sections:

1. Classified the critical success factors that were eminent in NKG.

2. Classified the critical challenges encountered in NKG.

3. Described the impact of Navision in NKG.

4. Identified the most Challenging department in NKG.

5. General comments or contributions.

Table 2 SHOWS THE STATUS OF THE 35 QUESTIONNAIRES THAT WERE ISSUED OUT IN NEXANS

KABELMETAL.

QUESTIONNAIRE STATUS

No. OF

WORKERS

RETURNED & CORRECTLY

FILLED 25 71%

RETURNED & INCORRECTLY

FILLED 5 14%

NOT RETURNED 5 14%

35

48

.

Figure 1 A GRAPHICAL REPRESENTATION OF TABLE 2

Abbreviations used in the presentation;

TMS- Top Management Support

UTE- User Training & Education

BPR- Business Process Re-engineering

TC- Team Competence

PM- Project Management

OC- Organisational Communication

CGO- Clear Goals & Objectives

CM- Change Management

PC- Project Champion

VS- Vendor Support

UIP- User Involvement & Participation

EC- External consultant

CT- Compatibility of Technology

MG & SS- Marketing & Sales

FE- Finance

WE- Warehouse

C.S.F- Critical Success Factors

C.C- Critical Challenges

49

PN- Production

PG- Purchasing

AN- Administration

.Navision has altered the way we do work in my area Q1

My area or department had to change to fit Navision Q2

Navision has hurt my areas ability co-ordinate with other areas Q3

Compared to our old system Navision makes my area more aware of important info

about other areas

Q4

Compared to our old system Navision makes it easier to get the information I need Q5

Important information that our old system provided is difficult to get with Navision Q6

Our old system fits my area or department needs better than Navision Q7

In my area, Navision makes it easier to get things done Q8

I feel that my area or department is better off with Navision Q9

Table 3 REPRESENTS QUESTIONS FROM SECTION 3 WHICH WERE SHORTENED IN THE PRESENTATION.

4.8.1 SECTION 1 Workers were asked the following question to ascertain their views on the critical success

factors identified in the literature. This section was to address objectives 1 and 5.

Classify the following critical success factors that were eminent in Nexans?

Top Management Support

User Training & Education

Business Process Re-engineering

Team Competence

Project Management

Organisational Communication

Clear Goals & Objectives

Change Management

Project Champion

Vendor Support

50

User Involvement & Participation

External consultant

Compatibility of Technology

REFER TO APPENDIX B (DESCRIPTIVE STATISTIC TABLE FOR SECTION 1)

Friedman Test

Ranks

Mean Rank

TMS 2.05

UTE 7.35

BPR 11.20

TC 7.20

PM 7.20

OC 5.00

CGO 11.20

CM 7.15

PC 7.45

VS 4.50

UIP 7.25

EC 11.20

CT 2.25

Table 4 FRIEDMAN’S TEST FOR CRITICAL SUCCESS FACTORS.

51

Figure 2 GRAPHICAL REPRESENTATION OF CRITICAL SUCCESS FACTORS RANKED BY FRIEDMAN’S TEST

Table 5 MEAN RANK OF CRITICAL SUCCESS FACTORS

52

CSF Mean

Rank

TMS 2.05 10th CT 2.25 9th VS 4.5 8th OC 5 7th CM 7.15 6th TC 7.2

PM 7.2 5th

UIP 7.25 4th UTE 7.35 3rd PC 7.45 2nd

BPR 11.2

CGO 11.2

EC 11.2

1st

Table 6 RANKING OF CSF

From the analysis of the responses given by the employees, 3 factors were adjudged as the

most eminent factors that influenced success during the implementation in Nexans

Kabelmetal.

These factors are:

1. Business Process Re-engineering: It was very evident that NKG re- engineered their

business processes before going live. (Murray and Coffin, 2001) stated that

Organizations should be willing to change their businesses to fit the software in order

to reduce the degree of customizations. The interview with the consultant revealed

that during the pre-implementation stage regular meeting were held between the

departmental heads and the consultants, this was where the consultants explained the

processes of standard Navision to each department. After that presentation he advised

departmental heads that process re-engineering was more likely to yield better results

than customization. These kinds of meeting went on for months before going live.

The main purpose of these meetings was to agree on how the system will operate and

what had to be changed to suit the system. From the opinion of the system users and

ERP consultants this factor was very critical in ensuring success at NKG.

53

2. Clears Goals and Objectives: Nah (2003) stated that one of the biggest problems ERP

project leaders face comes not from the implementation itself, but from expectations

of board members, senior staff, and other key stakeholders. It is important to set the

goals of the project before even seeking top management support. Many ERP

implementations have failed as a result of lacking clear goals (Somers and Nelson

2004). From the responses given in the questionnaire, Clear goals and objectives were

assigned at NKG and this also formed a basis of the successful implementation.

3. External Consultant: This factor was also revealed from the questionnaires as part of

the three most important factors of implementation. It was because the ERP

consultants dedicated two of their staff to be stationed at NKG a year before the

implementation and two years after implementation

The remaining rankings of the critical success factors eminent in Nexans are as stated below

in order of decreasing importance.

Project Champion - High Importance

User Training & Education

User Involvement & Participation

Project Management

Team Competence

Change Management


Vendor Support

Compatibility of Technology

Top Management Support - Low Importance

4.8.2 SECTION 2 To ascertain the level of impact of critical challenges identified from the literature review,

respondents were asked the following this was to determine objective 3 & 5)

Classify the following critical Challenge factors that were eminent in Nexans?

54

External Consultant

Project Management

Team Competence




REFER TO APPENDIX C (DESCRIPTIVE STATISTICS TABLE FOR SECTION 2)

Friedman Test

Ranks

Mean Rank

TMS 1.45

UTE 2.70

BPR 3.95

TC 5.25

PM 5.25

EC 6.70

OC 2.70

Table 7 FRIEDMAN TEST FOR CRITICAL CHALLENGE FACTORS

55

Figure 3 GRAPHICAL REPRESENTATION OF CRITICAL CHALLENGES RANKED BY FRIEDMAN’S TEST

Mean Rank

0 2 4 6 8

EC

TC

PM

BPR

UTE

OC

TMS

Mean Rank

Figure 4 MEAN RANK OF CRITICAL CHALLENGES

Ranks C.C Mean

Rank EC 6.7 5th TC 5.25 PM 5.25 4th

BPR 3.95 3rd UTE 2.7 OC 2.7 2nd

TMS 1.45 1st

The major critical challenges observed are as follows in order of increasing severity:

External Consultant – that was ranked as the least critical challenge in NKG.

56

Team Competence

Project Management



Top Management Support- this was adjudged as the greatest challenge encountered in

NKG

4.8.3 SECTION 3 Workers were also given the option to rate a number of statements on a scale of 1-5,

(Disagree) 1-2-3-4-5 (Definitely Agree) to address objective 4.

ERP Impact:

Navision has altered the way we do work in my area

My area or department had to change to fit Navision

Navision has hurt my areas ability co-ordinate with other areas

Compared to our old system Navision makes my area more aware of important info about

other areas

Compared to our old system Navision makes it easier to get the information I need

Important information that our old system provided is difficult to get with Navision

Our old system fits my area or department needs better than Navision

In my area, Navision makes it easier to get things done

I feel that my area or department is better off with Navision

Table 8 QUESTIONS IN SECTION 3 OF QUESTIONNAIRES

57

Figure 5 GRAPH SHOWING RESPONSES FOR Q1 OF SECTION 3


58



59



60



61


4.8.3.1 Interpretation of figures 5 – 13

a. Staff participating in the questionnaire agreed that Navision makes it easier to get things

done in their areas.

They feel better off with Navision in their departments.

That compared to the old system, Navision makes it easier to get things done.

Navision makes their departments or areas more aware of important information about other

areas.

b. However respondents of the survey disagreed with the following:

That Navision has altered the way they work in their areas and departments

That Navision has hurt their department’s ability to coordinate with other areas

That important information that their old system provided is difficult to get with Navision

That the old system fits the needs of their departments better than Navision

62

4.8.4 SECTION 4 To ascertain the most challenging departments during implementation: (objective 2 & 6)

Workers were asked to classify the following Departments in NKG?

Marketing & Sales

Finance

Warehouse

Production

Purchasing

Administration

REFER TO APPENDIX D (DESCRIPTIVE STATISTIC TABLE FOR SECTION 4)

Friedman Test

Ranks

Mean Rank

MG & SS 2.30

FE 4.85

WE 3.70

PN 6.00

PG 3.15

AN 1.00

Table 9 FRIEDMAN’S TEST TO RANK DEPARTMENTS AT NKG

63

Figure 14 GRAPHICAL REPRESENTATION OF NKG DEPARTMENTS RANKED BY FRIEDMAN’S TEST

Mean Rank

0 2 4 6 8

PN

FE

WE

PG

MG & SS

AN

Mean Rank

Figure 15 MEAN RANKING OF NKG DEPARTMENTS

Ranks

Departments Mean Rank

PN 6 1st

MOST CHALLENGING

FE 4.85 2nd WE 3.7 3rd PG 3.15 4th MG & SS 2.3

5th AN 1

6th LEAST

CHALLENGING Table 10 NKG DEPARTMENTS

64

4.8.4.1 Most challenging Departments

In the opinion of respondents the most challenging departments are:

1. Production and

2. Finance

The least challenging departments are: administration, Marketing/Sales, Purchasing and then

Warehouse in that order.

5. Other Comments and Contribution

In the open-ended questions, comments and contributions are as follows:

Respondents felt that resistance to change was a major problem in their

implementation effort.

An increase in time spent on planning activities and giving guidance to subordinates.

ERP has led to better coordination in terms of accessing information.

ERP has changed the business processes they use to work to a large extent.

ERP has had an impact on the culture and goal setting in the organization to a large

extent

With ERP implementation considerable decrease has occurred in ordering and

shipping time.

It was observed that the flexibility of the organization had increased substantially.

65

4.8.5 INTERVIEWS

Question 1: Challenges and impediments to ERP implementation factors?

The interviewees were asked about challenges and impediments to ERP implementation

success and as to how much of a problem they were in the implementation process. Their

responses were mainly focused on lack of data accuracy and lack of companywide support

and involvement.

Question 2: In your opinion what represented the success of an ERP implementation?

The first consultant defined success in terms of completing the project on time and within

budget, without disruptions to normal business and with user acceptance of the implemented

system. The second one defined success to achieving a short duration of implementation he

also felt that an ERP system that was on-time and within budget, maintained data integrity

and facilitated the organization to reap a rate on investment as an important factor to

measuring ERP success.

Question 3: What departments were most challenging during implementation?

They both pointed out that production was the most challenging department because of the

various processes that existed. They also made known of the fact that the production

department would have been less challenging if an automated means of getting the data was

employed, and then they gave an example of installing SCADA systems on the plant which

would be linked directly to the ERP to capture real time data.

Question 4: Which factors would they recommend to be scrutinized during ERP

implementation stages?

They pointed out the following factors as being very vital during ERP implementation, they

went further to say that these factors could help a company achieve success at the same time

it could be the down fall of an implementation process.

Below is the list of factors identified by the ERP consultants.

66

1. Top Management Support

2. User Training and education

3. Competency and Dedication of External Consultant

4. Project Management

5. Clear Goals and Objectives

6. Business Process re-engineering

These factors can either propel success or failure depending on the extent to which they are

prioritized.

67

CHAPTER 5

5.0 CONCLUSION AND RECOMMENDATIONS

ERP implementation represents high risk projects that need to be managed properly. This

study aims to improve understanding the challenges and critical success factors affecting ERP

implementation in manufacturing industries. Understanding the challenges and critical

success factors may ensure effective ERP implementation and a realization of the promised

benefits. Factors affecting ERP implementation are complex and abundant. A total of 13

critical success factors for ERP implementation have been identified based on a review of the

related literature. From the analysis of the data by employees at NKG, 3 factors were selected

to be very important. The factors are Business Process Re-engineering, Clear Goals and

Objectives and External Consultants.

Six critical challenges were identified from the literature review and the major critical

challenges observed at NKG were Top Management, Organisational Communication and

Business Process Re-engineering. The interview with the ERP consultants also brought to

light the fact that the critical challenging factors could also become critical success factors if

utmost priority is given to them.

In the opinion of respondents the most challenging departments during ERP implementation

in the manufacturing set-up is Production and Finance.

Staff participating in the questionnaire agreed that ERP makes it easier and faster to get

things done in their respective areas, staff however disagreed that ERP had altered the way

they work in their departments.

The value of this paper is to present small and medium sized enterprises wishing to

implement ERP with a set of critical success factors and their order of importance which can

guide their implementation. Understanding the challenges and critical success factors would

lead to a smoother implementation path.

As a single case study the ability to generalize the findings is limited, however the support

from literature and experiences at NKG during the ERP implementation will add to the

knowledge of ERP for small and medium sized companies.

68

Future research could focus on how these challenges and critical success factors differ among

various implementation partners such as employees, managers, IT specialists, vendors and

consultants.

69

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Al-Mashari, M, Al-Mudimigh A, Zairi M. 2003. ‘Enterprise resource planning: A taxonomy of

critical factors’, European Journal of Operational Research 146 352-364. Davison, R. 2002 Cultural Complications of ERP, COMMUNICATIONS OF THE ACM, 45(7), 109

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Kroenke, D. (2008) Experiencing MIS, Prentice Hall. Murray, M., & Coffin, G. (2001). ‘A case study analysis of factors for success in ERP system

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Markus, M.L., Axline, S., Petrie, D. and Tanis, C. (2000), ‘Learning from adopters’ experiences with

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Remus U. 2006. ‘Critical Success Factors of Implementing Enterprise Portals’. Proceedings of the

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APPENDIX A

EXECUTIVE MBA THESIS QUESTIONNAIRE

PROJECT STUDENT: JOSEPH ANNAN

PROJECT TOPIC: CHALLENGES OF IMPLEMENTING E.R.P (ENTERPRISE RESOURCE PLANNING) PROJECTS IN MANUFACTURING INDUSTRIES.

SURVEY ON MICROSOFT NAVISION IMPLEMENTATION IN NEXANS GHANA

NAME :

DEPARTMENT:

POSITION :

73

SECTION 1

1. Classify the critical success factors eminent in your institution (NEXANS KABELMETAL GH)? Please type OK one box per row

Absolutely

agree

Strongly

agree

To large extent

Fairly

agree

Hardly

agree

Definitely

Not agree

Can’t say


User training &

education

Business process re-engineering

Team competence

Project Management

Organisational

communication

Clear goals &

objectives

Change management

Project Champion

Vendor support

User involvement &

participation

External consultant

Compatibility of

technology

74

SECTION 2

2. Classify the critical challenges encountered? Please type OK one box per row

Absolutely

agree

Strongly

agree

To large extent

Fairly

agree

Hardly

agree

Definitely

Not agree

Can’t say

Top Management Commitment

User training &

education

Process Re-engineering

Team competence

External Consultant

Organisational

Change

SECTION 3

3. To what extent do you agree or disagree with the following statements? Please enter on a scale of 1 – 5.

DISAGREE 1 <2 <3 <4 <5 AGREE

Navision has altered the way we do work in my area

My area or department had to change to fit Navision

Navision has hurt my areas ability co-ordinate with other areas

Compared to our old system Navision makes my area more aware of important info about other areas

Compared to our old system Navision makes it easier to get the information I need

Important information that our old system provided is difficult to get with Navision

Our old system fits my area or department needs better than Navision

In my area, Navision makes it easier to get things done

I feel that my area or department is better off with Navision

75

SECTION 4

4. In your opinion which department was the most challenging during the implementation? Please enter on a scale of 1 – 10.

EASY 1 <2 <3 <4 <5<6<7<8<9<10 VERY DIFFICULT

MARKETING / SALES

FINANCE

WAREHOUSE

PRODUCTION

PURCHASING

ADMINISTRATION

5. Do you have any other comments to make about the content of this questionnaire or any contribution? Please write in below

76

APPENDIX B

Descriptive Statistics

N Mean Std. Deviation Minimum Maximum

TMS 20 3.00 .795 2 4

UTE 20 5.00 .649 4 6

BPR 20 6.00 .000 6 6

TC 20 5.00 .649 4 6

PM 20 5.00 .459 4 6

OC 20 4.00 1.589 2 6

CGO 20 6.00 .000 6 6

CM 20 4.90 .852 4 6

PC 20 5.00 .795 4 6

VS 20 4.00 1.026 2 6

UIP 20 5.00 .459 4 6

EC 20 6.00 .000 6 6

CT 20 3.00 .649 2 4

Table 11 DESCRIPTIVE STATISTICS FOR SECTION1

77

APPENDIX C



TMS 20 2.00 .000 2 2

UTE 20 3.00 .795 2 4

BPR 20 4.00 1.589 2 6

TC 20 5.00 .649 4 6

PM 20 5.00 .459 4 6

EC 20 6.00 .000 6 6

OC 20 3.00 .795 2 4


78

APPENDIX D



MG & SS 20 2.00 .000 2 2

FE 20 6.00 .000 6 6

WE 20 4.00 1.589 2 6

PN 20 10.00 .000 10 10

PG 20 3.00 .795 2 4

AN 20 1.00 .000 1 1


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