3 Companies With ERP Success And 3 That Failed Essay

Length: 8 pages Sources: 7 Subject: Business Type: Essay Paper: #38326503 Related Topics: Ajax, Success, Aerospace Engineering, Enterprise Resource Planning
Excerpt from Essay :

¶ … ERP Fail and Succeed

In order to increase its productivity and compete favorably, any company has to implement an elaborate Enterprise Resource Planning (ERP) system. Failure to do this will lead into a weak company without high possibilities of attained stipulated short-term and long-term goals. By definition, an ERP system helps consolidate enterprise information and control all business processes in an organization. Implementing an ERP successfully is not that simple. Its success or failure is depended on a variety of factors hence starting the process without an elaborate plan makes you vulnerable to a great number of snares along the way (Vinatoru & Calota, 2014).

Since an ERP focuses on integration and management, the company stands a better chance at making resource usage and distribution more elaborate and timely. This will in turn increase the company's reputation, and hence, competitive edge in the market. Despite the fact this is a plausible reason as to why a company should adopt an ERP solution, most of the companies that use the system made the move due to a variety of other different reasons.

These include:

1. Business needs like the need to cut down on inventory costs, improve on order management and establish a transparent pricing policy for the sake of clients and employees

2. Technical issues like the need for one system that will handle the entire business process and replace multiple systems that have proven ineffective at the job.

3. A mix of the above mentioned factors whose result is constraining the company's profit margins.

With an ERP, a company can store its information and automate all its functional domains. This, however, does not mean that all ERP implementations are successful.

Causes of ERP Failure

According to statistics more than half of all launched ERP projects fail. This is a concerning 60% of failures in all tested implementations. The fact that failure is relative could however make things look better. A good example of a number of criteria options that could define failure include:

Functional Requirement Failures:

This will happen when the client does not find the functionalities needed in the system. This could lead to re-engineering or change of the system as a whole. Regardless of the solution taken, this will lead to an increase in cost, drop in quality and increased time to delivery. To avoid this, developers ought to investigate all the requirements adequately before implementing the solution. Using prototyping tools like use-cases and JAD would reduce on errors (Ghosh, 2012).

Management's Divided Attention:

Even though the management is the one that solicits for the ERP management, there are instances where their lack of dedication leads to the project's failure. In most cases, the managers are not aware of the project's scope hence they do not know how much they are subscribing to. Without enough commitment, the ERP is definitely bound to fail. In most cases, the top-level managers will delegate responsibilities to the low-level managers. Even though this is a management strategy, it will more often than not slow down the implementation process. The most success will only be realized if a top-level manager willing to commit to its success (Ghosh, 2012) spearheads the project.

Insufficient Training:

Every ERP user must be adequately trained before rolling out the system. They need to be aware of its capabilities and understand how to leverage these powers to make their work easier. This will ensure that each employee understands his or her responsibility in working well and delivering in a timely manner since the ERP focuses on the success of each individual for everything to run efficiently (Ghosh, 2012).

Improper Package Selection:

In the modern day market, finding an ERP package in the market is not hard. You could either purchase a complete system of the shelf or buy packages to constitute your own system. Even though this is cheaper, you stand at risk of choosing a package that does not meet all your needs as a company. This could be due to lack of technical information or a mere misunderstanding of your requirements (Ghosh, 2012).

Underestimations:

This applies to the time and effort needed to bring the project to completion. If the estimated completion date is passed, the business might have to incur an extra cost or perhaps loose on productivity and customer trust since things will not be going as planned. It is better to do an overestimation than an underestimation (Ghosh, 2012).

Incompatibility:

...

It will either force the company to change its way of operation or cause gaps that could lead to poor synchrony in tasks and work processes. This results from assumptions and a poor understanding of the business' core operations (Ghosh, 2012).

Companies Succeeding in Implementing ERPs

Alcoa

Alcoa is an aluminum company founded in the 1880s. It is currently the world's biggest electrolytic aluminum, aluminum oxide and related products producer. It is also an active participant in aluminum recycling and reuse. Its products include aluminum wheels, body sheets, household membranes etc. And are used in aerospace, packaging, building and the commercial transport or industrial plans (Profile, 2011)

The company started its first ERP implementation efforts in 2001. Currently, it runs a couple of successful modules with the most notable being in its financial, Order to Cash (OTC), Requisition to Pay (RTP) and human resource management departments. Since it is a worldwide company, implementing the system took quite some time and effort. The company's first 50 branches in Europe reported increases in efficiency and productivity once the system was properly introduced and in use (Profile, 2011). The company now runs the ERP in other countries like North America, Australia, Asia and South America.

Lesson Learnt

Correct implementation of ERP is crucial for success in business. The OTC system at Alcoa has been very successful because ERP management has been given priority by the company. Without it, the company could not have witnessed success in all the realms that the company operates in.

How to do it better

Despite the fact the ERP implementation at Alcoa has been characterized by notable success, the company should have accelerated its implementation process to ensure that the duration taken to get the returns was minimized.

Warning Signs

For Alcoa, the correct use of ERP has allowed it to manage its platforms such that any possible warnings relating to failures have been covered up.

Capital One Financial Corp.

This is the first capital finance company on the list. Its adoption began in 1995 when it ventured into the credit card business. It had to adopt a totally different management system since it sought to implement a new philosophy, the philosophy Based on Information Strategy.

Currently, Capital One Financial Corp. is among America's top ten credit card companies. In 2004, it had over 15,000 employees and a turnover of $1.5 billion. Its ERP implementation took a new turn in 2000 when it started implementing the PeopleSoft ERP. It uses modules like financial management modules, human resource, supply chain and asset management modules (Profile, 2011).

Its implementation was in phases. Its first leg, however, only became stable after it began the second leg implementation. The goal behind all its implementations is creating a new solution that will streamline operations and handle its client base more effectively. By doing this, the company increases on customer satisfaction hence drawing more people to itself.

Lesson Learnt

ERP execution through financial strategies and PeopleSoft ERP led to positive growth in Capital One Financial Corp. It is through these strategies that the company emerged to be the leading credit card companies. Therefore, such strategies are necessary for business growth.

How to do it better

It took a long time for PeopleSoft ERP to be implemented. Moreover, the company faced a delay in moving to the second phase in the implementation. This needs to be avoided and certainly can be avoided with proper planning and focus.

Warning Signs

For a company that has successfully implemented the ERP strategy, it faced delay signs indicating that the process requires structured ERP for success.

Colgate Palmolive

Colgate-palm is an international consumer company based in New York USA and reaches out to over 200 countries with a total of 40,000 employees on its inventory. The company focuses on oral care, household care and personal care products. With a couple of reputable products like Colgate, Ajax and Protex, Colgate-palm must be benefiting from its elaborate ERP solution.

Colgate uses a SAP ERP system with special attention to a couple of modules that would strengthen its existing business plan. These include a supplies chain module to manage its vast chain stores, a human resource module for its huge employee's base and a financial management module to take care of its finances. A notable inclusion of a self-service module shows how dedication could make an ERP effective without adding on the number of in-house employees (Profile, 2011).

Its ERP implementation efforts date back to 1996. Up to date, it…

Sources Used in Documents:

References

Donovan, M. (2011). Successful ERP Implementation the First Time. Performance Improvement.

Ghosh, R. (2012). A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of Failure. Journal of Marketing and Management, 3(1), 123-134.

ICMR. (2005). ERP Implementation Failure at HP, 1-12.

Pemeco. A Case Study on Hershey's ERP Implementation Failure: The Importance of Testing and Scheduling, 1-3.


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