Enterprise resource planning systems: overview and applications

Hurricane Katrina

Discuss reasons behind NIBCO's decision to implement an ERP system.

The primary motivation behind NIBCO's decision to implement the new ERP system hinged on economic considerations. From a competitive standpoint, NIBCO needed to innovate. As the case illustrated, the company's information systems were unable to properly communicate with each other. As such, there was a lack of integration between critical business functions. The accounting department, for instances, was unable to properly communicate with the distribution department. This lack of communication and integration made the company's operations inefficient relative to its peers in the industry. This lack of integration, combined with competitive pressures stifled NIBCO's overall earnings growth. The company was losing market share to more efficient and nimble operations. Therefore, the decision to implement the new ERP system was a direct response to the market economy that NIBCO operates in. Without innovation, the company would continue to lose vital market share to competitors. Finally, the legacy systems in which NIBCO used were difficult to audit. For example, it was difficult to decipher the financing portion of many of the different departments. Due to the inability to communicate with one another, each department could conceal vital financial information, further hindering company growth. With the new integrated ERP system, executives are in a better position to track and monitor the financial performance of each individual department.

Describe the pros and cons of the approach to implementation decided upon by NIBCO.

To begin, the benefits of the implementation are the financial and operational betterment of the company. From a financial perspective, through the implementation of the ERP system costs associated with inefficiencies, fraud, and lost productivity will be significantly reduced. Differing department will be in a better position to communicate with one another regarding key operational metrics and objectives. Accounting, for example, will be able to efficiently provide feedback to the distribution department regarding costs. This collaboration between departments will help propel productivity and revenue. In addition, innovation is increased, as information can seamlessly be exchanged throughout the organization. Project metrics, goals and objectives can be better implemented through the use of cross- functional teams. In addition, fraudulent activity can be significantly abated or diminished through the use of the new ERP system. Detection can now occur simultaneously as systems are now coordinated. Management will also be able to view activities irrespective of their origin.

A negative aspect of the ERP system often occurs during the initial implementation phase. By implementing the system is quick manner, errors will occur. These errors, when large enough could cause a disruption of service for customers. Errors can also compromise valuable customer information such as billing information. As such, a very quick implementation could potentially harm the entire implementation process, as executives many skip smaller details to complete the project on time. In addition, the overall adoption of the system is another negative aspect of the ERP system. Due primarily to its broad-based implementation, the entire organization must be trained and familiar with the system. This will undoubtedly caused disruptions of service quality and customer retention as employees adjust to a different way of conducting business. Unintentional errors, frustrated customers, and low employee moral could all significantly impact the overall approach to implementation. As such, the overall cost gains from advanced efficiencies could be eroded away as angry customer defect and employees learn the overall systems.

Provide your analysis and recommendation for how the project was managed including its management structure.