ERP Implementation Impact on Employees and Business Processes

Introduction and Research Questions

This chapter presents the results of the research and the impact that implementation of an Enterprise Resource Planning (ERP) system had on the employees and business processes at the Manufacturing Company under study. The research was performed to obtain answers to the following four questions:

1. Why was the organization prompted to integrate the ERP and the SCM systems?

Survey Results by Question

2. How was the integration project managed, and what resources were required to manage it?

3. What challenges and obstacles were faced by the organization, and how were they resolved?

4. What changes were required to the existing processes due to integration?

Participants were categorized into four job roles: Customer Service Representative (CSR, n=14), Inventory Schedule Controller (ISC, n=3), Implementation Team Member (ITM, n=4), and Manager (Mgr, n=4). No further statistical analysis was required for this question; it was used solely to determine the number of research participants in each job category.

All 14 CSRs, all 3 ISCs, and all 4 ITMs reported that their jobs became more difficult after ERP. Among managers, 3 out of 4 reported their job difficulty was about the same, while 1 of 4 found it more difficult. A review of the responses indicates that the majority of frontline employees perceive their jobs have become more difficult, whereas management personnel generally feel that their level of difficulty is about the same as it was prior to ERP. As Koch (1999) observed, when people cannot perform their jobs in the familiar way and have not yet mastered the new way, they panic, and the business goes into spasms.

The majority of all personnel — CSRs, ISCs, ITMs, and Managers — received at least forty hours of training on ERP. Specifically, 11 of 14 CSRs, all 3 ISCs, 3 of 4 ITMs, and 3 of 4 managers received 40 or more hours of training. The remaining participants in each category received between 9 and 16 hours. As noted by Sumner (1999), Welti (1999), Soh (2000), and Kelly (1999), proper training is one of the main critical success factors for ERP implementation. Training varied slightly depending on the job role of the employee.

All 14 CSRs reported that their job included customer order processing. All 3 ISCs reported parts forecasting. Among ITMs, 2 of 4 reported customer order processing and 2 reported parts forecasting. Managers were more varied: 1 reported customer order processing, 1 reported parts shipping, and 2 reported all of these areas.

Analyzing the survey responses reveals that each job role impacts a different part of the overall process of customer order receipt and processing. All roles, with the exception of management, fulfill a specific part of the overall process to ensure that customer orders are received and processed into the ERP system. Part number schedules must then be accurately forecast to fulfill these orders so that products are shipped in a timely manner.

A customer order, for example, can flow through the system efficiently rather than journey in paper form, being keyed and re-keyed into different systems along the way. Each time an order is entered into a different system or travels via interdepartmental mail, the possibility of introducing errors or loss increases. Slater (1998) states that it should be easy for anyone to see that a single, enterprise-wide computer system should be cheaper and easier to maintain than a hodgepodge of antiquated COBOL applications from a dozen different vendors. Michel (1997) also described the use of ERP as critical in improving customer satisfaction.

Among CSRs, 12 of 14 rated their training as valuable and 2 of 14 as very valuable. Among ISCs, 2 of 3 found it valuable and 1 of 3 very valuable. Among ITMs and Managers, responses were split between valuable and very valuable, with none rating the training as not valuable or only slightly valuable.

A training plan approach should be developed early in the project and continue well after the implementation phase (Esteves and Pastor, 2000). Each employee category perceived that ERP training was valuable or very valuable for performing their respective jobs. It is evident from previous research that ERP training is usually very expensive because workers almost invariably have to learn a new set of processes, not just a new software interface (Slater, 1998). When people cannot do their jobs in the familiar way and have not mastered the new way, they often panic and the business goes into spasms. Wheatley (2000) argues that when ERP implementations go wrong, the culprit is usually discovered to be a lack of prior training — not the technical training of the core installation team, but the education of the broad user community of managers and employees who are supposed to actually run the business with the new system.

All participants — all 14 CSRs, all 3 ISCs, all 4 ITMs, and all 4 managers — were performing their current jobs prior to ERP implementation. This criterion ensured that all participants would have knowledge of both the pre-ERP and post-ERP systems and processes. Note: one new CSR was ineligible to participate in this research, reducing the total number of participants in that category to 14.

Among CSRs, 5 of 14 had been in their role for 1 year, 7 of 14 for 2 years, and 2 of 14 for 3 or more years. Among ISCs, 2 of 3 had 1 year of experience and 1 of 3 had 2 years. Among ITMs, 3 of 4 had 2 years and 1 of 4 had 3 or more years. All 4 managers had 3 or more years in their roles prior to ERP. All research participants were in their respective jobs for at least 1 year prior to ERP implementation, and more than half for more than two years.

Job responsibilities increased for 13 of 14 CSRs, all 3 ISCs, and all 4 ITMs. Among managers, 2 of 4 reported an increase and 2 of 4 reported no change. No participants in any category reported a decrease in responsibilities. Almost all study participants experienced an increase in the amount of job responsibility after ERP implementation.

Among CSRs, 12 of 14 reported that ERP diminished their ability to perform their jobs, while 2 reported no change. Among ISCs, 2 of 3 reported a diminished ability and 1 reported no change. Among ITMs, all 4 reported that ERP helped them perform their jobs. Among managers, 2 of 4 reported improvement and 2 reported no change. The majority of those in CSR and ISC roles perceive that ERP has diminished their ability to perform their jobs, while Implementation Team Members and Managers perceive that ERP helped them.

All 14 CSRs, all 3 ISCs, and all 4 ITMs reported more steps required to perform their jobs after ERP than before. Among managers, 1 of 4 reported more steps and 3 of 4 reported no change. CSRs, ISCs, and ITMs all have more steps required to perform their jobs after implementation of ERP, while most managers experienced no additional steps.

All 14 CSRs, all 3 ISCs, and all 4 managers reported that more information was required post-ERP. Among ITMs, 3 of 4 reported more information and 1 reported no change. Most participants agree that the SAP system used with the ERP implementation requires much more information than the previously used Co-Op legacy system.

Among CSRs, 11 of 14 reported a decrease in the number of orders they could process and 3 reported no change. Among ISCs, 2 of 3 reported a decrease and 1 reported no change. Among ITMs, 2 of 4 reported a decrease and 2 reported no change. Among managers, 1 of 4 reported a decrease and 3 reported no change. After implementation of ERP, the majority of employees are not able to process as many customer orders on a daily basis as they were before ERP implementation.

Prior literature has confirmed that implementing e-business technology results in better performance for firms (Johnson, 2007; Devaraj, 2007; Wu, 2003). Prior literature also indicates that e-business technologies assist firms in improving operational agility when responding to competitive and dynamic environments (Sambamurthy, 2003). The current findings, however, do not reflect this anticipated improvement in the short term following implementation.

Among CSRs, 7 of 14 reported a decrease in orders received and 7 of 14 reported no change. Among ISCs, 1 of 3 reported an increase and 2 of 3 reported no change. All 4 ITMs reported no change. Among managers, 1 of 4 reported a decrease and 3 of 4 reported no change.

Half of the CSRs said the number of customer orders received post-ERP decreased, while the majority of ISCs, ITMs, and managers saw no change. These results are not entirely consistent with prior research, which holds that e-business technologies provide savings in transaction costs, reduce inventory, and establish communication networks between buyers and suppliers (Min and Galle, 1999; Deeter-Schmelz, 2001). Such practices are said to enhance value, exceed customer expectations, and improve reliability including supply chain management (Goldstein and Schweikhart, 2002; Zhu and Sarkis, 2004; Lin, 2005).

Only 1 of 14 CSRs reported lacking access to a required tool; all other participants in every category reported that they had access to all necessary ERP tools. This indicates that employees were generally provided with the tools needed to perform their jobs following implementation.

Among CSRs, 6 of 14 reported that customers were less satisfied and 8 of 14 reported no change. Among ISCs, 1 of 3 reported less satisfaction and 2 of 3 reported no change. Among ITMs, 3 of 4 reported that customers were more satisfied and 1 of 4 reported no change. Among managers, 1 of 4 reported more satisfaction and 3 of 4 reported no change.

There were mixed responses to this question. Most CSRs and ISCs (58.8%) perceive that external customers are not experiencing any change in satisfaction with product delivery; however, 41.1% of CSRs and ISCs perceive that customers are actually less satisfied. The majority of ITMs (75%) feel that customers are more satisfied with product delivery, while 75% of managers feel there is no change.

Among CSRs, 6 of 14 answered yes and 8 of 14 answered no. All 3 ISCs answered no. Among ITMs, 3 of 4 answered yes and 1 of 4 answered no. Among managers, 1 of 4 answered yes and 3 of 4 answered no. The majority of CSRs and ISCs perceive that they are not rewarded or compensated commensurate with others performing a like function, whereas most ITMs perceive that they are.

Customer Order Processing Observations

None of the participants in any job category — CSR, ISC, ITM, or Manager — had applied for another job in the last two years.

The researcher anticipated that most managers would expect to see an increase in the level of customer satisfaction for product delivery after ERP implementation. The results reveal that the majority of managers perceive there was no change. One of the selling features of ERP systems is to integrate fragmented information in large business organizations: "If the systems are fragmented in an organization, then the business is fragmented" (Davenport, 1998). The process of data integration should allow disparate parts of the organization to function more efficiently, and hence a higher level of customer satisfaction would be expected. The fact that this was not observed constitutes a notable and unexpected finding.

The researcher made arrangements to observe the actual processing of several customer orders. The process began with a review of the customer request for quotation (RFQ) — a document received from a customer requesting that the company provide a quote for one or more specific items, delineated by part number. The CSR receives the customer order and compares it to the information previously provided in the RFQ. If the information is correct, the order is processed into the ERP system. If the information is not correct, the CSR rejects the order, notifies the customer, and explains the reason for the rejection.

ERP is a menu-driven system, meaning that the various screens are accessed by following a specific menu path. After reviewing the customer order, the CSR must determine the type of order to be entered. Various order types include: standard, free of charge, military, quoted, pick-up, and consignment. Each order type has a specific code and method of entry, and is processed by following a defined screen path through the logistics and sales modules.

The CSR then enters all "order-header" information, such as the order number, the sold-to party, the ship-to address, each line item number for tracking purposes, each item's name, the quantity required, the price, and the delivery date. If the availability of an item has changed since it was quoted to the customer, the CSR must determine when the item can now be made available and inform the customer of the change. If the customer is not satisfied with the revised delivery schedule, they may request cancellation of the item. The CSR must also enter all payment information — whether by cash, check, credit card, or charge to a bank account — and enter all specific text notes pertaining to delivery, including special packaging requirements for outdoor storage or specific environmental conditions. The time and number of steps required to complete entry of each customer order varied depending on the type of order, the number of items requested, special packaging requirements, special payment arrangements, part availability, and the proficiency of the CSR entering the data.