Alfiandri
Abstract: Enterprise Resource
Planning (ERP) is one of the systems to integrate different functional area in
the organization. By implementing ERP system, the organization can get the
information easy,
reduce waste time and would have simple bureaucracy and
administration. However, implementing ERP as a system in the organization is
not easy because there is some factors affect successfully implementation of
ERP system in the organization. Organizational culture and
change management, top management support, capital knowledge and organizational
structure are the names of few factors implement ERP system in the
organization. In addition to this, this study attempts to understand the
implementation of the Enterprise Resource Planning (ERP) as a system in the
organization and attempt to use contingency theory as theory and link to the
factors that influence or affect to successful of implementation ERP system in
the organization .
Key words: ERP implementation and
contingency theory
Alfiadi, Master of Accountancy Graduate School of Business,
National University of Malaysia, Malaysia
50
INTRODUCTION
Nowadays,
almost all organization in any significant size have used technology like
internet, Ethernet and use another new software as their communication, monitor
and control of their business and also make jobs become easy. In the past few
years, the organization used traditional tools but because of technology is
updated, therefore many organizations shift from old information system to new
information systems such as, enterprise resource planning systems (ERP), SAP
and Soft people, MRP and MRP II. However, this study focuses to ERP only as a
system in the organization.
ERP
is the system to integrate the different functional area in the organization.
Because of the hierarchical structure of organizations designed around business
functions created problems in that they tended to be inadvertently developed
around an information silo principle (Brett C, et, al, 2005). Therefore, it
leads them to create their own information systems to solve their own function
problems. For example, sales department will develop their own system to handle
sales records and customer sales orders, the warehouse division will develop
their own system for inventory and marketing department will develop their own
system for marketing product and service. Overall, each department will develop
their own system that fit to their function and later integrate each others.
The
adoption of the ERP is the mirror that many organizations are willing to shift
from the simple information system to new information system as their business
process. They move because they want to make the business process becomes
easier, reduces waste time and simple bureaucracy and administrations. In
addition, provide accurate information’s to make decision. This argue also
support from the researchers, by implementing of ERP system, the organization
can improve their agility, i.e., the speed at which they can respond to
consumers, improve service, enhance product quality and improve production
efficiency. Another reason of the organization to implement ERP system, it is
because to solve year 2000 issues, re-engineering business process and
facilitating e-business (S.V. Grabski, et, al. 2007).
Furthermore,
the function of ERP also as control in the business process in the
organization. The implementation of an ERP system can control various
activities business process such as, inventory control in warehouse department,
and sales control in marketing department. The function of internal control as
to ensure the company operates as effectively as possible and to have financial
statements are reliable (R. L. Hurt, 2008).
In
addition to this, this study attempts to understand the implementation of ERP
as system in the organization and attempt to find the characteristics that
influence the implementation of ERP system in the organization. Therefore, it
attempts also to use the contingency as theory in this study.
LITERATURE
REVIEW
Enterprise
Resource Planning System (ERPS)
Many
firms have implemented ERP systems in the past few years and ERP and continues
growth up at compounded annual growth rate of eleventh percent through 2011
(Jacobson et al., 2007). ERP continues to be one of largest, fastest growing
and most influence players in the application software industry in the next
decade (Yen et al., 2002). It is one of the factors the company invest enormous
capital to implement ERP systems.
According
to Eleventh Edition of the APICS Dictionary, ERP system defines as a framework
for organizing, defining, and standardizing the business processes necessary to
effectively plan and control an organization so the organization can use its
internal knowledge to seek external advantage (F. Robet, J, et, al. 2007). This
definition highlights the broad scope of applications that fit under ERP
framework.
Another
definition of ERP is a modular, relational database designed to provide
internal organizational stakeholders with more timely, comprehensive
information for decision (R. L. Hurt, 2008). The best known of ERP system today
are People soft (www.peoplesoft.com)
and SAP (www.sap.com). There are some
benefits of implement ERP namely can reduce cycle time, enable faster business
transactions, facilitate better management and enable e-commerce integration
(Davenport, 2000). However, implementing of ERP is not easy task. It is a major
project and as such requires the organization to pay attention to a variety of
stakeholders, i.e, management, information system professionals, line workers,
consultants and trading partners) and the management of their motivations and
expectations (S.V. Grabski, et, al. 2007).
it
is similar argue with Claire, B et, al., 2005, The ERP system is a tool
assembling and integrating all data and management skills which represent the
firm’s activity, in a unique database: from finance to human resources, going
through the elements of the supply chain that permanently link the production
to purchasing and sales.
The
implementation of ERP system generally requires an organization to adopt the
standardized business process embedded in the software and to move away from a
function-based organizational structure in favor of an integrated, process
oriented structure (Neil A. Morton, 2008). Therefore, it requires complex of
software to implement it which is take much cost to the companies. On the other
hand, the implementation of ERP systems would fail if top management is often
attempt to adopt the ERP system without understanding the consequences of a
potential “misfit” between the system and the organization (Neil A Morton et,
al., 2008). On the other hand, political conflicts and organizational
resistance and also information technology (IT) project identify as a critical
success for ERP implementation success (Neil A. Morton, 2008).
According
to A. Hakim and Hakim (2010) argue that there is four phase of ERP system
implementation and each phases have their own questions. Phase one, ERP as a
strategic corporate objective. Has ERP implementation been introduced as part
of corporate strategic objective? Phase 2: ERP effectiveness on the
organization. Is ERP beneficial for the organization? Phase 3: Corporate
Readiness. Is the organization ready to adopt and adapt to ERP. Phase 4:
Evaluation of ERP success rate considering the constraining factors and risks
involved.
On
the other hand, If the company can implement well of ERP system, the company
therefore will achieve their objectives timely and also increase the revenue
and reduce cost of business process. A study found that the company who adopted
ERP system is better performance than non-adopters. It can see at the financial
performance such as return on assets, return on investment and assets turn
over.
The
results of financial performance on the company who adopted ERP system were
significantly better over a 3-years period rather than non-adopters (C.Berchet
et, al., 2005).
The
factors of implementation ERP systems
Handling
the complexity of business process and also to enhance the performance, it
needs therefore a system to integrate all of part in the business process in
the organization. The business process can be included a set of mature business
applications and tools for financial and cost accounting, sales and
distribution, management of material, human resources, production planning and
computer integrated manufacturing, supply chain and customer information
(Indihar S. and Kovacic, 2008).
This
argument similar vein by Damijan Z, et al., (2009), the reason why large
companies spent much money to implement ERP system because ERP system enables
to implement of best business practice. The another reason is the potential
benefit of implementing ERP systems include drastic declines in inventory,
breakthrough reductions in working capital, abundant information about
customers’ wishes and needs, along with the ability to view and manage the
suppliers, alliances and customers as an integrated whole (Indihar S. and
Kovacic, 2008).
Among
the most important attributes of ERP systems are their ability to automate and
integrate the business process, share common data and practice across the
entire enterprise and produce and access information in real time environment
(Nah et, al, 2001).
However,
even the ERP system is good system to integrate all of business process, but
many organizations fail to implement ERP system well because lack of commitment
by management, miss communication or dishonest communication and unbalance and
underpowered team (V. Botta-Genoulaz et al., 2005). Successful ERP
implementation completely depends upon strong and persistent top management
involvement, because top management support has to be included in each step and
in all company levels. At the same time, effective communication is an
important factor when talking about changes and it is required through the
whole business process and on all levels (Damijan Z. et al., 2009)
In
addition, unsuccessful implementation could be observed from two aspects such
as completely or partly. Completely unsuccessful project are considered to be
those, in which companies resign from realization before taking up
implementation or failed so miserably that the company suffered significant
long term financial damage, while partly unsuccessful implementations often
results in tenuous adjustment processes (Taube and Gargeya, 2005). There is
some factors influence implementation of ERP system in the organization from
the researchers. Table-1 shows some factors which influence implementation of
ERP system in the organization.
Table-1: The Study of Factors implementation ERP system
in the
organisation
|
No
|
Authors
|
Titles
|
Studied factors
implementation of ERP system
|
|
1
2
3
4
5
6
7
|
Umble, EJ and Umble, M.M (2002),
Damijan Z, et, al (2009),
Gergaya. V.B and Brady.C (2005)
Zhang et, al (2003)
Chuck C.H. Law and Eric W.T. Ngai, (2007).
Indihar Stemberger, M and Kovacic, A (2008)
Neil A Morton and Q. Hu, 2008)
|
Avoiding ERP implementation failure
The Influence of business process management
and some other CSFs on successful ERP implementations
Success and failure factors of adopting SAP
in ERP system implementation
Critical success of ERP systems
implementations in China
An investigation of the relationship between
organizational factors, business process improvement, and ERP success
The role of business process modeling in ERP
implementation projects
Implication of the fit between
organizational structure and ERP: A structural contingency theory
perspective.
|
Organizational culture and change management
Change management and Top management support
Change management of human resources.
Socio culture and IT development
Management commitment and IT adoption
Top Management support
Organizational structure and information
technology
|
Organizational
culture and change management
Successful
implementation requires that people, processes, department and organizations
change (Umble and Umble, 2002). Change management comprises human resources
management as well as social changes, needed by top management when introducing
new processes and structure in order to prepare people to accept changes and
decrease their reluctant to change (Damijan Z. et al., 2009). Therefore, the
effectiveness of communication among employees play important roles when
talking about changes and it is required through the whole business process on
all levels. It is obviously that employees have ability to complete all new
tasks and hence to be flexible in order to have an ability to adapt to new
changes in companies (Hammer and Champy, 2003).
Change
management in human resources includes the activities such as training of the
employees would effective in the business process change, developing new skills
needed by new process and establishing management systems to grow the required
values. If these factors are not established in the organization, therefore,
the objectives of the organization will not achieve successfully (Gargeya and
Brady, 2005). Event if the organization manage to form a favorable environment such
as, top management support and provide high technology, it is therefore would
not guarantee that the company will achieve their objectives if the employee
lack their skills and knowledge or they are educated properly. In addition,
motivation and cooperation to the employees play significant role in the
implementing ERP system to enhance the performance of the organization (Damijan
Z. et al., 2009).
On
the other hand, the culture business processes also as one part influence
success or failure in implementing ERP system. For example, the misfit between
ERP and organization is greater in Asia because the underlying structure of
most ERP system is influenced by the US and European business processes which
are many cases are substantially different from those prevalent in business in
Asia (N.A Morton, Q. Hu, 2008)
According
to Zhang et al (2003) analyze the success factors of ERP implementation in
China, where the implementation success rate is significantly lower than in
western countries (10% instead of 33% according to the authors). Based on
finding of their study, the researchers argues that the most ERP software being
developed in technically advanced countries, therefore, the standard are often
too high for developing countries. In addition to this, in an effort to bring
the global organization to a common platform, different countries would need
levels of upgrades.
Top Management support
Top
Management support is one of important factor in the implementation of ERP
system in the organization. Successfully ERP implementation completely depends
upon strong and persistent top management involvement because top management
support has to be included in each step and level in the company (Damijan Z. et
al., 2009). According to Harrison (2004) argue that some companies hand over
its ERP implementation responsibility to technical department and therefore
make a vital mistake resulting in an unsuccessful project (Damijan Z. et al.,
2009).
Umble
and Umble (2002) studied and identified the failure of manager in implementing
IT project in the company. It is because lack of top management support. Even
though, the characteristic of ERP implementation require good information
technology and specialists who set up the information technology therefore,
without support from top management, the implementation of ERP system is
useless or failed. In addition to this, both of information specialists and top
management need cooperative and established a partnership to implement ERP
system in the company (Indihar. S and Kovacic, 2006).
Capital Knowledge
Intellectual
capital also plays significant roles in the success of implementation of ERP in
the business performance. According to Damijan Z, et al., (2009), the vital
role of knowledge and the ability of employees will be a key to success, and
the essential competitive advantage will be an organization’s ability to learn
more quickly than their competitors, as only an organization oriented towards
learning can sustain more and more pressure as a consequence of rapid and
unpredictable environmental changes. In addition, many literatures defines
human capital as part of intellectual capital, indicates ability and
flexibility as important excellence in competitive environment, contemplates
flexibility from different aspects and also as organization’s abilities to
respond various demand from dynamic competitive environment (Schuler and
Jackson, 1999)
Organizational Structure
Organizational
structure is more complicated than distinguishing between centralized and
decentralized. Other commonly mention in the structural dimension is
specialization, standardization, formalization and hierarchical levels
(Donaldson, 2001). According from N.A Moron and Q. Hu studied, they integrated
between dimension of organizational structure and ERP system and the argued
that success or unsuccessful implementation of ERP, it depends how the
organization adjust dimension of structural organization to ERP system
implementation. Fitting between ERP systems to organizational structure have to
be managed by manager of the organization. The manager must be able to
determine the propose of ERP system is good fit with their organizational structure
or if it only may be good fit with certain parts of the organization.
Contingencies
and factor implementation of ERP system
Contingency theory posits that organizational
effectiveness is achieved by matching organizational characteristics to contingency (N.A
Morton and Q.Hu, 2008). Contingency is defined as any variable that moderates
the effect of an organizational characteristic on organizational performance
(Donaldson, 2001).
Another source mentions contingency theory as
general, is a class of behavioral theory that claims that there is no best way
to organize a corporation, to lead a company, or to make decision. Instead, the
optimal course of action is contingent (dependent) upon the internal and
external situation (http://en.wikipedia.org). It is
also similar argue by Fiedler et, al that contingency theories are a class of
behavioral theory that contend that there is no one best way of organizing /
leading and that an organizational / leadership style that is effective in some
situations may not be successful in others (http://www.valuebasedmanagement.net)
Therefore, it is depend on knowledge of and
research into organizations as systems, and stresses the need for managerial
strategies based on all relevant facts. In contingency theory approach, each
managerial situation must be viewed separately and should observe and also
consider a wide range of external and internal factors in the organization. In addition
to this, each manager must have different approaches for different situation in
their organization (Belkaoi A.R, 2008).
According
to many studies, there are some factors (constraints) internal and external in
the organization namely, the size of the organization, how the firm adapts
itself to its environment, different among resources and operation activities,
assumptions of managers about employees, strategy and technology being used (http://www.referencesbusiness.com). In
addition to this, the contingency theory has four important ideas that should
be considered by organization. Firstly, there is no universal or one best way
to manage, secondly, the design of an organization and its subsystems must
‘fit’ with the environment, thirdly, effective organizations not only have a
proper ‘fit’ with the environment but also between its subsystems and finally,
the needs of an organization are better satisfied when it is properly designed
and the management style is appropriate both to the task undertaken and the
nature of the work group. (http://www.valuebasedmanagement.net).
Implementing
ERP system in the organization therefore must fit to the type of organization
self. For example, ERP system must be designed to fit with structure of the
organization so that the information can deliver to right department on the
right place. According to N.A Morton and Q. Hu found that some type of
organizations is good fit with ERP system and the others are not. In addition,
Organizations whose structures are better fit with ERP systems are likely to
have chance successful implementations. On the other hand, organizations whose
structures are poor fit with ERP system are likely to face organizational
resistance to system and increase the chance of successful.
At
the same time, the implementation of ERP system must fit with business
environment of the organizations and also must fit with the culture of the
country self. According to Zhang et al (2003), they found the ERP system must
fit and standardize to the country whose implement ERP system. It is because
different countries have different level of to implement ERP system as
information system.
CONCEPTUAL FRAMEWORK
According
to some the literatures above, it can develop the conceptual framework that
there is relationship between the factors of implementation ERP systems such as
organizational culture and change management, top management support, capital
knowledge and organizational structure as independent variable to the ERP
implementation successful as dependent variable.
IV DV
|
|||
|
|||
CONCLUSION
The
adoption of the ERP is the mirror that many organizations are willing to shift
from the simple information system to new information system as their business
process. They move because they want to make the business process becomes
easier, reduces waste time and simple bureaucracy and administrations. In
addition, provide accurate information’s to make decision. For example, sales
department will develop their own system to handle sales records and customer
sales orders and the warehouse division will develop their own system for
inventory. Furthermore, the ERP is the system to integrate the different
functional area in the organization.
However,
implementing ERP system is not easy task because its influence some factors
such as, organizational culture and change management, top management support,
capital knowledge and organizational structure. In addition, this study uses
contingency theory to study the factors of implement ERP system in the
organization. According to some studies, implementing of ERP system in the
organization therefore must fit to the type of organization self. For example,
ERP system must be designed to fit with structure of the organization so that
the information can deliver to the right department on the right place. At the
same time, business environment and culture also have to take consideration by
organization to implement ERP system.
Finally,
based on the literature review therefore, there is positive relationship
between factor implementation of ERP system with the successful of
implementation ERP system in the organizations.
Limitation
of this study. This study is subject to potential limitations. One of limitation is
this study does not include another variable like firm size to measure the
implementation of successful ERP system in the organization. The variable of
firm size is important to include in the study because firm size like big and
small company is one of measures to measures the successful implementation of
ERP system in the organization.
REFERENCES
Andreas I. Nicolaou, (2000), A contingency model of perceived
effectiveness in accounting information systems: Organizational coordination
and control effects, International Journal of Accounting Information Systems,
91-105
Amin Hakim and Hamid Hakim, (2010), A practical model on controlling
the ERP implementation risks, Information systems, 35, 204-214
Bernhard Wieder, Peter Booth, Zoltan P. Matolcsy and Maria-Luise
Ossimitz, (2006), The Impact of ERP systems on firm and business performance,
Journal of Enterprise information Management. Vol. 19, No.1, pp. 13-29
Belkaoi A. R. (2008), Accounting
Theory. Fifth Edition
Chuck C.H. Law and Eric W.T. Ngai, (2007). An investigation of the
relationship between organizational factors, business process improvement and
ERP success. Benchmarking: An International Journal, Vol. 14. No.3. pp. 387-406
Claire Berchet and George Habchi, (2005), The implementation and
deployment of an ERP system: An industrial case study. Computer in Industry,
56, 588-605
Damijan Z abjek, Andrej Kovac ic and Mojca Indihar S temberger (2009),
The influence of business process management and some other CSFs on successful
ERP implementation. Journal Business Process Management, Vol. 15, No.4, pp
588-608
Davenport, T. (2000), Mission Critical – Realizing the Promise of
Enterprise Systems, Harvard Business School Publishing, Boston, MA.
Donaldson, L. (2001). The contingency theory of organizations. Thousand
Oaks, CA: Sage Publications
Hurt, Robert L. Accounting information systems: basic concept and
current issues.
Nah, F.F.-H., Lau, J.L.-S. and Kuang, J. (2001), “Critical factors for
successful implementation of enterprise systems”, Business Process Management
Journal, Vol. 7 No. 3, pp. 285-96.
Indihar S Temberger, M. and Kovacˇicˇ, A. (2008), “The role of business
process modelling in ERP implementation projects”, Proceedings of the 10th
International Conference on Computer Modelling and Simulation, 1-3April
2008,Emmanuel College, Cambridge, England, pp. 260-265.
Gattiker, T. F., & Goodhue, D. L. (2004). Understanding the
local-level costs and benefits of ERP through organizational information
processing theory. Information and Management, 41(4), 431–443.
Neil A, Morton and Qing Hu, (2008), Implications of the fit between
organizational structure and ERP: A structural contingency theory perspective.
International Journal of Information Management, 28, 391-402.
Severin V. Grabski and Stewart A. Leech (2007). Complementary controls
and ERP implementation success. International Journal of Accounting Information
Systems, 8,
Shuler, R.S and Jackson, E.J. (1999), Strategic Human Resource
Management, Blackwell Publishing, Oxford.
V. Botta-Genoulaz, P.A. Millet and
B. Grabot, (2005), A Survey on the recent literature on ERP systems.
Computer in Industry, 56, 510-521.
Tidak ada komentar:
Posting Komentar