While it is difficult for many firms to attain, a comprehensive understanding of all implementation components and how the firm can leverage those components is critical to successful Enterprise Resource Planning (ERP) system management. ERP enables a firm to incorporate every major business process to augment efficiency and sustain a competitive advantage; however, these benefits will not be reaped if an ineffective implementation is performed. Basically, ERP is an enterprise-wide information system integrating and managing all of the business processes of a firm.
According to Nah and Lau (2001) ERP is “a packaged business software system that enables a company to manage the efficient and effective use of resources (materials, human resources, finance, etc.) by providing a total, integrated solution for the firm’s information-processing needs”. If implemented correctly, the software integrates the departmental informational data of a firm into a single, common database, allowing convenient, instantaneous access to sales, inventory, product, customer, and vendor data. Initially only performing internal routine transactions, ERP systems can now manage the flow of information across all internal and external business processes to unite suppliers, distributors and customers.
Many public and private firms are implementing ERP systems to replace archaic legacy systems that are incompatible with contemporary business environment; however, this complex and challenging process is expensive, and requires training, development of new procedures, and conversion of data.
Numerous ERP research studies have identified vital components in a successful ERP implementation, and when performed correctly, the benefits reaped afford a lucrative return on investment for the firm. By integrating the business processes and providing real-time data access, an ERP system improves the performance level of a supply chain by reducing cycle times. Some intangible benefits from implementation include improvements in customer satisfaction, vendor performance, organizational flexibility, information accuracy and decision-making capability. In spite of the aforementioned benefits, ERP systems have some drawbacks as well; as most are huge, complex, and expensive. Also, ERP implementation requires a huge time commitment from a firm’s information technology department or outside consultants. Additionally, since implementation affects most departments in a firm, they require new business processes, employee training, and managerial/technical support.
Some critical success factors in an ERP implementation are top management support, business plan and vision, re-engineered business processes, effective project management and project champion, teamwork, ERP system selection, user involvement, and education/training. Providing leadership and the necessary resources, top management support has been identified as the most important success factor in ERP system...