Editing Enterprise resource planning (section)

==Implementation==
ERP's scope usually implies significant changes to staff work processes and practices.<ref name="tech-faq.com">{{cite web|url=http://www.tech-faq.com/erp.shtml |title=ERP (Enterprise Resource Planning) |publisher=Tech-faq.com |date=March 5, 2014 |access-date=July 14, 2015}}</ref> Generally, three types of services are available to help implement such changes: consulting, customization, and support.<ref name="tech-faq.com" /> Implementation time depends on business size, number of modules, customization, the scope of process changes, and the readiness of the customer to take ownership for the project. Modular ERP systems can be implemented in stages. The typical project for a large enterprise takes about 14 months and requires around 150 consultants.<ref name="carl.sandiego.edu">{{cite web |title=Critical Issues Affecting an ERP Implementation |url=http://carl.sandiego.edu/gba573/critical_issues_affecting_an_erp.htm |publisher=Auerbach Publications |work=Information Systems Management |volume=16 |issue=3 |page=7 |year=1999 |access-date=January 10, 2013 |url-status=dead |archive-url=https://web.archive.org/web/20130103032912/http://carl.sandiego.edu/gba573/critical_issues_affecting_an_erp.htm |archive-date=January 3, 2013 |df=mdy }}</ref> Small projects can require months; multinational and other large implementations can take years.<ref name="SankarImplement06">{{cite book |url=https://books.google.com/books?id=sVS9AQAAQBAJ&pg=PA8 |title=Implementation Strategies for SAP R/3 in a Multinational Organization: Lessons from a Real-World Case Study |last1=Sankar |first1=C. |last2=Rau |first2=K.-H. |publisher=Cybertech Publishing |page=8 |year=2006 |isbn=9781591407782 |access-date=9 May 2018}}</ref><ref name="PelphreyDirecting15">{{cite book |url=https://books.google.com/books?id=KJO9BwAAQBAJ&pg=PA92 |title=Directing the ERP Implementation: A Best Practice Guide to Avoiding Program Failure Traps While Tuning System Performance |author=Pelphrey, M.W. |publisher=CRC Press |pages=92–111 |year=2015 |isbn=9781482248425}}</ref> [[Mass customization|Customization]] can substantially increase implementation times.<ref name="carl.sandiego.edu" />

Besides that, information processing influences various business functions e.g. some large corporations like [[Walmart]] use a [[Just in time (business)|just in time]] inventory system. This reduces inventory storage and increases delivery efficiency, and requires up-to-date data. Before 2014, Walmart used a system called Inforem developed by [[IBM]] to manage replenishment.<ref>{{cite web|url=http://www.thecitywire.com/node/31165 |title=Wal-Mart slow to roll out new replenishment system |work=Business, Political, and Cultural News in Fort Smith and Northwest Arkansas |publisher=Thecitywire.com |location=Arkansas |date=January 8, 2014 |access-date=July 14, 2015}}</ref>

===Process preparation===
Implementing ERP typically requires changes in existing business processes.<ref>Turban et al. (2008). ''Information Technology for Management, Transforming Organizations in the Digital Economy''. Massachusetts: John Wiley & Sons, Inc., pp. 300–343. {{ISBN|978-0-471-78712-9}}</ref> Poor understanding of needed process changes prior to starting implementation is a main reason for project failure.<ref>{{cite journal | last1 = Brown | first1 = C. | last2 = Vessey | first2 = I. | title = Managing the Next Wave of Enterprise Systems: Leveraging Lessons from ERP | journal = MIS Quarterly Executive | volume = 2 | issue = 1| year = 2003 }}</ref> The difficulties could be related to the system, business process, infrastructure, training, or lack of motivation.

It is therefore crucial that organizations thoroughly analyze processes before they deploy an ERP software. Analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of current processes with those provided by the ERP system. Research indicates that risk of business process mismatch is decreased by:
* Linking current processes to the organization's strategy
* Analyzing the effectiveness of each process
* Understanding existing automated solutions<ref>King. W., "Ensuring ERP implementation success," ''Information Systems Management'', Summer 2005.</ref><ref>Yusuf, Y., A. Gunasekaran, and M. Abthorpe, "Enterprise Information Systems Project Implementation: A Case Study of ERP in Rolls-Royce," ''International Journal of Production Economics'', 87(3), February 2004.</ref>

ERP implementation is considerably more difficult (and politically charged) in decentralized organizations, because they often have different processes, business rules, data semantics, authorization hierarchies, and decision centers.<ref>{{cite web |title=Requirements Engineering for Cross-organizational ERP Implementation: Undocumented Assumptions and Potential Mismatches |first1=Maya |last1=Daneva |author2=Roel Wieringa |author2-link=Roel Wieringa |publisher=University of Twente |url=http://www.vital-project.org/papers/Daneva-Wieringa-Camera-Ready-RE-Paper.pdf |access-date=July 12, 2008 |archive-date=5 July 2010 |archive-url=https://web.archive.org/web/20100705020710/http://www.vital-project.org/papers/Daneva-Wieringa-Camera-Ready-RE-Paper.pdf |url-status=dead }}</ref> This may require migrating some business units before others, delaying implementation to work through the necessary changes for each unit, possibly reducing integration (e.g., linking via [[master data management]]) or customizing the system to meet specific needs.<ref name="Thomas H. Davenport 1998">Thomas H. Davenport, "Putting the Enterprise into the Enterprise System", ''Harvard Business Review'', July–August 1998.</ref>

A potential disadvantage is that adopting "standard" processes can lead to a loss of [[competitive advantage]]. While this has happened, losses in one area are often offset by gains in other areas, increasing overall competitive advantage.<ref>Turban et al. (2008). ''Information Technology for Management, Transforming Organizations in the Digital Economy''. Massachusetts: John Wiley & Sons, Inc., p. 320. {{ISBN|978-0-471-78712-9}}</ref><ref>[[Bruce Dehning|Dehning, B.]] and T.Stratopoulos, 'Determinants of a Sustainable Competitive Advantage Due to an IT-enabled Strategy,' Journal of Strategic Information Systems, Vol. 12, 2003</ref>

===Configuration===
Configuring an ERP system is largely a matter of balancing the way the organization wants the system to work, and the way the system is designed to work out of the box. ERP systems typically include many configurable settings that in effect modify system operations. For example, in the [[ServiceNow]] platform, business rules can be written requiring the signature of a business owner within 2 weeks of a newly completed risk assessment. The tool can be configured to automatically email notifications to the business owner, and transition the risk assessment to various stages in the process depending on the owner's responses or lack thereof.

===Two-tier enterprise resource planning===

Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems at once: one at the corporate level and one at the division or subsidiary level. For example, a manufacturing company could use an ERP system to manage across the organization using independent global or regional distribution, production or sales centers, and service providers to support the main company's customers. Each independent center (or) subsidiary may have its own business operations cycles, [[workflow]]s, and [[business process]]es.

Given the realities of globalization, enterprises continuously evaluate how to optimize their regional, divisional, and product or manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability and delivering value.<ref name="ferdows">{{cite journal | last1 = Ferdows | first1 = K | year = 1997 | title = Making the most of foreign factories | journal = [[Harvard Business Review]] | volume = 75 | issue = 2| pages = 73–88 }}</ref> With two-tier ERP, the regional distribution, production, or sales centers and service providers continue operating under their own business model—separate from the main company, using their own ERP systems. Since these smaller companies' processes and workflows are not tied to main company's processes and workflows, they can respond to local business requirements in multiple locations.<ref name="gill">Gill, R. (2011). "The rise of two-tier ERP." ''Strategic Finance'', 93(5), 35–40, 1.</ref>

Factors that affect enterprises' adoption of two-tier ERP systems include:
* Manufacturing globalization, the economics of sourcing in emerging economies
* Potential for quicker, less costly ERP implementations at subsidiaries, based on selecting software more suited to smaller companies
* Extra effort, (often involving the use of [[enterprise application integration]]) is required where data must pass between two ERP systems<ref>Montgomery, Nigel (2010).[http://www.gartner.com/id=1412121 "Two-Tier ERP Suite Strategy: Considering Your Options."] Gartner Group. July 28, 2010. Retrieved September 20, 2012.</ref> Two-tier ERP strategies give enterprises agility in responding to market demands and in aligning IT systems at a corporate level while inevitably resulting in more systems as compared to one ERP system used throughout the organization.<ref>{{cite journal | last1 = Kovacs | first1 = G. L. | last2 = Paganelli | first2 = P. | year = 2003 | title = A planning and management infrastructure for large, complex, distributed projects&nbsp;— beyond ERP and SCM | url = http://ceit.aut.ac.ir/~sa_hashemi/My%20Teachings/MS-CEIT-Supply%20Chain%20Management/W-Selected%20Papers%20for%20class%20seminars-last/scm-pm-A%20planning%20and%20management%20infrastructure%20for%20large%2C%20complex%2Cdistributed%20projects-beyond%20ERP%20and%20SCM.pdf | journal = Computers in Industry | volume = 51 | issue = 2| page = 165 | doi=10.1016/s0166-3615(03)00034-4| citeseerx = 10.1.1.474.6993 }}</ref>

===Customization===
ERP systems are theoretically based on industry best practices, and their makers intend that organizations deploy them "as is".<ref>{{cite journal|last=Kraemmerand|first=P.|title=ERP implementation: an integrated process of radical change and continuous learning|journal=Production Planning & Control|year=2003|volume=14|issue=4|pages=228–248|display-authors=etal|doi=10.1080/0953728031000117959|s2cid=108921043}}</ref><ref>{{cite journal|last=Vilpola|first=Inka Heidi|title=A method for improving ERP implementation success by the principles and process of user-centred design|journal=Enterprise Information Systems|year=2008|volume=2|issue=1|pages=47–76|doi=10.1080/17517570701793848|s2cid=3032440}}</ref> ERP vendors do offer customers configuration options that let organizations incorporate their own business rules, but gaps in features often remain even after configuration is complete.

ERP customers have several options to reconcile feature gaps, each with their own pros/cons. Technical solutions include rewriting part of the delivered software, writing a homegrown module to work within the ERP system, or interfacing to an external system. These three options constitute varying degrees of system customization—with the first being the most invasive and costly to maintain.<ref name="Fryling 2010 391–421">{{cite journal|last=Fryling|first=Meg|title=Estimating the impact of enterprise resource planning project management decisions on post-implementation maintenance costs: a case study using simulation modelling|journal=Enterprise Information Systems|year=2010|volume=4|issue=4|pages=391–421|doi=10.1080/17517575.2010.519785|bibcode=2010EntIS...4..391F|s2cid=34298012}}</ref> Alternatively, there are non-technical options such as changing business practices or organizational policies to better match the delivered ERP feature set. Key differences between customization and configuration include:

* Customization is always optional, whereas the software must always be configured before use (e.g., setting up cost/profit center structures, organizational trees, purchase approval rules, etc.).
* The software is designed to handle various configurations and behaves predictably in any allowed configuration.
* The effect of configuration changes on system behavior and performance is predictable and is the responsibility of the ERP vendor. The effect of customization is less predictable. It is the customer's responsibility, and increases testing requirements.
* Configuration changes survive upgrades to new software versions. Some customizations (e.g., code that uses pre–defined "hooks" that are called before/after displaying data screens) survive upgrades, though they require retesting. Other customizations (e.g., those involving changes to fundamental data structures) are overwritten during upgrades and must be re-implemented.<ref>{{cite journal|last=Yakovlev|first=I.V.|title=An ERP implementation and business process reengineering at a Small University|journal=Educause Quarterly|year=2002|volume=2|pages=52–57}}</ref>

Advantages of customization include:
*Improving user acceptance<ref>{{cite book|last=Fryling|first=Meg|title=Total Cost of Ownership, System Acceptance and Perceived Success of Enterprise Resource Planning Software: Simulating a Dynamic Feedback Perspective of ERP in the Higher Education Environment|year=2010|isbn=978-1-109-74428-6|page=403}}</ref>
*Potential to obtain competitive advantage vis-à-vis companies using only standard features.

Customization's disadvantages include that it may:
* Increase time and resources required to implement and maintain<ref name="Fryling 2010 391–421"/><ref name="BradfordModern15">{{cite book |url=https://books.google.com/books?id=KZRqCAAAQBAJ&pg=PA107 |title=Modern ERP: Select, Implement, & Use Today's Advanced Business Systems |author=Bradford, M. |pages=107–108 |year=2015 |publisher=Lulu.com |isbn=9781312665989 |access-date=9 May 2018}}</ref>
* Hinder seamless interfacing/integration between suppliers and customers due to the differences between systems<ref name="BradfordModern15" />
* Limit the company's ability to upgrade the ERP software in the future<ref name="BradfordModern15" />
* Create overreliance on customization, undermining the principles of ERP as a standardizing software platform

===Extensions===
ERP systems can be extended with third-party software, often via vendor-supplied interfaces.<ref name="BendolyStrat05">{{cite book |url=https://books.google.com/books?id=GAOHQvgpeNYC&pg=PA95 |title=Strategic ERP Extension and Use|author1-link=Elliot Bendoly |last1=Bendoly |first1=E. |last2=Jacobs |first2=F.R. |publisher=Stanford University Press |page=95 |year=2005 |isbn=9780804750981 |access-date=9 May 2018}}</ref><ref name="LeonERP08">{{cite book |url=https://books.google.com/books?id=95QiBAAAQBAJ&pg=PA171 |title=ERP Demystified |author=Leon, A. |publisher=Tata McGraw-Hill Education |pages=170–171 |year=2008 |isbn=9780070656642}}</ref> Extensions offer features such as:<ref name="LeonERP08" />
* [[product data management]]
* [[product life cycle management]]
* [[customer relations management]]
* [[data mining]]
* [[e-procurement]]

===Data migration===
[[Data migration]] is the process of moving, copying, and restructuring data from an existing system to the ERP system. Migration is critical to implementation success and requires significant planning. Unfortunately, since migration is one of the final activities before the production phase, it often receives insufficient attention. The following steps can structure migration planning:<ref name="RamaswamyData07">{{cite web |url=http://research.ittoolbox.com/white-papers/backoffice/erp/data-migration-strategies-in-erp-4620/ |archive-url=https://web.archive.org/web/20071030160728/http://research.ittoolbox.com/white-papers/backoffice/erp/data-migration-strategies-in-erp-4620/ |title=Data Migration Strategy in ERP |author=Ramaswamy, V.K. |publisher=Information Technology Toolbox, Inc |date=27 September 2007 |archive-date=30 October 2007 |access-date=9 May 2018}}</ref>

* Identify the data to be migrated.
* Determine the migration timing.
* Generate data migration templates for key data components
* Freeze the toolset.
* Decide on the migration-related setup of key business accounts.
* Define [[data archiving]] policies and procedures.

Often, data migration is incomplete because some of the data in the existing system is either incompatible or not needed in the new system. As such, the existing system may need to be kept as an archived database to refer back to once the new ERP system is in place.<ref name="RamaswamyData07" />

===Advantages===
The most fundamental advantage of ERP is that the integration of a myriad of business processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:<ref name="MeerBest05">{{cite book |url=https://books.google.com/books?id=9YaMB6tOd5oC |title=Best Practices in ERP Software Applications |author=Meer, K.H. |page=59 |year=2005 |publisher=iUniverse |isbn=978-0595345137 |access-date=9 May 2018}}</ref>
* Sales forecasting, which allows [[inventory optimization]].
* Chronological history of every transaction through relevant data compilation in every area of operation.
* [[Order tracking]], from acceptance through fulfillment
* Revenue tracking, from [[invoice]] through cash receipt
* Matching [[purchase order]]s (what was ordered), inventory receipts (what arrived), and [[cost]]ing (what the vendor invoiced)

ERP systems centralize business data, which:
* Eliminates the need to [[Synchronization|synchronize]] changes between multiple systems—consolidation of finance, marketing, sales, human resource, and [[manufacturing]] applications{{citation needed|date=March 2020}}
* Brings legitimacy and transparency to each bit of statistical data
* Facilitates standard [[Product naming convention|product naming/coding]]
* Provides a comprehensive enterprise view (no "islands of information"), making real–time information available to management anywhere, anytime to make proper decisions
* Protects sensitive data by consolidating multiple security systems into a single structure<ref>{{cite web |first=Katherine |last=Walsh |url=http://www.csoonline.com/article/216940/The_ERP_Security_Challenge |title=The ERP Security Challenge |work=CSOonline |publisher=[[CXO Media, Inc.]] |date=January 2009 |access-date=January 17, 2008 |archive-date=4 May 2009 |archive-url=https://web.archive.org/web/20090504140508/http://www.csoonline.com/article/216940/The_ERP_Security_Challenge |url-status=dead }}</ref>

===Benefits===
* ERP creates a more agile company that adapts better to change. It also makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the business—internally and externally.<ref>{{cite book|last=O'Brien|first=James|title=Management Information Systems(MIS)|year=2011|publisher=McGraw-Hill, Irwin|location=New York|page=324}}</ref>
* ERP can improve data security in a closed environment. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised. This changes, however, with a more open environment, requiring further scrutiny of ERP security features and internal company policies regarding security.<ref name="SheSecurity07">{{cite journal |title=Security for Enterprise Resource Planning Systems |journal=Information Systems Security |last1=She |first1=W. |last2=Thuraisingham |first2=B. |s2cid=16472963 |volume=16 |issue=3 |pages=152–163 |year=2007 |doi=10.1080/10658980701401959}}</ref>
* ERP provides increased opportunities for [[collaboration]]. Data takes many forms in the modern enterprise, including documents, files, forms, audio and video, and [[email]]s. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems.<ref name="LeonERP08" />
*ERP is enhanced decision-making capabilities. By consolidating data from various departments and functions into a single, unified platform, ERP systems provide decision-makers with real-time insights and comprehensive analytics. This enables more informed and data-driven decision-making processes across the organization, leading to improved strategic planning, resource allocation, and overall business performance. Moreover, ERP systems facilitate better forecasting and trend analysis, helping businesses anticipate market changes, identify opportunities, and mitigate risks more effectively.<ref>{{Cite web |title= ERP gains ground in supply chain manaqement|url=https://www.proquest.com/docview/2705447086 | id={{ProQuest|2705447086}} }}</ref>

===Disadvantages===
* Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization's lowest common denominator needs, forcing the organization to find workarounds to meet unique demands.<ref>{{cite web|last=Young |first=Joanna |url=http://www.evolllution.com/opinions/audio-best-of-breed-vs-erp-whats-higher-ed-today/ |title=AUDIO &#124; Best-of-Breed vs. ERP: What's Best for Higher Ed Today? |date=May 16, 2014 |publisher=The EvoLLLution |access-date=July 14, 2015}}</ref>
* [[Business process re-engineering|Re-engineering business processes]] to fit the ERP system may damage competitiveness or divert focus from other critical activities.
* ERP can cost more than less integrated or less comprehensive solutions.
* High ERP [[switching cost]]s can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses.
* Overcoming resistance to sharing sensitive information between departments can divert management attention.
* Integration of truly independent businesses can create unnecessary dependencies.
* Extensive training requirements take resources from daily operations.
* Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money.<ref>{{cite web|url=http://www.cfo-insight.com/reporting-forecasting/forecasting/the-minefield-of-harmonising-erp/ |title=The Minefied of Harmonising ERP |publisher=Cfo-insight.com |date=July 23, 2012 |archive-url=https://web.archive.org/web/20120727021524/http://www.cfo-insight.com/reporting-forecasting/forecasting/the-minefield-of-harmonising-erp |archive-date=July 27, 2012}}</ref>

===Adoption rates===
Research published in 2011 based on a survey of 225 manufacturers, retailers and distributors found "high" rates of interest and adoption of ERP systems and that very few businesses were "completely untouched" by the concept of an ERP system. 27% of the companies survey had a fully operational system, 12% were at that time rolling out a system and 26% had an existing ERP system which they were extending or upgrading.<ref>McCrea, B., [https://www.mmh.com/article/supply_chain_technology_putting_the_spotlight_on_erp Supply Chain Technology: Putting the spotlight on ERP], ''Logistics Management'', June 2011, accessed 22 April 2022</ref>