Enterprise Resource Planning Systems For Smes

opening move Resource preparation Systems For SmesSeveral researches surrender revealed that try Resource patternning (ERP) systems bring greater benefits to organisations, weensy or large. These reports asserted that successful carrying discover of the chasten ERP ancestor will empower the financial success of the organisation while its failure can term of en diagnosement doom and gloom. SMEs in contrast to their larger counterpart w be peculiar challenges that further make the plectron of ERP termination difficult. These challenges pick prohibited got be the expectations and requirements of SMEs from ERP solutions. Various ERP computer parcel ar functional in the merchandise for their use, with the parcel leader being SAP, plainly it is essential for an SME to select the appropriate software system solution that appropriately organize their necessitys putting in consideration their peculiar predicament. This is soft achieved through an adequate software pickaxe and evaluation offset. This research looks into past works on ERP implementations for SMEs to come up with ERP requirements for SMEs avail equal software (and hardware) solutions available to them and a detailed software evaluation and selection process in profligate with assiduity better(p) practice which they can use. It likewise addresses current ERP securities manufacturing and trade trends.MethodologyThis paper is largely base on review of previous academic documents in form of journals, conference documents and books. These were reviewed extensively in bank bill with the topic of discussion. An a nonher(prenominal) helpful source of culture used in the report is the internet. Through the internet, we were able to get more current information and data to support previous academic works. eon we have done extensive research on this topic, it should be noted that the academic documents used in this research represent just a subset of the numerous documents tha t have been written concerning this topic. They are by no room a perfect representation of all the possible views.Table of Contents1Abstract 1Methodology 1Table of Contents 2Introduction 3Enterprise Resource Planning (ERP) Systems 4Small and forte Size Enterprises (SMEs) 4ERP marketplace and Market Trend 6ERP Requirements for SMEs 9depth psychology of ERP Solution ( parcel and hardware) 11SAP 11 vaticinator ERP computer software 14 multinational financial Services (IFS) 15 rational Accpac 15Microsoft dynamics 16 move over Source Software (OSS) 16ERP evaluation and Selection process 17 demo 1 Plan Requirement 18 wooden leg 2 Request for Proposals (RFP) 19Stage 3 Solution Evaluation 19Stage 4 choose Negotiation 19Stage 5 Selection and Agreement 20IntroductionEnterprise resource think (ERP) systems, fit in to Joseph et al 2003, is now being promoted as a desirable and diminutive link for enhancing integration between all functional areas within an green light and betwee n the enterprise and its upstream downstream trading partners.Despite all benefits potentially offered by ERP systems (Banker, 1998 Hicks, 1995 Minahan, 1998) barely, the issue of organisational changes engageed by ERP implementation as well as predicting return on investing assumes particular importance within small and medium-sized enterprises (SMEs) because of their peculiar challenges.In SMEs, the implementation and the evaluation of the potential benefits is still a difficult task. (Ravarini, 2000).(Chan, 1999), asserted that m either an(prenominal) SMEs either lack enough resources or are not enthusiastic about committing a spacious fraction of their resources to ERP implementation referable to long implementation period and broad(prenominal) fees associated with ERP, (Chau, 1995). These amongst other factors have resulted in slow ERP adoption by SME (Tagliavini et al, 2002).Nowadays, some SMEs are not only seeking courses of combine their various island-of-informati on within the organisation, but have withal moved to extend the whole scope beyond their organisation to involve their suppliers, trading partners and customers (Charlesworth et al., 2002). Therefore, implementation of a right and personify effective ERP solution is essential. This however must be preceded by an accurate ERP software evaluation and selection process.This paper explores ERP for SMEs and is formatted as follows Introduction, Methodology, dry land on ERP, ERP Market and Trends, ERP and SMEs, ERP requirement for SMEs, Different Software (and Hardware) Solutions Analysis a Detailed Software Evaluation and Selection Process, Discussion, Conclusion and Future Research work.Enterprise Resource Planning (ERP) SystemsERP systems can be defined as the close to predominant computing systems for note in a lot of organisations, both in the public and private sectors (Gable, 1998)The ERP software can be customised to support overcritical existing processes which organisati ons follow (Stefanou, CJ., 2001) involve in an ERP system are Storage, orders, assets, vendor contacts, purchasing, financials and human resources (Dahlen C. and Elfsson J., 1999)(OLeary, 2000) stated that An ERP system integrates the majority of course processes and allows admission fee to the data in real magazine. However, (Gardiner et al., 2002) to a fault stated that an ERP system improves the performance level of a supplying chain by helping to reduce cycle times.Other benefits which enterprises enjoy by implementing an ERP system include better customer satisfaction, reduced quality cost, increased flexibility, improved resource utility, improved stopping put-making capability, improved information accuracy and improved vendor performance (Siriginidi, 2000).The flip-side to this is that, or so ERP software tend to be complicated, large and high-ticket(prenominal) (Mabert et al., 2001). The implementation of an ERP system is time consuming and puts pressure on an organi sations information technology (IT) incision or outside professionals (Khaled Al-Fawaz et al., 2008)Putting ERP in place requires unseasoned procedures, useee training, and both managerial and technical support. (Shang and Seddon, 2002)Small and Medium Size Enterprises (SMEs)SMEs, in most countries are businesses that employ fewer than 250 people. For some other countries, SMEs are those which employ fewer than 500 people. Countries like these include USA, Italy and Australia. 99.9% of the businesses in Albania come under SMEs. (Nito E., 2005)ERP customers are usually unconnected into three market divisions by annual income. These include large, midmarket and small. The borderline of these divisions tend to be different, depending on which ERP vendor is using them.For small enterprises, discerning, SAP, Microsoft, Infor and to a slight extent Lawson, compete with a turn of scourts of smaller vendors for ERP systems. watch 1 Source bla bla blaAs shown in the diagram above, onl y SAP and Sage have set ERP merchandises designed for the small enterprise market. The other vendors compete in this division with products that they too use for the midmarket.The top six vendors compete in the mid-market. A lot of these products are industry ad hoc e.g. pharmaceutical distribution, get a lineoriented services, process manufacturing, etcetera Successful competition has been attained by the leading ERP vendors adding sector specific focus to their products.This has been approached by Industryspecific preconfigured templates using a standard ERP product being developed by the ERP vendor (e.g. Oracles Business Accelerators or SAPs Best recital Templates).ERP Market and Market TrendTrend, as defined by (Kotler, 1997) is A direction or grade of events that have some momentum and durability.Over the last decade, the ERP market has bring forthn rattling quickly. The three briny reasons for this growth are globalisation, year 2000, and the take in for better infor mation integration. (Dahlen C. and Elfsson J., 1999)As at 1998, Merrill Lynch estimated that 40% of companies with revenues over $1billion had already implemented base ERP systems in the USA (Caldwell Stein, 1998) and had started implementing additional screenings, a market that was estimated at $8billion by 2002.An American- base research firm, AMR Research, also predicted the enterprise practises market could hit $78billion by 2004 compared to $27million in 1999 (Stefanou, CJ., 2001). However, according to Gartner group, a high percentage (88%) of the ERP market is concentrated in the western countries.SAP, the German flagship compevery, holds a global market share of 32%, while Oracle has a global market share of 14.5%. Both vendors have the lion share of the Global ERP market. However, this is not the side in the Chinese market where SAP and Oracle hold a combined market share of 24.4% and the domestic companies holding a combined market share of 51.6%. (Huigang Liang et al. , 2004)Total ERP market revenue grew to over $28B in 2006. This was determined by a combine of strong customer demand and leading vendors expanding their product portfolios through acquisition. (Jacobson S., 2007)As at 2000, the AMR Research, Inc. predicted that the ERP market would grow at a compound annual growth rate of 37% over the following quintet years.Currently, SAP and Oracle have dominated the market. Their competition, however, lies in the SMEs market With rivals like Sage group, Microsoft, Epicor and Lawson (Jacobson S. et al 2007) beneath is an ERP application revenue estimate for 2006 2011This was estimated as at 2007 by the AMR, Research GroupFigure 2 (Jacobson, S. et al 2007 The ERP Market sizing Report, 2006-2011, AMR Research., ERP 2007 Market sizing series).In recent times, the ERP marketer Outlook has changed a lot. Six vendors are responsible for almost two thirds of global ERP sales. Oracle and SAP control 50% of the World market by income. At the start of the last decade, Infor and Microsoft did not have a market presence.Below is a pie chart screening Global ERP Revenue by Vendor (2008) Figure 3 Source BSM, ERP. may 2010ERP Requirements for SMEs match to Huin 2004, SMEs have an enormous difference in penurys, operating requirements, logistics fulfilment and financial capabilities compared to their large counterparts. early among these requirements is a cost effective ERP solution. Costs associated with ERP solution include not only the software, but also to items such as training, hardware and consulting (Willis et al 2001).Besides, most ERP software available in the market, according to Bounanno G. et al 2005, are just too expensive for SMEs.Chan R. 1999, supported that many small-medium enterprises either do not have sufficient resources or are not willing to commit a huge fraction of their resources due to long implementation times and high fees associated with ERP implementation. This emphasises the fact that cost is a ma jor factor for SMEs when attempting to endure a capital intensive venture like ERP implementation. A research of 50 Italian SMEs carried out by Federici 2009 suggested that small and medium enterprises mostly chose systems provided by small national software houses obviously for cost reasons.Contrast to larger establishments, SMEs have limited experiences, human resources and skills that are necessary for some kind of ERP implementations according to Adam and ODoherty 2003 cited in Winkelmann and Klose 2008. It is a well known fact that most SMEs have a leprose down issue forth of employees who handles more than one function.This position is further supported by Huin 2004, which confirmed that most SMEs experience a high turnover rate compared to large companies. That work further stated that high turnover rate adversely adverts how SMEs manage their labour resource-a key resource input in any ERP project.This is in line with the research work of Winkelmann A et al 2008 which emp hasised that a dedicated IT department addressing the selection and implementation of an ERP system dont actually exist in most SMEs. As such most SMEs have requirements for ERP solutions (software and hardware) that leverage on their lean human resources, especially in the IT department and provide a substance abuser friendly platform not riddled with so many complications.Achanga et al 2006 confirmed in his work that most SMEs do not have a good management structure on which innovations such as ERP thrives. It is customary to have the Managing transferor or the CEO involved in everyday administration of the companies in addition to making strategic decisions. They further explained that most SMEs were established by possessor managers who may not have the tactful management know-how. As such, strategic progress is usually hampered by lack of good leadership traits which bring about informal working processes. This was supported by (Mintzberg H. et al 2003 p.217).Processes here according to Beretta 2004 is the medium that coverts activities efficiently and effectively in order to generate shelter for a specific customer. It is important to note that these processes are what ERP serves to integrate. As such ERP solution for SMEs must be undecomposable and flexible to accommodate these peculiarities of most SMEs. Such flexibility involves things like allowing only specific modules or even sub-modules to be implemented.The type and focus of the SMEs should begat the requirement for consideration in the plectron of ERP solution. Most SMEs have very specific operations and as such have very specific processes. These processes differ according to the specialisation of the company. Example is the case of a construction company in Taiwan that wanted to implement ERP but could not get software fit because of its unique operations (Yang J et al, 2007).Another example Made-To-Stock (MTS) manufacturing companies have different ERP requirements from Made-To-Oder (M TO) companies (Deep A. et al 2007). The implication is that MTO and MTS have different production processes and thus will need a system that aligns with their peculiar requirement.We can thitherfore conclude according to Deep A. et al, 2007 that issues relating to the specificity of an organisation will need to be determined before proceeding to make a choice on the ERP solution for implementation.Analysis of ERP Solution (Software and hardware)ERP software belongs to a suit of software called Enterprise system software. According to Shanks G. et al 2003, it isa set of software packaged application software modules, with an integrated architecture, that can be used by organizations as their primary engine for integrating data, processes, and information technology, in real time, across internal and external value chainsimpound deep knowledge of business practices that vendors have accumulated from implementations in a considerable range of client organizations, that can exert cons iderable influence on the design of processes within refreshful client organizationsis a generic semi-finished product with tables and parameters that client organizations and their implementation partners must configure, customize and integrate with other computer-based information systems to meet their business needs.Thus, ERP software are sold to organisations on the platform that its a way for them to implement best practices in an organisation (Wagner and Newell 2004), but there is a vast gap between this theory, the actual implementation and use of the software. The idea behind the software use is that a blend of best practice within a particular industry is built into the design so that this can be used by a similar company irrespective of where it is to automate its working process.According to Holland and idle 1999, most organizations now opt for off the shelf software instead of developing one in-house for its function.While there are over one hundred ERP software availa ble, we will be reviewing a list of some well known ERP solutions available to an SME belowSAPA company that started in Germany, the application has captured the integrated market of most large and medium market throughout the world (Martin and Cheung 2000). With high functionality and a great deal of integration, the solution covers requirements such as financial accounting and control, sales and distribution, materials management, production planning and human resource management.Bancroft et al 1998 revealed that SAP design consists of the following layers of softwareThe SAP graphical user interface (GUI) representing the presentation layerThe SAP application layer andThe SAP database layerSAP supports critical business functions and processes and can actually be tailored to meet the business needs of any enterprise (SAP Global, 2010). It delivers the following solutionsSAP ERP Financials helps addressing changing financial reporting standards, improve cash flows and manage riski nesssSAP ERP mankind Capital centering helps in automating key processes like End-user service delivery, workforce analytics, talent management, workforce process management and workforce deploymentSAP ERP Operations helps with process like procurement and logistics execution, product knowledge and manufacturing and sales and servicesSAP Corporate Services covers real estate management, Enterprise asset management, project and portfolio management, start management, environment and safety management, quality management and global trade servicesSAP Global claimed that the product helps in increasing oversight of business operations and providing adequate information for strategic business decisions. It also claimed high flexibility and innovation and that modules can be implemented as needed and upgraded as the need arises. The SAP for SMEs has been implemented by over 80000 SMEs.Figure 4 below shows the SAP Solution roadmap showing the multiple level of blueprint of processes su pported by SAP.SAPs benefits were echoed by the research work of Mandal and Gunasekaran 2003. This was implemented at PMB Water Corporation. They discovered greater benefit of implementing SAP.However, Al-Mashari and Zairi 2000 confirmed that SAP is a very complex solution that is too prone to failure. This position is supported by the research work of Martin I. et al, 2000 in an organization in Australia where he discovered that the training was complex, expensive and enormous. It is also not a user friendly application. For a small and medium sized company this enormous complexity and capital investment among other things is not one that can be readily and easily accommodated as previously stated in the requirements section.Figure 4 SAP Solution Roadmap (available at http//www. sap.com/businessmapsHowever, it should also be noted that quite a number of medium establishments have been able to implement SAP successfully and are reaping the benefits (Martin I. et al 2000).Oracle ERP SoftwareThe Oracle ERP software is part of the Oracle e-Business suite. It consists of the following modules (Oracle 2010)Channel Revenue counselling enables information fight offn channel management. Includes modules like Accounts receivable deductions settlement, channel rebates and head up-of-sale, partner management, price protection and supplier ship and accountFinancial Management covers things like Asset lifecycle management, cash and treasury management, credit-to-cash, financial control and reporting, financial analytics, governance, risk and compliance, lease and finance management, procure-to-pay and travel and expense managementHuman Capital Management includes Global magnetic core HCM , Workforce Management, Workforce Service delivery, Integrated talent management, and HR analyticsProject Portfolio Management Involves things like project analytics, project billing, project contracts, project collaboration, project costing, project management, project portfolio ana lysis, project resource management and time and labour.According to Oracle, Oracle E-Business suite is the most adaptable global business platform and the most customer-focused application strategy. This opinion seems to be supported by Panorama Consulting group 2010, that the software has the highest level of predictability of all ERP software that was studied, and that the average initial cost to implement is 25% less than that of SAP. It also claimed that Oracles total cost of will power is nearly 50% less than that of SAP. The fact remains though that its usage does not as withal compare to that of SAP. This is true considering the fact that there has not been much academic research into the use of the software as an ERP solution.International Financial Services (IFS)IFS is a single, integrated product supporting the management of 4 core processes (IFSWorld 2010)Service and Asset, Manufacturing, Project, Supply chain.It can be added to other suites of software e.g. Financials, Human Resources, Sales and services, Engineering, Project, Manufacturing and Distribution. According to IFSWorld 2010, its easy to use software that provides an attractive, intuitive and efficient user experience. It is also quite flexible, allowing an organisation to consume the required module and upgrade at a future date if so desired.The benefits of IFS was supported by the work of Lahikainen T. et al 2000 comparatively saying that ERP software like SAP is rather clumsy and large, and because of this cannot easily be reworked to suit a business process. Rather, the business will have to readjust its process for the software.SAGE AccpacThis product offers middle sized organisation an adjustable enterprise resource for finance, SRM and operations (Sage, 2010). It supports global aspirations for mid-market and upper-mid-market companies with its gamey financial management capabilities and flexible open architecture.Modules of the software includeFinancials General Ledger, G/L Con solidations, Reporting, Multi-Currency, Intercompany doings, Transaction Analysis and Optional Field CreatorPurchasing Purchase Orders, Accounts Payable, electronic Funds Transfer (ETF), Direct payables, Document Management, Fixed Asset Management, Check and Form printingSales and Receivables Order Entry, Accounts Receivable, EFT Direct Receivables, Electronic Data Interchange (EDI), National Accounts Management, Unit Sales Analysis, Return Material Authorization (RMA)Customer Management Contact Management, Sales Force Automation, Marketing Automation, Customer Service AutomationInventory/Warehouse Management Inventory Control, Lot Tracking, Serialized Inventory, Warehouse Management, Manufacturing ManagementProject Management Project and Job Costing, Service and sustenance management,Payroll In-house Payroll, Electronic Funds Transfer (EFT), Direct Payroll, Sage Accpac HRMSSystem Administration System coach, Alerts and Alerts ManagerSage manages the processes that are common to all businesses, such as finance, HR, or CRM the vertical modules give customers a greater ability to match technology to specific industry needs (Sage, 2010).Microsoft DynamicsAccording to Microsoft 2010, Microsoft Dynamics offer solution that can help fastrack performance, measure financial effectiveness and enhance decision making. It helps drive businesses by providing a backbone of an elastic system. It is easy to implement and adapt. Apart from on-premise installation, the solution can also be deployed to work with cloud computing, a solution some organisations are already considering.The capabilities delivered by this solution includes Financial management, Supply chain management, business intelligence, performance management, Collaboration, Project Management, Human resource management, IT management and Software-plus-Services.Open Source Software (OSS)There are also a number of open source ERP software that seems to be of an increasing interest at the moment according to th e research work of Johansson and Sudzina 2008. The list includes Compiere, OpenBravo, Opentaps, Facturalux, TinyERP.It may be that most SMEs will find OSS ERP implementations able to cater for their needs since according to Raymond 2005, SMEs are highly flexible and adaptable to change. Implementation may also work out cheaper as costs associated with licensing fees are usually not incurred (Johansson and Sudzina, 2008). It should however be noted that support for implementations for OSS ERP software is quite hard, as there can be several versions of a given software and finding an expert can be daunting.ERP Evaluation and Selection processA successful ERP project requires selecting an ERP solution, implementing the solution, managing changes and examining the practicality of the system (Wei and Wang, 2004). Wrong ERP solution choice would either cause implementation to fail or weaken the system to a greater impact on the enterprise (Hicks,1995 Wilson,1994).Most enterprises often ju mp into looking at ERP functions and features rather than examining the strategy and business processes. According to Donovan, 2001, it is important for management to know the current strategy, processes and supporting systems compared to what they could be with the new systems.For most enterprises, the decision to implement ERP functionalities will require buying a software package from one of the more hot vendors on ERP market. But the selection process is not a straightforward task, hence thorough sense of what ERP packages are to offer, differences in each of them and what might be at stake in selecting one package over the other should be well examined or evaluated, (Sammon and Adam, 2000).Evaluating and selecting an ERP system, even though can be a very complex process (Donovan 2001). It should be a fact-based process that will bring an enterprise to the point where comfortable well-informed decisions can be made.Figure 5 below shows an online poll conducted by ESI Internat ional survey of 2,000 business professionals in 2005. This clearly indicated that most software projects, ERP inclusive, failed due to lack of adequate requirements definition.Fig. 5 Source ESI International survey of 2,000 business professionals, (2005).In addition to the above figure 5, Donovan pointed out that veritable(prenominal) ERP project implementation can also fail because of a wrong choice of ERP solution. Therefore, Management light Inc in 2005 revealed that it is imperative to adopt a thorough evaluation and evaluation process before adopting any ERP solution in SMEs. Their report detailed eight steps necessary for a careful and fair level of successful ERP implementation in SMEs. This is represented in Figure 6. We have further categorized this into the following five stages for our discussionPlanning, RFP, Solution Evaluation, Negotiation, Selection AgreementThese five stages are explained below based on the research carried out by Management Agility Inc in 2005.St age 1 Plan RequirementDefine business along with areas of business that require technical approach.Develop a specific business case with business value for a solution.Ensure that the project sponsor is willing to render the business case for change, identify vendors and get familiar with the available solutions.Get general view of investment needed, considering software, hardware, other related infrastructure and ongoing support.Evaluate the organisation readiness for the investment and decide whether to hold open or not.Define priorities under must-have and nice-to-have accordingly.Stage 2 Request for Proposals (RFP)Shortlist interesting vendors based on the outcome of market survey for solutions and then for demonstration.Collects facts in line with the business need from product demonstrations for the development of unbiased RFP for vendors.Set-up a neutral body to develop RFP, using facts gathered from products demonstration aligned to the business requirements.Distribute ou t RFP to selected vendors.Generate basic expectations from ideal proposal in line with the business need for onward selection of the ideal software vendor.Stage 3 Solution EvaluationIdentify and place remaining gaps between software capabilities as demonstrated and business requirements.Identify how the gaps will be bridged in impairment of configuration, process change or a combination of all these.If the gaps cannot be bridge, then discontinue the evaluation exercise immediately, otherwise consider reengineering of those affected business processes and continue with the evaluation.Stage 4 Contract NegotiationNegotiate with each vendor establish software, hardware and other infrastructure agreement requirements, which include version, components, maintenance and support. Also negotiate participation in user groups, license costs, maintenance fees and many others. render service provider agreement which also include deliverables, timelines, resources, costs, payment schedules a nd other legal requirements.Stage 5 Selection and AgreementUpon successful negotiation with the right vendorReview all legal terms on privacy protection, operation guidance and data manipulation etc.Approve agreements with the selected vendors.Agree on implementation plan.Fig. 6 Detailed flowchart for ERP Software, Hardware Evaluation and Selection Processes Management Agility Inc, 2005ERP Software Hardware (Solution) Evaluation and Selection StepsYesNoStage 4Stage 3Stage 2Stage 1Define RequirementsShop Round for ProductClarify RequirementsEvaluation Vendor InquiryInteract with VendorsNegotiate AgreementAction AgreementDefine business case/need and spell-out required values. Be specific. Ensure the business sponsor is willing to push through business case for change.Look round the market for what product is available. Identify vendors that operates and their general approaches to technologies the take. Discuss with others in the same industry as you are etc.Clarify your requiremen ts and be sure of what you are looking for in line with you business case. Refine requirements if possible and be specific too.Find out what product is looking undimmed in line with the business need and from which vendor. Identify which vendor and their products and invite interesting ones for demo etc. Request for proposal (RFP).Invite each shortlisted vendor over for a chat and find out more about the product. List out expectations based heavily on business requirements.At this point evaluate this approach. Can you afford to change your current process? Can you afford the change the new product will bring and many more?Initiate Negotiation for the selected product with the selected vendor. Agree on who does what, when are they to be done. Negotiate deliverables, timelines, co