ERP implementation projects normally involve a single vendor providing the packaged software for the entire system. Although most companies follow this practice, a significant number of firms employ an alternate strategy of “best of breed” ERP. This strategy involves selecting software that best matches the current or desired business practices of the company from a variety of vendors. This strategy reduces the need for the firm to customize the software or to significantly reengineer its business practices. Best of Breed offers firms the opportunity to maintain or create competitive advantage based on unique business processes. “Vanilla” ERP implementations may result in competitors all adopting the same business processes leaving no firm with an advantage.
ERP implementation projects can be distinguished from other IT projects by three characteristics (Somers, Ragowsky, Nelson, & Stern, 2001). First, ERP systems are “profoundly complex pieces of software, and installing them requires large investments in money, time and expertise (Davenport, 1998, p. 122).” Second, software packages may require the user to change business processes and procedures, may require customization, and leave the firm dependent on a vendor for support and updates (Lucas, Walton, & Ginsberg, 1988). Finally, adopting firms are usually required to reengineer their business processes. Implementation projects must be managed as broad programs of organizational change rather than a software implementation (Markus & Tanis, 2000; Somers et al, 2001)
ERP systems include functionality for basic business processes based on the vendor’s interpretation of best practices. However, the selected functionalities do not generally match the existing business processes of all organizations.
Key Terms in this Chapter
Integration: Integration is generally defined as “the bringing together of related components to form a unified whole…The primary concern of integration is ‘oneness’ and ‘harmony’ between user, technology, and the environment (Grant & Tu, 2005, p.8).” Grant & Tu propose a taxonomy of ERP integration ranging from the lowest level, system-specification integration, to global integration which deals with “issues of language, time difference, culture, politics, customs, management style.” Their proposed level-II deals with system-user integration at both the ergonomic and cognitive level. Level-III deals with integration of islands of technology throughout the firm.
Business Processes: “A business process is a set of business events that together enable the creation and delivery of an organization’s products or services to its customers (Gelinas et al, 2004).”
Legacy Systems: Transaction processing systems designed to perform specific tasks. Systems that have become outdated as business needs change and the hardware and software available in the market place have improved.
ERP II or Extended Enterprise Systems: ERP II opens ERP systems beyond the enterprise level to exchange information with supply chain partners and customers. ERP II extends beyond the four-walls of the business to trading partners. Typically, ERP II includes customer relationship management (CRM) packages, supply chain management (SCM) packages and e-business packages.
Material Requirements Planning Systems (MRP): Processes that use bills of materials inventory data and a master productions schedule to time phase material requirement, releasing inventory purchases in a manner that reduces inventory investment yet meets customer requirements.
Enterprise Resource Planning Systems (ERP): An off-the-shelf accounting-oriented information system that is designed to meet the information needs of most organizations. ERP systems enable organization to procure, process and deliver customer goods or services in a timely, predictable manner. These systems are complex and expensive information tools, which have proven difficult and time consuming to implement.
Customer Relationship Management (CRM): These are software packages that enable a business to develop knowledge of their customer’s needs and buying patterns. These systems “focus on the integration of externally based customer data for the organization to pursue more customer-oriented activities like targeted advertising, one-on-one marketing (Peppers et al., 1993), customer retention and building a real-time integrated view of the customer (Goodhue et al., 2002; Kos et al., 2001; Winer, 2001) ” (Pan, 2005, p. 66). Another definition is “a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and customers” (Parvatiyar and Sheth, 2001, p. 5).
Supply Chain Management (SCM): These software packages exchange information with supply chain partners to order and track the procurement of goods and services. SCM can be viewed in four basic categories (Davenport & Brooks, 2004): supply planning tools, demand planning tools, plant scheduling tools, and logistics systems. A newer functionality in SCM is collaborative planning, forecasting, and replenishment (CPFR). In CPFR, “supply chain partners exchange not only orders and shipment notices, but sales plans and production forecasts with each other, so that they can synchronize their respective processes more fully (p. 12).”
Service-Oriented Architecture (SOA): Service Oriented Architecture (SOA) represents a collection of best practices principles and patterns related to service-aware, enterprise-level, distributed computing (OASIS, 2008).
Manufacturing Resources Planning (MRPII): MRPII extends MRP by addressing all resources in addition to inventory. MRPII links material requirements planning with capacity requirements planning avoiding the over and under shop loading typical with MRP. MRPII includes more business functionality than MRP, dealing with sales, production, inventory, schedules, and cash flows (Palaniswamy & Frank, 2000)
Best of Breed: Combination of ERP software provided by more than one vendor and legacy systems designed to meet the needs of an organization in a manner superior to the single vendor ERP approach.