The Challenge of Implementing an ERP System in a Small and Medium Enterprise

The Challenge of Implementing an ERP System in a Small and Medium Enterprise Andrew C. Stephens 9/19/2012

Overview • Researchers from Butler University studied the first phase ERP installation at Custom Engineering Solutions (CES) • CES provides custom electronic controls and services to various industries focusing on large motors. • They are divided into two sections with two different business models

Overview • The drive to implement an ERP was pushed by the CFO who stated the following objectives: • Support niche market strategy • Provide better cost data • Improve the accuracy of financial reporting • Other – including streamlining the value chain to reduce carrying inventory, tracking of sales, improved sales forecasting, and implementing a web store. (Hongijang, et al., 2011)

RFP Process • Epicor was slated to provide the ERP software for $250,000 • Installation, conversion, and data cleaning being performed by CES • The IT manager had no input while Middle Managers were allowed little input • The final selection was made by the CFO and COO

Implementation • The younger and smaller division was selected to implement the ERP system • They were given a deadline of six months (July 1,2008) • Including • Installation • Data scrubbing • Testing • Training • However, they were not able begin the project until early April

Implementation • The CFO refused to push back the deadline stating… initial implementation date was fair and that individuals such as the IT manager were simply making excuses for not starting and completing their work on time (Hongijang, et al., 2011.)

PM Problems • The CFO stated that he assigned the IT Manager as the PM, however the IT Manager had no decision making capacity. • Epicoreprovided a 126 step project process, however CFO chose not to follow it closely. They decided to manage the process via a short task list with 12-15 tasks. • Middle and line mangers were also given little to no decision authority. The CFO resisted requests from division managers to release employees from existing work to work on the project. • The project budget was set at $500k by the CFO. The justification for the budget, since the ERP software had cost $250k…the implementation for both divisions would not exceed twice the purchase price. The CFO was cautioned by Epicor, other Epicor ERP firms, and by other ERP consultants that the cost could greatly exceed the budget. “He dismissed their cost projections as greatly exaggerated.”

Other Problems • Training was provided using only vendor supplied test data • Users were not aware of reporting limits • They assumed that reports would be available simular to the old system; they were caught off-guard when they had to use reporting tools such as Crystal Reports to build new reports.

IT Manager(s) • The IT Manager who started the project was dismissed after the first implementation cost was $90,000, $10k less than budget. • The CFO’s explanation was “I expected the IT Manager to show leadership to implement the ERP system at [the first division] for significantly less than the $100,000 budgeted for the first division.” • The IT Manager was unaware of the budget

IT Manager(s) • The second IT Manager was brought in to finish the second division • He had a Masters Degree in CIS • Extensive experience in IT • He was dismissed after he fell out of favor with the CFO. • When interviewed by the case authors he stated that “management does not appear to believe it is important to do the upfront planning work.” (Hongijang, et al., 2011.)

Audience • Presented in the Journal of Information Systems Education • Academic • Peer reviewed • IS education focus • Similar to a HBR article in format

Author Credentials • All three authors are associated with Butler • One runs a consulting firm • All three have Ph.Ds

Review • They did review some of the differences in the ERP product but fall short of comparing business requirement differences. • The abstract introduces the idea that the case was an investigation at CES’ request, this was never discussed in the body of the document

Review • Authors appear to be free from bias in the circumstance. • However, it is unknown if the third associate (the consultant) had or has since attempted to transact business with CES.

Conclusion • The paper wanted to discuss ERP in small and mid-size business – they did this well • The paper also begins to shed light on the importance of early ERP implementation. • It raises questions as to the availability of scalable ERP systems for small businesses in an effort to scale up the software as the company grows.

The Challenge of Implementing an ERP System in a Small and Medium Enterprise