Enterprise Resource

Planning (ERP) System

Implementation and Impact

December, 2014

An Introduction to ERP
An Enterprise Resource Planning (ERP) system, as defined by the ISACA, is an
integrated software application that covers literally all functions of an enterprise, including sales
and marketing, distribution and logistics, procurement, manufacturing, finance, and accounts,
personnel and management reporting (Sayana, 2004). It is currently the highest level of
computer management and aids businesses with the integration of its processes. Rather than the
typical management information systems (MIS) with separate systems for each function, an ERP
system connects all the organization functions in order to create a more unified and accurate
view of activities. While other companies may rely on more manual and time-consuming
processes, ERP allows for company-wide operations (Matys, 2012).
There are several factors that allow ERP to be a unique system within the business
organization. As mentioned above, the integration of processes is very distinctive with ERP
systems. Another characteristic is the ability to easily modify the database. With one module, it
is much quicker and less evasive to perform system updates than it would be with MIS.
Likewise, the streamlining of processes becomes possible in real time (Matys, 2012).
Figure 1 below shows how the different business functions are independent in a basic
MIS system. For business using an ERP system, the activities are coordinated and the
organization better functions as a whole (Gleim, 2014). Notice text of the MIS functions; they
are labeled as systems. This differs from the term module used in the ERP diagram. The
difference in wording is not accidental. System is used to explain one unit with a relatively small
scope; contrarily, the term module is used to describe something larger and more complex: it
insinuates integration and interchangeability. Thus, the modules of the ERP system encompass
much more than the systems of MIS.

MIS

Accounting
Information
System

ERP System

Accounting
Information
Module

Human
Resources

Finance
System

Mfg.
System

Human
Resources

Finance
Module

Mfg.
Module

Logistics

Logistics

Figure 1
*extracted from (Gleim, 2014)

Today, the implementation of an ERP system can provide the following for an
organization. It will integrate organizational processes to create a more associated company. It
will also integrate the organization with its customers and suppliers in ways that were not
formally possible. The future of ERP will facilitate growth for companies and allow them to
expand organizational goals and possibilities.
Advantages with ERP
It has now been ascertained that the integration of functions within the business structure
is the primary advantage of implementing an ERP system. However, there are many advantages
that may not at first be apparent with the integration of these functions. In order to more easily
find the advantages, it can first be worthwhile to acknowledge the many problems and risks that
are addressed and improved with the installation of an ERP system. Maintenance is one area that

can be greatly problematic within a Management Information System. When the system
becomes outdated or an update becomes available, the data can too easily be at risk. This is due
to the fact that each system requires its own update. ERP dissolves this issue altogether. Now
the entire company is on the same page, and adjustments can be made to one manually, and then
all are automatically updated as well. This is one example of the streamlining benefits of ERP
(Matys, 2012).
A difficult user interface is another downside of MIS. The system may not be used to its
full potential if the employees find the system to difficult and cumbersome to use. Not only does
the system itself need to be user friendly, but the reports developed from the system should be
easily viewable and manipulated. This is often not the case with MIS. ERP addresses this
problem with a much more understandable interface. It also uses data mining processes to create
very accurate, efficient, and malleable reports (Matys, 2012).
With the implementation of ERP, many new abilities are now being given to
organizations. A great benefit is the incorporation of customers and suppliers needs with frontoffice functioning. MIS and ERP alike have back-office functions such as operations, human
resources and finances. With the implementation of ERP, the business now gets front-office
functioning, which allows customer service and marketing to be included in the centralization of
information. With ERP, no function is left behind. All business functions become an integral
part of day-to-day operations. All activities are coordinated across the board and management is
able to view the organization as a whole rather than as separate processes (NMATec, 2008). See
Figure 2 below for more advantages.

Operational

Managerial

Strategic

Cost reduction
Productivity
improvement
Customer services
improvement

Better resource
management
Improved decision
making and
planning

Support business
growth
Build external
linkages
Enabling ecommerce

IT
Infrastucture
IT cost reduction
Increased IT
infrastucture
capability

Organizational
Facilitate
business learning
Build common
vissions

Figure 2
*Information extracted from (NMATec, 2008)

Disadvantages with ERP

Like all good things, ERP systems also come with their fair share of disadvantages from
implementation. They key is to determine whether the advantages outweigh the disadvantages.
With ERP, this is quite often a definitive yes. One primary reason it may not be worthwhile is a

lack of monetary means. But as for the actual system, the advantages far supersede the
disadvantages.
A knowledgeable ERP project manager will say that the number one issue with the
implementation of an ERP system is the vast size of the project (Trepper, 1999). The integration
of all functions does not come easily, and it uses the companys own employees in order to be
successful. While the project manager will be an external party, (s)he cannot come close to
managing the project without internal aid. It takes a lot of work; the problem is that this work is
not an organizations first priority. Keeping the business functioning normally while serving
customers must remain top on the list. This makes it difficult for employees to put in the time
and effort necessary for accurate implementation (NMATec, 2008).
Other notable disadvantages include the possibility of staffing turnover, risk management
issues, unreasonable deadlines, inadequate funding, and a resistance to change (Trepper, 1999).
Training must be implemented; therefore, if the employee turnover rate is high, it can be difficult
to adequately train all necessary employees. Without proper risk management, the entire project
can fall through. Unreasonable deadlines specifically are a problem because, as mentioned
above, the implementation is not an employees primary concern. Lastly, there will always be
those employees who want to do things a certain way simply because thats how weve always
done it. These employees can hinder the learning process during the implementation
(NMATec, 2008).
A final disadvantage to mention, though definitely not least, is that an unsuccessful
conversion can hinder or cause damage to data. This is true of any software system, but with the
integration of all functions, it would be the entire organization that would be affected by a

malfunction, rather than simply one sector or function. For this reason, the implementation
process of an ERP system is of utmost importance.
The Implementation Process
Before implementing an ERP system, an organization must weigh the costs and benefits
for its own specific entity. The high monetary cost may outweigh many of the possible
advantages, especially for smaller companies that do not have the means of purchase. However,
once an entity decides to install the system, many steps need to be carefully taken to ensure the
installation is successful and avoids exposure
to as many risks as possible. It is different
Scope
from that of an MIS or MRP (Material
Requirement Planning) system because of the
Plan
integration of the components. The
integration of systems enhances the

Design and Development

complexity of implementation. The

installation of one single system is not near as

Implement

risky as the installation of an entire network

of functioning components working as one. The vast size of an ERP system leads to a very
complex installation process. The large scope of an ERP system encompasses more than one
function of the organization and causes the installation to have more risks to overcome.
Without first coming up with a plan, the implementation cannot be effective. This is why
perhaps the single most decisive element of ERP success or failure is the knowledge, skills,
abilities, and experience of the project manager (Trepper, 1999). An effective project manager
knows the top problems found in this process and knows how to effectively approach these

problems. Knowledge is not the only characteristic of a good project manager. (S)he must also
be able to work well with others, be a quick decision maker, and know the ins and outs of the
company in question.
In order to best achieve a successful ERP system implementation, after acquiring the
project manager, is to establish an extensive plan led by the project manager. While it is
important for the project manager to be an enjoyable co-worker, it is also imperative to have
someone in top management that is agreeable with the implementation as a whole. Without this
manager, it would be difficult to surpass many of the problems and the implementation would
not be successful (Trepper, 1999).
Define the Scope
The first step of the implementation is to define the scope of the project. It is important
that all relevant parties know exactly what processes are being integrated, who will have roles in
the process, and what the overall goal of the project is. In this way, top management, the project
manager, and other employees are on the same page and are prepared to get the job done in the
most efficient and effective way. A great way to begin defining the scope is by interviewing
employees to see how the processes are currently being carried out. Flowcharting is an effective
way to grasp the way things are running, find control deficiencies, and determine the best way an
ERP system can address these issues (Hoffman, 2014).
Plan
Once the scope has been established, it is time to plan. This planning is led primarily by
the project manager. A primary factor of planning is to establish a timeline. The project
manager and top manager need to discuss when the implementation should be completed. This
however, is not the only deadline that should be established. The project manager should

establish consistent, small deadlines to ensure the organization is moving forward at a steady
pace. Planning should also include the establishment of roles for various personnel.
Design and Development
The next phase of the implementation includes design and development of the system.
System programmers work to create a system that works for a specific companys needs. While
this design is going forward, employees also need to begin training for the new system. Training
will not be done using live data. This would be reckless and would cause numbers and data to be
misconstrued and reconfigured. Instead, a test program will be used. This test program will
have all the data from the companys current system, but will not affect the workings of live
data. It will simply be for training purposes.
Implement
The final stage is the actual implementation of the ERP system. The project manager and
company management personnel should have already determined the way in which to fully
implement the program. Further training may go into this phase before the actual
implementation. Once it is time to implement the system, there are four strategies for the
conversion. The first is parallel operation. Though this option would cost the company the most
in monetary terms, it is by far the safest option. Both the organizations current system and the
new ERP system would be run simultaneously. In this way, the organization can ensure that the
new system is operating effectively before eliminating the old system all together. The second
strategy invoices a cutover. Opposite of parallel operation, this strategy costs the least but is the
most risky. In this situation, the old system is completely cut off. It may be common for the
company to be in the dark technologically for a few days. The old system will be shut down,
and then the new system will be up and running. The problem with this strategy is the

vulnerability of the data within the new system. It may be more difficult to catch mistakes and
the data could be incorrect for various programming reasons. The third technique is that of pilot
conversion. In this situation, only one segment of the company will switch over to the new
system. This way, if the system is not running effectively, it does not affect the whole
organization. Likewise, it gives a learning curve to the rest of the organization rather than
everyone learning everything all at once. The fourth and final conversion strategy is a phased
switch, which involves only one function of an organization at a time. Using Figure 1 above, for
example, the Accounting Information system may be the only one to change to the Accounting
Information module. In due time, the other systems will also convert to the new system. Once a
strategy is determined, it needs to be followed through to the best ability of the project manager
and other relevant parties (Gleim, 2014).
Role of the Auditor
Auditors involved in the design and implementation of an ERP system must have
significant technological knowledge in order to efficiently carry out their duties. They need to
know exactly how the ERP system will work and what they will need to do to aid the company
with the implementation. The auditor will need to assess the risk and should help in determining
new controls that need to be employed to best help the organization with its new system (Bae &
Ashcroft, 2004).
The auditors must exercise due diligence and ensure (s)he has done everything possible
to be prepared to work with and to advise the company on the new ERP system. It is of utmost
importance to replace controls that need to be replaced and find what needs to be done in order to
best fulfill managements goals for the organization (Bae & Ashcroft, 2004).

Overall Impact
The implementation of an ERP system will affect more than just the organization itself.
It will also affect the stakeholders of the business as well as the internal and external auditors. A
primary stakeholder affected by an ERP system is that of the organizations customers.
Customers will be served more efficiently and effectively with the integration of organization
processes. Auditors are also affected. They are required to learn and understand an ERP system
and how it works. New auditing processes need to be applied as an ERP system cannot be
evaluated the same as other systems. Auditors will also need to pay special attention to the
integrity of the business data and ensure that everything is running smoothly (Bae & Ashcroft,
2004).
ERP systems will change with the ever-evolving technology of todays society. Cloud
technology will help ERP become much more advanced. An advantage that could evolve for
smaller companies would be a smaller, more cost-effective, version of ERP. In this way, it
would not only be useful for larger organizations. More organizations will make the switch to
ERP if it does become more financially possible for smaller organizations. Also in the future,
implementation may become more complex, which would cause implementation disadvantages
to become much more prominent. Once system processing is correctly implemented, however, it
will become more integrated, reliable, and will lessen the problems of ERP systems (The Future
of ERP: Top ERP Trends for 2014, 2014).
Conclusion
The question of whether an ERP system should be implemented in a certain organizations
depends on several factors. It depends on the size and financial stability of organizations. Also,
the establishment of simpler ERP systems can become the solution to smaller companies

affording the new system. Today, the implementation of an ERP system can provide the
following for an organization. It will integrate organizational processes to create a more
associated company. It will also assimilate the organization with its customers and suppliers in
ways that were not formally possible. The future of ERP will facilitate growth for companies
and allow them to expand organizational goals and possibilities.

Works Cited
Bae, B. B., & Ashcroft, P. (2004). Implementation of ERP Systems: Accounting and Auditing
Implications. Retrieved from ISACA: http://www.isaca.org/journal/pastissues/2004/volume-5/documents/jpdf045-implementationoferpsystem.pdf
Gleim, I. N. (2014). Business Environment and Concepts. Gainesville: Gleim Publications.
Hoffman, J. (2014). 10 Steps to Blueprinting Successful ERP Projects. Retrieved from RJT
Compuquest: http://rjtcompuquest.com/10-steps-to-blueprinting-successful-erp-projects/
Matys, T. (2012, September 11). A Student Introduction to ERP. Retrieved from SlideShare:
http://www.slideshare.net/tmatys/erp-a-student-introduction
NMATec. (2008). What is an ERP System? Retrieved from NMA Technologies:
http://www.nmatec.com/workwise/what
Sayana, A. S. (2004). Auditing Governance in ERP Projects. Retrieved from ISACA:
http://www.isaca.org/Knowledge-Center/ITAF-IS-Assurance-Audit-/IT-AuditBasics/Pages/IT-Audit-Basics-Auditing-Governance-in-ERP-Projects.aspx
The Future of ERP: Top ERP Trends for 2014. (2014, April 25). Retrieved from WorkWise:
http://workwisellc.com/future-erp-top-erp-trends-2014/
Trepper, C. (1999, August 1). ERP Project Management is Key to a Successful Implementation.
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