Term Paper on "ERP Solutions for Small to Medium Enterprise SMES"

Term Paper 11 pages (3902 words) Sources: 1+

[EXCERPT] . . . .

Enterprise Resource Planning Solutions for Small to Medium Enterprises

ERP systems may feel like an albatross to companies that have expensively and painfully installed them. Nonetheless, they constitute a valuable foundation for a wide range of new value-enhancing applications. -- Dorien James and Malcolm L Wolf

Today, the competition for enterprise resource planning (ERP) software packages is fierce and vendors have frantically developed strategies to make their software available to small to medium enterprises (SMEs) (Blumling, Frick & Meehan, 2002). These strategies typically focus around preconfigured solutions, implementation methodologies and hosting options (). This paper provides a discussion and case study analysis concerning the various strategies ERP vendors have developed providing examples of findings from SMEs who utilised these new options, followed by an assessment of what barriers exist to the implementation of ERP systems in SMEs. This study provides an overview of the relevant issues, followed by an analysis of a series of selected case studies of SMEs that have adopted various ERP alternatives, as well as those factors that contributed to their success or failure; a summary of the research will be presented in the conclusion.

Review and Discussion

Background and overview. Today, more and more SMEs are being pressured by an increasingly globalized economy to modify their traditional management styles, both operationally and organizationally, by replacing them with more streamlined and integrated systems that serve to improve the speed and flexibility of their physical and information flows (Jones, 2002), help synchronize demand with supply, and help manage transactions more accurately (Bigras & Gelinas, 2004). There are, however, a wide range of ERP alternatives available to assist in this regard, depending on what size firm is involved (Laursen, 2002). The majority of the ERP software packages are most appropriate for companies with more than $500 million in annual sales and more than 500 employees (Johnston, 2003); however, there are now a number of ERP solutions available on the market and even the main ERP players have solutions that are appropriate for the SME market (Krystkowiak, Bucciarelli & Dubois, 2004; Bielski, 2002). According to the report, "Mid-market Manufacturers and the New Landscape for Enterprise Resource Planning" (2005), "Enterprise resource planning (ERP) systems are streamlining and automating processes that small manufacturers would have found cumbersome to carry out on a global basis. This process improvement, in turn, allows these manufacturers to extend their geographic reach at lower costs" (p. 3). Therefore, ERP packages provide SME managers with more efficient and effective ways to interconnect geographically dispersed stakeholders and integrate existing information and communication technologies (Blenkhorn & Fleisher, 2001).

Strategies to make the ERP software solutions available to SMEs. Among the strategies commonly used by ERP vendors are preconfigured solutions, implementation methodologies and hosting options. Because SMEs typically use ERP software to facilitate the exchange of information throughout their organizations, ERP vendors usually sell their applications in suites that contain various modules such as audit trail, payroll, purchasing, point of sale, manufacturing, inventory, job costing and bill of materials (Piturro, 1999). The competition in the ERP industry is also fierce, with SAP, the ERP market leader, and Oracle, the number-two company, consistently extending their product ranges to compete against emerging products from smaller competitors in newly identified functional areas (James & Wolf, 2000). In this regard, SMEs can elect to choose a single vendor for all of their IT needs, or they can elect to choose from the best ERP solutions available for each of their business functions; these seemingly disparate units, though, can now be integrated through the use of so-called "middleware" that allows an SME to upgrade its ERP package as its requirements change (James & Wolf, 2000). While preconfigured, a number of ERP applications are being developed for specific industries that allow for easier customization and a wider range of features (Banham, 2000; Tozzi, 2004; Ashbaugh & Miranda, 2002).

Barriers to ERP System Implementation in SMEs. According to Piturro, "When it works well, ERP can speed up business processes, reduce costs, increase selling opportunities, improve quality and customer satisfaction and measure results continuously. When it doesn't work well, it can be a very expensive way to gum up the works" (p. 41). In fact, many SMEs have reported disappointing (Chia & Ling, 2003) or even disastrous results from their ERP initiatives (Bhattacharjee & Moreno, 2003). Therefore, recognizing organizational constraints to the successful implementation of ERPs by SMEs is critical. According to Gable and Stewart (1999), there are four primary dimensions of SMEs that may represent potential constraints to the successful implementation of an ERP system; these are:

1. Organizational. This constraint relates to the fact that most SMEs have a simple and highly centralized structure; are "resource poor" terms of their human, financial and material assets; and are confronted with greater environmental uncertainty as a result of having a lower measure of control over their extraorganizational situations. Gable and Stewart cite the example of most SMEs having less influence over computer vendors or consultants and thus they may receive a relatively lower level of service; further, SMEs can be situated in more remote areas, where service delays are longer and external computing resources less available (Gable & Stewart, 1999).

2. Decisional. This dimension of SMEs relates to their strategic decision cycle or timeframe; in the case of SMEs, this dimension is typically short-term, with an orientation that tends to react to changes in the environment rather than anticipate and address them; decisional aspects of SMEs are also less formal than their larger counterparts, and they tend to employ fewer formal management techniques such as capital budgeting, project management, inventory control and financial analysis. The authors add that past studies indicate that the decision-making process in SMEs is more intuitive and judgmental without relying on formal information and decision models (Gable & Stewart, 1999).

3. Psycho-sociological. Owner-managers of SMEs play a dominant role in terms of strategy, decisionmaking, and the psychological climate within their organization; SMEs are also less likely to share information and delegate decision-making authority. As a result, SMEs will tend to have fewer individuals, other than the CEO, who will have the requisite authority and access to information to justify the implementation on an ERP package (Gable & Stewart, 1999).

4. Information systems. The majority of SME applications continue to relate to transaction processing applications, purchased as off-the-shelf software packages that are then customizable to a client's specific needs. In most SMEs, the information systems function is usually in an early stage of development; subordinated to the accounting function; lacks the requisite managerial expertise to plan, organize and control the use of information resources of the SME; and, at a relatively low level of technical systems development sophistication (Gable & Stewart, 1999). In addition, existing information systems are typically underused by SME managers (Gable & Stewart, 1999).

Gable and Stewart conclude that, "The four dimensions, and their related underlying properties, represent unique characteristics of SMEs, that may have significant influence on the ERP implementation lifecycle" (p. 779). Clearly then, SMEs are faced with some profound challenges as they seek first to determine whether an ERP is an appropriate solution for their unique situation, and then to decide which vendor is the best suited for their purposes. The following case studies are illustrative of how these issues can affect the successful outcome of an ERP initiative by SMEs.

Prestagaz, Luxembourg. A case study by Krystkowiak, Bucciarelli and Dubois (2004) focused on Prestagaz, a Luxembourg-based SME with 100 employees specializing in the reconditioning of gas bottles. According to these authors, "The main strategic goal for Prestagaz was to avoid multiple and redundant data input on a set of heterogenous machines, and thereby to have a single, central information system. Thus for this SME, investment in ERP acquisition is the challenge to be seriously considered" (p. 1). To determine which vendor and ERP application best suited their needs, the company used a methodological approach and a new tool called "OPAL"; this approach and the OPAL tool were used to help develop appropriate specifications and standardized questions, thereby facilitating a comparison of responses from vendors (Krystkowiak et al., 2004).

The OPAL software tool provides companies with the ability to take advantage of knowledge captured during the procurement processes that are performed in an equivalent business or application area; Figure 1 below shows how the software allows SMEs to develop lists of priorities of business processes and then assign a relative weight to these processes as they relate to their business goals. In reality, this process is not as time-consuming or as daunting as it first appears. The authors point out that it is possible to recycle requirements previously collected during other projects concerning ERP system selection. "Those reusable requirements are organized in terms of modules," they advise, "each of them being associated with a main functionality of an ERP" (p. 3).

Figure 1. Capture of the strategic objectives and business processes.

Source: Krystkowiak et al., 2004 p. 2.

The OPAL applications make such recycling easy; Figure 2 below illustrates a… READ MORE

How to Reference "ERP Solutions for Small to Medium Enterprise SMES" Term Paper in a Bibliography

Related Term Papers:

Study of Barriers to Success Implementation ERP Software in SME Company Data Analysis Chapter

ERP Implementation

Thailand has hundreds of vendors that qualify as SMEs, according to the criteria discussed earlier in this study. The research identified four providers of ERP in Thailand. The… read more

Data Analysis Chapter 15 pages (5312 words) Sources: 12 Topic: Business / Corporations / E-commerce

---

Enterprise Resource Systems Term Paper

Enterprise Resource Systems

The company in question (hereinafter "the company") is a medium-sized value-added manufacturer that assembles and fills more than 3,000 different sizes and types of aerosol cans. Flexibility… read more

Term Paper 13 pages (4679 words) Sources: 1+ Topic: Business / Corporations / E-commerce

---

Change Management for Enterprise 2.0 Implementations Dissertation

Enterprise 2.0 technologies employ social media tools to help individuals within organizations identify and connect with each other in ways that promote information sharing and collaboration (Hagel & Brown 2012).… read more

Dissertation 40 pages (14654 words) Sources: 80 Style: Harvard Topic: Computers / IT / Internet

---

Methods and Tools for Decision Making Research Paper

After successfully deploying and customizing the software, it takes a small team of support staff that is well-trained to maintain the program and its continuity, in addition to migrating legacy… read more

Research Paper 4 pages (1146 words) Sources: 4 Topic: Philosophy / Logic / Reason

---

View 100+ more related papers  >>