What is Enterprise resource planning (ERP)?
Enterprise resource planning (ERP) is an enterprise information system that shares a common database/s, common computer program, and common end-user experience such that data is managed according to configured business processes. Choosing the right system is the first step towards ERP implementation success.
Value of ERP Systems
ERP systems bring value to organizations in a variety of ways. Wamba, Kamdjoug, Akter, and Carillo (2018) suggest that a majority of companies implement ERP solutions in an effort to improve business process performance, enforce compliance, improve employee tasks, and to improve integration across company locations. ERP solutions can also reduce operational expenses, improve inventory management, improve customers’ delivery, and provide standardization in processes across the enterprise (Hachey, Hunton, Owhoso, Vasudevan, 2005). Wamba et al (2018) states that ERP solutions have totally transformed modern-day organizations. Moreover, ERP systems are widely accepted as one of the best mechanisms for organizations to gain competitive advantage (Sekulić, D, Lolić, T, Stefanović, D, 2018).
Challenges and Failure Rates
However, Al-Shamlan and Al-Mudimigh (2011) as well as Al-Fawaz (2008), describe ERP implementation failure rates as being between 60-90%. During an ERP implementation, business interruptions and not meeting intended objectives is a common organizational failure (Hakkinen & Hilmola, 2008). Literature suggests that ERP implementation methods and practices vary greatly and that many factors potentially contribute to this high rate of failure. These implementation practices and methods consist of different components, approaches, emphasis, and processes. It is due to the implementation practice, systems, and organizational complexities and influences that ERP projects have a high failure rate. For this reason, understanding effective implementation process and critical success factors (based on case study and research) may benefit organizations. ERP implementation success certainly does not come easy.
Importance of ERP Implementation Success
While the definition of ERP failure can mean anything from a significant amount of wasted time, money, and effort, and lack of proper functionality, or even catastrophic failure, preventing any level of failure is critical. Successful ERP assimilation matters because failure is extremely costly to U.S. organizations. The risk to the organization’s ERP implementation success goal, if success is not achieved, could lead to a loss in production, a decrease in product quality, loss of customers, and/or loss of sales. And, worse yet, bankruptcy or plant closure. All of these circumstances are documented in literature, case studies, and articles with evidence demonstrating that ERP failure is extremely costly to U.S. organizations.
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