POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Sta. Mesa, Manila

Business Process Re-engineering : A Critical Success Factor in

Implementation of Enterprise Resource Planning

SOFTWARE ENGINEERING1st Semester SY 2013-14

Master of Science in Information Technology

Submitted by :

Jasmin S. Ponce

CHAPTER 1

INTRODUCTION

Business organizations nowadays stand in front of the challenge of

standing out from competitors, expanding markets, and increasing customer

expectations. This increases the pressure on companies to lower total costs in

the entire supply chain, shorten throughput times, drastically reduce inventories,

expand product choice, provide more reliable delivery dates and better customer

service, improve quality, and efficiently coordinate global demand, supply, and

production. To remain competitive, companies bring into play with technology.

They make use of different information systems to improve and simplify their

business process.

Over the past years, organizations have transferred from stand-alone

business information systems applications to integrated and flexible enterprise

wide information systems. The rise of Enterprise Resource Planning (ERP)

systems has been the major event in the software industry in the 1990s

according to Oliver, D. and Romm, C. in their book named “Enterprise Resource

Planning Systems: An Outline Model Of Adoption”.

Enterprise resource planning (ERP) is defined by Gartner as the ability to

deliver an integrated suite of business applications. ERP tools share a common

process and data model, covering broad and deep operational end-to-end

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processes, such as those found in finance, HR, distribution, manufacturing,

service and the supply chain. ERP applications automate and support a range of

administrative and operational business processes across multiple industries,

including line of business, customer-facing, administrative and the asset

management aspects of an enterprise.

However, ERP systems are huge and complex systems and warrant

careful planning and execution to ensure their successful implementation. ERP

deployments tend to come at a significant price. Once ERP systems are

implemented successfully, significant benefits such as improved customer

service, better production scheduling, and reduced manufacturing costs can be

gained. However, the successful implementation rate is low and many firms that

have gained some benefits from ERP have yet to exploit the full potential of ERP

in their organizations.

The success or failure of ERP implementation is closely related to how the

companies handle the process. The ERP implementation process could differ in

every company. The differences might concern to the implementation goals, the

scope, or the available resources. But among all the differences in the every

implementation process there are some general points that are important in the

process and would strongly result in the success or failure in the implementation.

Those important points were identified as critical success factors (Laudon &

Laudon, 1998). Critical success factors are defined as “those few critical areas

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where things must go right for the business to flourish” (Rockhart, 1979).

Understanding the critical success factors in ERP implementation would give

some guidelines on what factors that should be given more attention in order to

bring the implementation process into success. The critical success factors could

either be a risk or opportunities, depends on how the organizations handle them.

Many ERP implementation failures have been due to the lack of focus on

‘the soft issues’ of business process and change management. Thus, today's

organizations have to constantly re-engineer their business practices and

procedures to be more and more responsive to customers and competition. In

the 1990's Information technology and Business Process Reengineering (BPR),

used in conjunction with each other, have emerged as important tools which give

organizations the leading edge. The impact of business process management

(BPM) or business process re-engineering (BPR) in successful ERP

implementation is crucial, and is thus the focus of discussion on this paper.

The following questions have significant implications for our understanding

and interpretation of business process re-engineering as one of the factors in the

success of ERP implementation in an organization.

1.) What is the role of business process management and re-engineering

in the success of ERP implementation?

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2.) How suit is the ERP software chosen with current business process?

How important is the identification of business process structure and

business processes associated with the company’s existing IT systems

in the beginning of ERP project and relate this to the business

processes contained within ERP system?

3.) What is the cycle time expended for redesigning the processes and

obtaining the expected results?

4.) How communication between stakeholders inside and outside the

organizations affects the BRP and ERP implementation?

5.) What is the role of BRP team in the implementation process?

A number of relevant studies and works will be presented and discussed

below to attempt to answer these questions and to provide a full grasp of

knowledge about business process re-engineering relating to ERP. After

reading this paper, it is expected to embrace the importance of business process

in the success of ERP implementation in an organization.

CHAPTER 2

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REVIEW OF RELATED LITERATURE AND STUDIES

2.1 Definition

ERP is short for enterprise resource planning. As defined in an article in

webopedia, Enterprise resource planning (ERP) is business management

software that allows an organization to use a system of integrated applications to

manage the business. ERP software integrates all facets of an operation,

including product planning, development, manufacturing processes, sales and

marketing.

ERP software typically consists of multiple enterprise software modules

that are individually purchased, based on what best meets the specific needs and

technical capabilities of the organization. Each ERP module is focused on one

area of business processes, such as product development or marketing. Some

of the more common ERP modules include those for product planning, material

purchasing, inventory control, distribution, accounting, marketing, finance and

HR.

As the ERP methodology has become more popular, software

applications have emerged to help business managers implement ERP into other

business activities and may also incorporate modules for CRM and business

intelligence and present them as a single unified package.

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The basic goal is to provide one central repository for all information that is

shared by all the various ERP facets in order to smooth the flow of data across

the organization.

2.2 The Concept of Business Process Reengineering (BPR)

The concept of Business Process Reengineering (BPR) was first

introduced by Hammer in 1990. BPR has been defined as a fundamental

redesign of business processes to achieve dramatic improvements in critical

areas such as cost, quality, service and speed as stated by Hammer in book

named “Reengineering work: don’t automate, obliterate”. BPR began as a private

sector technique to help organizations fundamentally rethink how they do their

work in order to dramatically improve customer service, cut operational costs,

and become world-class competitors. It has become a popular management tool

for dealing with rapid technological and business change in today’s competitive

environment according to Hamid in article entitled “An Examination of the Role of

Organizational Enablers in Business Process Reengineering and the impact of

Information Technology”. With the rise of e-commerce, enterprise systems,

customer relationship management and other technology-enabled new business

practices, businesses now face major changes in much shorter time periods. The

challenges of the new Internet economy may offer an opportunity to apply the

lessons learned from a decade of business process reengineering (BPR) efforts,

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which likewise sought ways to manage major change according to Alan, R.,

Traci, A., Gigi, G. from their article “Breaking the rules: success and failure in

groupware-supported business process reengineering”.

Davenport and James (1990) examined the relationship between

information technology capabilities and business process redesign, and

concluded that IT represents a useful tool in business process redesign, and

moreover that business process redesign should be transformed using IT. In

ERP implementation, systems are developed to support business processes

such as manufacturing, purchasing, or distribution, thus ERP implementation and

business process should be closely connected. Elbertsen and Reekum (2008)

indicated that in business process, ERP system is significantly explained by

competitive pressure and systems compatibility. Business Process

Reengineering (BPR) involves the adoption of process perspectives on a

business (Gunasekaran and Ichimura, 1997), and represents a fundamental

rethinking of organizations. Somers and Nelson (2004) also indicated that BPR

should play different important roles in each stage of ERP implementation.

As defined in Wikipedia, Business process re-engineering (BPR) is a

business management strategy, originally pioneered in the early 1990s, focusing

on the analysis and design of workflows and processes within an organization.

BPR aimed to help organizations fundamentally rethink how they do their work in

order to dramatically improve customer service, cut operational costs, and

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become world-class competitors.  In the mid-1990s, as many as 60% of the

Fortune 500 companies claimed to either have initiated reengineering efforts, or

to have plans to do so.

BPR seeks to help companies radically restructure their organizations by

focusing on the ground-up design of their business processes. According to

Davenport (1990) a business process is a set of logically related tasks performed

to achieve a defined business outcome. Re-engineering emphasized a

holistic focus on business objectives and how processes related to them,

encouraging full-scale recreation of processes rather than iterative optimization

of sub-processes.

Business process re-engineering is also known as business process

redesign, business transformation, or business process change management.

2.3 ERP systems implementation

Companies can adopt BPR to pursue multiple improvement goals

including quality, cost, flexibility, speed and accuracy. BPR supports the re-

thinking of business processes and is necessary to software applications such as

ERP systems. Grover, Jeong, Kettinger, and Teng (1995) identified BPR as a

key success factor in implementing IT projects, such as ERP systems. Bingi,

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Sharma, and Godla (1999), Nah, Zuekweller, and Lau (2003), and Somers and

Nelson (2004) also argued that BPR should be involved in the ERP

implementation.

Huq and Martin (2006) argued that BPR is a one management strategy

that creates change via process performance improvements. They analyzed

hospital cases to compare ERP approaches towards BPR implementation, and

attempted to identify which approach offers a larger probability of ERP success.

Huq and Martin found the ERP-driven BPR can more easily design process

change, and obtain a preview of project outcomes. Subramoniam, Tounsi, and

Krishnankutty (2009) examined the role of BPR in implementing ERP systems

and found that all organizations which implement ERP systems should select

their own approach based on organizational needs and constraints. Furthermore,

Sumner (1999) examined the relationship between critical success factors

(CSFs) and ERP system performance, and identified the CSFs as management

support, re-design of business processes, training and re-skilling, re-design of

business processes, external consultants, management structure, discipline and

standardization, effective communications, maintaining excellent staffing, and

avoiding attempts at software modification. Competitive pressure and systems

compatibility in business process significantly explain the success of ERP system

(Elbertsen and Reekum, 2008).

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Figure 1 shows the relationship between degree of BPR and ERP system

performance in the ERP implementation.

Due to the complex and integrated nature of ERP, the large investments

involved (time and money), and the relatively high implementation failure rates, it

is imperative for organizations to study the experiences of others, and learn from

their practices and success factors.

According to Dr. Yasar F. Jarrar, Dr. Abdullah Al-Mudimigh & Prof.

Mohamed Zairi in their research article in European Centre for best Practice

Management, it is concluded that all the main ERP Critical Success Factors fall

under one of four main categories, namely: commitment from top management,

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reengineering of the existing processes, the IT infrastructure, and deploying

change management. These CSF categories, and their interaction, are presented

in Figure 2.

Figure 2

The following is a brief overview of each of these categories:

1. Top management commitment:

Management must be a part of ERP implementations and it has been

clearly demonstrated that for IT projects to succeed top management support

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is critical. However, top management in many organizations still view the

installation of an ERP system as primarily a technological challenge and

assign its responsibility to the IT departments. This is seen as a dangerous

act due to ERP’s profound business implications. “Only top management is

equipped to act as the mediator between the imperatives of the technology

and the imperatives of the business”.

This concept refers to the need to have commitment from leadership at

the top level and the need for senior management who would be involved in

the strategic planning and technically oriented. Top management should be

willing to allocate the enough resource such as money and time to the ERP

project. The examples of action presented for the top management support

factor are 1.) Identify selected top management member. 2.) Inform selected

members of top management about the detail of the project’s processes and

project’s impact on the company. 3.) Set up management committee. 4.)

Plant for meeting management ex. monthly meeting. 5.) Include top

management in the decision-making process and/or project follow-up

activities.

2. Business Process Re-engineering:

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Implementing an ERP system involves reengineering the existing

business processes to the ‘best business process standard’ according to

Gibson, N.; Holland, C. and Light, B. in their paper entitled “A Case Study of a

Fast Track SAP R/3 Implementation at Guilbert”. ERP systems are built on

best practices that are followed in the industry, and to successfully install ERP,

all the processes in a company have to conform to the ERP model.

According to Holland and Light in their article named “ A Critical Success

Factors Model For ERP Implementation”, during the ERP planning phase,

companies face a question as to whether to implement the ERP software "as

is" and adopt the ERP system's built-in procedure or customize the product to

the specific needs of the company. As mentioned by Melymuka in article

published in Computerworld last September 1998 entitled “ERP is Growing

from Being just an Efficiency Tool to One That Can Also Help a Company

grow”, Research has shown that even a best application package can meet

only 70% of the organizational needs. An organization has to change its

processes to conform to the ERP package, customize the software to suit its

needs, or not be concerned about meeting the balance 30 %. In fact, this

need to re-engineer the organization’s business processes has been cited as

one of ERP’s major benefits according to Davenport.

3. IT Infrastructure:

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Adequate hardware and networking infrastructure are required for ERP

application. An ERP system relies in its operation on sophisticated

information technology infrastructure. In addition to this infrastructure, clearly,

the software configuration has a critical influence on the implementation

process and outcome according to Holland and Light.

4. Change management:

One of the main obstacles facing ERP implementation is resistance

to change. “About half of ERP projects fail to achieve hoped-for benefits

because managers underestimate the efforts involved in managing

change” as stated by Pawlowski, Boudreau, and Baskerville in the article

named “Constraints and Flexibility in Enterprise systems: A Dialectic of

System and Job”, In Proceedings of AMCIS, Milwaukee, WI, USA, last

August 13-15, 1999. To successfully implement ERP, the way

organizations do business will need to change and the ways people do

their jobs will need to change too as indicated by Koch, Slater, and Baatz

in article “ABCs of ERP” published by CIO Magazine last December 22,

1999. Thus, change management is essential for preparing a company

for the introduction of an ERP system, and its successful implementation.

However, change management has to be structured within an overall

Business Process Management methodology to achieve its goals.

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This factor is about the need for the implementation team to a

change management program. Building user acceptance and a positive

employee attitude are very important to this concept. One of the important

parts in change management is training. Change management should

start as soon as possible and should start to get support at mid-level

managers. The actions/practices supporting change management are: 1.)

Make sure that executive management support the ERP project. 2.)

Assess the organization’s capacity to accept the change. 3.) Provide

training throughout the organization. 4.) Communicate the benefits of

changes. 5.) Form the mitigate plan. 6.) Reduce the resistance at the

beginning of change. 7.) Motivate employee throughout the project. 8.)

Train project leader to handle with change management problems.

Clearly, three out of four of the main ERP CSF categories fall under the

umbrella of Business Process Management (BPM). If anything, this strongly

highlights the fact that ERP is not merely software implementation or an IT

project. Thus, to ensure successful ERP implementation and operation, an

organization must pay sufficient attention to BPM.

2.4 Connection between ERP and BPR

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According to Wisegeek, Enterprise resource planning (ERP) is a software

platform that helps business owners determine how to best use their available

resources. Implementing an ERP system does not necessarily mean redefining

an organization's business processes. ERP System can be used to enhance and

optimize the existing business process; however, an outright re-engineering

might be needed in some cases. Business Process Re-engineering simply

implies eliminating tasks that does not add value to a business process while

reorganization the value adding tasks. It can also be perceived as a restructuring

of redundant dependent tasks or work order. It involves a re-thinking and

consequently a re-moulding. In appreciating this concept, it is expedient to view

a process as a "chain of tasks". The truth is that in a typical business process,

you can have some redundant tasks that if not present does not really have any

impact. Such tasks can be eliminated thus streamlining business process.

Business process re-engineering (BPR) involves observing and analyzing how

the business works to determine changes that may streamline operation at the

business. ERP and BPR can go hand-in-hand. An organization's management

might use BPR as a means of looking at the current operations of a business to

determine how to best proceed when designing or choosing a new ERP.

The goal of business process re-engineering is to determine what

changes can be made in the way the business operates to improve aspects of a

business. Often, BPR will focus on a specific part of the business, like costs,

customer service or marketing and advertising. Using BPR does not necessarily

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lead to ERP. Though ERP and BPR are related, a well-conducted BPR may find

that there is no need for an ERP platform in the business. A business conducting

BPR may determine to drop an ERP method for reasons including cost,

effectiveness, or maintenance.

As an integrated type of software that performs in multiple departments of

business, an ERP platform handles a number of tasks. Generally, ERP programs

help business owners manage their finances, keep employee records and

schedule the use of their assets, whether the assets include buildings,

machinery, work, or money. Because an ERP addresses not only one business

task, but a number of business tasks, ERP and BPR are most often used

together to improve operations in a business with a fundamental problem in

organizing its processes and resources.

Implementing business process analysis usually starts with examining

how well the company is meeting the goals set out in its mission statement.

Effective BPR usually involves subdividing existing business tasks into smaller

units and improving processes within the subdivided task units. Generally, goals

during BPR include improving process effectiveness and efficiency, improving

adherence to regulations or specifications set for the product or service, and

improving control over variables in each process.

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Just like ERP and BPR can be used together to improve an existing ERP

platform, a business executive can benefit from using an existing ERP to

enhance the effectiveness of BPR. One of the advantages to an ERP is that it

stores integrated data from all parts of the program, allowing an executive to

access and examine data to plan the most effective business process changes.

An executive can use company information like resource and financial data to

make the best decisions for change within the company.

ERP and BPR can also be used together to facilitate change

management. Once BPR is completed and the course of change has been

determined, ERP can be used to facilitate communication and information

exchange for staff members affected by the readjustment process. BPR can also

be used to help establish the most effective way of implementing ERP use for an

existing workforce.

2.5 BPR plays a critical role in ERP implementation

Processes, organization, structure and information technologies are the

key components of BPR, which automates business processes across the

enterprise and provides an organization with a well-designed and well-managed

information system. While implementing ERP, the organizations have two options

to consider.

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Either the organization must reengineer business processes before

implementing ERP or directly implement ERP and avoid reengineering.

In the first option of reengineering business processes, before

implementing ERP, the organization needs to analyze current processes, identify

non-value adding activities and redesign the process to create value for the

customer, and then develop in-house applications or modify an ERP system

package to suit the organizations requirements. In this case, employees will

develop a good sense of process orientation and ownership.

This would also be a customized solution keeping with line of the

organization's structure, culture, existing IT resources, employee needs and

disruption to routine work during the change programmer likely to be the least. It

could have a high probability of implementation. The drawback of this option is

that the reengineered process may not be the best in the class, as the

organization may not have access to world-class release and best practices.

Moreover, this may be the only chance to radically improve in the near future and

most attention should be paid while choosing the right ERP. Also, developing an

in-house application or implementing a modified ERP is not advisable.

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The second option of implementing ERP package is to adopt ERP with

minimum deviation from the standard settings. All the processes in a company

should conform to the ERP model and the organization has to change its current

work practices and switch over to what the ERP system offers. This approach of

implementation offers a world-class efficient and effective process with built-in

measures and controls, and is likely to be quickly installed.

But if the employees do not have good understanding of their internal

customer needs or current processes, or if these processes are not well defined

and documented, then it is quite possible that while selecting the standard

process from the ERP package, employees may not be able to perceive the

difficulties likely to be encountered during the implementation stage. Employees

would lack process ownership and orientation. Other than technical issues,

issues like organization structure, culture, lack of involvement of people etc. can

lead to major implementation difficulties, and full benefits of standard ERP

package may not be achieved. It may lead to a situation where the organization

may have to again reengineer its processes. This could be a very costly mistake.

There is also a third option of reengineering business process during

implementation of ERP. But it does not considered to be a practical option and is

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likely to cause maximum disruption to existing work. It should not be forgotten

that during BPR and ERP initiatives, routine work is still to be carried out and

customers need to be served.

During ERP implementation, before a business process can be re-

engineered, excellent understanding of the defective process is a key. This is

why it is important to first carry out a critical and objective business process

definition and analysis before system design. At this juncture, it is important to

state that when restructuring a business process, adherence to best practices is

encouraged. This allows the client to be able to leverage the redefined business

process externally and not only internally.

For business process reengineering to be successful and consequently,

ERP implementation, the buy-in of the end users must be achieved. Often times,

I've heard people say "this is how we have been doing it and we like it that way",

according to Kehinde Eseyin. It is important to convince the process owners why

a re-engineering is needed. And the only way to do this is to make the user

uncomfortable with his hitherto work methodology. As a matter of fact, setting up

of an in-house restructuring team will help to foster users conviction within the

organization. The members of the team should cut across all process owners.

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Conclusively, the benefits of BPR are enormous. They include the

following, but not limited to

1. Business process is streamlined.

2. Business process is optimized and more efficient.

3. Strict controls can be enforced and monitored.

4. Best practices can be adhered to.

5. Time and cost saving as a result of eliminated redundant tasks. 

2.6 BPR Success and Failures

BPR has great potential for increasing productivity through reduced

process time and cost, improved quality, and greater customer satisfaction, but

it often requires a fundamental organizational change to accompany it. As a

result, the implementation process can be complex, and needs to be checked

against several success and failure factors to ensure successful implementation,

as well as to avoid implementation pitfalls. Al-Mashari and Zairi (1999) have

analyzed the literature on both the “soft and hard factors” that cause success

and failure in relation to BPR. The factors listed below are a distillation from

journal articles and empirical research in relation to the implementation of BPR

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which have been categorized into a number of subgroups representing various

dimensions of change. These dimensions are:

• Change management

• Management competency and support

• Organizational structure

• Project planning and management

• IT infrastructure

Factors Relating to BPR Success

The ability of management to be adaptable and to be able to manage

change is considered by many researchers to be a crucial component of any

BPR effort. Carr (1993) states that, “change management, which involves all

human and social-related changes and cultural adjustment techniques is required

by management to facilitate the insertion of newly designed processes and

structures into working practice and to deal effectively with resistance”. Zairi and

Sinclair (1995) place emphasis on the revision of reward systems, creating a

culture for change and stimulating receptivity of the organization to change.

Commitment and leadership in the upper echelons of management are often

cited as the most important factors of a successful BPR program. Hammer and

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Champy (1993) note that, “sufficient authority and knowledge, and proper

communication with all parts in the change process, are important in dealing with

organizational resistance during BPR implementation”.

a.) Factors relating to change management systems and culture

The management of change is an essential skill to facilitate the insertion of

newly-designed processes and structures into working practices, and to deal

effectively with resistance. This is considered by many researchers to be a

crucial component of any BPR effort. This is further emphasized by Zairi and

Sinclair (1995) who state that, “Revision of reward systems, communication,

empowerment, people involvement, training and education, creating a culture for

change, and stimulating receptivity of the organization to change are the most

important factors related to change management and establishing a culture of

performance measures”.

b.) Committed and strong leadership

The commitment and leadership of management are often cited as the

most important factors resulting in a successful outcome of a BPR programme.

Carr and Johansson (1995) make the point that leadership “must provide a clear

vision of the future”. This vision must be clearly communicated to a wide range of

employees who, then become involved and motivated rather than directly guided.

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Other leadership traits and characteristics that are cited and considered to be

important in the literature are:

• Leadership has to be effective, strong and visible

• It requires creative thinking and understanding

• There must be commitment to and support for the BPR effort

• The support from senior management must be constant throughout

the lifetime of the BPR program

c.) Factors relating to organizational structure

BPR creates new processes that define jobs and responsibilities across

the existing organizational functions. This results in a clear need to create a new

organizational structure which determines how BPR teams are going to look, how

human resources are integrated, and how the new jobs and responsibilities are

going to be formalized. The organization must therefore, have the ability to create

the new organizational structures without disrupting or destabilizing the existing

manufacturing capabilities. This requirement for the organization to have the

ability to create new organizational teams and structures forms a key element.

d.) Factors related to BPR program management

Zairi and Sinclair (1995) comment that, “successful BPR implementation is

highly dependent on an effective BPR management program which should

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include adequate strategic alignment and effective planning and project

management techniques”. These techniques should identify a methodology for

external orientation and learning, making effective use of consultants in building

a process vision, which integrates BPR with other improvement techniques, and

ensures adequate identification of the BPR value.

e.) Factors related to IT infrastructure

Brancheau et al (1996) make the point that “factors related to IT

infrastructure have been increasingly considered by many researchers and

practitioners as a vital component of successful BPR efforts”. IT function

competency and effective use of software tools have been proposed as the most

important factors that contribute to the success of BPR. These include:

• Building an effective IT infrastructure

• Adequate IT infrastructure investment

• Adequate measurement of IT infrastructure effectiveness

• Proper IT integration

• Effective Reengineering of legacy IT

Kettinger et al (1997) go on to state that: “BPR and IT infrastructure

strategies which are both derived from organizational strategy need to be in

effective alignment to ensure the success of the BPR initiative”. While, McDonald

and Earl (1995) adopt the stance that: “IT can best enhance an organization's

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position by supporting a business-thrust strategy which should be clear and

detailed”. Top management should be involved in strategy formulation, as well as

providing a commitment for the whole process of redesign, while the IT manager

should be responsible for designing and implementing the IT strategy. The

degree of alignment between the BPR strategy and the IT infrastructure strategy

is indicated by including the identification of information resource needs in the

BPR strategy. Alignment is also achieved by the active involvement of

management in the process of IT infrastructure planning, and IT managers in

business planning, and also by the degree of synchronization in formulating the

two strategies.

Factors Relating to BPR Failure

a.) Problems in communication and organizational resistance

Communication and commitment building are particularly important

aspects of BPR, and the ease with which management can communicate

through all levels of the organization during a BPR effort, will have a significant

bearing on the success of the program. It involves communicating and

translating the ideas and vision of management, which must then be translated

into the attitudes and behaviors of those impacted by the program. It is

necessary to ensure, that the communication effort starts well in advance of the

commencement of the BPR program.

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Davenport (1993) makes the point that; “inadequate communication

between BPR teams and other personnel relating to the need for change and the

hiding of uncertainties in communication can result in a lack of motivation and

reward”. Talwar (1993) also points out that; “organizational resistance can result

from inadequate communication between BPR teams and other personnel

relating to the need for change” which can result in a lack of motivation and

reward. Coupled with this, worries about job loss and security combined with a

sense of loss of control and position, particularly within middle management can

result in resistance to change. Grover et al (1995) make the point that; “lack of

organizational readiness can result when demand for change exceeds the

capacity of the company to absorb it and the need for change management is not

realized”. Line managers may not be receptive to change, due to a lack of

determination for radical change, and also through a lack of cross-functional

cooperation. Underestimating the human side of BPR is cited by many authors

as one of the key failure mechanisms which prevent successful implementation.

The company experienced a degree of resistance to the implementation of

BPR. A level of this resistance emanated from within the non-manufacturing and

support areas of operations. Within a number of these support areas; practices

had been established over time which personnel within these areas had become

comfortable with, and they were therefore, somewhat reticent about any

proposed changes that would impact on established practices. Employees

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usually resist change, particularly that which is perceived as self damaging.

Possible anxiety over job losses brought about by BPR can be due to poor

communication, According to Kiely (1995) “employees’ fear drives out optimism”.

Lack of optimism within the organization can damage reengineering programs.

Changing an organizational culture is clearly a difficult endeavor, because within

many organizations, after many years of operation, the culture becomes deeply

embedded in the everyday working lives of employees. As a result,

reengineering can represent a serious challenge, because of the need to bring

about the required cultural shift along with the required change in the business

process.

b.) Lack of organizational readiness for change

It can be the case, that the need to understand, how management thinks,

is not understood or realized, and along with this, line managers may not be

receptive to change due to a lack of determination, courage and skills for radical

change, and also because of a lack of cross-functional co-operation.

c.) Problems related to creating a culture for change

Underestimating the human side of BPR is cited by many authors as one

of the key failure mechanisms which prevent successful implementation. Below

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are a number of relevant academic articles which relate to this aspect of

reengineering.

• Is Reengineering A Fad?, Donlon et al (1996)

• The Trouble with Reengineering, Thomas (1994)

• Has Reengineering had its 15 Minutes of Fame? Henderson and

Venkatraman (1993)

• Business Process Reengineering RIP, Mumford and Hendricks

(1996)

Other aspects which can lead to failure are:

• Not considering existing management systems and organizational

culture

• A lack of trust between management and employees combined

with an ignorance of others values

• Underestimating the role of politics in BPR

• Animosity toward and by IT and human resources specialists

d.) Lack of training and education

Grover et al (1995) make the point that; “a lack of appropriate training for

those affected by BPR” as well as a lack of understanding of BPR and the

absence of theory, as further possible failure mechanisms.

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e.) Factors related to management support

Bashein et al (1994) make the point that problems can arise due to; “a

lack of top management attention and support and also due to lack of sustained

management commitment and leadership”. Lack of support from line managers

coupled with a “Do it to me” attitude have also been noted within the literature as

areas of concern. Any BPR program that does not have the full support of senior

management will struggle to attain its goals. The full support and sponsorship of

senior management or “champion” within senior management is critical to

success, and also having the wrong sponsor will serve to have a detrimental

impact on the successful outcome of a BPR program.

f.) Ineffective BPR teams

The ability of an organization to have the flexibility to create the types of

teams required for the successful implementation of a BPR program is another

extremely important factor. The inability to create cross-functional project teams

and difficulty in finding suitable teams members can give rise to serious

problems. The inability of an organization to create flexible, hierarchical

structures can also be problematic with people thinking solely in terms of their

own immediate working group. Conflicts can also occur between BPR teams

and the persons within them who have functional responsibilities, which can lead

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to unclear definition of job roles. Other reasons cited for ineffective BPR teams

are:

• Lack of IT staff credibility and involvement in Reengineering teams

• Inadequate communication among members

• Lack of training for BPR teams

• Lack of authority given to BPR teams

• Inadequate team skills

g.) Factors related to organizational structure

According to Davenport (1993) “The inability of an organization to create

flexible hierarchical structures can also be problematic with people thinking solely

in terms of their own immediate working group”. Conflicts can also occur between

BPR teams and the persons within them who have functional responsibilities,

which can lead to unclear definition of job roles.

h.) Problems related to goals and measures

Problems relating to goals and measures can be due to a lack of clear

performance objectives and milestones for a BPR program which has poorly

defined needs, which can result in a difficulty in establishing performance goals.

Other reasons cited are:

• Difficulty in measuring BPR project performance

• Using only quantifiable and easy measures

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• Spending too much time in analysing existing processes

i.) Inadequate focus and objectives

Problems relating to goals and measures can be due to a lack of clear

performance objectives and milestones, along with poorly defined needs, which

can result in a difficulty in establishing performance goals. Bashein et al (1994)

state that “There must be a clear strategic focus and efforts must be made to

avoid too narrow a technical focus and also to avoid a cost-cutting focus”. Other

reasons cited are:

• A focus on planning rather than on doing and using reengineering

to avoid making hard decisions

• Old patterns of automating existing processes without redesign

• Short-term view and quick fix mentality

j.) Ineffective process redesign

According to Hammer and Champy, issues can arise due to missing BPR

process elements, and also due to a lack of understanding and orientation and

who exactly are the program owners, along with:

• Inadequate determination of scope of change

• Inadequate focus on core processes

• Narrowly defined processes

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k.) Problems related to BPR resources

Before embarking on any BPR program, it is very necessary to ensure that

all the necessary resources required will be available to the program; while

Bashein et al (1994) further state that “program failure can occur due to a lack of

required resources for BPR efforts and undertaking BPR without the provision of

adequate or sound financial resources”. Another difficulty can be the failure to

understand the total financial impact of BPR, and also difficulty in forecasting

human, financial, and other resources.

l.) Unrealistic expectations

According to Bashein et al (1994), expecting BPR to solve all

organizational problems combined with unrealistic expectations of what BPR can

deliver, is yet another mechanism that can lead to failure within BPR programs.

2.7 ERP Performance Evaluation and measurement

ERP performance evaluation is an important step that helps a company

analyzing the contribution of ERP. ERP evaluation refers to the systematic

procedures followed to estimate the performance of ERP in a company. This is

not a one step process and it should be a part of the organizational study and as

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well as be done from time to time. The evaluation helps organization to analyze

the contribution of ERP to its business.  The study of ERP performance

evaluation helps firms to avoid pitfalls on ERP implementation.  In order to

evaluate the ERP performance, the businesses must deicide and stick on to one

particular method. The assessment should set up within the time gap of three,

six and twelve months.  The frequency of assessment depends on many factors

like the volume of business, ability to adapt to change and the characteristics

features of the software that is in use. The evaluation of ERP requires deep

understanding of the major impact ERP has on the business strategy, the

organizational structure and role of people in the organization throughout the

project.

Due to the complexity of ERP and the intangible of ERP implementation,

the evaluation must be both quantitative and qualitative. According to the

research of Chen and Wang, they mentioned about indicators of each area which

are:

Qualitative indicators include

o Human resources include personnel quality and management

quality. The personnel quality is the knowledge level, professional

standards, and corporate culture. Management quality includes the

operator's decision-making level.

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o Hardware resources refer to a variety of hardware involved in

establishment of ERP systems.

o Software resources refer to the performance of the ERP software.

Quantitative indicators consist of seven areas which are

o Business ability of innovation and learn, which are business model

innovation and business process innovation

o Marketing, including sales, orders and inventories.

o Business operations management, including enterprise production

management, logistic distribution and financial management.

o  Financial condition includes overall budget, the ability of using

financial indicators to monitor the production and operation

management.

o  Assets operation.

o  Information Resources, specifically the ERP application level and

application status.

o Business development capability, which is a comprehensive

economic indicators. [15]

In the ERP traditional measurement, ROI is one of the most important

parameter in assessment which decides if ERP should be a part of the

organization or if it should be given a go by. This is because a lot of money is

spent on ERP implementing and training.

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One of the important frameworks used to evaluate ERP is Balanced

Scorecard Approach. The BSC is a framework that constructs the important and

relevant KPIs or the key performance indicators for performance measurement

and management. Aside from the traditional measures that are associated with

the financial aspect, the ERP scorecard has now widened in its effects including

internal processes, customers and learning and innovation. Therefore, the ERP

scorecard contains the non financial as well as the less tangible features of the

business including response time, the implementation and the business functions

that support ERP.

CHAPTER 3

ANALYSIS / FINDINGS

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It is marked that employing an ERP system is not an inexpensive or risk-

free venture. In fact, according to Cliffe, 65% of executives believe that ERP

systems have at least a moderate chance of hurting their businesses because of

the potential for implementation problems. It is therefore worthwhile to examine

the factors that, to a great extent, determine whether the implementation will be

successful. Numerous authors have identified a variety of factors that can be

considered to be critical to the success of an ERP implementation.

1.) What is the role of business process management and re-

engineering in the success of ERP implementation?

As the ERP industry evolves it has become evident that additional

disciplines like Business Process Management (BPM) and Business Process

Reengineering (BPR) must be employed for a successful ERP experience. 

Business process re-engineering is the most common reason that

companies walk away from multimillion dollar ERP projects is that they discover

that the software does not support one of their important business processes. At

that point there are two things they can do: they can change the business

process to accommodate the software, which will mean deep changes in long-

established ways of doing business (that often provide competitive advantage)

and shake up important peoples' roles and responsibilities; or they can modify

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the software to fit the process, which will slow down the project, introduce

dangerous bugs into the system and make upgrading the software to the ERP

vendor's next release excruciatingly difficult, because the customizations will

need to be torn apart and rewritten to fit with the new version. In this regard, and

without exception, all six organizations cited BPR as one of the main critical

success factors for ERP success. Rather than attempting to modify the software,

Companies like Monsanto, ALVEO, and Epson reengineered their business

processes to be consistent with the software. This has proved to be critical to

their projects’ successes. The other organizations undertook a mix of BPR and

ERP software re-adjustment. Within this context, Microsoft and HP have strongly

emphasized on the criticality of structured project management approaches for

ERP success.

2.) How suit is the ERP software chosen with current business process?

How important is the identification of business process structure

and business processes associated with the company’s existing IT

systems in the beginning of ERP project and relate this to the

business processes contained within ERP system?

ERP implementations entail that key personnel throughout the

organization create a clear, compelling vision of how the company should

operate in order to satisfy customers, empower employees, and facilitate

suppliers for the next three to five years. There must also be clear definitions of

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goals, expectations, and deliverables. Finally, the organization must carefully

define why the ERP system is being implemented and what critical business

needs the system will address as stated by Krupp in the book “Transition to ERP

implementation” published last 1998.

It is evident that successful implementations require commitment, strong

leadership, and participation by top management according to Davis and Wilders.

Since executive level input is critical when analyzing and rethinking existing

business processes, the implementation project should have an executive

management planning committee that is committed to enterprise integration,

understands ERP, fully supports the costs, demands payback, and champions

the project. Moreover, the project should be spearheaded by a highly-respected,

executive-level project champion.

The existing organizational structure and processes found in most

companies are not compatible with the structure, tools, and types of information

provided by ERP systems. Even the most flexible ERP system imposes its own

logic on a company’s strategy, organization, and culture. Thus, implementing an

ERP system may force the reengineering of key business processes and/or

developing new business processes to support the organization’s goals as stated

in the book “Purchasing Enterprise Resource Planning” by Minahan. Moreover,

redesigned processes require corresponding realignment in organizational

control to sustain the effectiveness of the reengineering efforts. This realignment

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typically impacts most functional areas and many social systems within the

organization. The resulting changes may significantly affect organizational

structures, policies, processes, and employees.

Unfortunately, many chief executives view ERP as simply as software

system and the implementation of ERP as primarily a technological challenge.

They do not understand that ERP may fundamentally change the way in which

the organization operates. This is one of the problematic issues facing current

ERP systems. The ultimate goal should be to improve the business––not to

implement software. The implementation should be business driven and directed

by business requirements and not the IT department.

3.) What is the cycle time expended for redesigning the processes and

obtaining the expected results?

BPR projects must have a timetable, ideally between three to six months,

so that the organization is not in a state of "limbo". The compounding effect of

not meeting timelines is the reason why many other risks of ERP implementation

are influenced by scheduling and contingency risk. Thus, this is one of the high

risk areas that affect core strategic objectives. One way to effectively mitigate

these risks is to establish milestones that each project team in a business or

organization can develop plans around. ERP implementation is very different

from and far more complex than typical software installation. Considering the

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capital investment and resources required for ERP adoption and the impact its

success – or failure – may have on the organization, it is too risky to simply treat

it as normal software licensing and installation. The lack of strategic directions

and planning has been repetitively cited as a critical issue in current IT

investment practices.

4.) How communication between stakeholders inside and outside the

organizations affects the BRP and ERP implementation?

Communication and alignment is one of the five work streams through

which we conduct organizational change management engagements.

Communicating with employees and executives throughout implementation of

bpr projects and erp ensures that everyone is aligned with the overall goals of the

project. Frequent communication can increase user adoption and maximize

benefits realization.

5.) What is the role of BRP team in the implementation process?

Clearly, ERP implementations may trigger profound changes in corporate

culture. If people are not properly prepared for the imminent changes, then

denial, resistance, and chaos will be predictable consequences of the changes

created by the implementation. However, if proper change management

techniques are utilized, the company should be prepared to embrace the

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opportunities provided by the new ERP system––and ERP will make available

more information and make attainable more improvements than at first seemed

possible. The organization must be flexible enough to take full advantage of

these opportunities.

Moreover, executives often dramatically underestimate the level of

education and training necessary to implement an ERP system as well as the

associated costs. Top management must be fully committed to spend adequate

money on education and end user training and incorporate it as part of the ERP

budget. It has been suggested that reserving 10–15% of the total ERP

implementation budget for training will give an organization an 80% chance of

implementation success.

CHAPTER 4

CONCLUSION

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Information and communication Technologies (ICT) has significantly

changed the old ways of doing work in the organizations. In order to compete

and survive in the current competitive world most of the companies are in the

process of adoption of ERP systems. The implementation of ERP systems is

different from the implementation of traditional Information systems in an

organization according to Rajgopal. ERP systems integrate different business

processes and improve the efficiency and effectiveness of the enterprise;

however ERP implementation is a challenging task. ERP is not simply the

automation, as it requires various changes in existing business processes of the

organization to implement best practices. BPR is a tool that supports re-thinking

of business processes. Some companies adopt BPR to boost performance.

Grover et al. (1995) identified BPR as one of the key success factors in ERP

implementation. Based on previous studies on BPR, this study infers that

companies should consider BPR during ERP system initiation. The efficiency

and effectiveness of ERP systems is based on the efforts to be made regarding

Business Process Reengineering in the organization. The quality of end to end

business process integration may be realized only if the management put in

considerable efforts regarding BPR and further communicating the change

process to the staff. The past research reflects that negligence of BPR during

ERP implementation lack of user participation may lead to failure of ERP system.

The implementation of ERP without BPR has been found to be a big challenge

even in advance countries. Secondly, the importance of user participation during

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ERP implementation should not be ignored, because it plays a vital role in

successful implementation of ERP in the organization.

Business Process Reengineering is fundamental steps undertaken prior to

ERP implementation. BPR take a major role in analyst and suggestion the

structural changes. Also, feasibility study is one part of the BPR.  It is very

important process because it helps in knowing how the organization should be

customized in order to implement EPR. One of the results of BPR is to complete

description of how the business will operate after implement ERP package. In

order to practice the BPR, the business must review the business processes by

using appropriate tools.  Processes and activities have to be aligned with new

system. BPR activities must put in the plan. Business should keep in mind that

the best way to manage change is to adopt it.

The examples of action that should include in this factor are

1.) Inform the limitation of BPR.

2.) Record specific reengineering activities in the plan.

3.) Minimize the customization of the application.

Customization is an integral part of ERP implementation. The goal of

customization in ERP implementation is to ensure that the companies’

requirements match with ERP solution. Deciding the degree of customization for

an ERP system is an important decision. The companies might need help from

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consultants since this process require a strong working knowledge of ERP

system. Customization relates to both ERP’s success and achieving user

satisfaction. Therefore, customization in ERP affects directly to ERP’s success.

ERP often requires extensive customization but customization of the system

should be avoided or should be kept at the minimum level because customization

associates with a longer time and higher cost of implementation.

Thus, implementing an ERP system is not a matter of changing software

systems, rather it is a matter of repositioning the company and transforming the

business practices.

CHAPTER 5

RECOMMENDATION

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The following recommendations will established and increase awareness

regarding the impact of business process reengineering in implementing ERP.

5.1 Recognize the importance of business process reengineering in ERP

implementation

ERP projects are almost always associated with the reengineering of

business practices.

The concepts of ERP and BPR are unique and to understand better how

they are related to each other one has to follow the path of process study of the

problem. In essence, understanding the existing business processes is one of

the key elements in ERP implementations. Implementing an ERP system

involves reengineering the existing business processes to the best business

process standard (Bingi et al. 1999). ERP systems are built on best practices

that are followed in the industry domain. Therefore, in practice, BPR is aimed at

only when the customer’s requirements are not met within the scope of

customization allowed by the ERP system. The organization business strategy

outlines ‘what’ you want to do. BPR outlines ‘how’ you want to do it -

reengineering (human and system) behaviours in your business to achieve those

goals. ERP answers the question ‘with what’. As a system, the ERP is a tool to

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help change behaviours. As a philosophy, ERP is a strategy for changing that

behaviour. Soliman and Youssef (1998) note that information technology, in

general, and ERP systems in particular, are central to the success of the BPR

method. The main consulting organizations have their own BPR methodologies

and are based on the use of specific tools, such as Coopers&Lybrand (currently

PriceWaterhouseCoopers) that used a proprietary process modelling and

simulation tool called SPARKs. Kettinger et al. (1997) made an extensive review

of BPR methods and techniques available. In sum, ERP becomes a philosophy

(with technical tool overtones) that supports a BPR effort. These changes should

support the business strategy. Project team members and managers must

identify the core business processes in order to prioritize the BPR approach.

5.2 Alignment of the organization strategy, structure, and business

processes with the chosen ERP system

The lack of alignment between the organization strategy, structure, and

processes and the chosen ERP application is one risk that is repeatedly

identified in the literature. Both the business process reengineering literature and

the ERP literature suggests that an ERP system alone cannot improve the

company performance unless an organization restructures its operational

processes. Further, the ERP implementation project must be a business

initiative. This requires the organization to gain strategic clarity (i.e., know the

business, how it delivers value, etc.) and a constancy of purpose. Finally, an

outcomes orientation is required to achieve these goals.

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In order to minimize the risk associated with a lack of alignment of the

ERP system and business processes, organizations engage in Business Process

Reengineering (BPR), develop detailed requirements specifications, conduct

system testing prior to the ERP system implementation and closely monitor

system performance. First, the rethinking and radical redesign of business

processes enables an organization’s operational processes to be aligned with an

ERP system and allows an organization to better obtain the full benefits offered

by the ERP system. It also results in the ERP implementation originating as a

business initiative. Further, strategic clarity as well as constancy of purpose is

attained. Second, a detailed requirements specification for ERP selection

increases the probability that the ERP system will meet the organization’s system

requirements and support the required operational processes. While the detailed

planning is occurring, baseline metrics on current processes can be obtained

what are requisite for the evaluation of the project’s outcomes. Third, system

testing prior to system implementation and monitoring of the system after

implementation are seen as critical to ensure that the ERP system operates

smoothly and is able to provide adequate support for the organization’s

operational processes.

Thus, in order to minimize risks associated with a lack of alignment of the

ERP system and business processes, an organization should reengineer

business processes, develop a detailed requirements specification, conduct

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system testing prior to the system implementation and closely monitor the

system’s performance.

5.3 Consider the time cycle expended for business process

reengineering and ERP implementation

Business process reengineering began as a method to help companies

become more competitive by reexamining how they operate in terms of people

and processes. Today’s competitive marketplace is driven by the three C’s:

Customer, Competition, and Change. Bringing old solutions and ways of thinking

into this environment is a sure way to fail. Successful businesses know they

must constantly rethink and redesign their business processes to achieve

increased measures of performance. Business process reengineering

recommends that organizations analyze their basic functions, and instead of

making small adjustments, move toward total reinvention.

Business process reengineering or BPR is a long established tool to make

substantial improvements in businesses with even the most complex processes.

It creates organization in the alignment of technology, people, and processes.

BPR can help to shift a company paradigm, but its not an overnight-miracle cure.

The goal of BPR is to save time and effort, but it is time consuming and difficult to

achieve.

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5.4 Realize an effective communication in an organization

Effective communication is considered a major key to successful BPR-

related change efforts. Communication is needed throughout the change

process at all levels and for all audiences, even with those not involved directly in

the re-engineering project. Effective communication between stakeholders inside

and outside the organization is necessary to market a BPR program and to

ensure patience and understanding of the structural and cultural changes needed

as well as the organization's competitive situation. Communication should take

place frequently and in both directions between those in charge of the change

initiatives and those affected by them. Communication should be open, honest,

and clear, especially when discussing sensitive issues related to change such as

personnel reductions and implementing ERP system.

Effective communication must start with communication plan. Expectation

and goals must be communicated effectively throughout the organization. It is

essential for stakeholder to know and understand the capabilities and limitations

of the ERP system. The actions that support effective communications are 1)

Create the communication plan at the beginning of the project. 2) The language

that has been used to communicate be understandable for all members. 3)

Centralize information for a common understanding of decisions.

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5.5 Appreciate the importance of BPR and ERP team in an organization

Cross-functional BPR teams are a critical component of successful BPR

implementation. Teams should be adequately composed. Team members

should be experienced in variety of techniques. Teams should be made up of

people from both inside and outside the organization. The determinants of an

effective BPR team are as follows: competency of team members, their credibility

within the organization and their creativity, team empowerment, motivation,

effective team leadership, the training of members in process mapping and

brainstorming techniques, proper organization of the team, complementary skills

among team members, adequate size, interchangeable accountability, clarity of

work approach, and specificity of goals.

It is appropriate to employ suitable BPR team members to analyze and

reengineer business process as well as to implement best business practices.

Communication is important to take into practice among members to function

well as a team. Management should also provide trainings to the team and give

apt authority to implement new process in the organization.

This factor is about the combination of member and skill in ERP team.

The actions/practitioners that organization should practices are

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1.) Ensure that in the ERP team includes people both business and

technical knowledge. The selection of the implementation, vendors and

consultant is important to the project.

2.) Ensure that team leader posses the authority that is recognized

throughout the organization. Also, team leader needs to have adequate decision

making power.

3.) Encourage member to get involved in the project.

4.) Team should be balance and cross functional. The representative

should include both internal staff and consultant.

5.6 Provide adequate resources on the project

Even small ERP projects can cost millions of dollars. Nevertheless, the

payback is high: ERP systems can provide companies the reliable, integrated

data infrastructure they need to more easily access corporate data and,

consequently, manage their business more effectively. Companies must plan

their ERP implementations carefully and devote adequate resources to the

projects to gain the most benefits from their investments.

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