ERP And Decision Making

INTRODUCTION

WHY IS EFFECTIVE DECISION MAKING IMPORTANT IN ORG

Businesses make a large number decisions on a daily basis. It can be a very simple decision such buying office stationery or a rather complex one such as a business acquisition .Each organizational decision has a different degree of complexity, comprise of different styles and approaches, possesses different informational requirements and are set at a different time frame. The necessity of making decisions often seems to be the only constant in managerial action; other factors such as the process, the environment, the individuals, the organization change continuously(Herwood, Hillar and Turnbull, 2019). No matter what form of decisions managers make it is always followed by an impact, which can steer the organization towards the better or worse. For years managers considered decision making as art and a skill that is developed over time with experience (Turban, Sharda and Delen, 2011). In the past,decisions were merely made on the gut-feel and intuition of managers. Although this method was well validated in the past the business environment is growing more complex every day and therefore making decisions today is definitely a complex task (Turban, Sharda and Delen, 2011). In the present business climate, there is a great importance on effective decision making in organizations due to the increase in competitive forces and the presence of various risks and threats in the business environment which makes it very important that organizational decisions are driven by proper facts and realities. Organizational decisions must be effective. It must drive the business to achieve its said goals, objectives and must influence growth. Companies must grow. It is an imperative that drives companies to create new products and services, enter new regions and move into new businesses (Herwood, Hillar and Turnbull, 2019).construct a tag line to introduce ERP systems.

WHAT ARE ERP SYSTEMS AND WHY ARE THEY IMPORTANT

An ERP System is a packaged business software system that allows An organization to automate and integrate a majority of its business processes ,share common data and practices throughout the organization which helps produce and access information in the real time environment(Summer M,2005) . ERP systems help organizations deal with the supply chain, receiving, inventory management, customer order management, production planning, shipping, accounting, human resource management and other business functions (Summer M,2005). From an overall business standpoint an ERP helps business achieve a number of important objectives but one of the key areas of importance is that it supports the business in making effective business decisions. The implementation of ERP systems allows the business to make faster decisions with improved communication and collaboration which increases the overall productivity of the organization and its employees (Turban, Sharda and Delen, 2011).

HOW ERP AFFECTS DECISION MAKING

REAL TIME DATA

In the present corporate world, the only thing worse than a lack of information is the abundance of inaccurate or useless information (Nunn, 2019). To make accurate and informed decisions managers need access to real time data which is data that is up to date and viewable at the moment it’s available. A business should possess the capability to run reports at any point of time and on any device so that decisions are made at a fast pace without any lags or delays. If decisions are made by outdated information it could easily steer the organization in the wrong direction because the business environment is always changing and evolving in a day to day basis. Such decisions can cause serious consequences for an organization. Bouwman et al describes that the reason why Nokia failed to remain competitive in the telecommunication industry is mainly due to the fact that there decisions were merely outdated and didn’t fit in well with how the environment operated.

An ERP is an integrated system that operates in real-time and provides the organization with a consolidated data set from which accurate information can be made available to users .When the right users access this information at the time in which it is required, the organization will be in a better position to make decisions and take actions in a timely manner. It also provides helpful insights to managers therefore decisions made by them are more precise which will result in few errors or mistakes in judgement.

ONE SINGLE SOURCE OF TRUTH

Without an ERP system in place an organization will not possess the tactical information for effective monitoring and control of organization resources (Summer M,2005), but with its introduction it makes information widely available and allows cross functional access to the same set of data and information for planning and control .This integration will help organizations to monitor and control its integral resources. ERP takes standalone applications a step further by providing a common data warehouse which is a database which stores information related to the various business activities of the organization(Valacich and Schneider, 2010). This enables to create a one point access to all the information users of the firm (Valacich and Schneider, 2010), furthermore this centralization enables decisions to be made effectively since all sources of information is available in one single location.It also enable the organization’s performance and outcomes to be monitored (Chofreh and Goni, 2018).

Most major decisions made in organizations are not made by one individual alone. Such decisions are made by a group of people which can be of various sizes and consist of people from different departments, geographical locations or even different organizations(Turban, Sharda and Delen, 2011). Obviously there are often conflicting objectives in a group decision making setting, therefore coming into a mutually enhancing consensus can be a tough task. This problem can be effectively reduced if all the users refer to one centralized data and information set. This enables effective communications since reasoning, clarification and justifications can be made with ease and the group will be able to able to reach a decision with a clear and common perception.

INTERGRATE CUTOSMER AND SUPPLIERS

Another key advantage of ERP systems is that its implementation causes a dramatic improvement in the firm’s ability to respond to its customers and suppliers (Piccoli, 2012).

Knowledge store and infusion

Enterprise systems enable the infusion of knowledge into the adopting firm (Piccoli, 2012). ERP systems enables to organization to embed the “best practices “ of the industry to the firm so that it can be used as a mechanism for updating and enhancing business operation and processes (Piccoli, 2012).

While organizations are constantly generating and learning new knowledge, they can also forget or lose track of knowledge that has already been acquired It is thus important for organizations to properly maintain organizational memory so that newly acquired knowledge can be harvested, processed, and stored safely for future or additional use. Organizational memory includes various forms of knowledge residing as written documents, structured databases, and codified human knowledge in forms of expert systems, documents, or organizational procedures and processes (Li, Wu and Li, 2017).

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Reduce employee workload

ERP can improve employee satisfaction through removing redundancy and tediousness from day-to-day activities. It allows more time for value-added duties, which in turn should lead to a more fulfilling job for employees. Employees can become more involved in decision making and, with the right training and guidance, can become empowered to make those decisions without the close, watchful eye of their supervisor. If employees are challenged and not bored on the job, they will be more likely to stay with that job, become more experienced, and therefore become more of an asset to the company(Barker and Frolick, 2006)

Smart businesses know that by automating the right decisions, staff can be freed up to use their initiative, experience and instinct to innovate and drive the business forwards. It makes little sense to have senior people making decisions that could easily be made within business systems. Setting up the right processes for automating decisions should be an easy process and with a flexible platform these processes can be adjusted and fine-tuned as the business changes and grows

WHAT ARE DRWABACKS

To say that ERP does not have disadvantages would be a false statement, at a minimum. However, most of the pitfalls relate directly to the implementation and the organization itself, and can usually be avoided. Without the proper planning and organization, an ERP project is sure to fail.(barker and frolick,2006). Over the years there has been countless examples on how organizations have failed to implement ERP systems. Some examples includes the case of Ferrazolli Imports of New England’s Erp implementation in 2009 with its vendor, Epicor Software Corporation. The ERP failure was due to the fact that Epcior’s system never worked as intended or promised. The cost of the project was $224,656 (Piccoli, 2012). Another example of an ERP failure can be drawn from the case of Dorset County (UK) ‘s implementation with SAP. Due to improper ERP implementation a job that previously took a mere minute to complete and process took almost an hour after the introduction of ERP. The organization claimed that the system has to be shut down a few days each month to allow the data to be processed (Piccoli, 2012).

ERP implementation is “a significant organizational change” that involves substantial budgetary commitment (Li, Wu and Li, 2017). Consultancy charges, Set up fee, Maintainence charges and costs of customization and add on are few examples of costs that an organization must bear up during the implementation of an ERP (Koch, 2006).If the implementation is not managed with careful planning and consideration, due to its grand scale and high level of complexity (Li, Wu and Li, 2017) the relevant costs can increase significantly than what is was budgeted for, this makes thw hole process a waste of time and effort.

Another major hurdle posed to companies that implement enterprise systems involves changing business process to accommodate the manner in which the ERP software works(Valacich and Schneider, 2010).Any organization has spent many years developing business processes that provide them with their competitive advantage in the market.Adopting their industry’s best practices through the introduction of ERP may force companies to abandon their unique ways of conducting business and put them into a similar level with the other players in the industry(Valacich and Schneider, 2010).

HOW TO OVERCOME DRAWBACKS

If an organization is to reap the benefits of ERP, it must first develop a plan for success. But “prepare to see your organization reengineered, your staff disrupted, and your productivity drop before the payoff is realized.”1 Implementing ERP must be viewed and undertaken as a new business endeavor and a team mission, not just a software installation. Companies must involve all employees, and unconditionally and completely sell them on the concept of ERP for it to be a success.2 A successful implementation means involving, supervising, recognizing, and retaining those who have worked or will work closely with the system. Without a team attitude and total backing by everyone involved, an ERP implementation will end in less than an ideal situation(Barker and Frolick, 2006). To get the most from the software, you have to get people inside your company to adopt the work methods outlined in the software. If the people in the different departments that will use ERP don’t agree that the work methods embedded in the software are better than the ones they currently use, they will resist using the software(Lelic D,2013)

The primary reason that enterorise system fail is believed to be to direct result of the lack of top level management (Valacich and Schneider, 2010).AL though the executives do not necessarily make decisions regarding the enterprise system, it is very important that they are made aware of the costs, benefits, outcomes and changes that can be imposed on the organization due tot the implementation of ERP (Valacich and Schneider, 2010).If the top level management doesn’t understand the importance and the true value of the ERP system it is highly likely in the result of delays, stoppages and inefficient contribution of resources(Valacich and Schneider, 2010).

Enterprise systems are complex and even the most talented information system departments can struggle to come into grips with its applications(Valacich and Schneider, 2010). Implementation of ERp systems can be made easier if help is obtained from experts such as ……………..,. Most vendors have trained project managers and consultants to help organizations to install Enterprise systems.

Training is often overlooked, underlooked and poorly budgeted when it comes to ERP implementation.ERP systems are much more complex tha stand alone and require proper training to be in place for the users to fully grasp the understanding and functionality of the ERP system. By training users before the system goes live and giving hem sufficient opportunity to the learn the new system, a company can allay fears and mitigate potential productivity issues and drops (Valacich and Schneider, 2010)