Implementation

ERP's scope usually implies significant changes to staff work processes and practices. Generally, three types of services are available to help implement such changes—consulting, customization, and support. Implementation time depends on business size, number of modules, customization, the scope of process changes, and the readiness of the customer to take ownership for the project. Modular ERP systems can be implemented in stages. The typical project for a large enterprise takes about 14 months and requires around 150 consultants. Small projects can require months; multinational and other large implementations can take years. Customization can substantially increase implementation times.

Besides that, information processing influences various business functions e.g. some large corporations like Wal-Mart use a just in time inventory system. This reduces inventory storage and increases delivery efficiency, and requires up-to-date data. Before 2014, Walmart used a system called Inforem developed by IBM to manage replenishment.

Process preparationedit

Implementing ERP typically requires changes in existing business processes. Poor understanding of needed process changes prior to starting implementation is a main reason for project failure. The difficulties could be related to the system, business process, infrastructure, training, or lack of motivation.

It is therefore crucial that organizations thoroughly analyze business processes before they implement ERP software. Analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of current processes with those provided by the ERP system. Research indicates that risk of business process mismatch is decreased by:

• Linking current processes to the organization's strategy
• Analyzing the effectiveness of each process
• Understanding existing automated solutions

ERP implementation is considerably more difficult (and politically charged) in decentralized organizations, because they often have different processes, business rules, data semantics, authorization hierarchies, and decision centers. This may require migrating some business units before others, delaying implementation to work through the necessary changes for each unit, possibly reducing integration (e.g., linking via Master data management) or customizing the system to meet specific needs.

A potential disadvantage is that adopting "standard" processes can lead to a loss of competitive advantage. While this has happened, losses in one area are often offset by gains in other areas, increasing overall competitive advantage.

Configurationedit

Configuring an ERP system is largely a matter of balancing the way the organization wants the system to work with the way it was designed to work. ERP systems typically include many settings that modify system operations. For example, an organization can select the type of inventory accounting—FIFO or LIFO—to use; whether to recognize revenue by geographical unit, product line, or distribution channel; and whether to pay for shipping costs on customer returns.

Two-tier enterprise resource planningedit

Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems at once: one at the corporate level and one at the division or subsidiary level. For example, a manufacturing company could use an ERP system to manage across the organization using independent global or regional distribution, production or sales centers, and service providers to support the main company's customers. Each independent center (or) subsidiary may have its own business models, workflows, and business processes.

Given the realities of globalization, enterprises continuously evaluate how to optimize their regional, divisional, and product or manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability and delivering value. With two-tier ERP, the regional distribution, production, or sales centers and service providers continue operating under their own business model—separate from the main company, using their own ERP systems. Since these smaller companies' processes and workflows are not tied to main company's processes and workflows, they can respond to local business requirements in multiple locations.

Factors that affect enterprises' adoption of two-tier ERP systems include:

• Manufacturing globalization, the economics of sourcing in emerging economies
• Potential for quicker, less costly ERP implementations at subsidiaries, based on selecting software more suited to smaller companies
• Extra effort, (often involving the use of Enterprise application integration) is required where data must pass between two ERP systems Two-tier ERP strategies give enterprises agility in responding to market demands and in aligning IT systems at a corporate level while inevitably resulting in more systems as compared to one ERP system used throughout the organization.

Customizationedit

ERP systems are theoretically based on industry best practices, and their makers intend that organizations deploy them "as is". ERP vendors do offer customers configuration options that let organizations incorporate their own business rules, but gaps in features often remain even after configuration is complete.

ERP customers have several options to reconcile feature gaps, each with their own pros/cons. Technical solutions include rewriting part of the delivered software, writing a homegrown module to work within the ERP system, or interfacing to an external system. These three options constitute varying degrees of system customization—with the first being the most invasive and costly to maintain. Alternatively, there are non-technical options such as changing business practices or organizational policies to better match the delivered ERP feature set. Key differences between customization and configuration include:

• Customization is always optional, whereas the software must always be configured before use (e.g., setting up cost/profit center structures, organizational trees, purchase approval rules, etc.).
• The software is designed to handle various configurations and behaves predictably in any allowed configuration.
• The effect of configuration changes on system behavior and performance is predictable and is the responsibility of the ERP vendor. The effect of customization is less predictable. It is the customer's responsibility, and increases testing activities.
• Configuration changes survive upgrades to new software versions. Some customizations (e.g., code that uses pre–defined "hooks" that are called before/after displaying data screens) survive upgrades, though they require retesting. Other customizations (e.g., those involving changes to fundamental data structures) are overwritten during upgrades and must be re-implemented.

Customization advantages include that it:

• Improves user acceptance
• Offers the potential to obtain competitive advantage vis-à-vis companies using only standard features

Customization disadvantages include that it may:

• Increase time and resources required to implement and maintain
• Hinder seamless interfacing/integration between suppliers and customers due to the differences between systems
• Limit the company's ability to upgrade the ERP software in the future
• Create overreliance on customization, undermining the principles of ERP as a standardizing software platform

Extensionsedit

ERP systems can be extended with third–party software, often via vendor-supplied interfaces. Extensions offer features such as:

• product data management
• product life cycle management
• customer relations management
• data mining
• e-procurement

Data migrationedit

Data migration is the process of moving, copying, and restructuring data from an existing system to the ERP system. Migration is critical to implementation success and requires significant planning. Unfortunately, since migration is one of the final activities before the production phase, it often receives insufficient attention. The following steps can structure migration planning:

• Identify the data to be migrated.
• Determine the migration timing.
• Generate data migration templates for key data components
• Freeze the toolset.
• Decide on the migration-related setup of key business accounts.
• Define data archiving policies and procedures.

Often, data migration is incomplete because some of the data in the existing system is either incompatible or not needed in the new system. As such, the existing system may need to be kept as an archived database to refer back to once the new ERP system is in place.

Advantagesedit

The most fundamental advantage of ERP is that the integration of a myriad of business processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

• Sales forecasting, which allows inventory optimization.
• Chronological history of every transaction through relevant data compilation in every area of operation.
• Order tracking, from acceptance through fulfillment
• Revenue tracking, from invoice through cash receipt
• Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)

ERP systems centralize business data, which:

• Eliminates the need to synchronize changes between multiple systems—consolidation of finance, marketing, sales, human resource, and manufacturing applicationscitation needed
• Brings legitimacy and transparency to each bit of statistical data
• Facilitates standard product naming/coding
• Provides a comprehensive enterprise view (no "islands of information"), making real–time information available to management anywhere, anytime to make proper decisions
• Protects sensitive data by consolidating multiple security systems into a single structure

Benefitsedit

• ERP creates a more agile company that adapts better to change. It also makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the business—internally and externally.
• ERP can improve data security in a closed environment. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised. This changes, however, with a more open environment, requiring further scrutiny of ERP security features and internal company policies regarding security.
• ERP provides increased opportunities for collaboration. Data takes many forms in the modern enterprise, including documents, files, forms, audio and video, and emails. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems.
• ERP offers many benefits such as standardization of common processes, one integrated system, standardized reporting, improved key performance indicators (KPI), and access to common data. One of the key benefits of ERP; the concept of integrated system, is often misinterpreted by the business. ERP is a centralized system that provides tight integration with all major enterprise functions be it HR, planning, procurement, sales, customer relations, finance or analytics, as well to other connected application functions. In that sense ERP could be described as "Centralized Integrated Enterprise System (CIES)"

Disadvantagesedit

• Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization's lowest common denominator needs, forcing the organization to find workarounds to meet unique demands.
• Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities.
• ERP can cost more than less integrated or less comprehensive solutions.
• High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses.
• Overcoming resistance to sharing sensitive information between departments can divert management attention.
• Integration of truly independent businesses can create unnecessary dependencies.
• Extensive training requirements take resources from daily operations.
• Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money.
• Critical challenges include disbanding the project team very quickly after implementation, interface issues, lack of proper testing, time zone limitations, stress, offshoring, people's resistance to change, a short hyper-care period, and data cleansing.