Summary Class notes - Advanced Resource Planning

- Advanced Resource Planning
- Joris Hulstijn
- 2019 - 2020
- Tilburg University (Tilburg University, Tilburg)
- Information Management
144 Flashcards & Notes
1 Students
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Summary - Class notes - Advanced Resource Planning

  • 1572217200 What is ERP?

  • What is ERP?
    A framework for organising, defining and standardising the business processes necessary to effectively plan and control an organisation so the organisation can use its internal knowledge to seek external advantage (Blackstone and Cox, 2005). This is used to integrate information across functions (enterprise-wide) and standardise business processes
  • What is an ERP system?
    A suite of integrated software applications used to manage transactions through company-wide business processes, by using a common database, standard procedures, and data sharing between and within functional areas (Alone et al, 2009)

    An integrated, automated and mission critical system that can be used for the core functions necessary to support enterprise systems. 
  • Common database - essential, there should be one common storage point for the data. If you have duplicates of data, this will lead to errors and bad data quality. Large part of the advantage of ERP is that it is one central point of view. There will be no need for copies, which will help prevent a lot of errors and misunderstanding
  • Enterprise systems
    - Integrate business processes and information from all of an organisations functional areas, and to external parties
    - Help coordinate operation of business functions and provide a central information resource for the organisation 
  • Standarization
    A business process or workflow system helps to determine what people do as part of their job. However, there is a paradox between control and trust. The rules that are set in place leave space for interpretation and the corporate culture fills in the gaps. If you don't allow your employees to make mistakes, sometimes they never learn how to take risk and recognise business opportunities
  • Integration: third-party software
    Third-party modules are connected to ERP systems using middleware (= software for connecting applications/ modules). When using middleware, make sure that you recognise abbreviations 
  • Interoperability
    The ability of computer systems to collaborate and exchange information successfully.
  • Four dimensions of interoperability
  • MRP ( = Materials Resource Planning)
    A production planning and inventory control system used to manage manufacturing processes
  • Bill of Materials
    • Defines the (sub)assemblies, components and raw materials required to produce an item 
    • Describes the way a finished product or parent item is put together from individual components 
    • Production planners explode BOM for level zero item to determine the number, due dates and order dates of subcomponents 

    Like a blueprint, these items have codes that you can trace back in a big database and find all necessary information 

    Example top level: bike 
  • Implementing ERP
    ERP is hard to implement successfully, due to wrong decisions on IT project management aspects, and inadequate control, not the technology.
    ERP is seen as technology but actually strategic (affects business processes and daily activities)

    Functionality, time and budget are all interrelated 
  • Reasons for ERP implementations to fail
    • It takes longer than expected
    • Total implementation costs have exceeded the budget
    • Fail to realise> 50% of the expected benefits 
    • Operational disruptions when going live
    • Executives are unsatisfied
    • Employees are unsatisfied 
  • Why is implementing an ERP system so hard?
    • Installing an enterprise system is not merely a computer project, but an expensive risky investment. In other words: it involves organisational change 
    • Areas where critical impediments to success are likely to occur 
  • 1572476400 Customization

  • ERP configuration
    Configuration possibilities that range from module selection, master data provision, to access rights for different users. These configuration settings cover anticipated variability
  • ERP customization
    Source code-based adaption. They are meant to cover unanticipated variability.
  • The idea is to incorporate the company's own business rules, but often functionality gaps remain after completion. Technical solutions for these gaps include single report generation, rewriting part of delivered functionality, writing add-on modules, or interfacing to an external system. 
    Most of the IS literature suggest that no customisation is the best! 
  • Vanilla implementation
    The company chooses to adapt the business process to the ERP system
  • Reasons to consider a vanilla implementation
    • Relatively straightforward business practices that are not unique 
    • Not skilled or experienced in building or changing systems
    • In case of financial component of the ERP is critical for reporting
    • All branches run the same version in a single instance, and enter and retrieve data in a similar fashion 
    • Competitive advantage based on knowing what and where things are around the world 
    • Maximise return on investment in ERP software, by minimising the cost of upgrades and maintenance 
    • Standardizing: integrating processes and information systems at an enterprise-wide level is less complicated and costly, when components have the same application and version, without modifications 
      • Reduce the need for scarce technical resources, and make better use of the vendor's support 
  • Modifying

    Businesses that do have highly skilled IT developers and a proven development process, can change the system to match the processes 
  • What are the benefits of modifying?
    Addressing organisational change along with modifying the system to meet the needs of the business, will help minimise the risks
  • What ar the drawbacks of modifying?
    • In case of an upgrade, each modification will need to be analysed to see if it needs to be incorporated or not
    • An upgrade can turn into a re-implementation, which requires more resources and time 
  • Sia & Soh (2007)
    Research problem:
    • provide a theoretically grounded framework for systematic assessment of the extent and severity of misalignments
    • understanding when customisation and when organisational adaption is more appropriate to resolve the misalignments

    Three research questions:
    1. What are package-organisation misalignments?
    2. Why do package-organisation misalignments arise?
    3. When do organisations customise packages and when do they adapt to the packages instead? 

    Principle: for an information system to be stable, its structure must represent a 'good' mapping to the real world it seeks to model 

    • Identify significant misalignments early on, to make sound decisions on whether to adopt the package
    • If adopt, assess the extent of customisation and organisational change required so adequate resources can be provided and proper change management be put in place 
    • For voluntary-surface misalignments, tight control over such change requests is likely to be an effective response
    • The resolution of voluntary-deep misalignments in package systems is likely to be problematic. Such systems are often limited in catering to the range of voluntary responses individual organisers acquire to cope with their external environments 
  • What is institutional theory?
    When developing packages, vendors draw upon the institutional structures of referent organisations. Misalignments arise when institutional structures in packages differ from those of the implementing organisations.
  • What is ontology?
    As a theory on modelling, it provides a structure to describe the nature of these misalignments. 

    From an ontology perspective misalignments are instances where aspects of the real world are not adequately represented by the model embedded in the package. 
  • What is the Bunge-Wand-Weber ontology?
    Used here to provide a perspective to investigate misalignments: how is the 'meaning' of reality represented in the package software?
  • What are the different structures that determine the implementing organisations leeway in responding to misalignment?
    • Imposed structures - are the result of external demand made on the organisations by authoritative sources such as the government
    • Voluntary structures - are developed as a result of an organisations history and experience, strategy, and management preferences
  • What are the different kinds of package-organisation misalignments?
    • Deep structure - conveys the core meaning of the real-world system that the information is intended to model. Deep structure package-organisation misalignments thus occur when real-world things, properties, states, and transformations are missing or incorrectly represented in the system 
    • Surface structure - concerned with how real-world meanings are conveyed through the interface between the information systems and its users. Surface-structure  misalignments arise when the way users in the real world use information, differs from the interface. 
  • What is organisational adaption entail?
    Organisational adaption will require changes in organisational processes, policies, structures and/or roles.
  • What is package customisation?
    It involves changing the source code, making modifications that are maintained in a separate directory, installing extensions through user exits, and using report writers to modify and embed new screens and reports.
  • Typology of misalignments
    • Imposed-deep alignments: critical (ERP designed for manufacturing but implemented in a wholesale business)
    • Imposed-surface alignments: less severe (changing organisational requirements to conform to the packages)
    • Voluntary-deep alignments: can be modified, but takes effort (temporary storage locations were not represented as storage entities in the ERP's data model)
    • Voluntary-surface alignments: relatively mild (management reporting formats) 
  • Beijsterveld and Van Groenendaal (2015)
    Resolving misfits can be achieved by:
    • Adapting the processes to the ERP system 
    • Customising the ERP system to the business processes 

    Misfits consist of organisational needs and what the vendor can offer 
  • What are the main advantages on off-the shelf ERP systems?
    • Quick delivery
    • Incorporation of commonly used practices
    • Professionally produced technical solutions
    • Broad testing 
    • Fewer errors
  • Why should SME's not make use of  'off-the-shelf' ERP systems?
    Modifying business processes should not lead to losing uniqueness. SMEs work in niche markets, and adapting business processes to standardised ERP systems could be fatal for SMEs. Next to that, SMEs have fewer resources, limited IT expertise and acquire their strength from being unique
  • What is the contingency theory and corresponding four important ideas?
    Contingency theory = there is no single best way to design organisational structures. The optimal approach is contingent upon various internal and external constraints. 

    The four important ideas: 
    • There is no universal or best way to manage 
    • The design of an organisation and its subsystems must 'fit' the environment 
    • Effective organisations not only have a proper 'fit' with the environment, but also between its subsystems
    • The needs of an organisation are better satisfied when it is properly designed and the management style is appropriate, both to the tasks undertaken and the nature of the work. 
  • What kind of misfits are identified in the article?
    • Actual misfit: the system does not do what is required 
    • Perceived misfit: company does not understand how the ERP works 
  • Actual misfit
    This is a mismatch between the structures embedded in the ERP system and the structures embedded in the organisation utilising the system, leading to inefficiency or missing important functionalities on the organisational level. 

    The unit of analysis of an actual misfit has to be the organisation, not the individual user 
  • What are the types of actual misfits?
    • Data misfit = inability of the ERP system to capture various object attributes or documents into the database of the ERP system 
    • Process misfit = there are incompatibilities between the organisational and ERP system requirements in terms of processing procedures 
    • Output misfit = there is an incompatibility between the organisational and ERP system requirements in terms of data presentation and information content of the output 
  • What ar the negative effectes of actual misfits?
    • Lack of integration
    • Limited visibility 
    • Loss of control
    • Decreased productivity 
    • Increased costs 
  • Perceived misfit

    Is related to performance 
    In case some stakeholder wants to change the system in order to make it fit the process (or the other way around) while this is not necessary to achieve the performance required.
  • Which misfits are part of the laten structure?
    • Role misfit
    • Control misfit
    • Organisational culture misfit 
  • What is the laten structure?
    The latent structure is a second-order structure that arises from the physical, deep or surface structures of the ERP system
  • With regard to resolution strategies, what choices does an organisation have?
    1. Customisation = changing the embedded structures of the ERP system 
    2. Workarounds = uses the functionality of the ERP system different than the developers intended to achieve functionality required 
    3. Accept misfit = compromising on the requirements of the organisation 
    4. Changing embedded structures of the organisation 
  • What are the disadvantages of customisation?
    • Longer implementation time 
    • Problems with upgrades
    • Vendor software maintenance
    • Having minor bugs
    • Increased complexity 
  • What are the consequences if customisation is not carried out properly?
    • Budget overrun
    • Delay
    • Project failure 
  • What ar the disadvantages of a workaround?
    • Lower productivity 
    • Lower organisational control undermine potential benefits from integration 
    • Slow dawn processes
    • Increase possibility of making errors 
  • What are two possible reasons for changing the existing business processes?
    1. The ERP system is incapable of modelling certain business practices used by the organisation 
    2. The implementing organisation believes the process embedded in the ERP system are superior to the existing business processes 
  • Conclusions
    • SMEs choose adaptation of the ERP system over adapting business processes, to regain 'fit' and performance 
    • Imposed misfits require a solution, companies have to comply
    • For misfits based on voluntary structures companies have choice, and at the start they all preferred a vanilla implementation
      • However, their business strategy and market requirements required the companies to customise the ERP system 
      • Problem: Once the vanilla implementation has been abandoned, a company has no clear lead on where to stop 
      • If a misfit results from a mismatch between voluntary structures and the ERP system, the company needs to evaluate if this voluntary structure is needed to regain or maintain market fit 
    • About 50% of the misfits are actual misfits
    • The perceived misfits can be tackled by appropriate change management 
    • These findings contradict the general belief that voluntary structures need to change to meet the structure embedded in the ERP system 
  • What are the sources for perceived misfits?
    • Resistance to change = employees refuse to work according to the structures embedded in the ERP system because these deviate from the way things were performed before, regardless whether the new way of working lead to benefits for the company 
    • Ignorance = employees  do not understand the business processes and the processes embedded in the ERP system properly  
    • Wishes = employees have wishes how the ERP system would work. If these wishes are bit fulfilled, users may indicate this as a misfit 
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