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Integration Between ERP Systems And Supply Chain Management

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Supply Chain Management Journal

Integration Between ERP Systems And Supply Chain Management

Duminda.P.P.K. RAJAPAKSE
University of Kelaniya, Sri Lanka
[email protected]

Abstract
The purpose of this study is to understand the benefit and challenges associated with the
integration between ERP systems and supply chain management. From that, top
management can make clear and accurate decisions when adopting an ERP system. A
fundamental advantage of an ERP is providing access to the appropriate information that
the right people can capture at the right time. The ERP system can consolidate information
into a single integrated system for the organisation instead of multiple subsystems without
integrating each other. This provides more effective internal and external communication
with customers and suppliers. From that, it makes understanding the benefit to the
organisation better and is more valuable to find the challengers while engaging the ERP
system. The successful implementation of an ERP system involves a significant financial
investment, time, and well planning. When examining the challenges of ERP deployment,
it is also essential to learn how to minimize the risks of these challenges to achieve early
benefits. The supply chain leader can study all the benefits, challenges, and strategies to
be successful. Also, they will have the right information to help them decide to adopt an
ERP system and increase the return on investment to their organisation.
Keywords: Supply change management, ERP integration, Challengers of ERP
Implementation and Benefit.

flaws forced supply chains to spend more


time responding to problems, which
1. 1. Introduction
reduced their efficiency and ultimately
An integrated and effective management caused problems for their customers.
system is required to achieve objectives Hence, supply chain management has
such as speed, production capacity, high become more difficult for businesses to
quality and low cost as well as retaining a compete without the use of information
minimum inventory. According to Bursa technology that enables retailers to
(2014), spreadsheets are prone to human manage material, cash and information
mistakes and difficult to update. Rather flow throughout the entire production and
than proactively resolving issues before distribution processes. Because current
they arise, these spreadsheet planning market conditions show that the true

34 2022, Volume 13, Number 2


Supply Chain Management Journal

competition is between supply chains operations, and using an ERP system as a


rather than between enterprises, fundamental strategy to increase
businesses have sought to improve their efficiency is something that can be done.
supply chain skills to achieve a This article's primary objective will be to
competitive advantage by employing demonstrate that the appropriate
information technology (IT) solutions installation of an ERP system will enable
(Christopher, 1992). Because of this, mid to large-sized organisations to
information technologies became an achieve supply chain efficiency and
essential part of any business strategy increase customer satisfaction. A
that wanted to be competitive. Enterprise secondary objective of this study will be
resource planning (ERP), which is a type to clarify that an ERP implementation is a
of information technology, gives massive project that will require
businesses a way to organize their significant time and resources. Before
processes. The ERP makes it possible for moving forward with an ERP
a company to access up-to-date data implementation, leadership must have a
from across the organisation in real time. solid understanding of this topic.
This approach has advantages and This article will be important because it
disadvantages, but the most important will highlight the advantages of
one is that it streamlines the information implementing an ERP system to the
gathering process (Banerjee, 2018). supply chain and, eventually, the
Customers are more aware due to the organisation. The article will compare
technology available today, and they what an ERP system enables a
demand better supply chain service. corporation to do with alternative
Customers in the modern era expect systems that are incapable of doing the
service on par with that provided by same tasks. This will clarify to readers
Amazon, and one method for mid-sized to how an ERP system can lead to supply
large businesses to stay competitive with chain and company success. Getting an
their clientele is to implement an ERP ERP system up and running requires a lot
system. Companies who believe they do of effort and a strong commitment. To
not require an ERP system because the begin to realise the benefits of ERP, this
way they have operated in the past is is required. A half-truth would be to only
sufficient should be aware that their illustrate the benefits of an ERP without
competitors may choose to implement an also demonstrating how much effort will
ERP system. This would provide the be required upfront and the effort to
opponent a competitive advantage that maintain the system. An informed
would be tough to compete against over decision can only be made with an
the long term. The bottom line is that understanding of both the positives and
clients need efficiency in supply chain negatives. Also, this document should
2022, Volume 13, Number 2 35
Supply Chain Management Journal

assist company leaders in determining chain management, customer


whether an ERP installation is appropriate relationship management, knowledge
for their organisation. management, strategic management,
and decision support systems (Shiau et
al., 2009).
2. 2. Literature Review
Also, organisations address these
2.1. 2.1 ERP development history
challenges through various strategies,
including business model innovation,
Environmental dynamism and the
enhanced customer service, job
challenges that come with it lead to
automation, and the development of IT
massive investments in complex and
systems such as ERP (Mahara, 2013).
integrated IT-based innovations that
Furthermore, organisational operations
make businesses more competitive.
and data management are made simpler
Enterprises want to have automated
for small and medium enterprises with
systems that allow them to work together
ERP implementation (Shahawai & Idrus,
and share information about competitors,
2011). According to (Malonza & Nzuki,
consumption and market dynamics,
2014), at the beginning of the 21st
product-delivery attributes, and
century, the large company market for
technological developments (Awa et al.,
ERP systems was saturated, causing
2015; Poba-Nzaou et al., 2014; Rajan &
vendors to diversify into other industries,
Baral, 2015). Enterprise Resource
such as the service and small business
Planning (ERP) is a customised system
sectors. Nevertheless, the original
that manages connections, integrates,
Material Requirements Planning system
supports processes across an
had a significant flaw in that it thought
organisation’s boundaries, streamlines
each order could be made separately from
operations, and builds better service
the others and did not consider the
value (Doom et al., 2010; Savoy &
capacity of critical resources. Hence
Salvendy, 2016). (Metaxiotis, 2009;
introduce the advanced system, which is
Poba-Nzaou et al., 2014; Wymer &
called Material Requirements Planning II.
Regan, 2005) are explicit the usage of
However, ERP systems provide the same
ERP software dates back to the 1960s, but
functions as Material Requirements
its current growth is mainly driven by the
Planning II, integrating other essential
strategic use of knowledge to establish
systems within the organisation (Evans &
market sustainability through the
Lindsay, 2013).
integration and support of processes and
strategies, as well as resource
2.2. 2.2 Benefits of adopting ERP
optimisation. ERP systems’ data are most
likely to establish a foundation for supply The ERP deployment may have various

36 2022, Volume 13, Number 2


Supply Chain Management Journal

potential benefits (Maditinos et al., movement toward ERP systems (Shee et


2012). There are significant distinctions al., 2018), and the use of ERP can
between the deployment of traditional contribute to the overall improvement of
information systems and the deployment the performance of a business (Abro et
of ERP systems in businesses (Rajgopal et al., 2017). Therefore, there is a wealth of
al., 2002). According to Krajewski et al. information about the advantages of
(2016), the ERP systems consolidate utilising an ERP system. An ERP can
information from multiple systems and positively impact the entire organisation,
processes across the firm into a single not just supply chain operations. The
system. This allows the organisation to literature review sources were drawn
view all the components that make up the from various business disciplines (from
organisation in a single location, rather marketing to logistics) to demonstrate
than having to pull information from this.
multiple systems, and also highlights the
2.3. 2.3 Challengers during ERP
fact that with all the organization's
implementation
information flowing through a single
system, managers and leaders have
When designing an ERP system for the
access to information that enables them
company, all of its processes should be
to make a better and more appropriate
thoroughly evaluated. Additionally, an
decision (Grezek, 2020). ERP provides
organisation with complex information
supply chain management access to
flows or other comparable challenges may
global transactional data that can be
need to fully redesign its procedures
utilised to make more intelligent decisions
before getting the benefits of the ERP
(Chopra & Meindl, 2016). According to
system. Successful ERP deployments are
(Baran & Galka, 2016), ERP systems
distinguished by their simplicity and
support customer relationship
collaboration with a limited number of
management (CRM) because they give
software vendors, and failing to do so will
real-time data, which is the only source of
result in investing additional time and
customer information in the corporate
money to implement a difficult-to-use and
environment. According to Banta &
costly-to-maintain ERP (Fryling, 2010).
Boldeanu (2019), the ease of exchanging
Also, Rajgopal et al. (2002) conclude that
information across the organisation, the
implementing ERP systems requires
increase in customer satisfaction, and the
careful planning and management. Even
availability of the ERP software
though ERP systems involve both
throughout the entire organisation are
technological innovation and the
the benefits of ERP. Also, there is a
management of organisational change
growing demand for technology in the
(Kumar et al., 2002).
logistics industry, which necessitates a
2022, Volume 13, Number 2 37
Supply Chain Management Journal

The literature also says that ERP implementation complications (Potts,


implementation has a high failure rate for 2019). Also, most smaller organisations
various reasons (Alsayat & Alenezi, tend to focus on their core competencies
2018). Moalagh & Ravasan (2013), and don't recognise that they need to
realises that implementing an ERP bring in or contract with ERP
requires significant time and money. ERP implementation experts. The literature
cost overruns are caused in part by shows that an organisation needs to take
changes made to the system during into account both their needs and their
implementation, which can result in capacities when deciding what the ERP
failure or stalling of the project, wasting should be able to accomplish. In order to
more time and money. Therefore, each make an informed decision on whether an
area of the business will be affected ERP is the perfect fit for your company,
differently by ERP, and all components you need essential information
and activities of the organisation must be (Hasheela-Mufeti & Smolander, 2017).
identified and evaluated. However, as Hence, these ERP installation obstacles
Cereola (2006) pointed out, the ERP were not given to scare leaders away
system can often be customised to suit from adopting an ERP system but rather
the needs of the organisation that plans to help them make informed judgments.
to use it. This paper will discuss solutions to
This is another problem that arises with overcome these difficulties later.
global deployments. It is significantly
more challenging to train employees
3. 3. Methodology
when there is a language barrier between
ERP consultants and the organisation that First, this project's data was gathered
is adopting the ERP (Banta & Boldeanu, through an analysis method involving a
2019). Frost (2016) argues that the lack review of current ERP literature.
of a leader assigned to implement the Secondly, The literature reviewed was
system is a cause of ERP implementation chosen to demonstrate the history of the
troubles, as it leads to each area doing ERP, the advantages of utilising an ERP,
what they think to be best rather than and the implementation issues of an ERP.
focusing on what is required to deploy the The purpose of this article that
system across the organisation. There are demonstrates the advantage of ERP
many ways and systems to operate a adaptation and also explores the
company. Therefore failing to understand challenges of ERP. In order to make an
this and picking any ERP system may informed judgement regarding ERP
result in a system that is not a suitable fit selection for a supply chain professional.
for the organisation, which can lead to a
poor ERP deployment. This causes
38 2022, Volume 13, Number 2
Supply Chain Management Journal

4. 4. Discussion as all systems exchange information from


the ERP. With an ERP, it is no longer
When making a business decision, it is
relevant to have separate systems for
essential for a supply chain professional
sales and marketing, production
to ask, "What are the essential business
execution, warehousing, shipping, etc.,
improvements of this decision?" So, it is
because the ERP consolidates these
important to start thinking about how an
systems into a single platform. According
ERP can help the supply chain and the
to Shee et al.(2018), one advantage of an
organisation benefit. After all, bringing in
ERP is the ability to consolidate data from
the time and effort to set up an ERP
multiple systems into one system. As a
system would be unnecessary if it did not
result, information is more readily
have any benefits. On the other hand, the
available throughout the organisation,
advantages should be evaluated
enhancing the flow of ideas between
according to the question, "What are the
employees. For example, a salesperson
net benefits for the business and the
in a business with an ERP may see when
entire supply chain amalgamating with
an order is in production and in the
ERP ?" In order to answer that question,
warehouse from their computer without
it is necessary first to understand the
asking anyone else. In a legacy
challenges and risks involved with an
environment, a salesperson would need
ERP, then subtract those from the
to speak to someone on the shop floor to
benefits to determine the overall gain
find out when an order is in production
from employing an ERP system. After
and someone in the warehouse to find out
discussing the benefits of an ERP in detail,
when the order is being staged for
we will discuss its challenges in detail so
shipment. Each status updates
that a well-informed conclusion regarding
communication results in lost productivity
whether or not an ERP is the best option
since the time spent answering queries
for an organisation can be made. The
may have been spent on other tasks.
discussion will conclude with a success
Also, an ERP system can improve internal
plan that examines how to mitigate some
communication within a firm by ensuring
of the risks and challenges associated
that all locations utilise the same system
with the use of an ERP system.
globally. This indicates that an ERP
system can sometimes decrease regional
4.1. 4.1 Benefits of ERP
communication challenges when working
The main advantage of implementing an
with other countries (Banta & Boldeanu,
ERP system is that it facilitates
2019). Since an ERP is used throughout
coordination in three significant areas. In
the organisation, someone in a local
the first aspect, there is an increase in
country may be able to obtain information
interactions from within the organisation,
from another country without waiting for
2022, Volume 13, Number 2 39
Supply Chain Management Journal

someone to be in the office, meaning they return than disgruntled ones.


may get the information immediately The third area in which an ERP system
instead of waiting an entire day. All sides might increase communication is with
use the same system and call suppliers. The ERP helps reduce purchase
transactions the same, making errors by removing the need for mistake
communication clearer. This frees up time data entry. The ERP can automatically
to deal with difficulties instead of recommend order and quantity when
explaining what's needed. ERP systems component inventory decreases below
let organisations speak a consistent the reorder point. This reduces the need
language about business transactions, for someone to alert a purchaser that
improving communication. further supplies are required. The time
The second area of communication that saved by notifying someone to purchase
an ERP improves is the organization's the item could also contribute to the
communication with its consumers. The reduction of the item's restocking time.
ERP provides a central repository for all Moreover, this facilitates the transmission
client information. Similar to the internal of more accurate information to the
communication benefit, this means that provider. This will result in less time
the information for each customer is correcting errors and a stronger supplier
contained within the system, allowing relationship (Chapman et al., 2017). Also,
others to communicate with the customer quickly accessing real-time data is
using the information (Baran & Galka, another significant advantage of ERP
2016). Increased customer systems. Real-time data accelerate the
communication helps supply chain decision-making process and improve the
professionals establish more certainty, organization's efficiency. This indicates
minimise unpredictability, and save that if a modification is made to specific
inventory and expenses. When a customer order, the change will be
customer places an order, they know the updated instantly so that all parties
lead time and when to expect their involved can review it (Shee et al., 2018).
product with ERP. This gives the customer Hence, Real-time data gives decision-
the needed information. The buyer makers the latest information. This
wouldn't need to order additional to cover supports supply chain members by
the uncertainty of less precise systems. providing inventory, capacity, and
Increased communication with customers machine loading data. If an item's
also reduces the time spent answering inventory drops below the safety stock
customers' questions about the order level, the ERP system is updated as it
status. Customers who acquire the happens, not after the material is
information they need quickly or without consumed. This enables for a faster
asking are happier and more likely to replacement order, reducing supply chain
40 2022, Volume 13, Number 2
Supply Chain Management Journal

unpredictability. Real-time information system, an organisation’s complex


helps supply chain workers identify information flows or other issues may
capacity issues so they may take need to change (Fryling, 2010; Moalagh
corrective action sooner and satisfy & Ravasan, 2013). Based on the
consumer requests. organisation's process complexities, there
Moreover, there are numerous are two options. One option is to modify
advantages to using an ERP system in an their processes prior to using an ERP in
organisation. A few of these advantages order to eliminate the requirement for
include the ability to interact more customization. The second option is to
effectively internally and with consumers keep the processes by customising the
and suppliers. As the only system with ERP system.
real-time data, the ERP enables decision- When a process needs to be modified, the
makers to make faster and more accurate organisation must decide whether to
judgments. All of this improves the supply make the modifications immediately or
chain by removing variability to make the wait until the ERP implementation is
information more valuable. complete. As employees are needed to
learn a new system of doing things, quick
4.2. 4.2 Challengers of ERP.
change may cause business disruption.
Changes made throughout the ERP
As we have just seen, adopting an ERP
implementation process can make the
system has several advantages.
transition more challenging and time-
However, it is essential to have a solid
consuming. However, both approaches
understanding of the challenges
will result in challenges that the
associated with an ERP. The literature
organisation must understand in order to
review for this study indicates that the
make an informed decision regarding
biggest challenges of an ERP system
whether or not to use an ERP system.
occur during the new system's
If the decision is made not to change
implementation. So, this section will focus
current processes and information flows
on those challenges of ERP
to fit the new ERP system, then
implementation because they
customisation of the ERP system will be
significantly impact. One major challenge
challenging. The customization of the ERP
with shifting to an ERP system is that it
system takes a longer period and costs
may require changes to how information
more than planned to put ERP in place.
is currently handled. Because of this, an
Some of these delays can also cause the
ERP is much more than just a new type of
project to stop moving forward, which
technology to install. It will change the
means the organisation will not get to use
way information flows through an
the ERP system's benefits (Jennifer Miller,
organisation. Before shifting to an ERP
2019). This challenge is vital for a leader
2022, Volume 13, Number 2 41
Supply Chain Management Journal

to understand because the ERP may need add resources to help with the transition
to be changed to fit the organisation. period, which is a challenge that must be
Whether or not this is a big challenge addressed in order to make an informed
depends on how much customisation the decision and plan for the additional
organisation needs to do. As the number resource increases.
of customisation increases, so does the The last part of this section is about
complexity of switching to an ERP, which change and training. People who are
causes time and cost to be wasted affected by the new procedures will need
(Moalagh & Ravasan, 2013). However, training, as was stated before in this
(Shiner & DuPriest, 2012) explain that an article. However, even if there are no
ERP will affect each business area process modifications, everyone in the
differently. This means that each area of business who processes system
the organisation needs to understand the transactions will need to be trained on the
challenges in order to know what is new ERP system. Even more challenging
changing and how to do its work in the is that training for new systems is
ERP system. This challenge must also look sometimes required during the time that
at the fact that with an ERP, all functions people are still using their old systems.
are integrated into a single system. This This raises the possibility of problems. In
is essential because the activities of one addition to the need to train employees,
process area affect other process areas what training resources will be required to
within the organisation. This means that conduct the training challenge? This may
each area cannot modify the system need the use of additional infrastructure
without understanding the impact of for training. All of these factors must be
those changes on the downstream areas. taken into account when evaluating
Another challenge with adopting an ERP training requirements since they all come
system is that most organisations are at a cost, which must be understood
considering ERP experts. The smaller before an informed decision can be made.
organisations tend to concentrate on It is a challenge that a company
what makes them successful rather than considering the implementation of an ERP
realising that they need resources who system understands and weighs the risks
are knowledgeable about what it takes to and rewards before making a final
successfully adopt an ERP system decision. There are a variety of challenges
(Hasheela-Mufeti & Smolander, 2017). that need to be considered. As a leader,
Additionally, Frost (2016) points out that you need to know what the consequences
the lack of a project leader is a major will be, but you also need to have a plan
cause of challenges faced by to avoid or mitigate some of these
organisations during the transition to an challenges. This is why these challenges
ERP system. An organisation may need to are being highlighted.
42 2022, Volume 13, Number 2
Supply Chain Management Journal

4.3. 4.3 Strategy for Success ERP systems. When fewer customisation
needs to be made to the ERP, it is easier
Following an ERP system's advantages as
to transfer to an ERP. This suggests that
well as its disadvantages, we can now
making changes to the way things are
look at strategies of reducing the
done before switching to an ERP will make
challenges and increasing the benefits.
the transition easier (Banerjee, 2018).
This study will be done what other
Changing the process in advance to align
findings during ERP implementation. The
it with the ERP's end state makes it more
objective is to develop a method or
than just a new system to operate.
strategy that a leader can employ to
Instead of having to learn a new system
ensure a smooth transition to the ERP
and process, this is significantly easier for
system they select.
the company. It's therefore
The first step is identifying and
recommended that leaders modify
understanding the current processes
procedures whenever possible and only
before selecting the ERP system. The
customise ERPs when the processes
organisation should self-evaluate its
cannot be changed.
current processes to determine which
When moving to an ERP system, the next
areas require modification. This is
step is to find a project leader who knows
essential information when determining
how everything needs to fit together for
which ERP system is the greatest fit for
the project to succeed. The leader of this
the organisation out of multiple options
type of project should be able to evaluate
(Banerjee, 2018). Furthermore, Potts
the needs of various functions but will
(2019) emphasised multiple ways to
ultimately make the best decision for the
manage a business, and selecting the
overall organisation. There is a good
appropriate ERP system for the situation
chance that the person chosen will be in
can make a move more successful. With
a position where they can make decisions
an understanding of the business's
about the corporation as a whole rather
current processes and information flow,
than simply on a specific area (Jennifer
various ERP systems may be evaluated to
Miller, 2019). However, lower-level
determine the best fit for the
leaders will still need to be active in some
organisation. This would help to eliminate
aspects of the transition, as all sectors will
the need to adjust current processes or
be changing to some degree. Some of the
ERP customizations.
difficulties connected with an ERP
With a proper understanding of the
transition can be alleviated by having a
current processes of the busses, the next
competent project leader who has the
strategy is to identify the required
authority to make decisions that benefit
process changes and optimise the
the organisation. To preparation for the
information flows before implanting the
ERP transfer, the project manager and
2022, Volume 13, Number 2 43
Supply Chain Management Journal

their team can help drive process implemented in the presence of a detailed
changes. understanding of the current state of
The development of a training program is business operations and information
another part of the ERP transition that a flows. With the right leadership in place,
project leader and their team may drive. an ERP transition can be planned and
Developing an ERP training programme implemented in an efficient and effective
requires comparing present procedures manner by a team that understands the
and information flow to those that will present processes and information flows
exist once the ERP system has been of the organisation. It would then be
implemented. According to Banta and possible for the project team to create an
Boldeanu (2019), language barriers educational programme and identify the
between trainers and trainees should also tools required to put it into action. As a
be considered, which could necessitate result, the project team can educate
the use of translators in addition to those who may be affected by the ERP
trainers. Also, Hasheela-Mufeti and system change, which should alleviate
Smolander (2017), a successful ERP some of the worries that people have.
transition depends on bringing in
employees with the appropriate skill sets
5. 5. Conclusion
to teach the new way of doing things.
Another essential part of a successful
Many factors must be considered when
training strategy is ensuring that those
deciding whether or not to implement an
who require training have the time to use
ERP system. While there are a number of
it. The establishment of a management
advantages to an ERP system, there are
team and a training programme will assist
also a number of challenges that must be
the company in demonstrating the
comprehended to determine whether or
alterations the company will undertake.
not the ERP is best for the organisation.
There should be a discussion with those
With the ERP, more accurate real-time
who will be affected by the changes so
information can be shared internally, with
they may better prepare for what's to
customers, and with other suppliers in the
come. As a result, the project's leadership
supply chain. Data and transactions are
team should work with those who will be
linked to one system, which means that
affected to explain why and how the
essential information is passed when
changes will benefit them.
events occur immediately, allowing for
Even though implementing an ERP
faster response times. More correct
system is fraught with challenges,
judgments can be made sooner in the
following the strategies outlined here can
organisation as a result. The ERP system's
help alleviate some of those challenges to
challenges are the changes that must be
some extent. An ERP can only be
44 2022, Volume 13, Number 2
Supply Chain Management Journal

made in order for the ERP to be exceed the benefits of ERP for an
functional. This may require a change in organisation that has limited resources.
present procedures and information flows Expanding one's workers is more
before moving to an ERP. A further challenging in a small organisation since
challenge is determining how much it lacks larger organisations' resources.
money will be needed to implement the Because of this, the suggestion to shift to
policy change. There could be a high an ERP system was made for mid to large
resource need for a successful ERP oraganisaion because they have greater
transformation, which means that there flexibility to overcome the challenges to
will be a high cost. Additional resources enjoy the benefits of an ERP system.
always have associated costs that need to
be understood. Knowing these costs
6. References
might help an organisation assess if an
ERP implementation will be beneficial in
the long run. Abro, M. M. Q., Memon, Z. A., Shah, A.
A., & Naqvi, I. B., (2017), Antecedents of
ERP system benefits and disadvantages Enterprise Resource Planning and its
need to be considered before deciding to Impact on Firm Perfromance with Supply
Chain Integration as Mediating factor,
transform. Also, think about how you can
Mehran University Research Journal of
deal with the challenges that will arise as Engineering and Technology, 36(2), 407–
a result of the transformation. This allows 418.

the organisation to learn from others who Alsayat, M., & Alenezi, M., (2018), ERP
Implementation Failures in Saudi Arabia:
have gone through a similar path and gain
Key Findings, International Business
greater benefits from the experience. The Management, 12(1), 10–22.
strategies presented here show that
Awa, H., Baridam, D., & Nwibere, B.,
having a strong project leader who can (2015), Demographic determinants of e-
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