AnAssessmenttoidentifyCausesofERPImplementationFailure
AnAssessmenttoidentifyCausesofERPImplementationFailure
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Abstract
Evolving in early 1990s, Enterprise Resource Planning (ERP) has become a global standard
for the premier business firms for maintain their operations. ERP automates and streamlines
business processes, reduces the complexity of collaboration, optimizes the operations that
helps to gain superior control over business. However, ERP implementation success rate is
meager in the world due to its complex nature of implementation and cost. This paper shows
how to access the success of ERP implementation through a case study of a leading
pharmaceutical company of Bangladesh. This study identified the causes of preliminary
success in pre-implementation phase and the causes of delay in the implementation phase of
ERP.
1
Assistant Professor, Department of Management Information Systems, University of Dhaka, Dhaka 1000,
Bangladesh and PhD Scholar, Department of Logistics Management and e-Commerce, Glorious Sun School of
Business and Management, Donghua University, Shanghai, China. Email: [email protected]
2
Officer, MIS, Beximco Pharmaceuticals Limited
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Vol. 4, No.2, December 2015
1.0 Introduction
Real time information is the buzz in the business world. To agile in the competitive world,
companies requires an integrated real time view of their organization. Till now ERP is the
only such platform that offers this critical competitive advantage. In addition to that ERP has
high visibility, quality and control that enhances the decision making process of an
organization. But implementation of ERP is not an easy process.
The challenges may include but not limited to change management, restructure of
organization, financial commitment and so on. For these reason, 70-75 percent ERP
implementation endeavor failed (Gillooly, 1998; Pérez-Salazar et al., 2013; Whyte, 2015).
Still, FedEx air company (FedEx), The aluminum company (Alcoa),Germany BASF
company (BASF Aktiengesellschaft), Colgate-palm company (Colgate-Palmolive), Daimler
Chrysler (Daimler Chrysler), Del have food company, Del Monte Foods), The Dow Corning
company (Dow Corning), Whirlpool company (Whirlpool), Cadbury implemented ERP
considering the risks and benefits. Different researchers (Gargeya & Brady, 2005; Dong,
2001; Aladwani, 2001) have identified several success factors that lead to successful
implementation. Assessing the implementation progress in each phases of ERP
implementation against these identified success factors would definitely lead to effective
implementation of ERP. This paper will identify the ERP implementation success factors at
each phases of ERP implementation then try to demonstrate how to assess the success of ERP
implementation by comparing data collected from Beximco Pharmaceuticals Limited (BPL),
one of the leading health care companies in Bangladesh.
1.1 Objectives
The primary objective of the study is to identify the factors needed to consider for the
successful implementation of ERP. Secondary objectives are –
1.2 Methodology
The research is qualitative in nature. As we are studying a single unit of industry for our
study, case study is the right methodology to choose (Stake, 1978; Gerring, 2004). It aids in
forming descriptive inferences (Gerring, 2004) through descriptions of complex, holistic, and
a myriad of highly isolated variables (Stake, 1978). For case study data that are gathered
partly by personal observation (Stake, 1978) and partly from secondary sources. Thus our
data collection sources are:
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Vol. 4, No.2, December 2015
Enterprise Resource Planning (ERP) is a system that attempts to integrate all the functions of
a company into a single platform to streamline the processes and information across the
organization (Bibi & Hassan, 2014). The core feature of all ERP systems is a shared database
that supports all possible functions of different business units of an organization. Various
essential business processes for example; Inventory and Order Management, Human
Resource Management, Customer Relationship Management, Supply Chain Management and
beyond are now integrated to ERP platform, enabling the organizations to focus on
effectiveness and simplified success (Leyh, 2014).
Planning Centralized HR
Database
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Manufacturing (CIM) for the integration of administrative and technical functions like
Finance, IT, HR, Sales and distribution are conceptualized (Sysoptima, 2008).
SOURCE: Somers & Nelson, 2001; Umble et.al, 2003; Finney & Corbett, 2007.
During 1990 an explosive growth in technology covering all the functions of businesses had
drawn the attention of the large number of companies. From purchase to sale, Order to cash
all the functions is incorporated into a single corporate database. From early 2000 many
major vendors in ERP began to merge to satisfy the needs of the businesses with the software
suites (CTND, 2010). The journey is continuing. ERP vendors add on modules gradually
extending to advance scheduling and e-business solutions such as better supply chain and
customer relationship management. Mobile ERP (Robb, 2013), Hybrid ERP (Rivera, 2014),
Social ERP (Openbravo, 2014), Clouds EPR (Peng& Gala, 2014), IoT ERP (Dallas, 2014)
are relatively new in market and gaining ground to the different organization day by day.
Cloud providers will host the needed ERP infrastructure for companies so it lowers the initial
cost of implementation (Peng & Gala, 2014).
ERP has numerous benefits; but the two most important benefits are: One, it provides a
fundamental connection between the functionality and the processes of business and second it
ensures data integrity, security which is not easily attainable by the different software.
Incorporated software platform for modules are the key benefits of ERP. Organizations may
achieve competitive benefit speedily with successful implementation of ERP (Bibi& Hassan,
2014). ERP systems forwarded communication and transfer data of important information in
the entire enterprise. Now, workers have quick contact to real-time data, reports and
documents that concern their responsibilities. According to position of each user, information
flow is fully customized (Tambovcevs & Tambovceva, 2013).
There are a number of vendors available. SAP, Oracle, IQMS, TGI, Microsoft Dynamics,
Solarsoft, QAD, Peoplesoft, Abas, Baan, NET ERP are the names of some few. Packages
provided by them offer different advantages so organization need to choose that matches their
business requirements. Among the several features, organizations must choose the ERP suite
that provides greater flexibility and scalability towards them fulfilling defined organizational
requirements (Mohammad, 2009).
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Nanayakkaraet. et.al. (2015) identified almost 19 factors that has an influence on selection
and implementation of ERP. They categorized the factors into Major, Moderate and Minor
factors. for selection of erp; vendor/software reputation, cost and financial options, align with
business functions are considered as major factors; training & support, organizational culture,
implementation plan are at moderate level while licenses, user friendliness, interests of
project staffs/employees are mentioned at minor level.
Factors
Author Name Findings
Understand the Hong & Kim (2012) The extent to which the successful
Perspectives Zouine & Fenies (2014) implementation of an ERP depends on the
fitness between the company’s current
operations and the ERP solutions.
Understanding Fionah & Delgado (2003) In Pre-implementation stage of ERP
Strategic Goals Umble et.al (2003) System different CSFs such as Clear
Ijaz (2014) objectives and scope, complete awareness,
organizational analysis is needed for
successful project completion
Top Somers & Nelson (2001) The ERP project must be designated as
Management Umble & Haft (2003) top priority by top management. In
Commitment Levi & Tauber (2013) addition, the top management must be
Dallas (2014) willing to allocate valuable resources to
the implementation project. Resources
include time, money and personnel
necessary for the ERP implementation.
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Implementation Umble & Haft (2013) The project team should be balanced,
Team Zouine & Fenies (2014) cross-functional, and have representatives
Schiff (2015) from the internal staffs as well as
consultants.
Data Accuracy Somaer & Nelson(2001) Because of the integrated nature of ERP,
Umble & Haft (2013) if someone enters the wrong data, the
Dallas (2014) mistake can have a negative domino effect
throughout the entire enterprise.
Organizational Finney & Corbett (2007) A culture with shared values and common
Culture Peng & Gala (2014) aims is conductive to success because it
emphasizes quality and empowers the
willingness to accept new technology
Legacy Mashari et al. (2002) The majority of difficulties experienced
Management Saravanan (2014) during implementations are due to the
Systems costly developments of additional
software which has an interface to the
legacy systems for master data as well as
for transaction data.
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Maintenance & Fiona & Delgado (2006) Research on ERP upgrade is of the utmost
Upgrade Rivera (2014) importance because of its impact on
companies around the world that are
undergoing this major step or process
during ERP maintenance.
Testing M. al-Mashari et al. (2003) Testing is essential to ERP success. The
Araujo (2007) first testing is called unit testing. Then
Schiff (2015) Integration testing is conducted to ensure
it meets user requirements. At the end
user level testing is done that will ensure
whether ERP Solution will work or not.
Training Somers & Nelson (2001) Due to the complexity in the integrated
Gyampah (2003) ERP system, end user training is essential
Umble & Haft (2013) for a robust understanding of how the
M. al-Mashari et al. (2003) system works and how to use it.
Saravanan (2014)
For better understanding purposes, the factors are differentiated according to early,
implementation and post phases of ERP. Vendor and consultants are considered as push side
and companies likely to move towards ERP are in pull side as recipients.
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More details of these organizational factors are given below (Hong & Kim, 2002; Zouine &
Fenies, 2014.):
ERP require key people of organizations to visualize their requirements. There need to have a
specific goal, prospects and deliverables before requiring top management support. The
objectives of ERP should be set prior to the implementation of ERP. The objectives may
include increasing production, operational efficiencies or improving deliverables. Moreover,
a well-defined plan with previously defined responsibilities of individuals, scope,
deliverables and timeliness is required for the implementation of ERP.
IMPLEMENTATION PHASE
Organizational Legacy Data Organizational
Change Systems Management Culture
Management Management with Accuracy
SUCCESS
FACTORS Monitoring Data Consultants, Deviation
Performance Management Vendors & Handling
Measures with Accuracy Customers And
Relationship Cutover
POST IMPLEMENTATION
SUCCESS Post Maintenance Audit
FACTORS Evaluation & Upgrade
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A steering committee is form to handle the operations. This committee includes the project
manager and the specialist to configure different modules. Steering committee –
ERP implementation can take two ways: vanilla installation and customization by building
from scratch. Each strategy has its advantages and disadvantages. A recent survey of Fortune
1000 companies regarding ERP customization policies indicates that 41% of the companies
re-engineer their business to fit the application, 37% of the companies choose applications
that fit their business and customize a bit, and only 5% customize the application to fit their
business ( Toni &Klara, 2001). If the company chooses to go for vanilla installation, they
usually follow the following steps (Somaer & Nelson, 2001; Mashari et.al, 2002; Umble &
Haft, 2013):
Examine & rethink the existing processes and broadcast towards the entire
organization.
Each Business unit manager must submit documents on existing processes to their
project managers that would map to ERP application.
Selective fields must be configured. Non needed features must keep into inactive
mode.
If necessary major decisions- changing the vendors, reverse and re- negotiate the
contract etc. may be taken.
To uncover major surprises, good or bad and to foster implementation, pilot project
may run.
Cost benefit analysis are done to make formal go or no go decisions.
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used to work making activities connected. It would make the activities more
transparent. History shows that rresistance to change is one of the major barriers in
bringing technological changes. In ERP, where vast modifications of existing work
procedures will take place, resistance, denials are predictable consequences.
Companies need assistance during ERP implementation since they are not
experienced. Consultant’s assists the company personnel in analyzing system
requirements from top to bottom level & can recommend the suitable hardware and
software solution. Since they are held responsible for assisting the company in
implementing ERP, success and failure mostly depend on them. A close working
relationship would help BPL in transferring knowledge.
Organization has to specify how the legacy systems and data will be used and
converted. How data will be managed? If there is any deviation in the implementation
process, how it will be resolved? What would the cutover date, on which new
modules will be used.
A detail plan for monitoring, testing and validation are needed. Employees need to be
trained and educated during this period to avoid any unwanted circumstances and
delay.
In Bangladesh blue chip companies are embracing ERP and now its becoming a trend among
these companies. While large companies in Bangladesh are going for SAP or Oracle ERP
packages, SME companies are relying on local vendors.
Companies’ like- R.B. Group (Walton Hi-Tech Industries Ltd), PHP Group, Banglalink,
Banglalion, Grameenphone have implemented Oracle Financials, supply chain functionalities
for their organization. DBL Group, AbulKhair Group and the entire railway network of
Bangladesh Railway are being controlled by Oracle E-Business suite ERP.KAFCO has
implemented Oracle Human Capital Management functionality. DMTBF Project under ERP
facilitated through Oracle Financials and Inventory module which is financed by MDTF and
administered by World Bank (IBCS-PRIMAX Software (BD) Ltd, 2012).
Local ERP vendors and international support companies in Bangladesh includes PrismERP,
IBCS-Primax, SouthTech, LeadSoft, DivineIT, TigerIT Bangladesh Ltd, Best Business Bond,
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Talukder ICT Ltd, Genuity Systems Ltd are some of the names of ERP solution provider in
Bangladesh (www.erp.com.bd, 2015).
Starting its journey in 1980, Beximco Pharmaceuticals Ltd. has become leading edge
pharmaceutical company. It is manufacturing medicine both for local and international
markets ( 40 countries) under the licenses of Bayer AG of Germany and Upjohn Inc. of USA
for almost all disease ranking from AIDS to cancer, from infection to asthma, from
hypertension to diabetes etc. Beximco Pharma ranked among Top 30 from among 200
emerging brands in Asia. It also received Industry's #1 award in pharma category in 2013.
Recently, The US Food and Drug Administration or FDA has recently (July 2015) given its
approval to Beximco Pharmaceuticals. Beximco Pharmaceuticals Ltd. (BPL) is the largest
pharmaceutical exporter of Bangladesh. BPL was the first pharmaceutical company in
Bangladesh to receive ‘National Export Trophy (Gold)’ in different years.
BPL has selected Oracle E-Business suite to implement. It is in its ERP implementation
phase. We have observed BPL’s ERP implementation process since early implementation
phase. BPL successfully overcome the early implementation phase but fall behind schedule in
implementation phase. The following sections will try to identify the causes of success in the
early implementation phase and causes of delays in implementation phase. For the ease to
study we have eliminated the description of the success factors which BPL Lacks; however,
we have discussed these eliminated facts later.
procurement to sales and so on. Such legacy systems Maintenance, upgrades &
continuous support requires manpower and money. Upgrades of such legacy systems
would cost more than having a new integrated system.
ERP will enable BPL to better manage resources for example- lower inventory levels,
improve decision making therefore achieve overall efficiencies at all levels with
centralized storage/backup of all enterprise data.
The inherent nature of ERP will enable BPL to better manage resources, lower
inventory levels, improve decision making therefore achieve overall cost efficiencies
at all levels.
ERP facilitates real time movement of data transactions across the organization.
Information is more easily accessible in ERP in compared to their legacy system. This
will eliminate reporting delay and highly responsive organization.
One of the pre-requisite of ERP is to standardize the data requirements and data
processes and this will enable to extract, analyze and manipulate information at more
comprehensive level.
The integrated nature of ERP enables the user access to information to make informed
decisions. For example: Due to the access to the inventory stock sales representatives
may inform the customers whether the orders they place are available or not whereby
clients may decide to purchase at later date or decline. That’s how information
empowers representatives and enhances customer services.
ERP improves financial compliance. It will enable the organization to produce quality
reports with regulatory standards therefore reduces risks.
BPL wants to implement ERP to be more competitive, flexible and agile compared to its
competitors in the market.
BPL’s top managerial levels are showing their full commitments in making the ERP project a
success. Higher visibility for active participation on such large projects may boost their
careers as well.
v. Executive Sponsorship
BPL’s seems to have the top executives in the ERP implementation project. Executive
sponsors of CFO, CEO and MD of BPL are required since only they have the power and
authority to run such new and expensive project.
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Prominent Consulting firm, KPMG (India) has been appointed as steering committee in BPL.
Their professionals are grouped by industry focuses who are serving successfully in this field
since many years. An active involvement and continuous governance for conducting the ERP
functions is required from them. KPMG assigned fulltime employee in this project for
implementation.
Beximco Pharmaceuticals Limited (BPL) has initiated to implement Oracle E-Business Suite.
This suite has almost 50 modules covering areas such as HR, Finance and accounting, Supply
chain etc. They are expected to go live within 2016 with some of the modules. Oracle allows
the adoption of firms to tailor the standardized processes to accommodate with their
organization’s needs. BPL has some backend legacy systems that will not be replaced during
the early phase of implementation. mSales, Attendance & Time Management system,
Inventory Management Systems are names of some few which will be integrated with the
system.
From Oracle E-business suite, BPL has decided to move towards some of the modules in its
first phase of implementation. These modules along with the expected outcomes have already
being analyzed by the managerial level. The modules that BPL is implementing in the first
phase are:
Manufacturing: Better Production Scheduling, Production Scheduling
Human Resource: Core HRMS, Payroll
Finance: Oracle Payable, Receivable, General Ledger, Cash Managemnt, Fixed
Assets
Planning: Oracle Advance Supply Chain planning
Purchase
Supply Chain Management
BPL has decided to go live within 2016 with HR, Finance, and purchase and Supply chain
modules. Definitely it requires great time to make customizations or developments of the
needed features of the modules before go live.
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Vol. 4, No.2, December 2015
BPL’s ERP project implementation plan is being designed by DH&C with the consent of
KPMG and BPL’s Management.
BPL’s ERP implementation plan includes a number of instaces. in each of the phases of
implementation a number of documents need to be generate without which the system can’t
get approval during audit trials. Instances include-
CRP (Conference Room Pilot): CRP is a standard procedure of Oracle E-Business
suite.
DEV (Development): All the Customizations/ Configurations/ Modifications of CRP
are done DEV instance.
SIT (System Integration Testing): Once all the system level developments,
according to the user requirements are done, it is being integrated to the legacy
systems. This will be done in System Integration instance.
UAT (User Level Testing): After integration testing, user level testing will be done.
Here all the users at their premises will work with the system. Real life scenarios in
the name of some test cases will be given to them and once approved by them will
move towards the live session. But if any errors or bugs found, further developments
will be done and repeat the entire test processes.
Production (Go Live): System has been developed to fully handle the day to day
operations.
x. Implementation Team
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Project manager who is held responsible for the design and overall output
performance of the end-to-end processes along with reviewing validation documents
and reporting to the steering committee.
Validation Team who is responsible for -
the day to day validation activities of the project.
Consulting with team members on issues, which require a regulatory perspective
during the design phase and the later phases of the project.
Ensuring that change requests (during and after the project) is transported to the
production system only after the required validation activities.
Steering Committee (KPMG) who will ensure
The development, planning and execution of the Oracle implementation project.
Ensuring that the required information becomes available and that decisions are
made in time for the project to proceed as planned.
This implementation team is held responsible for-
Mapping the business requirements to the ERP modules to make sure it is compatible
to meet the business needs.
Scheduling the entire work plan through Proper evaluation whether ERP solutions
will match business strategies or not are considered here.
validate all the systematic processes with rapid decision making.
To make BPL’s processes compatible with the structure or tools of ERP, re-engineering or
redesign of existing system is must. Such re-alignment will definitely impact its functional
areas, policies, structures and mostly its employees. So a Formal Plan has been initiated to
develop where all the changing issues are highlighted, its expected benefits and impact on
existing processes employees and legacy systems.
Most of the cases it is believed that ERP is an IT project and only IT personnel are held
responsible for it. Right now, the fear of losing jobs especially in those workers who provide
back-end system supports are one of the major hurdles that BPL is dealing.
Company has more knowledge on their business operations but the vendors and the
consultants have mastery of skills in this ERP practice. IT Experts from MIS department is
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Vol. 4, No.2, December 2015
playing an important role since they possess knowledge in both areas. BPL Management
needs to analyze each situation in lieu of jumping into their recommendations in blending.
There is a wrong perception considering ERP as an IT project rather than a business one.
Oracle E-Business suite is a standardized method that suits more in developed countries like
USA. So the gaps between the functionality offered by vendor packages and the
organizations way of working are found which is quite obvious. BPL seems to be silent in
this area.
BPL’s steering committee has the following plan for data capture and conversions:
o ERP have the utility to upload data from spreadsheets. Legacy data will be uploaded
this way.
o Data from the legacy and new system must be integrated otherwise it will initiate new
development task of integration.
o Then the data will be validated against input. If the user become satisfied data will be
kept.
o If any discrepancies found the data will be cleaned. Data or entity that are no longer in
use will be dropped.
BPL has already started their training sessions with the validation team. Since this team will
directly link to all of the phases of ERP, early level training is necessary. They have hired
consultants from DH&C. At user level they are guiding them on preparing the URS 1 and 2
documents. The validation team is trained on preparing obligatory documents ensuring the
entire processes (‘As is’ level to ‘To be’) are validated and compliant with the designed
organizational rules and regulations.
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BPL has also initiated to train the business users and the key users before go live sessions that
means during their first phase implementation to avoid unforeseen circumstances in future.
Manuals, guidelines regarding the usage of system during the continuous training sessions
will be provided. When the users get 360-degree view of the system, they will better
understand whether it meets all their requirements or not.
vii. Testing
BPL has plan to do all three level of testing: unit level, system integration and acceptance.
During Implementation phase, BPL needs to be ensured that the system is in compliant with
the requirements and being able to conduct its functions appropriately. So, Logging files need
to be kept to trace the relevant events. At post Implementation phase, audit needs to be
designed to identify those areas that needs special assistance and to find whether the
anticipated benefits or ROI are realized or not.
Factors Already
(Implementation Phase) Considered Current Scenario/ Future Plan
Yes No
A Formal Plan has been initiated to develop where all
Organization Change √ the changing issues are highlighted, its expected
Management benefits and impact on existing processes employees
and legacy systems.
Legacy System Inventory Management Systems, mSales, Attendance
Management √ Management Systems, Performance Management
Systems are name of some legacy systems that are not
yet decided to shift into ERP.
What possible performance measures will be
Monitoring Performance √ considered for evaluating the systems acceptance are
Measures likely to be planned by the head of the management
after the pre-phase of ERP implementation.
There is a wrong perception considering ERP as an IT
Organizational Culture √ project rather than a business one.
Data Management with Data Migration Plan at different instances has already
Accuracy √ been planned. Without User Level Acceptance system
will not move towards production.
All deviations observed during execution of functional
and acceptance testing will be documented and
Deviations Management √ resolved. Test incidents include test results, which do
not meet the acceptance criteria, system errors,
program crashes, or other exceptional conditions.
Legacy system will be shut down after go live. If any
Cutover √ unforeseen or change request rises than further
developments / configurations will be continuing until
user approved the system.
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Project Delay BPL is running behind their expected time schedule. So there seems a
high possibility of Project delays which may cause cost over runs in
long run.
Migration Data Migration is costly and time consuming. Entire data may not be
uploaded to the system at once. Re-loading may be required.
Poor Project Management KMPG may not be able to lead the project as it is being expected
leading to project delays.
Create Dependencies More than one signatory authority is assigned to make decisions
sometimes lead to needless dependencies.
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Project Cancelation If project doesn’t able to meet the requirements of the business.
Time Constraints Project delay may take place.
It is clearly clear from the above table that early implementation phase had included all the
success factors and this is the reason to successfully overcome the phase. However,
Implementation phase has cultural problem, monitoring problem, deviation management
problem, proper training problem for which the project is lagging behind the schedule.
Prediction can be made that BPL may fail to get all the expected benefits from the ERP
system as the management is not concerned about the post evaluation and audit factors. It
may fail to check systematically whether expected benefits have been achieved or not. There
may be possible dispute between BPL and the Vendor over right number of module
installation, module performances and cost. Because, the vendor may feel reluctant or feel
careless in implementing all the modules in an assured manner as no post audit program has
been planned. Ultimately BPL may feel deceived.
5.0 Conclusion
ERP is becoming a necessity for maintain large organization and remain competitive. Like all
other large organization Bangladeshi companies are also moving towards adopting ERPTo
remain competitive in this industry, successful implementation of ERP would consider a
strategic move for BPL.
In this paper we tried to compare the success factor with that of BPL’s implementation
activities. It is seen that BPL’s ERP implementation activities in pre implementation phase
considered all success factor and thus it successfully overcome this phase. However, in
implementation phase BPL lacks the success factors such as monitoring performance
measures, setting cutover date, deviation management and sufficient training. As a result,
BPL has lagged behind schedule (going live on April 2016) and still in the integration testing
phase.
From Beximco Pharma Scenario, Business functionality alignment, adequate training, testing
and a well- structured validation team are considered as Major factors for the successful
Implementation. Financial aspects; costs, user friendliness, cultural would be the Moderate
one while Real time reporting functions, Agreements and licenses would consider least
prioritize factors affecting implementation of ERP.
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Vol. 4, No.2, December 2015
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