Posted at 09.10.2018
Keywords: ikea erp, erp research study, erp example, erp aue
Enterprise resource planning or ERP refers to the integration of management information systems across a whole organisation or business product (Gupta, 2000, p. 114). The goal of such integration is to merge information systems (or the info flows which they enable) organically in to the business processes and various business functions throughout the company, eliminating the gaps and bottlenecks that occur from using independent hardware or software solutions for money, accounting, creation, sales, human resources, and customer marriage management (Klaus, Rosemann, and Gable, 2000, pp. 142-146). While sometimes hard to identify precisely, ERP and other business huge business systems may also be a key element in helping to operate a vehicle organisational change and improve how business functions are conceived and put in place.
However, especially for large and complicated organisations, applying such a system can be an immense complex, logistical, and management concern. This newspaper will examine a few of the key factors which help determine the success or failure of an enterprise resource planning execution through the zoom lens of a research study of a major global retail organisation's experience in the United Arab Emirates.
As known above, the challenges of successfully putting into action an enterprise resource planning system have been greatly mentioned in the academics books on business, management, and information systems. Therefore, the first portion of this paper will first look at how, why, and in what contexts ERP is very important to business organisations. Next, the books on success factors for organization learning resource planning system implementations will be critically reviewed, with an attention towards determining key features that determine an effective ERP execution.
In order to understand what ERP implementation in a complicated real world scenario looks like used, this paper will introduce a research study of Swedish home furnishings retailer IKEA. After providing some track record on the business's entry in to the Middle East regional market, and Dubai in particular, this paper will examine the implications of the business's recent global roll out of any standardised ERP system and its own impact on business functions and functions in Dubai, focusing on an organisational change management perspective.
The paper will conclude with some conclusions and suggestions based on the material offered.
Enterprise source planning systems and other organisation-wide business information systems are important not only in their role as bits of technology, but also in how they help businesses to characterise, understand, and rationalise their key business operations.
In addition to its role in helping an enterprise to are better, the procedure of utilizing an ERP system itself could have a transformative impact as companies carefully analyse their business functions and possibly re-engineer these to more efficiently assimilate in to the new information system(s). Hall, for example, argues that ERP systems are an important source of organisational change, and can immediately result in a variety of sometimes paradoxical changes: organisations become leaner plus more decentralised, while ability and control may become more centralised; some careers require increased depth and skill while some become more routine; and more work can be created in a few jobs regardless of the basic goal of increased efficiency (2002). Koch even advised that information technology implementations like ERP could be utilized as a 'steamroller' for pressing management politics (2001). Plainly, it's important to look beyond the software aspects of ERP at its impact on the overall way an organisation does and considers business.
With the truth that lots of companies (especially smaller and mid-sized enterprises) now choose from industry standard business information system plans, it's important for managers to recognise how the in-built assumptions and understanding of business processes embodied in these systems will interface with the best way to the company currently does indeed business (Brehm et al, 2001). Even though most sellers of such systems offer considerable customisation options, their particular view of how certain business processes should be completed will likely show through in the way the software works, and a poor choice in this respect can cause an ERP system that does not fit with what sort of company actually works towards its business goals used (Holland and Light, 1999, p. 60). Kallinikos, for example, a detailed relationship between how ERP systems were created as software and the effects they have got on ways of thinking about human being action, company, and systems of organisation (2004).
It could very well be for this reason that a lot of the empirical books has shown the impact of organization learning resource planning systems and other business extensive included information systems to have put together performance at best. Although some organisations clearly gain a great deal from these assignments, many seem to simply 'bounce on the bandwagon' and discover limited or even negative results because of their investment. Wieder et al, for example, found no organized evidence of advanced performance at the company level for ERP adopters (apart from those who also implemented supply chain management systems at exactly the same time) (Wieder et al, 2006, pp. 25-26). Other experts have mentioned different results on different types of companies: Mabert, Soni, and Venkataramanan, for example, found that smaller firms saw more advantages in processing and logistics while much larger businesses gained increased financial performance from adopting ERP systems (2003, p. 245). Because of this, the business books has extensively looked into key success factors involved with successful ERP implementation, which is examined in the next section.
Like any sophisticated information technology job, employing an ERP system across an company is a major project management problem first and foremost, demanding lots of the same features and types of support as other major IT projects to become successful. However, ERP systems go deeper than most 'typical' IT assignments, and therefore it is accepted in the books that there is a key set of 'critical success factors' which determine whether or not an organisation can successfully apply such a system. Many such models have been suggested in the books, which also have important connections to how ERP impacts an organisation after implementation.
Jarrar et al argue that the key success factors for an effective ERP implementation are: top management support and a clear business perspective, as well as factors related to the settings of the software chosen and its own implementation (2000, p. 123-125). This echoes the extensively cited critical success factors model proposed by Somers and Nelson (2001), which combines top management support with a 'project champion, ' proper management prospects, and lots of factors related to the IT execution itself such as a focus on customer training, a good relationship with the vendor, use of consultants, collection of the appropriate ERP program, and minimal customisation of owner offering once this selection has been made.
From a small business process point of view, many freelance writers in the 1990s argued that companies needed to or should take part in so called 'business process re-engineering' as part of implementing ERP and other venture vast management information systems. Business process reengineering involves systematically analysing and reorganising work moves and tasks needed to achieve different business goals (Grover et al, 1995, p. 110). Because a systematic knowledge of business processes is usually a prerequisite to successful implementation of your enterprise-wide information system, the ERP execution process is often seen as an advantageous chance to improve or streamline existing business operations which may haven't been fully recorded or analysed in this manner before (Koch, 2001).
Finally it should be observed, as Akkermans and truck Helden point out, that lots of of the success factors determined in the books are actually interrelated, and can result in both vicious and virtuous circles as it pertains to implementation (2002). Their analysis shows that it's important to understand how many of the success factors are actually deeply related to the other person and therefore look highly correlated, so changing one may change others, while an especially serious failure in one area can bring an entire task down.
Ikea is perhaps one of the most iconic retailers on the globe, having its signature ready-to-assemble furniture and home accessory stores in 32 countries around the globe. The privately organised company is the most significant furniture retailer on the planet, with revenues of 23. 5 billion Euros this year 2010. Ikea's management composition is complex, with intellectual property, logistics, circulation, franchising, and other areas of the business manipulated by an interlocking network of foundations and having corporations located in places like Netherlands Antilles and Luxembourg (The Economist, 2011). Nearly all Ikea's 313 stores worldwide are run by INGKA Holdings (the Ikea Group), with a tiny minority of 37 stores in 17 countries being run by franchisees. This consists of most of the company's Middle East existence, including the stores in the United Arab Emirates as well as Kuwait, Israel, and Saudi Arabia (IKEA, 2010). The Saudi and Emirates stores are run by the Al-Futtaim Group, a private holding company which manages numerous retail brands throughout the Gulf region (Al-Futtaim, 2010).
Ikea entered the spot in 1991 with its first Emirates store in Dubai. Since the takeover of a fresh chief at Ikea in 2009 2009, the company has focused aggressively on appearing market growth, an approach which appears not to have been transformed by the global financial crisis even in the hard reach Gulf region. As of 2009, the Ikea Group company still organized to develop with new stores in Oman, Qatar, (Hartley, 2009) while Al Futtaim proved these plans and perhaps a store in Egypt this year 2010, as well as noted that its stores in Dubai and Abu Dhabi extended to out perform those anywhere else in the centre East (Diala, 2010).
Understanding Ikea's sophisticated management framework is important when considering the execution of any ERP system at Ikea; while many of the firm's activities (such as its global supply string) are linked across the company and could advantage greatly from an enterprise-wide information system, franchise and corporate stores may have very different procedures for other responsibilities like financing and accounting, human resources management, and procedure of the catalogue and online components of the business.
These management issues are specially important when contemplating the level to which aggressively efficient global supply chain management is the key to Ikea's success, permitting them to provide low prices and high quality goods that attract customers. Likewise, Ikea's product development operations would need to get on global business intelligence and customer sales data from franchise as well as commercial stores for maximum efficiency. But the undeniable fact that Ikea's Midsection East stores are run by way of a franchisee means that other common components of the full total ERP offer, such as financing and accounting, may be left out or will be difficult to incorporate, or could even be resisted by local managers who do not want to see greater control passing to the corporate 'centre. '
Some have advised that companies like Ikea are becoming so-called 'hollow' organisations, in which a strong brand, dedicated leadership, and low fat and agile organisational composition are used to control a much bigger network of trusted suppliers and partners. As Gadman creates, 'While this growing style towards business process outsourcing and off-shoring is increasing, so too is the permeability of commercial boundaries and increasing pressure to ensure that clear contractual terms of research are agreed and the offers they make are retained across a complete network of suppliers and companions' (Gadman, 2004, p. 342). In this value, information systems are a crucial area of the 'nervous system' of any company like Ikea which allow it to manage such a intricate web of partnerships, suppliers, and franchisees in an effective and coordinated manner, and to get a widely recognised global brand known for high quality and good deal. Moller and Rajala refer to these networked systems of business operations and their underlying logics as 'business nets' (2007), mirroring the imagery of computer systems from the IT and IS world.
With a view towards continuing to successfully control this type of global, decentralised, network type of business, Ikea commercial headquarters mandated this year 2010 - after a review of its global IT requirements - that of its franchisee partners worldwide adopt a standardised retail ERP platform. Ikea has reportedly managed the move out of the new global ERP system to franchisees through ongoing monitoring of Key Performance Signals, and has apparently achieved advancements in product supply, decrease in customer complaints, decrease in the perfect time to process requests, and faster inventory control and order execution times by introducing ERP in its source chain businesses (Savvas, 2008). The following section will look at the potential implications of the global retail ERP rollout for franchisees, especially in the Dubai and other Gulf Region procedures monitored by Al Futtaim.
The most evident potential impacts which can be identified will be the supply chain management advancements. Ikea established fact for successfully managing a globe spanning chain of suppliers and processing partners, and keeping yourself on top of sales and customer demand is crucial to keeping each of it's 12, 000 different retail items in stock and handling inventories at each location. Integrating the Dubai and Abu Dhabi stores into this network will allow them immediate access to Ikea's global source chain, as well as providing better business brains across demographically similar stores and parts throughout the center East.
The business intellect and data mining factors here are specifically important. Ikea continues to be a new existence in emerging market segments, with the vast majority of its sales and its long experience being in either American countries or places like China and Russia. The Middle East is in many ways a distinctive market, especially in the Gulf region, with a mix of extremely wealthy and intensely budget conscious consumers and possibly very different likes than other parts. Integrating Al Futtaim's Ikea stores into a global business intelligence and data mining paradigm allows stores over the Middle East to talk about data on what products and types of products are popular, which promotions are working rather than working, and what characteristics impact on successful store location. Using this information could prove important to the franchisee as they go ahead with programs to develop into other countries throughout the Arab world, keeping away from costly store moves as was done in Abu Dhabi and minimizing the chance on kick off.
Integrating these stores in a global ERP system can also lessen the burdens of training, specifically for middle professionals and also personnel in places with limited contact with American style retail service norms. An excellent ERP system will release employees to focus on customer service, knowing the product and sales data they want will be at their fingertips; for example, they could assist a customer in locating an sold-out product at another location if required, or at least let them know accurately when the new stock will get there. At the purchasing and store administrator levels, store managers should have a far greater idea about what varieties of products to order and which products and deals will work or not work in their particular store, whilst having less burden of training because of standardised it components.
However, the effects of the mandated ERP spin out may not be all positive for the global franchisees. Incorporating them into Ikea's global ERP network will necessarily mean some reduced amount of local autonomy and local management control, especially at the store manager level. Professionals who recently relied independently intuition and skill may now resent being 'informed what things to do' by a 'faceless' computer system. These sorts of information systems-mediated organisational and corporate culture clashes can have very real effects on both individual perceptions and organisational performance, as was mentioned previously.
Given these potential negative and positive effects, it becomes clear that issues associated with management and particularly the relationship between Ikea corporate headquarters and their global franchisees, will be critical to the success or failing of the ERP roll out in these franchises. On the software and job management part, Ikea faces the best of possible worlds, developing a best in course ERP system that has been thoroughly tested handling the sophisticated global supply chain feeding their hundreds of retail stores in diverse locations about the world. With this experience, integrating a relative handful of franchisee stores in to the system should pose very little technological challenge. However, you have the caveat that organisations should choose owner and program that suit their unique needs: in the case of the Ikea franchisees, owner and package have been completely chosen to them by Ikea commercial management. While this package obviously has the good thing about being carefully field analyzed and known to efficiently support Ikea's operations in other areas, it nevertheless brings with it certain assumptions about how exactly Ikea stores must do business. In this manner, the imposition of ERP on the franchisees is seen as a management tool by corporate and business headquarters just as much as a neutral efficiency enhancing process.
Therefore, the critical factor in determining whether or not this introduction is successful will likely be management and partnership issues. In cases like this, Ikea would take the role of 'top management' (who do strongly support the program) with their chosen seller, K3. It is up to them to discover a 'project champ' among each franchisee corporation, however; as observed above, failure in virtually any one success factor element can lead to the failing of the whole project.
While Ikea will probably continue steadily to enjoy remarkable success, in part through its successful use of ERP to control a organic global supply string and retail network, the extended performance of ever more 'hollow' organisations like Ikea requires attention be paid to individual factors as well as organic efficiency.
As the literature analyzed in this newspaper exhibited, ERP systems can have remarkable impacts how an company functions, both intentional and unintentional, as well as on the broader organisational culture and the various power functions and interactions within it. In addition to looking at business operations and basic notions of 'management support, ' those in charge of considering or implementing ERP systems should always be cognizant of this bigger picture and the increasingly deep and important role that information systems play in the manner that modern corporations and individuals interact and conduct business.