The Assessment of ERP System Implementation on the Performance of Napco Factory
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Date
2013
Authors
Ala'a Hasan
Dalia Halawa
Amera Khalil
Yasmine Dile'a
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Abstract
In the recent years, using organizational integrated systems has been foremost in organizational projects all over the world. Competition in business environments, necessity of inter and intra organizational unity, widespread revolution in Information Technology area are the main reasons of developing Enterprise Resource Planning (ERP). Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization includes manufacturing, sales, services, and customer relationship management, etc. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Therefore, we will assess the implementation of ERP system in NAPCO which is the only pioneering company in Palestine in the field of integral manufacturing of aluminum profiles that have many production lines: Casting, Extrusion line, Powder Painting line, and the Color - wood line. The main objective of this study is to assess the implementation of the ERP system in Napco factory and its impact on these departments: Production, Finance and Accounting, Quality Control and Quality Assurance, Inventory and Sales. We are also evaluate to what extent the ERP implementation succeeds to alleviate cost, improve the company productivity ,increase efficiency, reduce losses of ( raw material, time, cost, information), minimize delays, maximize customer satisfaction and improve information sharing. We have Read many of the previous studies on the subject of ERP system, and these studies have been summarized into the Literature Review Chapter. Then, we will highlight the main functional areas that will be covered in our study which are: Quality Control & Quality Assurance, Inventory, Finance and Sales and Production through visits and meetings with our supervisor and people in Npaco. Three different surveys are designed to assess the impact of ERP system on the performance of Npaco from improving internal control and reducing cost aspects, first questionnaire about general ERP questions which is distributed to 24 user of ERP system in the factory in many different departments, the second one is about internal control measurement which it is distributed to 10 different managers in different departments in the factory , and the third survey is a cost survey and it was filled up by the financial manager in Finance department. Then the data is analyzed by using SPSS, Minitab and Excel software's. Previous studies have been done on ERP but in NAPCO it will be the first time. The concept of Enterprise Resource Planning (ERP) can be viewed from different perspectives. First of all, ERP is a product in the form of computer software. Second, it can be seen as a means of mapping all processes and data of an organization and create a comprehensive integrative structure. Furthermore, there are several ERP definitions that are all more or less similar. Klaus et al (2000) define ERP as: "Comprehensive, packaged software solutions which seek to integrate the complete range of a businesss processes and functions in order to present a holistic view of the business from a single information and IT architecture." ERP originates from the large packaged application software that has been widespread since the 1970s. Among the first packaged business applications available was Material Requirement Planning (MRP) introduced in the 1950s. This software only supported material handling. During the 1970s, the MRP packages were extended and further applications were added. The extended MRP resulted in the MRPII Systems. This development continued in the 1980s as more and more functions were added. The first ERP Systems were introduced in the 1990s. Firms may have several reasons for deciding to adopt ERP Systems depending on for example industry and size. The most common reason for implementing ERP, as well as its most achieved benefit, is standardization of processes and systems, and the integration benefits of the system. Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization. The ERP systems automate this activity with an integrated software application. And the purpose of ERP is to facilitate the flow of information. The aim of this research is studying ERP effect on NAPCOs internal control and cost reduction. As we saw in the previous sections, all of the hypotheses had been confirmed by the respondent. So we can conduct that performing (ERP) has influences this companys internal controls and cost reduction. So we can conclude that management can rely on the data of the ERP system and internal control to make decision and study their validity and reliability. According to the Minitab results for Internal control parts: Sops, Risk Management, Control Environment, Monitoring, Control Measuring Tool and Organization Structure, there are a significant different for each control part before and after the implementation of ERP system since the null hypothesis H0 that the mean of each part data before applying ERP is not equal to data means after applying it; was true by using the paired t-test which used for paired of observations.And for Excel program results there was a 34% improvement in Napco Internal control after ERP implementation. So we can say that performing ERP in all section has been effective on the control environment. It means that the given company has been successful in developing methods in control environment, risk management, etc. And it has been able to reducing the investigation time and providing the information on time with high speed, and increasing the investigation quality by using this system. For the SPSS general ERP questions questionnaire results, we note that the most of employees agree that the new ERP system change the tools and the methods that they use to accomplish their work, improve the efficiency of performing their works and increasing their productivity. Although the ERP system needs some more effort from the company staff; but the most of them support the use of this system. And some of the staff says that they face some difficulty in the use of this new software it may be for insufficient training or for unwillingness to use of software programs. Also the most of the employees say that the ERP system provide better simpler generation of report , accurate information and reducing the routine works time because its completely a time management system. According to the given cost excel sheet we can say that the ERP system has no or less effect on the direct cost including the man power and manufacturing overhead but a more effect on the indirect cost including the sales revenue and the raw material; since that for transportation direct cost the ERP has 0% effect, and it increases the control of material flow indirect cost by a positive percentage of 30%. And for our interviews and observation that we made ;we see the difference between before and after applying ERP in the factory and how this program provide facilities for the daily staff works. But during the interviews we found some of the employees optimistic and the other pessimistic about the ERP system; it is possible because this program is still in the early stages of its application, and it is normal that any new change faces some resistance from the staff. Finally, we can conclude that ERP system implementation confirming the two conducted hypothesis that it has an effect in cost reduction and internal control enforcement. In this part, ERP has facilitated internal controls assessment by internal auditors, which in turn helps to compliance tests of independent auditors and leads to costs reduction and increase of reliability in conducted observations. An ERP implementation done right, can build the foundation for future growth, and translate into improved productivity, cost savings, and a much better bottom line.