According to Dehning & Stratopoulos (2003) multinational companies have experience a lot of challenges in managing most of their operations as a result of their great expansions. It has been observed that most companies have complained of experiencing challenges in accounting, inventory, marketing and sales, distribution, logistics as well as in communication with customers, dealers and suppliers. These challenges have resulted to fraudulent instances among those firms that do not uphold sound corporate governance. Uncontrolled expansion of some corporate have resulted to lack of proper framework for internal controls which has forced some executives to exploit this opportunity to engage into fraudulent or unethical transactions.
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The great advancement in IT has necessitated the development of Enterprise Resource Planning systems (ERP) that help organizations to manage processes such as: accounting, HRM, customer and supplier relations, inventory, and logistics among others. Gyampha & Salam (2004) posit that the integration of core business processes of organizations has enabled firms to boost their quality of work, improve performance as well as profitability. As a result of the various advantages that are associated with adoption of ERP, many companies are contemplating its adoption in order to enjoy the benefits associated which include: more accuracy in accounting, inventory, distribution, logics, forecasting as well as enhancing customers and suppliers’ communication. Berger (2003) posits that ERP systems are nowadays the backbone of IT infrastructures in many large as well as medium sized enterprises.
Hudson (2010) argues that ERP systems are important in integrating business functions and unit boundaries and even across business partners. ERP system is associated with both tangible as well as intangible benefits that are seen in the managerial, operational, strategic as well as infrastructural. When ERP systems are implemented successfully, they greatly boost business transactions, reduce cycle time, support e-commerce integration and facilitate better management (Gibson 2000; Hitt 2002).
Globalization has resulted in integration of world economies which has accelerated the rate in the expansion of multinational companies to foreign regions in search for new markets for their products as well as services. The high local as well as international demand for products has caused some multinational companies to outsource some of their operations to foreign countries to cut down the costs for productions. For example, many multinational companies in the United States such as Apple as well as Microsoft have outsourced some of their operations to China. In most cases the process of outsourcing services as well as venturing into foreign markets have been accompanied with some challenges in managing various operations for the concerned companies.
The Co-operative banking group which is the United Kingdom largest co-operative consumer is experiencing challenges in its accounting, inventory as well as in its logistics as a result of great expansion. The firm has over 6.5 million customers and provides various services to its customers such as mortgages, high street and internet banking, credit cards and loans. Moreover, the Co-operative insurance which is a branch of the Co-operative banking group specializes in proving its customers with services such as financial advice, units’ trusts and pensions.
The high expansion of the Co-operative banking group couple with its inadequacy in the management of its accounting, inventory as well as its logistics has raised some concerns on its capacity for successful management of its internal control in order to ensure the company adopts good corporate governance that will ensure that its executives do not engage in fraudulent dealings or act unethically which may result to the collapsing of the Co-operative banking group like what happened in many financial institutions in the United State of America. The Co-operative banking group will require implementing ERP systems in order to be able to manage its accounting, customers, inventory as well as logistics processes more effectively.
Through implementation of ERP, the firm will be in a better position to monitor its internal control as well as carry out more accurate forecast to predict future business performance in order to put into place appropriate platforms to manage any loaming hiccup (Turban 2008). Valerdi & Nightingale (2003) argue that the implementation of ERP system is regarded as a difficult task with more than half of ERP implementations considered to fail. Implementation of ERP system demands an organization to adopt standardized business operations that are embedded in the ERP system and transform from a functional based organization structure in support for a an integrated process-oriented structure. This factor will be considered during the implementation of the ERP system in Co-operative banking group
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The main aim of this report is to illustrate how implementation of ERP system in Co-operative banking group will help in improving the firm’s accounting, inventory as well as logistics practices.
- To find out how implementation of ERP system will assist Co-operative banking group enhance its business operations.
- To identify the challenges the company is likely to face in the implementation of ERP system.
- To find the best approach that Co-operative banking group should use in implementing an ERP. Justification of the Study
This report makes an assumption that Co-operative banking group has not implemented ERP system and that is the reason why it is facing challenges in its accounting, inventory as well as logistics. This assumption was essential in order to justify the importance for Co-operative banking group to implement an ERP.
Purpose of the Study
The implementation of ERP solution will greatly assist Co-operative banking group to enhance its core business operations in order to increase quality of work, performance and profitability. ERP helps in integrating core business operations that makes it easier as well as accurate in consolidating major business processes such as accounting, inventory, customer management as well as logistics. The implementation of ERP will help the management to be in a better position to manage internal controls in order to avoid fraudulent as well as unethical actions of some selfish executives. This will be very instrumental in ensuring good governance within Co-operative banking group that is imperative in preventing the collapsing of the entity in the same manner that many large financial institutions in the United States collapsed.
Benefits of ERP
According to Sheldon (2005) Enterprise Resource Planning (ERP) is enterprise management software that makes it more convenient for organizations to use integrated systems to manage enterprise processes, storages as well as analyzes. There are various types of ERP which are developed for various functions. Some ERP systems are tailored for: product development, marketing, accounting and inventory as well as for Human Resource management. Nightingale & Mize (2002) argue that ERP systems are associated with a lot of benefits such as being user friendly that requires users to learn a single system which they use to execute many tasks.
In addition Soh &Kien (2000) argue that ERP systems also help organizations to increase their productivity as a result of their efficiency and reduced errors. Finally, ERP systems are beneficial in enabling organizations to be in a position to compare past sales data with current sales data and execute appropriate forecast in order to predicate future performances and establish appropriate platforms in advance. Therefore, Co-operative banking group will greatly enjoy the aforementioned benefits by implementing ERP system (Shields 2001; Simon 2010; Soh & Sia 2004).
Structural Contingency theory is fundamental in studying the association between a firm’s structure and its technology. Morton and Hu (2008) posit that the theoretical framework structural contingency theory is essential in establishing the fit between the structure of an organization and the structure embedded inside an ERP package. The contingency theory recommends that firms should ensure that effectiveness is realized by matching organizational characteristics to contingences. Contingency theory considers any factor that regulates the outcome of organization traits on its performance. It is believed that the success of the firm depends on the fit amid a firm’s structure and contingencies.
There are three important aspects that form the core paradigm of structural contingency theory. These elements include: the association between contingency and a firm’s structure, how contingency impacts z firm as well as a fit of some degree of the structural variables to each degree of contingency. High fit is associated with effectiveness while low fit results to ineffectiveness. Some of important contingencies include: innovation, technology, size, environmental mental transformation and diversification. Authors perceive great interdependence and task uncertainty as essential contingencies in ERP implementation environment.
The task interdependent is perceived to be inversely related to the structural difference, formalization as well as decentralization. On the other hand, the task uncertainty is considered to be inversely proportional to formalization. The authors propose high task interdependent and low task uncertainty for greater probability for the success of ERP implementation. The authors argues that task uncertainty is considered as a stronger contingency than task interdependence and thus, high formalization with low centralization as well as low difference will result to low resistance of the employees towards the change.
The Authors posit that the fit between firm dimensions and characteristics of ERP solutions greatly determines the success or failure of ERP implementations. Firms’ structures that have low degree of business integration as well as non standardized work processes will experience high opposition from within as the ERP pushes the firm to integrate with functions and units to comply with the ERP standardized business operations embedded in the system. However firms that posses a cross-functional structure experiences lesser resistance in implementation of ERP system. Figure 1 below indicates the correct procedure for successful implementation of ERP system (Morton & Hu 2008).
This theory is important in determining the structure of Co-operative banking group in relation to the ERP package for it to be compatible with the structure of Co-operative banking group. In addition, this theory can be paramount for Co-operative banking group IT mangers in comparing their organization structure against the structure of the structure of the organization embedded in the ERP packages of various vendors in order to identify a best match for Co-operative banking group (The Co-operative banking group 2012).
Resource Based Theory is also very significant in ERP system implementation. The theory entails resources possessed by an entity and how they can be exploited to improve firm’s capability. The theory identifies the importance of complementary effects of the resources of an organization in determining the success of ERP implementation. The three Information System (IS) resources mainly cited are knowledge resources, relationship resources as well as IT infrastructure resources. These resources are regarded as more significant for the overall outcome of an organization than the isolated capabilities that are derived from ERP systems. Nicolaou (2004) posit that the mangers of Co-operative banking group should make sure that they identify the synergies between their resources and selecting a best set of resources that will be employed in building ERP capabilities in order for the organization to maximize the benefits derived from the ERP implementation.
Karimi, Somers & Cherjee (2007) posit that Technology Accepted Model (TAM) is also regarded as very effective in guiding ERP implementation.The main objective for an ERP is to enhance workforce productivity. Thus, it is imperative for the managers to understand the impacts of ERP implementation on employees. Monk & Wagner (2009)
Argue that TAM focuses on perceived usefulness as well as perceived ease of use as some external factors that assess the behavior intention of the employees about the change. In order for an ERP implementation to be successful, the model should address three elements which are; employees training, project communication as well as shared belief in the benefit of the system. According to Hunter (2009) the Co-operative banking management should consider the shared belief in the benefits of the system in order for them to be in a position to establish the advantages that an ERP will bring to them as well as to the overall firm. Morton & Hu (2008) posit that two other external factors which are training of employees and communication will assist the management in developing this shared belief that will enable Co-operative banking group realized the perceived usefulness as well as perceived ease of user that are associated with ERP system implementation ( Mumford 2006).
The implementation of ERP system will help Co-operative banking group to integrate its major processes, improve performance as well as profitability. In order for the firm to realize a successful ERP system implementation, the management should ensure that they are guided by Structural Contingency theory, Resource Based theory as well as Technology Accepted Model.
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