a study on post implementation benefits of erp in … · 2017-12-30 · benefits of erp in...

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International Journal of Civil Engineering and Technology (IJCIET)

Volume 8, Issue 12, December 2017, pp. 451–464, Article ID: IJCIET_08_12_052

Available online at http://http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=8&IType=12

ISSN Print: 0976-6308 and ISSN Online: 0976-6316

© IAEME Publication Scopus Indexed

A STUDY ON POST IMPLEMENTATION

BENEFITS OF ERP IN MANUFACTURING

Dr. D. Rajasekar

Professor, AMET Business School, AMET University, Chennai, India

Dr. R. Suresh

Associate Professor, Department of Management Studies,

Sri Sai Ram Engineering College, Chennai, India

ABSTRACT

This study examines the benefits during the post-implementation stage of ERP in a

manufacturing firm ,it also identifies the area where benefits are occurred The present

study mainly employs interview with experts from the organization ,who are working

in the respective functionality. By knowing the benefits after ERP implementation. The

time saved, the Man hours saved and the cost of Man hours saved by the organization

are found out .This study may useful to benchmark the process ,cost and time saved

during the execution of similar type of enterprise solution projects.

Key words: ERP; ERP Implementation; Post-implementation, Man hours, Benchmark.

Cite this Article: Dr. D. Rajasekar and Dr. R. Suresh, A Study on Post

Implementation Benefits of ERP in Manufacturing. International Journal of Civil

Engineering and Technology, 8(12), 2017, pp. 451-464.

http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=8&IType=12

1. INTRODUCTION

ERPs are designed to manage organizational resources in an integrated manner. The primary

benefits that are expected to result from their implementation are closely related to the level of

integration that is promoted across functions in an enterprise. The professional literature has

been proactive in determining the types of benefits that companies might anticipate from their

ERP systems and to what extent organizations had actually attained those benefits on a post-

implementation basis. Expectations for improved business performance after adoption may

result from both operational and strategic benefits. The most significant intangible benefits

related to internal integration, improved information and processes, and improved customer

service, while tangible benefits related to cost efficiencies in inventory, personnel,

procurement and the time needed to close books, as well as improvements in productivity,

cash/order management, and overall profitability. In assessing the extent to which they had

actually attained those benefits, however, on a post-implementation basis, it was evident that

they were not able to improve profitability or lower personnel, inventories, or system

maintenance costs as much as they had hoped. On the other hand, industries noted better-than-

expected results in overall productivity and in order-management cycle time, as well as

Dr. D. Rajasekar and Dr. R. Suresh


procurement, on-time delivery, and the ability to close financial cycles. Likewise, in the

Conference Board study responding companies reported anticipating similar types of tangible

and intangible benefits, although it was evident that the realization of those benefits required

more time than expect.

2. OBJECTIVES

Being a post implementation study of ERP products, the study was conducted in

Manufacturing industry after a minimum of 18 months from the date of ERP implementation,

the following two objectives are taken into consideration

To compare the program benefits to the cost.

To measure the intangibles.

This study is a survey of benefits realized in various ERP implementations in same or

similar type of industry .The other important idea of this study is to see only the benefits

derived from ERP in different functional areas.

3. REVIEW OF LITERATURE

Alkhaffaf, Maha and Aldalahmeh, Mahmood. (2016) The investigation went for examining

the effect of Enterprise Resources Planning (ERP) framework viability on accomplishing

better authoritative execution in the Hashemite establishment for human advancement by

breaking down the adequacy measurements of ERP framework (Information quality, System

quality, User fulfillment). The examination found a critical connection between viability of

ERP and their consolidated effect on hierarchical execution

Galy, Edith and Sauceda, Mary. (2014) examine gives exact confirmation to help to a

circumstances and end results relationship of administrative activities to money related

execution in a post-ERP usage organize. Senior data frameworks chiefs uncover the situation

giving a depiction reference amid that day and age. Budgetary figures were gathered for firms

who were coordinated to our study instrument. Relapse investigation builds up that expanded

mechanical capability influences net deals; associations with outside specialists influence

profit, return-on-resources and rate of profitability; top administration bolster influences net

deals and net salary; long-run arranging contrarily influences income; and sharing of data

between divisions

Samwel Matende (2013) recognizes the presentation of a data framework, for example,

Enterprise Resource Planning (ERP) framework in an association carries with it changes on

how clients function. An ERP framework cuts over the diverse useful units of an association

and along these lines if not legitimately oversaw amid its usage may prompt protection from

the clients. The distinctive surges of research on ERP frameworks have mostly been on ERP

appropriation, achievement estimation, and basic achievement factors (CSFs). There is a

scarcity of concentrates on client interest and the commitment of clients towards the fruitful

execution of ERP frameworks. This paper audits writing on ERP execution with a point of

building a case for including clients in this usage

Kamal Khanna (2012) recognizes, ERP usage has developed certain years back yet at the

same time the businesses falter to convey it in their structure since it is obviously a many-

sided undertaking. The faltering will itself brings about the mission of fruitful usage to go

futile. It ended up plainly trying for some, businesses to send ERP in their ventures the same

number of reports of finish and fractional disappointments illuminated the execution of ERP

programming bundles as a hard-hitting assignment. The prospect can be set for the fruitful

A Study on Post Implementation Benefits of ERP in Manufacturing


execution of an ERP framework by controlling a limiting the real business dangers at the

preparatory stage by choosing the proper procedure that decides how the ERP framework

ought to be sent. These techniques concentrate on the best way to change over from the old

inheritance framework to new ERP framework in a productive way.

Eli Hustad (2011) distinguishes on ERP post-execution issues in Small-and-Medium-

Sized Enterprises(SMEs).We led a contextual investigation in a little Norwegian retail

organization. We contemplated the endeavor in the period subsequent to running live with

their new ERP framework. Certain difficulties were watched, for example, security dangers as

a result of erroneous setup of the framework, troubles with operational issues, for example,

sending solicitations and getting deals reports, off base stock, inadequate preparing course of

action, workarounds, clashing impetuses among client, affiliate and expert. There were human

outcomes for end clients since the execution of the framework caused worry among a portion

of the workers. This investigation has suggestions for different SMEs intending to actualize

ERP frameworks.

Akkermans.H and K Van Helden (2002) distinguishes ERP usage are perplexing

endeavors. Late research has given us conceivable basic achievement factors (CSFs) for such

usage. This article portrays how one rundown of CSFs (Somers &Nelson, 2001) was utilized

to dissect and clarify venture execution in one ERP usage in the flight business. In this

specific case, poor undertaking execution prompted a genuine venture emergency yet this

circumstance was pivoted into a win. The inversion in execution after the undertaking

emergency was caused by significant changes in demeanors with a large portion of the

partners included, for example, top administration, venture administration, and task champion

and programming merchant.

Mabert, V.M.& et al., (2000) distinguishes in the course of recent years, a great many

organizations around the globe have actualized undertaking asset arranging (ERP)

frameworks. Actualizing an ERP framework is by and large a considerable test, with a regular

ERP usage taking somewhere in the range of one to five years. This paper experimentally

researches and distinguishes enter contrasts in the methodologies utilized by organizations

that dealt with their usage on time as well as on/under-spending plan versus the ones that did

not utilizing information gathered through a review of US producing organizations that have

actualized ERP frameworks. The outcomes demonstrate that a wide range of elements running

from pre-usage intending to framework setup impact execution, which directors ought to be

touchy about while actualizing real frameworks like ERP.



4. ANALYSIS AND DISCUSSIONS

4.1. Process Flow Diagram

Figure 1 Material Management



Figure 2 Operations



4.2. ERP Benefits Comparision

Figure 3 Bills Payable – Direct Material Accounting Process

The time saved in bills payable – Direct material accounting process is 1300 Mins. / Day.

Matching of Bills

Accounting of bills & D/N

Pay list preparation for payment

Cheque preparation by cash & bank section

Despatch of cheque to suppliers

60 Mins / Day

1260 Mins / Day

10 Mins / Day

30 Mins / Day

60 Mins / Day

Start

End

Run MRRL transaction

Monitor updations

Run automatic payment program

Print cheque & payment advice

Despatch of cheque to suppliers

End

Start

10 Mins / Day

10 Mins / Day

10 Mins / Day

30 Mins / Day

60 Mins / Day

Before ERP: After ERP:

Total Processing time 1420 Mins / Day

Total Processing Time 120 Mins / Day



4.3. Accounts Payable

Evaluated receipt settlement (ERS)

Figure 4 Accounts Payable

Before ERP the process has the following,

Total DM GRNs is 12000 per month.

Average bill matching time is 40 sec / bill.

Total Man hours is 142 per month.

After ERP:

Total DM GRNs is 12000 per month.

Average bill matching time is Nil.

Total Man hours is 34 per month.

The total Man-hours saved in this process is 108 per month; the total cost saved is

Rs.14040.

Receive bill

Sort / file bill

Enter bill

Match / Approve bill

Pass debit / Credit note

Finalise batch

Annexe bills With payment Advice for Bill pad verification


Receive bill

Sort / file bill

Run MRRL

Verify with Bill filing report



4.4. Process for Releasing Delivery Schedules

Figure 5 Process For Releasing Delivery Schedules

The benefits of this process are

Lead-time reduced from 24 hours to 8 hours, this saved 16 hours.

Planning frequency reduced from monthly to weekly.

Monthly production plan

Receive monthly production plan from EVP office & update

Delivery schedule calculation - Sybase

Add spares requirement (MIW)

Check whether is there pending stock updation due to RT / segregation

Check whether any variation on the consumption data due to ECN implementation in between the month

Check whether we have “Q” and “D” problem with one source and correct if required

Update delivery schedule in sybase

Print delivery schedule in sybase

Check and sign schedule

Audit and sign schedule (unit Head)

Fax / courier schedule to supplier

End

Receive weekly production plan from VP(O) and update

Weekly MRP run

System generated delivery schedules

Correct schedules in case Q & D problems

Transmit delivery schedule to suppliers through e-mail and WEB

Weekly plan

End




4.5. Material Management

Table 1 Material Procurement

Area Of

Action

Before ERP After ERP Benefits Realized Savings

Details From To

Material

Planning

Monthly Delivery

Schedule with weekly

Time buckets

Weekly Delivery

Schedule release

with daily time

buckets

Time spent for

schedule

verification &

correction

Day/Date of

schedule

release Time

spent to

communicate

schedule to

supplier

Inventory turn

over ratio

24

Hrs/

Mont

h

4 Hrs/

Month

20 Hrs./

Month

WIP and Sub-contract

stock not considered

Considered for

planning

Not

Fixed

Released

every

Sunday

Delivery schedule

communication to

vendors through hard

copy

Automated e-

mail and

published in

WEB

4 Hrs

Nil

4 Hrs

Cost Tracking

Effect of cost on, Share

of Business planned Vs

actual, done manually.

Share of

Business

variance report

available on-line

Information

lead time

reduction

6

Days

On Line

6 Days

Communicati

on

to Vendors

2 bin schedules manual

fax transaction

Automated

through e-mail

& published in

WEB

Time spent for

communicatio

n

4

Hrs./

Day

30 Min /

Day

3 Hrs. 30

Min / Day

Goods receipt &

acceptance status once

a month

Available on line

in the WEB

Faster

communicatio

n

one

mont

h

after

suppl

y

Instantaneou

s

1 Month

Quality Deviations

communicated through

manual fax

Schedule Vs Supply

report

SPC data hard copy

sent every month

Quality Rating

communicated through

hard copies

Line

Stoppage

prevention

Schedule Vs supply

measurement done

manually

On line data

available

Information

lead time

reduction

1 Day

On line

1 Day

Alert to vendors sent

manually

System

generated alert

letter

Time

compression

2 Hrs. 5 Min. 1 Hrs. 55

Min.

In Material Planning:

The time saved for the delivery schedule is 20 Hrs / Month.

The time saved for communicating to vendors is 4 Hrs.

In cost tracking the information lead-time has reduced by 6 Days.

In communication to vendors the time spent has reduced by 3 Hrs. 30 Mins. / Day.

In Line Stoppage Prevention:

Information lead-time has reduced by 1 Day.

The alert to vendors has reduced by 1 Hr. 55 Mins.



4.6. Stores Management

Table 2 Stores

Area Of Action Before ERP After ERP Benefits Realized Savings

Details From To

Productivity

Improvement

Two stages at

Goods receipt

process – GER

& GRN

GER stage

eliminated

Number

of goods

receipt

document

created

1000 /

Day

1800 / Day 800 / Day

After goods

acceptance, stock

updating done

Stock get

updated on

goods

acceptance

Number of

entries reduced

45000 /

Month

45000 /

Month

At material

issue, there were

two stages –

request & issue

Request Stage

eliminated

Number of

entries reduced

2000

entries /

Day

2000

entries /

Day

Materials

received on

hourly

frequency

received at unit

stores

Hourly items are

received directly

at super Market

Number of

entries reduced

10000 /

month

10000 /

month

Data from

supplier’s

invoice entered

manually to

create GER

Supplier’s

invoices are bar

coded

Number of

suppliers with

bar coded

invoice

50

50

In Productivity Improvement:

The number of entries reduced by 55000 / month

The goods receipt has increased by 800 / Day.

4.7. Operations

Table 3 Supply Products of Required quantity

Area Of

Action

Before ERP After ERP Benefits Realized Saving

s Details Fro

m

To

Vehicle

delivery

performance

Meeting the model

requirement

weekly.

Color requirement

monthly.

Planning

methodology

Manual.

Model requirement

Daily.

Color requirement

Weekly.

Planning

methodology

system driven

Delivery

performance

of Model /

color

improved

80 %

97 %

17 %

Capacity

evaluation

Manual System driven

based on routing

sheet data

Lead Time

reduced

4

Days

0.5

Day

3.5

Days



Table 4 Supply Products of Required Quality

Area Of Action


Details Fro

m

To

Vehicle direct

pass tracking

Manual reports

– Monthly

System data

– Daily

Aids daily

PDCA Vehicle

direct pass

improved.

78 %

94 %

16 %

Table 5 Control Cost

Area Of

Action


Details From To

Obsolete parts

tracking

Manual

tracking –

Multiple BOM

System

tracking –

Single BOM

Aids salvaging

& prevention

Regular use

Tools

procurement

Replenishment

through manual

purchase

requisitions

MRP triggered

procurement

schedules

based on re-

order level.

Average

Inventory

reduction

(plant I & II)

194

Lakhs

11

8

La

khs

76 Lakhs

In operation

The delivery performance of vehicle has improved by 17 %.

The Capacity evaluation lead-time has reduced by 3.5 Days.

Vehicle direct pass improved by 16 %.

In cost control 76 Lakhs has been saved.

4.8. Sales and Marketing

Table 6 Sales And Marketing

Area Of

Action


Details From To

Sales &

Operation

planning

Monthly planning

cycle

Weekly planning

cycle

Improved

warehouse booking

service level.

80 %

94 %

14 %

No right sizing of

finish goods

inventory

Inventory stock

norms set and

inventory right

sizing

Improve overall

inventory turnover

ratio for finish

goods

23

32

9

Vehicle

Distribution

Manual operation

and audit

Automated –

distribution

resources planning

Stock availability at

area warehouse.

79 %

90 %

11 %

No ABC analysis ABC analysis,

SKU

rationalization

Focus on A class

model. Improved

vehicle stock

availability

79 %

95 %

16 %

Vehicle Supply

– Dealer

Place order and

tracking on Website

Place order and

tracking on

Website

Communication

cost saving,

transparency

in operation

20 %

20 %

Warehouse can

push stock over and

above dealer’s

Dealer places order

on web, warehouse

has to service only

Improved sales

order service level.

94 %

94 %



order this order.

Spares

-----

Process

Re-engineering

Lead time reduction

for order

fulfillment

5 Days 5 Days

Manual tracking of

material in supply

chain

Online tracking of

material movement

across the chain

Man hour saving,

better planning

process

Place order through

courier, monthly

order tracking

Place order on

Website, daily

order tracking

Communication

cost saving, better

customer

satisfaction.

20 %

20 %

Service

Send service claim

through courier,

monthly tracking

report

Enter claim on

website and

tracking

information

available online

Communication

cost saving,

transparency

in operation

20 %

20 %

No idea on reason

for claim rejection

Information

available online

Better customer

satisfaction on

process

transparency

Warranty

Process

Send claim through

courier, no proper

system to process

claim

Enter warranty

claim on website,

fast processing

through ERP

Lead time reduction

for warranty claim

settlement

45

Days

15

Days

30 Days

Claim tracking on

phone, monthly

settlement report

Live claim tracking

information

available online

Communication

cost saving,

transparency

in operation

20 %

20 %

Others

Collect data

manually e-mail /

phone and prepare

reports

Reports available

online across the

chain

No data entry

duplication, data

transparency,

productivity

improvement

20

Man

Days

5 Man

Days

15 Man

Days

Benefits in sales and marketing:

Warehouse booking has improved by 14 %.

The availability of stock at warehouse has increased by 11 %.

Vehicle stock availability has increased by 16 %.

Communication cost has been saved by 40 %.

The lead time for spares has reduced by 5 Days.

Lead time for warranty claim reduced by 30 Days.

120 Man-hours has been saved in collecting data, which has improved the productivity, the

cost saved is Rs.15600.

4.9. Delivery Management

Table 7 Delivery Management

Before ERP After ERP

Deliveries commitment on monthly time

frame.

No robust system of monitoring service

level to dealers.

Sales opportunity loss at18 %.

Stock norms for area offices.

Distribution through DRP cycle.

Delivery commitment on 6 days time

frame.

Provision to check at 3 days service level.



4.10. Planning Cycle – Operations and Purchase

Table 8 Planning Cycle – Operations And Purchase

Before ERP After ERP

Meeting

Model requirement – Weekly

Color requirement – Monthly

Planning methodology – manual

Tracking production data shift wise.

Material requirement planning frequency

on a monthly cycle.

Schedule released to suppliers on a weekly

buckets.

Meeting

Model requirement – Daily

Color requirement – weekly

Planning methodology – System

Tracking production data online –

helps hourly PDCA.

Material requirement planning frequency on a

weekly cycle.

Schedule released to suppliers on a daily

buckets.

4.11. Financial Accounting and Controlling

Table 9 Financial Accounting and Controlling

Modules Improvement details Benefits

Account Payable

Control account reconciliation

elimination

Productivity improvement

TDS on advances Statutory compliance manual adjustment eliminated

Multiple TDS codes can be

attached to a vendor

No need to create separate vendor codes for same

vendor who provide varied services

Account groups For number range, stratification and MIS

Vendor balances can be

viewed for a date at any date

No need to create customized tables to maintain

month end balance

Multiple factoring companies

for a supplier

Flexibility and ease of operations, Productivity

improvement

Account Receivable

Automatic cleaning facility Can be used for spares customers. Reduction in

receipt processing time and improvement in accuracy

Partial cleaning facility First in first out assignment possible. Invoice to be

retained can be mentioned with amount.

Account group For number range, Stratification and MIS

Control account reconciliation

elimination

Productivity improvement

General Ledger

IDM less than Rs.2000

write off based on

account assignment at the time

of material

Productivity improvement, no need for manual

write offs, online IDM stock availability

Periods can be opened or

closed for a ledger account or

range of ledger accounts

High amount of flexibility and control at the time

of year and accounts finalization

Cash & Bank Online cash balance for

any period

No need to maintain tables to capture day wise balances

Central Excise Excise groups When there are plants within an excise registration, it is

possible to maintain separate registers.

TDS TDS deduction on advances Statutory adherence. No work around required

General

Configurable reports Report fields can chosen by the user, sorting can be done on

any fields, report variants can be saved and retrieved,

excel export is seamless

Source document drill

down facility from reports

Multiple drill down facility from any field possible right up

to the original document. Changes can be effected in

select cases

Asset Management

Asset management in ERP No need to maintain legacy. Automatic

depreciation calculation & posting to finance.

Monthly depreciation. Multiple depreciation.

Sub assets under a main asset. Capital WIP accounting.



In finance:

After implementation of ERP the total Man Hours saved in Finance department is 120 /

Month, the total cost saved is Rs.15600 / Month.

5. CONCLUSIONS

This investigation has endeavored to investigate the post-execution accomplishment in ERP

frameworks. It is clear from the examination that Man-hours are spared, increments in

execution and cost lessening are accomplished year and a half after the usage of ERP .

Theoretically, ERP post usage achievement could be characterized by deciding the degree to

which an association completes an arranged arrangement of audit/assessment exercises on a

post-execution premise which identify with the accompanying five measurements on

persistent premise (a) survey of general venture extension and arranging; (b) audit of driving

standards for venture advancement; (c) assessment of oddball determination procedures; (d)

assessment of accomplished advantages and (e) assessment of client and authoritative

learning. The extent of this examination can be additionally reached out in testing these

measurements .

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[4] Galy, Edith & Sauceda, Mary. (2014). Post-Implementation Practices of ERP Systems and

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http://link.springer.com/search?facet-author=%22Eli+Hustad%22

http://link.springer.com/search?facet-author=%22Dag+H.+Olsen%22

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