Theory of constraints-based methodology for effective ERP implementations

Abstract

The benefits as well as the turmoil that the implementation of enterprise resource planning (ERP) systems creates for multinational companies are well known. Several reports and evidence through case studies underline both the difficulties and the resulting benefits of ERPs. This paper addresses the reasoning behind long implementation times and organizational thunderstorms that tantalise the deployment of ERP systems. It focuses on two aspects of most implementation projects that generate the majority of technical and functional problems and constitute the projects’ bottleneck, i.e. code development within ERP systems due to key and unique requirements in a business environment, and localization and reporting needs that companies must adhere to or want to achieve. The approach proposes the classification of functional requirements into business critical and legally necessary, and the distribution of code development for system not fully supported processes among these two classes is discussed. Subsequently, the implementation times and deployment inefficiencies are coupled with the level of code development, and the difficulty of avoiding this for the two requirements’ classes, mainly due to user inflexibility and local environment peculiarities, is discussed. Using the Theory of Constraints, a coherent methodology for handling bottlenecks and effectively planning the code development effort is proposed, and trade-offs are derived between successful and on-time ERP implementations with managerial enforcement of best practices fully functional within major ERP systems. The approach is verified through field data from an actual SAP R/3 implementation at the largest manufacturer of packaging products and equipment in Europe.

Acknowledgements

Work was sponsored by the M. J. Maillis Group. The authors thank the management and company's IT department for help and support. Finally, the comments and suggestions of two anonymous referees are gratefully acknowledged.