Aligning ERP systems with international strategies (Madapuszi/Souza)

Information Systems Management winter 2005 , pp 42-46

With the globalization large multinationals are adopting enterprise resource planning (ERP) systems to meet their international information management needs. Proper alignment between ERP and international strategy can lead to superior performance globally.

Managers of the firm should be aware of, and understand the interrelationship between ERP system configuration and the international strategy of the firm. On the topic of system configuration, there are three ERP systems issues that should be addressed:

• Systems configuration, ERP systems should be configured hierarchically at four levels in the firm

  • Enterprise level; Four types of enterprise level ERP a firm can adopt:
    Single-financial/single-operation, single-financial/multi-operations, multi-financials/single-operation, and multi-financials/multi-operations.

  • System level, implementing modules of logistics, financials and operations

  • Business process level, customization of user products

  • Customization level, customer designed modifications

• Information architecture, how to configure the ERP information architecture

  • Centralized architecture, high levels of standardization

  • Distributed architecture, strong history or autonomous business units

  • Hybrid architecture, leverage global supply chains and localize products

• Systems rollout to reap the benefits of ERP system alignment

  • Number of sites and users, level of complexity of the business process and levels of customization can be critical in determining the success of the rollout strategy. Two types of roll-out are the big bang approach (complete change in one phase), and the phased approach (incremental change)

Aligning the ERP systems with the international strategy of the LME is also important. There are three types of strategy that are most adopted, these are the multinational strategy, the global strategy and the transnational strategy. Each strategy adopts ERP on a different way to fully utilize it. This can be seen in the following table:

ERP systems take considerable time and money to implement, and can create operational difficulties for the firm. Once implemented, these systems can be difficult and to expensive to undo. Some difficulties faced by managers stem from inadequate attention paid to synchronize the ERP systems with international strategy. Implementing an ERP systems is not merely a technological challenge, it involves significant and radical changes in the business. Careful planning of a firm’s ERP strategy alignment should always precede the ERP investment.