Relationship between enterprise resourse planning and knowledge management

1888 Business Transformation through Innovation and Knowledge Management: An Academic Perspective Citation: Akhavan, Peyman, Azhdari, Golnaz, and Mahdi Zarebahramabadi (2010), Relationship between enterprise resource  management, International business information management association (IBIMA2010), June, Turkey. planning and knowledge Relationship between Enterprise recourse planning And knowledge management Peyman Akhavan, Faculty member of Malek Ashtar university Golnaz Azhdari, Student at Alzahra university, g.azhdari@gmail.com Mahdi Zarebahramabadi, The Member of young research Club , Arak branch Abstract As both knowledge management and enterprise recourse planning, get the curtail role in organizations, also there is a trend to implement both systems at organizations, there are bulk of literature on the relationship between knowledge management and enterprise resource planning. There are two main points of views. One of them is process-based view that considers knowledge management such as enterprise resource planning long term organization process, that is needed to measure the effects and benefits in long time, not immediately after implementation, and both systems has some affects on each other. Another point of view is project-based, that consider knowledge management smoothing tool for implementation of enterprise recourse planning. This study compares these two points of views with references to literature. Key words: Knowledge management, Enterprise resource planning Introduction The result of the knowledge revolution is represented by a new economy – the knowledge-based economy, which is radically different from previous economic types known to mankind (Peyman Akhavan, Mostafa Jafari, 2008). Considering physical assets age, today’s workforce is mobile, and technology is quickly bypassed. (Mostafa Jafari, Peyman Akhavan,Mehdi N. Fesharaki,Mohammad Fathian, 2007). Despite the traditional organizations that focus on just physical assets, Nowadays, an enterprise, especially a high-tech enterprise, has two major types of assets, physical and knowledge assets (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006) . Moreover, within recent years technological/high-tech organizations are highly dependent on their intellectual capital rather than their physical assets. (Mostafa Jafari, Mohammad Fathian,Peyman Akhavan, Reza Hosnavi, 2007) From the enterprise's point of view, managing both types of enterprise assets is highly desirable (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006). Due to the fact that both types of assets need to be properly managed, the integration of knowledge management and ERP becomes a strategic initiative for providing competitive advantages to enterprises (Editorial, 2006). So far enterprise information systems such as ERP systems are developed and implemented for mainly managing physical assets of an enterprise since 1990s (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006). Enterprise Resource Planning (ERP) systems facilitate the gathering and dissemination of information across diverse areas of business in order to generate a more accurate measure of performance. ERP software is characterized by its fluid and seamless integration of information across functional divisions and locations. This integration results in more accurate information and reporting of performance data enabling more effective decision making (Gary Baker,Kathleen M. Utecht,, 2007). Business Transformation through Innovation and Knowledge Management: An Academic Perspective 1889  ERP systems emphasize the efficiency of business processes in enterprises. To achieve the goals, ERP systems maintain mechanism for data/information consistency through high degrees of standardization, formalization, and specialization (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006). A successfully implemented ERP can link all areas of an enterprise including customer relation, manufacturing, human resource, financial management, and distribution with customers and suppliers, and forming a highly integrated system with shared data (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006) In “knowledge economy” organizations are increasingly aware of the need for a “knowledge focus” in their organizational strategies as they respond to changes in the environment (Mostafa Jafari, Peyman Akhavan,Mehdi N. Fesharaki,Mohammad Fathian, 2007). In such a highly dynamic environment, enterprises also increasingly recognize that knowledge management is one of the most important factors contributing to business success (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006). Systematic management of enterprise knowledge, e.g. new ideas, innovations and patents, has a great impact on business sustainability and growth (Mohammad Taghi Isaai, Ali Amin Moghaddam, , 2006). KM systems are information systems designed to collect, code, integrate, disseminate, and facilitate organizational knowledge. Efficient knowledge management leads to superior business performance such as organizational creativity, operational effectiveness, and quality of products and service (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006) The knowledge-based view of enterprises argues that KM system is the centre of business enterprises and an enterprise's competitive advantage depends upon the effective integration and management of knowledge assets. From another angle, the information processing view considers that ERP is the centre of enterprise management; ERP enhances business performance through minimizing internal and external uncertainties by improving information flow. Although either view has its limitation, however, from systems perspective, they are complementary to each other. Although ERP and KM are based on different management philosophies, ERP and KM systems complement to each other to some extent. The distinction between information and knowledge not only suggests their different implication and value for organizations, but also suggests that both ERP and KM system are needed in order to provide and leverage the respective values of information and knowledge. In perspectives of enterprises, the ultimate goals of the two systems are helping enterprise survive in the global market by improving their performance. In summary, ERP and KM systems manage the business from the point of views of physical and knowledge assets respectively (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006). In this paper we answer this question: how researchers consider the relationship between ERP and KM, and also how these two systems interacts each other. There are two main papers that consider this relationship between two systems. While one of this categories, project-base, consider KM as an enabler for implementing ERP, the other one, process-base, consider KM as an ongoing process of any organization that help them to manage their assets better. Process-base In this point of view researchers mainly consider KM as an ongoing process of any organization that is needed for managing knowledge asset. This process needs some tools to be implemented. So for implementing the KM, papers suggest using the platform of ERP. From enterprises' point of view, ERP and KM systems should be integrated for competitive advantages. (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006) Integrating these two separate systems can provide an enterprise with better business performance. With the integration, the system can manage 1890 Business Transformation through Innovation and Knowledge Management: An Academic Perspective  physical as well as knowledge assets for achieving competitive advantages than ever before (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006). With a proper framework in which ERP and KM can cooperate with each other, an enterprise can benefit from the advantages of ERP and KM and be successful in global competition. Increasing requirements for extended enterprises have stimulated the integration of knowledge management (KM) function into ERP systems for knowledge asset management. (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006). The researches confirm that first the two system can be implemented in tandem to good effect and second complementary between two systems is possible, although this is not an automatic outcome it has to be fostered (S.Newell, J.C.Huang, R.D.Galliers, S.L.Pan, 2003). Although ERP and KM emphasize different types of assets respectively, the integration would satisfy the requirement of systematic management. ERP and KM systems manage the business from the point of views of physical and knowledge assets respectively. (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006). Increasing requirements for extended enterprises have stimulated the integration of knowledge management (KM) function into ERP systems for knowledge asset management. (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006) As implementation of two different IT concepts, the key characteristics of ERP and KM are quite different in their orientation: with ERP systems focusing primarily on managing physical assets and KM systems on innovation and utilization of knowledge assets (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006). KM integrated with ERP can improve the business processes managed by ERP to increase firms’ competitive advantages. The interaction between ERP and KM systems are synergistic and of significant importance (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006). Both ERP and KM systems are currently being widely implemented across organizations. In all probability they are being implemented simultaneously, or at least their implementation overlap in many companies (S.Newell, J.C.Huang, R.D.Galliers, S.L.Pan, 2003). In Process-base point of view, Knowledge management is a process in organization that need platform for its activities. ERP can help for sharing this platform in organization. (Yuan Li, Xiu Wu Liao, Hong Zhen Lei, 2006)  ERP system provides a platform for capturing, creating, storing, and sharing knowledge. KM manages both tacit and explicit knowledge that may be acquired through ERP information platform. (Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006) In this point of view researcher suggests due to the differences between ERP and KM, it is not easy to take advantage of integrating KM and ERP by simply adding a KM module into an ERP system. It is obvious that KM has its own purpose compared with that of ERP; to some extent such purposes may be conflicting to each other. For example, KM emphasizes the flexibility in business routine, whereas ERP focuses on the standardization of business routines. In integrating KM into ERP, changes are needed in ERP to facilitate KM implementation. Such changes include knowledge base management, knowledge presentation, etc. As a module in an ERP system, KM in general can support ERP for better decision making function. KM can capture knowledge, transfer tacit knowledge to explicit knowledge, and help use or reuse knowledge for ERP purpose. The future generation ERP may include a KM module through achieving trade-off between their contradictions based on two managerial philosophies (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006). Business Transformation through Innovation and Knowledge Management: An Academic Perspective 1891  In general, ERP defines business processes as standard routines to encourage dependence on predefined or pre-selected routines. Therefore, at the cost of flexibility, ERP systems can maximize organizational efficiency. In comparison with the orientation of ERP systems, KM concentrated on the utilization of knowledge needed for production and operation. Particularly, KM emphasizes on continuous learning at the individual and organizational levels as a complementary approach to improving productivity and efficiency (Lida Xu, Chengen Wang, Xiao chuan Luo, Zhongzhi Shi, 2006). In this point of view two different scenarios can happened one of them is using the KM module such as all different modules of ERP and try to implement this module in an enterprises. Many vendors of ERP can offer this module as well as other to the organizations(Shuojia Guo, Chengen Wang, Xiaochuan Luo, Ming Qi, Nini Cao, Chunqing Li, Lida Xu, 2006) Another scenario is that for implementing these two systems it is not needed to use a specific vendor. It is possible to use just an interface to interact these two systems. This interface is for communicating between ERP and KM. this means that by using some sort of knowledge base it is possible to interact information that is stored in data bases of ERP to knowledge that is stored in knowledge base of KM, and finally represented with user application. Project –base There is lots of literature that mentioned the role of KM as an enabler of successful ERP implementation. There is a strong financial and operational motivation for companies to better leverage ERP systems knowledge and make this knowledge available to those involved in the ongoing management of the system. Disregarding the importance of knowledge has become costly and many firms are now struggling to capture their current systems knowledge, identify knowledge requirements and develop a strategy to bridge this divide (Glenn Parry, Andrew Graves, 2008). Due to the size and scope of an ERP system, knowledge of implementing ERP therefore becomes a strategic asset of the organization. (Thomas C. McGinnis , Zhenyu Huang, 2007) This researches show that KM can facilitate the entire ERP lifecycle(Yuan Li, Xiu Wu Liao, Hong Zhen Lei, 2006) . A great deal of knowledge is accumulated by staff within an organization during the different phases of ERP lifecycle (Markus and Tanis 2000). Knowledge of the initial integrated software system should also be drawn down from the ERP system suppliers (Glenn Parry, Andrew Graves, 2008). The KM in ERP implementation faces a number of challenges (Yuan Li, Xiu Wu Liao, Hong Zhen Lei, 2006): 1. 2. 3. 4. The pivotal knowledge in ERP implementation is possessed by software vendor and consultants. They will vanish soon after the ERP implementation is completed. How can their knowledge be transferred into the adopting organization? In ERP implementation process, there exist a lot of knowledge gaps. They include the gaps between external vendor, consultants and internal experts, the gaps between internal experts and end users, the gaps between end-users from different business units. How can these gaps be eliminated? In ERP implementation, a lot of new tacit knowledge can be created through discussion, communication, imitation and practice. How can such tacit knowledge be converted to organization available knowledge? The cross-functional interconnectivity of an ERP system requires the employees involve in implementation process to have more cross-functional knowledge, how do they access such knowledge? 1892 Business Transformation through Innovation and Knowledge Management: An Academic Perspective  5. When some key employees, such as members of project team, retire or change job, they will take with them valuable knowledge and skills associated with ERP projects. In order to prevent or reduce interruptions in activities, and enhance overall ability to cope with changes in personnel, how can an organization store their knowledge and skills? In this point of view tries to answer tow main questions: What ERP systems knowledge is required by organizations for their successful ERP operation? What KM practices support ERP systems management? The first part is investigated in the light of the ERP literature and the second is investigated in light of the KM literature (Glenn Parry, Andrew Graves, 2008) Conclusion Due to the importance and effects of enterprise information systems in one hand and in other hand the importance of using them, these systems grab lots of attention in organizations(Thomas C. McGinnis , Zhenyu Huang, 2007). Most of these systems interact to each other. This interaction makes the managers to rethink about the way of their implementation. KM and ERP are two main information systems that affect the way that any enterprise cooperates. This two systems are widely implement in many organization, but systematic incorporation of KM into ERP project management is strategic and critical (Thomas C. McGinnis , Zhenyu Huang, 2007). In this paper we discuss about two main categories of literature about the relationship between KM and ERP. 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