Enterprise Resource Planning in the Hospitality Industry

Introduction

There is a variety of methods that companies can employ to increase their chances of success. One of such approaches is enterprise resource planning (ERP), which involves the integration of different processes vital for any business. These features include accounting, management, human resources, communication with customers, and other functions. With the help of ERP, it becomes possible to share the most relevant data across the organization.

ERP systems are rather complicated, and the company may fail if it underestimates the key success factors of ERP implementation (Mohamed, 2015). The paper aims at discussing these factors, analyzing the effect of ERP on organizational success in the hospitality industry, and investigating the ERP system employed by Hyatt hotels. It is argued that the use of ERP has the potential to increase the organization’s productivity on condition that key factors are taken into consideration, and the most effective approaches are selected.

Critical Success Factors of ERP Implementation

As any complicated system, ERP requires thorough analysis, preparation, and control to reach excellence in the implementation process. Scholars note that the achievement of the successful introduction of this structure involves a variety of success factors, some of them being more important than others. The most crucial success factor is associated with top management (AlSudairi, 2013; Chausi, Chausi, & Dika, 2016).

The role of this factor in supporting the process is highly crucial since ERP implementation involves a high budget and has a complex character (AlSudairi, 2013). Chausi et al. (2016) emphasize the importance of top management’s commitment and a clear strategy. The next success factor is concerned with change management. Since the introduction of ERP systems naturally presupposes changes within the organization, the change management’s role in this process cannot be overestimated. The key goal of change management in the process of introducing ERP is creating a positive attitude of employees and building the acceptance of users (AlSudairi, 2013). Therefore, it is necessary to pay due attention to change management during the ERP establishment.

Another important factor in project management, which involves the planning of the budget, resources, and time. To reach success at this point, it is necessary to follow the first-rate project management practices (Chausi et al., 2016). More than that, project management also deals with assigning responsibilities, establishing milestones, training employees, and settling success measures (AlSudairi, 2013). Project management also includes the definition of activities and allocating employees for each of them. As such, this factor is rather significant in the process of ERP implementation.

The next issue having a particular effect on the success of ERP introduction is communication. Therefore, streamlining and controlling communication is highly crucial for managers (Chausi et al., 2016). Both the positive atmosphere among employees and the communication between workers and the project team should be developed at the highest level (AlSudairi, 2013). Arranging positive communication techniques may be challenging, but this aspect has the potential to promote the success of the company. To avoid complications, it is necessary to start arranging positive communication at the early stages of the project.

IT infrastructure and the re-engineering of the business process are also regarded as critical factors of success. Since ERP is associated with the software, the organization must make sure that all the necessary equipment is available to launch ERP systems (AlSudairi, 2013). Re-engineering may involve altering business processes or modifying the software. The process of re-engineering is continuous, with new ideas constantly emerging.

Most commonly, re-engineering takes place before implementing ERP, but sometimes, a decision may be made to alter the system in the course of the process. The evaluation of the IT infrastructure is also important since it may require restoring or upgrading (AlSudairi, 2013). This aspect is related to the choice of hardware, which is most commonly assisted by the vendors of ERP software.

Finally, the issue of user training is defined as an important element of success. It is crucial to make sure that team members have the necessary knowledge and skills to operate in the conditions of ERP systems (Chausi et al., 2016). The main goal of training is achieving a high level of employee understanding of the system (AlSudairi, 2013). When all team members know how to employ the software and communicate about any emerging concerns, the implementation of ERP will be successful.

Benefits of ERP for the Organizational Success

The implementation of ERP is regarded as a positive element of any company’s development vector. As AlSudairi (2013) notes, running the organization towards sustainability requires the consideration of such processes as the privatization, increased competition, globalization, and deregulation. To cope with these challenging business alterations, managers need to restructure their data flows and market processes. The main advantage of ERP systems is the opportunity to predict and integrate business resources at the application level (AlSudairi, 2013). This function is manifested by offering the possibility to understand how enterprise policies and business processes are structured. The following groups of benefits are identified:

  • Infrastructural (the increased functional capability and business flexibility, the reduction in IT costs);
  • Organizational (increasing employee satisfaction and morale, reaching the business organizational change, altering employees’ vision and culture, promoting employees’ skill development and learning);
  • Strategic (support for alliances and the business growth plan, support for product differentiation and business innovation, support for e-business and global expansion);
  • Managerial (improved performance control and resource management, enhanced decision making);
  • Operational (reducing cycle time and costs, enhancing data quality and productivity, improving customer service) (AlSudairi, 2013).

Despite a wide range of advantages that the implementation of ERP offers, there are also challenges that managers may face during this process. These threats include the complexity of technologies, the possibility of employees’ resistance to change, and the time-consuming and complicated processes of altering the existing system (AlSudairi, 2013). Thus, if a company does not take into consideration all the possible pitfalls, it may find itself in a potentially dangerous situation instead of the beneficial ones. Still, many scholarly research papers are focused on ERP benefits rather than limitation, so it is possible to conclude that advantages are more numerous. Particularly, specialists emphasize the positive effect of ERP in the improvement of operational efficiency, competitiveness, and financial performance.

Enhancing Operational Efficiency Through ERP

One of the greatest advantages offered by ERP is the improvement of operational efficiency. The basic modules involved in this process are as follows:

  • ERP production planning: is used to enhance the material resources and manufacturing capacity through sales forecasts;
  • ERP inventory control module: promotes the maintenance of the relevant level of stock;
  • ERP purchasing module: establishes the acquisition of the needed raw materials through the automated approach to potential suppliers identification and price negotiation;
  • ERP sales module: is responsible for the placement of orders, shipping, and invoicing;
  • ERP financial module: the major component of software systems that collects financial data and generates reports;
  • ERP marketing module: arranges mailing campaigns and the analysis of clients’ preferences;
  • ERP human resources module: supports the employee database containing their contact information, salary aspects, performance analysis, attendance, and promotion (Madanhire & Mbohwa, 2016).

To reach the operational efficiency with the help of these modules, it is necessary to arrange the cooperation between each component at different levels. Financial and sales modules are regarded as the most significant. The financial component helps to prepare such reports as the general ledger, balance sheet, and trial balance, without which it would be impossible to evaluate the organization’s financial situation (Madanhire & Mbohwa, 2016). The sales component is important since the revenues are “the lifeblood” of any company (Madanhire & Mbohwa, 2016, p. 226). Therefore, the operational efficiency of any business can be enhanced through ERP in case the ERP modules are successfully arranged and controlled.

ERP’s Role in Improving Competitiveness

Another positive change that the introduction of ERP can promote is the increase in the organization’s competitiveness. The role of ERP in this process is closely connected with such aspects as employee management, the selection of the most suitable software, and taking into consideration the competitors’ systems (Azevedo, Romão, & Rebelo, 2014). The important thing that the manager should keep in mind is that purchasing the same ERP system as the rivals have is not the best solution. What is truly helpful is the choice of the most convenient and suitable system for one’s company and training the team members to work with it.

This factor is related to the next success factor for competitiveness: employee participation (Chausi et al., 2016). If workers are willing to adopt the new system, they will further promote the company’s success and overcome the competitors’ achievements. However, if the team’s knowledge and interest are not promoted, there will be no enhancements in productivity and, as a result, the competitiveness will not increase. Therefore, to improve the organization’s scores in the market, it is necessary to select the most convenient software and empower the employees.

The Effect of ERP on Financial Performance

The financial success of the company is probably the most important achievement towards which many goals are intended. The organizational benefits most frequently associated with ERP are divided into tangible and intangible, the former being associated with the financial sector (Bazhair & Sandhu, 2015). Tangible advantages involve the direct cost reduction that appears due to the successful implementation of ERP. The process of ERP presupposes the prediction of users’ needs and satisfaction, as well as employees’ satisfaction. Since these issues have a direct impact on financial performance, it is possible to conclude that ERP has the potential to affect this component of success.

The ERP System in Hyatt Hotels

ERP is highly popular with companies working in the hospitality industry. Hotels are some of the biggest clients of ERP since their successful functioning depends on planning to a great extent (Mohamed, 2015). The chain of Hyatt hotels is not an exception in this trend aimed at increasing profits and competitiveness through the introduction of the new technology. Hyatt hotels employ the Oracle ERP system that offers several advantages to its users.

The Selected ERP System and the Rationale for the Choice

Hyatt Hotels Corporation is one of the leaders in the global hospitality industry. Despite its general success, the company had noticed that their accounting reports in some branches were far from being perfect or even satisfactory (“Increasing visibility,” n.d.). In particular, the lack of visibility across the organization was considered as “incredibly limited” (“Increasing visibility,” n.d., para. 2). To increase visibility, it was decided to implement ERP in the organization’s processes. The system chosen was Oracle, and the management solution selected was BlackLine (“Increasing visibility,” n.d.).

The rationale for the choice was that the provider was leading in automation technology and innovative and advanced financial controls (“BlackLine for Oracle,” n.d.). Due to the variety of benefits offered by Oracle and BlackLine, Hyatt Hotels Corporation could count on increasing the visibility of their financial processes while simultaneously enhancing other aspects of work and reaching a high level of employee and customer satisfaction.

How the ERP System Supports the Organization

The support of the organization’s processes is performed with the help of ERP technology and guidance. The selected ERP system, Oracle, includes five stages:

  1. inception (the assimilation of the project’s goals),
  2. elaboration (the establishment of specific requirements),
  3. construction (the configuration of the system through the software functionality),
  4. transition (the preparation of the system to be accepted by the client company),
  5. production (putting the new system into operation) (Nagpal, Khatri, & Kumar, 2015).

Many organizations run Oracle and BlackLine to reach the transformation in their accounting and financial operations. The major benefit of BlackLine is the entirely integrated cloud platform that enables users to automate their account reconciliations, financial close, journal entries, Sarbanes-Oxley Act compliance, and other processes (“BlackLine for Oracle,” n.d.). The integration between BlackLine and Oracle is manifested through the complementary options that the former adds to the latter. Oracle systems, such as Corporate Performance Management and Governance Risk and Compliance, are promoted through BlackLine’s applications to reach the best outcomes for clients.

The support of Hyatt Hotels Corporation is performed through BlackLine’s unique options that enable the management team to have the processes across Oracle and non-Oracle landscape unified. BlackLine offers “class-leading account reconciliation” and intercompany financial and accounting close task management, which provides timely access to all financial affairs (“BlackLine for Oracle,” n.d., p. 3).

Because of the continuous approach to ERP, this system enables the Hyatt Hotels Corporation to manage such crucial tasks as variance analysis, intercompany processes, transaction matching, and many more (“BlackLine for Oracle,” n.d.). Unique advantages provided to Hyatt by BlackLine and Oracle are efficiency, speed, integrity, visibility, trust, and flexibility.

Conclusion

Enterprise resource planning plays a highly important role in organizations’ competitiveness and success. The use of ERP has the potential to enhance companies’ productivity and manage their financial processes effectively. These practices are widely employed in the hospitality industry since they help large corporations to operate their branches. One of the largest hotel chains, the Hyatt Hotels Corporation, has chosen Oracle and BlackLine to increase its competitiveness and reach financial stability.

The benefits provided by this ERP system have allowed the Corporation to increase its visibility and enhance performance. Although the implementation of ERP may cause difficulties, the final result is highly promising. Taking into consideration the critical success factors and encouraging employees to develop their skills are likely to promote the successful introduction of ERP in organizations.

References

AlSudairi, M. A. T. (2013). Analysis and exploration of critical success factors of ERP implementation: A brief review. International Journal of Computer Applications, 69(8), 44-52.

Azevedo, P. S., Romão, M., & Rebelo, E. (2014). Success factors for using ERP (Enterprise Resource Planning) systems to improve competitiveness in the hospitality industry. Tourism & Management Studies, 10, 165-168.

Bazhair, A., & Sandhu, K. (2015). Factors for the acceptance of enterprise resource planning (ERP) systems and financial performance. Journal of Economics, Business and Management, 3(1), 1-10.

BlackLine for Oracle: Transform your financial close. (n.d.). Web.

Chausi, B. A., Chausi, A., Dika, Z. (2016). Critical success factors in ERP implementation. Academic Journal of Business, Administration, Law and Social Sciences, 2(3), 19-30.

Increasing visibility across 200+ hotels and making audits a “non-event.” (n.d.). Web.

Madanhire, I., & Mbohwa, C. (2016). Enterprise resource planning (ERP) in improving operational efficiency: Case study. Procedia CIRP, 40, 225-229.

Mohamed, L. M. (2015). Exploring the critical success factors (CSF) and limitations of enterprise resource planning (ERP) systems: The case of Egyptian hotels. Journal of Hospitality and Management Tourism, 6(3), 17-29.

Nagpal, S., Khatri, S. K., & Kumar, A. (2015). Comparative study of ERP implementation strategies. In Systems, Applications and Technology Conference (LISAT) (pp. 1-9). Long Island NY: IEEE.