An investigation on effectiveness of Enterprise Resource Planning (ERP) on increasing organisational performance: a case study of Pizza Hut, UK
ABSTRACT
Past studies and researches identified the implementation of ERP in firms as the instant solution for meeting the services with the changing requirements of customers. Especially in fast food industry, where the customer involvements are more, the role of ERP is eminent in coordinating and integrating the multiple areas such financial, SCM, customer and vendor relationship, traceability of orders, quality control, etc to achieve efficiency in surviving against with competition. The primary objective of the current study was to investigate the effectiveness of Enterprise Resource Planning (ERP) in enhancing organisational performance of a restaurant chain by considering Pizza Hut, UK as case study. The main research problem identified in the current study was the dual aspects of ERP implementation. Even though ERP implementation in firm enhances the organizational performances the complication involved in its installation results in to lowered sales of firm. Hence in the current study various implications of ERP on the operations and customer management were discussed with great evidences from Pizza Hut.
For collecting the primary data required for the study, the researcher conducted interview and survey with managers and customers of Pizza Hut respectively. The author has conducted interview with 3managers (Operational Support Manager, Area Manager and Store Manager) for identifying the application and effectiveness of ERP on the operations firm as well as order management, delivery and services to customers. Survey was conducted by the author with 120 customers to identify the perceptions of customers against with the services of Pizza Hut. Finally the results collected through interview was analysed manually and the survey results were analysed using pie chart and bar charts. The research findings revealed that ERP system of Pizza Hut had clear influence on the organizational performance. It was revealed that ERP system enhanced financial performance and operational performance of Pizza. However, it was also understood that ERP did not improve performance of customer service in Pizza Hut. Based on these findings, the present research provided recommendations to improve accuracy of delivery and to provide deals and offers through online website of Pizza Hit. Recommendations were also made to introduce video marketing in the website of Pizza Hut and to make social media pages in website more visible to customers.
Contents
ABSTRACT 2
LIST OF FIGURES AND CHARTS 6
CHAPTER 1: INTRODUCTION 7
1.1. Introduction 7
1.2 Research background 7
1.3 Rationale 9
1.4. Research aim 10
1.5. Research objectives 10
1.6. Research questions 10
1.7 Problem statement 11
1.8. Purpose of the study 11
1.9. Structure of the dissertation 12
1.10 Summary 13
CHAPTER 2: LITERATURE REVIEW 14
2.1 Introduction 14
2.2 Enterprise Resource Planning 14
2.3 Need for ERP implementation in restaurant chains 14
2.4 Challenges associated with ERP implementation 15
2.5 Impact of ERP implementation on operations management 16
2.6 Impact of ERP implementation on customer service 16
2.7 The link between existing studies and present research 19
2.8 ERP in Pizza Hut and its impact on performance 19
2.8.1 Objectives of ERP implementation in Pizza Hut 19
2.8.2 Impact of ERP on Pizza Hut 20
2.8.3 Impact on operations management of Pizza Hut 21
2.8.4 Impact on customer service of Pizza Hut 22
2.9 Conceptual framework 23
2.10 Summary 23
CHAPTER 3: RESEARCH DESIGN AND METHODOLOGY 25
3.1 Introduction 25
3.2 Research philosophy 26
3.2.1 Positivism philosophy 26
3.2.2 Interpretivism philosophy 26
3.2.3 Realism philosophy 26
3.3 Research approach 26
3.3.1 Deductive approach 27
3.3.2 Inductive approach 27
3.4 Research purpose 27
3.4.1 Exploratory research design 28
3.4.2 Descriptive research design 28
3.4.3 Explanatory research design 28
3.5 Research strategy 28
3.5.1 Survey strategy 28
3.5.2 Interview strategy 29
3.5.3 Case study strategy 29
3.6 Sample selection 30
3.6.1 Population 30
3.6.2 Sample Size 30
3.7 Sampling methods 30
3.7.1 Probability sampling 30
3.7.2 Non-probability sampling 31
3.8 Data collection methods 32
3.8.1 Primary data collection method 32
3.8.2 Secondary data collection method 33
3.9 Data analysis plan 33
3.10 Accessibility issues 34
3.11 Ethical issues 35
3.12 Research limitations 35
3.13 Summary 35
CHAPTER 4: DATA ANALYSIS AND INTERPRETATION 37
4.1 Introduction 37
4.2 Qualitative Data Analysis 37
4.3 Quantitative data analysis 43
4.4 Identification of gaps 59
4.5 Judgement of findings 60
4.6 Summary of the chapter 61
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 62
5.1 Introduction 62
5.2 Conclusions 62
5.3 Evaluation of results 65
5.4 Recommendations 65
5.5 Limitations of the research 67
5.6 Recommendations for future research 67
References 68
APPENDIX 74
LIST OF FIGURES AND CHARTS
List of figures
Figure 3.1: Saunders’ Onion Model
Figure 2.1: Conceptual framework
List of Pie charts
Pie chart 4.1 Gender of the respondents
Pie chart 4.2 Age of the respondents
Pie chart 4.3 Occupation of the respondents
Pie chart 4.4 Making use of Pizza Hut service in own locality
Pie chart 4.5 Frequency of the usage of Pizza Hut service
Pie chart 4.6 Favoured means of ordering food
Pie chart 4.7 Source of information
Pie chart 4.8 Understandability of information well written on the website of Pizza Hut
Pie chart 4.9 Notion of updated contents in website
Pie chart 4.10 Ease of navigation of online service
Pie chart 4.11 Easiness of finding items
Pie chart 4.12 Opinion about the entire content of the website of Pizza Hut
Pie chart 4.13 Level of easiness in amending the items
Pie chart 4.14 Completeness of order
Pie chart 4.15 quickest way of placing order
Pie chart 4.16 Special offer
Pie chart 4.17 Delivery time
CHAPTER 1: INTRODUCTION
1.1. Introduction
Enterprise Resource Planning (ERP) techniques have altered the way companies move concerning the procedure of supplying information systems. This study discusses the benefits and issues related to the introduction of ERPs into fast food sector with the aim of understanding the importance of ERP systems in improving the performance of an organisation in the fast food sector as it is a sector which requires very quick distribution systems for its survival (Monk and Wagner, 2012). This part of the dissertation will thus provide the basic research and the chosen organisational background; the rationale; the aim, objectives and questions set for conducting the research; the purpose and significance of the research; and as the last part a general outline of the chapters of the dissertation.
1.2 Research background
In modern business organisations, communication and collaboration between different departments is essential for effective organisational performance. As per Maditinos, Chatzoudes and Tsairidis (2011), many organisations use Enterprise Resource Planning or ERP systems for this purpose. According to Monk and Wagner (2012), ERP is a combination of three significant mechanisms: information technology, business management practices and particular business objectives. The main objective of an ERP program is to combine procedures and information from all functional sections of a business and combine it for organised workflow and easy access. The incorporation is usually achieved by creating just one database repository that conveys with numerous software programs supplying information and numerous business statistics to various sections of a business. Even though ideal setup will be a solitary ERP program for a whole business, but several bigger businesses generally install a solo functional system and gradually interface it with the rest of the functional sections. This kind of implementation can definitely be costly and time-consuming (Monk and Wagner, 2012).
Just before development of the ERP model, each division within a business had its very own remote software program which did not interface with the rest of the systems. Such remote construction could not connect the inter-division procedures and therefore affected the speed, productivity and the entire organisational performance. These resulted in problems like insufficient synchronization, incompatible exchange standards, unproductive decisions, imperfect knowledge of organisational functioning, etc.; for example, the fiscal specialists could not organise together with the procurement group for planning out purchases according to the accessibility to income. Thus, implementing an extensive ERP program across a business results in workflow synchronization, performance boost, uniform information exchange platforms, total summary of the business operation, speed improvement, etc. (Maditinos, Chatzoudes and Tsairidis, 2011). Elragal and Al-Serafi (2011) also observe that ERP implementation helps organisations in improving performance. Halim, Kurniawan and Hartono (2014) on the other hand mention that ERP implementation is a complex endeavour which sometimes negatively influences organisation performance. Zeng (2010) also point out that ERP systems are expensive to implement and sometimes increase the complexity of existing process of the organisation. From these statements, it can be assimilated that ERP systems can influence organisational performance either positively or negatively based on how it is implemented in the organisation. So in the present research, the effectiveness of Enterprise Resource Planning in enhancing organisational performance in Pizza Hut, which has used ERP systems on a wide scale in their restaurants, will be investigated.
Pizza Hut is a restaurant chain of America, recognized for pizza and side dishes. It is today corporately referred to as Pizza Hut, Inc. and is Yum! Brands, Inc.’s subsidiary, the globe’s biggest restaurant organisation. Pizza Hut marked its entry into UK in 1973. As per the report of Pizza Hut (2015), websites of Pizza Hut plays a significant role as it receives 38% of its home delivery order through its website. This required Pizza Hut to implement an ERP system so as to link its website to other operational systems in the organisation for improving the performance. One of the most significant aspects of Pizza Hut’s customer service is the 30 minutes delivery guarantee, which requires high degree of integration between the different business units; so, ERP finds a high importance in Pizza Hut for this reason. However, according to the report in The Telegraph by Thomas (2014), Pizza Hut closed more than 20 restaurants in UK which were underperforming due to decrease in sales. Thus, this research seeks to analyse whether this decrease in sales, ultimately leading to decline in organisational performance, is attributed to any extent by the ineffective ERP system of Pizza Hut.
1.3 Rationale
What is the issue?
According to Elragal and Al-Serafi (2011), ERP system plays a very important role in this globalised era particularly in fast food sectors where about half of the organisations’ sales come through online delivery. Seo (2013) opines that ERP implementation must effortlessly integrate external and internal information management in the organisation that implements ERP system. The author also argues that there are organisations that use ERP and even then fail to reap profits; for example the move by HP to consolidate all the company’s divisions of North America into a one centralised ERP system led the company to lose high revenues due to whole ERP implementation failure. This study will thus identify the challenges associated with effective ERP implementation and how this relates to organisational performance.
Why is it an issue for Pizza Hut?
As per the report in the official website of Pizza Hut, more than 38% of its business is through home delivery through website (Pizza Hut, 2015). Thus, it is very important that online experience puts forward precisely what is expected by Pizza Hut’s customers. So, Pizza Hut requires an efficient ERP system because one of the main objectives of ERP system implementation is to offer a user-friendly, easily understandable and intuitive to apply website for e-commerce. As a number of Pizza Hut’s restaurants are franchised businesses (Pizza Hut, 2015), this research will challenge the organisation’s current ERP system and innovations in online ordering channels.
Why is it an issue for Pizza Hut now?
As per the report in the Financial Mail, UK by Bridge (2014), Pizza Hut suffered from a loss of£968,000 (over turnover of £230million) in the year 2013 in UK. So, these figures lead to a question in terms of satisfaction in the customers of Pizza Hut, UK. Since one of the important functions of an ERP system is to provide enhanced customer service, this study will identify the impact of the current ERP system in terms of the usability issues with its website on the customer satisfaction in UK.
What this research sheds light on?
In addition to identifying the impact of ERP system in enhancing the performance of Pizza Hut, this research will:
· Highlight other objectives of ERP system implementation apart from e-commerce.
· Identify the future innovations that can be brought about in the current online ordering channels.
· Recommend improvements in the current ERP system of Pizza Hut that will aid the organisation and similar organisations in creating a loyal customer base.
1.4. Research aim
The main aim of this research is to investigate the effectiveness of Enterprise Resource Planning (ERP) in enhancing organisational performance of a restaurant chain. For achieving this case study of Pizza Hut, UK will be carried out.
1.5. Research objectives
· To analyse the current ERP strategy of Pizza Hut
· To assess the performance levels of Pizza Hut
· To analyse the effectiveness of ERP on increasing organizational performance
· To identify gaps in the current performance level and provide recommendations to formulate a more effective ERP strategy
1.6. Research questions
This research will also try to answer the following research questions.
1. What are the main factors that influence performance levels of Pizza Hut?
2. Has organizational performance of Pizza Hut eroded in recent years?
3. How does ERP system in Pizza Hut influence the performance of employees?
4. How significant is ERP systems in the operations of Pizza Hut?
5. What are the main reasons behind the adoption of existing ERP strategy of Pizza Hut?
6. Was Pizza Hut able to improve the customer service in online channels though ERP implementation?
7. How can ERP strategy of Pizza Hut be further improved?
1.7 Problem statement
ERP is said to increase the organisational performance by enhancing the communication between different departments of an organisation and also by enhancing the customer service leading to an increase in sales and thus organisational performance (Maditinos, Chatzoudes and Tsairidis, 2011) but Halim, Kurniawan and Hartono (2014) argue that ERP can also negatively affect an organisation due to the complication involved in its implementation. As 2014 marked the shutting down of some of the restaurants of Pizza Hut in UK due to low sales (Thomas, 2014), this research will mainly focus on two main research issues: