ERP Systems
ERP Systems
Question 1
ERP is a system that seeks to integrate and streamline the operation process and the flow of information in the firm to synergize an organization resource namely money, materials, men, and machine through information. This is an integrated business management system that covers functional areas of an enterprise such as accounting, logistics, production, finance, and human resources. ERP promises one application, one database, and one user interface for the whole enterprise. This is different from the traditional information system where disparate systems ruled distribution, manufacturing, sales, and finance. This system will assist the managers and employees in planning, monitoring, and controlling the organization by taking information from the different functions (Leon, A 2008). This system enhances the ability of the manufacturer to schedule production accurately ensuring full utilization of capacity, reduce inventory, and meeting the promised shipping dates.
The traditional information systems are not able to integrate the different functional areas effectively to share resources. ERP indicates the integration of enterprise resources. The traditional system employed by organization normally treats transaction separately, whereby it is built on the boundary that a certain functions meant to cater for a certain application. ERP does not treat transactions separately as it considers the transactions as part of inter linked processes that make up a business (Leon, A 2008). ERP supports business and strategic planning activities, execution activities and operational planning, the creation of materials and resources. When the organization is using this system, all the functions get integrated for flow and update of the information immediately once the entry of any information happens.
ERP promises to integrate financial information by creation of a single version of the truth that is not questionable because every member in the company uses the same system. With the traditional information system, managers found it difficult understanding the performance of the company, because of the different versions of truth from different departments. The promises of the ERP system are successful as it is evident in different companies such as DHL, Nike, and Fujitsu (Leon, A 2008). These companies have achieved some benefits by implementing ERP system into their company. This benefits include giving the accounts payables personnel an increased control of payment and invoicing process. This has boosted their productivity and eliminated the reliance on computer personnel.
It has also reduced paper documents through the provision of online formats that ensure quick entry and retrieval of information. The system has also provided more efficient case collection by reducing payment delays from the customers. Some other benefits that the system provides companies with the system include provision of a unified customer database. The database used by all applicants and improvement in information access and management in the enterprise.
Question 2
Business process reengineering (BPR) is rethinking and radical redesign of the process in order to achieve remarkable improvement in measures of performance like quality, speed, service, and cost. BPR aim at transforming the business processes so that to have dramatic improvement. The enterprise business objective achieved through transformation of the processes of the business that may require or not require information technology. Companies planning to implement ERP should reengineer their processes through business process reengineering (Karni, R & Shtub, A 2010). BPR help in the rethinking of the business processes, and it is also essential to software application like ERP systems. BPR is a factor of success in the implementation of systems like ERP.
For a company to have successful ERP implementation, it is necessary for the company to reengineer its business processes. The company should analyze the current processes, identify activities that are not adding any value, and then redesign the process so that to create value for clients. Later, the company will modify and ERP system, which will suit the requirements of the company. Reengineering the business processes when implementing ERP is a customized solution in keeping with the culture, structure, employee need, and existing IT resources of the organization (Leon, A 2008). A firm with a successful implementation of ERP outcomes with BPR is Nike. Nike was able to increase its productivity after reengineering its business processes following the implementation of ERP.
When the company reengineered its business processes, the company was able to provide services that added value to customers and also improved the way it dealt with its customers. Many practices got changed through reengineering as it helps the company to change its old practices so as to ensure that it is servicing customers much better (Karni, R & Shtub, A 2010). The objective of implementation of ERP system is usually to put in place infrastructure architecture and application, which fully and effectively support the business plan of the enterprise and the business process. Once Nike reengineered its business process it was able to increase its productivity as reengineering captures the knowledge of experts into the system; thus resulting into productivity increase.
Successful implementation of ERP should not always be accompanied with BPR. ERP implementation can also be successful without the need of reengineering the business processes. BPR is an expensive exercise, risky and also consumes time. Reengineering process from BPR can have a significant risk if a decent ERP package not chosen. Ownership and process orientation may lack from the employees that will lead to implementation difficulties. A successful implementation of ERP should not always be accompanied by BPR. To ensure that the implementation is successful, it should be accompanied by project management.
Question 3
ERP implementation process can be referred to as a life cycle. There are several stages that should be followed during ERP implementation process. The first stage includes pre screening the chosen package. A team of experts should perform some tests so that to determine if the package is appropriate for the range of application in the field. The experts should also ascertain the software level of coordination that it would be able to achieve when working with the different departments. This stage involves determining if the various departments will offer increased output with the implementation of ERP.
The second process is preparation for the venture. This is the stage where ERP implementation is defined (Karni, R & Shtub, A 2010). The determination of the regulations and conditions happen in this stage, which is done by a team of officers. The officers then report to the highest authority in the organization. The third stage is project planning, which involves designing of the implementation process. The implementation details are worked out at this stage where the time schedule and deadline are decided. Responsibilities assigned roles allotted, and the plan gets chalked. The starting date is determined, and a committee of team leaders does the planning.
The fourth stage is the GAP analysis where identification of the gaps in the company done that requires to be traversed. This happens in order for the practice of the company can sync with ERP environment. GAP analysis involves large expenses, but it is unavoidable. Restructuring of the business usually decided based on the analysis. The fifth stage is designing the system. This stage helps in deciding and resolving the areas that are essential for restructuring (Karni, R & Shtub, A 2010). This stage normally chosen from the models of ERP implementation. Reengineering is the sixth stage that involves evident change in the employee number and their responsibilities that results because of a more efficient and automated system. It is during the reengineering stage that the human factors get considered.
The seventh stage is team training where the employees prepared to use ERP. During team training, the employees usually trained and prepared to handle the system on a regular and daily basis. Testing is the eighth stage and it usually marked up with attempts of breaking the system (Karni, R & Shtub, A 2010). Testing need to be done so that to find the weak links that can be corrected before implementation. The final stage of ERP implementation process is post implementation. It involves the efforts and measures taken to attain better benefits. The company must ensure that the implementation process is safe and smooth. Implementation of ERP replaces the legacy system when it becomes expensive to maintain or when it becomes too complex to be adapted in the ever changing business environment.
Question 4 A
ERP makes it easier to implement supply chain management in the firm. ERP develops better customer interaction and insight. Today, when building a strong relationship with the clients, it is necessary to listen and understand them. In order for this to happen, the firm must maintain a holistic view of the clients. Achieving this may be through the supply chain systems, customer service, sales and marketing, and internal database information. The ERP help in providing this integrated view; thus, enabling the manufacturers to look beyond and get a better understanding of the wishes of the customers. Those firms that are using ERP help the supply chain management to make sure that they are meeting the needs of the customers (Kuei, C & Madu, C 2005). This is through providing customers with the products and services that they require.
ERP helps the firm to achieve global visibility in the supply chain driven by demand. With the tight cost management, manufacturers should optimize the inventory investment and provide excellent customer services. In order to do this, the manufacturer should know where the inventory is in the entire supply chain and the ERP system helps in providing this. By providing information where the inventory is helps in enabling the manufacturer to provide a better plan for resupply and production in customer relationships. ERP systems help the firm in lean manufacturing, supplier integration, and global sourcing. It is essential to manage to the lowest manufactured cost possible. This means lean manufacturing, which is driving an increase in the speed and time of response for all participants in the supply chain. In SCM, in order to locate the best suppliers, comprehensive supplier database should be provided (Kuei, C & Madu, C 2005). This enables the manufacturer to recognize some of the new opportunities for low cost. ERP systems have been able to provide firms with this database that has enabled implementation of SCM.
Some of the challenges that ERP face in the implementation of SCM includes their insufficient extended enterprise functionality. The current ERP system developed in order to manage the flow of goods in a single enterprise, but the market is moving into inter organizational supply chain. Firms with this system find it hard to inter connect with other systems. Another challenge is the flexibility of adapting to the supply chain needs that are changing. Then ERP systems are not flexible hence not being able to change with the change in customer demands. The third challenge is the lack of functionality beyond management of transactions (Kuei, C & Madu, C 2005). The ERP systems usually have the capability of figuring out the appropriate way of delivering products to customers. The problems with firms that have the ERP system are deciding whether it is meaningful, economically to allocate the supply chain capacity to that customer. This is a challenge to the firm because ERP systems do not have this functionality.
Question 5
ERP has three tiers that include tier 1 ERP. This is the software for the large enterprise. The large enterprise includes the multinational, multisite corporations. Tier 1 customer is the firm with revenue in excess of $200 million and it has various sites geographically dispersed and in multiple companies (Pour, M 2002). The primary ERP vendors that included in this tier are Oracle, Baan, and SAP. These are the players in the tier 1 ERP. The second tier is Tier 2 ERP. This is the tier that is the largest of all when considering the number of potential customers. Tier 2 is a midsized tier with the customers of the software in the $20 million to $200 million (Pour, M 2002).
They are a few localized sites for instance; a company with the main office in California, a manufacturing facility in Ohio and also a distribution outlet in Texas can be tier 2 customers. Customers of tier 2 are single site with the revenue being the main indication. The problem that the tier is facing is that the players in tier 1 are pushing down to tier 2 space. The market in the arena of tier 1 is small, and in order for the players to continue with expanding the business, the players in the tier are reducing the cost. They are also simplifying the cost of the transaction and offer incentives like outsourced hosting. It allows the medium sized company to have tier 1 features.
The third tier is tier 3 ERP. The software designed for customers of single sites under $ 40million. The companies in this tier have users between 5 and 30 who have less demanding needs. These are companies that are growing and looking forward to expanding their capabilities. They are companies ran by families or small corporations. The first trend of ERP is Hype of the Software as a service, which allows any size of the company to have the capabilities that ERP is bringing (Pour, M 2002). The second trend is strong vertical focus. This second trend got large impact on the channel strategies of most software vendors. The third trend is mobility where tablets and smart phones are transforming people to mobile age. Almost all employers are pushing the employees to be accessible through the mobile devices.
Reference
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