ERP FOR
COMPETITIVE ADVANTAGE
Enterprise
Resource Planning (ERP) systems are core software programs developed
for use by corporations to help them integrate their information system for
each and every area of the business. ERP programs are designed to bring and
create a common database out of many that are available to them ,to manage a
single business process. A business process can be defined as a set of collective
activities that takes inputs gathered for processing and delivers output in the
form of a report or forecasting of some sort , which becomes meaningful to the
user. ERP software’s when integrated supports the most efficient operation any
kind of business process by seamlessly integrating various tasks such as
marketing and sales , production , transportation and logistics , Accounting
and finance , human resource and staffing to name a few.Moreover ERP brings Automation to most
of the processes involved .
But
to implement a fully automated ERP platform an organisation needs better
trained staff which has the requisite knowledge of using it to derive maximum
benefit.
Caution
Having
said that the real problem lies in the selection and integration of the ERP in
the Long Run. It’s a very arduous task
and the possibility of failing is quite high. What an organisation can
and must do in such a scenario is to find the right people to handle the ERP
system. There are at least three basic parameters to be fulfilled to manage ERP in the best possible manner. People are at the forefront, then the existing
processes and then of course the technology involved. ERP is always a change
that’s required but People involved in this needs to be trained so that they
understand the change and implement it wholeheartedly.
The
financial benefits of an ERP system is always pretty daunting to calculate
because sometimes ERP increases sales and decreases expenditure in many ways
which can’t be measured in the normal manner. Similarly there will be changes
over a long period of time and can’t be tracked and be converted into figures .
So there is every chance that initially ERP will be resented by some.
But
ERP overall changes the group dynamics and bring very radical ideas to the
table.The overall advantages brought in by ERP can be analysed from the
following real life cases:
ERP
Allows for Expansions
Au
Bon Pain, the bakery and café chain based in Boston, operates 200 outlets in
the United States and Asia. Over the last three years, Health magazine
has named Au Bon Pain one of America’s top five healthiest fast-food restaurant
chains. The company had an interest in expanding, and Tim Oliveri, the
company’s chief financial officer, wanted Au Bon Pain to be able to react to
market changes more rapidly while also reducing its costs.
The
company’s existing information systems were holding it back, but the company
decided to bring in a new SAP ERP system and helped itself to achieve these goals.The new ERP system
replaced disparate systems, some of which were in paper format. This integrated
enterprise system brings the storefront to the back office through a number of
different module implementations. With the single system, the company is able
to reduce its financial reporting cycle from weeks to days, and the system
allows better management of its workforce through a Web-based portal. In
addition, the new system facilitates greater compliance with financial
regulations and better sales management, along with the electronic purchasing
of all raw materials.
One
impetus for installing this ERP system was for management to be able to analyse
and digest information on market conditions, and react quickly to open new
stores or renovate existing stores. For example, cafés in New York City have
recently undergone major renovations, resulting in double-digit sales
increases. More cafes are planned to open soon.
Sales
and Operations Planning (SOP)
Sales
and operations planning (SOP) is typically used in for-profit manufacturing organizations;
however it can be applied to others as well.
For example, the non-profit America’s Blood Centres
is a network of more than 600 donor centres supplying over 3,500 hospitals and
healthcare facilities in North America.
As
with any business, a blood centre must quickly identify variations in forecasted
supply and demand and take action to lessen the potential negative effects of
those variations. For instance, if the demand for SDPs at a blood centre falls
below projections, “the excess SDPs may be exported if they have sufficient
shelf life remaining, or donors may be rescheduled to reduce supply. If SDP
demand spikes, recruitment and collections may have to work overtime to recruit
more donors.”
Blood
banks may not be for-profit companies, but they cannot operate at a loss either.
By using measurements, such as RONA (return on net assets), a blood centre can
help blood centres avoid situations in which “the cost per unit (CPU) collected
is higher than the sales cost of a unit to the health care provider or what an
imported unit would cost.”
One
of the major challenges to applying the sales and operations planning process
to blood banks is data accuracy. The authors note that it is not uncommon to
have data inconsistencies between the blood management system and the financial
system. Without accurate and consistent data, the results of the sales and
operations planning process would not be valid.
Solving
Complexities of Supply Chain Management with ERP
Over
the last few decades, a number of industry trends have focused on making supply
chains more efficient and effective. The first of these started in the 1980s
when techniques developed at the Toyota Motor Company, now commonly referred to
as lean manufacturing, started to be accepted and copied by companies
around the world. The main idea embodied in lean manufacturing or the Toyota
Production System (TPS) is that waste must be eliminated. The TPS identified
inventory resulting from “overproduction” as waste. Much of industrial
practice, especially in the United States, was focused on the idea that
efficiency should be measured by having each machine produce to its maximum
capacity. The TPS approach was that a company should produce exactly what is
required when it is required. The TPS emphasized “pull” systems, where customer
demand triggers production, rather than “push” systems, where planning methods
like MRP are frequently used to push material through the supply chain to the
customer in anticipation of demand.
A
second important trend has been a decrease in vertical integration of companies.
It means the extent to which a company
produces the components and assemblies used in the products it manufactures.
A
third trend is supply base rationalization, an effort to determine the
“appropriate” number of suppliers a company should have. Many large firms have
thousands of suppliers. However, the rationalization concept says that better
supplier relationships can be developed when there are fewer suppliers to
manage, and costs will be reduced when a smaller number of suppliers have
higher production volumes. In 2008, Ford’s Senior Vice President of Global
Purchasing announced that Ford would be reducing its supply base from over
2,000 suppliers to 700 to 800 over a period of years.
These
trends—lean manufacturing, reduced vertical integration, and supply base rationalization—have
been implemented by manufacturers in a number of industries over the past 30
years and have resulted in higher efficiencies and reduced cost.
Japanese-based
companies such as Toyota were obviously affected by disruptions from time to
time, but the integrated nature of global supply chains meant that the effect
of the earthquake rippled throughout the world. For example, the three largest
shipbuilders in the world are located in Korea and are dependent on Japanese
steel, and the Japanese steel industry was significantly impacted by the
Fukushima nuclear power plant disaster, which was triggered by the tsunami that
followed the earthquake.
Toyota
is now planning to lead the way in reducing supply chain risk. In September
2011, they announced plans to create a
robust supply chain that would recover within two weeks in the event of another
massive disruption. This plan consists of three fundamental steps. First,
Toyota intends to push for further standardization of parts across Japanese
automakers so they can share common components, which could, in turn, be
manufactured in several locations. The second element in the plan is the
development of technology that would provide more options for parts that
require unique materials or components that are only available from one source.
Finally, Toyota plans to make each region in the world independent in its parts
procurement so that a disaster in Japan would not affect production overseas
& vice versa.
Conclusions
Today’s
Managers think in terms of Business processes integrating all the related
functional areas and bringing in efficacy & competitiveness. To integrate
and cooperate all the things, there is need for sharing of information between
various platforms and relates partners.ERP brings these capacity by integrating
all the different sources of information to a common information platform. for
example when Marketing and sales people use the same data platform ,efficiency
will kick in. There are various fundamental changes happening in the ERP sector
as envisaged by the TOYOTA example. The need for doing business in a coherent
manner gives rise to new innovations each and every day.
Technologies
such as radio frequency identification (RFID) and smartphones are fueling explosive
growth in the amount of data available for businesses to process. This data can
provide real business value, but the challenge is how to manage and evaluate
this data to gain business knowledge. Business intelligence (BI) tools are
growing in sophistication and power. Technologies such as in-memory computing will provide greater
speed and flexibility to BI users and will increase the number of employees in
a company that can make use of BI.
Mobile
computing technology is increasing the use of ERP and BI data by making it more
convenient to access data when and where it is needed. Cloud computing has also come in which is the
delivery of a software product to a user via the Internet. The user typically
accesses the cloud product through a Web browser or a lightweight (meaning small
and simple) application for a computer or mobile device.
All
these innovations while being essential and required for cutting edge
technology in sales and Marketing they also bring in the advantage of First Mover
into the industry. Those who foresees the importance of them earlier than
others reaps the benefit more than anybody else in the Market. One has to not
only move ahead to fuel growth and sustainability but has to constantly
endeavour to remain that way. Unless corporations find newer methods and programmes
to redesign and redevelop the competitive advantage can be frivolous in the
long Run.
References
1. http://scn.sap.com/community/erp/blog/2013/03/11/a-new-application-that-makes-it-easier-to-find-sap-correction-notes(Kristen
Scheffler) March 11,2013
3. ERP demystified by Alexis Leon Tata McGraw-Hill Education, 2008
