ERP FOR COMPETITIVE ADVANTAGE

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

2. http://www.aabschools.com/case_studies/587.html(david west)

3. ERP demystified by Alexis Leon Tata McGraw-Hill Education, 2008

4. ERP: Making It Happen: The Implementers' Guide to Success with Enterprise  By Thomas F. Wallace 2001

5. Enterprise Resource Planning  By Bret Wagner, Ellen Monk,2008