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Thursday 26 January 2012

chapter 12


Enterprise resources Planning (ERP)
Today’s managers require real time views into their businesses so they can make decision when they need to. Enterprise resources planning (ERP) integrates all department and function throughout an organization into a single IT system (or integrated set of system) so employees can make decisions by viewing enterprise wide information about all business operation.
Many organizations fail to maintain consistency across business operations. If a single department, such as sales, decides to implement a new system without considering other department, like marketing and accounting, inconsistencies can occur throughout the company, and operations can become discontinuous, like silos. Enterprise resource planning systems provide organizations with consistency. They allow for the effective planning and controlling of all the resources required to plan, sources, make, and deliver goods and services.

Bringing the Organization Together
The key word in enterprise resources planning is enterprise. At the core of an ERP system is a central database that gathers transactional data from operational systems across the company. Each time information is altered, it is automatically updated throughout the entire system. For example, sales representatives can access the ERP system automatically routes it to the next department in the order process.

The Evolution of ERP
ERP is an outcome of 40 years of trial and error. It has evolved as a strategic tool because of continuous improvement in the available techniques to manage business and the fast growth of information technology.
Prior to 1960s, business had to rely on the traditional ways of inventory management to ensure smooth functioning of the organization. These theories are called classical inventory management of scientific inventory control methods. The most popularly known amongst them is EOQ (Economic Order Quantity).
In this method, each item in the stock is analyzed for its ordering cost and the inventory carrying cost. A trade off is established on a phased out expected demand of one year, and this way the most economic ordering quantity can be decided. This technique in principle is a deterministic way of managing inventory.
Along with EOQ, we find various inventory models such as fixed order quantity, periodic order method, optional replenishment method, etc., which were in practice earlier. These theories were very popular in pre-MRP era.
In 1960s, a new technique of Material Requirements Planning, popularly known as MRP, was evolved. This was a proactive manner of inventory management. This technique fundamentally explodes the end product demand obtained from the Master Production Schedule (MPS) for a specified product structure (which is taken from Bill of Material) into a detailed schedule of purchase orders or production orders, taking into account the inventory on hand. MRP is a simple logic but the magnitude of data involved in a realistic situation makes it computationally cumbersome. If undertaken manually, the entire process is highly time-consuming.
MRP successfully demonstrated its effectiveness in reduction of inventory, production, and delivery lead times by improving coordination and avoiding delays, thus making commitments more realistic. MRP proved to be a very good technique for managing inventory, but it did not take into account other resources of an organization. In 1970s, this gave birth to a modified MRP logic, popularly known as closed loop MRP. In this technique, the capacity of the organization to produce a particular product is also taken into account by incorporating a module called capacity requirements planning (CRP)

Year’s
Evolution
2000s
Extended ERP
1990s
Enterprise Resources Planning (ERP)
1980s
Manufacturing Resources Planning (MRP 2)
1970s
Material Requirement Planning (MRP)
1960s
Inventory Control Packages

ERP systems can support numerous business processes far beyond order processing, such as employee benefits and financial reporting. An ERP system can also support supplier and customer business process infiltrating the entire value chain and helping the organization achieve greater operational efficiency.


Measuring ERP Success
One of the best6 methods of measuring ERP success is the balanced scorecard, created by Dr. Robert Kaplan and Dr. David Norton, both from the Harvard Business School. The balanced scorecard is a management system, as well as a measurement system, that a firm uses to translate business strategies into executable tasks. It provides feedback for both internal and external business processes, allowing continuous improvement. Kaplan and Norton describe the balanced scorecard as follows: “The balanced scorecard retains traditional financial measures. The balanced scorecard uses four perspectives to monitor an organization:
1.    The learning and growth perspective
2.    The internal business process perspective
3.    The customer perspective
4.    The financial perspective


Integrating SCM, CRM and ERP

 CRM, SCM, and ERP and so on. But there is just one way to get maximize revenue and profits synchronize supply and demand in real time while ERP applications help a business to manage the important parts of supply chain operation, interaction with customers, order tracking and parts purchasing although it’s neither SCM nor CRM

That is many companies led to a growing number of integration challenges for e-businesses of all sizes and types. Unfortunately, most of companies believe to making a web site and scrambling to get an e-commerce at first phase of building an e-business. That's not fortunate since usually there was little or no consideration how scalable or reliable the site needed to be or even how captivating the content. It was just a matter of beating the competition. And unfortunately, these first-to-market consumer sites were rarely integrated with the manufacturing side of the business, which was establishing its own Internet-based relationships with suppliers or consumer. This lack of integration has proved to be significant
 challenge for many organizations as the customer base has grown, real-time orders status requested and products returned.

In other words, considering SCM and CRM separately can result in missed opportunities and poor performance. Some bridges are necessary between them that are enterprises should consider. And it's not possible without an integrated strategy. As a result an e-business model can help to step forward and guaranty success. Some computing and IT companies offer some software solution which couldn't warranty to reach goals.
We try to offer a model so that each enterprise should adapt it with their needs and their sections. The model will show the implementation steps as well as integrating processes are necessary in an e-business.


Integration Tools
Implementing a new ERP system does not always guarantee successful results. There is according to Bermudez (1998) number of reasons why ERP systems failed to improve manufacturing planning:

·         The level of detail in ERP systems is too rough for adequate decision making. Also, the existing technology which is used for ERP systems does not allow greater detail for real time analysis and simulation, which enables adequate decision-making;
·         The tools used within ERP systems are used infrequently and are sometimes incomprehensible for senior management; and
·         There is no consideration given to the interdependency of material and capacity availability (Bermudez, 1998). Other reasons why ERP systems failed according to Kapp et al., (2001) can be:
·         Inadequate training: As companies try to cut back on the budget for implementing an ERP system, the first item on the chopping block is often training. This will seriously hamper long term chances of success.
·         Employees’ resist: The real reason ERP implementations fail is because employees resist the new ERP software rather than embrace it (Kapp et al., 2001). Companies fail to reconcile the technological imperatives of the ERP with the business requirements of the enterprise itself (Davenport, 1998). If a company rushes to install an ERP without first having a clear understanding of the business implications within an Internet economy, the dream of integration can quickly turn into a dreadful.
·         The logic of the ERP may conflict with the logic of the e-business. Thus, the main reasons for ERP implementation failures are due to business and management problems (Davenport,1998; Al-Mashari, 2003).

Enterprise Resources Planning’s Explosive Growth
No doubt that the market for Enterprises Resources Planning (ERP)( A group of interacting, interrelated, or interdependent elements forming a complex whole) is in great demand. Industry analyses {to examine methodically by separating into parts and studying their interrelations} are foresting growth more than 30% for at least next 5 years Why are so many companies replacing their key business system with ERP? We have good reasons for that.
  • Cycle{The act or process of reducing} time reduction fast by ERP
  • Increased business agility in ERP {The state or quality of being agile ; nimbleness}
  • Inventory reduction{The state or quality of being agile; nimbleness}
  • Order fulfilment{To bring into actuality; effect} improvement day by day by using ERP
To Support business growth requirements
  • New products/product lines, new customers updated packages.
  • Global requirements including multiple languages and currencies for different countries.
To provide flexible {Capable of being bent or flexed pliable}, integrated, real-time decision support
  • Improve responsiveness across the organization every person takes works as.
To eliminate limitation in legacy systems
  • Century dating issues
  • Fragmentation{The act or process of breaking into fragments} of date and processing
  • Inflexibility{Not easily bent; stiff or rigid} to change
  • Insupportable{Not endurable; intolerable} technologies
To take advantage of the untapped mid-market (medium size organizations)
  • Increased functionality at a reasonable cost
  • Client server/open system technology
  • Vertical{Being or situated at right angles to the horizon; upright.} market solution























REFERENCES
     Alwabel, S A., Ahmed, A M. And Professor Zairi, M. (2005) Working Paper Series: The Evolution of ERP and its Relation with E-Business.
     Baltzan. Business Driven Information System (2008) McGraw-Hill Irwin
     Baltzan, Phillips, Haag. Business Driven Technology (2006) McGraw-Hill Irwin International Edition
     ERP Pandit.com your guide to enterprise resources planning (2010)     http://www.erppandit.com/
     Muhammad A. Rashid, Liaquat Hussain, Jon David Patrick (1996) The Evolution of ERP System: A Historical Perspective 1
     Nasrollah Moghaddan, Neda Abdolvand (2010) A Proposal Model in Integrating SCM, CRM, & ERP

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