ERP (Enterprise Resource Planning)

The emergence of the Internet, evolving customer demands, pressure to accelerate business process, and the need to establish more collaborative relationships with key suppliers and business partners are all pushing organizations towards ERP solution. So, what is ERP?

Enterprise Resource Planning (ERP) is described as an “information system package that integrates information and information based processes within and across functional areas in an organization” [1].

Traditional stand-alone applications were designed for specific customers, with limited functionality, and isolated from other applications. On the contrary, ERP is a business tool that integrates all the applications required by an organization as a whole, and connects the organization to other enterprises in a network form. It is usually compromised of several modules such as: a financial module, a distribution module, or a production module. Today, ERP have added new functions such as supply chain management, product data management, electronic commerce and warehouse management. Thus, ERP opens a window of opportunity for businesses to compete globally, respond to competitive pressures, and increase revenue.

ERP Characteristics & Basic Operations:

ERP facilitates company-wide Integrated Information System covering all functional areas like Manufacturing, Selling and distribution, Payables, Receivables, Inventory, Accounts, Human resources, Purchases etc.

– ERP performs core business activities and increases customer service satisfaction.

– ERP facilitates information flow across different sections or departments of the organisation.

– ERP bridges the gap between business partners allowing ongoing collaboration.

– ERP is a good solution for better project management.

– ERP is built as open system architecture, meaning it allows automatic introduction of the latest technologies such as: Electronic Fund Transfer (EFT), Electronic Data Interchange (EDI), Internet, Intranet, Video conferencing, E-Commerce etc.

– ERP not only addresses the current requirements of the company but also provides the opportunity of continually improving and refining business processes.

– ERP provides business intelligence tools like Decision Support Systems (DSS), Executive Information System (EIS), Reporting, Data Mining and Early Warning Systems (Robots) for enabling people to make better decisions and thus improve their business processes.

– ERP tracks a wide range of events in an organisation, and plans for future activities based on these events.

ERP driving forces:

1. The need to increase supply chain efficiency.

2. The need to increase customer access to products or services.

3. The need to reduce operating costs.

4. The need to respond more rapidly and flexibly to a changing market place.

Global ERP Implementation:

Historically, most international companies have managed their systems on regional basis, because there was no single solution that was globally acceptable.

In today’s dynamic business environment there is a strong need for the organisations to become globally competitive. The key for success lies in customer satisfaction, through understanding customer needs, and providing quality goods and services in the shortest time possible. To support a global outlook, many firms implemented or are in the process of implementing Enterprise Resource Planning (ERP) Systems, in order to improve level of coordination among national entities of the same firm, and also with business partners. However, to achieve this level of coordination it is important to have a global market strategy, a common IT infrastructure, and business processes in place.

An analysis of past global ERP projects, highlight on the importance of aligning organisation structure with business process and business strategy with IT strategy in order to compete in the international market. ‘Threads’ is a good example of an international company that replaced its legacy system with ERP. ‘Threads’ had a national organisation structure that operates on country by country basis.

To obtain a global view ‘Threads’ decided that its time for change by transforming the company from a local to a global geographical perspective. Hence, making Europe as one market for their business operations, and also ensuring competitiveness through a focus on the quality, price, and customer service. The intended organization structure and supporting global ERP is shown in [2].

Enabling Technologies:Traditional ERP systems required sophisticated and expensive information technology infrastructure such as, mainframe computers. Nowadays, with the advancement of information technology and the cost reduction of computers it becomes possible for SME’s to think about ERP Systems. Moreover, the power of Three Tier Client Server architecture and scalable relational data base management has made it easier to deploy ERP Systems in multiple locations.

Implementation of ERP

Implementing an ERP project is a process consisted of many phases. Following, a step by step approach will simplify the process and is more likely to yield a better result. The normal steps involved in the implementation of an ERP are as below:

o Project Planning

o Business & Operational analysis including Gap analysis

o Business Process Reengineering

o Installation and configuration

o Project team training

o Business Requirement mapping

o Module configuration

o System interfaces

o Data conversion

o Custom Documentation

o End user training

o Acceptance testing

o Post implementation/Audit support

In short, implementing ERP can transform the way an organization conducts business. It helps the enterprise link its resources, utilise and allocate them in the best possible manner and control them on real time basis. For instance, in the case of ‘Threads’ the transformation from Legacy system to ERP system resulted in a reduction of data redundancy, reduction of overheads, an increase in customer responsiveness and customer service levels throughout the firm. This has been facilitated by implementing a common global ERP system throughout its European operation.

Critical factors for Success of ERP:

The successful implementation of an ERP project requires management to plan carefully, and have all needed human and financial resources in place. Below is a list of the main critical factors for the success of ERP:

1- Top Management Support:

Among the most important factors for the success of ERP project is the top management commitment and support. The role of top management includes, developing an understanding of the capabilities and limitation of the proposed system, setting goals, and communicating the corporate IT Strategy to all employees [3].

2- Project Management:

Another important factor for the success of ERP is managing the project life cycle from initiating to closing phase. The Project Manager (PM) has sole responsibility and authority for planning and controlling the project scope to meet the deliverables in the given time frame and budget.

3- Selection of the appropriate package:

Selecting the appropriate package is an important managerial decision. Analysing and evaluating the organisation needs and processes help in taking the right choice that best suits the business environment. A careful selection of the right package results in minimum modification and successful implementation and use. On the hand, selecting the wrong software may mean a commitment to architecture and application that do not fit the organizational strategic goal or business process [3].

4- User training and education:

A quality implementation can de derailed by poorly trained employees who do not know how to properly operate the ERP system. The knowledge transfer to employees is arguably more important than the quality of the system. For that reason, companies should use consultants to run training sessions on how the system works, and how they relate to the business process.

5- Business Process Re-engineering:

Business Process Reengineering is a pre-requisite for going ahead with implementing ERP system. An in depth BPR study has to be done before taking up ERP. Business Process Reengineering brings out deficiencies of the existing system and attempts to maximize productivity through restructuring and re-organizing the human resources as well as divisions and departments in the organisation

6- Dedicated Resources:

One of the main critical factors for ERP success is determining the human and financial resources needed to implement the system. This should be done at an early stage of the project. Failing to commit the required resources often result in schedule and cost overdue.

7- Project Team Competence:

Another key element of ERP success or failure is related to the knowledge, skills, abilities, and experience of the project manager and team members. The project team should work in a coordinated way to achieve one goal. Hence, it is vital for team members to have technical and business skills to complement their work.

8- Clear goals and objectives:

Setting clear goals and Identifying the Objectives of the ERP Project is the third most critical success factor. The initial phase of any project should begin with a conceptualization of the goals and possible ways to accomplish these goals. It is important to set the goals of the project before even seeking top management support [3].

9- Ongoing Vendor Support:

Ongoing vendor support represents an important factor with any software package. ERP systems require ongoing vendor support to keep them up to date with the latest modules and version. In addition to this, vendor support provides technical assistance, and maintenance.

10- Interdepartmental communication:

Good communication is a key component for the success of ERP. Hence, it is essential to communicate effectively between team members and the rest of the organization, in order to keep everything working properly.

To conclude, ERP implementation could become a complex and risky process, if not managed properly. Organizations need to identify the critical issues that affect the implementation process. Such as: selecting the appropriate software package, securing commitment and support from top management, cooperation from business partners, having adequate knowledge among team members, training employees and keeping them informed. All those issues and other more can minimize the failure of ERP project and maximizes the success of ERP implementation.

References:

[1] Kumar, K. and Van Hillegersberg, J. ERP Experiences and Evolution, Communication of the ACM, (43:4), pp. 23- 26, 2000.

[2] Holland C. and Light B. (1999) Global Enterprise Resource Planning Implementation Retrieved August, 27, 2005 from: http://csdl2.computer.org/comp/proceedings/hicss/1999/0001/07/00017016.PDF

[3] Somers T.M., and Nelson K. (2001), The Impact of Critical Success Factors across the Stages of Enterprise Resource Planning Implementations, published in 34th Hawaii International Conference on System Sciences 2001, Hawaii

[4] Holland C.P, and Light B. (1999), A Critical Success factor Model for ERP implementation, IEEE Software, May/June 1999, pp. 30-36

[5] Hammer M. and Champy J. (1994) Reengineering the Corporation, New York, Harper Business.

[6] Kerchevak M. (2005) Five Steps to an ERP Solution, Retrieved September 3, 2005 from: http://archives.tcm.ie/businesspost/2005/06/05/story5254.asp

[7] Robinson S. (2004) A Developer’s Overview of ERP, Retrieved September 1, 2005 from: http://www.developer.com/design/article.php/3446551

Benefits Of Enterprise Resource Planning (ERP) Systems

Business owners demand instant and low-cost solutions that are easy to upkeep and maximize return on their investment. Enterprise resource planning – ERP systems fit the bill perfectly and hence have become popular with many businesses, especially in implementing the the resource efficiency lessons learned during recent recessionary periods. In fact, now not only multi-million dollar businesses that deploy such systems, but also small-sized units and even start-ups.

So how will your business benefit from an Enterprise resource planning software system? Here are the lures that have prompted business owners to walk the ERP road:

Reduction in Operational Costs: Deploying an ERP software system holds benefits for all three process streams of an organization-strategic planning, production control, and management control. Such a system integrates varied business processes across the myriad of departments in an organization into a single and comprehensive information repository. This integration makes communication smooth in-between departments and this improved communication, in turn, imparts a degree of efficiency in the production, planning, and decision making processes. This efficiency is manifested in various ways-lower production costs, less marketing expenses incurred, and less need for securing help desk support.

Facilitating Inventory Management: Businesses these days are located in various geographical regions. Administrative units, warehouses, and back-end support offices are spread all over the world and this leads to complexities in managing the inventory in these locations. An Enterprise Resource Planning (ERP) software system lets you maintain detailed inventory records, keep a track of materials and lot, thus simplifying your inventory transactions. With an ERP system empowering you, you can keep inventory volumes at optimum levels.

Streamlining Day-to-Day Management: An Enterprise Resource Planning (ERP) system streamlines the process involved in carrying out the day-to-day tasks of managing a business. This is primarily because an ERP software system facilitates the creation of a backbone data warehousing system. This makes it easy for the employees of an organization to easily gain access to updated business-related data. This ready access to data eases the process of decision-making and exerting managerial control over key factors of production.

Support to Resource Planning: Resource planning forms an integral component of the strategic planning process that is carried out in an organization. Enterprise Resource Planning (ERP) systems are therefore designed to take on the tasks involved in planning resources effectively and efficiently, and over the years, this functionality has improved in leaps and bounds.

So where can you obtain an Enterprise Resource planning (ERP) software system that will provide you with all these strategic benefits? ABAS Software Partner has ERP software solutions that will take care of the varied resource planning needs of your business.

The Five W’s of Human Resource

Why have an HR function?

A well-established HR function will:

• increase your productivity

• reduce your overheads

• increase your employees commitment to your business

• improve your employee/employer relationship

• minimise risk in employment relationships

• assist in establishing your business strategy

• help put your strategy into an operational plan

• enable you to measure significant milestones in your operational plan

What will an HR function provide?

An HR function is designed to provide you with some practical tools and advice such as:

• an employment agreement

• a robust recruitment process and tools

• a performance management system

• tools and support for managing performance problems

• metrics regarding your people

HR will contribute to your construction of a strategic business plan integrated with sound people plans.

Following on from your strategic business plan is the compilation of operational objectives and action plans for employees with measures to monitor the progress and results.

These operational objectives mean you will have a way to measure and reward employee behaviour.

As your company grows and requires more resources or changes to your organisational structure the right HR person will be able to work with you to identify your business needs, establish a process and guide you through the change process to achieve maximum employee buy in and minimisation of risk. This would apply to change involving downsizing as much as change resulting from growth.

When should you put in an HR function?

Human resources starts from the moment you no longer can run your business with just you and you start on the process of planning how to meet your business requirements by hiring staff. It is the quality and intentionality of your HR function which drives when you should consider a dedicated HR resource to manage the HR function.

The rule of thumb is when you have 80 plus full time employees, you warrant having a dedicated full time resource in your own company. Up to that number you can outsource your function to qualified professionals who will achieve the same objectives on a part-time or contract basis.

Where would you find qualified professionals?

You could find suitable resources from finance/management consultants who offer HR resources as part of their auditing services as do some recruitment/management consultants. Lawyers may offer employment agreement templates. Some business associations offer templates and have internal advisors to assist businesses in employment related matters. Using non-HR specialists, particularly management consultants can be an expensive option, and often they lack the whole of business approach.

Another avenue for help with this function is through human resource experts who have set up their own consulting business. They offer the HR function on an hourly or monthly fee basis and work with you in your business on an as need basis. This is a more holistic and cost effective way of having a function which can be fully integrated into your business. These people can be found on the internet, through your human resource institute or local business association.

Who is the best consultant to choose?

The best people are those who are experienced Human Resource consultants. They should have both the qualification and the experience in order to understand your whole business and can partner with you. Look for someone who has worked either in your industry sector and/or over a broad spectrum of organisations, who has a proven ability to understand business needs. Check to ensure they have sat on management teams and can talk sales, marketing, operations etc., and can understand finance and customer service. You want someone who can think strategically but yet are operational. Also check to ensure they have personal credibility. Will they do what they say they will?

Conclusion

A quality human resource function is a major asset to your business. The sooner you ensure you have such a function the earlier you will start to see positive results in your company. It may not need to be a large financial commitment, but it does involve finding the right professional to manage that function for you.

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