March 29, 2015

The Silo Effect (Information Silo)

This article will discuss about The Silo Effect, its drawback in a functional organization and how ERP systems like SAP helps to manage it.

Employees in the different functional areas have tendency to perform their steps in the process in isolation, without fully understanding which steps happened before and which steps will happen after. They are just focused on their specific tasks which lose the sight of the “big picture” of the larger process. This is known as the Silo Effect or Information Silo.

To make it simpler to understand, let’s take an example of our batch where we have completed GBI simulation exercise on SAP system. By using this ERP System, We (ERPI-Module Students) performed a series of tasks for Sales and Distribution (SD) Case Study, taking on roles of various people involved to perform an integrated order-to-cash cycle. This gave us the “big picture” of the larger process however in real life without the support of ERP system, Mr. Mathias Dosch was using the new information to create a customer inquiry. While, Mr. David Lopez was responsible for creating a customer quotation and sales order, unaware and not concerned with customer inquiry generation process. This continues further where he is not concerned with the new details being used by Mr. Sandeep Das to check the stock in warehouse to fulfil new sales order.

Moving on, this silo nature of the functional organizational structure can be a drawback. The employees are completing their specific tasks without regards to the consequences for the other components in the process. This is simply reducing the co-ordination amongst them. Companies nowadays require “think side-ways” attitude from their employees. Therefore, ERP systems are helpful in managing business processes efficiently and we have already experienced this advantage by using them during our simulation exercise.

The learning outcome from this article is that to view a business process from end to end is essential in understanding how enterprise systems help businesses manage their processes efficiently and this understanding has become a critical skill that companies have come to demand from their employees.

Article by Muhammad Umer Noonari (1461606)

Reference: Magal, Simha, and Jeffrey Word. Integrated Business Processes With ERP Systems. Hoboken, NJ: Wiley, 2012. Print.

- One comment Not publicly viewable

  1. Brilliantly highlighted the silo effect normally occurred in the real life situation of an organisation and subsequently relating to the in-class experience.

    Secondly, adding to this blog, one of the most influential mistake many ERP projects indicate by not considering to undertake a common understanding of all the employees daily activities. Thus potential opportunities for improvement are stagnated.

    Consequently, employees do not need to consider it as a luxury of automation but a necessity where incremental opportunities are further expected. Although employees collectively understand the processes but still have different individual view regarding the processes.

    04 Apr 2015, 20:24

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