Managing Risk using ERP

Can implementation of enterprise resource planning (ERP) ever be acknowledged as the ultimate risk managing strategy with in a business? There are numerous literatures surrounding the challenges of ERP implementation. However it must be recognised by CEO’s or senior management that ERP has the potential of performing beyond their expectation levels. ERP can enable business to manage risk in a collective perspective. There is interconnectedness amongst risks and the joined-up risks requires to be mitigated or managed considering the consequence on others. ERP can support businesses to managed risk in holistic manners, where the most crucial information of the business processes is held.

Lack of control due to consistent outsourcing is seen as a major risk to supply chains, ERP can help companies integrated in a modern manner. Where information can flow through numerous different levels between the customer and the outsourced party. ‘Information is power’ which means more information makes one competitive. However the increase in information sharing across supply chain make the supply chains even stronger (Christopher & Lee 2004).

ERP will further help reduce risk such as information distortion, which is caused because of exaggerated figures due to numerous reasons such as, promotional schemes causing forward buying from customers (Sunil & Sodhi 2004).

Supply risk and demand risks are managed using strategies such as, increase integration, building relationships amongst supplier and customers. Customer relationship management (CRM) has been included in the workings of ERP; it would be beneficial to investigate what results are achieved in terms of handling risk by managing the customer.

ERP systems are situated centrally with the elements of functional integration to improve business performance. One can argue that the challenges of implementing and operating ERP, undermines the benefits one can achieve from the system.

ERP has the potential of being used as an initial, essential tool for supporting the adopted risk managing strategies. If looked closely ERP is constantly managing risk for the business, by streamlining and automating the processes to make it less vulnerable to uncertainties, ERP constantly reduces mistakes and fraudulent activities, however one must understand the complete use of such systems in terms of handling risk.

Sources

Chopra, S. & Sodhi, M.S., 2004. Managing Risk To Avoid Supply-Chain Breakdown. MIT Sloan Management Review, 46(1), pp.53-62.

Christopher, M. & Lee, H., 2004. Mitigating Supply Chain Risk Through Improved Confidence. International Journal of Physical Distribution & Logistics Management, 34(5), pp.388-96.

Zain Tariq : 05 May 2013 17:12 |  Comments (0) |  Close comments |  Report a problem

The Role Of Enterprise Resource Planning

Enterprise Resource Planning is the process of implementing an Enterprise Resource Planning system and ensuring that it synthesises effectively with existing systems and software architecture within the business. Since the original development of ERP's in the early 1990s the sophistication of these systems has increased exponentially and with the complexity of organisational software and Management Information Systems (MIS's). Organisations have come to rely on ERP's to help them achieve their strategic goals and objectives which has increased reliance on management data and effective interface between various different management systems within the business. The role of an ERP is to bring together all of this information in a central repository so that managers within the business can be confident that they have the most accurate and timely information on which to base their decisions.

However it is unrealistic to think that a full organisational-wide ERP can be implemented in one attempt. Normally, it is necessary to adopt a modular approach to ERP implementation at various stages in the process. It is necessary to integrate the ERP with existing systems such as accounts packages and Materials Resource Planning (MRP) packages. One very popular ERP has been developed by the company known as SAP. This is a modular ERP which helps to improve and ensures that organisations gain return on their investment and information flows within the business remain accurate and timely. The reason for this is SAP has worked with many organisations to create a software solution which can be adapted to suit the needs of the business.

Sources:

- Kallunki, J. P., Laitinen, E. K., and Silvola, H. (2011) Impact of enterprise resource planning systems on management control systems and firm performance. International Journal of Accounting Information Systems, 12(1), 20-39.

- Su, Y. F., and Yang, C. (2010) Why are enterprise resource planning systems indispensable to supply chain management. European Journal of Operational Research, 203(1), 81-94.

- Momoh, A., Roy, R., and Shehab, E. (2010) Challenges in enterprise resource planning implementation: state-of-the-art. Business Process Management Journal, 16(4), 537-565.

: 05 May 2013 09:39 |  Comments (1) |  Close comments |  Report a problem

Should SMEs use ERP systems?

In the knowledge era of today, organisational performance relies deeply on the level of knowledge that can be obtained, used and retained within an array of organisations. Increasingly, firms are realising the importance of integrated information systems and enterprise resources planning systems as a tool to achieving higher performance and gain greater competitiveness within the business environment. Nevertheless, the implementation of these highly integrated systems have proven to come with a hefty price tag. Owing to its extreme price, it can be argued that traditionally, only large organisations are willing to pay and bare the risks these systems entails. The question is then, would it be worthwhile for small and medium sized enterprise to adopt an ERP system?

As the business world gets ever more competitive by the day, there are many advantages that can be brought to small and medium enterprises (SME) by implementing ERP systems. On top of the well-established advantages such as the shortening of lead time, integration of databases, refinement of business process etc... from different academic literatures. One significant unique benefit to SMEs is that ERP can bring SMEs closer to large enterprises. Traditionally, large enterprises relies heavily on the its established business processes and information systems. As a basic requirement, external organisations who aspire to partner with these large enterprises will incur huge costs in the adoption of electronic data interchange systems to support data transfers from these large enterprises to their partners. The benefits of ERP can open up huge market potential and act as a competitive advantage against similar sized enterprises. (Malhotra & Temponi, 2010)

However, considering the amount of resources an average SME can afford to invest into a complex ERP system together with the risks that may incur, it may not be realistic to propose such a drastic change. Many organisations tend to fall into the trap of romanticising and underestimating the resources needed for the adoption of an ERP system. First of all, the software system accounts only for approximately one-third of the total costs incurred. Secondly, human resources through direct intervention and indirectly through training and education can also consume a substantial cost. Finally, the prolonged time frame of the implantation is also often underestimated. These are only some of the resources needed for the implantation of an ERP system as a highlight.

(Malhotra & Temponi, 2010) identifies 6 critical decisions which SMEs are advised to consider throughout before selecting and implementing ERP systems to enhance implementation and organisational success.

In conclusion, with the globalisation effect, the world is becoming a smaller place. In order for SMEs to survive, they must enhance their competitiveness against organisations across the globe. I feel that is it necessary for SMEs to evolve by unifying business processes through the use of best practices as a foundation, and therefore can then develop competitive advantages through flexibility and adaptability to compete with their large scale competitors. If resources permits, SMEs should implement ERP systems which they can cope with within their capabilities.

References

: 04 May 2013 15:42 |  Comments (1) |  Close comments |  Report a problem

Organizational Support on ERP

ERP systems are information systems which provide integrated processes for an organization to share information by using a common database. The organization may receive many advantages like reduce cost on operations, reduce the time to complete business processes, as well as enhance organizational performance. The adoption of ERP systems has been considered to be a key to accomplish a competitive advantage in the fast changing business environment. Brazel and Dang (2008) reported that ERP adoption creates positive market responses and ERP implementations may improve operational performance in organizations (Hunton et al., 2003).

However, not all organizations using ERP system improved their organizational performance significantly (Olson, 2004). Thence, it is important to know the success factors of ERP implementation, but also the causes of ERP implementation failure.

 From the previous studies, we can find out that numerous of theoretical models which are successful in ERP implementation. Since the ERP system is complex, employees who are involved in ERP implementation in the workplace may gain good skills and information. However, employees who lack information and/or training may feel anxiety (Olson, 2004).

Actually, those organizations that implement ERP systems successfully usually provide a better work environment for their employees which they can work efficiently with different level of supports.

Organizational support has been argued to be a critical success factor for enhance the performance of any organization (Chung and Lee, 2005) as well as for the successful adoption of a new system (Lee et al., 2006). Organizational support theory considers factors that heighten employee satisfaction and then evaluate performance of the increased work effort through their contribution.

Organizational support has been identified as a crucial value for improving employees??business performance and job satisfaction as well as emotional power (Chung and Lee,2005). Thus, organizational support has been viewed as employees resource in a workplace of any organization (Leung et al., 2008), which can help employees to determine the fraud of stressful situations, in order to cope with stress by improving their jobs in their ability.Moreover,Organizational support can sustain employees' belief and improve the task performance.

Organizational support affects BI to use the system, especially in organizations with using a technical system.Organizational support can be divided into two categories: formal support systems and informal support systems(House, 1981).

Informational and instrumental support are included in the formal systems,and instrumental support assists the individual work directly. Informational support is complementary and supplemental to formal support systems of an organization, which includes support from peers and supervisors in the workplace.

Formal support systems can include education and training of employees for new systems, such as new technologies, improved business process, ERP systems. Informal support systems can involve methods to provide a better communication with co-workers or a better work environment where learning from peers can take place.

If the organization offers sufficient support to employees for their tasks, employees are more likely to improve their performance through usage of the new system in an ERP system environment.

Also, stress of using the system would be reduced when employees who used the ERP system felt that sufficient support and information were received from the organization.

Organizational support leads to the emotional reaction of employees, and consequently reduces stress about using the system. Therefore,organizational support refers to the support-providedfor employees work in an ERP system environment.

: 03 May 2013 15:57 |  Comments (0) |  Close comments |  Report a problem

ERP: The necessary evil

When reading relevant literature on ERP implementation and its Critical Success Factors, one gets the impression that ERP is very rigid, complex and risky. In fact, reading case studies of ERP implementation projects that have failed and forced large organisations to file for bankruptcy is like being told stories of people who have died as a result of ignoring their doctors’ instructions when taking medications. Just like one is required to follow the doctor’s prescriptions fully in order to get rid of a life-threatening disease, the ERP implementing company is required to pay attention to key Critical Success Factors for the project to be successful and lead to process performance improvement. These Critical Success Factors include senior management involvement, Business Process Re-engineering, Training and Education, IT infrastructure, proper package selection, Project Management and Management of Change.

Due to the severity of the consequences of poor ERP project implementation organisations must always avoid the temptation to succumb to peer-pressure and hasty decisions. Kick-starting the ERP implementation process should only take place when the most important Critical Success Factors are readily available and the environment made conducive enough to handle the complexities and massive changes that are associated with ERP introduction and operation. Failure to pay attention to these rules serves to invite the Evil side of ERP which often represents disaster!

Source: Basu, R., Upadhyay, P., Das, M. & Dan, P. (2012), “An approach to identify issues affecting ERP implementation in Indian SMEs”, Journal of Industrial Engineering and Management, 5(1):133-154.

Emmanuel Ngarambe : 01 May 2013 15:20 |  Tags: Critical Erp Factors Implementation Success |  Comments (5) |  Close comments |  Report a problem

SAP Netweaver and Process Integration

SAP Netweaver and Process Integration

SAP Netweaver is an application and integration platform that unifies ‘people’, ‘information’ and ‘business processes’. It has been built as the new technical foundation for all future SAP applications. This platform is based on Enterprise Service Architecture (ESA), keeping in mind SAP’s strategy of offering future products in compliance with ESA. ESA is built on the benefits of web service, which is an interface implementing the industry standards of SOAP and WSDL to expose different functionalities to a web service consumer. The use of web service allows direct integration between applications and ERP system or more specifically SAP, without involving a middleware for integration.

SAP Netweaver is not a replacement for SAP R/3, but has been explained as a marketing strategy. One important part of Netweaver is integration of processes. This is done through SAP’s own middleware called SAP PI (Process integration, previously known as SAP XI). SAP PI is used for integrating both SAP and non-SAP applications. It is used for both internal and external integration. i.e. for both application to application and business to business. It runs on SAP WAS (Web application Server), which is the common platform for all SAP applications. The integration builder, which is the middleware, comprises of two main parts-

• ESR (Enterprise Service Repository)
• ID ( Integration directory)

These two are used for designing and configuration of objects within the middleware respectively. The integration builder is built on two stacks- ABAP and Java. The best part about SAP PI is that all definitions use open technologies like BPEL (Business Process Execution Language), WSDL,XML and XSD. Java based graphical tools are also deployed in this middleware.

Process Integration is an important part of the framework, and critical for successful implementation of SAP. For this reason, most SAP implementation projects involve the use of SAP Netweaver and SAP PI.

Sourabh Bajaj : 29 Apr 2013 14:25 |  Tags: Erp Integration Netweaver Process Sap |  Comments (0) |  Close comments |  Report a problem

The integration of ERP System and Lean Manufacturing

Lean manufacturing encourages the production efficiency through eliminating waste and ERP helps to integrate the business process and also to provide some real-time information that will support the managerial decision-making. However, in the lean manufacturing, ERP might be identified as a source of waste because it can create the excess inventory, slow production and less flexibility. Furthermore, ERP system usually requires data, which is not used to control or improve the business process and also sometimes the gap between the actual business process and the ERP system is too big. It is therefore there is on-going debate whether ERP system can support Lean manufacturing or not.

The major conflicts lies within production scheduling and material planning. ERP system depends on the forecast demand for planning the material whilst lean manufacturing encourages ‘pull’ system in which the production scheduling is driven by the customer demand. Consequently the inventory will be kept as minimum as possible possibly through kanban card and any other lean manufacturing tools.

Despite this argument, lean concept requires high data quality and accuracy in which ERP system does support. The quality of data helps the company in solving the problem and sustaining the continuous improvement if data is managed properly. Furthermore, The ERP system that doesn’t involve directly with the production/outside the factory plant does support the Lean manufacturing very good, for example ERP can help the decision whether to accept or reject the order by calculating the capacity in which the ordering can be processed faster. Consequently it helps the company to reduce the lead-time in overall and this is aligned with the one of lean manufacturing concept, which is to shorten the lead-time.

However, the biggest impact in determining the lead-time lies in the production line. Setup and cycle time can bring impact to the lead-time and these are tracked in the ERP system so that the wasted time in those processes can be eliminated gradually. In addition to that, The Business Intelligence, which is part of the ERP, helps the company to monitor their performance.

It is therefore important for the company that adopt lean practices to select which ERP systems that suitable for their business process especially if it involves the production line and subsequently adjust that ERP system in accordance with their need so that the gaps between the actual business process and ERP system model can be reduced. Nowadays, there are some ERP software firms that make their product support lean manufacturing. One example of those is Microsoft Dynamics AX 2012.

Source:

Daryl Powell, Jan Riezebos & Jan Ola Strandhagen (2013): Lean production and ERP systems in smalland medium-sized enterprises: ERP support for pull production, International Journal of Production Research, 51:2, 395-409

Lean manufacturing and ERP: How to leverage ERP to get lean. Available online at<http://www.iqms.com/products/brochures/eBook_LeverageToLean.pdf> [Accessed on 1 April 2013]

Can Lean and ERP Work Together. Available online at <http://www.industryweek.com/systems-integration/can-lean-and-erp-work-together> [Accessed on 1 April 2013]

Evan Widyanto Tjoa : 28 Apr 2013 16:23 |  Tags: Erp Systems Lean |  Comments (1) |  Close comments |  Report a problem

ERP and PLM integration

The percentage of ERP implementation failure is high which is the ERP solution cannot fits organization objective. The critical reason of failure is organization did not preparing properly before use ERP solution, the information system is weak and preparation of business information data is not accurate and enough. Integration of ERP and PLM is a generation of enterprise systems.

PLM (product lifecycle management)is the process of managing the entire lifecycle of a product from its conception, through design and manufacture, to service and disposal.PLM integrates people, data, processes and business systems and provides a product information backbone for companies and their extended enterprise. PLM can solve problem relate to products development, such as, how to organise products information data, how to generate and control products information data and who is responsible for different part of the products. On the other hand, ERP is more focus on organisation resources management strategy, eliminate resource waste and reduce costs. Therefore, today¡¯s vendors start thinking integrates PLM and ERP to increase the ERP implementation success rate and products quality.

The customers¡¯ needs in today are variable and constantly changing, organisation has to emphasis on production diversity to obtain market share. This business environment requires ERP system has to be able to processing the product information and inventory data to all departments effectively and accurately, in order to help organisation achieve the objectives of low production costs, high quality product and shorter new products launch time. Therefore, I think the PLM can be the base of ERP to achieve these objectives.

In addition, through PLM and ERP integration, organisation can effectively carry though significant innovation, for example R&D new and distinctive products, lower production costs and improve products quality. Integrated PLM and ERP system, provides value of innovation to organisation, at same time, gives organisation ability to control products manufacture. This integration brings organisation huge competitive advantage, because it pushed manufactural development, thus makes organisation capture and response to market opportunities quickly and confidently.

Bibliography:

Charles Møller, (2005),"ERP II: a conceptual framework for next-generation enterprise systems?", Journal of Enterprise Information Management, Vol. 18 Iss: 4 pp. 483 - 497

Jing Zhang : 18 Jun 2012 01:01 |  Tags: Erp Integration Plm |  Comments (0) |  Close comments |  Report a problem

Impact of Business complexity on ERP system

In today's fast changing environment and the impact of globalization, business became more complicated than before. The form of OEM, ODM, Joint venture has become more and more popular. Thus, the whole value chain has been extended to customers, suppliers and business partners. Under such circumstance, existing ERP solution could not satisfy organizations due to it only provide a simple interface with others. Furthermore, ERP system by nature only focuses on internal information flow and resource allocation. Such as the integrated IT platform make information go smoothly between different departments within organization. Everyone could easily understand and track the flow of their work. However the benefit so far only remain within the organizations. The collaborative business forms requires ERP system to provide more flexible solution and more focus on external relationship instead of just simple interface.

This is a big challenge for vendors to overcome due to more interest-related parties will be involved. To catch external business activity will be more difficult than internal ones. If the ERP system has to integrate IT system outside the organization, it will probably involve different type of systems, which may provide by different vendors and using different platforms and technologies. Moreover, if the organization has many suppliers and business partners, the size of ERP project will become too large to be managed. The impact of senior management involvement may not as useful as existing ones due to the fact that who could really in charge of the whole project should be agreed by different parties. Finally, when try to capture business activity between different business partners, how many business activities could be modeled? The confidentiality will also be an issue for ERP integration because these partners may be potential competitor as well. How many core business activities could be captured by uniform ERP system will really arise an issue.

To summarize, although the new business complexity globally has required more feature from existing ERP system, how to achieve them should go through carefully consideration.

Xin Jiang : 18 Jun 2012 00:54 |  Comments (0) |  Close comments |  Report a problem

ERP System Integration Under Collaborative Business Enviroment

The twenty first century business enviroment require company to collaborate with other supply chain partners, in order to gain competitive advantage. To achieve that, better connectivity is very necessary. one of the enabler to collaboration is Information technology fawcett et al (2007).

The ERP system become popular in 1990. As an enterprise integartion solution, the ERP system able to integrate the so called desperate "legacy systems". However, the era of globalization, collaboration, and merger that characterized the late 1990s make ERP systems to become less important in terms of external integration of the enterprise, that is integration beyond the boundary of the organization. According to "Gartner vice president, bruce bond, traditional, inwardly connective enterprise resource planning (ERP) is dead, destroyed, by demand for greater collaboration among supply chain partners" Fawcett et al (2007). They are non- flexible systems, they are not designed to collaborate with other applications, they are monolithic tools that are not compatible with other applications Grabot et al (2008). Modification of the internal working of ERP system is difficult once the technology installed. They do not support distributed data management Harmon (2003).

However, there are emerging technologies that supported integration of ERP system with other applications. for example, web technology with supporting technologies such as XML, SOAP, WSDL, UDDI, and DOT (Distributed, Object technologies such as COBRA, DCOM, JAVA BEAN.

Despite the view that ERP system cannot be integrated with other applications because of the monolithic, non-flexibility nature of the system by(fawcett et al 2007, Grabot et al 2008, Themistocleous et al 2002, harmon 2003). recent report indicated Volvo sucessfully and smoothly integrated SAP ERP system with Apriso Flexnet under two tier solution (Scott Park, Global CIO and VP processes and systems integration, Volvo construction equipment). Therefore, the view that ERP system cannot be integrated with other applications is not 100% perfect base on Volvo experience .In addition the integration also enable volvo to fix processes after implementation, because the technology is build around SOA computing enviroment which is highly flexible.

Conclusively, organization that want to collaborate, and integrate their systems with supply chain partners will find it easy because of emerging technologies that make it possible to integrate two or more different systems.

Reference

1) Fawcett, E. S., Ellaram, M.L., and Ogden, J. A. (2007) " Supply Chain management from Vision to Implementation, New Jersey, Pearson Education Inc.

2) Grabot, B. and Meyere, A. (2008) ERP system and Organization change: A Socio-Technical Insight:Isa belle Bazet.

3) Harmon, P. (2003) Business Process Change: A Manager's Guide to Improving, Redesigning' and Automating Processes: Morgan Kaufman Publishing.

4) Parker, K. (2010) Control Engineering: Mobile Inspiring Engineering Interaction ( To Reach Desired " IT end-state, " Volvo CE focuses on Multi-Plant Performance: CFE media 2010.

Ibrahim ABBA ALI

I.A.Ali @warwick.ac.uk

Ibrahim Ali : 12 Jun 2012 16:10 |  Comments (0) |  Close comments |  Report a problem