Description
It explains the journey of ERP (Enterprise Resource Planning) from late 1990s till date. It describes about ERP, ERP II, cloud-ERP and how today's business industries leverage advantages of ERP and faces some disadvantages of the same
Running head: ERP IN OPERATIONS MANAGEMENT
1
ERP in Operations Management: A Future Trend and its Challenges Vrushali Soni Northwest University
Author Note This paper is prepared for Operations Management, taught by Professor Lucas. Correspondence concerning this article should be addressed to Vrushali Soni, Northwest University, Kirkland, WA 98033. Contact: [email protected]
ERP IN OPERATIONS MANAGEMENT Introduction Operations Management is about managing tasks from product manufacturing till its delivery to the end customers. This complex series of tasks is difficult to handle, moreover, it requires numerous work force and time. In manual management of such tasks, there is more possibility of human errors. In order to avoid such problems new technologies were discovered. Among these technologies, one was ERP (Enterprise Resource Management). Invention of ERP has outstripped the technological innovations in the field of Operations Management (OM). It is
2
software that manages the records of information about all the departments in a business and this information is in the form of centralized data that is accessible from different computer systems across various departments. The reasons for focusing on ERP, invented 40 years ago, as a future trend are explored in this paper. It also mentions about some existing and future challenges faced by present and future customers of ERP.
Future Trend of Operations Management: ERP Technological innovation is the core of today’s Operations Management. The researchers, Gunasekaran and Ngai (2012) claims that, the future trend in operations management includes virtual enterprise, ERP, global SCM (Supply Chain Management), RFID (Radio Frequency Identification) based SCM, sustainability, CRM service and so on. Among the above-mentioned technologies, this paper focuses on ERP as the future trend because innovations in this technology are unstoppable. Due to past customer-experience with ERP I, ERP II is readily absorbed in businesses and currently Cloud ERP is said to be the future trend of OM (Operations Management). ERP is of critical importance in future of OM because it underpins the information flow among various departments of a business. For instance, if a manager wants to know the latest
ERP IN OPERATIONS MANAGEMENT upgrade in a product from the manufacturing department of his business, he can easily check it via ERP while sitting in his cubical. This helps in tracking various stages of the product updates without much effort. It integrates all the departments and its functions through ERP, which is accessible by everyone who needs in the department. Hence, it makes information
3
communication easier across the departments. This reduces redundancy of work, decrease human errors, saves time, and often increases customer satisfaction by timely delivery. ERP was introduced in early 1990s, it was a huge success in its initial stages but gradually its demand declined due to its inability to manage supply chain, sales and services. It was not able to manage most of the non-inventory operations. Then updated ERP called, ERP II had more quality and managerial features (“Making ERP”, 2005) came into existence. Applicability of ERP II software in various industries like construction, manufacturing, medical, property, and food and beverage industries is incredible. ERP has innovatively grown in past few decades by demonstrating skills in management of front office and back-office work like, order management, procurement, inventory, warehouse, finance, accounting, EDI-Electronic Data Integration, manufacturing, logistics, reverse logistics, 3PL (Third Party Logistics), CRM-Customer Relationship Management, ecommerce and SCM-Supply Chain Management. Yusuf et al (2004) claimed, “It is almost impossible to achieve a well-integrated supply chain without the application of a sound ERP system, particularly in the global operation environment” (as cited in Gunasekaran and Ngai, 2012, p. 697). ERP is well established in the business industry since last forty years. There are some famous ERP software vendors like Oracle, SAP, Microsoft, Infor and Epicor, which provides ERP software in more than 100 countries. Some firms like, Oracle and SAP provide very
ERP IN OPERATIONS MANAGEMENT expensive ERP software for large-scale businesses whereas, firms like Microsoft and Epicor provide low priced ERP software for medium and small-scale businesses. SAP is now entering into market of low range software for medium and small-scale businesses. In the era of Cloud computing, it becomes essential for the ERP vendors to introduce Cloud ERP as a competitive advantage for their success. The Cloud ERP system is customer
4
friendly and does not need a professional person to upgrade the system. It also overcomes one of the drawbacks of traditional ERP, which was a need of professional training of employees for its operation. SaaS, one of the ERP vendors introduced “multi-tenant” architecture as a part of its new cloud ERP software to fulfill the above-mentioned advantages (Symonds, 2012, p. 40). Infor, a business software provider, has collaborated with Amazon Web Services (AWS) to deliver Infor10 Business Cloud as a service to the businesses around the world. This service provides an application of ERP. "One of the beauties of having these environments in the cloud is that they can be deployed in minutes, used for a temporary purpose, and taken down very quickly," said Jim Plourde (n.d.), VP cloud operations at Infor (as cited in Preez, 2012, Infor partners section, ¶ 4). Hardy (2012) reported, “SAP, however, has recently been striving to get deeper into socially oriented cloud software businesses. It agreed to buy a cloud software company called Success Factors in December for $3.4 billion” (Yammer integrates section, ¶ 10). Cloud ERP is introduced in a market which is saturated with traditional ERP (ERP II); but, there are numerous businesses around the world, which are either unaware about ERP or face few challenges with its implementation in their business.
ERP IN OPERATIONS MANAGEMENT Similar to ERP, various other technologies of OM face many challenges for their implementation in small and medium scale businesses of developing countries. Unawareness about technology and its application is one of the barriers that restrict various businesses from excelling in this competitive world. Overcoming such challenges is of significant importance because developing countries like China and India have a huge potential market for ERP and similar other technologies.
5
Challenges of ERP One of the major challenges of ERP is its highly diversified offerings. ERP software have various features but all of these are not incorporated into a single software instead there are different ERP softwares with varying features. Hence, it becomes important to select the most relevant software for a specific business in order to gain maximum profits from its implementation. Emerging businesses sometimes lack awareness about ERP and therefore fail to explain their specific expectations from the software. Complete knowledge about the business and future goals and objectives from the ERP software must be given to the ERP vendors in order to help him make an appropriate choice of ERP software according to the business requirement. In the words of Sawah et al. (2008), “Organizational fit to ERP package is proven to be the most important determinant of ERP implementation success” (as cited in Abdullabhai and Acosta, 2012, p. 77). Secondly, ERP lacks its long-term usability. ERP implemented at early stages of a business, becomes inoperable, with the expansion of business due to its inadaptability with the changing environment of business (Nicholls, 2012). In order to overcome the diversification and long-term usability issues, highly flexible ERP software must be created, which is easily adaptive to any type of business changes.
ERP IN OPERATIONS MANAGEMENT Third major challenge, ERP is not user friendly. Only ERP vendors can do implementation and upgradation of ERP software. Its usability also requires some professional
6
training, which is very crucial to implement in businesses of developing countries where there is lack of educated work force. ERP should be more customer-friendly in future to avoid such issues (Symonds, 2012). Fourth major challenge of ERP implementation is its buying and installing expenses. Developing countries’ emerging businesses cannot afford million dollars softwares hence it should perform satisfactory functions with cost effectiveness (Tambovcevs, 2012). Cloud ERP successfully fulfills the first three challenges mentioned about traditional ERP. However, Cloud ERP has its own challenges like specific technological requirements, which are generally not well established in developing countries; and higher expenses of Cloud ERP makes it unaffordable by small-scale businesses.
Conclusion Enterprise Resource Planning saves a lot of labor work and provides an efficient management capability that is free from human errors. It helps from preventing overstocking of inventory to maintaining customers’ records for better understanding of their requirements. ERP is a definite future trend of OM because it still has to invade many parts of the world and Cloud ERP is going to replace the traditional ERP in current customer businesses. Efforts to overcome all the major challenges of ERP can result in pursuing new customers easily.
ERP IN OPERATIONS MANAGEMENT References Abdullabhai, M., & Acosta, F. (2012). Impact of Adopting Enterprise Resource Planning Systems by Commercial Organizations in Kenya. DLSU Business & Economics Review, 21(2), 63-86. Retrieved from Business Source Complete database (73149255). Gunasekaran, A., & Ngai, E. T. (2012). The future of operations management: An outlook and analysis. International Journal Of Production Economics, 135(2), 687-701. doi:10.1016/j.ijpe.2011.11.002 Hardy, Q. (2012, February). Yammer integrates into SAP software. Retrieved from
http://bits.blogs.nytimes.com/2012/02/23/yammer-intergrates-into-sap-software/
7
Making ERP deliver on its promise to the enterprise. (2005). In Exact holding North America, Inc. Retrieved from http://www.erpsolutions4u.com/webportal/docs/BDBinDoc.asp?ID= {2627AA64-8057-4EF8-8216-D5781C34128E} Nicholls, P. (2012). Long-term promises. Works Management, 65(2), 24-25. Retrieved from Business Source Complete database (72268855) Preez, D. (2012, April). Infor partners with Amazon to deliver ERP in the Cloud. Retrieved from
http://www.cio.com/article/705099/Infor_Partners_with_Amazon_to_Deliver_ERP_ in_the_Cloud?taxonomyId=3009
Symonds, M. (2012). Cloud ERP Meets Manufacturing. Quality, 51(4), 40-43. Retrieved from Business Source Complete database (74009704). Tambovcevs, A. (2012). ERP system implementation in Latvian manufacturing and construction company. Technological & Economic Development Of Economy, 18(1), 67-83. doi:10.3846/20294913.2012.661176
doc_562583086.docx
It explains the journey of ERP (Enterprise Resource Planning) from late 1990s till date. It describes about ERP, ERP II, cloud-ERP and how today's business industries leverage advantages of ERP and faces some disadvantages of the same
Running head: ERP IN OPERATIONS MANAGEMENT
1
ERP in Operations Management: A Future Trend and its Challenges Vrushali Soni Northwest University
Author Note This paper is prepared for Operations Management, taught by Professor Lucas. Correspondence concerning this article should be addressed to Vrushali Soni, Northwest University, Kirkland, WA 98033. Contact: [email protected]
ERP IN OPERATIONS MANAGEMENT Introduction Operations Management is about managing tasks from product manufacturing till its delivery to the end customers. This complex series of tasks is difficult to handle, moreover, it requires numerous work force and time. In manual management of such tasks, there is more possibility of human errors. In order to avoid such problems new technologies were discovered. Among these technologies, one was ERP (Enterprise Resource Management). Invention of ERP has outstripped the technological innovations in the field of Operations Management (OM). It is
2
software that manages the records of information about all the departments in a business and this information is in the form of centralized data that is accessible from different computer systems across various departments. The reasons for focusing on ERP, invented 40 years ago, as a future trend are explored in this paper. It also mentions about some existing and future challenges faced by present and future customers of ERP.
Future Trend of Operations Management: ERP Technological innovation is the core of today’s Operations Management. The researchers, Gunasekaran and Ngai (2012) claims that, the future trend in operations management includes virtual enterprise, ERP, global SCM (Supply Chain Management), RFID (Radio Frequency Identification) based SCM, sustainability, CRM service and so on. Among the above-mentioned technologies, this paper focuses on ERP as the future trend because innovations in this technology are unstoppable. Due to past customer-experience with ERP I, ERP II is readily absorbed in businesses and currently Cloud ERP is said to be the future trend of OM (Operations Management). ERP is of critical importance in future of OM because it underpins the information flow among various departments of a business. For instance, if a manager wants to know the latest
ERP IN OPERATIONS MANAGEMENT upgrade in a product from the manufacturing department of his business, he can easily check it via ERP while sitting in his cubical. This helps in tracking various stages of the product updates without much effort. It integrates all the departments and its functions through ERP, which is accessible by everyone who needs in the department. Hence, it makes information
3
communication easier across the departments. This reduces redundancy of work, decrease human errors, saves time, and often increases customer satisfaction by timely delivery. ERP was introduced in early 1990s, it was a huge success in its initial stages but gradually its demand declined due to its inability to manage supply chain, sales and services. It was not able to manage most of the non-inventory operations. Then updated ERP called, ERP II had more quality and managerial features (“Making ERP”, 2005) came into existence. Applicability of ERP II software in various industries like construction, manufacturing, medical, property, and food and beverage industries is incredible. ERP has innovatively grown in past few decades by demonstrating skills in management of front office and back-office work like, order management, procurement, inventory, warehouse, finance, accounting, EDI-Electronic Data Integration, manufacturing, logistics, reverse logistics, 3PL (Third Party Logistics), CRM-Customer Relationship Management, ecommerce and SCM-Supply Chain Management. Yusuf et al (2004) claimed, “It is almost impossible to achieve a well-integrated supply chain without the application of a sound ERP system, particularly in the global operation environment” (as cited in Gunasekaran and Ngai, 2012, p. 697). ERP is well established in the business industry since last forty years. There are some famous ERP software vendors like Oracle, SAP, Microsoft, Infor and Epicor, which provides ERP software in more than 100 countries. Some firms like, Oracle and SAP provide very
ERP IN OPERATIONS MANAGEMENT expensive ERP software for large-scale businesses whereas, firms like Microsoft and Epicor provide low priced ERP software for medium and small-scale businesses. SAP is now entering into market of low range software for medium and small-scale businesses. In the era of Cloud computing, it becomes essential for the ERP vendors to introduce Cloud ERP as a competitive advantage for their success. The Cloud ERP system is customer
4
friendly and does not need a professional person to upgrade the system. It also overcomes one of the drawbacks of traditional ERP, which was a need of professional training of employees for its operation. SaaS, one of the ERP vendors introduced “multi-tenant” architecture as a part of its new cloud ERP software to fulfill the above-mentioned advantages (Symonds, 2012, p. 40). Infor, a business software provider, has collaborated with Amazon Web Services (AWS) to deliver Infor10 Business Cloud as a service to the businesses around the world. This service provides an application of ERP. "One of the beauties of having these environments in the cloud is that they can be deployed in minutes, used for a temporary purpose, and taken down very quickly," said Jim Plourde (n.d.), VP cloud operations at Infor (as cited in Preez, 2012, Infor partners section, ¶ 4). Hardy (2012) reported, “SAP, however, has recently been striving to get deeper into socially oriented cloud software businesses. It agreed to buy a cloud software company called Success Factors in December for $3.4 billion” (Yammer integrates section, ¶ 10). Cloud ERP is introduced in a market which is saturated with traditional ERP (ERP II); but, there are numerous businesses around the world, which are either unaware about ERP or face few challenges with its implementation in their business.
ERP IN OPERATIONS MANAGEMENT Similar to ERP, various other technologies of OM face many challenges for their implementation in small and medium scale businesses of developing countries. Unawareness about technology and its application is one of the barriers that restrict various businesses from excelling in this competitive world. Overcoming such challenges is of significant importance because developing countries like China and India have a huge potential market for ERP and similar other technologies.
5
Challenges of ERP One of the major challenges of ERP is its highly diversified offerings. ERP software have various features but all of these are not incorporated into a single software instead there are different ERP softwares with varying features. Hence, it becomes important to select the most relevant software for a specific business in order to gain maximum profits from its implementation. Emerging businesses sometimes lack awareness about ERP and therefore fail to explain their specific expectations from the software. Complete knowledge about the business and future goals and objectives from the ERP software must be given to the ERP vendors in order to help him make an appropriate choice of ERP software according to the business requirement. In the words of Sawah et al. (2008), “Organizational fit to ERP package is proven to be the most important determinant of ERP implementation success” (as cited in Abdullabhai and Acosta, 2012, p. 77). Secondly, ERP lacks its long-term usability. ERP implemented at early stages of a business, becomes inoperable, with the expansion of business due to its inadaptability with the changing environment of business (Nicholls, 2012). In order to overcome the diversification and long-term usability issues, highly flexible ERP software must be created, which is easily adaptive to any type of business changes.
ERP IN OPERATIONS MANAGEMENT Third major challenge, ERP is not user friendly. Only ERP vendors can do implementation and upgradation of ERP software. Its usability also requires some professional
6
training, which is very crucial to implement in businesses of developing countries where there is lack of educated work force. ERP should be more customer-friendly in future to avoid such issues (Symonds, 2012). Fourth major challenge of ERP implementation is its buying and installing expenses. Developing countries’ emerging businesses cannot afford million dollars softwares hence it should perform satisfactory functions with cost effectiveness (Tambovcevs, 2012). Cloud ERP successfully fulfills the first three challenges mentioned about traditional ERP. However, Cloud ERP has its own challenges like specific technological requirements, which are generally not well established in developing countries; and higher expenses of Cloud ERP makes it unaffordable by small-scale businesses.
Conclusion Enterprise Resource Planning saves a lot of labor work and provides an efficient management capability that is free from human errors. It helps from preventing overstocking of inventory to maintaining customers’ records for better understanding of their requirements. ERP is a definite future trend of OM because it still has to invade many parts of the world and Cloud ERP is going to replace the traditional ERP in current customer businesses. Efforts to overcome all the major challenges of ERP can result in pursuing new customers easily.
ERP IN OPERATIONS MANAGEMENT References Abdullabhai, M., & Acosta, F. (2012). Impact of Adopting Enterprise Resource Planning Systems by Commercial Organizations in Kenya. DLSU Business & Economics Review, 21(2), 63-86. Retrieved from Business Source Complete database (73149255). Gunasekaran, A., & Ngai, E. T. (2012). The future of operations management: An outlook and analysis. International Journal Of Production Economics, 135(2), 687-701. doi:10.1016/j.ijpe.2011.11.002 Hardy, Q. (2012, February). Yammer integrates into SAP software. Retrieved from
http://bits.blogs.nytimes.com/2012/02/23/yammer-intergrates-into-sap-software/
7
Making ERP deliver on its promise to the enterprise. (2005). In Exact holding North America, Inc. Retrieved from http://www.erpsolutions4u.com/webportal/docs/BDBinDoc.asp?ID= {2627AA64-8057-4EF8-8216-D5781C34128E} Nicholls, P. (2012). Long-term promises. Works Management, 65(2), 24-25. Retrieved from Business Source Complete database (72268855) Preez, D. (2012, April). Infor partners with Amazon to deliver ERP in the Cloud. Retrieved from
http://www.cio.com/article/705099/Infor_Partners_with_Amazon_to_Deliver_ERP_ in_the_Cloud?taxonomyId=3009
Symonds, M. (2012). Cloud ERP Meets Manufacturing. Quality, 51(4), 40-43. Retrieved from Business Source Complete database (74009704). Tambovcevs, A. (2012). ERP system implementation in Latvian manufacturing and construction company. Technological & Economic Development Of Economy, 18(1), 67-83. doi:10.3846/20294913.2012.661176
doc_562583086.docx