1. [/b]Introduction[/b]
1.1. [/b]ERP Defined[/b]
Enterprise Resource Planning software systems (ERP) encompass a wide range of software products supporting day-to-day business operations and decision-making. ERP serves many industries and numerous functional areas in an integrated fashion, attempting to automate operations from supply chain management, inventory control, manufacturing scheduling and production, sales support, customer relationship management, financial and cost accounting, human resources and almost any other data oriented management process.
ERP is a software architecture that facilitates the flow of information among the different functions within an enterprise. Similarly, ERP facilitates information sharing across organizational units and geographical locations. It enables decision-makers to have an enterprise-wide view of the information they need in a timely, reliable and consistent fashion.
ERP system is an integrated set of programs that provides support for core organizational activities such as manufacturing and logistics, finance and accounting, sales and marketing, and human resources. An ERP system helps the different parts of the organization share data and knowledge, reduce costs, and improve management of business processes.
ERP software is a suite of application program modules designed to set up an interactive environment for enterprise users to analyse and manage business processes associated with the production and distribution of goods and services The software thus serves to help integrate enterprise–wide business processes and the information needed for the execution of those processes. These descriptions serve to emphasize integration of program applications, business processes and data across the entire enterprise to create a unified (non–fragmented) information system in support of its operation.
1.2. [/b]What ERP is up to?[/b]
The broad purpose underlying the ERP software design features is to equip enterprises with a tool to optimise their underlying business processes to enable them create a seamless, integrated information flow from suppliers through to manufacturing and distribution.
The ERP system, first introduced by The Garter Group, Inc., is integrated management software developed to the American Production, Inventory and Control Society, Inc. (APICS) MRPII standards. As an advanced management theory model, the ERP system’s objective is to improve corporate performance by balancing and optimizing enterprise resources, which includes managing people, finances, assets, information, and time. ERP integrates optimal modern business processes of marketing, logistic, production, just-in-time, materials, total quality, finance, and human resource management. ERP comprises information, money, and logistic flow. Thus ERP is an information processing system that includes all information in the enterprise. Its product is information. ERP helps not only to establish a complete, accurate, and timely information flow system but also to produce much standard information for inside and outside stakeholders, making the management and stakeholder levels more transparent. At the same time, ERP implementation provides accurate and timely guarantee of information that enterprises disclose. Although ERP implementation resolves information asymmetry problems, not all companies are equally willing or motivated to implement ERP. We believe that companies that choose to implement ERP will show patterns of corporate governance that are different from companies that do not implement ERP.
ERP provides the backbone for an enterprise-wide information system. At the core of this enterprise software is a central
database which draws data from and feeds data into modular applications that operate on a common computing platform, thus standardizing business processes and data definitions into a unified environment. With an ERP system, data needs to be entered only once. The system provides consistency and visibility-or transparency-across the entire enterprise. A primary benefit of ERP is easier access to reliable, integrated information. A related benefit is the elimination of redundant data and the rationalization of processes, which result in substantial cost savings. The integration among business functions facilitates communication and information sharing, leading to dramatic gains in productivity and speed.
A successful ERP system implementation can shorten production cycles, increases accuracy of demand for materials management & sourcing and leads to inventory reduction because of material management, etc. Moreover it can be used as a primary tool for re-engineering. However various studies have revealed that not all ERP implementations are successful. According to Gray A. Langenwalter (2000), ERP implementation failure rate is from 40% to 60%, yet companies try to implement these systems because they are absolutely essential to responsive planning and communication. The competitive pressure unleashed by the process of globalization is driving implementation of ERP projects in increasingly large numbers, so a methodological framework for dealing with complex problem of evaluating ERP projects is required. It has been found that, unique risks in ERP implementation arises due to tightly linked interdependencies of business processes, relational databases, and process reengineering.
Tangible Benefits after ERP Implementation
w Inventory Reduction
w Personal reduction
w Productivity improvement
w Order management improvement
w Technology cost reduction
w Procurement cost reduction
w Cash management improvement
w Revenue/profit improvement
w Transportation/ logistics cost reduction
w Maintenance reduction
w On time delivery improvement
Intangible benefits after ERP implementation
w New/improved business processes
w Customer responsiveness
w Cost reduction
w Integration
w Standardization
w Flexibility
w Globalization
w Year 2000
w Business performance
w Supply/ demand chain
w Information/visibility
w Economic Performance of firm (Internal coordination cost)
w Monitoring cost
w Bonding cost
w Residual cost
w Information processing cost
w Communication cost
w Documentation cost
w Opportunity cost due to poor information
Business Performance factor
w Reduced organizations business risks
w Enhanced organizations regulatory compliance
w Makes MIS more accurate and accessible.
w Facilitate improved services to customer and suppliers
w Allows new services to customer and suppliers
w Enhanced primary users knowledge and skills
w Increased institutional accountability
w Increased shareholders confidence in organization
w Enhanced support to organizational activities
w Enhanced organization business performance
w Decreased work load in various departments