Qasim Ali

TERM PAPER

“ERP: A Strategic Supply Chain

Weapon”

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Introduction..........................................................................................................................3
Literature Review.................................................................................................................4
1) Savings from improved back-office administrative processes:...................................5
2) Savings from improved “master” data processes:.......................................................5
3) Sales growth through improved self service, order-entry processes:..........................5
4) Sales growth through improved contract administration/management processes:......6
5) Increased margins from improving responsiveness in a company’s supply chain
processes:.........................................................................................................................6
6) Labor savings from improved workflow processes:....................................................6
Recognizing the new breed of ERP.................................................................................7
ERP A Positive leading indicator....................................................................................7
The selection criteria........................................................................................................7
Conclusion...........................................................................................................................9
Bibliography......................................................................................................................10

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 Introduction

An enterprise is a group of people with a common goal, which has certain resources at its

disposal to achieve this goal. The organization is divided into different nits based on the

functions they perform. These departments function in isolation and have their own systems

of data collection and analysis. In enterprise way the entire organization is considered a

system and all departments are its sub system, each sub system knows what others are doing ,

why they are doing and what should be done to move the company towards common goal. If

the information that is generated is accurate, timely and relevant, then the systems will go a

long. ERP integrates the information system of an organization and automates most of the

functions. The activities supported by ERP system include all core functions of an

organization, including financial management, human resource management, and operations.

They are improved efficiency, information integration for better decision making, faster

response time to customer queries, etc. The indirect benefits include better corporate image,

improved customer goodwill, customer satisfaction and so on. Other direct benefits of an

ERP system are business integration, flexibility, better analysis and planning capabilities and

use of latest technology. The SCM encompasses all activities relating to the supply chain.

This includes vendor selection, negotiation, relations and performance. To increase

efficiencies, companies are also focusing on core competencies and filling the gaps with

strategic outsourcing partnerships. In this globalize business arena, where organizations are

struggling hard to create value by exceeding the expectations of their customers. Global

enterprises are struggling hard to create inevitable supply chain strategies to achieve their

goal of customer satisfaction.

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 Literature Review

Enterprise Resource Planning (ERP) can indeed be a strategic weapon. ERP provides a

necessary infrastructure that forms the transactional system of record upon which a

business is based, it serves as a source of cost savings and operational improvements, and

it streamlines and accelerates business processes. Top performing ERP implementations

are 80% more likely to quantify the business benefits and are 95% more likely to measure

the time to value. This requires due diligence up front to establish a baseline of metrics,

the setting of goals and then the continued diligence to measure progress. The best ERP

implementations are never “done.” As technology and applications evolve, there are

always more benefits to be gained. Unless operational and supporting processes are

aligned with the software, the efficiency of an ERP system suffers tremendously. When

horizontal processes that span the entire enterprise are aligned within a horizontal system,

significant cost savings result. Even at the best price, goods that have to be transported,

handled, and stored create new costs downstream for manufacturing and distribution.

Businesses operate daily with broken processes that never touch the ERP system. It’s

common for employees to work around the system because they don’t understand how to

use the software’s functionality. These wasted process steps add labor costs that have no

value to the organization. Disconnects are opportunities for improvement where waste is

being generated within a process. Waste is non value-added activity from a customer

perspective, it increases total costs, and it doesn’t support a company’s business

strategies. But the real problem is a lack of training for system users.

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1) Savings from improved back-office administrative processes:
When business processes aren’t integrated into the ERP system, companies lose the

advantage of centralization for economies of scale. For example, invoicing processes

were different across each business unit they weren’t standardized or automated so each

business unit needed specialized clerical help. The company must had a more efficient

and centralize invoicing process that could support all business units with standardized

processes that enabled a higher degree of automation, thus reducing administration

expenses.

2) Savings from improved “master” data processes:

A cornerstone of any ERP system is the quality and integrity of its “master” data, which

typically includes key attributes of customers, products, suppliers, and the organization.

Without disciplined processes for creating, changing, and deleting master data, low-

quality information can cause many costly issues. For example, a consumer-goods

company consistently experienced high freight cost overruns. An analysis revealed the

lack of a clear master data control process for new products. As a result, each new

product’s weight and dimensions were often wrong, missing, or dummied up. This

eliminated problems downstream when employees needed to give customers accurate

freight/shipping quotes. The company saved more than $800,000 in annual freight.

3) Sales growth through improved self service, order-entry processes:

Many companies establish Web-based processes for creating a customer self-service,

order-entry option through the ERP system or integrated ERP Web applications.

Problems arise when the order process is more confusing than intuitive or isn’t

convenient for customers.

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4) Sales growth through improved contract administration/management
processes:
Many businesses, especially in the business-to-business space, require the development,

administration, and management of complex customer contracts and agreements.

Companies often don’t understand the processes and functionality available in their ERP

systems that typically offer capabilities to support cost-effective contract management.

5) Increased margins from improving responsiveness in a company’s

supply chain processes:
Increased global competition often means having an extremely nimble, responsive supply

chain to ensure that the right product is in the right place at the right time. Many

companies have implemented ERP or WMS (warehouse management systems) by simply

enabling the current bad/slow processes without “leaning out” their supply chain

processes and leveraging advanced functionality. Once a clear demand pattern became

noticeable, the time it took to change over production lines to produce the demanded

product.

6) Labor savings from improved workflow processes:

ERP systems have tremendous workflow automation capabilities, yet many companies

try to solve too many process issues with a workflow that overwhelms employees with

numerous warnings or alerts. A typical scenario may include an e-mail alert generated by

the ERP system and sent to a manager when a certain business condition or event occurs,

such as a quality issue that could substantially impact customers or create a major

company liability.

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 Recognizing the new breed of ERP

ERP used to just group together basic functions like your accounts, your manufacturing

processes, bill of materials and the like. One system, no double entry and complete

transparency through the business everybody can see what everyone else is doing. ERP

packages now have the ability to offer secure web pages, linked back to your business

package (database) through which your customers can request a service, an order or

check the status of an order. The benefit of this is all your information in one place. It's

easy-to-find, easy-to-access and nothing goes missing, and you have full control over

what information your customers can access.

ERP A Positive leading indicator

Warehouse automation utilizing bar codes and wireless scanning equipment on the shop

floor is rapidly becoming commonplace for such functions as shipping, receiving,

physical inventories and tracking processing time.

The selection criteria

ERP packages come in all sizes and shapes, with all the frills, bells and whistles, gizmos

and gadgets that you can imagine. Hence, it is a good practice to specify selection criteria

for evaluating the packages that survive the pre-evaluation screening. The criteria can be

in the form of a questionnaire and a point system can be implemented. This will help in

making the selection process more objective. The questions should address the

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company’s business needs and concerns and each issue or question should be given a

weight according to how critical that function is for the company. For example, if the

company has offices in different countries, then the capability of handling multiple

languages and currencies becomes an important criterion. Likewise the selection criteria

should be divided into categories vital, essential and desirable and points should be given

to each criterion. The point rating system will simplify the evaluation process. But the

importance of human intuition, gut feeling, and judgment should never be

underestimated.

The best method for preparing the selection criteria is to conduct a requirements analysis

find out what the company needs. The requirements must reflect those factors that the

company considers indispensable for the successful running of the business according to

the company’s work culture and practices. Given below are some examples of the

selection criteria. The package should have Multilanguage and multi-currency support.

The package should be international and should have installations in specified countries

(basically in countries where the company have offices). The vendor should also have a

local presence in those countries. The package should have at least ‘x’ number of

installations out of which at least ‘y’ should be in your business sector. The cost of the

package with all the necessary modules should be less than ‘x’ Rupees. The package

should have the facility to do an incremental module addition. For example, the company

should have the facility to buy the core modules initially and then go in for the additional

modules as and when desired.

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 Conclusion

To conclude, we can say that ERP not only mobilize the business process but also acts as

a competitive and strategic weapon against business environment. The supply chain is

itself penetrated within the ERP and providing tangible and intangible benefits in

business. It is saving back office administrative costs, creating a single master data,

providing self services to customer to replenish their orders by saving time, making

contract management efficient and saving labor cost by increasing labor productivity.

ERP packages now have the ability to offer secure web pages, linked back to your

business package (database) through which your customers can request a service, an

order or check the status of an order. ERP packages come in all sizes and shapes, with all

the frills, bells and whistles, gizmos and gadgets that you can imagine. Enterprise

resource planning (ERP) keeps transforming as vendors find new ways to solidify this

system's standing as the fundamental data backbone of any company. The best method

for preparing the selection criteria is to conduct a requirements analysis find out what the

company needs. The requirements must reflect those factors that the company considers

indispensable for the successful running of the business according to the company’s work

culture and practices.

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 Bibliography

T Alen (2011) “Improve your Business” Strategic Finance, Institute of

Management Accountants.

ERP Demystified (2008)“ERP Package Selection” Tata McGraw-Hill Publishing

Company Limited, ISBN # 1251442.

T Triplett (2011) “ERP Software A Positive Leading Indicator ” Sackett Business

Media, Inc.

Lawrence S. Gould (2011) “The Five Ubiquities of ERP” Gardner Publications,

Inc.

John Hayward (2010) “The power of ERP” Canadian Institute of Chartered

Accountants.

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