Enterprise Resource Planning as a Modular Integrated Systems Strategy - Case Study Example

Enterprise Resource Planning as a Modular Integrated Systems Strategy Department Small and Medium Enterprises are moving over from old systems to new systems daily to improve the production process, reduce costs and achieve customer satisfaction without compromising product quality. With many strategies involved in the process of change over, this paper looked at the integration using Modular Intergraded System Strategy. It highlights on its benefits over other systems and on the end results achieved. Small and medium enterprises (SMEs) are operating in times that are full of competition amongst themselves and other larger companies locally and internationally. This means they have to increase efficiency in the manufacture of their products, maintain good quality and make reasonable profit just to stay ahead of the others in the game. With this in mind, SMEs is embracing methods of improving manufacturing through different methods among which specialized designing and modular designing. Unlike specialized designing which is customized for a specific SME, modular designing involves the combination of standard components together to form a complete system that functions as desired by the manufacturer. This method offers a variety of options for the SME to choose from since standard components are in abundance in the market, thus making many modular designs available. However, one must research which of the many is best suited for the business. The best way to solve this is developing a Modular Integrated Systems Strategy (MISS) framework to help in the selection. This paper will look at the best way for SMEs to integrate formulation of a manufacturing strategy through MISS. Given that there are several types of modular design methods, only six of them are considered as standard. These include component sharing, component swapping, cut-to-fit mix bus and sectional modularity as illustrated in the figure below. Figure 1. Diagram based on William J. Abernathy and James M. Utterback, “Patterns of Industrial Innovation,” Technology Review, June/July 1978 (The Daily Module, 2014) All these forms of modularity are visible in our day to day lives in their simplest forms. Workmen’s tool kits with drills, sanders and jigsaws are one example. In terms of component sharing modularity, these tools are designed to use the same battery pack between them and the drill head being switched for a sander is an example of component swapping modularity. Bus modularity is used in the communication system of telephones through switchboards and cut-to-fit in the tailoring industry for custom fit clothes. The best example of sectional modularity is best brought out by the LEGO ® Company in making blocks that stack in any direction (The Daily Module, 2014). These forms of modularity can be incorporated into SMEs manufacturing strategies, but one has to know the one that best fits the enterprise. Choosing the wrong modularity has consequences on the manufacturing process, the product and in the long run, the customer’s satisfaction. Therefore, one has to come up with a MISS that will help in identifying the problem and coming up with a modularity that best suits the need of the enterprise. Of the six, a combination of a few would give the best result. This brings to the market the Enterprise Resource Planning (ERP) Software. With newer components introduced into the software suite, it has become a key part of manufacturing. ERP software being an integration of several components allows an SME to run its business with ease with functionalities accommodating all stages of the business. The software is able to perform product planning and development, the manufacture, market and sale of the product and can count stock available for shipping. It can also handle the shipping and payment for retailers in real time (Greenbeacon.com, 2014). Through the use of databases, it is able to track company resources and records from cash flow to production rates and manage tasks as complex as product orders and payroll. The only way this is achieved is through resource sharing by the applications that constitute the ERP software, the resource being mainly data accumulated throughout the whole manufacturing process. It is one of the most beneficial and important forms if manufacturing integrations a company can use given the fact that it uses modern technology to achieve its goals by the main use a database as an information hub (Holetzky, 2014). The use of the ERP did not just occur over night. It was initially focused on the back office functionalities and was later upgraded to undertake with it does now. These improvements have led to Lean Manufacturing being incorporated into ERP. Lean manufacturing is the type of manufacturing that puts into consideration the cost of production and the quality of the product simultaneously. That is it focuses on preserving the quality with less work done, which was mostly undertaken by the Toyota car company in the production of their cars. Toyota focused on the waste, quality and customer satisfaction aimed at reducing the space used by the car, reduced production capital and labor. This resulted in the elimination of unnecessary items leading to the production of superior products and services. IN general, it seeks to minimize all resources used in production and this is achieved through consistent quality improvement techniques. (Halgeri and Mchaney et al., n.d.) For effective incorporation of Lean, there are five aspects that have to be considered (Polcyn and Engelman, n.d.). The first is identifying value where features that create value for the product are looked at from the manufacture and customer’s eyes. That is to say, how the product satisfies the consumer needs in all aspects from place, time and price. The other is identifying the value stream. Here the processes contributing to the identification of value are evaluated. The third aspect involves improving stream flow. This is achieved by identifying and eliminating negativity in the processes being undertaken by the company. Elimination of attributes that slow down or interrupt processing and causes the use of unnecessary resources leads to wastage of time, capital and manpower. The last two are working towards perfection and allowing consumer pull. This is to say once the stream flow has been improved, the company puts into place structures that ensure the continuity of streamlined flow. This can be achieved through advances in IT and other fields. Consumer pull basically means that the goal is to provide the product when needed or as needed by the consumer, hence making the consumer the focus of the whole manufacturing process. Therefore, with the above considered, the Lean Manufacturing aspect would have made the overall manufacturing process more productive in the end. Adding Lean Manufacturing to ERP systems has brought out the full potential of the system. ERP incorporates both internal and external flows and is a practical system. It runs on a multitude of computer hardware and networks, including on site and cloud hosted. This allows accessibility in some way or the other through multi-module application framework with a common database which is a benefit over “point solutions.” Point solutions that were in use before ERP solutions relied on multiple databases leading to duplication of data and straining of the IT systems and resources. ERP changed this by the use of on application that runs the system on a single database that was interconnected among all components of the business increasing efficiency in production of the SME. Not only that, but it decreased the overall cost of ownership in turn reducing operational cost and increasing the amount of profit gained by the company. Also with the use of ERP, a company is able to update the system with minimal effects affecting the production process. Given the fact that the system is made up of independent building blocks that work together to attain the same goal, changing out one component for a better version of the former has minimal effect on the system. To achieve this, the designs have the following characteristics: They are functionally partitioned into discrete scalable components that are capable of self-contained functioning Are easily adaptable to changing technologies and make use of standard industry concepts of key interfaces Make use of well-defined modular interfaces in connecting the separate components By doing so one has combined the advantages of standardization with those of customization bring out the full potential of any one system. The following table shows ERP systems that support Lean Manufacturing (Azani and Khorramshahgol, n.d., pp. 66-74). Table 1: List of Lean enabled ERP systems (Halgeri and Mchaney et al., n.d) On the other hand, not all ERPS support Lean Manufacturing. The designers that offer these applications claim there is a conflict of interest between the two if combined. Compared to ERP systems that have different modules that support the functions of the whole company, Lean only concentrates on the manufacturing and production (Bartholomew, 2012). Both offer efficiencies for the users, but ERP is able to manage a greater part of the company offers more compared to Lean. ERP systems that do don’t offer Lean services are therefore to be avoided if a company wants better results. Also not all Lean functionalities are offered by all ERP systems as shown below. This in turn affects the overall benefits to be experienced if one was to implement one of these over one that offers all Lean functionalities. A designer thus must consider the desired functionality wanted by the a company and the company must really ensure they have done proper research on the services offered before purchasing and implementing ERP software. Table 2: Software comparison of Lean enabled ERP systems (Halgeri and Mchaney et al., n.d) When evaluating the functionalities offered by ERP applications one must ensure they cover the company’s needs and goals. Here the 80-20 rule can be used for evaluation where the ERP system should cover up to 80% of the company’s need and the system should allow flexibility in the remaining 20% as necessary. The last 20% allows for a 1-2% margin of error since 100% fit is not feasible (Johansson, 2007). Also the implementation process has to be looked at critically and analytically. This is to say that the application cannot just replace the existing system spontaneously. Proper implementation is crucial for the success of the application and this can be achieved through phases. The best approach is running both systems concurrently with training on the use of the new system occurring as the old system is gradually phased out. This will ensure the continued flow of production, thus not compromising the company’s work. Proper implementation should allow processing to continue with the application not dictating the ability to deliver results but help in the delivery process. The graph below shows the overall effect of implementation of the new system. Figure 2: Graph showing increased functionality in new system introduction (Grunow and Killick, 2014) It is clear to see that ERP systems offer a wide range of benefits to the implementer of the system. It significantly reduces cost expenditure and increases productivity. With one database, the system is efficient in the reduction of duplication of data and processes in the company. Also the use of one database allows for better organization of data. It enables easy storage and retrieval of data both on site and through cloud connection (Cruz-Cunha, 2010). The communication between modules is also faster and more direct with proper inter module structures set up. The system is also flexible in the sense that it requires simply removing a given module and replacing it with a better version of the same. Given the modules are also functionally independent; there is minimal risk of compromising the ongoing processes. Once the module is restored, the system continues functioning as it was. The integration of several different modules to procedure one system therefore has its benefits. The above is clear proof on the efficiencies presented by the implementation of modular building blocks. What one has to factor is the fact that the overall switch from standard operational system to the modular system requires adequate research, planning and timing. The one who develops the MISS framework has to first research on which ERP application best fits the needs of the SME. With the wrong application one will definitely fail in the change of systems. Also the time it takes to set up the new system has to be considered. For its work at optimum functionality, the users must have undergone required operational training (Pavitt, 1991, pp. 41--50). This will ease smooth the transfer of systems. This is best done through implementing the new system in phases and eliminating the old the same way. Once one section of the new system is in place and functioning properly, the old section of the same is removed and new phase is begun. Finally, once all these are done accordingly, the system should in the end pay for itself through reduced production cost and increased profits for the SME. 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[online] Available at: http://www.ictknowledgebase.org.uk/cloudcomputingtwoperspectives?type=98 Halgeri, P., Mchaney, R. and Pei, Z. J. n.d. ERP Systems Supporting Lean Manufacturing in SMEs. pp. 56-73. Holetzky, S. 2014. What Are the Different Types of Modular Design? (with picture). [online] Available at: http://www.wisegeek.com/what-are-the-different-types-of-modular-design.htm Johansson, B. 2007. Point Applications vs. Integrated Solutions. [online] Available at: http://it.toolbox.com/blogs/erp-for-smb/point-applications-vs-integrated-solutions-19251 Pavitt, K. 1991. Key Characteristics of the Large Innovating Firm*. British Journal of Management, 2 (1), pp. 41--50. Polcyn, K. A. and Engelman, S. S. n.d. Gaining A Competitive Advantage With Lean And Six-Sigma Tools. [online] Available at: http://www.devaindustries.com/articles/CompetitiveAdvantageWithLeanSixSigma.htm The Daily Module. 2014. The Six Degrees of Modularity - The Daily Module. [online] Available at: http://module-r.com/blog/design/the-six-degrees-of-modularity Utterback, J. M. 2006. Design-inspired innovation. Hackensack, NJ: World Scientiific Pub.   Read More