Business Information System in Tesco - Case Study Example

Implications of Implementing a Company-wide Business Information System (ERP) in Tesco As the business environment becomes more and more competitive,companies are looking for ways to ensure that they remain relevant in the market. There are many ways through which companies can ensure that they achieve and maintain a competitive advantage. Adopting Information technology into the operations of a business will surely help a business achieve most of its objectives (Beynon-Davies, 2009). One of the most important aspects of IT in business environments is what is known as business information system. This provides a platform for companies to manage their information and business data so that they can carry out their daily operations in the most effective way possible. Enterprise Resource Planning is a form of business information system which companies can make use of when they want to effectively manage all their operations (Abramowicz and Zurada, 2001). Enterprise Resource Planning (ERP) refers to the incorporation of modern technology in business management systems (Adam and Sammon, 2004). In this day and age, information technology plays a major role in how business processes are carried out and this has a direct impact on the ultimate performance of a company. In this respect, ERP is a combination of three business aspects: management practices, business objectives and information technology. ERP helps business entities that have a wide operations base to have adequate information to carry out their vast business functions and still be able to beat their competitors in the market (Abramowicz and Zurada, 2001). The implementation of an ERP system in Tesco would greatly enhance the company’s performance. Tesco is a U.K. based grocery and general retailer founded in 1919. The retailer is the world’s third largest with stores in 14 countries in Europe, Asia and North America. Tesco is the largest retail company in the UK where it commands a strong 30% market share. It was originally founded as a food and drinks retailing company, but it has since diversified its business to include electronics, telecoms, financial services, clothing, health, home, car, pet insurance, dental as well as retailing, and renting music, movies, software and internet services. With this wide array of operations, it is important for the company to have an ERP system that will make it easy for the company to share information with the aim of increasing profits and beating the competition (Schneider, 2010). This paper discusses the implications of implementing a company-wide business information system (ERP) in Tesco Plc. Some of the issues that will be discussed in detail include: the method of application of ERP in Tesco and the benefits of the system to Tesco’s core business. Issues such as critical success factors, supplier control, design and manufacture as well as information and data management as pertaining to ERP are part of what will be discussed. The paper also looks at some of the positive and negative aspects of implementing ERP in Tesco. The requirements and conditions that must be met to implement an ERP system in the company will also be discussed. For ERP to work in any environment, there have to be various Critical Success Factors (CSFs) to support it (Monk and Wagner, 2009). In Tesco’s case, there are various CSFs which can be utilized by the company in order to make business operations much easier. These CSFs which are relevant to Tesco’s current situation are: product diversification, proper management and good employee relations and organized data management. The fact that Tesco has a wide array of products that it sells to its customers is a big plus for the company. The situation is likely to get even better with a fool-proof ERP system. The system will make it possible for the organization to keep track of the product circulation throughout its areas of operations. Since it has several products under its banner, having a reliable EPR system will enable the company to know when the how each of the products are doing in the market and what can be done to increase the number of customers (Bocij, Greaslay and Hickie, 2009). Through its product diversification, the company has a wide network of suppliers who can provide a strong foundation for the implementation of a relevant ERP system. Proper management is an import factor that should be in place for ERP system to be implemented in any situation. As a major player in the retail market in the UK, Tesco’s management is essential in enabling the company maintain its place in the competition. It is important for a company’s top managers to be involved in the major business decision making and operations if their effects are to be felt. When it comes to the implementation of ERP systems within a company, the managers need to be fully involved before, during and after the implementation (O’Sullivan and Ciaola, 2008). This will ensure that there are no complications arising from the implementation at any one time. Another critical success factor that is vital for the implementation of ERP systems within businesses is good employee relations. Tesco is one company that really takes care of the needs of its employees. There is a healthy working relationship between the managers and the lowest of employees. Such a relationship is important as it helps involve both the employees and their managers in every aspect of organizational running. The implementation of ERP systems requires that everyone gets involved in the whole process (Monk and Wagner, 2009). The more the employees contribute to the implementation of this system, the easier it will be to realize the results that are expected of the implementation. Encouraging employee involvement also enables the company to come up with the best implementation approach that will minimize operational costs (Farah, 1996). ERP systems are crucial when it comes to the management and coordination of suppliers. Tesco is a company that relies on many different suppliers who deliver many different types of products in the company’s stores throughout the country and in stores found in other parts of the world as well (Shtub and Karni, 2009). Adopting an ERP system would be beneficial for the company as it would make it quite easy to track down the deliveries and sub-deliveries at any one time. Through the ERP system, the company will be able to facilitate communication to its suppliers so that nothing goes wrong. It will be easy to share and facilitate the transfer of data and information that will ensure that issues to do with supply are dealt with on time (Adam and Sammon, 2004). ERP systems play a vital role in the design and manufacture of goods and services which are likely to bring the company maximum profits (Summer, 2005). Although Tesco does not design or even manufacture the products it sells to its customers, it can use ERP to make its products attractive to its customers. An enterprise resource planning system will make it possible for the company to get the required information about the needs of the customers and how the company can best fulfill these needs. This system will help the company to come up with ways through which it will present its products to the market so as to attract as many customers as possible, in the long run, staying on top of the competition (Sofroniou, 1998). Material inventory is the detailed record or report of things that a company has in stock. As a retailer Tesco needs a fail-proof mechanism for recording all the goods and other materials that it has in stock. ERP comes in very handy when a company needs to streamline its material inventory (Bocij, Greaslay and Hickie, 2009). Information technology makes it easy for the company to create a database of all its possessions. For a company like Tesco which runs several stores all of which are stocked with many different goods, a system that makes it easy to record all the company’s goods will facilitate better management. Different stores will be able to keep track of what they have and this will make it possible for them to make inventory records that will reflect the real situation and help the company from making unnecessary loses (O’Leary, 2000). With ERP, it becomes very easy for the company to manage its information and data flow. In Tesco, most departments carry out their operations independently (Harwood, 2003). This means that when a department has a particular task to carry out, it will do so and complete it without caring much what happens in the other departments. This has a huge impact on operations since there is almost no co-ordination at all among different departments (Schneider, 2010). The sales at Tesco would need to seek help from the finance department but if there is no system to enable them to do so, then it becomes hard for the sales team to meet their objectives. Information sharing will also be enhanced through the implementation of a relevant ERP system. Information technology is very helpful when it comes to management of information and data that might be valuable to a company (Summer, 2005). The flow of information in and outside the company will be streamlined, thereby enhancing business operations throughout the company’s business centers. A company like Tesco which has multiple branches all of which are operational, might find it difficult to manage information collectively. The application of ERP systems in the company has the likelihood of making it possible for the flow of information from one department or branch to another without a hitch (Monk and Wagner, 2009). Tesco has plans to make data and information flow within the company flawless and the use of information technologies will greatly help the company to achieve this objective. So as to implement the ERP that will enable Tesco achieve its core business objectives, it is important to understand exactly what the implementation of ERP will entail. The ERP system to be used in Tesco is based on a concept of management of a company’s internal economic complexities. The system makes it possible for the company to keep a tally of its asset management, invoicing, supplies, tax document, facilities and buildings and the flow of finances (Harwood, 2003). Understanding the ERP needs of the company will make it easy for Tesco managers to prepare for and make the relevant changes. In order for the ERP system to work in Tesco, there are vital requirements and conditions which have to be met. This is because the implementation of any ERP system is very intricate and great care must be taken so as to avoid mistakes that might lead to the company losing lots of money. In most cases, Business Process Reengineering (BPR) is considered the best method of implementing ERP systems in a business environment (O’Leary, 2000). Business Process Reengineering emphases on the alignment of business processes to match what is required for ERP to work. for BPR to be effective as a method of ERP implementation, the managers in the company have to be highly educated (Rainer and Cegielski, 2009). Top level education at the management level ensures that the individuals who are responsible for implementation of important ERP systems have the required skill to do so. Tesco has managers who are highly educated, and therefore, it would be easy for them to accept BPR as an implementation strategy (Harwood, 2003). However, BPR is not fool-proof in itself. In Tesco, not all operations have the capacity to be aligned with ERP processes. When the BPR approach to implementation fails, Tesco can turn to customization. Tesco’s business processes are well established and it would be an uphill task to change them in order to accommodate ERP systems. Customization as a way of implementing ERP is very effectual in Tesco’s situation since there is no need of changing the existing business processes (Curtis and Cobham, 2008). In this context, Tesco would only need to modify a few elements of the ERP to match the existing business processes in the company. However, there are areas within the company where implementation through customization would not work because of the intricacies involved (O’Leary, 2000). The best approach would therefore be to use both BPR and customization. In Tesco, it would be easy to use the BPR approach in business areas which are not so complex, for example in inventory and human resource (Garg and Venkitakrishnan, 2003). Customization on the other hand should be used more complex situations. However, it should be avoided when it becomes obvious that it is going to make the implementation of the ERP system too complex. In most situations, companies normally avoid customization because it is too expensive and requires a lot of personnel involvement which might lead to low performance in other business aspects (Rainer and Cegielski, 2009). There are several positive aspects that come with the use of ERP systems in a company. Tesco can use ERP for forecasting sales which makes it easy to carry out inventory optimization. Inventory is a very important aspect of the operations of Tesco. Inventory optimization is therefore necessary to ensure that the company does not run into loses through improper inventory records (Callaway, 1999). The company’s ERP program also allows it to track its orders and revenues. The ERP system in Tesco will make it easy for the company to match their purchase orders with what is in inventory receipts and costing documents. When the system is implements in the whole company, it will be easy to keep record of what is purchase and for how much it was purchased in each of the individual stores (Fui-Hoon Nah, 2002). This information is necessary in making purchase and marketing plans without incurring too much operational costs. Another one of the most important benefits that ERP is likely to have in the operations of Tesco is making it easy for the company to have easy cooperation with the external world. ERP systems would enhance the cooperation of Tesco with other people who are not directly involved in the day to day operations of the company, but who have the ability to help it achieve its goals and objectives. Tesco has plans of expanding into other countries especially in Africa and adopting a relevant ERP system would go a long way in enabling the company to have easy access to any information regarding the new market that they want to start operations in. Although ERP is likely to have numerous positive results for the company there are some downsides to the application. One of the negative aspects of ERP for Tesco is the cost of application. Implementation of ERP programs is normally a very costly process which may have devastating affects on a company’s finances (Callaway, 1999). However, Tesco is fully aware of the implication of having ERP, then it come up with solutions that will prevent it from losing too much money from the implantation of the ERP. If Tesco does not integrate a new ERP system into its existing IT system, then it might be forced to create a platform to incorporate ERP into its system. This in itself is a negative aspect of ERP since the company will have to dig deeper into its coffers to finance the venture. It also means that Tesco has to hire new personnel who will help the implement the ERP once it is adopted. a lot of time will be wasted between adoption and implementation of the system and this greatly affect the performance of the company (Fui-Hoon Nah, 2002). The implementation of ERP also requires too many resources in terms of finances, time and personnel. Although the finances may be there, getting the time and personnel to carry out the implementation may not be very easy (Callaway, 1999). Tesco is a very busy retail business and stopping operations in order to implement a new system can greatly affect revenues. The personnel in Tesco all have their own specific duties, which if they were to neglect or leave unattended to, they would crumble. Getting new personnel to deal with the implementation would only add to the company’s expenses and the additional personnel will be without any work within the organization once the implementation is over (Curtis and Cobham, 2008). Conclusion Implementing a company-wide business information system (ERP) in Tesco could be one of the best business ideas for the company. Not only will the system enhance information sharing within its stores around the country, it will also streamline other aspects of business such as inventory management and supplier control. An ERP system in Tesco will enable the company to realize its objectives through better management of information and data that is necessary for the daily operations in various stores. However, the company needs to come up with the best approach to use when implementing ERP systems. It can integrate customization of Business Reengineering Process in the implementation of ERP in different aspects of business. This will ensure that best practices are enhanced in the implementation, thus minimizing the operational costs of the implementation process. For the implementation process to be successful there needs to be a conducive environment for the ERP system in place. This means that the managers and employees need to combine effort in making the implementation process work. References Abramowicz, W. and Zurada, J. (2001). Knowledge Discovery for Business Information Systems. Norwell, MA: Kluwer Academic Publishers Adam, F. and Sammon, D. (2004). The enterprise Resource Planning Decade: Lessons Learned and Issues for the Future. London: Idea Group Publishing Beynon-Davies, P. (2009). Business Information Systems. New York: Palgrave Macmillan Bocij, P., Greaslay, A. and Hickie, S. (2009). Business Information Systems: Technology, Development and Management. London: Pearson Education Limited Callaway, E. (1999). Enterprise Resource Planning: Integrating Applications and Business Processes across the Enterprise. New York: Computer Technology Research Curtis, G. and Cobham, D. (2008). Business Information Systems: Analysis, Design and Practice. London: Pearson Education Farah, B. (1996). Business Information System: Development and Implementation. London: Simon & Schuster Fui-Hoon Nah, F. (2002). Enterprise Resource Planning Solutions and Management. London: IRM Press Garg, V.K. and Venkitakrishnan, N.K. (2003). Enterprise Resource Planning: Concepts and Practice. New Delhi: Prentice-Hall Harwood, S. (2003). ERP: The Implementation Cycle. Burlington, MA: Butterworth-Heinemann Monk, E.F. and Wagner, B.J. (2009). Concepts in Enterprise Resource Planning. Boston, MA: Cengage Learning O’Sullivan, J. and Ciaola, G. (2008). Enterprise Resource Planning: A Transitional Approach from the Classroom to the Business world. New York: McGraw-Hill O’Leary, D.E. (2000). Enterprise Resource Planning Systems: Systems, Life Cycle, Electronic Commerce and Risk. Cambridge: Cambridge University Press Rainer, K. and Cegielski, C. (2009). Introduction to Information Systems: Enabling and Transforming Business. New York: John Wiley and Sons Schneider, G.(2010). Enterprise Resource Planning: An Introduction for Financial Managers. Nashville, TN: Southwestern Publishers Shtub, A. and Karni, R. (2009). ERP: The Dynamics of Supply Chain and Process Management. New York: Springer Sofroniou, A. (1998). Business Information Systems: Concepts and Examples. Ipswich: PsySys Limited Summer, M. (2005). Enterprise Resource Planning. Hoboken, NJ: Prentice Hall Read More